FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in the future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to significant risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
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the impact of the worldwide COVID-19 pandemic and government actions, on our business; |
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supply chain disruptions; |
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our limited operating history; |
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our ability to manufacture, market and sell our products; |
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our ability to maintain or protect the validity of our U.S. and other patents and other intellectual property; |
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our ability to launch and penetrate markets; |
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our ability to retain key executive members; |
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our ability to internally develop new inventions and intellectual property; |
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interpretations of current laws and the passages of future laws; and |
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acceptance of our business model by investors. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.
Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Quarterly Report on Form 10-Q.
Our Company was formed to design, manufacture, and distribute innovative tools and accessories to the building industry. The global tool market industry is a multibillion-dollar business.
ToughBuilt’s business is based on the development of innovative and state-of-the-art products, primarily in the tools and hardware category, with a particular focus on the building and construction industry with the ultimate goal of making life easier and more productive for contractors and workers alike.
Our three major categories contain a total of 11 product lines, consisting of (i) Soft Goods, which includes kneepads, tool bags, pouches and tool belts, (ii) Metal Goods, which consists of sawhorses, tool stands and workbench and (iii) Utility Products, which includes utility knives, aviation snips, shears, lasers and levels. The Company also has several additional categories and product lines in various stages of development.
We are continuing to focus our efforts on increased marketing campaigns, and distribution programs to strengthen the demand for our products globally. Management anticipates that our capital resources will improve and our products gain wider market recognition and acceptance resulting in increased product sales.
As discussed below, while the Company has faced the impacts of COVID-19 and inflation, we have been able to obtain significant revenue growth. Notwithstanding, we have incurred substantial operating losses since our inception and anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can commercialize our technology currently in development. In their audit report included in the Quarterly Report on Form 10-Q, our auditors have expressed that there is substantial doubt as to our ability to continue as a going concern. To fund our operations and grow our business, we will require to fund our capital requirements through the sale of debt or equity securities or other arrangements to fund operations. There can be no assurances that will be able to obtain additional financing on acceptable terms, if at all. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. See “
Liquidity and Capital Resources
” below and Item 1A. Risk Factors “
Going Concern
” and “
We will require additional capital to achieve commercial success and, if necessary, to finance future losses from operations as we endeavor to build revenue, but we do not have any commitments to obtain such capital and we cannot assure you that we will be able to obtain adequate capital as and when required
” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 18, 2022.
We were incorporated in the State of Nevada on April 9, 2012, as Phalanx, Inc. We changed our name to ToughBuilt Industries, Inc. on December 29, 2015. On September 18, 2018, we effected a 1-for-2 reverse stock split of our common stock. We consummated our initial public offering pursuant to a registration statement on Form S-1 (File No: 333- 22610) declared effective by the SEC on November 8, 2018 and became an Exchange Act reporting company pursuant to a Form 8-A (File No. 001-38739) on November 8, 2018. On April 15, 2020, we effected a 1-for-10 reverse stock split of our outstanding common stock. On April 25, 2022, we effected a 1-for-150 reverse stock split of our outstanding common stock. All share amounts and dollar amounts have been adjusted for the reverse stock splits.
The following highlights material business developments in our business during the fiscal year ended December 31, 2021 and during the second quarter ended June 30, 2022:
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On February 17, 2021, we announced that we have grown our business from four stock keeping units (SKUs) to 25 SKUs with Toolstation, a Netherlands based company with over 60 stores in the Netherlands, Belgium and Luxembourg and one of the highly respected single-source suppliers of tools, accessories, and building products for professionals and serious do-it-yourselfers. These SKUs include current ranges of ToughBuilt’s steel sawhorse line, soft-sided tool storage, and kneepads and have been slotted for immediate placement in all stores and in Toolstation’s catalog; |
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In November 2021, we launched two new product lines, ToughBuilt lasers and levels, and fully integrated with our mobile application, ToughBuilt Connect, allowing professional and DIY builders to quickly measure rooms, seamlessly upload information to a smartphone, and create shareable information with the touch of a button: |
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In December 2021, we launched a new product line, the ToughBuilt Workbench, available for purchase across our strategic global partners and buying groups servicing over 14,400 stores worldwide: |
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In August 2021, we launched a new product line, the ToughBuilt utility knives; |
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In September 2021, we launched ToughBuilt Brazil; |
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In 2021, our total revenues, net of allowances, totaled approximately $70.0 million as compared to approximately $39.4 million in 2020, including a 71% increase in online sales through Amazon.com from $7 million for 2020 to $12 million for 2021: and |
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We have raised a total of approximately $96.4 million in gross proceeds in registered and unregistered equity offerings. |
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We received a total of $2.9 million in gross proceeds from warrant exercises. |
Units and Prefunded Public Offering
On June 22, 2022, we completed a public offering of (i) 772,157 units (“Units”), each Unit consisting of one share of common stock and one warrant to purchase one share of common stock (each, a “Warrant”) for $1.90 per Unit; and (ii) 2,385,738 prefunded units (“Prefunded Units”), each Prefunded Unit consisting of one prefunded warrant (a “Prefunded Warrant”) to purchase one share of common stock and one Warrant, for $1.8999 per Prefunded Unit. Subject to certain ownership limitations described in the Warrants, the Warrants have an exercise price of $1.90 per share of common stock, are exercisable upon issuance and will expire five years from the date of issuance. The exercise price of the Warrants is subject to adjustment for stock splits, reverse splits, and similar capital transactions as described in the warrants. In connection with the offering, the Company issued Warrants to purchase an aggregate of 3,157,895 shares of common stock.
Subject to certain ownership limitations described in the Prefunded Warrants, the Prefunded Warrants are immediately exercisable and may be exercised at a nominal consideration of $0.0001 per share of common stock any time until all of the Prefunded Warrants are exercised in full. A holder will not have the right to exercise any portion of the Warrants or the Prefunded Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, at the election of the holder, 9.99%) of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants or the Prefunded Warrants, respectively. However, upon notice from the holder to the Company, the holder may increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants or the Prefunded Warrants, respectively, provided that any increase in the beneficial ownership limitation will not take effect until 61 days following notice to the Company.
As compensation to H.C. Wainwright & Co., LLC (“Wainwright” or the “Placement Agent”), as the exclusive placement agent in connection with the offering, the Company paid the Placement Agent a cash fee of 7% of the aggregate gross proceeds raised in the offering, plus a management fee equal to 0.5% of the gross proceeds raised in the offering and reimbursement of certain expenses and legal fees. The Company also issued to designees of the Wainwright Agent warrants to purchase up to 189,474 shares of common stock (the “Placement Agent Warrants”). The Placement Agent Warrants have substantially the same terms as the Warrants, except that the Placement Agent Warrants have an exercise price equal to $2.375 per share, and expire on the fifth anniversary from the date of the commencement of sales in the offering.
In connection with the offering, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors on June 17, 2022. The Purchase Agreement contained customary representations and warranties and agreements of the Company and the Purchasers and customary indemnification rights and obligations of the parties.
The shares of common stock and Warrants underlying the Units, the Warrants and Prefunded Warrants underlying the Prefunded Units and the Placement Agent Warrants described above and the underlying shares of common stock were offered pursuant to the Registration Statement on Form S-1 (File No. 333-264930), as amended, which was declared effective by the Securities and Exchange Commission on June 17, 2022.
The Company received net proceeds of approximately $5.1 million from the offering, after deducting the estimated offering expenses payable by the Company, including the Placement Agent fees. The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital, and the repurchase of certain existing warrants.
Private Placement of Shares of Common Stock and Warrants
On July 27, 2022, we consummated the closing of a private placement pursuant to Section 4(a)(2) and/or Regulation 506(b) of the Securities Act (the “Private Placement”). Pursuant to the terms and conditions of the Securities Purchase Agreement, dated as of July 25, 2022 (the “Purchase Agreement”), by and among the Company and certain institutional investors named on the signature pages thereto (the “Purchasers”). At the closing of the Private Placement, the Company issued (i) 700,000 shares of common stock (the “Placement Shares”), (ii) 3,300,000 prefunded warrants (the “Prefunded Warrants”); (iii) 4,000,000 Series A preferred investment options (the “Series A Preferred Investment Options”); and (iv) 4,000,000 Series B preferred investment options (the “Series B Preferred Investment Option, and together with the “Series A Preferred Investment Options, the “Preferred Investment Options” and collectively with the Prefunded Warrants, the “Warrants”). The purchase price of each Placement Share and associated Preferred Investment Options was $5.00 and the purchase price of each Prefunded Warrant and associated Preferred Investment Options was $4.9999.
Each Prefunded Warrant is exercisable for $0.0001 per share of common stock until all of the Prefunded Warrants are exercised in full. Each Series A Preferred Investment Option is exercisable for one share of common stock for $5.00 per share until the third anniversary date of the issuance date. Each Series B Preferred Investment Option is exercisable for one share of common stock for $5.00 per share until the second anniversary date of the issuance date. The exercise price and the number of our shares of common stock issuable upon the exercise of each of the Warrants are subject to adjustment for stock splits, reverse splits, and similar capital transactions, as described in the Warrants. The Preferred Warrants are exercisable on a “cashless” basis. The Preferred Investment Options may be exercised on a “cashless basis” if there is no effective registration for the underlying shares of common stock.
A holder of the Warrants will not have the right to exercise any portion of the Prefunded Warrants, Series A Preferred Investment Option or Series B Preferred Options, as the case may be if the holder (together with its affiliates) would beneficially own more than 4.99% or 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, upon notice from the holder to the Company, the holder may increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants, provided that any increase in the beneficial ownership limitation will not take effect until 61 days following notice to the Company (the “Beneficial Ownership Limitation”).
If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the Warrants with the same effect as if such successor entity had been named in such security itself. If our stockholders are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holders of the Warrants shall be given the same choice as to the consideration it receives upon any exercise of the Warrants following such fundamental transaction. In addition, holders of the Preferred Investment Options will have the right to require us to repurchase its Preferred Investment Options for cash in an amount equal to the value of the remaining unexercised portion of the Warrants based on the Black-Scholes option pricing formula. However, if the fundamental transaction is not within our control, including not approved by our board of directors, then the holder of Preferred Investment Options will only be entitled to receive the same type or form of consideration (and in the same proportion), at the value per share of common stock in the fundamental transaction for each share of common stock underlying the unexercised portion of the pre-funded warrants or preferred investment options, that is being offered and paid to our stockholder in connection with the fundamental transaction.
In addition, if at any time the Company grants, issues or sells any common stock equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of common stock (the “Purchase Rights”), then the holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of common stock acquirable upon complete exercise of its Warrants (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of common stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the holder’s right to participate in any such Purchase Right would result in the holder exceeding the Beneficial Ownership Limitation, then the holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of common stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Beneficial Ownership Limitation).
During such time as the Warrants are outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of common stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin-off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), then, in each such case, the holders of the Warrants shall be entitled to participate in such Distribution to the same extent that the holders would have participated therein if the holders had held the number of shares of common stock acquirable upon complete exercise of the Warrants (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation).
All of the Purchasers were “accredited investors” as such term is defined in Rule 501(a) under the Securities Act. The Placement Shares and Warrants were offered pursuant to the exemptions provided in Section 4(a)(2) under the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, and they were not offered pursuant to this prospectus or another prospectus. Accordingly, the Selling Stockholders may sell the Placement Shares and, upon the exercise of the Warrants, the underlying shares of common stock (the “Warrant Shares”) only pursuant to an effective registration statement under the Securities Act covering the resale of those shares, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act.
In connection with the Private Placement, we entered into a Registration Rights Agreement with the Purchasers, dated July 25, 2022 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that we shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the SEC no later than August 4, 2022 and have the registration statement declared effective by the SEC as promptly as possible after the filing thereof, but in any event no later than September 8, 2022, or, in the event of a “full review” by the SEC, October 10, 2022.
Upon the occurrence of any Event (as defined in the Registration Rights Agreement), which, among others, prohibits the Purchasers from reselling the Securities for more than ten (10) consecutive calendar days or more than an aggregate of fifteen (15) calendar days during any 12-month period, we are obligated to pay to each Purchaser, on each monthly anniversary of each such Event, an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 2.0% multiplied by the aggregate subscription amount paid by such Purchaser pursuant to the Purchase Agreement. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full.
Subject to certain exceptions, neither we nor any of our security holders (other than the Purchasers in such capacity pursuant thereto) may include the securities of the Company in any registration statements other than the Securities. We may not file any other registration statements until all Securities are registered pursuant to a registration statement that is declared effective by the SEC, provided that we may file amendments to registration statements filed prior to the date of the Registration Rights Agreement so long as no new securities are registered on any such existing registration statements.
TOUGHBUILT® manufactures and distributes an array of high-quality and rugged toolbelts, tool bags, and other personal tool organizer products. We also manufacture and distribute a complete line of knee pads for various construction applications, and a variety of metal goods, including utility knives, aviation snips, shears, and digital measures such as lasers and levels. Our line of job site tools and material support products consists of a full line of miter saw and table saw stands, sawhorses/job site tables, roller stands, and workbench. All our products are designed and engineered in the United States and manufactured in China, India, and the Philippines under our quality control supervision. We do not need government approval for any of our products.
The flagship of the product line is the soft goods line that consists of over 100 variations of tool pouches, tool rigs, toolbelts and accessories, tool bags, totes, a variety of storage solutions, and office organizers/bags for laptop/tablet/cellphones, etc. Management believes that the breadth of the line is one of the deepest in the industry and has specialized designs to suit professionals from all sectors of the industry including plumbers, electricians, framers, builders, and more.
We have a selection of over 10 models of kneepads, some with unique patented design features that allow the users to interchange components to suit conditions of use. Management believes that these kneepads are among the best performing kneepads in the industry. Our “all terrain” knee pad protection with snapshell technology is part of our interchangeable kneepad system which helps to customize the job site needs. They are made with superior quality using multilevel layered construction, heavy-duty webbing, and abrasion-resistant PVC rubber.
Sawhorses and Work Support Products
The second major category consists of Sawhorses and Work Support products with unique designs targeted at the most discerning users in the industry. The innovative designs and construction of the more than 15 products in this category have led to the sawhorses becoming among the best sellers of the category everywhere they are sold. The newest additions in this category include several stands and work support products that are quickly gaining recognition in the industry and are expected to position themselves in the top tier products in a short time. Our sawhorse line, miter saw, table saw & roller stands and workbench are built to very high standards. Our sawhorse/job site table is fast to set up, holds 2,400 pounds, has adjustable heights, is made of all-metal construction, and has a compact design. We believe that these lines of products will become the standard in the construction industry.
Digital measures and levels
TOUGHBUILT’s third major product line is the digital measure and levels. These digital measures are targeted toward the PROs for accurate job site measuring, to make sure the job is done right and in time. These digital measures help calculate what amount of construction product is needed to finish the job, such as measures for floors, tile, and paint.
Our product strategy is to develop product lines in several categories rather than focus on a single line of goods. We believe that this approach allows for rapid growth,
and
wider brand recognition, and may ultimately result in increased sales and profits within an accelerated time period. We believe that building brand awareness of our current ToughBuilt lines of products will expand our share of the pertinent markets. Our business strategy includes the following key elements:
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A commitment to technological innovation achieved through consumer insight, creativity, and speed to market; |
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A broad selection of products in both brand and private labels; |
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Superior customer service; and |
We will continue to consider other market opportunities while focusing on our customers’ specific requirements to increase sales.
In addition to the construction market, our products are marketed to the “Do-It-Yourself” and home improvement marketplace. The U.S. housing stock of more than 130 million homes requires regular investment merely to offset normal depreciation. According to Statista.com
1
, in recent years, the U.S. home improvement industry has witnessed steady growth, and the trend is expected to continue in the near future. A significant increase occurred in 2020, mostly due to the outbreak of the coronavirus (COVID-19) pandemic and the lockdowns which ensued, leading people to stay home more often than before and take up hobbies and projects such as DIY home improvement. According to a Joint Center for Housing Studies forecast, homeowner improvements and repair expenditures were expected to reach roughly 370 billion U.S. dollars in the first quarter of 2022. Aside from the COVID pandemic
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, the rising real estate prices in many Western countries were a likely contributing factor to the increase in home improvement projects. With real estate price changes outperforming wage increases, homeowners may have opted for upgrading their homes instead of purchasing a new house.
TOUGHBUILT® products are available worldwide in many major retailers ranging from home improvement and construction products and services stores to major online outlets. Currently, we have placements in Lowes, Home Depot, Menards, Bunnings (Australia), Princess Auto (Canada), Dong Shin Tool PIA (S. Korea) as well as seeking to grow our sales in global markets such as Western and Central Europe, Eastern Europe, South America, and the Middle East.
“Home Depot and Lowe’s: average amount spent by consumers 2011-2021”; published by C. Simionato (April 26, 2022);
https://www.statista.com/statistics/240861/average-amount-spent-by-consumers-at-the-home-depot-and-lowes/
“Home improvement projects - statistics & facts”; published by C. Simionato; (Jan 12, 2022);
https://www.statista.com/topics/7899/home-improvement-projects/#topicHeader__wrapper
Retailers by region include:
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United States: Lowe’s, Home Depot, Menards, GM products, Fire Safety, Hartville Hardware, ORR, Pooley, Wesco, Buzzi, and Western Pacific Building Materials. |
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United Kingdom distribution throughout the UK and online selling for Europe. |
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Australia: Kincrome, and Bunnings. |
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New Zealand: Kincrome, and Bunnings. |
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South Korea: Dong Shin Tool PIA Co., Ltd. |
We are actively expanding into markets in Mexico and other Latin American countries, the Middle East, and South Africa.
We are currently in product line reviews and discussions with Home Depot Canada, Do It Best, True Value, and other major retailers both domestically and internationally. A product line review requires the supplier to submit a comprehensive proposal that includes product offerings, prices, competitive market studies, relevant industry trends, and other information. Management anticipates, within the near term, adding to its customer base up to three major retailers, along with several distributors and private retailers within six sectors and among fifty-six targeted countries.
In 2021, we launched the following product lines:
Since 2013, we have been planning, designing, engineering, and sourcing the development of a new line of ToughBuilt mobile devices and accessories to be used in the construction industry and by building enthusiasts. We are planning to have our mobile device products ready to market in 2024 at which time we intend to commence marketing and sell our mobile device products to our current global customer base. We believe that an increasing number of companies in the construction industry are requiring their employees to utilize mobile devices not just to communicate with others but to utilize the special apps that will allow the construction workers to do their job better and more efficiently. All of our mobile devices are designed and built-in accordance with IP-68 and to a military standard level of durability.
Our ruggedized mobile line of products was created to place customized technology and wide varieties of data in the palm of building professionals and enthusiasts such as contractors, subcontractors, foremen, general laborers, and others. We are designing the devices, accessories, and custom apps to allow the users to plan with confidence, organize faster, find labor and products faster, estimate accurately, purchase wisely, protect themselves, workers, and their business, create and track invoicing faster and easier.
Commencing in 2024, we intend to launch the following accessories: car charger, QI charger, car mounts, and earbud pack, and we will focus on sales in the following industries: construction, industrial, military, and law enforcement and “dotcoms.” In late 2024, we intend to launch our T.55 rugged mobile phones and earbud headphones, as well as a “T-Dock,” attachable battery, tri lens camera, and tough shield cover and accessories.
In late 2024, we also intend to launch applications for our mobile phones relating to the following topics:
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Estimating apps & programs |
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Project insurance & bonds |
We hold several patents and trademarks of various durations and believe that we hold or have applied for, or license all the patent, trademark, and other intellectual property rights necessary to conduct our business. We utilize trademarks (licensed and owned) on nearly all our products and believe having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying our brands and our Company, and in distinguishing our goods from the goods of others. We consider our ToughBuilt
®
, Cliptech
®
, and Fearless
®
trademarks to be among our most valuable intangible assets. Trademarks registered both in and outside the U.S. are generally valid for 10 years, depending on the jurisdiction, and are generally subject to an indefinite number of renewals for a like period on appropriate application.
In 2019, the United States Patent and Trademark Office (USPTO) granted two new design patents (U.S. D840,961 S and US D841,635 S) that cover ToughBuilt’s ruggedized mobile devices, which are valid for a period of 15 years. We also have several patents pending with the USPTO and anticipate three or four of them to be granted in the near future.
The tool equipment and accessories industry is highly competitive on a worldwide basis. We compete with a significant number of other tool equipment and accessories manufacturers and suppliers to the construction, home improvement and Do-It-Yourself industry, many of which have the following:
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Significantly greater financial resources than we have; |
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More comprehensive product lines; |
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Longer-standing relationships with suppliers, manufacturers, and retailers; |
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Broader distribution capabilities; |
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Stronger brand recognition and loyalty; and |
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The ability to invest substantially more in product advertising and sales. |
Our competitors’ greater capabilities in the above areas enable them to better differentiate their products from ours, gain stronger brand loyalty, withstand periodic downturns in the construction and home improvement equipment and product industries, and compete effectively based on price and production, and more quickly develop new products. These competitors include DeWalt, Caterpillar, and Samsung Active.
The markets for our mobile products and services are also highly competitive and we are confronted by aggressive competition in all areas of our business. These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of mobile communication and media devices, personal computers and other digital electronic devices. Our competitors who sell mobile devices and personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share. Our financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins. Principal competitive factors important to us include price, product features, relative price/performance, product quality and reliability, design innovation, a strong third-party software and peripherals ecosystem, marketing and distribution capability, service and support, and corporate reputation.
We are focused on expanding its market opportunities related to mobile communication and media devices. These industries are highly competitive and include several large, well-funded and experienced participants. We expect competition in these industries to intensify significantly as competitors attempt to imitate some of the features of the Company’s products and applications within their products or collaborate to offer solutions that are more competitive than those they currently offer. These industries are characterized by aggressive pricing practices, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers and businesses. Competitors include Apple, Samsung, and Qualcomm, among others.
Key factors affecting our performance
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Known Trends and Uncertainties
Our business is seasonal as a result of our China-based production. For the first calendar quarter, we are not able to ship our products from China due to the hiatus as a result of their New Year holidays. We typically make up the lost sales from the first calendar quarter in the subsequent quarters.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic that continues to spread throughout the United States and the world. We are currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. All of our Chinese facilities were temporarily closed for a period of time. All of these facilities have been reopened. Depending on the progression of the outbreak, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted globally. To date, we have been able to obtain supplies and products needed. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress, it could have a material negative impact on our results of operations and cash flow, in addition to the impact on its employees.
Due to the speed and fluidity with which the COVID-19 pandemic continues to evolve, and the emergence of highly contagious variants, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We have concluded that while it is reasonably possible that the virus could negatively impact our results of operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices in the component materials for the parts of our goods may impact the availability, the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality products as they may substitute lower-cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins if the Company is unable to mitigate any inflationary increases through various customer pricing actions and cost reduction initiatives. To offset increased prices charged by our manufacturers and increased shipping rates, we increased the prices of our products in 2021.
We acquire a majority of our products from manufacturers and distributors located in China, India, and the Philippines. We do not have any long-term contracts or exclusive agreements with our foreign suppliers that would ensure our ability to acquire the types and quantities of products we desire at acceptable prices and in a timely manner. We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of other qualified suppliers. We increased our inventory from $38,432,012 at December 31, 2021 to $40,
156,305
at June 30, 2022. Due to our increased inventory levels in 2021 and the six months ended June 30, 2022, the ongoing supply chain disruptions have not had a material adverse effect on our operations and we do not currently anticipate that any continued supply chain disruptions will have a material adverse effect on our operations for the fiscal year 2022.
On April 25, 2022, we effected a 1-for-150 reverse stock split of our issued and outstanding common stock as part of our plan to regain compliance with Nasdaq Listing Rule 5550(a)(2) (the “Minimum Bid Price Requirement”). On May 9, 2022, we were notified by Nasdaq that we regained compliance with Nasdaq’s Minimum Bid Price Requirement and that the matter was closed.
The three months ended June 30, 2022 compared to the three months ended June 30, 2021.
Revenues for the three months ended June 30, 2022 and 2021 were $17,887,655 and $15,853,368, respectively, which consisted of metal goods, soft goods and electronic goods sold to customers. Revenues increased in 2022 over 2021 by $2,034,287, or 12.83%, primarily due to wide acceptance of our products in the tools industry and receipt of recurring sales orders for metal goods and soft goods from our existing and new customers, and introduction and sale of new soft goods products to our customers. An increase in sales through Amazon was a major factor of the increase.
Cost of goods sold for the three months ended June 30, 2022 and 2021 was $12,939,239 and $12,500,092, respectively. Cost of goods sold increased in 2022 over 2021 by $439,147, or 3.51%, primarily due to our increased sales as well as increases in materials (e.g., steel and plastics polyester) to manufacture metal goods and soft goods and increase in labor cost in China. Cost of goods sold as a percentage of revenues in 2022 was 72.34% as compared to cost of goods sold as a percentage of revenues in 2021 of 78.85%.
Operating expenses consist of selling, general and administrative expenses and research and development costs. Selling, general and administrative expenses (the “SG&A Expenses”) for the three months ended June 30, 2022 and 2021 were $14,496,942 and $9,242,946, respectively. SG&A Expenses increased in 2022 over 2021 by $5,253,996, or 56.84%, primarily due to an increase in shipping costs, marketing and advertising expenses for product launches and the hiring of additional employees. SG&A Expense for the quarter ended June 30, 2022 as a percentage of revenues was 81.04%, compared to 58.3% for the quarter ended June 30, 2021. We expect our SG&A Expenses will start to increase at a lower rate as our business matures, and we develop economies of scale.
Research and development costs (“R&D”) for the three months ended June 30, 2022 and 2021 were $2,754,351 and
$1,429,819, respectively. R&D costs increased by $1,324,532. or 92.64%. This increase was primarily due to the Company developing new tools for the construction industry.
Other expense for the three months ended June 30, 2022 consisted of warrant issuance costs in the amount of $170,308, interest expense of $92,438 and change in fair value of warrant liabilities in the amount of $429,572. Other expense for the three months ended June 30, 2021 consisted of interest expense of $102,937.
Due to factors set forth above, we recorded a net loss of $
12,136,051
for the three months ended June 30, 2022 as compared to a net loss of $7,422,426 for the three months ended June 30, 2021.
The six months ended June 30, 2022 compared to the six months ended June 30, 2021.
Revenues for the six months ended June 30, 2022 and 2021 were $35,108,400 and $28,135,621, respectively, which consisted of metal goods, soft goods and electronic goods sold to customers. Revenues increased in 2022 over 2021 by $6,972,779 or 24.78%, primarily due to wide acceptance of our products in the tools industry and receipt of recurring sales orders for metal goods and soft goods from our existing and new customers, and introduction and sale of new soft goods products to our customers. An increase in sales through Amazon was a major factor of the increase.
Cost of goods sold for the six months ended June 30, 2022 and 2021 was $27,156,857 and $21,319,219 respectively. Cost of goods sold increased in 2022 over 2021 by $5,837,638, or 27.38%, primarily due to our increased sales as well as increases in materials (e.g., steel and plastics polyester) to manufacture metal goods and soft goods and increase in labor cost in China. Cost of goods sold as a percentage of revenues in 2022 was 77.35% as compared to cost of goods sold as a percentage of revenues in 2021 of 75.77%.
Operating expenses consist of selling, general and administrative expenses and research and development costs. Selling, general and administrative expenses (the “SG&A Expenses”) for the six months ended June 30, 2022 and 2021 were $30,430,841 and $17,192,727, respectively. SG&A Expenses increased in 2022 over 2021 by $13,238,114, or 77%, primarily due to an increase in shipping costs, marketing and advertising expenses for product launches and the hiring of additional employees. SG&A Expense for the six months ended June 30, 2022 as a percentage of revenues was 86.68% compared to 61.11% for the six months ended June 30, 2021. We expect our SG&A Expenses will start to increase at a lower rate as our business matures, and we develop economies of scale.
Research and development costs (“R&D”) for the six months ended June 30, 2022 and 2021 were $5,268,805 and
$2,836,204, respectively. R&D costs increased by $2,432,601, or 85.77%. This increase was primarily due to the Company developing new tools for the construction industry.
Other expense for the six months ended June 30, 2022 consisted of warrant issuance costs in the amount of $445,438, interest expense of $92,181 and change in fair value of warrant liabilities in the amount of $
4,045,732
. Other expense for the six months ended June 30, 2021 consisted of interest expense of $263,556.
Due to factors set forth above, we recorded a net loss of
$24,239,990
for the six months ended June 30, 2022 as compared to a net loss of $13,476,085 for the six months ended June 30, 2021.
Liquidity and Capital Resources; Going Concern
We had $2.1 million in cash at June 30, 2022 compared to $7.5 million at December 31, 2021. The Company has incurred substantial operating losses since its inception. As reflected in the consolidated financial statements, the Company had an accumulated deficit of approximately $120.9 million at June 30, 2022, a net loss of approximately $24.2 million, and approximately $12.9 million of net cash used in operating activities for the six months ended June 30, 2022. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. The Company anticipates incurring additional losses until such time, if ever, that it can obtain marketing approval to sell, and then generate significant sales, of its technology that is currently in development. As such it is likely that additional financing will be needed by the Company to fund its operations and to develop and commercialize its technology.
We will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for the next twelve months from the issuance of these consolidated financial statements.
On January 19, 2021, the Company filed a prospectus supplement dated January 15, 2021 to the Company’s shelf registration statement on Form S-3 (File No. 333-251185) (the “First Form S-3”) declared effective by the SEC on December 13, 2020 for the offer and sale of shares of common stock having an aggregate value of $8,721,746 through H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), pursuant to that certain At The Market Offering Agreement, dated December 7, 2020 (the “ATM Agreement”), between the Company and Wainwright. Pursuant to the prospectus supplement, the Company sold an aggregate of 99,748 shares of common stock for net proceeds of $16,242,904 after deducting underwriting discounts and expenses.
On February 2, 2021, the Company filed a second registration statement on Form S-3 (File No. 333-252630) (the “Second Form S-3”) containing a base prospectus covering the offering, issuance and sale by the Company of up to $100,000,000 of the Company’s common stock, preferred stock, warrants and units; and a sales agreement prospectus covering the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $100,000,000 (which amount was included in the aggregate offering price set forth in the base prospectus) of the Company’s common stock that may be issued and sold under that certain At The Market Offering Agreement, dated February 1, 2021, between the Company and Wainwright, as sales agent. The Second S-3 was declared effective by the SEC on February 8, 2021. The Company terminated the First S-3 simultaneously with the filing of the Second S-3. From February 2021 to July 2021, the Company sold an aggregate of 125,508 shares of common stock through Wainwright with net proceeds of $24,602,110, after deducting underwriting discounts and expenses.
On July 14, 2021, the Company sold an aggregate of 306,855 shares of common stock to several institutional and accredited investors in a registered direct offering pursuant to the Second Form S-3 for net proceeds of $36,259,050, after deducting underwriting discounts and expenses.
On February 15, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued, in a registered direct offering, an aggregate of $5,000,000 of Preferred Stock (split evenly among 2,500 shares Series F Convertible Preferred Stock, par value $0.0001 per share (“Series F Preferred Stock”), and 2,500 shares of Series G Convertible Preferred Stock, par value $0.0001 per share (“Series G Preferred Stock”). The Series F Preferred Stock and Series G Preferred Stock have a stated value of $1,000 per share and are convertible into common stock at any time after the date of issuance. The conversion rate, subject to adjustment as set forth in the Certificate of Designation, is determined by dividing the stated value of the Series F Preferred Stock and Series G Preferred Stock by $30 (the “Conversion Price”). The Conversion Price can be adjusted as set forth in the Certificate of Designation for stock dividends and stock splits or the occurrence of a fundamental transaction. The 2,500 shares of Series F Preferred Stock and 2,500 shares of Series G Preferred Stock are each convertible into 83,334 shares of common stock. The Series F Preferred Stock and Series G Preferred Stock and the underlying shares of common stock were offered pursuant to the Second Form S-3 (as defined above).
In a concurrent private placement, the Company also issued to such investors unregistered warrants to purchase up to an aggregate of 125,000 shares of the Company’s common stock for $37.65 per share from April 15, 2022 until the fifth year from the date of issuance.
We received net proceeds of approximately $5.1 million from the offering, after deducting the estimated offering expenses payable by the Company, including the placement agent fees.
On July 27, 2022, we consummated the closing of a private placement pursuant to Section 4(a)(2) and/or Regulation 506(b) of the Securities Act (the “Private Placement”). Pursuant to the terms and conditions of the Securities Purchase Agreement, dated as of July 25, 2022 (the “Purchase Agreement”), by and among the Company and certain institutional investors named on the signature pages thereto (the “Purchasers”). At the closing of the Private Placement, the Company issued (i) 700,000 shares of common stock (the “Placement Shares”), (ii) 3,300,000 prefunded warrants (the “Prefunded Warrants”); (iii) 4,000,000 Series A preferred investment options (the “Series A Preferred Investment Options”); and (iv) 4,000,000 Series B preferred investment options (the “Series B Preferred Investment Option, and together with the “Series A Preferred Investment Options, the “Preferred Investment Options” and collectively with the Prefunded Warrants, the “Warrants”). The purchase price of each Placement Share and associated Preferred Investment Options was $5.00 and the purchase price of each Prefunded Warrant and associated Preferred Investment Options was $4.9999. The net proceeds to the Company from the Private Placement were approximately $18.4 million, after deducting placement agent fees and other offering expenses.
The Company plans to use its cash within the twelve months from June 30, 2022 and beyond for working capital and research and development.
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Six Months Ended June 30, |
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Cash flows used in operating activities |
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Cash flows used in investing activities |
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Cash flows from financing activities |
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Net (decrease) increase in cash during period |
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Cash Flows Used in Operating Activities
Net cash flows used in operating activities for the six months ended June 30, 2022 was $12,893,604, attributable to a net loss of $24,239,990, offset by depreciation expense of $1,938,527, amortization of right of use asset of $230,758, change in fair value of warrant liabilities of $4,045,732, warrant issue costs of $445,438, loss on sale of property equipment of $15,806, stock-based compensation expense of $26,202, a net increase in operating assets of $1,136,009 and a net increase of operating liabilities of $13,871,397. Net cash flows used in operating activities for the six months ended June 30, 2021 was $22,609,721, attributable to a net loss of $13,476,085, offset by depreciation expense of $644,098, amortization of capitalized contract costs of $213,353, stock-based compensation expense of $163,076, common stock issued for services of $189,000 and net change in operating assets and liabilities of $10,343,163.
Cash Flows from (Used in) Investing Activities
Net cash provided by investing activities for the six months ended June 30, 2022 was $1,736,292 attributed to the sale of property and equipment and the purchase of property and equipment. Net cash provided by investing activities for the six months ended June 30, 2021 was $4,088,199 attributed to the purchase of property and equipment.
Cash Flows from Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2022 was $9,300,684 attributable to the net cash proceeds received from the issuance of common stock, preferred stock and warrants, as well as the repurchase of common stock warrants. Net cash provided by financing activities for the six months ended June 30, 2021 was $44,729,005, primarily attributable to the net cash proceeds of $5,408,540 received from exercise of warrants, cash proceeds of $39,911,415 received from issuance of common stock under the First S-3 and Second S-3, and repayments of $590,950 from loans payable to factor.
Net (Decrease) Increase in Cash During Period
As a result of the activities described above, we recorded a net decrease and net increase in cash of $5,329,212 and $18,031,085 for the six months ended June 30, 2022 and 2021, respectively.
Material Cash Requirements from Known Contractual and Other Obligations
The following table summarizes our contractual obligations as of June 30, 2022 and as for the 12 months thereafter:
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For the
twelve months
ended
June 30, 2023 |
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Operating lease obligations |
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1,104,336
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Total Contractual Obligations |
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1,104,336
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Off Balance Sheet Arrangements
Significant Accounting Policies
See the footnotes to our unaudited financial statements for the quarter ended June 30, 2022 and 2021, included with this Quarterly Report on Form 10-Q.
I
TEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
I
TEM 4. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Based on our management’s evaluation (with the participation of the individuals serving as our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, each of the individuals serving as our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of June 30, 2022, the end of the period covered by this report.
Material Weakness in Internal Control over Financial Reporting
The Company did not design policies and procedures at a sufficient level of precision to support the operating effectiveness of the controls to prevent and detect potential errors. The Company did not maintain adequate documentation to evidence the operating effectiveness of certain control activities and did not maintain proper levels of supervision and review of complex accounting matters. The Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated within those systems including those used to cost inventory.
These control deficiencies create a reasonable possibility that a material misstatement to the financial statements will not be prevented or detected on a timely basis, and there we concluded that the deficiencies represent material weaknesses in our internal control over financial reporting and our internal control over financial reporting was not effective as of June 30, 2022.
During the six months ended June 30, 2022, we have continued to enhance our internal control over financial reporting in an effort to remediate the material weaknesses described above. We are committed to ensuring that our internal control over financial reporting is designed and operating effectively.
Our remediation process includes, but not limited to:
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Investing in IT systems to enhance our operational and financial reporting and internal controls. |
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Enhancing the organizational structure to support financial reporting processes and internal controls. |
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Providing guidance, education and training to employees relating to our accounting policies and procedures. |
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Further developing and documenting detailed policies and procedures regarding business processes for significant accounts, critical accounting policies and critical accounting estimates. |
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Establishing effective general controls over IT systems to ensure that information produced can be relied upon by process level controls is relevant and reliable. |
We expect to remediate these material weaknesses in the second half of 2022. However, we may discover additional material weaknesses that may require additional time and resources to remediate.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting that occurred during the quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
P
ART II. OTHER INFORMATION
I
TEM 1. LEGAL PROCEEDINGS
From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities.
On August 16, 2016, a plaintiff filed a complaint against Defendants ToughBuilt Industries, Inc. (the “Company”) and Michael Panosian in the Superior Court of California, County of Los Angeles, Case No. EC065533.The complaint alleges breach of oral contracts to pay the plaintiff for consulting and finder’s fees and to hire him as an employee. The complaint further alleged claims of fraud and misrepresentation relating to an alleged payment in exchange for stock in the Company. The complaint seeks unspecified monetary damages, declaratory relief, stock in the Company, and other relief according to proof.
On April 12, 2018, the Court entered judgments of default against the Company and Mr. Panosian in the amounts of $7,080 and $235,542, plus awarding the plaintiff a 7% ownership interest in the Company (the “Judgments”). The plaintiff served notice of entry of the judgments on April 17, 2018 and the Company and Mr. Panosian received notice of the entry of the default judgments on April 19, 2018.
The Company and Panosian satisfied the judgments on September 14, 2018 by payment of $252,949 to the plaintiff and by issuing the plaintiff 2,509 shares of common stock of the Company. On October 18, 2018, the Company and Panosian filed a Notice of Appeal from the Order denying their motion for relief from the above-referenced default judgment.
On October 1, 2019, the Second Appellate District of the California Court of Appeal issued its opinion reversing the trial court’s order denying ToughBuilt’s motion for relief from the default judgment and directing the trial court to grant ToughBuilt’s motion for relief, including allowing ToughBuilt to file an Answer and contest the plaintiff’s claims.
The plaintiff was seeking damages and stock based on a breach of an alleged oral agreement. This case concluded in April 2022. The plaintiff was awarded $160,000 which was offset by a prior judgment against the plaintiff.
As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item.
I
TEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
In connection with a registered direct offering of Series F Preferred Stock and Series G Preferred Stock on February 15, 2022 and disclosed elsewhere in this Quarterly Report on Form 10-Q, on February 15, 2022, the Company issued the same investors warrants to purchase up to an aggregate of 125,000 shares of common stock for $37.65 per share from April 15, 2022 until the fifth anniversary of the initial exercise date. The warrants were issued pursuant to Section 4(a)(2) and/or Rule 506(b) under Regulation D promulgated under the Securities Act due to the fact the issuance of the warrants did not involve a public offering of securities and there was no solicitation or advertising. See “Management’s Discussion and Analysis of Financial Condition; Recent Event; Unit and Prefunded S-3 Offering” for more information.
I
TEM 3. DEFAULTS UPON SENIOR SECURITIES.
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TEM 4. MINE SAFETY DISCLOSURES.
I
TEM 5. OTHER INFORMATION.
See “Private Offering of Shares of Common Stock and Warrants” under “Item 2. Management’s Discussion And Analysis of Financial Condition and Results of Operations.
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(a) Exhibits. The following documents are filed as part of this report:
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Inline XBRL Instance Document |
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Inline XBRL Schema Document |
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Inline XBRL Calculation Linkbase Document |
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Inline XBRL Definition Linkbase Document |
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Inline XBRL Label Linkbase Document |
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Inline XBRL Presentation Linkbase Document |
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Cover Page Interactive Data File (embedded within the Inline XBRL document filed as Exhibit 101) |
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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TOUGHBUILT INDUSTRIES, INC. |
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Chief Executive Officer and Chairman |
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(Principal Executive Officer) |
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(Principal Financial Officer)
(Principal Accounting Officer) |