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Securities registered pursuant to Section 12(b) of the Act:

 

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

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.    

 

 

 

On November 17, 2022, ToughBuilt Industries, Inc. (the “”) consummated the closing of a private placement (the “”), pursuant to the terms and conditions of the Securities Purchase Agreement, dated November 15, 2022 (the “”), by and among the Company and certain purchasers named on the signature pages thereto (the “”). At the closing of the Private Placement, the Company issued (i) 982,466 shares of common stock (the “”); (ii) pre-funded warrants (the “”) to purchase an aggregate of 1,637,445 shares of common stock, and (iii) Series C Preferred Investment Options to purchase 10,619,911 shares of common stock (the “,” and, collectively with the Shares, the Pre-Funded Warrants, the “”).  

 

The purchase price of each Share and associated Series C Preferred Investment was

$2.862692

and the purchase price of each Pre-Funded Warrant and associated Series C Preferred Investment Option was $2.862592. The aggregate gross proceeds to the Company from the Private Placement were approximately $7,500,000, before deducting placement agent fees and other offering expenses.

The Company intends to use the net proceeds from the offering for general working capital purposes

.

H.C. Wainwright & Co., LLC (the “” or “”) acted as the exclusive placement agent for the Private Placement. 

 

In connection with the offering, the investors in the private placement agreed to cancel preferred investment options to purchase up to an aggregate of 8,000,000 shares of common stock of the Company which were previously issued to the investors in July 2022.

 

The Purchase Agreement contains customary representations, warranties, and covenants of the Company and Purchasers and customary closing conditions, indemnification rights, and other obligations of the parties. Under the Purchase Agreement, the Company agreed to use the net proceeds from the sale of the Securities for working capital purposes and to not use such proceeds: (a) for the satisfaction of any portion of the Company’s debt (other than payment of trade payables in the ordinary course of the Company’s business and prior practices), (b) for the redemption of any common stock or Common Stock Equivalents (as defined in the Purchase Agreement), (c) for the settlement of any outstanding litigation, or (d) in violation of the Foreign Corrupt Practices Act of 1977, as amended, or the regulations promulgated by the Office of Foreign Assets Control of the U.S. Treasury Department. The Purchase Agreement is governed by the laws of the State of New York.

 

The Company also agreed that, from the date of the Purchase Agreement until sixty (60) days after the effective date of the initial registration statement (the “Effective Date”) filed under the Registration Rights Agreement (as defined below), the Company will not (i) issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of common stock or Common Stock Equivalents (as defined in the Purchase Agreement) or (ii) file any registration statement or any amendment or supplement thereto, in each case other than as contemplated under the Registration Rights Agreement. Further, until the one (1) year anniversary of the Effective Date of the initial registration statement filed under the Registration Rights Agreement, the Company is prohibited from effecting or entering into an agreement to effect any issuance by the Company of common stock or Common Stock Equivalents (or a combination of units thereof) involving a Variable Rate Transaction (as defined in the Purchase Agreement), subject to certain limited exceptions set forth in the Purchase Agreement;

, , that, after six (6) months following the Effective Date, the issuance of shares of common stock in an “at the market” offering with Wainwright as sales agent shall not be deemed a Variable Rate Transaction. 

 

The foregoing summary of the Purchase Agreement is qualified in its entirety by reference to the form of the Purchase Agreement, which is filed as Exhibit 10.1 to this Form 8-K and is incorporated by reference herein.

 

The Pre-Funded Warrants have an exercise price of $0.0001 per share of common stock (the “”), and are exercisable on or after the date of issuance until all of the Pre-Funded Warrants are exercised in full.

 

The foregoing summary of the Pre-Funded Warrants is qualified in its entirety by reference to the form of Pre-Funded Warrants, which is filed herewith as Exhibit 4.1 to this Form 8-K and is incorporated by reference herein.

 

 

The Series C Preferred Investment Options are exercisable at any time on or after November 17, 2022 at an exercise price of $2.356 per share of common stock (the “”), subject to certain adjustments, including with respect to stock dividends, splits, subsequent rights offerings, pro rata distributions and a Fundamental Transaction (as defined in the Series C Preferred Investment Options), and terminate on the third anniversary of such date. If, at any time at the time of exercise of the Series C Preferred Investment Options, there is no effective registration statement registering, or the prospectus contained therein is not available for the resale of the shares issuable pursuant to the exercise of Series C Preferred Investment Options, the Series C Preferred Investment Options may be exercised, in whole or in part, by means of a cashless exercise, in which the holder is entitled to receive a number of shares of common stock to be determined by a formula contained in the Preferred Investment Options. No fractional shares or scrip representing fractional shares may be issued upon the exercise of the Preferred Investment Options.

 

The foregoing summary of the Series C Preferred Investment Options is qualified in its entirety by reference to the form of the Series C Preferred Investment Option which is filed as Exhibit 4.2 to this Form 8-K and is incorporated by reference herein.

 

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with the Purchasers, dated November 15, 2022 (the “”). The Registration Rights Agreement provides that the Company shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the Securities and Exchange Commission (the “”) no later than the 10th calendar day following the date of the Registration Rights Agreement, or November 25, 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 the 45th calendar day following the date of the Registration Rights Agreement, or in the event of a “full review” by the SEC, the 75th day following the date of the Registration Rights Agreement.

 

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, the Company is 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.

 

Subject to certain exceptions, neither the Company nor any of its 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 Shares and the Warrant Shares. The Company may not file any other registration statements until all Shares and Warrant Shares are registered pursuant to a registration statement that is declared effective by the SEC, provided that the Company 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.

 

 

All fees and expenses incident to the performance of or compliance with the Registration Rights Agreement by the Company will be borne by the Company, whether or not any Shares or Warrant Shares are sold pursuant to a registration statement.

 

The foregoing summary of the Registration Rights Agreement is qualified in its entirety by reference to the form of Registration Rights Agreement, which is filed as Exhibit 10.2 to this Form 8-K and is incorporated by reference herein.

 

Wainwright served as the exclusive placement agent for the issuance and sale of the securities pursuant to the Purchase Agreement and is entitled to preferred investment options (the “”) to purchase up to 157,195 shares of common stock. The Placement Agent Preferred Investment Options are in substantially the same form as the Series C Preferred Investment Options, except that the exercise price is approximately $3.578365 per share. The foregoing summary of the Placement Agent Preferred Investment Options is qualified in its entirety by reference to the form of Placement Agent Preferred Investment Options, which is filed as Exhibit 4.3 to this Form 8-K and is incorporated by reference herein.

In addition, upon any exercise for cash of any preferred investment options issued to investors in the offering, the Company shall pay Wainwright, within five (5) business days of the Company's receipt of the exercise price, a cash fee of seven (7.0%) percent of the aggregate gross exercise price paid in cash with respect thereto and a management fee of 0.5% of the aggregate gross exercise priced paid in cash with respect thereto.   

 

The information contained above in Item 1.01 related to the Securities is hereby incorporated by reference into this Item 3.02. The Securities were sold without registration under the Securities Act of 1933, as amended (the “”), in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as a transaction not involving a public offering and Rule 506(b) of Regulation D promulgated under the Securities Act as sales to accredited investors and in reliance on similar exemptions under applicable state laws.

 

Additionally, the Wainwright Warrants were issued and, upon exercise, the shares of common stock underlying such warrants will be issued, without registration under the Securities Act, in reliance on the exemptions provided by Section 4(a)(2) under the Securities Act as a transaction not involving a public offering.

 

 

On November 16, 2022, the Company issued a press release announcing the pricing of the Private Placement. On November 17, 2022, the Company issued a press release announcing the closing of the Private Placement. Copies of the press releases are attached as Exhibit 99.1 and Exhibit 99.2 to this Current Report on Form 8-K and are incorporated herein by reference.

 

 

(d) Exhibits

 

 

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.