ToughBuilt Industries, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2022

The Company calculated the estimated fair value of warrants on the date of issuance and at each subsequent reporting date using the following assumptions:

	For the Year Ended December 31, 2022			For the Year Ended December 31, 2021
Risk-free interest rate		4.06% - 4.32%			0.80% - 1.19%
Contractual term		1.75 – 4.75 years			4.54 – 5 years
Dividend yield		0	%		0	%
Expected volatility		88%-99.5%			56.27%- 88.3%

Schedule of Warrants Liabilities Measured at Fair Value Using Significant Unobservable Inputs

The table below provides a reconciliation of the beginning and ending balances for the warrant and preferred investment option liability which is measured at fair value using significant unobservable inputs (Level 3):

Balance, January 1, 2021	$	-
Fair value of warrant liability at issuance		7,463,005
Change in the fair value of warrant liability		(2,661,076	)
Balance, December 31, 2021	$	4,801,929

Balance, January 1, 2022	$	4,801,929
Fair value of warrant and preferred investment option liability at issuance		37,687,895
Fair value of warrant and preferred investment option liability upon exercise		(9,610,346	)
Change in the fair value of warrant and preferred investment option liability		(16,763,205	)
Balance, December 31, 2022	$	16,116,273

Schedule of Potential Dilutive Securities

Potentially dilutive securities that are not included in the calculation of diluted net loss per share because their effect is anti-dilutive are as follows (in common equivalent shares):

	Year Ended
	December 31, 2022		December 31, 2021
Warrants and preferred investment options		11,624,579		281,832
Options and restricted stock units		1,351,271		1,354
Total anti-dilutive weighted average shares		12,975,850		283,186