ToughBuilt(TBLT) - 2022 Q3 - Quarterly Report

Financial Performance - In Q3 2022, total revenues reached approximately $30.2 million, a significant increase from approximately $17.2 million in the same period in 2020, representing a growth of 75%[165] - Revenues for the three months ended September 30, 2022, were $30,245,252, an increase of $13,029,314 or 75.68% compared to $17,215,938 in the same period of 2021[206] - Revenues for the nine months ended September 30, 2022, were $65,353,651, an increase of $20,002,093 or 44.10% compared to $45,351,558 in 2021[213] - The company recorded a net income of $8,006,430 for the three months ended September 30, 2022, compared to a net loss of $9,094,707 for the same period in 2021[212] - Cost of goods sold for the three months ended September 30, 2022, was $22,328,094, an increase of $10,556,779 or 89.68% compared to $11,771,315 in 2021, with a cost of goods sold as a percentage of revenues of 73.82%[207] - Cost of goods sold for the nine months ended September 30, 2022, was $49,484,951, an increase of $18,005,775 or 57.2% compared to $31,479,176 in 2021, with a cost of goods sold as a percentage of revenues at 75.72%[214] - Operating expenses for the three months ended September 30, 2022, were $14,676,135, a decrease of $566,645 or 3.72% compared to $15,242,780 in 2021, with SG&A expenses as a percentage of revenues at 48.52%[209] - Operating expenses for the nine months ended September 30, 2022, were $45,106,976, an increase of $11,202,018 or 33.04% compared to $33,904,958 in 2021[216] - Research and development costs for the three months ended September 30, 2022, were $2,781,676, an increase of $1,171,005 or 72.7% compared to $1,610,671 in 2021, primarily due to new tool development for the construction industry[210] - The company had $1.6 million in cash at September 30, 2022, down from $7.5 million at December 31, 2021, with an accumulated deficit of approximately $121.9 million[220] - Net cash used in operating activities for the nine months ended September 30, 2022, was $30,295,137, compared to $45,708,621 in 2021[229] Market Expansion - The company entered into an agreement with Ace Hardware to distribute 35 ToughBuilt products across 5,500 individual Ace stores[165] - ToughBuilt expanded its European distribution network, including agreements with two major wholesale tool distributors in Switzerland and over 250 retailers[165] - The company announced major expansions in Great Britain, confirming agreements with multiple retailers representing over 900 locations[165] - ToughBuilt is actively expanding its market presence in regions including Western and Central Europe, Eastern Europe, South America, and the Middle East[182] - The company anticipates adding up to three major retailers and several distributors within six sectors across fifty-six targeted countries in the near term[185] Product Development - ToughBuilt launched the Reload Utility Knife, a new cutting tool available through a leading US home improvement retailer with over 15,500 storefronts globally[165] - ToughBuilt launched 21 new SKUs in the global handsaws segment, including the QuickSet™ Double-Edge Pull Saw, available in Q4 2022[165] - The company plans to launch a new line of rugged mobile devices and accessories for the construction industry, with products expected to be ready for market in 2024[186] - In 2021, TOUGHBUILT® introduced several new products, including the world's first patented magazine-fed reloading blade mechanism in the Reload Utility Knife and 21 new SKUs in the global handsaws segment[190] Financial Challenges - ToughBuilt has incurred substantial operating losses since inception and may require additional financing to continue operations[161] - The company has increased product prices in 2021 to offset rising costs from manufacturers and shipping rates due to inflation[203] - The business is seasonal, with production in China affected by the New Year holidays, typically resulting in lost sales in the first calendar quarter[199] - The competitive landscape includes major players like DeWalt, Caterpillar, and Samsung Active, which possess greater financial resources and broader distribution capabilities[195] Contractual Obligations - As of September 30, 2022, total contractual obligations amounted to $4,676,840, with operating lease obligations being $4,676,840[233] - For the twelve months ended September 30, 2023, total contractual obligations are projected to be $1,104,336[233] - The company has no off-balance sheet arrangements reported[234] Company Classification - The company is classified as a smaller reporting company and is electing scaled disclosure reporting obligations[237]