ToughBuilt(US:TBLT)2023-03-31 21:15Sales Growth - Annual sales growth increased from approximately $1,000,000 in 2013 to approximately $95,000,000 in 2022, reflecting a significant growth trajectory [20] - Online sales through Amazon increased by 41% to approximately $3.4 million in Q1 2022 compared to Q1 2021, and total sales for the first half of 2022 rose by 28% to approximately $7.0 million [26] - Global Amazon sales for 2022 reached approximately $15.9 million, representing a 34% increase from $11.9 million in 2021 [26] - ToughBuilt's online sales for Q3 2022 through Amazon.com were $3.9 million, a 38% rise from Q3 2021, with total sales for the nine-month period increasing by 32% to approximately $10.9 million [26] - Revenues for the fiscal year ended December 31, 2022, were $95,253,767, a 36% increase from $70,026,324 in 2021, driven by strong product acceptance and new customer orders [207] Product Development - The company launched 21 new SKUs in the global handsaws segment, including the QuickSet™ Double-Edge Pull Saw, expected to be available in Q4 2022 [26] - In 2022, the company launched multiple new product lines, including 21 new SKUs in the global handsaws segment and over 40 new SKUs in the handheld screwdrivers segment [54] - ToughBuilt's product strategy includes developing multiple product lines to enhance brand recognition and accelerate sales growth [41] Distribution and Market Expansion - ToughBuilt entered into a distribution agreement with Sodimac, the largest home improvement supplier in South America, expanding its presence in multiple countries [26] - The company expanded its distribution agreement with major retailers in Germany, which accounted for a 35% share of the global hand tools market in 2019 [26] - A comprehensive distribution agreement was reached with Sodimac, the largest home improvement supplier in South America, starting with 15 ToughBuilt SKUs in Peru and Colombia [197] - The company entered into a supply agreement with Elecktro3 S.C.C.L and NCC Hardware Purchasing and Services Centers, SL, enhancing its presence in Spain's hardware market [197] Financial Performance - The company incurred a net loss of approximately $39.3 million for the year ended December 31, 2022, compared to a net loss of $37.5 million for the previous year [68] - The accumulated deficit was approximately $145 million as of December 31, 2022 [66] - Cost of goods sold increased by 37.6% to $70,042,504 in 2022, up from $50,912,513 in 2021, with cost of goods sold as a percentage of revenues rising to 73.5% from 72.7% [208] - Operating expenses rose by 28.7% to $66,189,907 in 2022, compared to $51,434,180 in 2021, with SG&A expenses as a percentage of revenues decreasing to 69.5% from 73.4% [209] - Research and development costs increased by 61.8% to $11,296,948 in 2022, up from $6,980,453 in 2021, primarily due to new tool development and related expenses [210] Risks and Challenges - The company is highly dependent on manufacturers in China, India, and the Philippines for its products [74] - Supply chain disruptions could negatively impact the company's ability to deliver inventory timely, potentially leading to lost sales and increased costs [75] - A significant percentage of production occurs outside the U.S., making the company vulnerable to tariffs and trade restrictions, which could harm financial condition and growth prospects [76] - The COVID-19 pandemic has created significant volatility and uncertainty, potentially impacting financial results and overall demand for services [83] - Rising commodity prices, including fuel and raw materials, could negatively affect profit margins and overall business performance [85] Intellectual Property - The company emphasizes the importance of protecting its intellectual property rights, including trademarks and patents, to maintain brand recognition and customer loyalty [99] - The company currently holds issued patents, patent applications, trademarks, and trade secrets, but faces risks that these may be challenged or misappropriated by third parties [100] - There is uncertainty regarding the issuance of new patents and their ability to provide meaningful protection against infringement [101] Corporate Governance and Compliance - The company has identified material weaknesses in its internal control over financial reporting, which could adversely affect the accuracy and timeliness of financial reporting [127] - The company may face increased costs and administrative burdens due to compliance with public company regulations, which could divert resources from business development [126] - The company is subject to potential litigation that could result in significant financial liabilities, including judgments and legal fees [105] Stock and Financing - The company is authorized to issue up to 200,000,000 shares of common stock, which may lead to dilution of current stockholders' ownership interests [118] - A private placement in July 2022 raised approximately $20 million, issuing 700,000 shares of common stock and pre-funded warrants for 3,300,000 shares [169] - The November 2022 private placement generated approximately $7.5 million, issuing 982,466 shares of common stock and pre-funded warrants for 1,637,445 shares [179] Operational Challenges - The company is monitoring the ongoing impacts of COVID-19, which could disrupt supply chains and labor levels [200] - The company has incurred substantial operating losses and requires additional financing to fund operations and growth, with no assurances of obtaining such financing [195]