ToughBuilt(TBLT) - 2023 Q1 - Quarterly Report

Financial Performance - Global Amazon sales for 2022 reached approximately $15.9 million, representing a 34% increase from $11.9 million in 2021[155] - Revenues for the three months ended March 31, 2023, were $20,212,711, an increase of $2,991,967 or 17.37% compared to $17,220,744 in the same period of 2022[177] - The net loss for the three months ended March 31, 2023, was $8,275,162, an improvement compared to a net loss of $12,103,938 in the same period of 2022[183] - Cash flows from operating activities for the three months ended March 31, 2023, were $782,927, a significant improvement from a net cash outflow of $10,062,099 in 2022[189] - The company had $2.4 million in cash at March 31, 2023, down from $2.6 million at December 31, 2022, and an accumulated deficit of approximately $153.2 million[184] Operating Expenses and Costs - Cost of goods sold for the three months ended March 31, 2023, was $16,655,439, an increase of $2,437,822 or 17.15% compared to $14,217,617 in 2022, with a cost of goods sold as a percentage of revenues of 82.40%[178] - Operating expenses decreased by $843,929 or 5.3% to $15,090,116 for the three months ended March 31, 2023, compared to $15,934,045 in 2022[180] - Research and development costs increased by $1,013,471 or 40.31% to $3,527,521 for the three months ended March 31, 2023, primarily due to the development of new tools for the construction industry[181] Market Expansion and Product Development - The company launched over 40 new SKUs in the Handheld Screwdrivers segment and more than 20 new SKUs in the Handheld Wrenches segment in January 2023[155] - An expanded distribution agreement with Sodimac will introduce 15 SKUs in-store and 23 SKUs online across several South American countries[155] - The company is actively expanding into markets in Mexico, Latin America, the Middle East, and South Africa[163] - The company plans to add up to three major retailers and several distributors within six sectors across fifty-six targeted countries[164] - The company has launched new products including the Reload Utility Knife and various tape measures, enhancing its product offerings[167] Financial Challenges and Future Outlook - The company has incurred substantial operating losses since inception and anticipates additional losses until technology in development is commercialized[153] - Prices of certain commodity products have been volatile, impacting profit margins due to increased costs of raw materials and shipping[175] - The company plans to seek additional capital through debt or equity financing to fund operations and technology development, with substantial doubt about its ability to continue as a going concern for the next twelve months[185] - The company anticipates incurring additional losses until it can obtain marketing approval for its technology currently in development[184] - Total contractual obligations as of March 31, 2023, were $4,203,913, with obligations for the next three months amounting to $3,244,283[194] Intellectual Property - The company holds several patents and trademarks, with new design patents granted for ruggedized mobile devices valid for 15 years[169] Industry Context - The U.S. home improvement industry has shown steady growth, with over 130 million homes requiring regular investment to offset depreciation[160]