Nevada | 46-0820877 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
8669 Research Drive Irvine, CA 92618 | 92618 | |
(Address of principal executive offices) | (Zip Code) |
(949) 528-3100 |
(Registrant’s telephone number, including area code) |
25371 Commercentre Drive, Lake Forest, CA 92630 |
(Former name, former address and formal fiscal year, if changed since last report) |
Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
Common Stock | TBLT | |||
Series A Warrants | TBLTW |
Large accelerated filer | Accelerated filer | ||
Non-accelerated filer | Smaller reporting company | ||
Emerging growth company |
June 30, | December 31, | September 30, | December 31, | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||||
(UNAUDITED) | (UNAUDITED) | ||||||||||||||||
Assets | |||||||||||||||||
Current Assets | |||||||||||||||||
Cash | $ | 2,143,012 | $ | 7,472,224 | $ | 1,588,440 | $ | 7,472,224 | |||||||||
Accounts receivable, net | 15,037,633 | 18,179,933 | 23,403,628 | 18,179,933 | |||||||||||||
Inventory, net | 40,156,305 | 38,432,012 | 40,005,614 | 38,432,012 | |||||||||||||
Prepaid and other current assets | 2,564,983 | 786,036 | 2,861,504 | 786,036 | |||||||||||||
Total Current Assets | 59,901,933 | 64,870,205 | 67,859,186 | 64,870,205 | |||||||||||||
Other Assets | |||||||||||||||||
Property and equipment, net | 16,548,006 | 13,341,629 | 18,678,836 | 13,341,629 | |||||||||||||
Right-of-use asset | 4,899,059 | - | 4,678,336 | - | |||||||||||||
Other assets | 1,517,760 | 742,691 | 1,683,160 | 742,691 | |||||||||||||
Total Assets | $ | 82,866,758 | $ | 78,954,525 | $ | 92,899,518 | $ | 78,954,525 | |||||||||
Liabilities and Stockholders’ Equity | |||||||||||||||||
Current Liabilities | |||||||||||||||||
Accounts payable | $ | 31,401,313 | $ | 14,440,506 | $ | 29,096,188 | $ | 14,440,506 | |||||||||
Accrued expenses | 2,346,390 | 1,815,567 | 2,745,785 | 1,815,567 | |||||||||||||
Lease liability, current maturities | 1,039,199 | - | 952,989 | - | |||||||||||||
Warrant liabilities | 2,960,853 | 4,801,929 | |||||||||||||||
Short-term loan payable | 1,390,833 | - | |||||||||||||||
Warrant and preferred investment option liabilities | 5,179,342 | 4,801,929 | |||||||||||||||
Total Current Liabilities | 37,747,755 | 21,058,002 | 39,365,137 | 21,058,002 | |||||||||||||
Lease liability, net of current maturities | 3,797,491 | - | 3,723,851 | - | |||||||||||||
Total Liabilities | 41,545,246 | 21,058,002 | 43,088,988 | 21,058,002 | |||||||||||||
Commitment and Contingencies (Note 5) | 0 | 0 | |||||||||||||||
Stockholders’ Equity | |||||||||||||||||
Series C Preferred Stock, $0.0001 par value, 4,268 authorized, 0 issued and outstanding at June 30, 2022 and December 31, 2021 | 0- | 0- | |||||||||||||||
Series D Preferred Stock, $1,000 par value, 5,775 shares authorized, issued, and outstanding at June 30, 2022 and December 31, 2021, respectively | 0- | 0- | |||||||||||||||
Series E Preferred Stock, $0.0001 par value, 15 authorized, 9 issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 0- | 0- | |||||||||||||||
Series F Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at June 30, 2022, 0 authorized, issued and outstanding at December 31, 2021 | 0- | 0- | |||||||||||||||
Series G Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at June 30, 2022, 0 authorized, issued and outstanding at December 31, 2021 | 0- | 0- | |||||||||||||||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 5,722,743 and 861,997 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | 572 | 86 | |||||||||||||||
Series C Preferred Stock, $0.0001 par value, 4,268 authorized, 0 issued and outstanding at September 30, 2022 and December 31, 2021 | - | - | |||||||||||||||
Series D Preferred Stock, $1,000 par value, 5,775 shares authorized. 0 issued, and outstanding at September 30, 2022 and December 31, 2021, respectively | - | - | |||||||||||||||
Series E Preferred Stock, $0.0001 par value, 15 authorized, 9 issued and outstanding at September 30, 2022 and December 31, 2021, respectively | - | - | |||||||||||||||
Series F Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at September 30, 2022, 0 authorized, issued and outstanding at December 31, 2021 | - | - | |||||||||||||||
Series G Preferred Stock, $0.0001 par value, 2,500 authorized, issued and outstanding at September 30, 2022, 0 authorized, issued and outstanding at December 31, 2021 | - | - | |||||||||||||||
Common stock, $0.0001 par value, 200,000,000 shares authorized, 12,326,531 and 861,997 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively | 1,232 | 86 | |||||||||||||||
Additional paid-in capital | 163,751,509 | 156,184,327 | 171,700,637 | 156,184,327 | |||||||||||||
Accumulated deficit | (122,430,569 | ) | (98,287,890 | ) | (121,891,339 | ) | (98,287,890 | ) | |||||||||
Total Stockholders’ Equity | 41,321,512 | 57,896,523 | 49,810,530 | 57,896,523 | |||||||||||||
Total Liabilities and Stockholders’ Equity | $ | 82,866,758 | $ | 78,954,525 | $ | 92,899,518 | $ | 78,954,525 |
3 |
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues, net of allowances | ||||||||||||||||
Metal goods | $ | 19,226,191 | $ | 8,078,180 | $ | 34,354,744 | $ | 18,130,530 | ||||||||
Soft goods | 8,239,785 | 9,137,758 | 27,258,989 | 27,221,028 | ||||||||||||
Electronic goods | 2,779,275 | - | 3,739,918 | |||||||||||||
Total revenues, net of allowances | 30,245,251 | 17,215,938 | 65,353,651 | 45,351,558 | ||||||||||||
Cost of Goods Sold | ||||||||||||||||
Metal goods | 14,923,322 | 6,419,003 | 28,041,096 | 13,680,028 | ||||||||||||
Soft goods | 4,868,601 | 5,352,312 | 18,011,023 | 17,799,148 | ||||||||||||
Electronic goods | 2,536,171 | - | 3,432,832 | |||||||||||||
Total cost of goods sold | 22,328,094 | 11,771,315 | 49,484,951 | 31,479,176 | ||||||||||||
Gross profit | 7,917,157 | 5,444,623 | 15,868,700 | 13,872,382 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 14,676,135 | 15,242,780 | 45,106,976 | 33,904,958 | ||||||||||||
Research and development | 2,781,676 | 1,610,671 | 8,050,481 | 4,558,781 | ||||||||||||
Total operating expenses | 17,457,811 | 16,853,451 | 53,157,457 | 38,463,739 | ||||||||||||
Income (loss) from operations | (9,540,654 | ) | (11,408,828 | ) | (37,288,757 | ) | (24,621,357 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Warrant issuance costs | (969,791 | ) | (588,221 | ) | (1,415,229 | ) | (588,221 | ) | ||||||||
Change in fair value of warrant and preferred investment option liabilities | 19,065,297 | 2,902,342 | 23,111,029 | 2,902,342 | ||||||||||||
Interest expense | (548,422 | ) | - | (640,603 | ) | (263,555 | ) | |||||||||
Total other income (expense) | 17,547,084 | 2,314,121 | 21,055,197 | 2,050,566 | ||||||||||||
Net income (loss) | 8,006,430 | (9,094,707 | ) | (16,233,560 | ) | $ | (22,570,791 | ) | ||||||||
Common stock deemed dividend | (7,467,200 | ) | - | (7,467,200 | ) | - | ||||||||||
Net income (loss) attributable to common stockholders | $ | 539,230 | $ | (9,094,707 | ) | $ | (23,700,760 | ) | $ | (22,570,791 | ) | |||||
Basic net income ( loss ) per share attributed to common stockholders | $ | 0.05 | $ | (11.18 | ) | $ | (5.42 | ) | $ | (37.36 | ) | |||||
Basic weighted average common shares outstanding | 10,872,412 | 813,734 | 4,376,175 | 604,128 | ||||||||||||
Diluted net income ( loss ) per share attributed to common stockholders | $ | 0.03 | $ | (11.18 | ) | $ | (5.42 | ) | $ | (37.36 | ) | |||||
Diluted weighted average common shares outstanding | 19,721,339 | 813,734 | 4,376,175 | 604,128 |
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenues, net of allowances | ||||||||||||||||
Metal goods | $ | 7,259,924 | $ | 5,707,154 | $ | 15,128,553 | $ | 10,052,351 | ||||||||
Soft goods | 10,160,625 | 10,146,214 | 19,019,204 | 18,083,270 | ||||||||||||
Electronic goods | 467,106 | - | 960,643 | |||||||||||||
Total revenues, net of allowances | 17,887,655 | 15,853,368 | 35,108,400 | 28,135,621 | ||||||||||||
Cost of Goods Sold | ||||||||||||||||
Metal goods | 5,845,432 | 4,391,373 | 13,117,774 | 7,720,868 | ||||||||||||
Soft goods | 6,675,715 | 8,108,719 | 13,142,422 | 13,598,351 | ||||||||||||
Electronic goods | 418,092 | - | 896,661 | |||||||||||||
Total cost of goods sold | 12,939,239 | 12,500,092 | 27,156,857 | 21,319,219 | ||||||||||||
Gross profit | 4,948,416 | 3,353,276 | 7,951,543 | 6,816,402 | ||||||||||||
Operating expenses: | ||||||||||||||||
Selling, general and administrative expenses | 14,496,942 | 9,242,946 | 30,430,841 | 17,192,727 | ||||||||||||
Research and development | 2,754,351 | 1,429,819 | 5,268,805 | 2,836,204 | ||||||||||||
Total operating expenses | 17,251,293 | 10,672,765 | 35,699,646 | 20,028,931 | ||||||||||||
Income (loss) from operations | (12,302,877 | ) | (7,319,489 | ) | (27,748,103 | ) | (13,212,529 | ) | ||||||||
Other income (expense) | ||||||||||||||||
Warrant issuance costs | (170,308 | ) | - | (445,438 | ) | |||||||||||
Change in fair value of warrant liabilities | 429,572 | - | 4,045,732 | |||||||||||||
Interest expense | (92,438 | ) | (102,937 | ) | (92,181 | ) | (263,556 | ) | ||||||||
Total other income (expense) | 166,826 | (102,937 | ) | 3,508,113 | (263,556 | ) | ||||||||||
Net loss | $ | (12,136,051 | ) | (7,422,426 | ) | (24,239,990 | ) | $ | (13,476,085 | ) | ||||||
Basic and diluted net loss per share attributed to common stockholders | $ | (9.45 | ) | $ | (13.64 | ) | $ | (22.57 | ) | (27.08 | ) | |||||
Basic and diluted weighted average common shares outstanding | 1,284,110 | 544,035 | 1,074,220 | $ | 497,588 |
4 |
Series C Preferred Stock | Serie s D Preferred Stock | Series E Preferred Stock | Series F Preferred Stock | Series G Preferred Stock | Common Stock | Additional | Accumulated | Total Stockholders' | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Paid-in Capital | Deficit | Equity (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance - January 1, 2021 | - | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | 292,792 | $ | 29 | $ | 80,108,016 | $ | (60,761,992 | ) | $ | 19,346,053 | |||||||||||||||||||||||||||||||||||
Issuance of common stock upon conversion of warrants | - | - | - | - | - | - | - | - | - | - | 36,057 | 4 | 5,408,536 | - | 5,408,540 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for services | - | - | - | - | - | - | - | - | - | - | 1,000 | - | 189,000 | - | 189,000 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | - | - | - | - | - | - | - | - | 214,186 | 21 | 39,074,368 | - | 39,074,390 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 81,537 | - | 81,537 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (6,053,659 | ) | (6,053,659 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance - March 31, 2021 | - | - | - | - | - | - | - | - | - | - | 544,035 | 54 | 124,861,457 | (66,815,651 | ) | 58,045,861 | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon conversion of Series D Preferred Stock | - | - | - | - | - | - | - | - | - | - | - | - | 81,539 | - | 81,539 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (7,422,426 | ) | (7,422,426 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance – June 30, 2021 | - | - | - | - | - | - | - | - | - | - | 544,035 | 54 | 124,942,996 | (74,238,077 | ) | 50,704,974 | ||||||||||||||||||||||||||||||||||||||||||||
Balance – January 1, 2022 | - | - | - | - | 9 | $ | - | - | - | - | $ | - | 861,997 | 86 | 156,184,327 | (98,287,890 | ) | 57,896,523 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of preferred stock | - | - | - | - | - | - | 2,500 | - | 2,500 | - | - | 1,833,995 | 1,833,995 | |||||||||||||||||||||||||||||||||||||||||||||||
Adoption of lease guidance | - | - | - | - | - | - | - | - | - | - | - | 97,310 | 97,310 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expens e | - | - | - | - | - | - | - | - | - | - | - | 13,101 | 13,101 | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (12,103,938 | ) | (12,103,938 | ) | |||||||||||||||||||||||||||||||||||||||||||||
- | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - March 31,2022 | - | - | - | - | 9 | $ | - | 2,500 | - | 2,500 | $ | - | 861,997 | 86 | 158,031,423 | (110,294,518 | ) | 47,736,991 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants, net of issuance costs | - | - | - | - | - | - | - | - | - | - | 3,157,895 | 316 | 1,848,756 | - | 1,849,072 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | - | - | - | - | - | - | - | - | - | - | 1,549,211 | 155 | 6,358,244 | - | 6,358,399 | |||||||||||||||||||||||||||||||||||||||||||||
Cashless warrants exercised | - | - | - | - | - | - | - | - | - | - | 153,640 | 15 | (15 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock warrants | - | - | - | - | - | - | - | - | - | - | - | - | (2,500,000 | ) | - | (2,500,000 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (12,136,051 | ) | (12,136,051 | ) | |||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 13,101 | - | 13,101 | |||||||||||||||||||||||||||||||||||||||||||||
- | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance - June 30, 2022 | - | - | - | - | 9 | $ | - | 2500 | 2,500 | $ | - | 5,722,743 | 572 | 163,751,509 | (122,430,569 | ) | 41,321,512 |
Series C Preferred Stock | Series D Preferred Stock | Series E Preferred Stock | Series F Preferred Stock | Series G Preferred Stock | Common Stock | Additional Paid-in | Accumulated | Total Stockholders ’ Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | (Deficit) | ||||||||||||||||||||||||||||||||||||||||||||||
Balance - January 1, 2021 | - | $ | - | - | $ | - | - | $ | - | - | $ | - | - | $ | - | 292,792 | $ | 29 | $ | 80,108,016 | $ | (60,761,992 | ) | $ | 19,346,053 | |||||||||||||||||||||||||||||||||||
Issuance of common stock upon conversion of warrants | - | - | - | - | - | - | - | - | - | - | 36,057 | 4 | 5,408,536 | - | 5,408,540 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock for services | - | - | - | - | - | - | - | - | - | - | 1,000 | - | 189,000 | - | 189,000 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock | - | - | - | - | - | - | - | - | - | - | 214,186 | 21 | 39,074,368 | - | 39,074,390 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 81,537 | - | 81,537 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (6,053,659 | ) | (6,053,659 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance - March 31, 2021 | - | - | - | - | - | - | - | - | - | - | 544,035 | 54 | 124,861,457 | (66,815,651 | ) | 58,045,861 | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon conversion of Series D Preferred Stock | - | - | - | - | - | - | - | - | - | - | - | - | 81,539 | - | 81,539 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (7,422,426 | ) | (7,422,426 | ) | |||||||||||||||||||||||||||||||||||||||||||
Balance – June 30, 2021 | - | - | - | - | - | - | - | - | - | - | 544,035 | 54 | 124,942,996 | (74,238,077 | ) | 50,704,974 | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants | - | - | - | - | - | - | - | — | 317,935 | 32 | 31,154,858 | - | 31,154,890 | |||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | - | - | - | - | - | - | - | - | - | - | 27 | - | 4,000 | - | 4,000 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | - | - | - | - | - | - | - | - | 69,371 | - | 69,371 | |||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | (9,094,707 | ) | (9,094,707 | ) | ||||||||||||||||||||||||||||||||||||||||||||
Balance – September 30, 2021 | - | - | - | - | - | - | - | - | - | - | 861,997 | 86 | 156,171,225 | (83,332,784 | ) | 72,838,528 | ||||||||||||||||||||||||||||||||||||||||||||
Balance – January 1, 2022 | - | - | - | - | 9 | $ | - | - | - | - | $ | - | 861,997 | 86 | 156,184,327 | (98,287,890 | ) | 57,896,523 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of preferred stock | - | - | - | - | - | - | 2,500 | - | 2,500 | - | - | 1,833,995 | 1,833,995 | |||||||||||||||||||||||||||||||||||||||||||||||
Adoption of lease guidance | - | - | - | - | - | - | - | - | - | - | - | 97,310 | 97,310 | |||||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | 13,101 | 13,101 | |||||||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | (12,103,938 | ) | (12,103,938 | ) | |||||||||||||||||||||||||||||||||||||||||||||
- | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance - March 31,2022 | - | - | - | - | 9 | $ | - | 2,500 | - | 2,500 | $ | - | 861,997 | 86 | 158,031,423 | (110,294,518 | ) | 47,736,991 | ||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants, net of issuance costs | - | - | - | - | - | - | - | - | - | - | 3,157,895 | 316 | 1,848,756 | - | 1,849,072 | |||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | - | - | - | - | - | - | - | - | - | - | 1,549,211 | 155 | 6,358,244 | - | 6,358,399 | |||||||||||||||||||||||||||||||||||||||||||||
Cashless warrants exercised | - | - | - | - | - | - | - | - | - | - | 153,640 | 15 | (15 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Repurchase of common stock warrants | - | - | - | - | - | - | - | - | - | - | - | - | (2,500,000 | ) | - | (2,500,000 | ) | |||||||||||||||||||||||||||||||||||||||||||
Net loss | - | - | - | - | - | - | - | - | - | - | - | - | - | (12,136,051 | ) | (12,136,051 | ) | |||||||||||||||||||||||||||||||||||||||||||
Stock based compensation expense | - | - | - | - | - | - | - | - | - | - | - | - | 13,101 | - | 13,101 | |||||||||||||||||||||||||||||||||||||||||||||
- | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
Balance - June 30, 2022 | - | - | - | - | 9 | $ | - | 2500 | 2,500 | $ | - | 5,722,743 | 572 | 163,751,509 | (122,430,569 | ) | 41,321,512 | |||||||||||||||||||||||||||||||||||||||||||
Cashless warrants exercised | - | - | - | - | - | - | - | - | - | - | 1,000,104 | 100 | (100 | ) | - | - | ||||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock and warrants, net of issuance costs | - | - | - | - | - | - | - | - | - | - | 4,000,000 | 400 | (1,293,727 | ) | - | (1,293,327 | ) | |||||||||||||||||||||||||||||||||||||||||||
Issuance of common stock upon exercise of warrants | - | - | - | - | - | - | - | - | - | - | 1,603,684 | 160 | 9,229,854 | - | 9,230,014 | |||||||||||||||||||||||||||||||||||||||||||||
Net income | - | - | - | - | - | - | - | - | - | - | - | - | - | 539,230 | 539,230 | |||||||||||||||||||||||||||||||||||||||||||||
Stock based compensation | - | - | - | - | - | - | - | - | - | - | - | - | 13,101 | - | 13,101 | |||||||||||||||||||||||||||||||||||||||||||||
Balance - September 30, 2022 | - | - | - | - | 9 | $ | - | 2500 | 2,500 | $ | - | 12,326,531 | 1,232 | 171,700,637 | (121,891,339 | ) | 49,810,530 |
5 |
Six Months Ended June 30, | Nine Months Ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (24,239,990 | ) | $ | (13,476,085 | ) | $ | (16,233,560 | ) | $ | (22,570,791 | ) | ||||
Adjustments to reconcile from net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation | 1,938,527 | 644,098 | 3,103,204 | 1,196,562 | ||||||||||||
Stock-based compensation expense | 26,202 | 163,076 | 39,303 | 232,447 | ||||||||||||
Amortization of capitalized contract costs | 213,353 | - | 213,353 | |||||||||||||
Amortization of right-of-use asset | 230,758 | 451,481 | - | |||||||||||||
Common stock issued for services | 189,000 | - | 189,000 | |||||||||||||
Warrant issuance costs | 445,438 | - | 1,415,229 | 588,221 | ||||||||||||
Loss on sale of property and equipment | 15,806 | - | 15,806 | - | ||||||||||||
Change in fair value of warrant liabilities | (4,045,732 | ) | - | |||||||||||||
Change in fair value of warrant and preferred investment option liabilities | (23,111,029 | ) | (2,902,342 | ) | ||||||||||||
Changes in operating assets and liabilities | ||||||||||||||||
Accounts receivable, net | 3,142,300 | (2,516,523 | ) | (5,223,695 | ) | (6,502,967 | ) | |||||||||
Factor receivables, net | - | 807,648 | - | 807,648 | ||||||||||||
Inventory | (1,724,293 | ) | (9,663,833 | ) | (1,573,602 | ) | (22,402,533 | ) | ||||||||
Prepaid assets | (1,778,947 | ) | (1,000,242 | ) | (2,075,468 | ) | (255,074 | ) | ||||||||
Other assets | (775,069 | ) | (186,849 | ) | (940,469 | ) | (332,923 | ) | ||||||||
Accounts payable | 13,536,390 | 2,054,064 | 13,263,112 | 5,187,717 | ||||||||||||
Accrued expenses | 638,373 | 162,572 | 1,037,768 | 843,061 | ||||||||||||
Lease liability | (303,367 | ) | - | (463,217 | ) | - | ||||||||||
Net cash used in operating activities | (12,893,604 | ) | (22,609,721 | ) | (30,295,137 | ) | (45,708,621 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Proceeds from sale of property and equipment | 50,000 | - | 50,000 | - | ||||||||||||
Purchases of property and equipment | (1,786,292 | ) | (4,088,199 | ) | (7,113,646 | ) | (8,059,748 | ) | ||||||||
Net cash used in investing activities | (1,736,292 | ) | (4,088,199 | ) | (7,063,646 | ) | (8,059,748 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Proceeds from exercise of warrants | 2,931,067 | 5,408,540 | 5,978,067 | 5,412,540 | ||||||||||||
Repurchase of common stock warrants | (2,500,000 | ) | - | (2,500,000 | ) | - | ||||||||||
Proceeds from issuance of stock, net of costs | 8,869,617 | 39,911,415 | 26,606,099 | 77,941,089 | ||||||||||||
Proceeds from short-term loan payable | 1,669,000 | - | ||||||||||||||
Repayments of short-term loan payable | (278,167 | ) | - | |||||||||||||
Repayments of factor loan payable | 0- | (590,950 | ) | - | (590,950 | ) | ||||||||||
Repayments of Series D Preferred Stock | - | - | ||||||||||||||
Net cash provided by financing activities | 9,300,684 | 44,729,005 | 31,474,999 | 82,762,679 | ||||||||||||
Net increase (decrease) in cash | (5,329,212 | ) | 18,031,085 | (5,883,784 | ) | 28,994,310 | ||||||||||
Cash, beginning of period | 7,472,224 | 2,194,850 | 7,472,224 | 2,194,850 | ||||||||||||
Cash, end of period | $ | 2,143,012 | $ | 20,225,935 | $ | 1,588,440 | $ | 31,189,160 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid during the period for: | ||||||||||||||||
Interest | $ | - | $ | - | $ | - | $ | - | ||||||||
Income taxes | $ | - | $ | - | $ | - | $ | - | ||||||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||||||||||
Purchases of property and equipment in accounts payable | $ | 3,424,416 | $ | - | $ | 1,392,570 | $ | - | ||||||||
Initial value of lease liability | $ | 5,140,057 | $ | - | $ | 5,140,057 | $ | - | ||||||||
Initial fair value of warrants | $ | 5,631,988 | $ | - | ||||||||||||
Derecognition of warrant liability upon conversion | $ | 3,427,332 | $ | - | ||||||||||||
Initial fair value of warrants and preferred investment options | $ | 23,488,442 | $ | 7,463,005 | ||||||||||||
Derecognition of warrant and preferred investment option liability upon conversion | $ | 9,610,346 | $ | - |
6 |
● | tool belts, tool bags and other personal tool organizer products; |
● | complete line of knee pads for various construction applications; and |
● | job-site tools and material support products consisting of a full line of miter-saws and table saw stands, saw horses/job site tables and roller stands. |
7 |
8 |
9 |
● | Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company could access. |
● | Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates, and yield curves that are observable at commonly quoted intervals. |
● | Level 3 inputs are unobservable inputs for the asset or liability, which is typically based on an entity’s own assumptions, as there is little, if any, related market activity. |
10 |
At June 30, 2022 | At December 31, 2021 | At September 30, 2022 | At December 31, 2021 | |||
Risk-free interest rate | 3.01%-3.22% | 0.81% - 1.19% | 4.06%-4.25% | 0.81% - 1.19% | ||
Contractual term | 4-5 years | 4.54 years | 1.75-4.75 years | 4.54 years | ||
Expected volatility | 88% | 88% | 88% | 88% |
Balance, January 1, 2022 | $ | 4,801,929 | ||
Fair Value of warrant and preferred investment option liability at issuance | 33,098,789 | |||
Fair Value of warrant and preferred investment option liability upon exercise | (9,610,346 | ) | ||
Change in fair value of warrant and preferred investment option liability | (23,111,029 | ) | ||
Balance, September 30, 2022 | $ | 5,179,343 |
Balance, January 1, 2022 | $ | 4,801,929 | ||
Fair Value of Warrant Liability at issuance | 5,631,988 | |||
Fair Value of Warrant Liability upon exercise | (3,427,332 | ) | ||
Change in fair value of warrant liability | (4,045,732 | ) | ||
Balance, June 30, 2022 | $ | 2,960,853 |
Balance, July 1, 2022 | $ | 2,960,853 | ||
Fair Value of warrant and preferred investment option liability at issuance | 27,466,801 | |||
Fair Value of warrant and preferred investment option liability upon exercise | (6,183,014 | ) | ||
Change in fair value of warrant and preferred investment option liability | (19,065,297 | ) | ||
Balance, September 30, 2022 | $ | 5,179,343 |
Balance, April 1, 2022 | $ | 3,831,904 | ||
Fair Value of Warrant Liability at issuance | 2,985,853 | |||
Fair Value of Warrant Liability upon exercise | (3,427,332 | ) | ||
Change in fair value of warrant liability | (429,572 | ) | ||
Balance, June 30, 2022 | $ | 2,960,853 |
11 |
12 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net loss computation of basic and diluted net loss per common share: | ||||||||||||||||
Net loss attributable to common stockholders | $ | (10,600,863 | ) | $ | (7,422,426) | $ | (22,704,819 | ) | $ | (13,476,085 | ) | |||||
Basic and diluted net loss per share: | ||||||||||||||||
Basic and diluted net loss per common share | $ | (9.45 | ) | (13.64 | ) | $ | (22.57 | ) | (27.08 | ) | ||||||
Basic and diluted weighted average common shares outstanding | 1,284,110 | 544,035 | 1,074,220 | 497,588 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net loss computation of basic and diluted net loss per common share: | ||||||||||||||||
Net income ( loss ) attributable to common stockholders | $ | 539,230 | $ | (9,094,707 | ) | $ | (23,700,760 | ) | $ | (22,570,791 | ) | |||||
Basic and diluted net income ( loss ) per share: | ||||||||||||||||
Basic net income ( loss ) per common share | $ | 0.05 | $ | (11.18 | ) | $ | (5.42 | ) | $ | (37.36 | ) | |||||
Basic weighted average common shares outstanding | 10,872,412 | 813,734 | 4,376,175 | 604,128 | ||||||||||||
Diluted net income (l oss ) per common share | $ | 0.03 | $ | (11.18 | ) | $ | (5.42 | ) | $ | (37.36 | ) | |||||
Diluted weighted average common shares outstanding | 19,721,339 | 813,734 | 4,376,175 | 604,128 |
2022 | 2021 | |||||||
Warrants and preferred investment options | 8,847,473 | 281,929 | ||||||
Options and restricted stock units | 1,354 | 1,354 | ||||||
Total anti-dilutive weighted average shares | 8,848,827 | 283,283 |
2022 | 2021 | |||||||
Warrants | 2,211,157 | 110,110 | ||||||
Options and restricted stock units | 1,354 | 1,354 | ||||||
Total anti-dilutive weighted average shares | 2,212,511 | 111,464 |
13 |
June 30, 2022 | December 31, 2021 | September 30, 2022 | December 31, 2021 | |||||||||||||
Furniture | $ | 1,841,936 | $ | 1,066,219 | $ | 2,050,942 | $ | 1,066,219 | ||||||||
Computers | 1,247,098 | 1,038,154 | 1,382,745 | 1,038,154 | ||||||||||||
Production equipment | 155,977 | 245,713 | 155,977 | 245,713 | ||||||||||||
Tooling and molds | 7,538,600 | 6,390,962 | 9,527,742 | 6,390,962 | ||||||||||||
Auto | 635,542 | 635,542 | 635,542 | 635,542 | ||||||||||||
Application development | 3,578,919 | 2,398,919 | 4,074,919 | 2,398,919 | ||||||||||||
Website design | 1,033,182 | 814,733 | 1,120,431 | 814,733 | ||||||||||||
Steelbox | 882,000 | 882,000 | 882,000 | 882,000 | ||||||||||||
Leasehold improvements | 4,542,042 | 2,862,079 | 4,920,504 | 2,862,079 | ||||||||||||
Less: accumulated depreciation | (4,907,290 | ) | (2,992,692 | ) | (6,071,966 | ) | (2,992,692 | ) | ||||||||
Property and Equipment, net | $ | 16,548,006 | $ | 13,341,629 | $ | 18,678,836 | $ | 13,341,629 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Depreciation expense | $ | 1,004,802 | $ | 348,082 | $ | 1,938,527 | $ | 644,098 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Depreciation expense | $ | 1,164,689 | $ | 552,464 | $ | 3,103,204 | $ | 1,196,562 |
14 |
Operating leases | ||||||||
Right-of-use assets, net | $ | 4,899,059 | $ | 4,678,336 | ||||
Current liabilities | 1,039,199 | 952,989 | ||||||
Non-current liabilities | 3,797,491 | 3,723,851 | ||||||
Total operating lease liabilities | $ | 4,836,690 | $ | 4,676,840 | ||||
Weighted Average Remaining Lease Term | 4.41 years | 4.16 years | ||||||
Weighted Average Discount Rate | 4 | % | 4 | % |
For the years ending December 31, | Building leases | Building leases | ||||||
2022 (remaining) | $ | 589,810 | $ | 322,055 | ||||
2023 | 960,276 | 960,276 | ||||||
2024 | 1,311,858 | 1,311,858 | ||||||
2025 | 1,140,177 | 1,140,177 | ||||||
2026 | 1,082,177 | 1,082,177 | ||||||
Thereafter | 359,916 | 359,916 | ||||||
Total lease payments | 5,444,214 | 5,176,459 | ||||||
Less: imputed interest | (607,524 | ) | (499,619 | ) | ||||
Present value of lease liabilities | $ | 4,836,690 | $ | 4,676,840 |
15 |
16 |
Not entitled to dividends; |
Voting rights, as outlined in the Certificate of Designation; |
In the event of a voluntary or involuntary liquidation, dissolution, or winding up of the Company (collectively with a Deemed Liquidation, a “Liquidation”), the holders of Series E Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Junior Securities (as described in the Certification of Designation) by reason of their ownership thereof, an amount in cash equal to the aggregate Liquidation Value of all Series E Preferred Stock held by such holder, plus all unpaid accrued and accumulated dividends on all such Series E Preferred Stock (whether or not declared). |
17 |
Entitled to dividends, on an as-if converted basis, equal to and in the same form as dividends actually paid on shares of common stock, when and if actually paid; |
No voting rights, except for rights outlined in the Certificate of Designation; |
Upon any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary (a “Liquidation), the then holders of the Series F Preferred Stock and Series G Preferred Stock shall be entitled to receive out of the assets, whether capital or surplus, of the Company the same amount that a holder of common stock would receive if the Series F Preferred Stock and Series G Preferred Stock were fully converted (disregarding for such purposes any conversion limitations hereunder) to common stock which amounts shall be paid pari passu with all holders of common |
18 |
The Series F Preferred Stock and Series G Preferred Stock is convertible into common stock at any time after the date of issuance. The conversion rate, subject to adjustment as set forth in the Certificate of Designation, is determined by dividing the stated value of the Series F Preferred Stock and Series G Preferred Stock by $30 (the “Conversion Price”). The Conversion Price can be adjusted as set forth in the Certificate of Designation for stock dividends and stock splits or the occurrence of a fundamental transaction; and |
The Series F Preferred Stock and Series G Preferred Stock can be converted at the option of the holder at any time and from time to time after the date of issuance. |
19 |
20 |
21 |
22 |
23 |
Percentage of | Percentage of | Percentage of | Percentage of | |||||||||||||||||||||||||||||||||||||||||||||
revenues for the | revenues for the | Percentage of accounts | revenues for the | revenues for the | Percentage of accounts | |||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | receivables as of | Three Months Ended | Nine Months Ended | receivables as of | |||||||||||||||||||||||||||||||||||||||||||
June 30, | June 30, | June 30, | December 31, | September 30, | September 30, | September 30, | December 31, | |||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||
Customer 1 | 18 | % | 16 | % | 18 | % | 17 | % | 8 | % | 5 | % | 51 | % | 12 | % | 63 | % | 9 | % | 52 | % | 5 | % | ||||||||||||||||||||||||
Customer 2 | 43 | % | 37 | % | 41 | % | 37 | % | 25 | % | 33 | % | 15 | % | 10 | % | 11 | % | 9 | % | - | % | 33 | % | ||||||||||||||||||||||||
Customer 3 | 10 | % | 9 | % | 7 | % | 9 | % | 14 | % | 6 | % | - | % | 15 | % | - | % | 16 | % | - | % | 6 | % | ||||||||||||||||||||||||
Customer 4 | 1 | % | 7 | % | 2 | % | 8 | % | 10 | % | 8 | % | - | % | 35 | % | - | % | 36 | % | - | % | 8 | % | ||||||||||||||||||||||||
Customer 5 | 0 | % | 0 | % | 0 | % | 0 | % | 13 | % | 11 | % | - | % | - | % | - | % | - | % | - | % | 11 | % |
Percentage of | Percentage of | |||||||||||||||||||||||
purchases for the | purchases for the | Percentage of accounts | ||||||||||||||||||||||
Three Months Ended | Three Months Ended | payable as of | ||||||||||||||||||||||
June 30, | June 30, | June 30, | December 31, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Supplier 1 | 11 | % | 37 | % | 12 | % | 34 | % | 14 | % | 25 | % | ||||||||||||
Supplier 2 | 10 | % | 14 | % | 13 | % | 18 | % | 10 | % | 6 | % | ||||||||||||
Supplier 3 | 6 | % | 9 | % | 0 | % | 10 | % | 6 | % | 7 | % | ||||||||||||
Supplier 4 | 10 | % | 21 | % | 10 | % | 18 | % | 6 | % | 14 | % | ||||||||||||
Supplier 5 | 14 | % | 0 | % | 12 | % | 0 | % | 5 | % | 0 | % |
Percentage of | Percentage of | |||||||||||||||||||||||
purchases for the | purchases for the | Percentage of accounts | ||||||||||||||||||||||
Three Months Ended | Nine Months Ended | payable as of | ||||||||||||||||||||||
September 30, | September 30, | September 30, | December 31, | |||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||
Supplier 1 | 12 | % | 29 | % | 5 | % | 33 | % | 15 | % | 24 | % | ||||||||||||
Supplier 2 | 1 2 | % | - | % | 6 | % | - | % | - | % | - | % | ||||||||||||
Supplier 3 | 1 1 | % | 4 | % | 4 | % | 14 | % | 9 | % | 3 | % | ||||||||||||
Supplier 4 | - | % | 11 | % | - | % | 11 | % | 5 | % | 9 | % | ||||||||||||
Supplier 5 | - | % | 10 | % | - | % | 5 | % | - | % | 8 | % | ||||||||||||
Supplier 6 | - | % | - | % | - | % | - | % | 1 | % | - | % |
Percentage of | Percentage of | Percentage of | Percentage of | |||||||||||||||||||||||||||||||||||||||||||||
revenues for the | revenues for the | Percentage of accounts | revenues for the | revenues for the | Percentage of accounts | |||||||||||||||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | receivables as of | Three Months Ended | Nine Months Ended | receivables as of | |||||||||||||||||||||||||||||||||||||||||||
June 30, | June 30, | June 30, | December 31, | September 30, | September 30, | September 30, | December 31, | |||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||
Canada | 3 | % | 4 | % | 3 | % | 4 | % | 7 | % | 4 | % | 2 | % | 3 | % | 3 | % | 4 | % | - | % | 4 | % | ||||||||||||||||||||||||
Europe | 11 | % | 14 | % | 12 | % | 11 | % | 4 | % | 11 | % | 4 | % | 5 | % | 5 | % | 9 | % | 11 | % | 11 | % | ||||||||||||||||||||||||
United States of America | 85 | % | 74 | % | 84 | % | 78 | % | 77 | % | 82 | % | 90 | % | 80 | % | 87 | % | 78 | % | 80 | % | 82 | % | ||||||||||||||||||||||||
Other | 1 | % | 8 | % | 1 | % | 7 | % | 12 | % | 3 | % | 4 | % | 12 | % | 6 | % | 9 | % | 10 | % | 3 | % |
24 |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.
Moreover, new risks regularly emerge, and it is not possible for our management to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Quarterly Report on Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the cautionary statements contained above and throughout this Quarterly Report on Form 10-Q. Business Overview Our Company was formed to design, manufacture, and distribute innovative tools and accessories to the building industry. The global tool market industry is a multibillion-dollar business. ToughBuilt’s business is based on the development of innovative and state-of-the-art products, primarily in the tools and hardware category, with a particular focus on the building and construction industry with the ultimate goal of making life easier and more productive for contractors and workers alike. Our three major categories contain a total of 11 product lines, consisting of (i) Soft Goods, which includes kneepads, tool bags, pouches and tool belts, (ii) Metal Goods, which consists of sawhorses, tool stands and workbench and (iii) Utility Products, which includes utility knives, aviation snips, shears, lasers and levels. The Company also has several additional categories and product lines in various stages of development. We are continuing to focus our efforts on increased marketing campaigns, and distribution programs to strengthen the demand for our products globally. Management anticipates that our capital resources will improve and our products gain wider market recognition and acceptance resulting in increased product sales. As discussed below, while the Company has faced the impacts of COVID-19 and inflation, we have been able to obtain significant revenue growth. Notwithstanding, we have incurred substantial operating losses since our inception and anticipate incurring additional losses for the foreseeable future until such time, if ever, that we can commercialize our technology currently in development. In their audit report included in Liquidity and Capital Resources ; Going Concern ” below and We will require additional capital in order to achieve commercial success and, if necessary, to finance future losses from operations as we endeavor to build revenue, but we do not have any commitments to obtain such capital and we cannot assure you that we will be able to obtain adequate capital as and when required ” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on April 18, 2022. Corporate History We were incorporated in the State of Nevada on April 9, 2012, as Phalanx, Inc. We changed our name to ToughBuilt Industries, Inc. on December 29, 2015. On September 18, 2018, we effected a 1-for-2 reverse stock split of our common stock. We consummated our initial public offering pursuant to a registration statement on Form S-1 (File No:
Business Developments The following highlights material business developments in our business during the
Recent Developments Private Placement of Shares of Common Stock and Warrants On July 27, 2022, we consummated the closing of a private placement pursuant to Section 4(a)(2) and/or Regulation 506(b) of the Securities Act (the “Private Placement”). Pursuant to the terms and conditions of the Securities Purchase Agreement, dated as of July 25, 2022 (the “Purchase Agreement”), by and among the Company and certain institutional investors named on the signature pages thereto (the “Purchasers”). At the closing of the Private Placement, the Company issued (i) 700,000 shares of common stock (the “Placement Shares”), (ii) 3,300,000 prefunded warrants (the “Prefunded Warrants”); (iii) 4,000,000 Series A preferred investment options (the “Series A Preferred Investment Options”); and (iv) 4,000,000 Series B preferred investment options (the “Series B Preferred Investment Option, and together with the “Series A Preferred Investment Options, the “Preferred Investment Options” and collectively with the Prefunded Warrants, the “Warrants”). The purchase price of each Placement Share and associated Preferred Investment Options was $5.00 and the purchase price of each Prefunded Warrant and associated Preferred Investment Options was $4.9999. Each Prefunded Warrant is exercisable for $0.0001 per share of common stock until all of the Prefunded Warrants are exercised in full. Each Series A Preferred Investment Option is exercisable for one share of common stock for $5.00 per share until the third anniversary date of the issuance date. Each Series B Preferred Investment Option is exercisable for one share of common stock for $5.00 per share until the second anniversary date of the issuance date. The exercise price and the number of our shares of common stock issuable upon the exercise of each of the Warrants are subject to adjustment for stock splits, reverse splits, and similar capital transactions, as described in the Warrants. The Preferred Warrants are exercisable on a “cashless” basis. The Preferred Investment Options may be exercised on a “cashless basis” if there is no effective registration for the underlying shares of common stock. A holder of the Warrants will not have the right to exercise any portion of the Prefunded Warrants, Series A Preferred Investment Option or Series B Preferred Options, as the case may be if the holder (together with its affiliates) would beneficially own more than 4.99% or 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, upon notice from the holder to the Company, the holder may increase the beneficial ownership limitation, which may not exceed 9.99% of the number of shares of common stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants, provided that any increase in the beneficial ownership limitation will not take effect until 61 days following notice to the Company (the “Beneficial Ownership Limitation”). If a fundamental transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that we may exercise and will assume all of our obligations under the Warrants with the same effect as if such successor entity had been named in such security itself. If our stockholders are given a choice as to the securities, cash or property to be received in a fundamental transaction, then the holders of the Warrants shall be given the same choice as to the consideration it receives upon any exercise of the Warrants following such fundamental transaction. In addition, holders of the Preferred Investment Options will have the right to require us to repurchase its Preferred Investment Options for cash in an amount equal to the value of the remaining unexercised portion of the Warrants based on the Black-Scholes option pricing formula. However, if the fundamental transaction is not within our control, including not approved by our board of directors, then the holder of Preferred Investment Options will only be entitled to receive the same type or form of consideration (and in the same proportion), at the value per share of common stock in the fundamental transaction for each share of common stock underlying the unexercised portion of the pre-funded warrants or preferred investment options, that is being offered and paid to our stockholder in connection with the fundamental transaction. In addition, if at any time the Company grants, issues or sells any common stock equivalents or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of shares of common stock (the “Purchase Rights”), then the holder will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the holder could have acquired if the holder had held the number of shares of common stock acquirable upon complete exercise of its Warrants (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of shares of common stock are to be determined for the grant, issue or sale of such Purchase Rights (provided, however, that, to the extent that the holder’s right to participate in any such Purchase Right would result in the holder exceeding the Beneficial Ownership Limitation, then the holder shall not be entitled to participate in such Purchase Right to such extent (or beneficial ownership of such shares of common stock as a result of such Purchase Right to such extent) and such Purchase Right to such extent shall be held in abeyance for the holder until such time, if ever, as its right thereto would not result in the holder exceeding the Beneficial Ownership Limitation).
During such time as the Warrants are outstanding, if the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of common stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin-off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”), then, in each such case, the holders of the Warrants shall be entitled to participate in such Distribution to the same extent that the holders would have participated therein if the holders had held the number of shares of common stock acquirable upon complete exercise of the Warrants (without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation). All of the Purchasers were “accredited investors” as such term is defined in Rule 501(a) under the Securities Act. The Placement Shares and Warrants were offered pursuant to the exemptions provided in Section 4(a)(2) under the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder, and they were not offered pursuant to this prospectus or another prospectus. Accordingly, the Selling Stockholders may sell the Placement Shares and, upon the exercise of the Warrants, the underlying shares of common stock (the “Warrant Shares”) only pursuant to an effective registration statement under the Securities Act covering the resale of those shares, an exemption under Rule 144 under the Securities Act or another applicable exemption under the Securities Act. In connection with the Private Placement, we entered into a Registration Rights Agreement with the Purchasers, dated July 25, 2022 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that we shall file a registration statement covering the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement) with the SEC no later than August 4, 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 September 8, 2022, or, in the event of a “full review” by the SEC, October 10, 2022. 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, we are 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. If the Company fails to pay any partial liquidated damages in full within seven days after the date payable, the Company will pay interest thereon at a rate of 12% per annum (or such lesser maximum amount that is permitted to be paid by applicable law) to the holder, accruing daily from the date such partial liquidated damages are due until such amounts, plus all such interest thereon, are paid in full. Subject to certain exceptions, neither we nor any of our 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 Securities. We may not file any other registration statements until all Securities are registered pursuant to a registration statement that is declared effective by the SEC, provided that we 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. Our Products TOUGHBUILT® manufactures and distributes an array of high-quality and rugged toolbelts, tool bags, and other personal tool organizer products. We also manufacture and distribute a complete line of knee pads for various construction applications, and a variety of metal and electronic goods, including utility knives, aviation snips, shears, and digital measures such as lasers and levels. Our line of job site tools and material support products consists of a full line of miter saw and table saw stands, sawhorses/job site tables, roller stands, and workbench. All our products are designed and engineered in the United States and manufactured in China, India, and the Philippines under our quality control supervision. We do not need government approval for any of our products. Our Business Strategy Our product strategy is to develop product lines in several categories rather than focus on a single line of goods. We believe that this approach allows for rapid growth, and wider brand recognition, and may ultimately result in increased sales and profits within an accelerated time period. We believe that building brand awareness of our current ToughBuilt lines of products will expand our share of the pertinent markets. Our business strategy includes the following key elements:
We will continue to consider other market opportunities while focusing on our customers’ specific requirements to increase sales. Market In addition to the construction market, our products are marketed to the “Do-It-Yourself” and home improvement marketplace. The U.S. housing stock of more than 130 million homes requires regular investment merely to offset normal depreciation. According to Statista.com 1 , in recent years, the U.S. home improvement industry has witnessed steady growth, and the trend is expected to continue in the near future. A significant increase occurred in 2020, mostly due to the outbreak of the coronavirus (COVID-19) pandemic and the lockdowns which ensued, leading people to stay home more often than before and take up hobbies and projects such as DIY home improvement. According to a Joint Center for Housing Studies forecast, homeowner improvements and repair expenditures were expected to reach roughly 370 billion U.S. dollars in the first quarter of 2022. Aside from the COVID pandemic2 , the rising real estate prices in many Western countries were a likely contributing factor to the increase in home improvement projects. With real estate price changes outperforming wage increases, homeowners may have opted for upgrading their homes instead of purchasing a new house.TOUGHBUILT® products are available worldwide in many major retailers ranging from home improvement and construction products and services stores to major online outlets. Currently, we have placements in Lowes, Home Depot, Menards, Bunnings (Australia), Princess Auto (Canada), Dong Shin Tool PIA (S. Korea) as well as seeking to grow our sales in global markets such as Western and Central Europe, Eastern Europe, South America, and the Middle East. 1 “Home Depot and Lowe’s: average amount spent by consumers 2011-2021”; published by C. Simionato (April 26, 2022); https://www.statista.com/statistics/240861/average-amount-spent-by-consumers-at-the-home-depot-and-lowes/ 2 “Home improvement projects - statistics & facts”; published by C. Simionato; (Jan 12, 2022); https://www.statista.com/topics/7899/home-improvement-projects/ wrapper Retailers by region include:
We are actively expanding into markets in Mexico and other Latin American countries, the Middle East, and South Africa. We are currently in product line reviews and discussions with Home Depot Canada, Do It Best, True Value, and other major retailers both domestically and internationally. A product line review requires the supplier to submit a comprehensive proposal that includes product offerings, prices, competitive market studies, relevant industry trends, and other information. Management anticipates, within the near term, adding to its customer base up to three major retailers, along with several distributors and private retailers within six sectors and among fifty-six targeted countries. New Products Tools In 2021, we launched the following products:
Mobile Device Products Since 2013, we have been planning, designing, engineering, and sourcing the development of a new line of ToughBuilt mobile devices and accessories to be used in the construction industry and by building enthusiasts. We are planning to have our mobile device products ready to market in 2024 at which time we intend to commence marketing and sell our mobile device products to our current global customer base. We believe that an increasing number of companies in the construction industry are requiring their employees to utilize mobile devices not just to communicate with others but to utilize the special apps that will allow the construction workers to do their job better and more efficiently. All of our mobile devices are designed and built-in accordance with IP-68 and to a military standard level of durability. Our ruggedized mobile line of products was created to place customized technology and wide varieties of data in the palm of building professionals and enthusiasts such as contractors, subcontractors, foremen, general laborers, and others. We are designing the devices, accessories, and custom apps to allow the users to plan with confidence, organize faster, find labor and products faster, estimate accurately, purchase wisely, protect themselves, workers, and their business, create and track invoicing faster and easier. In
Intellectual Property We hold several patents and trademarks of various durations and believe that we hold or have applied for, or license all the patent, trademark, and other intellectual property rights necessary to conduct our business. We utilize trademarks (licensed and owned) on nearly all our products and believe having distinctive marks that are readily identifiable is an important factor in creating a market for our goods, in identifying our brands and our Company, and in distinguishing our goods from the goods of others. We consider our ToughBuilt ® , Cliptech® , and Fearless® trademarks to be among our most valuable intangible assets. Trademarks registered both in and outside the U.S. are generally valid for 10 years, depending on the jurisdiction, and are generally subject to an indefinite number of renewals for a like period on appropriate application.In 2019, the United States Patent and Trademark Office (USPTO) granted two new design patents (U.S. D840,961 S and US D841,635 S) that cover ToughBuilt’s ruggedized mobile devices, which are valid for a period of 15 years. We also have several patents pending with the USPTO and anticipate three or four of them to be granted in the near future. Competition The tool equipment and accessories industry is highly competitive on a worldwide basis. We compete with a significant number of other tool equipment and accessories manufacturers and suppliers to the construction, home improvement and Do-It-Yourself industry, many of which have the following:
Our competitors’ greater capabilities in the above areas enable them to better differentiate their products from ours, gain stronger brand loyalty, withstand periodic downturns in the construction and home improvement equipment and product industries, and compete effectively based on price and production, and more quickly develop new products. These competitors include DeWalt, Caterpillar, and Samsung Active. The markets for our mobile products and services are also highly competitive and we are confronted by aggressive competition in all areas of our business. These markets are characterized by frequent product introductions and rapid technological advances that have substantially increased the capabilities and use of mobile communication and media devices, personal computers and other digital electronic devices. Our competitors who sell mobile devices and personal computers based on other operating systems have aggressively cut prices and lowered their product margins to gain or maintain market share. Our financial condition and operating results can be adversely affected by these and other industry-wide downward pressures on gross margins. Principal competitive factors important to us include price, product features, relative price/performance, product quality and reliability, design innovation, a strong third-party software and peripherals ecosystem, marketing and distribution capability, service and support, and corporate reputation. We are focused on expanding its market opportunities related to mobile communication and media devices. These industries are highly competitive and include several large, well-funded and experienced participants. We expect competition in these industries to intensify significantly as competitors attempt to imitate some of the features of the Company’s products and applications within their products or collaborate to offer solutions that are more competitive than those they currently offer. These industries are characterized by aggressive pricing practices, frequent product introductions, evolving design approaches and technologies, rapid adoption of technological and product advancements by competitors, and price sensitivity on the part of consumers and businesses. Competitors include Apple, Samsung, and Qualcomm, among others. Key factors affecting our performance As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations. Known Trends and Uncertainties Seasonality Our business is seasonal as a result of our China-based production. For the first calendar quarter, we are not able to ship our products from China due to the hiatus as a result of their New Year holidays. We typically make up the lost sales from the first calendar quarter in the subsequent quarters. COVID-19 In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (COVID-19) as a pandemic that continues to spread throughout the United States and the world. We are currently monitoring the outbreak of COVID-19 and the related business and travel restrictions and changes to behavior intended to reduce its spread. All of our Chinese facilities were temporarily closed for a period of time. All of these facilities have been reopened. Depending on the progression of the outbreak, our ability to obtain necessary supplies and ship finished products to customers may be partly or completely disrupted globally. To date, we have been able to obtain supplies and products needed. Also, our ability to maintain appropriate labor levels could be disrupted. If the coronavirus continues to progress, it could have a material negative impact on our results of operations and cash flow, in addition to the impact on its employees. Due to the speed and fluidity with which the COVID-19 pandemic continues to evolve, and the emergence of highly contagious variants, we do not yet know the full extent of the impact of COVID-19 on our business operations. The ultimate extent of the impact of any epidemic, pandemic, outbreak, or other public health crisis on our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic, outbreak, or other public health crisis and actions taken to contain or prevent the further spread, including the effectiveness of vaccination and booster vaccination campaigns, among others. Accordingly, we cannot predict the extent to which our business, financial condition and results of operations will be affected. We have concluded that while it is reasonably possible that the virus could negatively impact our results of operations, the specific impact is not readily determinable as of the date of these financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Inflation Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs (e.g., in China), competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices in the component materials for the parts of our goods may impact the availability, the quality and the price of our products, as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality products as they may substitute lower-cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins if the Company is unable to mitigate any inflationary increases through various customer pricing actions and cost reduction initiatives. To offset increased prices charged by our manufacturers and increased shipping rates, we increased the prices of our products in 2021. Supply Chain We acquire a majority of our products from manufacturers and distributors located in China, India, and the Philippines. We do not have any long-term contracts or exclusive agreements with our foreign suppliers that would ensure our ability to acquire the types and quantities of products we desire at acceptable prices and in a timely manner. We utilize a number of techniques to address potential disruption in and other risks relating to our supply chain, including in certain cases the use of other qualified suppliers. We increased our inventory from $38,432,012 at December 31, 2021 to at Results of Operations The three months ended Revenues Revenues for the three months ended Cost of Goods Sold Cost of goods sold for the three months ended Operating Expenses Operating expenses consist of selling, general and administrative expenses and research and development costs. Selling, general and administrative expenses (the “SG&A Expenses”) for the three months ended Research and development costs (“R&D”) for the three months ended Other Expense Other expense for the three months ended $2,902,342. Net Income (Loss) Due to factors set forth above, we recorded a net for the three months ended The Revenues Revenues for the Cost of Goods Sold Cost of goods sold for the Operating Expenses Operating expenses consist of selling, general and administrative expenses and research and development costs. Selling, general and administrative expenses (the “SG&A Expenses”) for the Research and development costs (“R&D”) for the Other Expense Other expense for the $2,902,342. Net Income (Loss) Due to factors set forth above, we recorded a net loss of $16,233,560 for the Liquidity and Capital Resources; Going Concern We had 1.9 million at 16.2 million, and approximately We will seek to obtain additional capital through the sale of debt or equity financings or other arrangements to fund operations; however, there can be no assurance that the Company will be able to raise needed capital under acceptable terms, if at all. The sale of additional equity may dilute existing stockholders and newly issued shares may contain senior rights and preferences compared to currently outstanding shares of common stock. Issued debt securities may contain covenants and limit the Company’s ability to pay dividends or make other distributions to stockholders. If the Company is unable to obtain such additional financing, future operations would need to be scaled back or discontinued. Due to the uncertainty in the Company’s ability to raise capital, management believes that there is substantial doubt in the Company’s ability to continue as a going concern for the next twelve months from the issuance of these consolidated financial statements. On February 15, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain institutional investors, pursuant to which the Company issued, in a registered direct offering (the “Direct Offering”), an aggregate of $5,000,000 of Preferred Stock (split evenly among 2,500 shares Series F Convertible Preferred Stock, par value $0.0001 per share (“Series F Preferred Stock”), and 2,500 shares of Series G Convertible Preferred Stock, par value $0.0001 per share (“Series G Preferred Stock”). The Series F Preferred Stock and Series G Preferred Stock have a stated value of $1,000 per share and are convertible into common stock at any time after the date of issuance. The conversion rate, subject to adjustment as set forth in the Certificate of Designation, is determined by dividing the stated value of the Series F Preferred Stock and Series G Preferred Stock by $30 (the “Conversion Price”). The Conversion Price can be adjusted as set forth in the Certificate of Designation for stock dividends and stock splits or the occurrence of a fundamental transaction. The 2,500 shares of Series F Preferred Stock and 2,500 shares of Series G Preferred Stock are each convertible into 83,334 shares of common stock. The Series F Preferred Stock and Series G Preferred Stock and the underlying shares of common stock were offered pursuant to the Second Form S-3 (as defined above). In a concurrent private placement, the Company also issued to such investors unregistered warrants to purchase up to an aggregate of 125,000 shares of the Company’s common stock for $37.65 per share from April 15, 2022 until the fifth year from the date of issuance. We received net proceeds of approximately $5.1 million from the offering, after deducting the estimated offering expenses payable by the Company, including the placement agent fees. On July 27, 2022, we consummated the closing of a private placement pursuant to Section 4(a)(2) and/or Regulation 506(b) of the Securities Act (the “Private Placement”). Pursuant to the terms and conditions of the Securities Purchase Agreement, dated as of July 25, 2022 (the “Purchase Agreement”), by and among the Company and certain institutional investors named on the signature pages thereto (the “Purchasers”). At the closing of the Private Placement, the Company issued (i) 700,000 shares of common stock (the “Placement Shares”), (ii) 3,300,000 prefunded warrants (the “Prefunded Warrants”); (iii) 4,000,000 Series A preferred investment options (the “Series A Preferred Investment Options”); and (iv) 4,000,000 Series B preferred investment options (the “Series B Preferred Investment Option, and together with the “Series A Preferred Investment Options, the “Preferred Investment Options” and collectively with the Prefunded Warrants, the “Warrants”). The purchase price of each Placement Share and associated Preferred Investment Options was $5.00 and the purchase price of each Prefunded Warrant and associated Preferred Investment Options was $4.9999. The net proceeds to the Company from the Private Placement were approximately $18.4 million, after deducting placement agent fees and other offering expenses. The Company plans to use its cash within the twelve months from Cash Flows
Cash Flows Used in Operating Activities Net cash flows used in operating activities for the Cash Flows from (Used in) Investing Activities Net cash used in investing activities for the Cash Flows from Financing Activities Net cash provided by financing activities for the Net (Decrease) Increase in Cash During Period As a result of the activities described above, we recorded a net decrease in cash of $5,883,784 for the nine months ended September 30, 2022 and a net increase in cash of 2021. Material Cash Requirements from Known Contractual and Other Obligations The following table summarizes our contractual obligations as of
Off Balance Sheet Arrangements None. Significant Accounting Policies See the footnotes to our unaudited financial statements for the quarter ended As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item. Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Disclosure controls and procedures are controls and other procedures designed to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable and not absolute assurance of achieving the desired control objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on our management’s evaluation (with the participation of the individuals serving as our principal executive officer and principal financial officer) of our disclosure controls and procedures as required by Rules 13a-15 and 15d-15 under the Exchange Act, each of the individuals serving as our principal executive officer and principal financial officer has concluded that our disclosure controls and procedures were not effective at the reasonable assurance level as of Material Weakness in Internal Control over Financial Reporting The Company did not design policies and procedures at a sufficient level of precision to support the operating effectiveness of the controls to prevent and detect potential errors. The Company did not maintain adequate documentation to evidence the operating effectiveness of certain control activities and did not maintain proper levels of supervision and review of complex accounting matters. The Company did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated These control deficiencies create a reasonable possibility that a material misstatement to the financial statements will not be prevented or detected on a timely basis, and there we concluded that the deficiencies represent material weaknesses in our internal control over financial reporting and our internal control over financial reporting was not effective as of Remediation Plan During the Our remediation process includes, but not limited to:
We expect to remediate these material weaknesses in the Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended From time to time, claims are made against us in the ordinary course of business, which could result in litigation. Claims and associated litigation are subject to inherent uncertainties and unfavorable outcomes could occur, such as monetary damages, fines, penalties or injunctions prohibiting us from selling one or more products or engaging in other activities. On As a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this item. Anything in third quarter? None. Not applicable. Any? (a) Exhibits. The following documents are filed as part of this report:
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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