ToughBuilt™ Reports Second Quarter 2020 Financial Results

Rhea-AI Summary

ToughBuilt Industries reported financial results for Q2 2020, highlighting a 43% increase in net sales to $6.8 million, up from $4.7 million in Q2 2019. Gross profit surged by 117% to $2.5 million, compared to $1.1 million year-over-year. However, the company faced a net loss of $2.5 million, contrasting sharply with a profit of $7,000 in the same quarter of 2019. For the first half of 2020, net sales rose 10% to $10.7 million, but net losses totaled $6.2 million, compared to a profit of $507,000 in H1 2019. CEO Michael Panosian expressed optimism about future global market opportunities.

Positive

• Net sales increased 43% YoY to $6.8 million for Q2 2020.
• Gross profit rose by 117% YoY to $2.5 million for Q2 2020.
• New partnerships and global distribution agreements established.

Negative

• Net loss of $2.5 million in Q2 2020 compared to a profit of $7,000 in Q2 2019.
• Net loss for the first half of 2020 was $6.2 million compared to a profit of $507,000 in H1 2019.

LAKE FOREST, California, Aug. 14, 2020 (GLOBE NEWSWIRE) -- ToughBuilt Industries, Inc. (“ToughBuilt^®” or the “Company”) (NASDAQ: TBLT; TBLTW) is an advanced product design, manufacturer and distributor with emphasis on innovative products, announced today its financial results for the quarter ended June 30, 2020.

 Highlights of Second Quarter 2020 and 6-Month Financial Results

Operating Results for the Three Months Ended June 30, 2020

-	Net sales for three months ended June 30, 2020 were $6.8 million, an increase of 43% from $4.7 million in the same period of 2019.
-	Gross profit increased by 117% to $2.5 million in the three months ended June 30, 2020, compared to $1.1 million in the same period in 2019.
-	Net loss for the three months ended June 30, 2020 was $2.5 million, as compared to a profit of $7 thousand in the same period of 2019.

Operating Results for the Six Months Ended June 30, 2020

-	Net sales for the six-month period ended June 30, 2020 were $10.7 million, an increase of 10% from $9.7 million in the same period 2019.
-	Gross profit increased by 73% to $4 million in the six months ended June 30, 2020, compared to $2.3 million in 2019.
-	Net loss for the six-month period ended June 30, 2020 was $6.2 million, as compared to a profit of $507 thousand in the same period of 2019.

Michael Panosian, Chief Executive Officer of ToughBuilt, stated, “I am pleased with our accomplishments and believe our company to be in a good position to take advantage of global market opportunities as we are moving forward. We signed several new partnerships, including global distribution agreements and new sales channels that will be invaluable for the short and long term. Also, exceedingly proud of our team and global partners performance and would like to applaud everyone for always putting safety first. Our entire team has shown real dedication during this pandemic by quickly and effectively implementing new protocols to promote the safety and welfare of our employees and the communities in which we serve,” stated Mr. Panosian.

ABOUT TOUGHBUILT INDUSTRIES, INC.

ToughBuilt is an advanced product design, manufacturer and distributor with emphasis on innovative products. Currently focused on tools and other accessories for the professional and do-it-yourself construction industries. We market and distribute various home improvement and construction product lines for both the do-it-yourself and professional markets under the TOUGHBUILT brand name, within the global multibillion dollar per year tool market industry. All of our products are designed by our in-house design team. Since launching product sales in 2013, we have experienced significant annual sales growth. Our current product line includes three major categories, with several additional categories in various stages of development, consisting of Soft Goods & Kneepads and Sawhorses & Work Products. Our mission is to provide products to the building and home improvement communities that are innovative, of superior quality derived in part from enlightened creativity for our end users while enhancing performance, improving well-being and building high brand loyalty. Additional information about the Company is available at: https://www.toughbuilt.com/.

FORWARD-LOOKING STATEMENTS

This press release contains “forward-looking statements.” Such statements may be preceded by the words “intends,” “may,” “will,” “plans,” “expects,” “anticipates,” “projects,” “predicts,” “estimates,” “aims,” “believes,” “hopes,” “potential” or similar words. Forward-looking statements are not guarantees of future performance, are based on certain assumptions and are subject to various known and unknown risks and uncertainties, many of which are beyond the Company’s control, and cannot be predicted or quantified and consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with (i) market acceptance of our existing and new products, (ii) delays in bringing products to key markets, (iii) an inability to secure regulatory approvals for the ability to sell our products in certain markets, (iv) intense competition in the industry from much larger, multinational companies, (v) product liability claims, (vi) product malfunctions, (vii) our limited manufacturing capabilities and reliance on subcontractors for assistance, (viii) our efforts to successfully obtain and maintain intellectual property protection covering our products, which may not be successful, (ix) our reliance on single suppliers for certain product components, (x) the fact that we will need to raise additional capital to meet our business requirements in the future and that such capital raising may be costly, dilutive or difficult to obtain and (xi) the fact that we conduct business in multiple foreign jurisdictions, exposing us to foreign currency exchange rate fluctuations, logistical and communications challenges, burdens and costs of compliance with foreign laws and political and economic instability in each jurisdiction. More detailed information about the Company and the risk factors that may affect the realization of forward looking statements is set forth in the Company’s filings with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q. Investors and security holders are urged to read these documents free of charge on the SEC’s web site at http://www.sec.gov. The Company assumes no obligation to publicly update or revise its forward-looking statements as a result of new information, future events or otherwise.

Investor Relations Contact:

Andrew J. Barwicki
Investor Relations
Tel: 516-662-9461
Andrew@barwicki.com

TOUGHBUILT INDUSTRIES, INC.
CONDENSED BALANCE SHEETS
(UNAUDITED)

		June 30,				December 31,
		2020				2019
Assets
Current Assets
Cash		$	19,628,685			$	25,063
Accounts receivable			3,086,402				2,075,380
Factor receivables, net			388,364				174,042
Inventory			1,855,595				2,215,497
Prepaid assets			1,792,666				254,070
Note receivable			1,480,000				4,480,000
Total Current Assets			28,231,712				9,224,052
Property and equipment, net			1,598,583				1,029,885
Other assets			470,688				215,688
Total Assets		$	30,300,983			$	10,469,625
Liabilities and Shareholders’ Equity
Current Liabilities
Accounts payable		$	2,105,052			$	2,536,871
Accrued expenses			404,197				364,309
Factor loan payable			294,868				125,645
Convertible notes payable, net of discount			1,759,081				4,216,307
Total Current Liabilities			4,563,198				7,243,132
Total Liabilities			4,563,198				7,243,132
Shareholders’ Equity
Series D Preferred Stock, $1,000 par value, 5,775 shares authorized, 0 and 5,775 issued, and outstanding at June 30, 2020 and December 31, 2019, respectively. Liquidation preference of $5,775,000 at December 31, 2019.			-				4,816,485
Common stock, $0.0001 par value, 200,000,000 shares authorized, 38,414,631 and 3,300,015 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively			3,842				330
Additional paid-in capital			75,421,130				41,823,048
Accumulated deficit			(49,687,187	)			(43,413,370	)
Total Shareholders’ Equity			25,737,785				3,226,493
Total Liabilities and Shareholders’ Equity		$	30,300,983			$	10,469,625

The accompanying notes are an integral part of these condensed unaudited financial statements.

TOUGHBUILT INDUSTRIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)

		Three Months Ended June 30,								Six Months Ended June 30,
		2020				2019				2020				2019
Revenues, net of allowances
Metal goods		$	3,374,066			$	2,274,978			$	5,456,846			$	3,916,250
Soft goods			3,465,580				2,479,362				5,292,312				5,860,561
Total revenues, net of allowances			6,839,646				4,754,340				10,749,158				9,776,811
Cost of Goods Sold
Metal goods			2,291,948				1,680,762				3,652,461				2,974,433
Soft goods			1,990,681				1,896,656				3,017,911				4,447,742
Total cost of goods sold			4,282,629				3,577,418				6,670,372				7,422,175
Gross profit			2,557,017				1,176,922				4,078,786				2,354,636
Operating expenses:
Selling, general and administrative expenses			4,313,015				2,528,461				8,816,839				5,258,003
Research and development			422,072				666,448				946,239				1,130,043
Total operating expenses			4,735,087				3,194,909				9,763,078				6,388,046
Loss from operations			(2,178,070	)			(2,017,987	)			(5,684,292	)			(4,033,410	)
Other income (expense)
Interest expense			(341,088	)			(86,275	)			(589,525	)			(168,538	)
Change in fair value of warrant derivative			-				2,111,684				-				4,709,583
Total other income (expense)			(341,088	)			2,025,409				(589,525	)			4,541,045
Net income (loss)		$	(2,519,158	)		$	7,422			$	(6,273,817	)		$	507,635
Common stock deemed dividend			-				-				-				(2,137,190	)
Redemption of Series D Preferred Stock deemed dividend			-				-				(1,295,294	)			-
Net income (loss) attributable to common stockholders		$	(2,519,158	)		$	7,422			$	(7,569,111	)		$	(1,629,555	)
Basic and diluted net loss per share attributed to common stockholders
Basic net loss per common share		$	(0.11	)		$	0.00			$	(0.49	)		$	(1.06	)
Basic weighted average common shares outstanding			22,209,152				1,904,270				15,440,558				1,538,834
Diluted net loss per common share		$	(0.11	)		$	0.00			$	(0.49	)		$	(1.05	)
Diluted weighted average common shares outstanding			22,209,152				1,904,270				15,440,558				1,551,618

The accompanying notes are an integral part of these condensed unaudited financial statements.

TOUGHBUILT INDUSTRIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		Six Months Ended June 30,
		2020				2019
Cash flows from operating activities:
Net income (loss)		$	(6,273,817	)		$	507,635
Adjustments to reconcile from net income (loss) to net cash used in operating activities:
Depreciation			217,631				101,911
Amortization of debt discount and debt issuance cost			448,908				-
Change in fair value of warrant derivative			-				(4,709,583	)
Stock-based compensation expense			323,989				209,763
Changes in operating assets and liabilities
Accounts receivable			(1,011,022	)			(809,543	)
Factor receivables, net			(214,322	)			150,995
Inventory			359,902				(786,682	)
Prepaid assets			(966,196	)			(75,848	)
Other assets			(5,000	)			(3,537	)
Accounts payable			(431,819	)			(157,002	)
Accrued expenses			39,888				(524,377	)
Deferred revenue			-				(33,665	)
Net cash used in operating activities			(7,511,858	)			(6,129,933	)
Cash flows from investing activities:
Proceeds from note receivable			3,000,000				-
Advance for property and equipment			(250,000	)			-
Purchases of property and equipment			(786,329	)			(276,554	)
Net cash provided by (used in) investing activities			1,963,671				(276,554	)
Cash flows from financing activities:
Proceeds from sales of common stock and warrants, net of costs			28,122,740				-
Proceeds from exercise of Series A warrants			-				2,172,680
Proceeds from exercise of Placement Agent warrants			-				16,818
Proceeds from factor loan payable			169,223				1,809,884
Repayments of factor loan payable			-				(2,028,866	)
Repayments of Series D Preferred Stock			(3,140,154	)			-
Net cash provided by financing activities			25,151,809				1,970,516
Net increase (decrease) increase in cash			19,603,622				(4,435,971	)
Cash, beginning of period			25,063				5,459,884
Cash, end of period		$	19,628,685			$	1,023,913
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest		$	-			$	-
Income taxes		$	-			$	-
Supplemental disclosure of non-cash investing and financing activities:
Cashless exercise of warrants		$	244			$	-
Conversion of Series C Preferred Stock to common stock		$	13			$	-
Conversion of Series D Preferred Stock to common stock		$	2,971,311			$	-
Conversion of convertible notes payable to common stock		$	2,906,134			$	-
Issuance of common stock for prepaid services		$	572,400			$	-
Conversion of Series B warrants into common stock		$	-			$	13,369,232
Issuance of convertible preferred stock in exchange for warrants		$	-			$	3,671,024

The accompanying notes are an integral part of these condensed unaudited financial statements.

FAQ

What were ToughBuilt's net sales for Q2 2020?

ToughBuilt's net sales for Q2 2020 were $6.8 million, a 43% increase from Q2 2019.

What was the gross profit for ToughBuilt in the second quarter of 2020?

The gross profit for ToughBuilt in Q2 2020 was $2.5 million, up 117% from the same quarter in 2019.

How did ToughBuilt's net loss change in Q2 2020 compared to Q2 2019?

ToughBuilt reported a net loss of $2.5 million in Q2 2020, compared to a profit of $7,000 in Q2 2019.

What were ToughBuilt's sales figures for the first half of 2020?

For the first half of 2020, ToughBuilt reported net sales of $10.7 million, a 10% increase from $9.7 million in the same period of 2019.

What is ToughBuilt's outlook after the recent financial results?

CEO Michael Panosian expressed optimism about future global market opportunities and potential growth from new partnerships.