ToughBuilt Industries, Inc. $TBLT Other Considerations
Consideration 1: Purchase Order Financing for $30M+ Announced 2 April 2024
ToughBuilt Industries, Inc. announced a strategic alliance with King Trade Capital, securing a line of credit expected to enhance the Company's procurement, direct import, and order fulfillment capabilities. This enables the company to better meet commitments to existing and new retail partners, and strengthen relationships with key retail partners and factories.
In our words, ToughBuilt has obtained 'secured' purchase order financing for a minimum of $30M (or ~33% of 2023 sales) to more affordably finance revenue growth. This should result in more ToughBuilt products being supplied into the retail channel, from StackTech, to Massive Mouth, to ClipTech, from sawhorses to mitre saw stands. Before this financing, growth was limited to cycling gross profits back into new orders, along with any cash raised from equity sales.
Since this time, we have seen StackTech products for sale globally (outside the USA), Menards and Ace Hardware carrying a wider range of products, and Lowe's restock StackTech.
We have also seen smaller, more frequent shipments of StackTech and other products into United States retailers, with better documentation in the bills of lading, using UPS logistics services.
ToughBuilt Industries, Inc. announced a strategic alliance with King Trade Capital, securing a line of credit expected to enhance the Company's procurement, direct import, and order fulfillment capabilities. This enables the company to better meet commitments to existing and new retail partners, and strengthen relationships with key retail partners and factories.
In our words, ToughBuilt has obtained 'secured' purchase order financing for a minimum of $30M (or ~33% of 2023 sales) to more affordably finance revenue growth. This should result in more ToughBuilt products being supplied into the retail channel, from StackTech, to Massive Mouth, to ClipTech, from sawhorses to mitre saw stands. Before this financing, growth was limited to cycling gross profits back into new orders, along with any cash raised from equity sales.
Since this time, we have seen StackTech products for sale globally (outside the USA), Menards and Ace Hardware carrying a wider range of products, and Lowe's restock StackTech.
We have also seen smaller, more frequent shipments of StackTech and other products into United States retailers, with better documentation in the bills of lading, using UPS logistics services.
Consideration 2: European trade show participation could lead to new retailers carrying ToughBuilt products in their stores and online.
ToughBuilt attended the Nordbygg Hardware Show in Stockholm, Sweden on April 23 - 26, 2024.
In March 2024, ToughBuilt presented at Troy Means Business 2024.
ToughBuilt attended the Feicon 2024 (International construction Fair) in São Paulo, Brazil April 2 - 5 2024 and showed their StackTech line (Latin America).
As of March 5, 2024, we are noticing that ToughBuilt Industries in Europe is participating in key trade shows. We have gathered some open source information and will be adding that information here.
European Trade Shows:
Hardware Show 2024 (Dublin, Ireland).
TOUGHBUILT will be proud to welcome you at The Hardware Show, in Dublin this Sunday and Monday 18th-19th of February at booth K10
ToughBuilt Industries welcomes you to join us for the International Hardware Fair (Eisenwarenmesse) in Cologne, DE from 3rd-6th, March! Contact [email protected] for passes and more information!
Silverstone, Troy (Northamptonshire, United Kingdom.). ToughBuilt’s ground-breaking booth was onsite today for
(Troy Means Business 2023) at Silverstone, fully equipped with disruptive innovation for your toughest jobs.
I assume they will be at BouwBeurs event: February 03, 2025 until February 07, 2025 since they were there in 2023.
ToughBuilt attended the Nordbygg Hardware Show in Stockholm, Sweden on April 23 - 26, 2024.
In March 2024, ToughBuilt presented at Troy Means Business 2024.
ToughBuilt attended the Feicon 2024 (International construction Fair) in São Paulo, Brazil April 2 - 5 2024 and showed their StackTech line (Latin America).
As of March 5, 2024, we are noticing that ToughBuilt Industries in Europe is participating in key trade shows. We have gathered some open source information and will be adding that information here.
European Trade Shows:
Hardware Show 2024 (Dublin, Ireland).
TOUGHBUILT will be proud to welcome you at The Hardware Show, in Dublin this Sunday and Monday 18th-19th of February at booth K10
ToughBuilt Industries welcomes you to join us for the International Hardware Fair (Eisenwarenmesse) in Cologne, DE from 3rd-6th, March! Contact [email protected] for passes and more information!
Silverstone, Troy (Northamptonshire, United Kingdom.). ToughBuilt’s ground-breaking booth was onsite today for
(Troy Means Business 2023) at Silverstone, fully equipped with disruptive innovation for your toughest jobs.
I assume they will be at BouwBeurs event: February 03, 2025 until February 07, 2025 since they were there in 2023.
Consideration 3: ToughBuilt makes great product demonstration videos with solid branding.
This one, TOUGHBUILT StackTech® Mobile Organization System, is on the ToughBuilt YouTube channel. There are so many others, and now ToughBuilt is making YouTube shorts, and they are on Facebook, Instagram, TikTok.
This one, TOUGHBUILT StackTech® Mobile Organization System, is on the ToughBuilt YouTube channel. There are so many others, and now ToughBuilt is making YouTube shorts, and they are on Facebook, Instagram, TikTok.
Consideration 4: Announced new product lines that we cannot find in stores
Product 1: Wrenches
We read that in January 2023 ToughBuilt rolled out a new line of Handheld Wrenches, including adjustable wrenches, construction wrenches, and pipe wrenches. In total, there are 20 SKUs. We have not seen any wrenches in our due diligence. Same thing with Pliers and Clamps, which were announced by ToughBuilt in February, 2023.
Product 2: StackTech next generation products
In the United States, where Lowe's has an exclusive on StackTech, we only see first generation products and occasionally we see the three-drawer box (second generation product) in stock. We had thought the StackTech line would be about twice the breadth with more SKUs by July 2024, but understand the company's focus may have shifted to near-term profitability.
Product 3: Saw Horses
Although we see orders being filled through the Bill of Lading supply chain (shipments via ship into the USA), we do not see saw horses for sale in stores, nor online, at scale. Where are the saw horses?
Product 4: New StackTech products (the extension of the product line)
Some of these products, such as the dolly and three-drawer box, were available for a very short period of time at Lowe's, but are currently unavailable for retail purchase.
Product 1: Wrenches
We read that in January 2023 ToughBuilt rolled out a new line of Handheld Wrenches, including adjustable wrenches, construction wrenches, and pipe wrenches. In total, there are 20 SKUs. We have not seen any wrenches in our due diligence. Same thing with Pliers and Clamps, which were announced by ToughBuilt in February, 2023.
Product 2: StackTech next generation products
In the United States, where Lowe's has an exclusive on StackTech, we only see first generation products and occasionally we see the three-drawer box (second generation product) in stock. We had thought the StackTech line would be about twice the breadth with more SKUs by July 2024, but understand the company's focus may have shifted to near-term profitability.
Product 3: Saw Horses
Although we see orders being filled through the Bill of Lading supply chain (shipments via ship into the USA), we do not see saw horses for sale in stores, nor online, at scale. Where are the saw horses?
Product 4: New StackTech products (the extension of the product line)
Some of these products, such as the dolly and three-drawer box, were available for a very short period of time at Lowe's, but are currently unavailable for retail purchase.
Consideration 5: Poor accounting system and non-timely 10-K and 10-Q filings
ToughBuilt Industries has some issues with the speed of their accounting processes. They installed Acumatica, possibly around the 2019 or 2020 timeframe, as we learned in the Acumatica case study here. That was their first level of automation and integration with suppliers and customers, moving them away from QuickBooks and manual data entry of orders.
The company replaced its financial reporting system as of January 1, 2023, and has issues in integrating that system and reconciling past and future financial records.
Most likely the old system and integration into the new system is causing ToughBuilt to be late in filing their 10-K and 10-Q reports. They are saying they lack the information required, and the ability to process that information in a timely manner without unreasonable costs, and the effort to reconcile transactions from the old and new system. However, they plan to file those reports and are diligently working on it. They filed in a recent SEC filing that the results of those reports should not reflect a significant difference in their results.
Given the non-timely SEC filings, we wonder what type of work is required on their financial system, and their enterprise resource planning (ERP) system and at what cost. This will likely be a very expensive (e.g., millions of dollars) systems project.
ToughBuilt Industries has some issues with the speed of their accounting processes. They installed Acumatica, possibly around the 2019 or 2020 timeframe, as we learned in the Acumatica case study here. That was their first level of automation and integration with suppliers and customers, moving them away from QuickBooks and manual data entry of orders.
The company replaced its financial reporting system as of January 1, 2023, and has issues in integrating that system and reconciling past and future financial records.
Most likely the old system and integration into the new system is causing ToughBuilt to be late in filing their 10-K and 10-Q reports. They are saying they lack the information required, and the ability to process that information in a timely manner without unreasonable costs, and the effort to reconcile transactions from the old and new system. However, they plan to file those reports and are diligently working on it. They filed in a recent SEC filing that the results of those reports should not reflect a significant difference in their results.
Given the non-timely SEC filings, we wonder what type of work is required on their financial system, and their enterprise resource planning (ERP) system and at what cost. This will likely be a very expensive (e.g., millions of dollars) systems project.
Consideration 6: Possibly moving some manufacturing to Vietnam to lower COGS
According to Trademo dot com, ToughBuilt may be moving some of their manufacturing from China to a split of India (soft goods) and Vietnam (metal goods) in addition to buying primarily from China. There is no other evidence of this shift, and the company states in their ToughBuilt registration statement dated February 15, 2024, "All of our products are designed and engineered in the United States and manufactured in China, India and the Philippines under our quality control supervision." There is no mention of Vietnam by the company.
According to Trademo dot com, ToughBuilt may be moving some of their manufacturing from China to a split of India (soft goods) and Vietnam (metal goods) in addition to buying primarily from China. There is no other evidence of this shift, and the company states in their ToughBuilt registration statement dated February 15, 2024, "All of our products are designed and engineered in the United States and manufactured in China, India and the Philippines under our quality control supervision." There is no mention of Vietnam by the company.
In this article, there are eight reasons given for a move to Vietnam from China.
In this article, Cosmosourcing dot com explores in detail why 'now is the time' for small and medium sized U.S. manufacturers to explore moving their manufacturing from China to Vietnam. Here is another related link to similar information from Cosmo Sourcing.
Statistica gives the average hourly wage in China, Mexico and Vietnam from 2016 to 2020. All are growing, but Vietnam is by far the least expensive option of the three countries.
In this 2022 article, we learn that Vietnam's government is supporting the growth in manufacturing with incentives.
In this September 2023 article, McKinsey & Company (we are alumni) discusses how Vietnam can accelerate its already rapid manufacturing growth rate. We learn that Vietnam earns 20% of its GDP from manufacturing.
East West Manufacturing, a consultancy, wrote this in 2022 to help firms understand some key metrics about rapid manufacturing growth rates and relative literacy and education in Vietnam when compared to China. They specifically discuss public investments in public education (K-12) to help their factory labor do greater things.
Consideration 7: Still an industry-wide slump, but slight tailwinds
June 2024: This is still a true statement as far as we can tell, given elevated mortgage interest rates, a lack of new housing supply and demand, and a slowdown in existing home sales. Home prices remain strong, supporting non-discretionary and small project homeowner investments, but larger, discretionary projects (e.g., kitchen and bathroom remodels) are down.
Census Retail Sales for February 2024, advance reading, show Building Material & Garden Equipment & Supplies Dealers retail sales rebounded in January 2024, but are still down significantly from December 2023 and down materially from a year ago. We are still in a slump, but had a good month. Inflation readings are elevated but in control, which should mean lower interest rates moving forward, this would also be good for home sales and price appreciation.
Lowe's Q4 earnings, and overall macroeconomic news, has been moderately positive for the industry of DIY and PRO home improvement services. We are seeing the beginning of a recovery. Scroll to the bottom for our commentary on what Lowe's results could mean for ToughBuilt Industries in 2024.
June 2024: This is still a true statement as far as we can tell, given elevated mortgage interest rates, a lack of new housing supply and demand, and a slowdown in existing home sales. Home prices remain strong, supporting non-discretionary and small project homeowner investments, but larger, discretionary projects (e.g., kitchen and bathroom remodels) are down.
Census Retail Sales for February 2024, advance reading, show Building Material & Garden Equipment & Supplies Dealers retail sales rebounded in January 2024, but are still down significantly from December 2023 and down materially from a year ago. We are still in a slump, but had a good month. Inflation readings are elevated but in control, which should mean lower interest rates moving forward, this would also be good for home sales and price appreciation.
Lowe's Q4 earnings, and overall macroeconomic news, has been moderately positive for the industry of DIY and PRO home improvement services. We are seeing the beginning of a recovery. Scroll to the bottom for our commentary on what Lowe's results could mean for ToughBuilt Industries in 2024.
- Home Depot just bought a huge Professional Contracting Services company to increase their PRO business.
- L.S. Starrett Company just went private. They are a smaller competitor.
- Hillman Solutions Corp., a smaller competitor, just reached a 52-week high in their stock price.
- TTNDY, or Techtronic Industries (owner of Milwaukee Tools) rose 30% since early March 2024.
- Lowe's stock rose ~20%, and Home Depot rose ~15% since the beginning of February 2024.
- Even Stanley Black & Decker is up 10% since the beginning of March 2024
Consideration 8: Low institutional holding percentage in company shares.
CUSIP Number 89157G868, formerly 89157G884 before the December 2023 reverse split.
This section is based on conjecture and may not be factual.
We believe that there are very few institutional holders of this stock and the float is held by new, or previously undisclosed investors.
Former owners:
CUSIP Number 89157G868, formerly 89157G884 before the December 2023 reverse split.
This section is based on conjecture and may not be factual.
We believe that there are very few institutional holders of this stock and the float is held by new, or previously undisclosed investors.
- Lind Global Fund II LP, Jeff Easton: likely sold his common stock but holds 405,076 $4.40 warrants.
- Advisory Services Network, LLC owns 24,500 shares (3.2%) for their investors.
- Susquehanna International Group LLP owns 17,486 shares (2.3%) for their investors.
- Tower Research Capital LLC owns 2,961 shares (0.4%).
- Ayrton Capital LLC, Waqas Khatri: owns warrants to purchase 63,033 shares (8.2%).
Former owners:
- Sabby Management, run by Robert Grundstein
- Intracoastal Capital, LLC
- State Street Corp
Consideration 9: Common stock warrants were recently in the money
Big Picture
Practically speaking and ignoring important practicalities, there are now 1,400,000 shares outstanding (common shares and pre-paid warrants) and 1,100,000 $4.405 warrants. The stock has dipped below the warrant execution price, so that dilution is 'off the table' for now.
Big Picture
Practically speaking and ignoring important practicalities, there are now 1,400,000 shares outstanding (common shares and pre-paid warrants) and 1,100,000 $4.405 warrants. The stock has dipped below the warrant execution price, so that dilution is 'off the table' for now.