UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

SCHEDULE 14A14A/A

(Amendment No. 1)

 

INFORMATION REQUIRED IN PROXY STATEMENT

 

SCHEDULE 14A INFORMATION

 

Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934

 

¨☐Preliminary Proxy Statement

 

☐¨Confidential, For Use of the Commission Only (As Permitted by Rule 14a-6(e)(2))

 

x☒Definitive Proxy Statement

 

¨☐Definitive Additional Materials

 

¨☐Soliciting Material under Rule 14a-12

 

 

TOUGHBUILT INDUSTRIES, INC.

(Name of Registrant as Specified in its Charter)

 

N/A

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

 

x☒No fee required.

 

¨☐Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

(1)Title of each class of securities to which transaction applies:

(2)Aggregate number of securities to which transaction applies:

(3)Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4)Proposed maximum aggregate value of transaction:

(5)Total fee paid:

 

¨☐Fee paid previously with preliminary materials.

 

¨☐Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the form or schedule and the date of its filing.

 

(1)Amount Previously Paid:

(2)Form, Schedule or Registration Statement No.:

(3)Filing Party:

(4)Date Filed:

 

 

 

   

 

 

 

ToughBuilt Industries, Inc.TOUGHBUILT INDUSTRIES, INC.

8669 Research Drive

Irvine, CA 92618

Telephone: (949) 528-3100

www.toughbuilt.com

October 30, 2023

Dear Stockholder:

 

September 1, 2022

Dear Shareholder:

You are cordially invited to attend the 20222023 Annual Meeting of ShareholdersStockholders (the “Annual Meeting”“Annual Meeting”) of ToughBuilt Industries, Inc., a Nevada corporation (“ToughBuilt,” the “Company,“Company,” “we,“we,” “us,“us,” and “our”“our”), which will be held on Wednesday, September 21, 2022,Monday, December 11, 2023, at 1:00 p.m. (PDT)(Pacific Time). The Annual Meeting will be held in a virtual meeting format only and conducted via live audio webcast to enable our shareholdersStockholders to participate from locations around the world. You will be able to attend the meeting, vote and submit your questions via the internet by visiting www.virtualshareholdermeeting.com/TBLT2022TBLT2023 and entering the control number included on your proxy card. You will not be able to attend the Annual Meeting physically in person.

 

Attached to this letter are a Notice ofDetails regarding the Annual Meeting of Shareholders and proxy statement, which describe the business to be conducted at the Annual Meeting are more fully described in the accompanying Notice of Special Stockholders Meeting and proxy statement. You are entitled to vote at our Annual Meeting and any adjournments, continuations or postponements thereof only if you were a stockholder as of October 18, 2023. As a result of the dividend of the shares of Series H Preferred Stock, par value $0.0001 per share (“Series H Preferred Stock”) distributed on October 18, 2023, each holder of shares of our common stock also holds a number of one one-thousandths (1/1,000th) of a share of our Series H Preferred Stock equal to the whole number of shares of common stock held by such holder. Because any one one-thousandths (1/1,000th) of a share of Series H Preferred Stock that are not present in person or by proxy at the Annual Meeting as of immediately prior to the opening of the polls at the Annual Meeting will be automatically redeemed, if you fail to submit a proxy to vote your shares or attend the Annual Meeting in order to do so, your shares of Series H Preferred Stock will be redeemed immediately prior to the opening of the polls at the Annual Meeting and will not be entitled to vote at the Annual Meeting.

 

On behalf of our entire Board of Directors, we thank you for your continued support. Your vote is very important, regardless of the number of shares of our voting securities that you own. Whether or not you ownexpect to attend the Annual Meeting online, please vote as promptly as possible by following the instructions in the accompanying proxy statement to ensure your representation and the presence of a fewquorum at the Annual Meeting. As an alternative to voting online during the Annual Meeting, you may vote via the Internet, by telephone, or by signing, dating and returning the accompanying proxy card.

If your shares are held in the name of a broker, trust, bank or many,other nominee, and whetheryou receive these materials through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary, or you may also virtually attend the meeting and vote online during the meeting.

If you have any questions regarding the attached proxy statement or need assistance in voting your shares of common stock or Series H Preferred Stock, please contact our proxy solicitor, Kingsdale Advisors, by telephone at 1-855-476-7860 (stockholders) and 1-646-868-3820 (brokers, banks and other nominees), or by email at contactus@kingsdaleadvisors.com.

YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.

Whether or not you plan to attend the Annual Meeting online, we urge you to vote your shares as promptly submit your vote via the internet,as possible by Internet, telephone or mail. Returning the proxy does not deprive you of your right to attend and vote your shares electronically at the Annual Meeting.

 

On behalf of the Board of Directors and management, I would like to thankThank you for choosing to invest in ToughBuilt and look forward to your participation atongoing support of our Annual Meeting.Company.

 

 By Order of the Board of Directors,
  
 /s/ Michael Panosian
 Michael Panosian
 Chief Executive Officer, President and Chairman of the Board

 

YOUR VOTE IS IMPORTANT

On or about September 1, 2022, we expect to mail to our shareholders a proxy statement for the Annual Meeting (the “Proxy Statement”), proxy card, and our Annual Report on Form 10-K for the year ended December 31, 2021 (“2021 Annual Report”). The Proxy Statement and proxy card provide instructions on how to vote online or by telephone and include instructions on how to receive a paper copy of proxy materials by mail. This Proxy Statement, Proxy Card and our 2021 Annual Report can be accessed directly online at www.proxyvote.com by using the control number located on the proxy card. A copy of our 2021 Annual Report and Proxy Statement are also available on our investor relations website at www.toughbuilt.com.

   

 

 

TOUGHBUILT INDUSTRIES, INC.

8669 Research Drive

Irvine, CA 92618

Telephone: (949) 528-3100

www.toughbuilt.com

NOTICE OF 2022 ANNUAL MEETING OF SHAREHOLDERS OFSTOCKHOLDERS

TOUGHBUILT INDUSTRIES, INC.

To Be Held Virtually at 1:00 PM (Pacific Time) on December 11, 2023

Notice is hereby given that an annual meeting of the stockholders (the “Annual Meeting”) of ToughBuilt Industries, Inc., a Nevada corporation (“ToughBuilt,” the “Company,” “we,” “us,” and “our”), will be held on December 11, 2023, at 1:00 p.m. (Pacific Time) via a live webcast on the Internet. You will be able to virtually attend the Annual Meeting online, vote and submit questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/TBLT2023 during the meeting. Except as provided below with respect to the shares of our Series H Preferred Stock, $0.0001 par value per share (“Series H Preferred Stock”), only stockholders of record of our common stock on October 18, 2023 (the “Record Date”) will be entitled to vote at the Annual Meeting and any adjournments, continuations or postponements thereof that may take place. We are holding the Annual Meeting for the following purposes, which are more fully described in the accompanying proxy statement:

 

 
DATE:Wednesday, September 21, 2022
TIME:1:00 p.m., PDT (or 4:00 p.m. EDT)
PLACE:

The Annual Meeting will be held via virtually, live on the internet at

www.virtualshareholdermeeting.com/TBLT2022.

Instructions on how to vote either before or at the Annual Meeting are contained on your notice and proxy card accompanying this proxy statement. You will need the 16-digit control number from your notice or proxy card or notice to vote either way.
ITEMS OF BUSINESS:1.To elect five directors, Michael Panosian, Joshua Keeler, Robert Faught, Linda Moossaian, and William Placke, each to hold officeserve until ourthe Company’s 2024 annual meeting of shareholders in 2023 andstockholders or until their respective successor issuccessors are duly elected and qualified.qualified (“Election of Directors”);
   
 2.To approve an amendment to the ToughBuilt Industries, Inc. 2022 Equity Incentive PlanCompany’s Articles of Incorporation, as amended (the “Equity Plan”“Charter”)., in substantially the form attached to the proxy statement as Annex A, to, at the discretion of the Board of Directors of the Company (the “Board”), effect a reverse stock split with respect to the Company’s issued and outstanding common stock, par value $0.0001 per share (“Common Stock”) at a ratio of 1-for-20 to 1-for-100 (the “Range”), with the ratio within such Range to be determined at the discretion of the Board (the “Reverse Stock Split Proposal”) and included in a public announcement;
   
 3.To ratify the selectionappointment of Marcum LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2022.2023 (the “Auditor Ratification Proposal”); and
   
 4.To authorize theapprove an adjournment of the meetingAnnual Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if necessary or appropriate, ifin the event there are not sufficient votes are not represented at the meeting to approve anyin favor of the foregoing proposals.
 5. To transact such other business as may properly come before the meeting.
Reverse Stock Split Proposal (the “Adjournment Proposal”).

 

The foregoing items of businessStockholders are more fully described inreferred to the proxy statement accompanying this Notice.notice for more detailed information with respect to the matters to be considered at the Annual Meeting. After careful consideration, the Board has determined that each proposal listed above is in the best interests of the Company and its stockholders and has approved each proposal. The Board recommends a vote “FOR” the Election of each Director Nominee (Proposal 1), “FOR” the Reverse Stock Split Proposal (Proposal 2), “FOR” the ratification of the Auditors (Proposal 3), and “FOR” the Adjournment Proposal (Proposal 4).

 

The Board has fixed the close of Directors recommendsbusiness on October 18, 2023 as the Record Date for the Annual Meeting. Only stockholders of record on the Record Date are entitled to receive notice of the Annual Meeting and to vote at the Annual Meeting or at any postponement(s) or, continuations(s), or adjournment(s) of the Annual Meeting. Notwithstanding the foregoing, holders of our outstanding shares of Series H Preferred Stock will only be entitled to vote such shares on the Reverse Stock Split Proposal and the Adjournment Proposal to the extent that you vote:such shares have not been automatically redeemed in the Initial Redemption as described in the accompanying Proxy Statement. A complete list of registered stockholders entitled to vote at the Annual Meeting will be available for inspection at our offices during regular business hours for the ten calendar days prior to the Annual Meeting and online during the Annual Meeting.

 

1.“FOR” the director nominees named in Proposal 1.

YOUR VOTE AT THE ANNUAL MEETING IS IMPORTANT.

2.“FOR” the approval of the Equity Plan as described in Proposal 2.

3.“FOR” the ratification of the selection of Marcum LLP as our independent registered public accounting firm as described in Proposal 3.

4.“FOR” the proposal to adjourn the meeting to permit further solicitation of proxies, if necessary or appropriate, if sufficient votes are not represented at the meeting to approve any of the foregoing proposals as described in Proposal 4.

 

YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Annual Meeting online, we encourageurge you to read the Proxy Statement and submit your proxy or voting instructions as soon as possible. You can vote your shares electronically via the internet,as promptly as possible by Internet, telephone or by completing and returning the proxy cardmail. You may change or voting instruction card if you requested paper proxy materials. Voting instructions are printed onrevoke your proxy card and included in the accompanying Proxy Statement. You can revoke a proxy at any time prior to its exercisebefore it is voted at the Annual Meeting by following the instructions in the Proxy Statement.Meeting.

 

Important Notice Regarding the AvailabilityOn behalf of Proxy Materialsour entire Board of Directors, we thank you for the Annual Meeting and our 2021 Annual Report are available free of charge at: www.proxyvote.com.your continued support.

Byorder of the Board of Directors,
/s/ Michael Panosian
Michael Panosian
Chief Executive Officer
Irvine, California
October 30, 2023

 

   

 

 

TOUGHBUILT INDUSTRIES, INC.

PROXY STATEMENT FOR THE
2022 ANNUAL MEETING OF SHAREHOLDERS

TABLE OF CONTENTS

 

GENERAL INFORMATION1
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING1
VOTING RIGHTS1
ITEMS OF BUSINESS2
  
VOTING RECOMMENDATION OF THE BOARD2
HOW TO VOTE2
REVOKING A PROXY3
SOLICITATION3
VOTES REQUIRED3
QUORUM4
IMPLICATIONS OF BEING AN “EMERGING GROWTH COMPANY”4
PROPOSAL 15
1: ELECTION OF DIRECTORS5
VOTES REQUIRED5
PROPOSAL 26
APPROVAL OF THE TOUGHBUILT INDUSTRIES, INC. 2022 EQUITY INCENTIVE PLAN6
PLAN HIGHLIGHTS6
The Options9
  
Restricted Stock UnitsDIRECTORS AND EXECUTIVE OFFICERS129
  
U.S. FEDERAL INCOME TAX CONSEQUENCESCORPORATE GOVERNANCE1413
  
COMPLIANCE WITH SECTION 409A OF THE CODE16
FUTURE AWARDS16
INTERESTS OF CERTAIN PERSONS IN THE PROPOSALAUDIT COMMITTEE REPORT17
REASONS FOR AUTHORIZATION AND VOTE REQUIRED17
VOTES REQUIRED17
PROPOSAL 318
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM18
VOTES REQUIRED18
PROPOSAL 419

APPROVAL OF ADJOURNMENT PROPOSAL, IF NECESSARY19
OTHER MATTERS19
DISSENTERS’ RIGHTS19
DIRECTORS AND EXECUTIVE OFFICERS19
BOARD MEETING QUORUM REQUIREMENTS22
BOARD COMMITTEES22
SECTION 16(A) REPORTING COMPLIANCE23
CODE OF ETHICS23
  
BOARD DIVERSITY MATRIX23
ROLE AND COMPOSITION OF THE BOARD24
Board Committees26
Audit Committee26
Compensation Committee27
Nominating and Corporate Governance Committee28
SHAREHOLDER RECOMMENDATIONS29
BOARD SELF-ASSESSMENT29
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION2919
  
DIRECTOR COMPENSATION19
EXECUTIVE COMPENSATION20
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS28
PROPOSAL 2: APPROVAL OF THE AMENDMENT TO THE COMPANY’S AMENDED AND RESTATED CHARTER TO EFFECT THE REVERSE STOCK SPLIT29
  
INDEMNIFICATIONPROPOSAL 3: RATIFICATION OF OFFICERS AND DIRECTORSAPPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM3037
  
AUDIT COMMITTEE REPORTPROPOSAL 4: APPROVAL OF THE ADJOURNMENT PROPOSAL3138
  
EXECUTIVE COMPENSATIONDEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS3239
  
EMPLOYMENT AND RELATED AGREEMENTSHOUSEHOLDING OF PROXY MATERIALS3239
  
AGREEMENTS WITH OUR NAMED EXECUTIVE OFFICERSOTHER MATTERS3239
  
PRINCIPAL SHAREHOLDERSANNEX A42
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS43
POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS43
SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING44
HOUSEHOLDING45
ANNUAL REPORT ON FORM 10-K45
TOUGHBUILT INDUSTRIES, INC. 2022 EQUITY INCENTIVE PLANA-140

 

   

 

 

TOUGHBUILT INDUSTRIES, INC.

ToughBuilt Industries, Inc.

8669 Research Drive

Irvine, CA 92618

Telephone: (949) 528-3100

www.toughbuilt.com

 

GENERAL INFORMATIONPROXY STATEMENT

FOR

ANNUAL MEETING OF STOCKHOLDERS

To Be Held on December 11, 2023

 

THE ANNUAL MEETING

The 2022 Annual Meeting of Shareholders (the “Annual Meeting”) of ToughBuilt Industries, Inc.(“ToughBuilt,Unless the context otherwise requires, references in this proxy statement to “ToughBuilt,” the “Company,” “we,” “us,” and “our” refer to ToughBuilt Industries, Inc., a Nevada corporation, and its consolidated subsidiary as a whole. In addition, unless the context otherwise requires, references to “stockholders” are to the holders of our common stock, par value $0.0001 per share (“Common Stock”) and holders of our Series H Preferred Stock, par value $0.0001 per share (the “Series H Preferred Stock”).

The accompanying proxy is solicited by the Board of Directors (the “Board”) on behalf of ToughBuilt Industries, Inc. to be voted at the Company’s Annual Meeting of Stockholders (the “Annual Meeting”) to be held on December 11, 2023, and at any adjournment, continuation or postponement thereof, for the purposes set forth in the accompanying Notice of Annual Meeting of Stockholders (the “Notice”). The Annual Meeting will take placebe held virtually via a live webcast on Wednesday, September 21, 2022,the Internet on December 11, 2023 at 1:00 p.m. PDT (4:00 EDT)(Pacific Time).

This proxy statement and accompanying form of proxy are dated October 18, 2023 and are expected to be first sent or given to stockholders on or about October 30, 2023.

 

This year’s Annual Meeting will be a completely virtual meeting of shareholders through an audio webcast live over the internet. There will be no physical meeting location. The Annual Meeting will only be conducted via an audio webcast. Please go to www.virtualshareholdermeeting.com/TBLT2022 for instructions on how to attend and participate in the Annual Meeting. Any shareholder may attend and listen live to the webcast of the Annual Meeting over the internet at such website. Shareholders as of the Record Date may vote and submit questions while attending the Annual Meeting via the internet by following the instructions listed on your proxy card. The webcast starts at 1:00 p.m. PDT on September 21, 2022. We encourage you to access the meeting prior to the start time. Technicians will be available to assist you if you experience technical difficulties accessing the virtual meeting website. If you encounter any difficulties accessingheld shares of our Common Stock or Series H Preferred Stock at the virtual meeting during the check-in or meeting time, please call the technical support number posted at www.virtualshareholdermeeting.com/TBLT2022.

You may vote by telephone, over the internet or by completing, signing, dating and returning your proxy card as soon as possible in the enclosed postage prepaid envelope.

VOTING RIGHTS

Shareholderclose of Record. If your shares are registered directly in your name with our transfer agent, Vstock Transfer LLC.business on October 18, 2023 (the “Record Date”), you are considered the “shareholder of record,” with respect to those shares. The proxy materials will be sent to you by mail directly by us. As a shareholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you planinvited to attend the Annual Meeting virtually we urgeat www.virtualshareholdermeeting.com/TBLT2023 and if you held shares of our Common Stock or Series H Preferred Stock at the close of business on the Record Date, you are invited to vote on the internet or by phone or mail as instructedproposals described in this proxy statement applicable to the class of stock which you held.

The executive offices of the Company are located at, and the mailing address of the Company is, 8669 Research Drive, Irvine, CA 92618.

The Company will pay the costs of soliciting proxies from stockholders. We have retained Kingsdale Advisors to assist in the proxy cardsolicitation of proxies for a fee of $11,500, plus reimbursement of expenses. In addition to ensure your vote is counted.solicitation by mail and by Kingsdale Advisors, our directors, officers and employees may solicit proxies on behalf of the Company, without additional compensation, by telephone, facsimile, mail, on the Internet or in person.

 

Beneficial Owner. If your shares are held in a stock brokerage account or by a bank or other nominee, you are consideredUnder Securities and Exchange Commission rules that allow companies to furnish proxy materials to stockholders over the “beneficial owner”Internet, we have elected to deliver our proxy materials to the majority of shares held in street name. The organization holding your account is consideredour stockholders over the shareholder of record for purposes of votingInternet. This delivery process allows us to provide stockholders with the information they need, while at the same time conserving natural resources and lowering the cost of delivery. On or about November 1, 2023, we will begin sending to our stockholders a Notice of Internet Availability of Proxy Materials (the “Internet Availability Notice”) containing instructions on how to access our proxy statement for our 2023 Annual Meeting. As a beneficial owner, you have the rightMeeting of Stockholders and our 2022 Annual Report to direct your broker, bank, or other agentStockholders. The Internet Availability Notice also provides instructions on how to vote online or by telephone, how to access the shares in your account. Your brokerage firm, bank, or other agent will not be ablevirtual Annual Meeting and how to vote inreceive a paper copy of the electionproxy materials by mail. The Notice of directors unless they have your voting instructions, so it is very important that you indicate your voting instructions to the institution holding your shares. As a beneficial owner of shares, youAnnual Meeting and Proxy Statement are also invited to attend the Annual Meeting virtually. However, since you are not the shareholder of record, you may not vote your shares in personavailable at the Annual Meeting unless you request and obtain a valid proxy from your broker, bank, or other agent.www.proxyvote.com.

 

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Only holdersQUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

What is a proxy?

A proxy is another person that you legally designate to vote your stock. If you designate someone as your proxy in a written document, that document is also called a “proxy” or a “proxy card.” By using the methods discussed below, you will be appointing Michael Panosian, the Company’s Chief Executive Officer, President and Chairman, and Martin Galstyan, the Company’s Chief Financial Officer, as your proxy. The proxy agent will vote on your behalf, and will have the authority to appoint a substitute to act as proxy. If you are unable to attend the Annual Meeting, please vote by proxy so that your shares may be voted.

What is a proxy statement?

A proxy statement is a document that regulations of the Company’s commonSecurities and Exchange Commission (“SEC”) require that we give to you when we ask you to sign a proxy card to vote your stock as recorded in our stock register at the close of business on August 12, 2022 (the “Record Date”) may vote at the Annual Meeting. On August 12, 2022, there were 9,026,531 shares of common stock outstanding. Each holder of common stock is entitled to one vote per share for each director nominee and each other proposal.

 

ITEMS OF BUSINESSWhat is the purpose of the Annual Meeting?

 

There are three matters scheduled for a vote:At the Annual Meeting, stockholders will act upon the following proposals:

 

●Proposal 1: To electThe election of five directors, Michael Panosian, Joshua Keeler, Robert Faught, Linda Moossaian, and William Placke, each to hold officeserve until our Annual Meetingthe Company’s 2024 annual meeting of Shareholders in 2023 andstockholders or until their respective successor issuccessors are duly elected and qualified.qualified;

●Proposal 2: To approveThe approval of an amendment (the “Reverse Stock Split Charter Amendment”) to the ToughBuilt Industries, Inc. 2022 Equity Incentive PlanCompany’s Articles of Incorporation, as amended (the “Equity Plan”“Charter”)., in substantially the form attached to the proxy statement as Annex A, to, at the discretion of the Board, effect a reverse stock split with respect to the Company’s issued and outstanding Common Stock, par value $0.0001 per share (the “Common Stock”), including stock held by the Company as treasury shares, at a ratio of 1-for-20 to 1-for-100 (the “Range”), with the ratio within such Range to be determined at the discretion of the Board and included in a public announcement (such action, the “Reverse Stock Split” and such proposal is referred to herein as the “Reverse Stock Split Proposal”);

●Proposal 3: To ratifyThe ratification of the selectionappointment of Marcum LLP as the Company’sour independent registered public accounting firm for the fiscal year ending December 31, 2022.2023 (the “Auditor Ratification”); and

●Proposal 4: To adjournThe approval of an adjournment of the meetingAnnual Meeting to a later date or dates, if necessary, to permit further solicitation and vote of proxies if necessary or appropriate, ifin the event there are not sufficient votes are not represented at the meeting to approve anyin favor of the foregoing proposals.Reverse Stock Split Proposal (the “Adjournment Proposal”).

 

Aside fromWhy is the electionCompany electing to effect a reverse stock split?

Our Board has unanimously adopted a resolution declaring advisable, and recommending to our stockholders for their approval, the Reverse Stock Split Charter Amendment authorizing the Reverse Stock Split at a ratio in the Range, such ratio to be determined by the Board and included in a public announcement, and granting the Board the discretion to file a certificate of directors,amendment to our Charter with the approvalSecretary of our Equity Plan and the ratificationState of the selectionState of our independent registered public accounting firm,Nevada effecting the Reverse Stock Split prior to the one-year anniversary of the date on which the Reverse Stock Split is approved by the Company’s board of directors (“Board of Directors” or the “Board”) knows of no matters to be presentedstockholders at the Annual Meeting.Meeting or to abandon the Reverse Stock Split altogether. The form of the proposed Reverse Stock Split Charter Amendment is attached to this proxy statement as Annex A. The Reverse Stock Split Charter Amendment will effect the Reverse Stock Split by reducing the number of outstanding shares of Common Stock as compared to the number of outstanding shares immediately prior to the effectiveness of the Reverse Stock Split, but will not increase the par value of Common Stock, and will not change the number of authorized shares of our capital stock. Stockholders are urged to carefully read Annex A. If any other matter is properly brought beforeimplemented, the Annual Meeting,number of shares representedof our Common Stock owned by all proxies receivedeach of our stockholders will be reduced by the Boardsame proportion as the reduction in the total number of shares of our Common Stock outstanding, so that the percentage of our outstanding Common Stock owned by each of our stockholders will be voted with respect thereto in accordance withremain approximately the judgment of the persons appointed as proxies.

VOTING RECOMMENDATION OF THE BOARD

The Board recommends that you vote your shares:

●“FOR” the election of five directors, Michael Panosian, Joshua Keeler, Robert Faught, Linda Moossaian, and William Placke, each to hold office until our Annual Meeting of Shareholders in 2023 and until their respective successor is duly elected and qualified;

●“FOR” the approval of the Equity Plan;

●“FOR” the ratification of the selection of Marcum LLP as our independent registered public accounting firm for the year ending December 31, 2022; and

●“FOR” the proposal to adjourn the meeting to permit further solicitation of proxies, if necessary or appropriate, if sufficient votes are not represented at the meeting to approve any of the foregoing proposals.

HOW TO VOTE

You may vote “For All,” “Withhold All” or “For All Except” with respect to each nomineesame, except to the Board. For Proposal 2, Proposal 3 and Proposal 4, you may vote “For,” “Against”extent that the Reverse Stock Split could result in some or “Abstain.”

If you areall of our stockholders receiving one share of Common Stock in lieu of a shareholder of record as of the Record Date, you may vote during the Annual Meeting by (i) attending the Annual Meeting virtually and following the instructions posted at www.virtualshareholdermeeting.com/TBLT2022 fractional share.or (ii) by proxy (x) over the internet at www.proxyvote.com, (y) by phone by calling 1-800-690-6903 or (z) by signing and returning the proxy card in the enclosed envelope. Whichever method you use, giving us your proxy means you authorize us to vote your shares at the meeting in the manner you direct. If you submit a proxy but do not specify how to vote, the Company representative named in the proxy will vote your shares in favor of the director nominees identified in this Proxy Statement, for Proposal 2 and for Proposal 3.

 

 2 

 

 

WhetherWhat are the consequences if the Reverse Stock Split Proposal is not approved by stockholders?

If stockholders fail to approve the Reverse Stock Split Proposal, our Board will not have the authority to effect the Reverse Stock Split to, among other things, facilitate the continued listing of our Common Stock on The Nasdaq Stock Market LLC (“Nasdaq”) by increasing the per share trading price of our Common Stock to help ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement. Any inability of our Board to effect the Reverse Stock Split could expose us to delisting from Nasdaq.

What is the record date and what does it mean?

The Record Date to determine the stockholders entitled to notice of and to vote at the Annual Meeting is the close of business on October 18, 2023. The Record Date is established by the Board as required by Nevada law. On the Record Date, 35,388,443 shares of Common Stock were issued and outstanding and 35,388.444 shares of Series H Preferred Stock were issued and outstanding and, except as provided below with respect to the shares of our Series H Preferred Stock, entitled to vote.

Who is entitled to vote at the Annual Meeting?

Holders of record of our Common Stock and our Series H Preferred Stock as of the close of business on the Record Date will be entitled to notice of and to vote at the Annual Meeting and at any adjournments or postponements thereof. Holders of record of shares of Common Stock have the right to vote on all matters brought before the Annual Meeting. Holders of record of shares of Series H Preferred Stock have the right to vote only on the Reverse Stock Split Proposal and the Adjournment Proposal. Holders of Common Stock and Series H Preferred Stock will vote on the Reverse Stock Split Proposal and the Adjournment Proposal as a single class. Notwithstanding the foregoing, holders of outstanding shares of Series H Preferred Stock will only be entitled to vote such shares on the Reverse Stock Split Proposal and the Adjournment Proposal to the extent that such shares have not you planbeen automatically redeemed in the Initial Redemption (as defined below).

You do not need to attend the Annual Meeting virtually, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting virtually and vote during the Annual Meeting if you have already voted by proxy.

If you are a beneficial owner and hold shares through another party, such as a bank or brokerage firm,shares. Instead, you may receive material from them asking how you want to vote. Simply follow the instructions to ensure that your vote is counted. To vote virtually at the Annual Meeting, you must obtain a valid proxy from your broker, bank, or other agent. Follow the instructions from your broker, bank, or other agent included with the notice, or contact your broker, bank, or other agent.

You may receive more than one set of proxy materials depending on how you hold your shares. Please vote all of your shares. To ensure that all of your shares are voted, for each set of proxy materials, please submit your proxy by phone, via the internet, or bymarking, signing, dating and returning the enclosed proxy card inor voting through the enclosed envelope.Internet.

 

REVOKING A PROXYWhat are the voting rights of the stockholders?

 

A shareholderEach share of our Common Stock outstanding as of the record date is entitled to one vote per share on all matters properly brought before the Annual Meeting. As previously announced on September 21, 2023, the Board declared a dividend of one one-thousandth (1/1,000th) of a share of Series H Preferred Stock for each outstanding share of Common Stock to stockholders of record may revoke any proxy which is not irrevocable by submittingof Common Stock as of 5:00 p.m. Eastern Time on October 18, 2023. The holders of Series H Preferred Stock have 1,000,000 votes per whole share of Series H Preferred Stock (i.e., 1,000 votes per one one-thousandth (1/1,000th) of a new proxy bearing a later date, by voting by telephone or over the internet, or by delivering to the Chief Financial Officershare of the Company a revocation of the proxy in writing so that it is received by the Company prior to the Annual Meeting at 8669 Research Drive, Irvine, CA 92618. A proxy shall be irrevocable if it states that it is irrevocableSeries H Preferred Stock) and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power.

If you are a beneficial owner, you may revoke your proxy by submitting new instructions to your broker, bank, or other agent, or if you have received a proxy from your broker, bank, or other agent giving you the rightentitled to vote your shares at the Annual Meeting, by attending the meeting virtually and voting during the meeting.

SOLICITATION

These proxy materials are being provided in connection with the solicitation of proxies byCommon Stock, together as a single class, on the CompanyReverse Stock Split Proposal and the Adjournment Proposal, but are first being sent to shareholders on or about September 1, 2022. We will pay the cost of soliciting proxies. We have retained Kingsdale Advisors for certain advisory and solicitation services at a fee of approximately $30,000. In addition to the mailing of these proxy materials, the solicitation of proxies or votes may be made in person, by telephone, or by electronic communication by our directors, officers, and employees, who will not receive any additional compensation for such solicitation activities. We may also reimburse brokerage firms, banks, and other nominee holders of record for the cost of forwarding proxy materials to beneficial owners.

Shareholders voting via the telephone or internet should understand that there may be costs associated with telephonic or electronic access, such as usage charges from telephone companies and internet service providers, which must be borne by the shareholder.

Quorum and Votes Required

In accordance with our bylaws, the presence of at least a majority of the voting power, regardless of whether the proxy has authorityotherwise entitled to vote on all matters, constitutes a quorum which is required in orderthe other proposals to hold the Annual Meeting and conduct business. Presence may be in person or by proxy. You will be considered part of the quorum if you voted on the internet, by telephone, by facsimile or by properly submitting a proxy card or voting instruction form by mail, or if you are present and votepresented at the Annual Meeting. Votes for and against, abstentions and “broker non-votes”Notwithstanding the foregoing, each share of Series H Preferred Stock redeemed pursuant to the Initial Redemption (as defined below) will each be counted as present for purposes of determining the presence of a quorum. Assuming the existence of a quorum, the affirmative vote of a plurality of the shares of our common stock present, either in person or represented by proxy, and entitled to vote at the Annual Meeting is required to elect directors (Proposal 1). Withhave no voting power with respect to the approvalReverse Stock Split Proposal and the Adjournment Proposal or any other matter. Unless otherwise provided on any applicable proxy, when a holder of Common Stock submits a vote on the Reverse Stock Split Proposal and the Adjournment Proposal, the corresponding number of shares of Series H Preferred Stock (or fraction thereof) held by such holder will be automatically cast in the same manner as the vote of the Equity Plan (Proposal 2),share of Common Stock (or fraction thereof) in respect of which such share of Series H Preferred Stock (or fraction thereof) was issued as a dividend is cast on the Reverse Stock Split Proposal and the ratificationAdjournment Proposal or such other matter, as applicable, and the proxy or ballot with respect to shares of Marcum LLP as our independent registered public accounting firm forCommon Stock held by any holder on whose behalf such proxy or ballot is submitted will be deemed to include all shares of Series H Preferred Stock (or fraction thereof) held by such holder. Holders of Series H Preferred Stock will not receive a separate ballot or proxy to cast votes with respect to the fiscal year ending December 31, 2022 (Proposal 3), assumingSeries H Preferred Stock on the existenceReverse Stock Split Proposal and the Adjournment Proposal or any other matter brought before the Annual Meeting. For example, if a stockholder holds 10 shares of a quorum, the affirmativeCommon Stock (entitled to one vote of a majorityper share) and votes in favor of the Reverse Stock Split Proposal, then 10,010 votes will be recorded in favor of the Reverse Stock Split Proposal, because the stockholder’s shares of our common stock present, eitherSeries H Preferred Stock will automatically be voted in person or represented by proxy, and entitled to vote atfavor of the Annual Meeting is required to decideReverse Stock Split Proposal alongside such matter. If a quorum is not present in person or by proxy, the Annual Meeting may be adjourned until a quorum is obtained.stockholder’s shares of Common Stock.

 

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All shares of Series H Preferred Stock that are not present in person or by proxy at the Annual Meeting as of immediately prior to the opening of the polls at the Annual Meeting will be automatically redeemed (the “Initial Redemption”). Any outstanding shares of Series H Preferred Stock that have not been redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our Board or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Proposal at any meeting of stockholders held for the purpose of voting on such proposals.

Abstentions are counted toward

When and where is the calculationAnnual Meeting and what do I need to be able to attend online?

The Annual Meeting will be held on December 11, 2023, at 1:00 p.m. (Pacific Time) at www.virtualshareholdermeeting.com/TBLT2023. Any stockholder who owns our Common Stock or our Series H Preferred Stock on the Record Date can attend the Annual Meeting online.

You will be able to attend the Annual Meeting online, vote, view the list of stockholders entitled to vote at the Annual Meeting and submit your questions during the Annual Meeting by visiting www.virtualshareholdermeeting.com/TBLT2023. To participate in the virtual meeting, you will need a quorum16-digit control number included on your proxy card or voting instruction form, as applicable. The meeting webcast will begin promptly at 1:00 p.m. (Pacific Time). We encourage you to access the meeting prior to the start time and you should allow ample time for the check-in procedures. Because the Annual Meeting will have the same effect asbe a vote against a proposal. completely virtual meeting, there will be no physical location for stockholders to attend.

How do I cast my vote?

If you are a beneficial owner whosestockholder of record or if your shares are heldregistered in the name of record by a broker, bank or other nominee (i.e.,(typically referred to as being held in “street name”), there are four ways to vote:

(1)By Internet at www.proxyvote.com 24 hours a day, seven days a week, until 11:59 p.m. Eastern time on December 10, 2023 (have your 16-digit stockholder control number, which can be found on your voting instruction form, in hand when you access the website);
(2)By toll-free telephone at 1-800-690-6903, until 11:59 p.m. Eastern time on December 10, 2023 (have your 16-digit stockholder control number, which can be found on your voting instruction form, in hand when you call);
(3)By completing, signing, dating and mailing your voting instruction form in the postage-paid envelope provided to you; or
(4)Online during the Annual Meeting at www.virtualshareholdermeeting.com/TBLT2023. You will need your 16-digit Stockholder control number, which can be found on your voting instruction form, in hand when you vote online during the Annual Meeting.

By completing and submitting a proxy, you must instructwill direct the broker, bank or other nominee howdesignated persons (known as “proxies”) to vote your shares.stock at the Annual Meeting in accordance with your instructions. The Board has appointed Michael Panosian, our Chief Executive Officer, and Martin Galstyan, our Chief Financial Officer, to serve as the proxies for the Annual Meeting.

In order to be counted, proxies submitted by telephone or Internet must be received by 11:59 p.m. Eastern time on December 10, 2023. Proxies submitted by U.S. mail must be received before the start of the Annual Meeting.

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Your proxy will be voted according to your instructions. If you are a stockholder of record and do not provide voting instructions,vote via the Internet or telephone or by returning a signed proxy card, your shares will not be voted unless you virtually attend the Annual Meeting and vote your shares online. If you vote via the Internet or telephone and do not specify contrary voting instructions, your shares will be voted in accordance with the recommendations of our Board on all matters, and in the discretion of proxy holders as to any proposalother matters that may properly come before the meeting or any adjournment, continuation or postponement thereof. Similarly, if you sign and submit your proxy card with no instructions, your shares will be voted in accordance with the recommendations of our Board on whichall matters, and in the discretion of proxy holders as to any other matters that may properly come before the meeting or any adjournment, continuation or postponement thereof. We know of no other business to be considered at the Annual Meeting.

In the event you do not provide instructions on how to vote, your broker will have authority to vote your shares with respect to the Reverse Stock Split Proposal (Proposal 2), the Auditor Ratification Proposal (Proposal 3), and the Adjournment Proposal (Proposal 4). Under the rules that govern brokers who are voting with respect to shares that are held in street name, brokers have the discretion to vote such shares on “routine” matters, but not on “non-routine” matters. Each of the Reverse Stock Split Proposal, Auditor Ratification Proposal and the Adjournment Proposal is considered a “routine” matter. Accordingly, your broker, bank or other nominee may vote your shares without receiving instructions from you on Proposal 2 (Reverse Stock Split Proposal), Proposal 3 (Auditor Ratification Proposal) and Proposal 4 (Adjournment Proposal). A failure to instruct your broker, bank or other nominee on how to vote your shares will not necessarily count as a vote against Proposal 2 (Reverse Stock Split Proposal), Proposal 3 (Auditor Ratification Proposal) and Proposal 4 (Adjournment Proposal). The Election Director Proposal is not considered a routine matter. Accordingly, your broker, bank or other nominee does not have discretionary authority to vote. This is called a “broker non-vote.” Proxies returned by brokerage firms for which no voting instructions have been providedvote your shares with respect to Proposal 1 (Election Director Proposal).

Who counts the votes?

All votes will be tabulated by the beneficial ownersinspector of election appointed for the Annual Meeting. Each proposal will count towardsbe tabulated separately.

How does the quorum. A broker or other nominee holding shares for a beneficial owner may generallyBoard recommend I vote on routine matters, but not non-routine matters, without receiving voting instructions. the proposals?

The uncontested electionBoard recommends you vote:

●“FOR” all five director nominees:
●“FOR” the Reverse Stock Split Proposal;
●“FOR” the Auditor Ratification; and
●“FOR” the Adjournment Proposal.

What is a “quorum?”

A quorum is the minimum number of directors (Proposal 1)shares required to be present or represented by proxy at the Annual Meeting to properly hold a meeting of stockholders and the adoptionconduct business under our Amended and Restated Bylaws, as amended (“Bylaws”), and Nevada law. The presence, in person or by proxy, of one-third (33.3%) of the 2021 Plan (Proposal 2)voting power of the stock issued, outstanding and entitled to vote at the Annual Meeting will constitute a quorum at the Annual Meeting. Shares of Series H Preferred Stock that are considered non-routine matters. If your shares are held by a broker or nominee and you do not provide such voting instructions, your sharesautomatically redeemed in the Initial Redemption will not be voted “FOR” Proposals 1 and 2. The ratification ofcounted towards the selection of the independent registered public accounting firm (Proposal 3) is considered a routine matter. Please provide instructions to your brokers or nominee on how to vote your shares.

QUORUM

In order to carry on the business of the meeting, we must have a quorum. This means that the holders of recordpresence of a majority of the voting powerquorum or as part of the issued and outstanding shares of capital stock of the Company entitled to vote at our Annual Meeting for purposes of determining the presence of a quorum. Abstentions and broker non-votes will be counted as shares present and entitled to vote for the purposes of determining a quorum for the Annual Meeting must be represented atMeeting. “Broker non-votes” occur when brokers, banks or other nominees that hold shares on behalf of beneficial owners do not receive voting instructions from the Annual Meeting, either by proxy or present on the internet.

Notwithstanding the foregoing, where a separate vote by a class or classes or series is required, a majority of the voting power of the issued and outstanding shares of such class or classes or series, present at the Annual Meeting or represented by proxy, shall constitute a quorum entitled to take action with respectbeneficial owners prior to the meeting and do not have discretionary voting authority to vote on that matter. None of the matters scheduled for a vote at the Annual Meeting require a separate vote by class or classes or series of common stock. Once a quorum is present to organize a meeting, it shall not be broken by the subsequent withdrawal of any shareholders.

IMPLICATIONS OF BEING AN “EMERGING GROWTH COMPANY”

We qualify as an “emerging growth company” under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and a “smaller reporting company” (as defined in the Securities and Exchange Commission (the “SEC”) rules) under the reporting rules set forth under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result, we are permitted to and intend to, rely on exemptions from certain disclosure requirements. For so long as we are an emerging growth company, we will not be required to:

●have an auditor report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
●comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
●submit certain executive compensation matters to shareholder advisory votes, such as “say-on-pay,” “say-on-frequency” and pay ratio; and
●disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation.

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards.those shares.

 

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In other words, an emerging growth company can delayWhat vote is required to approve each item?

The following table sets forth the adoption of certain accounting standards until those standards would otherwise applyvoting requirement with respect to private companies. We have elected to take advantageeach of the benefits of this extended transition period. Our financial statements may therefore not be comparable to those of companies that comply with such new or revised accounting standards.proposals:

Proposal 1 —Election of Directors.The nominees for director who receive the most “FOR” votes (also known as a “plurality” of the votes cast) will be elected. You may vote either “FOR” all of the nominees, “WITHHOLD” your vote from all of the nominees or “WITHHOLD” your vote from any one of the five nominees. Votes that are withheld will not be included in the vote tally for the election of the directors. Brokerage firms do not have authority to vote customers’ unvoted shares held by the firms in street name for the election of the directors. As a result, any shares not voted by a customer will be treated as a broker non-vote. Such broker non-votes will have no effect on the results of this vote.

Proposal 2 — Reverse Stock 

Split Proposal.

To be approved by stockholders, this proposal must receive the affirmative “FOR” vote of the majority of the voting power of the outstanding shares of Common Stock and Series H Preferred Stock present in person (which would include voting online at the virtual Annual Meeting) or represented by proxy at the Annual Meeting and entitled to vote on the proposal, voting together as a single class. Please refer to the discussion above under “Who is entitled to vote at the Annual Meeting?” and “What are the voting rights of the stockholders?” for a description of the Series H Preferred Stock, which is entitled to be voted together with the Common Stock as a single class on the Reverse Stock Split Proposal and the Adjournment Proposal. Shares of Series H Preferred Stock that are not present in person or by proxy as of immediately prior to the opening of the polls will be automatically redeemed in the Initial Redemption and, therefore, will not be outstanding or entitled to vote on either the Reverse Stock Split Proposal or the Adjournment Proposal and will be excluded from the calculation as to whether such proposals pass at the Annual Meeting. Due to the voting power of the shares of Series H Preferred Stock that are not redeemed pursuant to the Initial Redemption on the Reverse Stock Split Proposal and the Adjournment Proposal, the holders of Common Stock that submit a proxy to vote their shares at the Annual Meeting or attend the Annual Meeting will effectively have enhanced voting power on the two proposals over holders of Common Stock that are not represented in person or by proxy at the Annual Meeting. This means that the Reverse Stock Split Proposal and the Adjournment Proposal could each be approved by the affirmative vote of the holders of less than a majority of the outstanding shares of our Common Stock that have voted against the Reverse Stock Split Proposal. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote.
Proposal 3 — Auditor Ratification Proposal.The affirmative vote of a majority of the voting power of the shares present in person or represented by proxy at the meeting and entitled to vote for this proposal is required to ratify the appointment of our independent registered public accounting firm. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. We are not required to obtain the approval of our stockholders to appoint our independent registered public accounting firm. However, if our stockholders do not ratify the appointment of Marcum LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2023, the audit committee of our Board will reconsider its appointment.
Proposal 4 — Adjournment Proposal.To be approved by stockholders, this proposal must receive the affirmative “FOR” vote of the majority of the voting power of the outstanding shares of Common Stock and Series H Preferred Stock present in person (which would include voting online at the virtual Annual Meeting) or represented by proxy at the Annual Meeting and entitled to vote on the proposal, voting together as a single class. Abstentions will be treated as votes against this proposal. Brokerage firms have authority to vote customers’ unvoted shares held by the firms in street name on this proposal. If a broker does not exercise this authority, such broker non-votes will have no effect on the results of this vote. See “Proposal 2 – Reverse Stock Split Proposal” for more information regarding the voting rights of the Series H Preferred Stock” on the Adjournment Proposal.

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Is voting confidential?

 

We expectwill keep all the proxies, ballots and voting tabulations private. We only let our Inspectors of Election, representatives of Broadridge Investor Communication Solutions, Inc., examine these documents. Management will not know how you voted on a specific proposal unless it is necessary to take advantage of these reporting exemptions until we are no longer an emerging growth company or a smaller reporting company.meet legal requirements. We will, remain an “emerging growth company” for uphowever, forward to five years,management any written comments you make on the proxy card or untilthat you otherwise provide.

How are abstentions and broker non-votes treated?

Abstentions are included in the earliest of (i) the last daydetermination of the first fiscal yearnumber of shares of Common Stock and Series H Preferred Stock present at the Annual Meeting for determining a quorum at the meeting. An abstention is not an “affirmative vote,” but an abstaining stockholder is considered “entitled to vote” at the Annual Meeting. Accordingly, an abstention will have the effect of a vote against Proposals 2, 3 and 4.

Broker non-votes will be included in which our total annual gross revenues exceed $1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock held by non-affiliates exceeds $700 million asdetermination of the last business daynumber of our most recently completed second fiscal quarter,shares of Common Stock and Series H Preferred Stock present at the Annual Meeting for determining a quorum at the meeting. Broker non-votes, to the extent applicable, will have the effect of a vote against Proposals 2, 3 and 4. Because your broker will have discretionary voting authority with respect to Proposals 2, 3 and 4, a broker non-vote would only arise in the event that your broker does not receive your voting instructions and chooses not to exercise its discretionary voting authority with respect to such matter. Broker non-votes will have no effect on upon the approval of Proposal 1 as broker non-votes are not considered “entitled to vote.”

If your shares are held in the name of a bank, broker or (iii)other nominee, you should check with your bank, broker or other nominee and follow the voting instructions provided. Attendance at the Annual Meeting alone will not revoke your proxy.

Can I revoke or change my proxy?

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may vote again on a later date via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a proxy card or voting instructions form with a later date, or by attending the Annual Meeting and voting via the virtual meeting website. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy is revoked by delivering to the Company’s corporate secretary at 8669 Research Drive, Irvine, California 92618 a written notice of revocation prior to the Annual Meeting.

Do I have any dissenters’ or appraisal rights with respect to any of the matters to be voted on which we have issuedat the Annual Meeting?

No. None of the stockholders has any dissenters’ or appraisal rights with respect to the matters to be voted on at the Annual Meeting.

What does it mean if I get more than $1 billionone set of voting materials?

Your shares are probably registered in non-convertible debt duringmore than one account. Please follow the preceding three year period.separate voting instructions that you received for your shares of Common Stock or Series H Preferred Stock held in each of your different accounts to ensure that all of your shares are voted.

What are the solicitation expenses and who pays the cost of this proxy solicitation?

Our Board is asking for your proxy and we will pay all of the costs of asking for stockholder proxies. We will qualify as a smaller reporting company until our public float, asreimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses for forwarding solicitation material to the beneficial owners of Common Stock and Series H Preferred Stock and collecting voting instructions. We may use officers and employees of the last day of our second fiscal quarter, exceeds $250 million; because our common stock held by our directors, executive officers and our controlling shareholder and its affiliates are excluded from the calculation of public float, we anticipate qualifyingCompany to ask for proxies, as a smaller reporting company for the near future.described below.

 

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We have availed ourselves in

Is this Proxy Statement the only way that proxies are being solicited?

No. In addition to the solicitation of proxies, we have engaged Kingsdale Advisors, the proxy solicitation firm hired by the Company, at an approximate cost of $11,500, plus reimbursement of expenses, to solicit proxies on behalf of our Board. Kingsdale Advisors may solicit the return of proxies, either by mail, telephone, telecopy, e-mail or through personal contact. The fees of Kingsdale Advisors as well as the reimbursement of expenses of Kingsdale Advisors will be borne by us. Our officers, directors and employees may also solicit the return of proxies, either by mail, telephone, telecopy, e-mail or through personal contact. These officers and employees will not receive additional compensation for their efforts but will be reimbursed for out-of-pocket expenses. Brokerage houses and other custodians, nominees and fiduciaries, in connection with shares of the reduced reporting requirements described above. Because weCommon Stock and Series H Preferred Stock registered in their names, will be subjectrequested to ongoing public reporting requirementsforward solicitation material to the beneficial owners of shares of Common Stock and Series H Preferred Stock.

Are there any other matters to be acted upon at the Annual Meeting?

Management does not intend to present any business at the Annual Meeting for a vote other than the matters set forth in the Notice and has no information that are less rigorous than Exchange Act rules for companies that are not emerging growthothers will do so. If other matters requiring a vote of the stockholders properly come before the Annual Meeting, it is the intention of the persons named in the form of proxy to vote the shares represented by the proxies held by them in accordance with applicable law and their judgment on such matters.

Where can I find the voting results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting. The final results will be published in a Current Report on Form 8-K to be filed by us with the SEC within four business days of the meeting.

Whom do I call if I have questions?

If you have any questions, need additional material, or smaller reporting companies, shareholders could receive less information than they might expectneed assistance in voting your shares, please feel free to receive from more mature or larger public companies.contact the firm assisting us in the solicitation of proxies, Kingsdale Advisors. Brokers, banks and other nominees may call 1-646-868-3820 . Stockholders may call toll free at 1-855-476-7860. Or you may contact Kingsdale Advisors by email at contactus@kingsdaleadvisors.com.

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PROPOSAL 1:

ELECTION OF DIRECTORS

 

ELECTION OF DIRECTORSNominees

 

Our Bylaws provide that unless otherwise provided in our Articles of Incorporation, the authorized number of directors shall be not less than 1 (minimum number) nor more than 9 (maximum number). The Board has nominatedfixed the followingnumber of directors at five director candidates, all of whom currently serve as our directors, for reelection(5), each to serve asfor a director:period of one year until the next annual stockholders meeting and until their respective successor is elected or qualified.

Our Board has nominated Michael Panosian, JoshuaJosh Keeler, Linda Moossaian, Robert Faught and William Placke. Each of these nominees has agreed to standChris Homeister for reelectionelection as directors at the Annual Meeting. Our management has no reason to believe that any nominee will be unable to serve. If elected at the Annual Meeting, each of these nominees would serve until the annual meeting of shareholdersStockholders to be held in 20232024 and until his or her respective successor has been duly elected and qualified, or until the director’s earlier death, resignation or removal. William Placke is a current director whose term will expire at the Annual Meeting. However, Chris Homeister is a new director nominee at the Annual Meeting.

 

The Company representative named in thisUnless otherwise instructed, the proxy intends toholders will vote for the election ofproxies received by them “FOR” each of the director nominees above unless you indicate on your proxy that your vote should be withheld from any or all of the nominees.named above. If any nominee becomes unavailable for election as a result of an unexpected occurrence, shares that would have been voted for that nominee will instead be voted for the election of a substitute nominee proposed by our Board of Directors.

For details regarding the qualifications and the specific experiences, qualifications and skills of each of our director nominees, see “Directors and Executive Officers” on page 17 of this proxy statement.

VOTES REQUIRED

Approval of Proposal 1 requires the plurality of the votes cast with respect to a director nominee. This means that the five director nominees receiving the highest number of affirmative “for” votes will be elected.

The Board recommends you vote FOR each of the nominated directors.

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PROPOSAL 2Board.

 

APPROVAL OF THE TOUGHBUILT INDUSTRIES, INC. 2022 EQUITY INCENTIVE PLAN

On August 11, 2022, ourOur Board of Directors adopted, subject to shareholder approval, the ToughBuilt Industries, Inc. 2022 Equity Incentive Plan (the “Equity Plan”), otherwise referred to herein as the Equity Plan, which provides for the grant of stock options and restricted stock units to our officers, employees, directors, advisors and consultants. A total of 1,350,000 shares of common stock have been reserved for the issuance of awards under the Equity Plan. The Equity Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the Equity Plan will automatically increase on January 1 of each calendar year during the term of the Equity Plan, beginning with the calendar year 2023, by an amount of shares of common stock so that the total amount of common stock available under the Equity Plan is equal to 15% of the total number of shares of common stock outstanding on December 31st of the prior calendar year. The terms and provisions of the Equity Plan are summarized below, which summary is qualified in its entirety by reference to the Equity Plan, a copy of which is attached as Appendix A to this proxy statement.

PURPOSE OF THE EQUITY PLAN

The purpose of the Equity Plan is to secure for the Company and its shareholders the benefits inherent in share ownership by the employees, consultants, and directors of the Company and its affiliates who, in the judgment of the Board, will be largely responsible for its future growth and success. It is generally recognized that equity incentive plans of the nature provided for herein: (a) aid in retaining and encouraging individuals of exceptional ability because of the opportunity offered to them to acquire a proprietary interest in the Company; and (b) promote a greater alignment of interests between such persons and shareholders of the Company. 

plan highlights

Below is a general description of the Equity Plan. Undefined terms are as defined in the Equity Plan which is attached to this proxy statement as Annex A. Unless otherwise stated, section references refer to the section in the Equity Plan.

Awards

The Equity Plan authorizes the grant, from time to time, of (i) options intended to qualify under Section 422(a) of the Internal Revenue Code of 1986, as amended (the “Code”), referred to as “Incentive Stock Options” or “ISOs,” (ii) options not intended to qualify under Section 422(a) of the Code, referred to “Nonqualified Stock Options” or “NQSOs,” and (iii) restricted stock units referred to as “Restricted Stock Units” or “RSUs.” The ISOs and NQSs are collectively referred to as the “Options” and together with the RSUs, the “Awards.”

Administration of the Equity Plan

The Equity Plan provides that it is to be administered by the Board of Directors, the Compensation Committee or any other committee appointed by the Board of Directors to administer the Equity Plan. The Board has appointed the Compensation Committee as the administrator of the Equity Plan until further notice is given. Any such committee shall be comprised of three or more “non-employee directors” as defined in Rule 16b-3 under the Exchange Act and “independent directors” as defined by Nasdaq Rule 5605(a)(2).

Eligibility

The Compensation Committee has sole authority, in its discretion, to determine which officers, employees consultants, advisors or directors will receive Awards, the number of shares of common stock to be subject to each Award, and the forfeiture restrictions for each Award. The Company currently has four officers, 110 employees, five consultants, and three non-employee directors.

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Authorized Number of Shares

The total number of shares of common stock reserved and available for issuance under the Equity Plan shall be 1,350,000 shares of common stock and may consist, in whole or in part, of authorized and unissued shares or treasury shares. The number of shares of common stock available for issuance under the Equity Plan shall automatically increase on the first trading day of January each calendar year during the term of the Equity Plan, beginning with calendar year 2023, resulting in the aggregate number of shares of common stock available under the Equity Plan is equal to fifteen percent (15%) of the total number of shares of common stock outstanding on the last trading day in December of the immediately preceding calendar year. If any shares of common stock that have been granted pursuant to an Award cease to be subject to such Award or are forfeited or if any Award otherwise terminates without a payment being made to the Holder in the form of common stock, such shares shall again be available for distribution in connection with future grants and Awards under the Equity Plan.

Term of the Plan

This Plan shall be in effect upon the adoption by the Board of Directors and remain in effect until the tenth (10th) anniversary of the date the Board approves and adopts the Equity Plan, unless terminated earlier by the Board. This Plan and all Awards issued hereunder will terminate immediately without any further action if the stockholder resolution required to trigger the Effective Date is not approved by the stockholders or if the Exchange determines not to approve the Equity Plan.

Lapsed Awards

If Awards are surrendered, terminated, or expire without being exercised in whole or in part, new Awards may be granted covering the shares of common stock not issued under such lapsed Awards, subject to any restrictions that may be imposed by the Code.

Adjustment in Shares of Common Stock

If the outstanding shares of common stock shall at any time be changed or exchanged by a declaration of a stock dividend (bonus shares), stock split, combination or exchange of shares of common stock, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class, and kind of the shares of common stock subject to the Equity Plan or subject to any Options therefore granted, and the exercise price, shall be appropriately and equitably adjusted so as to maintain the proportionate number of shares of common stock, without changing the aggregate exercise price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights or a rights offering on outstanding shares of common stock. Upon the occurrence of any of the foregoing, the class and aggregate number of shares of common stock issuable pursuant to the Equity Plan in respect of which Options have not yet been exercised shall be appropriately adjusted.

Non-Transferability

Any Awards accruing to any Participant in accordance with the terms and conditions of the Equity Plan shall not be transferable or assignable to anyone unless specified in the Equity Plan. During the lifetime of a Participant all Awards may only be exercised by the Participant. Awards are non-transferable and non- assignable except by will or by the laws of descent and distribution.

Nothing contained in the Equity Plan shall confer upon any Participant any right with respect to employment or continuance of employment with the Company or any Affiliate or interfere in any way with the right of the Company or any Affiliate to terminate the Participant’s employment at any time. Participation in the Equity Plan by a Participant is voluntary.

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Necessary Approval

The issue of Shares under the Equity Plan is prohibited until the date that the Company obtains approval of the Equity Plan by Stockholder Approval (the “Effective Date”). Notwithstanding the foregoing, the Board may issue Awards prior to the Effective Date, with all such Awards subject to the following additional restrictions unless and until the occurrence of the Effective Date: (x) all Awards will be prohibited from being converted or exchanged for Shares; and (y) all Awards will terminate upon a Change of Control or upon either the stockholders of the Company or the Exchange failing to approve the Equity Plan.

Amendments to the Equity Plan

The Board shall have the power to, at any time and from time to time, either prospectively or retrospectively, amend, suspend, or terminate the Equity Plan or any Award granted under the Equity Plan without stockholder approval, including, without limiting the generality of the foregoing: changes of a clerical or grammatical nature, changes regarding the persons eligible to participate in the Equity Plan, changes to the exercise price, vesting, term, and termination provisions of the Award, changes to the Cashless Exercise Right provisions, changes to the authority and role of the Board under the Equity Plan, and any other matter relating to the Equity Plan and the Awards that may be granted hereunder, provided however that:

(a)such amendment, suspension, or termination is in accordance with applicable laws and the rules of the Exchange, and any such amendment has been approved by the Exchange;

(b)no amendment to the Equity Plan or to an Award granted hereunder will have the effect of impairing, derogating from or otherwise adversely affecting the terms of an Award that is outstanding at the time of such amendment without the written consent of the holder of such Award;

(c)the expiry date of an Option Period in respect of an Option shall not be more than ten years from the date of grant of an Option except as expressly provided in Section 3.4;

(d)the Directors shall obtain Stockholder Approval of:

(i)any amendment to the number of Shares specified in Section 6.1;

(ii)any amendment to the limitations on Shares that may be reserved for issuance, or issued, to Insiders; or

(iii)any amendment that would reduce the exercise price of an outstanding Option other than pursuant to Section 6.3;

(iv)any amendment that would extend the expiry date of the Option Period in respect of any Option granted under the Equity Plan except as expressly contemplated in Section 3.4; and,

(v)to the extent necessary and desirable to comply with applicable law or the rules of the Exchange.

If the Equity Plan is terminated, the provisions of the Equity Plan and any administrative guidelines and other rules and regulations adopted by the Board and in force on the date of termination will continue in effect as long as any Award or any rights pursuant thereto remain outstanding and, notwithstanding the termination of the Equity Plan, the Board shall remain able to make such amendments to the Equity Plan or the Award as they would have been entitled to make if the Equity Plan were still in effect.

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Withholding Taxes

The Company or any Designated Affiliate may take such steps as are considered necessary or appropriate for the withholding of any taxes or other amounts which the Company or any Designated Affiliate is required by any law or regulation of any governmental authority whatsoever to withhold in connection with any Award.

The Options

Exercise Price

The exercise price per Share of any Option shall be not less than 100% of the Market Price on the date of grant, provided that with respect to an Option granted to a U.S. Taxpayer, the exercise price per Share shall not be less than the Fair Market Value on the date of grant of the Option. Notwithstanding the foregoing, the Company may designate and exercise price less than the Fair Market Value on the date of grant if the Option: (i) is granted in substitution of a stock option previously granted by an entity acquired that is acquired by or merged with the Company or an Affiliate, or (ii) otherwise is structured to be exempt from, or to comply with, Section 409A of the Code, in the case of Options awarded to U.S. Taxpayers. In addition, in the case of an Incentive Stock Option granted to an Eligible Employee who, at the time the Incentive Stock Option is granted, owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

Grant of Options

Each Option will be designated in the Award agreement as either an Incentive Stock Option or a Non-qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Non-qualified Stock Options. Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

Terms of Options

The Option Period shall be ten years from the date such Option is granted or such greater or lesser duration as the Board, on the recommendation of the Committee, may determine at the date of grant, and may thereafter be reduced with respect to any such Option as provided in Section 3.6 hereof covering termination of employment or engagement of the Optionee or death or Disability of the Optionee. In the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns Shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five years from the date of grant or such shorter term as may be provided in the Award agreement.

Except as set forth in Section 3.6, no Option may be exercised unless the Optionee is at the time of such exercise:

(a)in the case of an Eligible Employee, in the employ of the Company or a Designated Affiliate and shall have been continuously so employed or retained since the grant of the Option;

(b)in the case of an Eligible Consultant, a Consultant of the Company or a Designated Affiliate and shall have been such a Consultant continuously since the grant of the Option; or

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(c)in the case of an Eligible Director, a director of the Company or a Designated Affiliate and shall have been such a director continuously since the grant of the Option.

Cashless Exercise Right

Unless prohibited by the Exchange, and except with respect to Incentive Stock Options awarded to U.S. Taxpayers, Participants have the right (the “Cashless Exercise Right”), in lieu of the right to exercise an Option, to terminate such Option in whole or in part by notice in writing delivered by the Participant to the Company electing to exercise the Cashless Exercise Right and, in lieu of receiving the Shares (the “Option Shares”) to which such terminated Option relates, to receive the number of Shares, disregarding fractions, which is equal to the quotient obtained by:

(a)subtracting the applicable Option exercise price per Share from the Market Price per Share on the business day immediately prior to the exercise of the Cashless Exercise Right and multiplying the remainder by the number of Option Shares;

(b)subtracting from the amount obtained under subsection 3.5(a) that amount of Tax Obligations applicable to the Option Shares; and

(c)dividing the net amount obtained under subsection 3.5(b) by the Market Price per Share on the business day immediately prior to the exercise of the Cashless Exercise Right.

If a Participant exercises a Cashless Exercise Right in connection with an Option, it is exercisable only to the extent and on the same conditions that the related Option is exercisable under the Equity Plan.

Effect of Termination of Employment or Death or Disability

If an Optionee:

(a)dies or becomes disabled while employed by, a Consultant to or while a director of the Company or a Designated Affiliate, any Option that had vested and was held by him or her at the date of death or Disability shall become exercisable in whole or in part, but only by the person or persons to whom the Optionee’s rights under the Option shall pass by the Optionee’s will or applicable laws of descent and distribution. Unless otherwise determined by the Board, on the recommendation of the Committee, all such Options shall be exercisable only to the extent that the Optionee was entitled to exercise the Option at the date of his or her death or Disability and only for 12 months after the date of death or Disability or prior to the expiration of the Option Period in respect thereof, whichever is sooner;

(b)ceases to be employed by, or to act as a director of, or to be engaged as a Consultant of, the Company or a Designated Affiliate for cause, no Option held by such Optionee will, unless otherwise determined by the Board, on the recommendation of the Committee, be exercisable following the date on which such Optionee ceases to be so employed or engaged; and

(c)ceases to be employed by, or to or act as a director of, or to be engaged as a Consultant of, the Company or a Designated Affiliate for any reason other than cause then, unless otherwise determined by the Board, on the recommendation of the Committee, any Option that had vested and is held by such Optionee at the effective date thereof shall become exercisable for a period of up to 30 days thereafter or prior to the expiration of the Option Period in respect thereof, whichever is sooner.

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Reduction in Exercise Price

Any change to the exercise price of any Option shall be subject to the approval of the Board.

Stockholder Approval (as required by the Exchange) shall be obtained for any reduction in the exercise price of any Option granted under the Equity Plan if the holder thereof is an Insider of the Company at the time of the proposed amendment.

Change of Control

In the event of a Change of Control, all Options outstanding shall vest immediately and be settled by the issuance of Shares or cash, or a combination of both Shares and cash, at the discretion of the Committee.

Incentive Stock Options

(a)          Maximum Number of Shares for Incentive Stock Options. Notwithstanding any other provision of the Equity Plan to the contrary, the aggregate number of Shares available for Incentive Stock Options shall not exceed 10% of the number of Shares issued at such time, subject to adjustment pursuant to the Equity Plan and subject to the provisions of Sections 422 and 424 of the Code.

(b)          Designation of Options. Each stock option agreement with respect to an Option granted to a U.S. Taxpayer shall specify whether the related Option is an Incentive Stock Option or a Non-qualified Stock Option. If no such specification is made in the stock option agreement or in the resolutions authorizing the grant of the Option, the related Option will be a Non-qualified Stock Option.

(c)          Special Requirements for Incentive Stock Options. In addition to the other terms and conditions of the Equity Plan (and notwithstanding any other term or condition of the Equity Plan to the contrary), the following limitations and requirements will apply to an Incentive Stock Option:

(i)          An Incentive Stock Option may be granted only to an employee of the Company, or an employee of a Subsidiary of the Company within the meaning of Section 424(f) of the Code.

(ii)         The aggregate Fair Market Value of the Shares (determined as of the applicable grant date) with respect to which Incentive Stock Options are exercisable for the first time by any U.S. Taxpayer during any calendar year (pursuant to the Equity Plan and all other plans of the Company and of any Parent or Subsidiary, as defined in Sections 424(e) and (f) respectively of the Code) will not exceed US$100,000 or any other limitation subsequently set forth in Section 422(d) of the Code. To the extent that an Option that is designated as an Incentive Stock Option becomes exercisable for the first time during any calendar year for Shares having a Fair Market Value greater than US$100,000, the portion that exceeds such amount will be treated as a Non-qualified Stock Option.

(iii)         The exercise price per Share payable upon exercise of an Incentive Stock Option will be not less than 100% of the Fair Market Value of a Share on the applicable grant date; provided, however, that the exercise price per Share payable upon exercise of an Incentive Stock Option granted to a U.S. Taxpayer who is a 10% Stockholder (within the meaning of Sections 422 and 424 of the Code) on the applicable grant date will be not less than 110% of the Fair Market Value of a Share on the applicable grant date.

(iv)         No Incentive Stock Option may be granted more than 10 years after the earlier of (A) the date on which the Equity Plan, or an amendment and restatement of the Plan, as applicable, is adopted by the Board; or (B) the date on which the Equity Plan, or an amendment and restatement of the Equity Plan, as applicable, is approved by the stockholders of the Company.

(v)         An Incentive Stock Option will terminate and no longer be exercisable no later than 10 years after the applicable date of grant; provided, however, that an Incentive Stock Option granted to a U.S. Taxpayer who is a 10% Stockholder (within the meaning of Sections 422 and 424 of the Code) on the applicable grant date will terminate and no longer be exercisable no later than 5 years after the applicable grant date.

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Restricted Stock Units

A Restricted Stock Unit, or RSU, is a compensatory award granted by a company to an employee or other individual performing services for the company. An RSU represents a promise by the company to transfer a share of the company's stock or a cash payment equal to the value of a share of the company's stock at a specific time in the future.

The holder of an RSU is not the beneficial owner of the shares underlying the RSU award and therefore is not entitled to voting, dividend, or other stockholder rights unless and until shares are delivered in settlement of the award.

Restricted Period

Concurrent with the determination to grant Restricted Stock Units to a Participant, the Board, on the recommendation of the Compensation Committee, shall determine the Restricted Period applicable to such Restricted Stock Units. In addition, at the sole discretion of the Board, at the time of grant, the Restricted Stock Units may be subject to performance conditions to be achieved by the Company or a class of Participants or by a particular Participant on an individual basis, within a Restricted Period, for such Restricted Stock Units to entitle the holder thereof to receive the underlying shares of common stock or cash in lieu thereof.

Deferred Payment Date

Any Participant who is not a U.S. Taxpayer may elect to defer to receive all or any part of the shares of common stock, or cash in lieu thereof, underlying Restricted Stock Units until one or more Deferred Payment Dates. Any other Participants may not elect a Deferred Payment Date.

Prior Notice of Deferred Payment Date

Participants who elect to set a Deferred Payment Date must give the Company written notice of the Deferred Payment Date(s) not later than 30 days prior to the expiration of the Restricted Period. For certainty, Participants shall not be permitted to give any such notice after the day which is 30 days prior to the expiration of the Restricted Period and a notice once given may not be changed or revoked.

Retirement or Termination during Restricted Period

In the event and to the extent of the Retirement or Termination and/or, as applicable, the Director Retirement or Director Termination of a Participant from all such roles with the Company during the Restricted Period, any Restricted Stock Units held by the Participant shall immediately terminate and be of no further force or effect; provided, however, that the Board shall have the absolute discretion to modify the grant of the Restricted Stock Units to provide that the Restricted Period shall terminate immediately prior to the date of such occurrence.

Retirement or Termination after Restricted Period

In the event and to the extent of the Retirement or Termination and/or, as applicable, the Director Retirement or Director Termination of the Participant from all such roles with the Company following the Restricted Period and prior to a Deferred Payment Date (as elected by a Participant who is not a U.S. Taxpayer), the Participant shall be entitled to receive, and the Company shall issue forthwith, shares of common stock or cash in lieu thereof in satisfaction of the Restricted Stock Units then held by the Participant. The provisions of Section 4.8 shall not apply to Participants who are Israeli taxpayers.

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Death or Disability of Participant

In the event of the death or Disability of a Participant, any shares of common stock or cash in lieu thereof represented by Restricted Stock Units held by the Participant shall be immediately issued or paid by the Company to the Participant or legal representative of the Participant.

Payment of Dividends

Subject to the absolute discretion of the Board, in the event that a dividend (other than a dividend payable in shares) is declared and paid by the Company on the shares of common stock, a Participant may be credited with additional Restricted Stock Units. The number of such additional Restricted Stock Units, if any, will be calculated by dividing (a) the total amount of the dividends that would have been paid to the Participant if the Restricted Stock Units (including Restricted Stock Units in which the Restricted Period has expired but the shares of common stock have not been issued due to a Deferred Payment Date) in the Participant’s account on the dividend record date had been outstanding shares of common stock (and the Participant held no other shares of common stock) by (b) the Market Price of the shares of common stock on the date on which such dividends were paid. Additional Restricted Stock Units Awarded pursuant to the Section 4.10 shall be subject to the same terms and conditions as the underlying Restricted Stock Units to which they relate.

Change of Control

In the event of a Change of Control, all Restricted Stock Units outstanding shall vest immediately and be settled by the issuance of shares of common stock or cash, or a combination of both shares of common stock and cash, in each case in the discretion of the Compensation Committee, notwithstanding the Restricted Period and any Deferred Payment Date.

Redemption of Restricted Stock Units

Except to the extent prohibited by the Exchange, upon expiry of the applicable Restricted Period (or on the Deferred Payment Date, as applicable), the Company shall redeem Restricted Stock Units in accordance with the election made in a Redemption Notice given by the Participant to the Company by:

(a)issuing to the Participant one Share for each Restricted Stock Unit redeemed provided the Participant makes payment to the Company of an amount equal to the Tax Obligation required to be remitted by the Company to the taxation authorities as a result of the redemption of the Restricted Stock Units;

(b)issuing to the Participant one Share for each Restricted Stock Unit redeemed and either (i) selling, or arranging to be sold, on behalf of the Participant, such number of shares of common stock issued to the Participant as to produce net proceeds available to the Company equal to the applicable Tax Obligation so that the Company may remit to the taxation authorities an amount equal to the Tax Obligation; or (ii) receiving from the Participant at the time of issuance of the shares of common stock an amount equal to the applicable Tax Obligation;

(c)subject to the discretion of the Company, paying in cash to, or for the benefit of, the Participant, the value of any Restricted Stock Units being redeemed, less any applicable Tax Obligation; or

(d)a combination of any of the shares of common stock or cash in Section 4.12(a), Section 4.12(b), or Section 4.12(c) above.

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The shares of common stock shall be issued and the cash, if any, shall be paid as a lump sum by the Company within ten business days of the date the Restricted Stock Units are redeemed under the Equity Plan. Restricted Stock Units of U.S. Taxpayers will be redeemed as soon as possible following the end of the Restricted Period (as set forth in the Restricted Stock Unit Grant Letter or such earlier date on which the Restricted Period is terminated pursuant to the Equity Plan), and in all cases by the end of the calendar year in which the Restricted Period ends, or if later, by the date that is 75 days following the end of the Restricted Period. A Participant shall have no further rights respecting any Restricted Stock Unit which has been redeemed in accordance with the Equity Plan.

No Participant who is resident in the U.S. may receive shares of common stock for redeemed Restricted Stock Units unless the shares of common stock to be issued upon redemption of the Restricted Stock Units are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

Right as a Stockholder

A Participant receiving Restricted Stock Units shall have the rights of a stockholder only as to shares of common stock, if any, actually issued to such Participant upon expiration of the applicable Restricted Period and satisfaction or achievement of the terms and conditions of the Award, and in accordance with the provisions of the Equity Plan and the applicable Award agreement, and not with respect to shares of common stock to which such Award relates but which are not actually issued to such Participant.

U.S. FEDERAL INCOME TAX CONSEQUENCES

The following summary of the federal income tax consequences relating to the Equity Plan is based on present U.S. federal tax laws and regulations. We cannot assure you that the laws and regulations will not change in the future and affect the tax consequences of the matters discussed in this section. This summary is not intended to be exhaustive and does not discuss the tax consequences of a participant’s death or the provisions of any income tax laws of any municipality, state or foreign country in which a participant may reside.

Incentive Stock Options (ISOs)

ISOs (sometimes also called statutory stock options) receive favorable tax treatment if a holding period is met and other statutory requirements are satisfied. Only company employees and executives are eligible to receive ISOs. The following summarizes the key federal tax consequences of ISOs.

Tax at grant: None

Tax at vesting: None

Tax at exercise: None, but the spread (the excess of the fair market value of the shares acquired on exercise over the aggregate exercise price) is a tax adjustment item for purposes of calculating alternative minimum tax (AMT) (which can be significant).

Tax at sale:

·If the shares acquired on exercise are held for two years following the grant date and one year following the date of exercise, capital gain or loss on the difference between the sale price and the exercise price.

·If the sale occurs within one year from the date of exercise or two years from the grant date (a disqualifying disposition), the employee recognizes ordinary income equal to the excess of the fair market value of the shares on the date of exercise over the aggregate exercise price.

·However, if the amount realized on the sale in a disqualifying disposition is less than the fair market value of the shares on the date of exercise, then the employee generally recognizes ordinary income equal to the excess of the amount realized on the sale of the shares over the aggregate exercise price (that is, the entire gain).

·If the amount realized on the sale of the shares is greater than the fair market value of the shares on the date of exercise (that is, the ISO shares are sold at a profit), then the employee will have capital gains treatment on the amount realized in excess of the spread at exercise.

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Nonqualified Stock Options (NQSOs):

Non-qualified stock options (sometimes called non-statutory stock options) provide employees with the right to purchase employer stock at a specified exercise price at the end of a specified vesting period. Company employees, executives, directors, contractors, and consultants are eligible to receive NQSOs. The following summarizes the key federal tax consequences of NQSOs.

Tax at grant: None

Tax at vesting: None

Tax at exercise: Ordinary income recognized on the spread (the excess of the fair market value of the shares acquired on exercise over the aggregate exercise price).

Tax at sale: Capital gain or loss on the difference between the sale price and the sum of the exercise price paid plus the ordinary income recognized on exercise. Whether it is a long-term or short-term gain or loss depends on how long the shares are held.

Restricted Stock Units (RSUs)

Restricted stock units are a way an employer can grant company shares to employees. The grant is "restricted" because it is subject to a vesting schedule, which can be based on length of employment or on performance goals, and because it is governed by other limits on transfers or sales that a company can impose. The following summarizes the key tax consequences of RSUs.

Tax at grant: None

Tax at vesting: No income tax so long as Award is exempt from or complies with Section 409A, but fair market value of RSU is subject to Federal Insurance Contributions Act (FICA) tax.

Tax at settlement:

·To avoid application of Section 409A, settlement must occur within 2 1/2 months following the end of the vesting year.

·If subject to Section 409A, settlement date must be a Section 409A permitted date or event and timely elected.

·Cannot be exercised at the holder's election but rather must be settled on the designated settlement date.

·Ordinary income recognized at settlement equal to the fair market value of the stock or the cash provided on settlement.

Tax at sale (for stock-settled RSUs): Capital gain or loss on the excess of the sale proceeds over the fair market value of the shares at the time of settlement. Whether it is a long-term or short-term gain or loss depends on how long the shares are held.

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Additional Tax Matters

Unless otherwise determined in an award agreement, in the event of a change in control, as defined in the Equity Plan: (1) each outstanding award will become fully vested and, if applicable, exercisable, (2) the restrictions, payment conditions, and forfeiture conditions applicable to any such award granted will lapse, and (3) any performance conditions imposed with respect to awards will be deemed to be fully achieved. Under Section 280G of the Code, we may not deduct certain compensation payable in connection with a change of control. The acceleration of vesting of awards in conjunction with a change in control of the Company may be limited under certain circumstances thereby avoiding nondeductible payments under Section 280G. In addition, Code § 409A applies to any award that constitutes nonqualified deferred compensation, and imposes a 20% excise tax on the participant, in addition to a current income inclusion and interest at the underpayment rate plus 1%. While most awards under the Equity Plan are anticipated to be exempt from the requirements of Code § 409A, awards not exempt are intended to comply with Code § 409A.

COMPLIANCE WITH SECTION 409A OF THE CODE

Section 409A of the Code governs certain types of nonqualified deferred compensation. The Equity Plan contemplates both deferred compensation that is subject to Section 409A and deferred compensation that is not subject to Section 409A. The Equity Plan requires that it be administered so that neither it nor any grant granted under it violates Section 409A of the Code. Accordingly, the Compensation Committee is required to structure all grants so that they are either exempt from or comply with Section 409A of the Code, and the Board of Directors and the Compensation Committee are permitted, within the bounds of the Equity Plan and applicable law, including Section 409A of the Code, to interpret the Equity Plan and/or any grant agreement, and to make any and all amendments to the Equity Plan or any grant agreement, to ensure that all grants are either exempt from or comply with Section 409A.

FUTURE AWARDS

We currently have no plans, proposals, or arrangements, written or otherwise, at this time to grant any awards under the Equity Plan. Because no awards have been granted under the Equity Plan as of the date of this proxy statement and all awards will be granted at the discretion of the Compensation Committee, it is not possible for us to determine and disclose the benefits, or amount, of awards that may be granted to the named executive officers and the executive officers as a whole, if the Equity Plan is approved by our shareholders.

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INTERESTS OF CERTAIN PERSONS IN THE PROPOSAL

Our named executive officers and non-employee directors are or will be eligible to receive awards under the Equity Plan.

REASONS FOR AUTHORIZATION AND VOTE REQUIRED

The Equity Plan is being submitted to the shareholders for approval pursuant to Section 422 of the Code and the rules of Nasdaq.

VOTES REQUIRED

Approval of Proposal 2 requires the affirmative vote of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual Meeting. Abstentions are considered shares present and entitled to vote on this proposal and, thus, will have the same effect asrecommends a vote “AGAINST” this proposal.

The Board of Directors recommends that you vote “FOR”“FOR” the approval of the
ToughBuilt Industries, Inc. 2022 Equity Incentive Plan.nominees named herein.

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PROPOSAL 3

RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has approved the selection of Marcum LLP as our independent registered public accountants to audit our financial statements for the year ending December 31, 2022. We are asking that you ratify that appointment, although your ratification is not required. A Marcum LLP representative will attend the Annual Meeting to answer appropriate questions and to make a statement if he or she desires.

The following table presents fees for professional services rendered by Marcum LLP during the years ended December 31, 2020 and December 31, 2021. Marcum LLP did not bill us for other services during those periods. All services that occurred during 2021, which is the period subsequent to Marcum LLP becoming our independent public accounting firm, were approved by the Audit Committee in accordance with the approval policy referred to below.

  Fiscal Year Ended December 31, 
  2021  2020 
Audit Fees $150,861  $145,760 
Audit-Related Fees (1) $107,000  $144,930 
Tax Fees $-  $- 
All Other Fees $-  $- 
Total $257,861  $290,690 

(1)Fees incurred in conjunction with consents for various registration statements filed during years.

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements. All other fees relate to professional services rendered in connection with the review of the quarterly financial statements.

Audit Committee Approval Policies and Procedures

The Audit Committee charter sets forth our policy regarding retention of the independent auditors, giving the Audit Committee responsibility for the appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors. As part of this responsibility, our Audit Committee approves the audit and non-audit services performed by our independent auditors in order to assure that they do not impair the auditor’s independence from the Company. The Audit Committee has adopted a policy that sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditors may be approved.

VOTES REQUIRED

Approval of Proposal 3 requires the affirmative vote of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual Meeting. Abstentions are considered shares present and entitled to vote on this proposal and, thus, will have the same effect as a vote “AGAINST” this proposal.

The Board recommends you vote FOR the ratification of the selection of Marcum LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2022.

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PROPOSAL 4

APPROVAL OF ADJOURNMENT PROPOSAL, IF NECESSARY

In the event there are not sufficient votes at the time of the Annual Meeting to approve the Equity Plan, our Board of Directors may propose to adjourn the Annual Meeting to a later date or dates in order to permit the solicitation of additional proxies. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given unless the meeting is adjourned and a new record date is set.

In order to permit proxies that have been received by us at the time of the Annual Meeting to be voted for an adjournment, if necessary, we have submitted this proposal to you as a separate matter for your consideration. In this proposal, we are asking you to authorize the holder of any proxy solicited by our Board of Directors to vote in favor of adjourning the Annual Meeting and any later adjournments. If shareholders approve this adjournment proposal, we could adjourn the Annual Meeting, and any adjourned session of the Annual Meeting, to use the additional time to solicit additional proxies in favor of approval of the Equity Plan, including the solicitation of proxies from shareholders who have previously voted against the proposal. Among other things, approval of the adjournment proposal could mean that, even if proxies representing a sufficient number of votes against the proposal to approve the Equity Plan have been received, we could adjourn the Annual Meeting without a vote and seek to convince the holders of those shares to change their votes to votes in favor of the plan.

The Board of Directors unanimously recommends that you vote “FOR” adjournment of the Annual Meeting, if necessary to solicit additional votes.

 

OTHER MATTERS

We do not presently know of any matters to be acted upon at the Annual Meeting other than the matters referred to in this Proxy Statement. If any other matter is properly presented, proxy holders will vote on the matter at their discretion.

DISSENTERS’ RIGHTS

Under Nevada law, there are no dissenter’s rights available to our common shareholders in connection with any matter submitted to a vote at the Annual Meeting.

DIRECTORS AND EXECUTIVE OFFICERS

 

SetThe following table sets forth below iscertain information regarding our directors and executive officers.director nominees:

 

Name Age Position Director Since
Michael Panosian 5960 

President, Chief Executive Officer, and
Chairman of the Board of Directors

(Principal Executive Officer)

 January 1, 2012
Martin Galstyan 3637 

Chief Financial Officer

(Principal Financial and Accounting Officer)

 --—
JoshuaJosh Keeler 4347 Chief Design Officer and Director June 7, 2019
Zareh Khachatoorian 6263 Chief Operating Officer and Secretary --—
Robert Faught 72 Director (1) November 14, 2018
Linda Moossaian 5557 Director (2) December 12, 2019
William Placke 55Director (3)July 11, 2021
Chris Homeister54 Director Nominee (4) June 11, 2021—

(1)Mr. Faught serves as the Chair of our Board’s Nominating and Corporate Governance Committee and as a member of its Audit Committee and Compensation Committee.
(2)Ms. Moossaian serves as the Chair and of our Board’s Audit Committee and as a member of its Compensation Committee and Nominating and Corporate Governance Committee.
(3)Mr. Placke serves as the Chair of our Board’s Compensation Committee and as a member of its Audit Committee and Corporate Governance Committee. Mr. Placke term as member of the Board will expire at the Annual Meeting.
(4)Mr. Homeister is a new director nominee and is not currently a director of the Board, or a member of any of its committees. If elected as a director, it is anticipated that Mr. Homeister will serve as a member of the Board’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

 

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Directors serve until the next annual meeting and until their successors are elected and qualified. Officers are appointed to serve for one year until the meeting of the Board following the Annual Meeting and until their successors have been elected and qualified.

Michael Panosian, Co-Founder,Co-founder, President, CEO and Chairman of the Board

 

Mr. Panosian co-founded our Company in 2012 and has been CEO, President, and Chairman of the Board since its inception. Mr. Panosian has over 25 years of experience in the commercialization process including innovation, design direction, product development, brand management, marketing, merchandising, sales, supply chain and finance. Mr. Panosian has deep knowledge of doing business in China where he managed large sourcing and manufacturing teams. Mr. Panosian'sPanosian’s educational background is in technical aerospace engineering and is a graduate of Northrop University with specializations in helicopters and jet engines. He has been a visionary and an inventor throughout his career and is the holder of numerous patents and trademarks. Mr. Panosian'sPanosian’s business background also includes construction and real-estate development and product design and innovation consultancy.

 

We believe Mr. Panosian is qualified to serve on our Board of Directors due to his business and leadership experience.

 

Martin Galstyan, Chief Financial Officer

 

Mr. Galstyan has been serving as the Chief Financial Officer of the Company since July 2, 2020. Mr. Galstyan joined the Company in 2012 as an account manager and became controller of the Company in 2014. Mr. Galstyan set up the Enterprise Resource Planning system for the Company and EDI (Electronic Data Interchange) for the Company’s big box retailers. Mr. Galstyan has a Bachelor’s in Accounting from Woodbury University in California.

 

JoshuaJosh Keeler, Co-founder, Chief Design Officer and Director

 

As the Chief Design Officer at our Company, Mr. Keeler is responsible for all product development since the inception of the Company. Mr. Keeler is also a member of the Board. He co-founded our Company in 2012 and works directly with Mr. Panosian in bringing innovative ideas to market. Mr. Keeler is a graduate of Art Center College of Design with a Bachelor of Science (BS) in Industrial Design. Mr. Keeler has over 12 years of product development experience, working on projects spanning several fields, includingincluding: automotive, personal electronics, sporting goods and a wide expanse of tools. From 1999 to 2000 he was co-owner and Vice President of Oracle Industrial Design, Co., a private company specializing in industrial design and product development. From August 2000 to April 2004, Mr. Keeler worked for Positec Power Tool Co., a private company in Suzhou, China, designing and creating a large innovation library of numerous power tool concepts. From August 2005 to April 2008, Mr. Keeler was the chief designer for Harbinger International, Inc. From August 2008 to April 2012, he was the chief designer for Pandun Inc, specializing in innovative tools and supporting products. He has lived in China and has extensive experience working directly with manufacturers to get designs into production.

 

We believe Mr. Keeler became a Director at our 2019 Annual Meeting, and is qualified to serve ondeemed suitable as a director by our Board of Directors givendue to his depth of knowledge of ourin the industry.

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Zareh Khachatoorian, Chief Operating Officer and Secretary

 

Mr. Khachatoorian has over thirty30 years of experience in the realms of corporate purchasing, product development, merchandising and operations. BeforePrior to joining ToughBuilt in January 2016, Mr. Khachatoorian was the President of Mount Holyoke Inc. in Northridge, California, starting in May 2014. Mr. Khachatoorian led Mount Holyoke Inc. in the servicing of its entire import and distribution operations. From August 2008 to April 2014, Mr. Khachatoorian served as the Vice President of Operations at Allied International in Sylmar, California. At Allied, Mr. Khachatoorian was responsible for the management of overseas and domestic office employees and departments involved in the areas of procurement and purchasing, inventory management, product development, engineering, control and quality assurance, and other related areas. Mr. Khachatoorian holds a BS degree in Industrial Systems Engineering from the University of Southern California. Additionally, Mr. Khachatoorian has been credited as the inventor or co-inventor of more than twenty issued patents, as well as several pending patents with the USPTO. Mr. Khachatoorian is fluent in Armenian and Farsi.

 

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Robert Faught, Director

Mr. Faught is President of RKF International a corporate distribution and advisory company. He currently sits on the board of Kansas City-basedCity based SmartHome Ventures, a private equity-backedequity backed company that he founded that has developed a worldwide platform for IoT (Internet of things) products. He is also a Board Advisor for TROC, a Miami-basedMiami based company focused on the sales, marketing and merchandising of consumer products within the retail environment for cable, broadband, wireless and home security products. He is a member of the ToughBuilt Board of Directors, a public corporation based in Lake Forest, Ca. selling construction and communication products and accessories to retailers, military and international partners. HeMr. Faught was previously a board member of Stratus Silver Lining, Inc a private equity-backedequity backed company that sold to Erickson in July of 2020. From 2003-2013, Mr. Faught was the Senior Vice President of Consumer Channels for Philadelphia-basedPhiladelphia based Comcast. He created an industry-leading organization of retail, digital marketing and retail “store within a store”store’s” through a series of acquisitions and innovative solutions selling and marketing cable, broadband, telephone, wireless and home security, which resulted in a $4.5BB division. He negotiated the industry’s first extensive retail contracts, generating distribution in over 10,000 retail stores nationwide. He represented the cable industry as the Chairman of the Consumer/Retail Committee for CTAM from 2004 to 2013, the cable industry'sindustries Washington DC-basedDC based public interest firm. From 2001-2003, Mr. Faught was the President and CEO of Atlanta-basedAtlanta based Enrev Power Solutions. He was recruited by the Board to grow revenues and position the firm for a favorable initial public offering (IPO).IPO. He built, trained and led a high–high- performance cross-functional management team of Sales, Marketing, Finance and R&D and IT personnel. In 1998, Mr. Faught was recruited by the Chairman of Philips Electronics to be the President of the Americas Region. He was brought in to lead a turnaround and assume accountability for North and South America. He increased the distribution and sales of several lines of consumer electronic products, which lead to a $3.0BB joint venture with Lucent Technologies. In addition, Mr. Faught directed a team of twenty-five25 Senior Managers and 12,000 employees, oversaw the manufacturing of productsproduct in Guadalajara, Mexico and traveled extensively to Paris to source European goods and expand the product portfolio. He also sat on Tom Wheeler’s (FCC Chairman) CTIA board in Washington. BeforeWashington from 1998 to 2003. Prior to 1998, Mr. Faught worked in Los Angeles for L.A. Cellular and in Atlanta for Bell South Cellular, where he managed consumerConsumer sales and marketing. Prior experiences also include leading Atari and Activision in senior salesSales and marketingMarketing roles. Mr. Faught has a BA degree in communicationsCommunication from John Carroll University, Cleveland, Ohio.

 

We believe Mr. Faught is qualified to serve on our Board of Directors given his leadership and business experience.

 

Linda Moossaian, Director

 

Linda Moossaian is an achievement-oriented financial strategist with an exceptional record of successful initiatives in financial planning, profit optimization, joint venture accounting, and treasury management. She has a strong history of forging strategic partnerships with senior management, including CEOs and CFOs as well as key stakeholders to drive financial objectives, make strategic decisions, and analyze value-added analytics. Ms. Moossaian has a sophisticated understanding of long-range budget preparation, GAAP accounting, M&A, planning models, financial forecasting & analysis, decision support, accounting procedures, and continuous process improvement. Her advanced critical thinking, analytical, qualitative, and quantitative analysis skills have been developed through positions in corporate and public accounting and consulting. She currently is the Executive Director, Theatrical Production Finance for WarnerMediaWarner Bros. Discovery in Burbank, CA, a position she has held since August 2021. Ms. Moossaian is currently thehas previously acted as Director, Audit & Controls-WBTV Financial Administration, Director, Theatrical Production Finance and Director, Financial Planning & Analysis for Warner Bros. Discover.

Bros from 2009 to the present.

 

We believe that Ms. Moossaian is qualified to serve on our Board of Directors given her expertise in finance and business.

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William Placke, Director

 

William “Bill” Placke has been serving asis the Executive Vice PresidentEVP of Corporate Development and Operations ofat TruU, Inc., a Silicon Valley-basedglobal cybersecurity company. Prior to TruU, Bill was the Head of Strategic Partnerships and Business Development for Ericsson Wireless Office, a publicly listed, global company since April 2022. Additionally, since September 2021, he has been serving as an advisor for an Infrastructure Venture Capital fund, GlenMartin.with more than 100,000 employees operating in over 120 countries from August 2020 until August 2021. Before being acquired by Ericsson in August 2020, Bill served as the Executive Vice President of Corporate Development and Strategic Alliances for StratusWorX, a Silicon Valley technology company, from June 2016 until its acquisition in August 2020 by Ericsson Wireless Office, a publicly listed, global company with more than 100,000 employees operating in over 120 countries. From August 2020 to August 2021, Bill was the Head of Strategic Partnerships and Business Development for Ericsson Wireless Office.2016. From June 2016 to June 2017, Bill served as Executive Vice President of Corporate Development at Console Connect, a SaaS and network company in Silicon Valley acquired by PCCW in August 2017. Prior to this, he was the Executive Vice President, General Counsel, and Company Secretary of Digital Globe Services, a London Stock Exchange-listed digital media company from January 2010 to July 2016. Bill has served in executive roles at Charter Communications and in board positions, as a member of the Investment Committee, and as Sr. Director of Legal Mergers & Acquisitions at United Pan-Europe Communications/Liberty Global.

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Bill began his career as a corporate,Corporate, M&A (mergers and acquisitions), and initialIPO (initial public offering (IPO)offering) attorney with the law firm of Roberts, Sheridan & Kotel in New York (now Dickstein, Shapiro) and later as a cross-border mergersCross-Border Mergers and acquisitionsAcquisitions attorney at Clifford Chance, LLP, one of the largest law firms in the world. Bill has served on the Boardboard of Directorsdirectors of companies in the US, Netherlands, UK, Ireland, and France and has published articles and cited in multiple legal reviews and business reviews on various topics from corporate governance to cross-border mergers and acquisitions and securities issues. Bill earned his law degree (J.D.) from St. John’s University School of law in May 1994, a Diploma in European Union Law from King’s College London in 2000, and his undergraduate degree in Business Administration from the University of Dayton in 1989. He has been licensed to practice law in New York since November 1994 and is a member in good standing with the New York Bar. ToughBuilt’s Board of Directors has determined that Mr. Placke’s legal expertise and extensive international experience in corporate finance, mergers and acquisitions, and securities offerings would be valuable to the Company’s growth during the Company’s recent rapid growth.

 

We believe Mr. Placke is qualified to serve on our Board of Directors due to his legal expertise and extensive international experience in corporate finance, mergers and acquisitions, and securities offerings.

 

BOARD MEETING QUORUM REQUIREMENTSChris Homeister, Board Nominee

 

Our bylaws (the “Bylaws”Chris Homeister is a board nominee. Since February 2022, Chris has been serving as the Managing Partner for Keystone Capital Group, LLC, a private equity firm that focuses on providing financial capital to small and middle market companies. Since April 2022, He also has been serving as the Consumer Operating Partner for LongueVue Capital. From June 2019 to June 2021, Mr. Homeister served as Executive Vice President and Chief Merchandising Officer for GameStop Corp. (NYSE: GME) (“GameStop”) provide thatwhere Chris led the overall product assortment and strategy, supply chain and transportation, visual merchandising, pricing, forecasting, demand planning, private label & licensing, financial services, vendor relations, sourcing, refurbishment operations and all e-commerce functions. Prior to joining GameStop, from October 2013 to October 2017, Mr. Homeister served as the Chief Executive Officer, President, and a majoritymember of the total numberboard of directors thenof Tile Shop Holdings, Inc. (Nasdaq: TTSH), a publicly traded specialty home improvement retailer. Earlier in office will constitutehis career, Homeister held several senior roles at Best Buy (NYSE: BBY), including senior vice president of merchandising & general manager and senior vice president of their Entertainment Business Group, where he oversaw a quorum.

Our Boardwide array of Directors meets periodically duringproduct categories. Earlier in his career, Homeister was the year to review significant developments affecting usvice president of product development at Gateway, Inc. Homeister began his career at Amoco Oil Company holding a variety of finance and to act on matters requiring the approvalproduct marketing roles. Homeister is a graduate of our BoardThe University of Directors. In 2022, our Board met two times. During 2022, each director, other than Joshua Keeler, attended at least 75%Iowa, holding a Bachelor of the aggregateBusiness Administration degree, majoring in finance. Homeister also holds an MBA degree from The University of (i) the total number of meetings of our Board of Directors held during the period for which he or she had been a director and (ii) the total number of meetings held by all committees of our Board of Directors on which he or she served during the periods that he served.Notre Dame.

 

We encouragebelieve that Mr. Homeister’s experience as an executive officer and board member in the retail sector, combined with his broad financial knowledge and experience advising and working with small to middle market companies, makes him qualified to serve on our Board.

Family Relationships

There is no family relationship between our directors, and nomineesexecutive officers, or person nominated or chosen by the Company to attend our Annual Meeting.become a director.

 

BOARD COMMITTEESLegal Proceedings

 

Our Board has established an Audit Committee, a Compensation Committee, and Nominating and Corporate Governance Committee, each with its own charter posted onTo the best of our website at www.toughbuilt.com. These committees aim to strengthen and supportknowledge, none of our corporate governance structure.directors or director nominee or executive officers have, during the past ten years, been involved in any legal proceedings described in subparagraph (f) of Item 401 of Regulation S-K.

 

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SECTION 16(A) REPORTING COMPLIANCECORPORATE GOVERNANCE

Section 16(a) of the Exchange Act requires that executive officers and directors, and any persons who own more than ten percent of a registered class of the Company’s equity securities file reports of ownership and changes in ownership with the SEC. Specific dates for such filings have been established by the SEC, and the Company is required to report in this Annual Report on Form 10-K any failure to file reports in a timely manner in 2021. Joshua Keeler, the Chief Design Officer of the Company, failed to file a Form 4 in a timely manner regarding his grant of stock options on September 14, 2018, which was subsequently filed with the SEC on April 12, 2022. Also, Robert Faught, a director of the Company’s Board of Directors failed to file a Form 3 in a timely manner reporting his appointment to the Board of Directors on June 11, 2021, which was subsequently filed with the SEC on April 12, 2022. Other than the foregoing, the Company believes that applicable Section 16(a) filing requirements were met during 2021 by its directors and executive officers.

CODE OF ETHICS

We have adopted a written Code of Business Conduct and Ethics (the “Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted a current copy of the Code on our website, www.toughbuilt.com. In addition, we will post on our website all disclosures that are required by law or the listing standards of The Nasdaq Stock Market LLC (“Nasdaq”) concerning any amendments to, or waivers from, any provision of the Code.

BOARD DIVERSITY MATRIX

On August 6, 2021, the SEC approved Nasdaq’s proposed rule changes regarding board diversity, which require listed companies to:

●disclose statistical information regarding the diversity of the company’s board; and

●have, or explain why they do not have, at least two diverse directors on the board of directors.

Nasdaq-listed companies, subject to certain exceptions, must disclose statistical information on the company’s board of directors related to a director’s self-identified gender, race, and self-identification as LGBTQ+. Nasdaq Rule 5606 of the Nasdaq Listing Rules includes a uniform matrix format for the disclosure, which companies are required to provide annually in their proxy statement or on their website.

Companies must disclose the board matrix by the later of:

●August 8, 2022; or

●the date the company files its proxy or information statement for its annual shareholders' meeting being held in 2022.

Nasdaq-listed companies, with certain exceptions, will also need to either:

●Have at least:

oone director who self-identifies as female, without regard to the individual’s designated sex at birth; and

oone director who self-identifies as an “underrepresented minority” or LGBTQ+, as defined in the proposal.

●Explain why the company does not have at least two directors on its board who self-identify in the categories listed above.

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Nasdaq Rule 5605 includes scaled board diversity requirements for smaller reporting companies, foreign issuers and companies with boards comprised of five or fewer directors. In addition, the board diversity requirement will be phased in for each of Nasdaq’s three tiers. Since the Company is listed on the Nasdaq Capital Market, the Company has until August 2023 to have at least one diverse director and until August 2026 to have two diverse directors, or explain why they do not in either case.

 

The following Board Diversity Matrix presentsbusiness and affairs of our Board diversity statistics in accordance with Nasdaq Rule 5606, as self-disclosed by our directors. EachCompany are managed under the direction of the categories listed in the below table has the meaning as it is used in Nasdaq Rule 5605(f).Board.

 

Board Diversity Matrix (as of the Record Date)

Total Number of Directors:   5
    
Part I: Gender Identity   Female  Male  Non-Binary  Did Not Disclose Gender
             
Directors  1  4  —  —
Part II: Demographic Background             
African American or Black  —  —  —  —
Alaskan Native or American Indian  —  —  —  —
Asian  —  —  —  —
Hispanic or Latinx  —  —  —  —
Native Hawaiian or Pacific Islander  —  —  —  —
White  1  4  —  —
Two or More Races or Ethnicities  —  —  —  —
LGBTQ+  —  —  —  —
Did Not Disclose Demographic Background  —  —  —  —

Our Board of Directors seeks members from diverse professional backgrounds who combine a solid professional reputation and knowledge of our business and industry with a reputation for integrity. Our Board of Directors does not have a formal policy concerning diversity and inclusion but is in the process of establishing a policy on diversity. Diversity of experience, expertise, and viewpoints is one of many factors the Nominating and Corporate Governance Committee considers when recommending director nominees to our Board of Directors. Further, our Board of Directors is committed to actively seeking highly qualified women and individuals from minority groups and the LGTQ+ community to include in the pool from which new candidates are selected. Our Board of Directors also seeks members that have experience in positions with a high degree of responsibility or are, or have been, leaders in the companies or institutions with which they are, or were, affiliated, but may seek other members with different backgrounds, based upon the contributions they can make to our Company.

ROLE AND COMPOSITION OF THE BOARD

Chairperson of the BoardLeadership Structure

 

Our Board of Directors currently has no established policy on whether the roles of Chief Executive Officer and Chairperson of the Board of Directors should be separated. Our Board of Directors believes that it is most appropriate to make that determination based on the Company’s circumstances. Mr. Panosian services as our Chief Executive Officer and Chairperson of our directors. The Board of Directors does not believe that introducing an independent Chairperson would provide appreciably better direction for the Company. Also, the Board does not have a lead independent director. The Board of Directors believes its current structure is functioning effectively.

 

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Board Risk OversightIndependence

 

Our Board has determined, after considering all of Directorsthe relevant facts and circumstances, that Robert Faught, Linda Moossaian, and our new director nominee, Chris Homeister, are independent directors, as “independence” is defined by the listing standards of The Nasdaq Stock Market LLC, or Nasdaq, and by the SEC, because they have no relationship with us that would interfere with their exercise of independent judgment in carrying out their responsibilities as a director. Mr. Michael Panosian and Mr. Josh Keeler are employee directors.

Board Meeting Quorum Requirements

Our Bylaws provide that a majority of the total number of directors then in office will constitute a quorum.

Our Board meets periodically during the year to review significant developments affecting us and to act on matters requiring the approval of our Board. In 2022, our Board met five times . During 2022, each director, other than Josh Keeler, attended all meetings 100% of the aggregate of (i) the total number of meetings of our Board held during the period for which he or she had been a director and (ii) the total number of meetings held by all committees of our Board on which he or she served during the periods that he served. Throughout the year, the Board also passed resolutions by unanimous written consent in lieu of a meeting as permitted by the Nevada Revised Statutes and the Company’s Bylaws.

We encourage our directors and nominees to attend our Annual Meeting.

Executive Sessions

We regularly schedule executive sessions in which independent directors meet without the presence or participation of management.

Board Risk Oversight

Our Board as a whole has responsibility for risk oversight. Our Board of Directors exercises this risk oversight responsibility directly and through its committees. The risk oversight responsibility of our Board of Directors and its committees are informed by reports from our management teams to provide visibility to our Board of Directors about the identification, assessment, and management of key risks and our management’s risk mitigation strategies. Our Board of Directors has primary responsibility for evaluating strategic and operational risks, including those related to significant transactions. Our Audit Committee has primary responsibility for overseeing our major financial and accounting risk exposures and, among other things, discusses guidelines and policies with respect to assessing and managing risk with management and our independent auditor. Our Compensation Committee has responsibility for evaluating risks arising from our compensation and people policies and practices. Our Nominating and Corporate Governance Committee has responsibility for evaluating risks relating to our corporate governance practices. Our committees and management provide reports to our Board of Directors on these matters.

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In its governance role, and particularly in exercising its duty of care and diligence, our Board of Directors is responsible for ensuring that appropriate risk management policies and procedures are in place to protect the Company’s assets and business. Our Board of Directors has broad and ultimate oversight responsibility for our risk management processes and programs, and executive management is responsible for the day-to-day evaluation and management of risks to the Company. We do not have a policy as to whether our Chairperson and Chief Executive Officer’s roles should be separate. Instead, our Board of Directors makes this determination based on what best serves our Company’s needs at any given time.

 

Director IndependenceCodes of Ethics and Business Conduct

 

UnderWe have adopted a written Code of Ethics and Business Conduct (the “Code”) that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted the rules of The Nasdaq Stock Market, LLC (“Nasdaq”), whereCode on our common stock trades, independent directors must constitute a majority of a listed company’s Board of Directors. Also,website, www.toughbuilt.com as well as filed the Nasdaq rules requireCode as an exhibit to our Form 10-K for the fiscal year ended December 31, 2022. In addition, we will post on our website all disclosures that each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent, subject to specified exceptions. Audit Committee members must also satisfyare required by law or the independence criteria outlined in Rule 10A-3 under the Exchange Act. Under the ruleslisting standards of Nasdaq concerning any amendments to, or waivers from, any provision of the Code. These documents are also available in print, free of charge, to any stockholder requesting a director will only qualify as an “independent director”copy in writing from our Secretary at the address of a company if such director is not anour executive officer or employee of such company or, in the opinion of such company’s Board of Directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.offices.

 

In order to be considered independent for purposes of Rule 10A-3, a member of an Audit Committee of a listed company may not, other than in his or her capacity as a member of the Audit Committee, the Board of Directors, or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fees from the listed company or any of its subsidiaries, or be an affiliated person of the listed company or any of its subsidiaries.Committees

 

Our Board of Directors has undertaken a review of each director’s independence and considered whether any director has a material relationship with us that could compromise the director’s ability to exercise independent judgment in carrying out his or her responsibilities. As a result of this review, our Board of Directors determined that each member of the board, other than Michael Panosian, the Chief Executive Officer of the Company, and Joshua Keeler, our Chief Design Officer, are “independent directors” as defined in Nasdaq Listing Rules and SEC Rule 10A-3 promulgated under the Exchange Act. A majority of our directors are and will continue to be independent, as required under applicable Nasdaq rules. As required under applicable Nasdaq rules, our independent directors have and will continue to meet in regularly scheduled executive sessions at which only independent directors are present.

Our Board of Directors also determined that each member of our Audit Committee, Compensation Committee, and Nominating and Corporate Governance Committee satisfy the independence standards for those committees established by the SEC’s and Nasdaq’s applicable rules and regulations.

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In making these determinations, our Board of Directors considered the relationships that each non-employee director has with our Company and all other facts and circumstances our Board of Directors deemed relevant in determining their independence, including each non-employee director’s beneficial ownership of our capital stock.

Executive Sessions of Independent Directors

Independent members of our Board of Directors convene executive sessions from time to time as deemed necessary or appropriate. These sessions generally are without the presence of our non-independent directors or members of the Company’s management.

Board Committees

Our Board of Directors has three standing committees, an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee. As of this proxy statement’s date, the composition and primary responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our Board of Directors.Board.

 

Audit Committee

 

Under Nasdaq Rule 5605(c)(2), we are required to have an audit committee of at least three members, each of whom must: (i) be an independent director as defined under Rule 5605(a)(2); (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Exchange Act (subject to the exemptions provided in Rule 10A-3(c) under the Exchange Act); (iii) not have participated in the preparation of the financial statements of the Company or any current subsidiary of the Company at any time during the past three years; and (iv) be able to read and understand fundamental financial statements, including a Company’s balance sheet, income statement, and cash flow statement. Additionally, each Company must have at least one member of the audit committee who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable experience or background which results in the individual’s financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.

 

Our Audit Committee currently consists of Linda Moossaian, Robert Faught and William Placke,Chris Homeister, all of whom are deemed to be independent directors under Nasdaq Rule 5605(a)(2) and Rule 10A-3 of the Exchange Act. Ms. Moossaian serves as the Chairperson of the Audit Committee and also qualifies as an “audit committee financial expert” as defined in Item 407(d)(5)(ii) of Regulation S-K.

 

We are required to provide the Audit Committee with the appropriate funding for payment of (i) compensation to any registered public accounting firm engaged for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for ToughBuilt, (ii) compensation to any advisors employed by the Audit Committee and (iii) ordinary administrative expenses of the Audit Committee that are necessary or appropriate in carrying out its duties.

 

The Audit Committee holds meetings as often as required, but no less than two (2) times per year. Minutes of each meeting of the Audit Committee are prepared and filed in the minute book of the Board of Directors.

The Audit Committee assists our Board in its oversight of (1) the integrity of our financial statements, (2) the independent auditor’s qualifications and independence, (3) the performance of our internal audit function and independent auditors, and (4) our compliance with legal and regulatory requirements not specifically delegated to our other committees. In particular, the Audit Committee has the following duties:

 

●appointing, compensating, retaining and overseeing the work of any registered public accounting firm engaged (including resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for ToughBuilt, and each such registered public accounting firm must report directly to the Audit Committee;

 

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●the selection and oversight of the internal auditor;

 

●reviewing and approving the appointment and replacement of the head of the internal auditing department;

 

●advising the head of the internal auditing department that he or she is expected to provide to the Audit Committee summaries of and, as appropriate, the significant reports to management prepared by the internal auditing department and management’s responses thereto;

 

●recommending and approving the compensation plan for the head of internal audit in consultation with management;

 

●advising management, the internal auditing department and the independent auditors that they are expected to provide to the Audit Committee a timely analysis of significant financial reporting issues and practices and significant internal audit controls and procedures;

 

●reviewing and approving the annual audit plan and audit fee submitted by the independent auditors and discussing with the independent auditors the overall approach to and scope of the audit examination with particular attention focused on those areas where either the Audit Committee, the Board, management or the independent auditors believe the special emphasis is desirable;

 

●reviewing and discussing with the independent auditors and management the audited financial statements, the results of the audit and the independent auditors’ report or opinion on matters related to the performance of such audit;

 

●reviewing any other financial statements or reports, as requested by management or determined by the Audit Committee, which are required to be filed with any federal, state or local regulatory agency prior to filing with the appropriate regulatory body;

 

●reviewing and reassessing the adequacy of the Audit Committee charter on an annual basis, and making recommendations as to changes thereto as may be necessary or appropriate; and

 

●reporting its activities to the full Board on a regular basis, and making such recommendations the Audit Committee deems necessary or appropriate.

 

The Audit Committee’s charter is available free of charge on the Company’s website, www.toughbuilt.com. and has been filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.

 

The Audit Committee holds meetings as often as required, but no less than four times per year. The Audit Committee held four meetings in 2021.2022. Each member of the Audit Committee attended all four meetings. Minutes of each meeting of the Audit Committee are prepared and filed in the minute book of the Board.

 

Compensation Committee

 

The Compensation Committee consists of at least two members of our Board, each of whom, following the time at which we are no longer a “controlled company” as defined under the Nasdaq rules, shall qualify as “independent” under the Nasdaq independence rules and shall also be “Non-Employee Directors” as defined by Rule 16b-3 under the Exchange Act. The members of our Compensation Committee elect a chairperson to preside at all meetings of the Compensation Committee. The Compensation Committee has the authority to delegate any of its responsibilities to subcommittees as the Compensation Committee may deem appropriate, provided the subcommittees are composed entirely of directors who meet the above-listed criteria.

 

15

Our Compensation Committee currently consists of Linda Moossaian, Robert Faught and William Placke,Chris Homeister, all of whom are deemed to be independent directors under Nasdaq Rule 5605(a)(2). Mr. Placke serves as the Chairperson of the Compensation CommitteeCommittee.

 

The Compensation Committee holds meetings as often as required. Minutes of each meeting of the Compensation Committee are prepared and are filed in the minute book of our Board.

 

The Compensation Committee is established to discharge certain of our Board’s responsibilities relating to the compensation of our executive officers and directors. In particular, the Compensation Committee has the following duties:

 

 27

●making and approving all option grants and other issuances of our equity securities to our chief executive officer and other executive officers;

 

●approving all other option grants and issuances of our equity securities as compensation, and recommending that our full Board make and approve such grants and issuances;

 

●establishing corporate and individual goals and objectives relevant to the compensation of our chief executive officer and other executive officers, and evaluating each such officer’s performance in light of those goals and objectives and certifying achievement of such goals and objectives;

 

●determining the compensation of our Chief Executive Officer;

 

●determining the compensation of the Chairman of our Board and reviewing and making recommendations to our Board regarding director compensation;

 

●recommending the compensation of our executive officers (other than the chief executive officer) to our Board for determination;

 

●administering our cash and equity incentive plans;

 

●preparing an annual compensation discussion and analysis for inclusion in our annual proxy statement in accordance with applicable SEC rules and regulations, which shall be prepared following discussion thereof with our management;

 

●reviewing and evaluating, at least annually, the Compensation Committee charter and the adequacy of the Compensation Committee charter, as well as the performance of the Compensation Committee; and

 

●performing any other duties or responsibilities expressly delegated to the Compensation Committee by our Board from time to time.

 

The Compensation Committee’s charter is available free of charge on the Company’s website, www.toughbuilt.com., and has been filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.

 

The Compensation Committee held two meetingsmet five times in 2021.2022. Each of the members of the Compensation Committee attended all five meetings.

 

16

Nominating and Corporate Governance Committee

 

Our Nominating and Corporate Governance Committee is comprised of Linda Moossaian, Robert Faught and William Placke,Chris Homeister, each of whom is an independent director under the Nasdaq rules. Mr. Faught serves as the Chairperson of the Nominating and Corporate Governance Committee.

 

The Nominating and Corporate Governance Committee is responsible for recommending to the Board of Directors nominees for election to our Board of Directors at each annual meeting of shareholdersStockholders and identifying one or more candidates to fill any vacancies that may occur on our Board of Directors.Board. New candidates may be identified through recommendations from existing directors or management, consultants, or third-party search firms, discussions with other persons who may know of suitable candidates to serve on our Board, of Directors, and shareholderStockholder recommendations. Evaluations of prospective candidates typically include a review of the candidate’s background and qualifications by the Nominating and Corporate Governance Committee, interviews with the committee as a whole, one or more members of the committee, or one or more other board members, and discussions within the committee and the board. The Nominating and Corporate Governance Committee then recommends candidates to the board, with the full Board of Directors selecting the candidates to be nominated for election by the shareholdersStockholders or appointed by the Board of Directors to fill a vacancy.

 

The Nominating and Corporate Governance Committee has a charter (which is reviewed annually) and performs several functions. The Nominating and Corporate Committee’s charter is available free of charge on the Company’s website, www.toughbuilt.com. , and has been filed as an exhibit to the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2022.

The Nominating and Corporate Committee met one timedid not meet in 2021.

28

SHAREHOLDER RECOMMENDATIONS2022.

 

Stockholder Recommendations

The Nominating and Corporate Governance Committee will consider director candidates proposed by shareholdersStockholders and recommendations from other sources. Additional information regarding the process for properly submitting shareholderStockholder nominations for nomination candidates to our Board of Directors is outlined in the section titled “Shareholder“Stockholder Proposals for the 20232024 Annual Meeting”Meeting” in this proxy statement.

BOARD SELF-ASSESSMENTBoard Self-Assessment

 

At least annually, the Board, or a committee designated by the Board, will oversee an evaluation of the performance of the Board against our Corporate Governance Guidelines. As part of this process, the Board will conduct a self-evaluation to determine whether the Board and its committees are functioning effectively.

 

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATIONCompensation Committee Interlocks and Insider Participation

 

The current members of our Compensation Committee are Linda Moossaian, Robert Faught and Wiliam Placke. None of our Compensation Committee members is or was, during 2021, an officer or employee of ours. None of our Compensation Committee members had any relationships requiring disclosure by the Company under Item 404 of Regulation S-K in 2021. None of our executive officers currently serves, or in the past year, has served as a member of the Board of Directors or Compensation Committee of any entity with one or more executive officers serving on our Board of Directors or Compensation Committee.

 

AUDIT COMMITTEE REPORT

The following report of the Audit Committee is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any other of the Company’s filings under the Securities Act or the Exchange Act, except to the extent we specifically incorporate this report by reference therein.

The Audit Committee is comprised of three non-management directors, each of whom is independent as that term is defined in the Nasdaq Marketplace Rules and satisfies the audit committee independence standard under Rule 10A-3(b)(1) of the Exchange Act.

17

The Audit Committee operates under a written Audit Committee charter that was approved by the Audit Committee and Board of Directors. The Audit Committee held four meetings during 2022 and each member attended 100% of the meetings.

The Audit Committee has reviewed and discussed with the management of the Company and Marcum LLP, the independent registered public accounting firm for the Company, the audited financial statements of the Company for the year ended December 31, 2022. The Audit Committee has discussed with Marcum LLP the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board, as in effect on the date of this proxy statement.

Marcum LLP provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communication with the Audit Committee concerning independence, and the Audit Committee discussed with Marcum LLP the latter’s independence, including whether its provision of non-audit services compromised such independence.

Based on the reviews and discussions described above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022 for filing with the SEC.

Submitted by the Members of the Audit Committee,
Linda Moossaian (Chair)
Robert Faught
William Placke

Board Diversity

We seek diversity in experience, viewpoint, education, skill, and other individual qualities and attributes to be represented on our Board. We believe directors should have various qualifications, including individual character and integrity; business experience; leadership ability; strategic planning skills, ability, and experience; requisite knowledge of our industry and finance, accounting, and legal matters; communications and interpersonal skills; and the ability and willingness to devote time to our Company. We also believe the skill sets, backgrounds, and qualifications of our directors, taken as a whole, should provide a significant mix of diversity in personal and professional experience, background, viewpoints, perspectives, knowledge, and abilities. Nominees are not to be discriminated against on the basis of race, religion, national origin, sex, sexual orientation, disability, or any other basis proscribed by law. The assessment of prospective directors is made in the context of the perceived needs of our Board from time to time.

Our Board seeks members from diverse professional backgrounds who combine a solid professional reputation and knowledge of our business and industry with a reputation for integrity. Our Board does not have a formal policy concerning diversity and inclusion but is in the process of establishing a policy on diversity. Diversity of experience, expertise, and viewpoints is one of many factors the Nominating and Corporate Governance Committee considers when recommending director nominees to our Board. Further, our Board is committed to actively seeking highly qualified women and individuals from minority groups and the LGTQ+ community to include in the pool from which new candidates are selected. Our Board also seeks members that have experience in positions with a high degree of responsibility or are, or have been, leaders in the companies or institutions with which they are, or were, affiliated, but may seek other members with different backgrounds, based upon the contributions they can make to our Company.

18

BOARD DIVERSITY MATRIX

  As of October 18, 2023  As of October 18, 2022 
Total Number of Directors: 5  5 
                
Part I: Gender Identity Female  Male  Non-Binary  

Did Not

Disclose Gender

  Female  Male  Non-Binary  Did Not Disclose 
                         
Directors  1   4   —   —   1   4   —   — 
Part II: Demographic Background                                
African American or Black  —   —   —   —   —   —   —   — 
Alaskan Native or American Indian  —   —   —   —   —   —   —   — 
Asian  —   3   —   —   —   3   —   — 
Hispanic or Latino  —   —   —   —   —   —   —   — 
Native Hawaiian or Pacific Islander  —   —   —   —   —   —   —   — 
White  1   1   —   —   1   1   —   — 
Two or More Races or Ethnicities  —   —   —   —   —   —   —   — 
LGBTQ+  —   —   —   —   —   —   —   — 
Did Not Disclose Demographic Background  —   —   —   —   —   —   —   — 

Stockholder Communications with Directors

Stockholders and other interested parties may communicate with our Board or specific members of our Board, including our independent directors and the members of our various board committees, by submitting a letter addressed to the Board of ToughBuilt Industries, Inc. c/o any specified individual director or directors at the address of our executive offices. Any such letters are sent to the indicated directors.

DIRECTOR COMPENSATION

 

The Compensation Committee establishes and reevaluates if it deems necessary or prudent in its discretion, the cash and equity awards (amount and manner or method of payment) to be made to non-employee directors for such fiscal year. In making this determination, the Compensation Committee may utilize such market standard metrics as it deems appropriate, including, without limitation, an analysis of cash compensation paid to our peer group’s independent directors.

 

The Compensation Committee has the power and discretion to determine in the future whether non-employee directors should receive annual or other grants of options to purchase shares of common stock or other equity incentive awards in such amounts and under such policies as the Compensation Committee may determine utilizing such market standard metrics as it deems appropriate, including, without limitation, an analysis of equity awards granted to independent directors of our peer group.

 

Our Compensation Committee approved the following annual cash retainers for each of our non-employee directors: $75,000 for service as a member of the Board and Chairperson of one of the Board’s committees. For 2021, our non-employee directors received prorated cash retainers for their service as directors in 2021 in the amounts set forth in the table below.

 

The table below sets forth information regarding non-employee director compensation for the year ended December 31, 2021.2022.

Director Compensation

As of December 31, 2021

Name 

Fees
Earned
or Paid
in
Cash

($)

  

Stock
Awards

($)

  

Option
Awards

($)

  

Non-Equity
Incentive Plan
Compensation

($)

  

All Other
Compensation

($)

  

Total

($)

 
Robert Faught  50,000   -   -   -   -   50,000 
Linda Moossaian  50,000   -   -   -   -   50,000 
William Placke  31,250   -   -   -   -   31,250 

 

 2919 

 

ParticipationDirector Compensation Table

As of Employee Directors; New DirectorsDecember 31, 2022

Name 

Fees

Earned

or Paid

in

Cash

($)

 

Stock

Awards

($)

  

Option

Awards

($)

  

Non-Equity

Incentive Plan

Compensation

($)

  

All Other

Compensation

($)

  

Total

($)

Robert Faught 62,500  -   -   -   -  62,500
Linda Moossaian 62,500  -   -   -   -  62,500
William Placke 62,500  -   -   -   -  62,500

Non-Employee Director Remuneration Policy

 

Our Board has not adopted a non-employee director remuneration policy. Unless it is separately and specifically approved by the Compensation Committee in its discretion, no employee directornone of our Company shall beemployee directors are entitled to receive any remuneration for servingservice as a director (other than expense reimbursement as per prevailing policy). Michael Panosian and Joshua Keeler are considered employee directors because they are also executive officers of the Company.

New directors joining our Board of Directors shall be entitled to a prorated portion (based on months to be served in the fiscal year in which they join) of cash and stock options or other equity incentive awards (if applicable) for the applicable fiscal year at the time they join our Board of Directors.the Board.

 

INDEMNIFICATION OF OFFICERS AND DIRECTORS

The Nevada Revised Statutes (NRS) provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. NRS Chapter 78 further provides that a corporation similarly may indemnify any such person serving in any such capacity who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) actually and reasonably incurred in connection with the defense or settlement of such action or suit if he is not liable pursuant to NRS Section 78.138 or acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court or other court of competent jurisdiction in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court or other court of competent jurisdiction shall deem proper.

Our bylaws provide that we may indemnify our officers, directors, employees, agents, and any other persons to the maximum extent permitted by the NRS.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the “Securities Act”), may be permitted to directors, officers or persons controlling us according to the preceding provisions, we have been informed that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

30

AUDIT COMMITTEE REPORT

The following report of the Audit Committee is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference into any other of the Company’s filings under the Securities Act or the Exchange Act, except to the extent we specifically incorporate this report by reference therein.

The Audit Committee is comprised of three non-management directors, each of whom is independent as that term is defined in the Nasdaq Marketplace Rules and satisfies the audit committee independence standard under Rule 10A-3(b)(1) of the Exchange Act.

The Audit Committee operates under a written Audit Committee charter that was approved by the Audit Committee and Board of Directors. The Audit Committee held four meetings during 2021.

The Audit Committee has reviewed and discussed with the management of the Company and Marcum LLP, the independent registered public accounting firm for the Company, the audited financial statements of the Company for the year ended December 31, 2021. The Audit Committee has discussed with Marcum LLP the matters required to be discussed by Auditing Standard No. 1301, “Communications with Audit Committees” issued by the Public Company Accounting Oversight Board, as in effect on the date of this proxy statement.

Marcum LLP provided to the Audit Committee the written disclosures and the letter required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent accountant’s communication with the Audit Committee concerning independence, and the Audit Committee discussed with Marcum LLP the latter’s independence, including whether its provision of non-audit services compromised such independence.

Based on the reviews and discussions described above, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2021, for filing with the SEC.

Submitted by the Members of the Audit Committee,
Linda Moossaian (Chairperson)
Robert Faught
William Placke

31

EXECUTIVE COMPENSATION

 

The following table summarizes compensation for the years ended December 31, 20212022 and 20202021 for all individuals serving as the Company’sour principal executive officer or acting in a similar capacity during the last completed fiscal year (“PEO”), regardless of compensation level, two most highly compensated executive officers other than the PEO who were serving as executive officers at the end of the last completed fiscal year; and up to two additional individuals for whom disclosure would have been provided pursuant to paragraph (m)(2)(ii) of Item 402 of Regulation S-K but for the fact that the individual was not serving as an executive officer of the smaller reporting company at the end of the last completed fiscal year (each a “Named Executive Officer”).

 

Summary Compensation Table

 

Name and Position Fiscal
Year
Ended
December 31,		 Salary
($)		  All Other
Compensation
($) (1)		  Total
($)		  

Fiscal

Year

Ended

December 31,

 

Salary

($)

 

Stock

Awards ($)

 

Option

Awards ($)

 

All Other

Compensation

($) (1)

 

Total

($)

 
Michael Panosian 2021  435,000   29,615   464,615   2022   635,000   -   813,240(2)  -   1,448,240 
Chief Executive Officer, President (PEO) 2020  444,500   18,510   463,010   2021   435,000   -   -   29,615   464,615 
                                      
Martin Galstyan 2021  230,000   -   230,000   2022   320,000   -   165,262(3)  -   485,262 
Chief Financial Officer (2) 2020  210,000   9,135   219,135   2021   230,000   -   -   -   230,000 
                                      
Joshua Keeler 2021  450,000   20,072   470,072 
Josh Keeler  2022   620,000   -   528,840(4)  -   1,148,840 
Chief Design Officer 2020  353,125   13,702   366,827   2021   450,000   -   -   20,072   470,072 
                                      
Zareh Khachatoorian 2021  230,000   -   230,000   2022   320,000   -   165,262(5)  -   485,262 
Chief Operating Officer 2020  230,000   8,846   238,846   2021   230,000   -   -   -   230,000 

 

(1)Vacation pay and other.

 

20

(2)On December 28, 2022, we granted Michael Panosian an incentive stock option to purchase 540,000 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Panosian Option”). The 2022 Panosian Option vests 50% on the grant date, with the remaining 50% vesting in equal installments on the last day of each of the thirty-six (36) full calendar months thereafter, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Panosian Option was 50% vested. The expiration date of the 2022 Panosian Option is December 28, 2032. The fair value of the option awards issued on the grant date was $813,240.
(3)On December 28, 2022, we granted Martin Galstyan was appointed as Chief Financial Officeran incentive stock option to purchase 112,500 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Galstyan Option”). The 2022 Galstyan Option vests in equal installments on the last day of each of the Companythirty-six (36) calendar months following the date of grant, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Galstyan Option has not vested. The expiration date of the 2022 Galstyan Option is December 28, 2032. The fair value of the option awards issued on July 2, 2020.the grant date was $165,262.
(4)On December 28, 2022, we granted Josh Keeler an incentive stock option to purchase 360,000 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Keeler Option”). The 2022 Keeler Option vests 50% on the grant date, with the remaining 50% vesting in equal installments on the last day of each of the thirty-six (36) full calendar months thereafter, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Keeler Option was 50% vested. The expiration date of the 2022 Keeler Option is December 28, 2032. The fair value of the option awards issued on the grant date was $528,840.
(5)On December 28, 2022, we granted Zareh Khachatoorian an incentive stock option to purchase 112,500 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Khachatoorian Option”). The 2022 Khachatoorian Option vests in equal installments on the last day of each of the thirty-six (36) calendar months following the date of grant, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Khachatoorian Option has not vested. The expiration date of the 2022 Khachatoorian Option is December 28, 2032. The fair value of the option awards issued on the grant date was $165,262.

 

EMPLOYMENT AND RELATED AGREEMENTSEmployment and Related Agreements

 

Except as set forth below, we currently have no other written employment agreements with any of our officers and directors. The following is a description of our current executive employment agreements:

 

AGREEMENTS WITH OUR NAMED EXECUTIVE OFFICERSAgreements with Our Named Executive Officers

We have entered into written employment agreements with each of our named executive officers,Named Executive Officers, as described below. Each of our named executive officersNamed Executive Officers has also executed our standard form of confidential information and invention assignment agreement.

 

Michael Panosian Employment Agreement

We entered into the Employment Agreement dated as of December 29, 2022 with Michael Panosian (the “Panosian Employment Agreement”). The Panosian Employment Agreement provides that Mr. Panosian will serve as our Chief Executive Officer, President, and Chair of the Board for a term beginning on December 29, 2022 and ending on December 29, 2025 (the “Initial Term”), with automatic one (1) year extensions unless notice not to renew is given by either party at least 90 days prior to the relevant end date.

Pursuant to the Panosian Employment Agreement, Mr. Panosian will be entitled to: (i) an annual base salary of $650,000, which may be increased annually at the sole discretion of the Board; (ii) a potential annual target bonus of up to $350,000 payable in cash, which may be granted in the discretion of, and in an amount determined by the Compensation Committee and approved by the Board; (iii) a grant of 540,000 incentive stock options, pursuant to the 2022 Plan and also be eligible to receive annual long-term incentive awards from time to time under the 2022 Plan; (iv) participate in the Company’s health insurance plan offered to its employees; (v) participate in the Company’s 401(k) Plan; and (vi) reimbursement for all reasonable business expenses, including a $1,000 monthly automobile allowance. Any incentive-based compensation or award that Mr. Panosian receives will be subject to clawback by the Company as may be required by applicable law or, if applicable, any stock exchange listing requirement and on such basis as we determine.

 3221 

 

 

In the event we terminate Mr. Panosian without “Cause” (as defined below) at any time with 90 days prior written notice, or Mr. Panosian resigns for “Good Reason” (as defined below), Mr. Panosian will be entitled to the following, provided that he executes a general waiver and release of claims: (i) an amount equal to 1.5 times the average of his base salary if terminated during the Initial Term, or an amount equal to 1 times the average of his then base salary; (ii) monthly payments for up to 12 months (and 18 months, if terminated during the Initial Term) of COBRA premiums for continued group health, dental and vision coverage; and (iii) the immediate vesting of all long-term incentive awards, that utilize time-based vesting.

In the event of Mr. Panosian’s termination by us with Cause or Mr. Panosian’s resignation without “Good Reason, Mr. Panosian will only be entitled to accrued and unpaid compensation and wages accrued prior to such date.

If, within one year following a Change of Control of the Company, Mr. Panosian’s employment is terminated involuntarily by us other than for Cause, death, or disability or by Mr. Panosian pursuant to a voluntary termination for Good Reason, and Mr. Panosian executes and does not revoke a general release of claims against us and our affiliates in a form acceptable to us, then we shall, in addition to any other earned but unpaid base salary and vacation pay due through the date of such termination, provide Mr. Panosian (i) an amount equal to two times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 18 months of COBRA premiums for continued group health, dental and vision coverage.

The Panosian Employment Agreement with Michaelcontains restrictive covenants prohibiting Mr. Panosian from disclosing our confidential information at any time, and has executed a Proprietary Information, Inventions Assignment and Non-Disclosure Agreement.

Martin Galstyan Employment Agreement

 

We entered into anthe Employment Agreement dated as of December 29, 2022 with Mr. Panosian on January 3, 2017Martin Galstyan (the “Panosian“Galstyan Employment Agreement”) that governs the terms of his employment with us as President and Chief Executive Officer. Under the terms of this agreement, Mr. Panosian received a “sign-on-bonus” of $50,000.. The term of the PanosianGalstyan Employment Agreement provides that Mr. Galstyan will serve as our Chief Financial Officer for a term beginning on December 29, 2022 and ending on December 29, 2025, with automatic one (1) year extensions unless notice not to renew is for five years. Undergiven by either party at least 90 days prior to the Panosianrelevant end date.

Pursuant to the Galstyan Employment Agreement, Mr. Panosian isGalstyan will be entitled toto: (i) an annual base salary of $350,000 beginning on January 1, 2017, and increasing by 10% each year commencing on January 1, 2018. Mr. Panosian was also granted a stock option to purchase 125,000 shares of the Company’s common stock at an exercise price of $10.00 per share. The Panosian Employment Agreement also entitles Mr. Panosian to, among other benefits, the following compensation: (i) eligibility to receive an annual cash bonus$300,000, which may be increased annually at the sole discretion of the BoardBoard; (ii) a potential annual target bonus of up to $150,000 payable in cash, which may be granted in the discretion of, and asin an amount determined by the Compensation Committee commensurate withand approved by the policiesBoard; (iii) a grant of 112,500 incentive stock options, pursuant to the 2022 Plan, and practices applicablealso be eligible to other senior executive officers ofreceive annual long-term incentive awards from time to time under the Company; (ii) an opportunity to2022 Plan; (iv) participate in any stock option, performance share, performance unitthe Company’s health insurance plan offered to its employees; (v) participate in the Company’s 401(k) Plan; and (vi) reimbursement for all reasonable business expenses, including a $500 monthly automobile allowance. Any incentive-based compensation or other equity-based long-term incentive compensation plan commensurate with the terms and conditions applicableaward that Mr. Galstyan receives will be subject to other senior executive officers; and (iii) participation in welfare benefit plans, practices, policies and programs providedclawback by the Company as may be required by applicable law or, if applicable, any stock exchange listing requirement and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent available to our other senior executive officers.on such basis as we determine.

 

The Panosian Employment Agreement expired on January 3, 2017. The Board intends to enter into a new employment agreement withIn the event we terminate Mr. Panosian, subject to the parties agreeing on the terms of such agreement.

Employment Agreement with Joshua Keeler

We entered into an Employment Agreement with Mr. Keeler on January 3, 2017 (the “Keeler Employment Agreement,” and together with the Panosian Employment Agreement (the “NEO Employment Agreements”)) that governs the terms of his employment with us. Under the terms of this agreement, Mr. Keeler received a “sign-on-bonus” of $35,000. The term of the Keeler Employment Agreement is for five years and Mr. Keeler is entitled to an annual base salary of $250,000 beginning on January 1, 2017, and increasing by 10% each year commencing on January 1, 2018. The Keeler Employment Agreement also entitles Mr. Keeler to, among other benefits, the following compensation: (i) eligibility to receive an annual cash bonus at the sole discretion of the Board and as determined by the Compensation Committee commensurate with the policies and practices applicable to other senior executive officers of the Company; (ii) an opportunity to participate in any stock option, performance share, performance unit or other equity-based long-term incentive compensation plan commensurate with the terms and conditions applicable to other senior executive officers and (iii) participation in welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including,Galstyan without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent available to our other senior executive officers.

The Keeler Employment Agreement expired on January 3, 2017. The Board intends to enter into a new employment agreement with Mr. Keeler, subject to the parties agreeing on the terms of such agreement.

Potential payments to Messrs. Panosian and Keeler upon termination or change in control

Pursuant to the NEO Employment Agreements, regardless of the manner in which Messrs. Panosian and Mr. Keeler’s service terminates, each executive officer is entitled to receive amounts earned during his term of service, including salary and other benefits. In addition, each of them is eligible to receive certain benefits pursuant to his appliable agreement with us described above.

The Company is permitted to terminate the employment of Mr. Panosian and Mr. Keeler for the following reasons: (1) death or disability, (2) termination for Cause“Cause” (as defined below), or (3) for no reason.

Each such officer is permitted terminationMr. Galstyan resigns for “Good Reason” (as defined below) of such officer’s employment. In addition, each such officer may terminate his employment upon written notice, Mr. Galstyan will be entitled to the Company 90 days prior tofollowing, provided that he executes a general waiver and release of claim and does not revoke the effective date of such termination.

In the event of such officer’s death during the employment period or termination due to such officer’s disability, such officer or his beneficiaries or legal representatives shall be provided the sum of (a)release: (i) an amount equal to two6 months of his then base salary; (ii) monthly payments for up to 6 months of COBRA premiums for continued group health, dental and vision coverage, unless Mr. Galstyan starts receiving coverage under his subsequent employment; and (iii) continuation of his vesting schedule per the 2022 Plan, with three months for exercise of any vested option(s). If Mr. Galstyan’s employment is terminated by us following a Change of Control of the Company, Mr. Galstyan will be entitled to: (i) an amount equal to 1 times the officer’shis then prevailing base salary and (b) the bonus that would have been payable to such officer subject to any performance conditions and (c) certain other benefits provided for in the applicable NEO Employment Agreement.

In the event of such officer’s termination for Cause by the Company or the termination of such officer’s employment as a result of such officer’s resignation other than a termination for Good Reason, such officer shall be provided certain benefits provided in the applicable NEO Employment Agreement and paymentsalary; (ii) immediate vesting of all accruedincentive awards; and unpaid compensation(iii) monthly payments for up to 12 months of COBRA premiums for continued group health, dental and wages, but such officer shall have no right to compensation or benefits for any period after the effective date of termination.vision coverage.

 

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UnderIn the NEOevent of Mr. Galstyan’s termination with Cause or Mr. Galstyan’s resignation without Good Reason, Mr. Galstyan shall only be entitled to accrued and unpaid compensation and wages accrued prior to such date.

If, within one year following a Change of Control of the Company, Mr. Galstyan’s employment is terminated involuntarily by us other than for Cause, death, or disability or by Mr. Galstyan pursuant to a voluntary termination for Good Reason, and Mr. Galstyan executes and does not revoke a general release of claims against us and our affiliates in a form acceptable to us, then we shall, in addition to any other earned but unpaid base salary and vacation pay due through the date of such termination, provide Mr. Galstyan (i) an amount equal to two times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 12 months of COBRA premiums for continued group health, dental and vision coverage.

The Galstyan Employment Agreement contains restrictive covenants prohibiting Mr. Galstyan from disclosing our confidential information at any time, and has executed a Proprietary Information, Inventions Assignment and Non-Disclosure Agreement.

Josh Keeler Employment Agreement

We entered into the Employment Agreement dated as of December 29, 2022 with Josh Keeler (the “Keeler Employment Agreement”). The Keeler Employment Agreement provides that Mr. Keeler will serve as our Chief Design Officer for a term beginning on December 29, 2022 and ending on December 29, 2025, with automatic one (1) year extensions unless notice not to renew is given by either party at least 90 days prior to the relevant end date.

Pursuant to the Keeler Employment Agreement, Mr. Keeler will be entitled to: (i) an annual base salary of $475,000, which may be increased annually at the sole discretion of the Board; (ii) a potential annual target bonus of up to $150,000 payable in cash, which may be granted in the discretion of, and in an amount determined by the Compensation Committee and approved by the Board; (iii) a grant of 360,000 incentive stock options, pursuant to the 2022 Plan, and also be eligible to receive annual long-term incentive awards from time to time under the 2022 Plan; (iv) participate in the Company’s health insurance plan offered to its employees; (v) participate in the Company’s 401(k) Plan; and (vi) reimbursement for all reasonable business expenses, including a $750 monthly automobile allowance. Any incentive-based compensation or award that Mr. Keeler receives will be subject to clawback by the Company as may be required by applicable law or, if applicable, any stock exchange listing requirement and on such basis as we determine.

In the event we terminate Mr. Keeler without “Cause” (as defined below) with 90 days prior written notice, or Mr. Keeler resigns for “Good Reason” (as defined below), Mr. Keeler will be entitled to the following, provided that he executes a general waiver and release of claims: (i) an amount equal to 1.5 times the average of his base salary if terminated during the Initial Term, or an amount equal to 1 times the average of his then base salary; (ii) monthly payments for up to 12 months (and 18 months, if terminated during the Initial Term) of COBRA premiums for continued group health, dental and vision coverage; and (iii) the immediate vesting of all incentive awards, that utilize time-based vesting. If Mr. Keeler’s employment is terminated by us following a Change of Control of the Company, Mr. Keeler will be entitled to: (i) an amount equal to 2 times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 18 months of COBRA premiums for continued group health, dental and vision coverage.

In the event of Mr. Keeler’s termination by us with Cause or Mr. Keeler’s resignation without Good Reason, Mr. Keeler shall only be entitled to accrued and unpaid compensation and wages accrued prior to such date.

If, within one year following a Change of Control, Mr. Keeler’s employment is terminated involuntarily by us other than for Cause, death, or disability or by Mr. Keeler pursuant to a voluntary termination for Good Reason, and Mr. Keeler executes and does not revoke a general release of claims against us and our affiliates in a form acceptable to us, then we shall, in addition to any other earned but unpaid base salary and vacation pay due through the date of such termination, provide Mr. Keeler (i) an amount equal to two times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 18 months of COBRA premiums for continued group health, dental and vision coverage.

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The Keeler Employment Agreement contains restrictive covenants prohibiting Mr. Keeler from disclosing our confidential information at any time, and has executed a Proprietary Information, Inventions Assignment and Non-Disclosure Agreement.

Zareh Khachatoorian Employment Agreement

We entered into the Employment Agreement dated as of December 29, 2022 with Zareh Khachatoorian (the “Khachatoorian Employment Agreement” and, together with the Panosian Employment Agreement, the Galstyan Employment Agreement and the Khachatoorian Employment Agreement, the “Employment Agreements”). The Khachatoorian Employment Agreement provides that Mr. Khachatoorian will serve as our Chief Operating Officer and Secretary for a term beginning on December 29, 2022 and ending on December 29, 2025, with automatic one (1) year extensions unless notice not to renew is given by either party at least 90 days prior to the relevant end date.

Pursuant to the Khachatoorian Employment Agreement, Mr. Khachatoorian will be entitled to: (i) an annual base salary of $300,000, which may be increased annually at the sole discretion of the Board; (ii) a potential annual target bonus of up to $150,000 payable in cash, which may be granted in the discretion of, and in an amount determined by the Compensation Committee and approved by the Board; (iii) a grant of 112,500 incentive stock options, pursuant to the 2022 Plan, and also be eligible to receive annual long-term incentive awards from time to time under the 2022 Plan; (iv) participate in the Company’s health insurance plan offered to its employees; (v) participate in the Company’s 401(k) Plan; and (vi) reimbursement for all reasonable business expenses, including a $500 monthly automobile allowance. Any incentive-based compensation or award that Mr. Khachatoorian receives will be subject to clawback by the Company as may be required by applicable law or, if applicable, any stock exchange listing requirement and on such basis as we determine.

In the event we terminate Mr. Khachatoorian without Cause, or Mr. Khachatoorian resigns for Good Reason (each as defined in the Khachatoorian Employment Agreement), Mr. Khachatoorian will be entitled to the following, provided that he executes a general waiver and release of claim and does not revoke the release: (i) an amount equal to 6 months of his then base salary; (ii) monthly payments for up to 6 months of COBRA premiums for continued group health, dental and vision coverage, unless Mr. Khachatoorian starts receiving coverage under his subsequent employment; and (iii) continuation of his vesting schedule per the 2022 Plan, with three months for exercise of any vested option(s). If Mr. Khachatoorian’s employment is terminated by us following a Change of Control of the Company, Mr. Khachatoorian will be entitled to: (i) an amount equal to 1 times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 12 months of COBRA premiums for continued group health, dental and vision coverage.

In the event of Mr. Khachatoorian’s termination with Cause or Mr. Khachatoorian’s resignation without Good Cause, Mr. Khachatoorian shall only be entitled to accrued and unpaid compensation and wages accrued prior to such date.

If, within one year following a Change of Control of the Company, Mr. Khachatoorian’s employment is terminated involuntarily by us other than for Cause, death, or disability or by Mr. Khachatoorian pursuant to a voluntary termination for Good Reason, and Mr. Khachatoorian executes and does not revoke a general release of claims against us and our affiliates in a form acceptable to us, then we shall, in addition to any other earned but unpaid base salary and vacation pay due through the date of such termination, provide the Mr. Khachatoorian (i) an amount equal to two times his then prevailing base salary; (ii) immediate vesting of all incentive awards; and (iii) monthly payments for up to 12 months of COBRA premiums for continued group health, dental and vision coverage.

The Khachatoorian Employment Agreement contains restrictive covenants prohibiting Mr. Khachatoorian from disclosing our confidential information at any time, and has executed a Proprietary Information, Inventions Assignment and Non-Disclosure Agreement.

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The term “Cause” is defined in the Employment Agreements “Cause” means such officer wilfully engagesas any of the following: (i) willful engagement in an act or omission which is in bad faith and to the detriment of the Company, engages(ii) engagement in gross misconduct, gross negligence, or willful malfeasance, in each case that causescausing material harm to the Company, breaches his applicable(iii) breach of employment agreement in any material respect, habitually neglects(iv) executive’s habitual neglect or materially failsmaterial failure to perform histheir duties (other than any such failure resulting solely from such officer’sthe executive’s physical or mental disability or incapacity) after a written demand for substantial performance is delivered to such officerthe executive which identifies the manner in which we believe that the Company believes that such officerexecutive has not performed histheir duties, commits(v) committing, pleading nolo contendere, or is convicted ofconviction for a felony or any crime involving fraud, embezzlement, misappropriation, theft, or moral turpitude, usesor use of drugs or alcohol in a way that either interferes with the performance of his duties or compromisescompromise of the integrity or reputation of the Company, (vi) violation of any law relating to our business, or engagesviolation of any lawful Company policy, procedure or guideline that results in material harm to the Company as determined by us, in our reasonable discretion, or (vii) engagement in any act of dishonesty involving the Company, disclosureus, breach of Company’s confidential information not required by applicable law,any agreement with us containing confidentiality obligations, commercial bribery, or perpetration of fraud; provided, however, that such officerthe executive shall have at least forty-five (45) calendar days to cure, if curable, any of the events which could lead to histheir termination for Cause.

Under The term “Good Reason” is defined in the NEO Employment Agreements “Good Reason” meansas any of the following that are undertaken without the officer’sexecutive’s express written consent: (i) the assignment to such officerthe executive of principal duties or responsibilities, or the substantial reduction of such officer’sthe executive’s duties and responsibilities, either of which is materially inconsistent with such officer’sthe executive’s position as President and Chief Executive Officer of the Company or Vice President of Research and Development, as applicable;with us; (ii) a material reduction by us in the Company in such officer’sexecutive’s annual base salary except(except to the extent the salaries of our other executive employees of the Company and any of our other controlled subsidiary of the Companysubsidiaries are similarly reduced;reduced); (iii) such officer’sthe executive’s principal place of business is, without his consent, relocated by a distance of more than thirty (30)forty (40) miles from the center of Glendale,Irvine , California; or (iv) any material breach by the Companyus of any provision of the executive’s employment agreements.agreement.

 

Involuntary Termination other than for Cause, Death or Disability or Voluntary Termination for Good Reason

If, within twenty-four (24) months following a ChangeThe term “Change of Control, the officer’s employment is terminated involuntarily by the Company other than for Cause, death, or Disability or by such officer pursuant to a voluntary termination for Good Reason, and such officer executes and does not revoke a general release of claims against the Company and its affiliates in a form acceptable to the Company, then the Company shall provide such officer with, among other benefits, a lump-sum paymentControl” defined in the amount equal to four times such officer’s then prevailing base salary in the case of Mr. Panosian and three times such officer’s then prevailing base salary in the case of Mr. Keeler, plus the officer’s target for the annual short term incentive portion of the corporate bonus program for such year as in effect immediately prior to such termination, in addition to any other earned but unpaid base salary or vacation pay due through the date of such termination, as well as a pro rata portion of the executive’s annual short term incentive portion of the corporate bonus program for such year (if any) and a pro rata portion of the executive’s long-term incentive portion of the corporate bonus program (if any).

Under the NEO Employment Agreements “Change of Control” means the occurrence of any of the following events:

(i) aA change in the ownership of the Company which occurs on the date that any one person, or more than one person acting as a group (“Person”), acquires ownership of theour stock of the Company that, together with the stock held by such Person, constitutes more than fifty percent (50%) of the total voting power of the stock of the Company;our stock; provided, however, that for purposes of this subsection, the acquisition of additional stock by any one Person, who is considered to own more than fifty percent (50%) of the total voting power of theour stock of the Company will not be considered a Change of Control; or

(ii) aA change in the effective control of the Company which occurs on the date that a majority of members of the Boardboard is replaced during any twelve (12) month period by Directorsdirectors whose appointment or election is not endorsed by a majority of the members of the Boardboard prior to the date of the appointment or election; provided, however,election. For purposes of this clause (ii), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Change of Control; or

(iii) aA change in the ownership of a substantial portion of the Company’sour assets which occurs on the date that any Person acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by such person or persons) assets from the Companyus that have a total gross fair market value equal to or more than fifty percent (50%) of the total gross fair market value of all of theour assets of the Company immediately prior to such acquisition or acquisitions; provided, however, that for purposes of this subsection (iii), the following will not constitute a change in the ownership of a substantial portion of the Company’sour assets: (A) a transfer to an entity that is controlled by the Company’s shareholdersour stockholders immediately after the transfer, or (B) a transfer of assets by the Companyus to: (1) a shareholderone of the Companyour stockholders (immediately before the asset transfer) in exchange for or with respect to the Company’sour stock, (2) an entity, fifty percent (50%) or more of the total value or voting power of which is owned, directly or indirectly, by the Company,us , (3) a Person, that owns, directly or indirectly, fifty percent (50%) or more of the total value or voting power of all theof our outstanding stock, of the Company, or (4) an entity, at least fifty percent (50%) of the total value or voting power of which is owned, directly or indirectly, by a Person described in this subsection (iii)(B)(3). For purposes of this subsection (iii), gross fair market value means the value of theour assets, of the Company, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.

For purposes of this definition, persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase or acquisition of stock, or similar business transaction with the Company.

 

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Employment Agreement with Zareh Khachatoorian

We entered into an Employment Agreement with Mr. Khachatoorian on January 3, 2017 (the “Khachatoorian Employment Agreement”) that governs the terms of his employment with us as Chief Operating Officer and Secretary. The term of this agreement was for an initial term of three years with automatic one-year renewals unless either party gives the other party gives ninety (90) calendar days written notice of nonrenewal prior to the expiration of the then current term. Mr. Khachatoorian is entitled to an annual base salary of $180,000 beginning on January 1, 2017 and increasing by 10% each year commencing on January 1, 2018. The Khachatoorian Employment Agreement also entitles Mr. Khachatoorian to, among other benefits, the following compensation: (i) eligibility to receive an annual cash bonus at the sole discretion of the Board and as determined by the Compensation Committee commensurate with the policies and practices applicable to other senior executive officers of the Company; (ii) an opportunity to participate in any stock option, performance share, performance unit or other equity-based long-term incentive compensation plan commensurate with the terms and conditions applicable to other senior executive officers and (iii) participation in welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent available to our other senior executive officers.

The Company is permitted to terminate the employment of Mr. Khachatoorian for the following reasons: (1) death or disability, (2) termination for Cause (as defined above) or (3) for no reason. In the event of Mr. Khachatoorian’s (i) death or disability, or (ii) termination for Cause by the Company, Mr. Khachatoorian or his beneficiaries or legal representatives shall be entitled to payment for all accrued and unpaid compensation and wages and in addition pay to Mr. Khachatoorian a sum equivalent to one month’s salary, but shall have no right to compensation or benefits for any period subsequent to the effective date of his death or disability.

In the event of the termination of Mr. Khachatoorian’s employment for Good Reason, he shall be provided certain benefits listed in the Khachatoorian Employment Agreement and payment of all accrued and unpaid compensation and wages, but the executive shall have no right to compensation or benefits for any period subsequent to the effective date of termination.

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Outstanding Equity Awards atAt December 31, 20212022

 

  Option Awards   
Name Number of
securities
underlying
unexercised
options (#)
exercisable		  Number of
securities
underlying
unexercised
options (#)
unexercisable		  Equity
incentive
plan
awards:
Number of
securities
underlying
unexercised
unearned
options (#)		  Option
exercise
price ($)		  Option
expiration
date
Michael Panosian, CEO & Pres. (PEO)  83(1)  -   -  $15,000  1/3/2022
   133(2)  -   -  $6,435  6/30/2023
Joshua Keeler, CDO  133(3)  -   -  $6,435  6/30/2023
Zareh Khachatoorian, COO  73(4)  -   -  $5,850  6/30/2023

  Option Awards 
Name Number of securities underlying unexercised options (#) exercisable  Number of securities underlying unexercised options (#) unexercisable  Equity incentive plan awards: Number of securities underlying unexercised unearned options (#)  Option exercise price ($)  Option expiration date 
Michael Panosian, CEO & Pres. (PEO)  270,133(1)(2)  270,000(1)(2)  -  $         (1)(2)            (1)(2)
Martin Galstyan, CFO  -   112,500(3)  -  $(3)  (3)
Josh Keeler, CDO  180,133(4)(5)  180,000(4)(5)  -  $(4)(5)  (4)(5)
Zareh Khachatoorian, COO  83(6)(7)  112,500(6)(7)  -  $(6)(7)  (6)(7)

 

(1)On January 3, 2017, the CompanySeptember 14, 2018, we granted Michael Panosian an incentive stock option to purchase 125,000200,000 shares of common stock for $10.00$4.29 per share (the “2018 Panosian Option”) under the Company’s 2016ToughBuilt Industries, Inc. 2018 Equity Incentive Plan.Plan (the “2018 Plan”). The option vested2018 Panosian Option vests in 25% equal increments commencing on the firstdate of grant and each anniversary of the date of grant and expires on the fifth anniversary of the date of grant. Due to the 1-for-2, 1-for-10 and 1-for-150 reverse stock splits of the Company’sour common stock on September 3, 2018, April 15, 2020 and April 25, 2022, respectively, the amount of shares issuable upon the exercise of the stock option2018 Panosian Option was adjusted to 83133 and the exercise price was adjusted to $15,000$6,435 per share. As of December 31, 2021,2022, the option2018 Panosian Option was 100% vested but expiredvested. The expiration date of the 2018 Panosian Option is June 30, 2023.
(2)On December 28, 2022, we granted Michael Panosian an incentive stock option to purchase 540,000 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Panosian Option”). The 2022 Panosian Option vests 50% on January 3, 2022.the grant date, with the remaining 50% vesting in equal installments on the last day of each of the thirty-six (36) full calendar months thereafter, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Panosian Option was 50% vested. The expiration date of the 2022 Panosian Option is December 28, 2032.

(2)
(3)On December 28, 2022, we granted Martin Galstyan an incentive stock option to purchase 112,500 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Galstyan Option”). The 2022 Galstyan Option vests in equal installments on the last day of each of the thirty-six (36) calendar months following the date of grant, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Galstyan Option has not vested. The expiration date of the 2022 Galstyan Option is December 28, 2032.
(4)On September 14, 2018, the Companywe granted Michael PanosianJosh Keeler an incentive stock option to purchase 200,000 shares of common stock for $4.29 per share under the Company’s 2018 Equity Incentive Plan.Plan (the “2018 Keeler Option”). The 2018 Keeler Option vests in 25% equal increments commencing on the date of grant and on each anniversary of the date of grant and expires on the fifth anniversary of the date of grant. Due to the 1-for-10 reverse stock split of our common stock on April 15, 2020, the amount of shares issuable upon the 2018 Keeler Option was adjusted to 133 and the exercise price was adjusted to $6,435 per share. As of December 31, 2022, the 2018 Keeler Option was 100% vested. The expiration date of the 2018 Keeler Option is June 30, 2023.
(5)On December 28, 2022, we granted Josh Keeler an incentive stock option to purchase 360,000 shares of common stock for $1.79 per share under the 2022 Plan (the “2022 Keeler Option”). The 2022 Keeler Option vests 50% on the grant date, with the remaining 50% vesting in equal installments on the last day of each of the thirty-six (36) full calendar months thereafter, which may be exercised in lots of a minimum of 200 shares of our common stock. As of December 31, 2022, the 2022 Keeler Option was 50% vested. The expiration date of the 2022 Keeler Option is December 28, 2032.

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(6)On September 14, 2018, we granted Zareh Khachatoorian an incentive stock option to purchase 110,000 shares of common stock for $3.90 per share under the 2018 Plan (the “2018 Khachatoorian Option”). The 2018 Khachatoorian Option vests in 25% equal increments commencing on the date of grant and each anniversary of the date of grant and expires on the fifth anniversary of the date of grant. Due to the 1-for-10 and 1-for-150 reverse stock splits of the Company’sour common stock on April 15, 2020 and April 25, 2022, respectively, the amount of shares issuable upon the stock option2018 Khachatoorian Option was adjusted to 133 and the exercise price was adjusted to $6,435 per share. As of December 31, 2021, the option was 100% vested.

(3)On September 14, 2018, the Company granted Joshua Keeler an incentive stock option to purchase 200,000 shares of common stock for $4.29 per share under the Company’s 2018 Equity Incentive Plan. The option vests in 25% equal increments commencing on the date of grant and each anniversary of the date of grant and expires on the fifth anniversary of the date of grant. Due to the 1-for-10 and 1-for-150 reverse stock splits of the Company’s common stock on April 15, 2020 and April 25, 2022, respectively, the amount of shares issuable upon the stock option was adjusted to 133 and the exercise price was adjusted to $6,435 per share. As of December 31, 2021, the option was 100% vested.

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(4)On September 14, 2018, the Company granted Zareh Khachatoorian an incentive stock option to purchase 110,000 shares of common stock for $3.90 per share under the Company’s 2018 Equity Incentive Plan. The option vests in 25% equal increments commencing on the date of grant and each anniversary of the date of grant and expires on the fifth anniversary of the date of grant. Due to the 1-for-10 and 1-for-150 reverse stock splits of the Company’s common stock on April 15, 2020 and April 25, 2022, respectively, the amount of shares issuable upon the stock option was adjusted to 7383 and the exercise price was adjusted to $5,850 per share. As of December 31, 2021,2022, the option2018 Khachatoorian Option was 100% vested.

The 2016 Equity Incentive Plan

The 2016 Equity Incentive Plan was adopted by the Board and approved by the shareholders on July 6, 2016. The awards per the 2016 Plan may be granted through July 5, 2026 to the Company’s employees, consultants, directors, and non-employee directors provided such consultants, directors, and non-employee directors render good faith services not in connection with the offer and sale of securities in a capital-raising transaction. The awards issuable under the 2016 Plan consist of incentive stock options (“ISOs”), nonqualified stock options (“NQSOs”), restricted stock awards, stock bonus awards, stock appreciation rights (“SARs”), restricted stock units (“RSUs”) and performance awards (collectively, the “Awards”). The 2016 Plan shall be administered by a committee of the Board or the Board.

ISOs may be granted only to employees. All other awards (“Awards”) may be granted to employees, consultants, directors and non-employee directors of the Company or any subsidiary of the Company; provided such consultants, Directors and Non-employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.

Options may be vested and exercisable within the times or upon the conditions as set forth in the award agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of 10 years from the date the Option is granted; and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee or Board also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of shares or percentage of shares as the Committee or Board determines.

Under the 2016 Plan, the exercise price of an option will be determined by the Committee or if there is no committee, the Board when the option is granted; provided that: (i) the exercise price of an Option will not be less than 100% of the fair market value of the shares on the date of grant and (ii) the exercise price of any ISO granted to a 10% shareholder will not be less than 110% of the Fair Market Value of the shares on the date of grant.

Under the 2016 Plan, the term “Fair Market Value” is defined, as of any date, the value of a share of the Company’s common stock determined as follows: (a) if such common stock is publicly traded and is then listed on a national securities exchange, the closing price on the date of determination on the principal national securities exchange on which the common stock is listed or admitted to trading as officially quoted in the composite tape of transactions on such exchange or such other source as the Committee deems reliable for the applicable date; (b) if such common stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable; (c) in the case of an Option or SAR grant made on the effective date, the price per share at which shares of the Company’s common stock are initially offered for sale to the public by the Company’s underwriters in the IPO of the Company’s common stock pursuant to a registration statement filed with the SEC under the Securities Act.

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If the number of outstanding shares of common stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company, without consideration, then (a) the number of shares reserved for issuance and future grant under the 2016 Plan, (b) the exercise prices of and number of shares subject to outstanding Options and SARs, (c) the number of shares subject to other outstanding Awards, (d) the maximum number of shares that may be issued as ISOs set forth in the 2016 Plan, (e) the maximum number of shares that may be issued to an individual or to a new employee in any one calendar year set forth in the 2016 Plan and (f) the number of shares that are granted as Awards to non-employee Directors, shall be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and in compliance with applicable securities laws; provided that fractions of a share will not be issued.

The maximum number of shares of our common stock that may be issued under the 2016 Plan is 100,000 shares, which amount will be (a) reduced by Awards granted under the 2016 Plan, and (b) increased to the extent that Awards granted under the 2016 Plan are forfeited, expire or are settled for cash (except as otherwise provided in the 2016 Plan). No employee will be eligible to receive more than 12,500 shares of common stock in any calendar year under the 2016 Plan under the grant of Awards.

The initial number of shares of common stock authorized and reserved for issuance under the 2016 Plan was 12 million. The amount was subsequently reduced to 2 million due to the Company’s 1-for-6 reverse stock split on October 5, 2016, then to 1 million for the Company’s 1-for-2 reverse stock split on September 3, 2018, then to 100,000 shares for the Company’s 1-for-10 reverse stock split on April 15, 2020. The amount was reduced to 667 shares for the 1-for-150 reveres stock split on April 25, 2022.

The 2018 Equity Incentive Plan

On July 1, 2018, the Board and the shareholders of the Company approved and adopted the Company’s 2018 Equity Incentive Plan. The 2018 Plan supplements, and does not replace, the existing 2016 Equity Incentive Plan. Awards may be granted under the 2018 Plan through June 30, 2023 to the Company’s employees, officers, consultants, and non-employee directors.

The Awards issuable under the 2018 Plan consist of ISOs and NQSOs, restricted stock awards, stock bonus awards, SARs, restricted stock and RSUs, performance awards and other share-based awards. The Board may delegate all or a portion of the administration of the 2018 Plan to a Committee. The Board shall administer the 2018 Plan unless and until the Board delegates administration of the 2018 Plan to a Committee.

The initial number of shares of common stock authorized and reserved for issuance under the 2018 Plan was 2 million. The amount was subsequently reduced to 1 million due to the Company’s 1-for-2 reverse stock split on September 3, 2018. On April 12, 2019, the Board and shareholders approved increasing the number of shares to 20 million and then on February 14, 2020, to 35 million. The amount was later reduced to 3.5 million as a result of the Company’s 1-for-10 reverse stock split on April 15, 2020 and then to 23,334 for the 1-for-150 reverse stock split on April 25, 2022.

The number of shares of common stock that may be issued under the 2018 Plan will be (a) reduced by Awards granted under the 2018 Plan, and (b) increased to the extent that Awards granted under the 2018 Plan are forfeited, expire or are settled for cash (except as otherwise provided in the 2018 Plan). Currently, no employee will be eligible to receive more than 10% of authorized shares under the 2018 Plan in any calendar year under the 2018 Plan pursuant to the grant of Awards.

If any shares of common stock subject to an Award are forfeited, an Award expires or otherwise terminates without the issuance of shares of common stock, or an Award is settled for cash (in whole or in part) or otherwise does not result in the issuance of all or a portion of the shares of common stock subject to such Award (including payment in shares of common stock on the exercise of a Stock Appreciation Right), such shares of common stock shall, to the extent of such forfeiture, expiration, termination, cash settlement or non-issuance, again be available for issuance under the 2018 Plan.

If (i) any option or other award granted is exercised through the tendering of shares of common stock (either actually or by attestation) or by the withholding of shares of common stock by the Company, or (ii) withholding tax liabilities arising from such option or other award are satisfied by the tendering of shares of common stock (either actually or by attestation) or by the withholding of shares of common stock by the Company, then the shares of common stock so tendered or withheld shall be available for issuance under the 2018 Plan.

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The following provisions shall apply to awards in the event of a Corporate Transaction unless otherwise provided in a written agreement between the Company or any affiliate and the holder of the award or unless otherwise expressly provided by the Board at the time of grant of an award:

●In the event of a Corporate Transaction, any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue any or all awards outstanding under the 2018 Plan or may substitute similar stock awards for Awards outstanding under the 2018 Plan (including, but not limited to, Awards to acquire the same consideration paid to the shareholders of the Company pursuant to the Corporate Transaction), and any reacquisition or repurchase rights held by the Company in respect of common stock issued pursuant to Awards may be assigned by the Company to the successor of the Company (or the successor’s parent company, if any), in connection with such Corporate Transaction. A surviving corporation or acquiring corporation may choose to assume or continue only a portion of a stock Award or substitute a similar stock Award for only a portion of a stock Award. The terms of any assumption, continuation or substitution shall be set by the Board in accordance with the provisions of the 2018 Plan.Khachatoorian Option is June 30, 2023.

 ●In the event of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Awards or substitute similar
(7)On December 28, 2022, we granted Zareh Khachatoorian an incentive stock awards for such outstanding Awards, then with respectoption to Awards that have not been assumed, continued or substituted and that are held by participants whose continuous service has not terminated prior to the effective time of the Corporate Transaction (referred to as the “Current Participants”), the vesting of such Awards (and, if applicable, the time at which such stock awards may be exercised) shall (contingent upon the effectiveness of the Corporate Transaction) be accelerated in full to a date prior to the effective time of such Corporate Transaction as the Board shall determine (or, if the Board shall not determine such a date, to the date that is five days prior to the effective time of the Corporate Transaction), and such Awards shall terminate if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction, and any reacquisition or repurchase rights held by the Company with respect to such Awards shall lapse (contingent upon the effectiveness of the Corporate Transaction). No vested Restricted Stock Unit Award shall terminate without being settled by delivery ofpurchase 112,500 shares of common stock their cash equivalent, any combination thereof, orfor $1.79 per share under the 2022 Plan (the “2022 Khachatoorian Option”). The 2022 Khachatoorian Option vests in any other formequal installments on the last day of consideration, as determined by the Board, prior to the effective timeeach of the Corporate Transaction.

●Inthirty-six (36) calendar months following the eventdate of grant, which may be exercised in lots of a Corporate Transaction in which the surviving corporation or acquiring corporation (or its parent company) does not assume or continue any or all outstanding Awards or substitute similar stock awards for such outstanding Awards, then with respect to Awards that have not been assumed, continued or substituted and that are held by persons other than Current Participants, the vestingminimum of such Awards (and, if applicable, the time at which such Award may be exercised) shall not be accelerated and such Awards (other than an Award consisting of vested and outstanding200 shares of our common stockstock. As of December 31, 2022, the 2022 Khachatoorian Option has not subject to the Company’s right of repurchase) shall terminate if not exercised (if applicable) prior to the effective timevested. The expiration date of the Corporate Transaction; provided, however, that any reacquisition or repurchase rights held by the Company with respect to such Awards shall not terminate and may continue to be exercised notwithstanding the Corporate Transaction. No vested Restricted Stock Unit Award shall terminate without being settled by delivery of shares of common stock, their cash equivalent, any combination thereof, or in any other form of consideration, as determined by the Board, prior to the effective time of the Corporate Transaction.

39

Notwithstanding the foregoing, in the event an Award will terminate if not exercised prior to the effective time of a Corporate Transaction, the Board may provide, in its sole discretion, that the holder of such Award may not exercise such Award but will receive a payment, in such form as may be determined by the Board, equal in value to the excess, if any, of (i) the value of the property the holder of the Award would have received upon the exercise of the Award immediately prior to the effective time of the Corporate Transaction, over (ii) any exercise price payable by such holder in connection with such exercise.

The term “Corporate Transaction” is defined in the 2018 Plan as the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:

●a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its subsidiaries;

●a sale or other disposition of at least ninety percent (90%) of the outstanding securities of the Company;

●the consummation of a merger, consolidation or similar transaction following which the Company2022 Khachatoorian Option is not the surviving corporation; or

●the consummation of a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of common stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.December 28, 2032.

 

An Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control (as defined in the 2018 Plan) as may be provided in the agreement for such Award or as may be provided in any other written agreement between the Company or any affiliate and the participant. An Award may vest as to all or any portion of the shares subject to the Award (i) immediately upon the occurrence of a Change in Control, whether or not such Award is assumed, continued, or substituted by a surviving or acquiring entity in the Change in Control, or (ii) in the event a Participant’s Continuous Service is terminated, actually or constructively, within a designated period following the occurrence of a Change in Control. In the absence of such provisions, no such acceleration shall occur.

Our Compensation Committee will: (i) interpret our equity incentive plans; and (ii) make all other determinations and take all other action that may be necessary or advisable to implement and administer our Plans. The Plans provide that in the event of a change of control event, the Compensation Committee or our Board shall have the discretion to determine whether and to what extent to accelerate the vesting, exercise or payment of an award.

In addition, our Board may amend our Plans at any time. However, without shareholder approval, our Plans may not be amended in a manner that would:

●increase the number of shares that may be issued under the Plans;

●materially modify the requirements for eligibility for participation in the Plans;

●materially increase the benefits to participants provided by the Plans; or

●otherwise disqualify the Plans for an exemption under Rule 16b-3 promulgated under the Exchange Act.

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Awards previously granted under the Plans may not be impaired or affected by any amendment of the Plans, without the consent of the affected grantees.

EQUITY PLAN INFORMATION

Plan Category: Number of
securities to be
issued upon
exercise of
outstanding
options,
warrants and
rights:		  Weighted
average
exercise price of
outstanding
options,
warrants and
rights:		  Number of
securities
remaining
available for
future
issuance:		 
2016 Equity Incentive Plan:            
Equity compensation plans approved by security holders  83  $15,000   99,917 
Equity compensation plans not approved by security holders  0   0   0 
Total  83  $15,000   99,917 
             
2018 Equity Incentive Plan:            
Equity compensation plans approved by security holders  667(1) $6,084   22,667(3)
Equity compensation plans not approved by security holders  0   0   0 
Total  667  $6,084   22,667(3)

Non-Employee Director Remuneration Policy

Our Board has not adopted a non-employee director remuneration policy.

Stock and Option Awards

Each of our non-employee directors may receive up to 50,000 options to purchase shares of common stock (which we refer to as the Annual Director Options) for each fiscal year. The Annual Director Options will be confirmed (together with the exercise price for such options) at the first meeting of our Board for each fiscal year and shall vest quarterly in arrears. Annual Director Options shall have a ten-year term and shall be issued under the 2016 and 2018 Plans.

Compensation Committee Review

The Compensation Committee shall, if it deems necessary or prudent in its discretion, re-evaluate and approve in January of each such year (or in any event prior to the first Board meeting of such fiscal year) the cash and equity awards (amount and manner or method of payment) to be made to non-employee directors for such fiscal year. In making this determination, the Compensation Committee shall utilize such market standard metrics as it deems appropriate, including, without limitation, an analysis of cash compensation paid to independent directors of our peer group.

The Compensation Committee shall also have the power and discretion to determine in the future whether non-employee directors should receive annual or other grants of options to purchase shares of common stock or other equity incentive awards in such amounts and pursuant to such policies as the Compensation Committee may determine utilizing such market standard metrics as it deems appropriate, including, without limitation, an analysis of equity awards granted to independent directors of our peer group.

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Participation of Employee Directors; New Directors

Unless separately and specifically approved by the Compensation Committee in its discretion, no employee director of our Company shall be entitled to receive any remuneration for serving as a director (other than expense reimbursement as per prevailing policy).

New directors joining our Board shall be entitled to a prorated portion (based on months to be served in the fiscal year in which they join) of cash and stock options or other equity incentive awards (if applicable) for the applicable fiscal year at the time they join the Board.

PRINCIPAL SHAREHOLDERSSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table presents information regarding beneficial ownership of our equity interests as of the dateRecord Date of this prospectus by:

●each shareholder or group of shareholders known by us to be the beneficial owner of more than 5% of any class of our voting securities;

●our Named Executive Officers;

●each of our directors; and

●all of our executive officers and directors as a group.

our executive officers, directors and persons known to us who beneficially own more than 5% of our common stock. Beneficial ownership is determined in accordance with the rules of the SEC and, thus, represents voting or investment power with respect to our securities as of The date of this prospectus.the Record Date. In computing the number and percentage of shares beneficially owned by a person, shares that may be acquired by such person within 60 days of The date of this prospectusthe Record Date are counted as outstanding, while these shares are not counted as outstanding for computing the percentage ownership of any other person. Unless otherwise indicated, the principal address of each of the persons below is c/o ToughBuilt Industries, Inc., 8669 Research Drive, Irvine, CA 92618. Unless otherwise indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole investment power with respect to all equity interests beneficially owned, subject to community property laws where applicable.

 

Name and Address 

Number of Shares

Beneficially
Owned

  Percentage of
Class		 
Named Executive Officers and Directors        
Michael Panosian—CEO, President and Chair of the Board  2,969(2)  * 
Martin Galstyan—CFO  20   - 
Joshua Keeler—CDO  565(3)  * 
Zareh Khachatoorian—COO  110(4)  * 
Linda Moossaian—Director  0   - 
Robert Faught—Director  0   - 
William Placke—Director  0   - 
All Executive Officers and Directors as a group (7 persons)  3,799   * 
         
5% or More Shareholders        
None        

Name and Address 

Number of Shares of Common Stock Beneficially Owned

(1)

 Percentage of Class Number of Series H Preferred Stock Beneficially Owned
(6)		 Percentage of Class Total Voting Power Percentage of
Total Voting Power
Executive Officers and Directors                        
Michael Panosian —CEO, President and Chair of the Board  353,890(2)  *   1.216   *   1,217,216   * 
Martin Galstyan —CFO  73,438(3)  *   -   *   -   * 
Josh Keeler —CDO and Director  235,564(4)  *   0.431   *   431,431   * 
Zareh Khachatoorian —COO  73,625(5)  *   0.037   *   37,037   * 
Robert Faught —Director  -   -   -   -   -   - 
Linda Moossaian – Director  -   -   -   -   -   - 
William Placke —Director  -   -   -    -    -   -  
All Officers and Directors as a group (7 persons)  736,517   2.04%  1.684   *   1,685,684   * 
*                        
5%+ Stockholders                        
None                         

 

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*Less than 1%

(1)Percentages are based on 9,026,54135,388,443 shares of common stock issued and outstanding as of the Record Date plus shares of common stock the person has the right to acquire within 60 days thereafter.

 

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(2)

Includes 133352,674 shares of common stock issuable upon the exercise of options vested options.or will vest within 60 days of the Record Date.

(3)Includes 13373,438 shares of common stock issuable upon the exercise of options vested options.or will vest within 60 days of the Record Date.

(4)

Includes 73235,133 shares of common stock issuable upon the exercise of options vested options.or will vest within 60 days of the Record Date.

(5)

Includes 73,588 shares of common stock issuable upon the exercise of options vested or will vest within 60 days of the Record Date.

(6)Percentages based on 35,388.444 shares of Series H Preferred Stock issued and outstanding as of the Record Date.

 

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Under Item 404(d) of Regulation S-K, we are required to disclose transactions for the prior two fiscal years to which we were a party in which (i) the amount involved exceeded or will exceed the lesser of $120,000 of one percent (1%) of our average total assets at year-end for the last two completed fiscal years and (ii) any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, any of the foregoing persons, who had or will have a direct or indirect material interest, other than equity and other compensation, termination, change in control and other similar arrangements, which are described under “Executive Compensation.”

To the best of our knowledge, during the past two fiscal years, there were no transactions, or series of similar transactions, or any currently proposed transactions, or series of similar transactions, to which we were or are to be a party, in which the amount involved exceeds the lesser of $120,000 or 1% of our average total assets at year-end for the last two complete fiscal years, and in which any director or executive officer, or any security holder who is known by us to own of record or beneficially more than 5% of any class of our common stock, or any member of the immediate family of any of the foregoing persons, has an interest (other than compensation to our officers and directors in the ordinary course of business).

POLICIES AND PROCEDURES FOR RELATED PARTY TRANSACTIONS

 

We have adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration, and oversight of “related party“related-party transactions.” For purposes of our policy only, a “related party“related-party transaction” is a transaction, arrangement, or relationship (or any series of similar transactions, arrangements, or relationships) in which we and any “related party” are participants involving an amount that exceeds the lesser of $120,000 or 1% of our average total assets at year-end for the last two complete fiscal years.$120,000.

 

Transactions involving compensation for services provided to us as an employee or director are not considered related-person transactions under this policy. A related party is any executive officer, director or a holder of more than five percent of our common stock, including any of their immediate family members and any entity owned or controlled by such persons.

 

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There have been no related party transactions during the last two fiscal years.

 

Policy and Procedures

Our Chief Financial Officer, Martin Galstyan, must present information regarding a proposed related partyrelated-party transaction to our Board. Under the policy, where a transaction has been identified as a related partyrelated-party transaction, Mr. GalstyanFaught must present information regarding the proposed related partyrelated-party transaction to our Nominating and Corporate Governance Committee once the same is established, for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related parties, the benefits of the transaction to us and whether any alternative transactions are available. To identify related partyrelated-party transactions in advance, we rely on information supplied by our executive officers, directors and certain significant shareholders. In considering related partyrelated-party transactions, our Nominating and Corporate Governance Committee will take into account the relevant available facts and circumstances including, but not limited to:

 

●whether the transaction was undertaken in the ordinary course of our business;

●whether the related party transaction was initiated by us or the related party;

●whether the transaction with the related party is proposed to be, or was, entered into on terms no less favorable to us than terms that could have been reached with an unrelated third party;third-party;

●the purpose of, and the potential benefits to us from the related party transaction;

●the approximate dollar value of the amount involved in the related party transaction, particularly as it relates to the related party;

●the related party’s interest in the related party transaction; and

●any other information regarding the related party transaction or the related party that would be material to investors in light of the circumstances of the particular transaction.

 

The Nominating and Corporate Governance Committee shall then make a recommendation to the Board, which will determine whether or not to approve of the related party transaction, and if so, upon what terms and conditions. In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval.

 

SHAREHOLDER PROPOSALS FOR THE 2023 ANNUAL MEETING

Shareholder who, in accordance with Rule 14a-8 of the Exchange Act, wish to present proposals at our 2023 Annual Meeting of Stockholders (the “2023 Annual Meeting”) and wish to have those proposals included in the proxy materials to be distributed by us in connection with our 2023 Annual Meeting must submit their proposals to the Company at the physical address provided below on or before May 24, 2023; provided, however, if the Company’s 2023 Annual Meeting is changed by more than 30 days from the date of the Annual Meeting, then the deadline is a reasonable time before the Company begins to print and send its proxy materials, which we deem to be no later than the:

●90th day before such Annual Meeting, or

●10th day following the day on which public announcement of the date of such meeting is first made.

All proposals must meet the requirements set forth in the rules and regulations of the SEC, including Rule 14a-8 of the Exchange Act, in order for such proposal to be eligible for inclusion in our 2023 proxy statement.

Either you, or your representative who is qualified under state law to present the proposal on your behalf, must attend the 2023 Annual Meeting to present the proposal. If we hold the 2023 Annual Meeting in whole or in part via electronic media, and the Company permits you or your representative to present your proposal via such media, then you may appear through electronic media rather than traveling to the meeting to appear in person. Whether you attend the meeting yourself or send a qualified representative to the meeting in your place, you should make sure that you, or your representative, follow the proper state law procedures for attending the meeting and/or presenting your proposal. If you or your qualified representative fail to appear and present the proposal, without good cause, we will be permitted to exclude all of your proposals from our proxy materials for any meetings held in the following two calendar years.

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Our bylaws have been publicly filed with the SEC at www.sec.gov. You may also contact our Corporate Secretary at our principal executive offices for a copy of the relevant bylaw provisions regarding the requirements for making shareholder proposalsPROPOSAL 2:

APPROVAL OF THE AMENDMENT TO THE COMPANY’S

AMENDED AND RESTATED CHARTER TO EFFECT THE REVERSE STOCK SPLIT

Background and nominating director candidates.Proposed Amendment

 

HOUSEHOLDINGOur Amended and Restated Certificate of Incorporation, as amended (the “Charter”), currently authorizes the Company to issue a total of 120,000,000 shares of capital stock, consisting of 100,000,000 shares of Common Stock, and 20,000,000 shares of Series H Preferred Stock.

On September 21, 2023, subject to stockholder approval, the Board approved an amendment to our Charter to, at the discretion of the Board, effect the Reverse Stock Split of the Common Stock at a ratio within a range of 1-for-20 to 1-for-100, including shares held by the Company as treasury shares, with the exact ratio within such range to be determined by the Board at its discretion. The primary goal of the Reverse Stock Split is to increase the per share market price of our Common Stock to meet the minimum per share bid price requirements for continued listing on The Nasdaq Capital Market. We believe that a range of Reverse Stock Split ratios provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split is not intended as, and will not have the effect of, a “going private transaction” covered by Rule 13e-3 promulgated under the Exchange Act. The Reverse Stock Split is not intended to modify the rights of existing stockholders in any material respect.

If the Reverse Stock Split Proposal is approved by our stockholders and the Reverse Stock Split is effected, up to every 100 shares of our outstanding Common Stock would be combined and reclassified into one share of Common Stock. The actual timing for implementation of the Reverse Stock Split would be determined by the Board based upon its evaluation as to when such action would be most advantageous to the Company and its stockholders. Notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, the Board will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split. If the Reverse Stock Split Proposal is approved by our stockholders, the Board will make a determination as to whether effecting the Reverse Stock Split is in the best interests of the Company and our stockholders in light of, among other things, the Company’s ability to increase the trading price of our Common Stock to meet the minimum stock price standards of The Nasdaq Capital Market without effecting the Reverse Stock Split, the per share price of the Common Stock immediately prior to the Reverse Stock Split and the expected stability of the per share price of the Common Stock following the Reverse Stock Split. If the Board determines that it is in the best interests of the Company and its stockholders to effect the Reverse Stock Split, it will hold a Board meeting to determine the ratio of the Reverse Stock Split. For additional information concerning the factors the Board will consider in deciding whether to effect the Reverse Stock Split, see “— Determination of the Reverse Stock Split Ratio” and “— Board Discretion to Effect the Reverse Stock Split.”

 

The SECtext of the proposed amendment to the Company’s Charter to effect the Reverse Stock Split is included as Annex A to this proxy statement . If the Reverse Stock Split Proposal is approved by the Company’s stockholders, the Company will have the authority to file the Reverse Stock Split Charter Amendment with the Secretary of State of the State of Nevada, which will become effective upon its filing; provided, however, that the Reverse Stock Split Charter Amendment is subject to revision to include such changes as may be required by the office of the Secretary of State of the State of Nevada and as the Board deems necessary and advisable. The Board has determined that the amendment is advisable and in the best interests of the Company and its stockholders and has submitted the amendment for consideration by our stockholders at the Annual Meeting.

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Reasons for the Reverse Stock Split

Maintain Nasdaq Listing

We are submitting this proposal to our stockholders for approval in order to increase the trading price of our Common Stock to meet the minimum per share bid price requirement for continued listing on The Nasdaq Capital Market. We believe increasing the trading price of our Common Stock may also assist in our capital-raising efforts by making our Common Stock more attractive to a broader range of investors. Accordingly, we believe that the Reverse Stock Split is in our stockholders’ best interests.

On July 7, 2023, we received a letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) indicating that, based upon the closing bid price of Common Stock for the 30 consecutive business day period between May 23, 2023 through July 6, 2023, the Company did not meet the minimum bid price of $1.00 per share required for continued listing on The Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2). The letter also indicated that the Company will be provided with a compliance period of 180 calendar days, or until January 3, 2024 (the “Compliance Period”), in which to regain compliance pursuant to Nasdaq Listing Rule 5810(c)(3)(A). In order to regain compliance with Nasdaq’s minimum bid price requirement, our Common Stock must maintain a minimum closing bid price of $1.00 for at least ten consecutive business days during the Compliance Period.

We believe that the Reverse Stock Split is our best option to meet the criteria to satisfy the minimum per share bid price requirement for continued listing on The Nasdaq Capital Market. A decrease in the number of outstanding shares of our Common Stock resulting from the Reverse Stock Split should, absent other factors, assist in ensuring that the per share market price of our Common Stock remains above the requisite price for continued listing. However, we cannot provide any assurance that our minimum bid price would remain over the minimum bid price requirement of The Nasdaq Capital Market following the Reverse Stock Split.

In addition, as noted above, we believe that the Reverse Stock Split and the resulting increase in the per share price of our Common Stock could encourage increased investor interest in our Common Stock and promote greater liquidity for our stockholders. A greater price per share of our Common Stock could allow a broader range of institutions to invest in our Common Stock (namely, funds that are prohibited or discouraged from buying stocks with a price below a certain threshold), potentially increasing marketability, trading volume and liquidity of our Common Stock. Many institutional investors view stocks trading at low prices as unduly speculative in nature and, as a result, avoid investing in such stocks. We believe that the Reverse Stock Split will provide the Board flexibility to make our Common Stock a more attractive investment for these institutional investors, which we believe will enhance the liquidity for the holders of our Common Stock and may facilitate future sales of our Common Stock. The Reverse Stock Split could also increase interest in our Common Stock for analysts and brokers who may otherwise have policies that discourage or prohibit them in following or recommending companies with low stock prices. Additionally, because brokers’ commissions on transactions in low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher.

The Board intends to effect the Reverse Stock Split only if it believes that a decrease in the number of shares outstanding is in the best interests of the Company and our stockholders and is likely to improve the trading price of our Common Stock and improve the likelihood that we will be allowed to maintain our listing on Nasdaq. Accordingly, our Board approved the Reverse Stock Split as being in the best interests of the Company.

Risks Associated with the Reverse Stock Split

The Reverse Stock Split May Not Increase the Price of our Common Stock Over the Long-Term.

As noted above, the principal purpose of the Reverse Stock Split is to increase the trading price of our Common Stock to meet the minimum stock price standards of The Nasdaq Capital Market. However, the effect of the Reverse Stock Split on the market price of our Common Stock cannot be predicted with any certainty, and we cannot assure you that the Reverse Stock Split will accomplish this objective for any meaningful period of time, or at all. While we expect that the reduction in the number of outstanding shares of Common Stock will proportionally increase the market price of our Common Stock, we cannot assure you that the Reverse Stock Split will increase the market price of our Common Stock by a multiple of the Reverse Stock Split ratio, or result in any permanent or sustained increase in the market price of our Common Stock. The market price of our Common Stock may be affected by other factors which may be unrelated to the number of shares outstanding, including the Company’s business and financial performance, general market conditions, and prospects for future success.

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The Reverse Stock Split May Decrease the Liquidity of our Common Stock.

The Board believes that the Reverse Stock Split may result in an increase in the market price of our Common Stock, which could lead to increased interest in our Common Stock and possibly promote greater liquidity for our stockholders. However, the Reverse Stock Split will also reduce the total number of outstanding shares of Common Stock, which may lead to reduced trading and a smaller number of market makers for our Common Stock, particularly if the price per share of our Common Stock does not increase as a result of the Reverse Stock Split.

The Reverse Stock Split May Result in Some Stockholders Owning “Odd Lots” That May Be More Difficult to Sell or Require Greater Transaction Costs per Share to Sell.

If the Reverse Stock Split is implemented, it will increase the number of stockholders who own “odd lots” of less than 100 shares of Common Stock. A purchase or sale of less than 100 shares of Common Stock (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers. Therefore, those stockholders who own fewer than 100 shares of Common Stock following the Reverse Stock Split may be required to pay higher transaction costs if they sell their Common Stock.

The Reverse Stock Split May Lead to a Decrease in our Overall Market Capitalization.

The Reverse Stock Split may be viewed negatively by the market and, consequently, could lead to a decrease in our overall market capitalization. If the per share market price of our Common Stock does not increase in proportion to the Reverse Stock Split ratio, then the value of our Company, as measured by our market capitalization, will be reduced. Additionally, any reduction in our market capitalization may be magnified as a result of the smaller number of total shares of Common Stock outstanding following the Reverse Stock Split.

Potential Consequences if the Reverse Stock Split Proposal is Not Approved

If the Reverse Stock Split Proposal is not approved by our stockholders, our Board will not have the authority to effect the Reverse Stock Split Charter Amendment to, among other things, facilitate the continued listing of our Common Stock on Nasdaq by increasing the per share trading price of our Common Stock to help ensure a share price high enough to satisfy the $1.00 per share minimum bid price requirement. Any inability of our Board to effect the Reverse Stock Split could expose us to delisting from Nasdaq.

Determination of the Reverse Stock Split Ratio

The Board believes that stockholder approval of a range of potential Reverse Stock Split ratios is in the best interests of our Company and stockholders because it is not possible to predict market conditions at the time the Reverse Stock Split would be implemented. We believe that a range of Reverse Stock Split ratios of 1-for-20 to 1-for-100 provides us with the most flexibility to achieve the desired results of the Reverse Stock Split. The Reverse Stock Split ratio to be selected by our Board will be no more than 1-for-100.

The selection of the specific Reverse Stock Split ratio will be based on several factors, including, among other things:

●our ability to maintain the listing of our Common Stock on The Nasdaq Capital Market;
●the per share price of our Common Stock immediately prior to the Reverse Stock Split;
●the expected stability of the per share price of our Common Stock following the Reverse Stock Split;
●the likelihood that the Reverse Stock Split will result in increased marketability and liquidity of our Common Stock;
●prevailing market conditions;
●general economic conditions in our industry; and
●our market capitalization before and after the Reverse Stock Split.

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We believe that granting our Board the authority to set the ratio for the Reverse Stock Split is essential because it allows companiesus to take these factors into consideration and intermediaries (such as brokers)to react to changing market conditions. If the Board chooses to implement the Reverse Stock Split, the Company will make a delivery procedure called “householding.” Householdingpublic announcement regarding the determination of the Reverse Stock Split ratio.

Board Discretion to Effect the Reverse Stock Split

If the Reverse Stock Split proposal is approved by our stockholders, the term usedBoard will have the discretion to describeimplement the practiceReverse Stock Split or to not effect the Reverse Stock Split at all. The Board currently intends to effect the Reverse Stock Split. If the trading price of deliveringour Common Stock increases without effecting the Reverse Stock Split, the Reverse Stock Split may not be necessary. Following the Reverse Stock Split, if implemented, there can be no assurance that the market price of our Common Stock will rise in proportion to the reduction in the number of outstanding shares resulting from the Reverse Stock Split or that the market price of the post-split Common Stock can be maintained above $1.00. There also can be no assurance that our Common Stock will not be delisted from Nasdaq for other reasons.

If our stockholders approve the Reverse Stock Split proposal at the Annual Meeting, the Reverse Stock Split will be effected, if at all, only upon a single setdetermination by the Board that the Reverse Stock Split is in the best interests of notices, proxy statementsthe Company and annual reportsits stockholders at that time. No further action on the part of the stockholders will be required to either effect or abandon the Reverse Stock Split. If our Board does not implement the Reverse Stock Split prior to the one-year anniversary of the date on which the reverse stock split is approved by the Company’s stockholders at the Annual Meeting, the authority granted in this proposal to implement the Reverse Stock Split will terminate and the Reverse Stock Split Charter Amendment will be abandoned.

The market price of our Common Stock is dependent upon our performance and other factors, some of which are unrelated to the number of shares outstanding. If the Reverse Stock Split is effected and the market price of our Common Stock declines, the percentage decline as an absolute number and as a percentage of our overall market capitalization may be greater than would occur in the absence of the Reverse Stock Split. Furthermore, the reduced number of shares that will be outstanding after the Reverse Stock Split could significantly reduce the trading volume and otherwise adversely affect the liquidity of our Common Stock.

We have not proposed the Reverse Stock Split in response to any householdeffort of which we are aware to accumulate our shares of Common Stock or obtain control of the Company, nor is it a plan by management to recommend a series of similar actions to our Board or our stockholders. Notwithstanding the decrease in the number of outstanding shares of Common Stock following the Reverse Stock Split, our Board does not intend for this transaction to be the first step in a “going private transaction” within the meaning of Rule 13e-3 of the Exchange Act.

Effects of the Reverse Stock Split

Effects of the Reverse Stock Split on Issued and Outstanding Shares.

If the Reverse Stock Split is effected, it will reduce the total number of issued and outstanding shares of Common Stock by a Reverse Stock Split ratio of 1-for-20 to 1-for-100. Accordingly, each of our stockholders will own fewer shares of Common Stock as a result of the Reverse Stock Split. However, the Reverse Stock Split will affect all stockholders uniformly and will not affect any stockholder’s percentage ownership interest in the Company, except to the extent that the Reverse Stock Split would result in an adjustment to a stockholder’s ownership of Common Stock due to the treatment of fractional shares in the Reverse Stock Split. Therefore, voting rights and other rights and preferences of the holders of Common Stock will not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). Common stock issued pursuant to the Reverse Stock Split will remain fully paid and nonassessable, and the par value per share of Common Stock will remain $0.0001.

All shares of Series H Preferred Stock that are not present in person or by proxy at the Annual Meeting as of immediately prior to the opening of the polls at the Annual Meeting will be automatically redeemed in the Initial Redemption. Any outstanding shares of Series H Preferred Stock that were not redeemed pursuant to the Initial Redemption will be redeemed in whole, but not in part, (i) if and when ordered by our Board or (ii) automatically upon the approval by the Company’s stockholders of the Reverse Stock Split Charter Amendment effecting the Reverse Stock Split. Please refer to the discussion in the Questions and Answers About the Annual Meeting section under “Who is entitled to vote at the Annual Meeting?”; “What are the voting rights of the stockholders?” and “What vote is required to approve each item?” for a description of the voting power of the Series H Preferred Stock.

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We are currently authorized to issue a maximum of 200 million (200,000,000) shares of our Common Stock. As of the Record Date, there were 35,388,443 shares of our Common Stock issued and outstanding. Although the number of authorized shares of our Common Stock will not change as a result of the Reverse Stock Split, the number of shares of our Common Stock issued and outstanding will be reduced in proportion to the ratio selected by the Board. Thus, the Reverse Stock Split will effectively increase the number of authorized and unissued shares of our Common Stock available for future issuance by the amount of the reduction effected by the Reverse Stock Split.

Following the Reverse Stock Split, the Board will have the authority, subject to applicable securities laws, to issue all authorized and unissued shares without further stockholder approval, upon such terms and conditions as the Board deems appropriate. We do not currently have any plans, proposals or understandings to issue the additional shares that would be available if the Reverse Stock Split is approved and effected, but some of the additional shares underlie warrants, which two or more shareholders reside. This procedure reducescould be exercised after the volumeReverse Stock Split Charter Amendment is effected.

Effects of duplicate information shareholders receivethe Reverse Stock Split on Outstanding Equity Awards and also reducesPlans.

If the Reverse Stock Split is effected, the terms of equity awards granted under the ToughBuilt Industries, Inc. 2016, 2018 and 2022 Equity Incentive Plans (the “Incentive Plans”), including (i) the number of shares of Common Stock which thereafter may be made the subject of awards; (ii) the number of shares of Common Stock subject to outstanding awards; (iii) the exercise price of outstanding option awards previously granted and unexercised under the Incentive Plans will be proportionally adjusted to the end that the same proportion of our issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate exercise price; subject to adjustments for any fractional shares as described herein and provided, however, that the number of shares of Common Stock subject to any award shall always be a company’s printingwhole number. In addition, the total number of shares of Common Stock that may be the subject of future grants under the Incentive Plans, as well as any plan limits on the size of such grants will be adjusted and mailing costs. Householding willproportionately decreased as a result of the Reverse Stock Split.

Effects of the Reverse Stock Split on Voting Rights.

Proportionate voting rights and other rights of the holders of Common Stock would not be affected by the Reverse Stock Split (other than as a result of the treatment of fractional shares). For example, a holder of 1% of the voting power of the outstanding Common Stock immediately prior to the effective time of the Reverse Stock Split would continue until you are notified otherwise or you submit contrary instructions.to hold 1% of the voting power of the outstanding Common Stock after the Reverse Stock Split.

Effects of the Reverse Stock Split on Regulatory Matters.

 

The Company is subject to the periodic reporting and other requirements of the Exchange Act. The Reverse Stock Split will promptly delivernot affect the Company’s obligation to publicly file financial and other information with the SEC.

Effects of the Reverse Stock Split on Authorized Share Capital and Outstanding Shares

The total number of shares of capital stock that we are authorized to issue will not be affected by the Reverse Stock Split.

The following table summarizes, for illustrative purposes only, the anticipated effects of a Reverse Stock Split on our shares available for issuance based on information as of the Record Date (unless otherwise noted below) and without giving effect to the treatment of fractional shares.

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Assuming this proposal is approved by the shareholders and implemented by the Board:

Status 

Number of Shares

of Common Stock

Authorized

  

Number of Shares of

Common Stock

Issued and

Outstanding

  

Number of

Shares of

Common

Stock

Reserved

for Future

Issuance

  

Number of

Shares of

Common Stock

Authorized but

Unissued and

Unreserved

  

Hypothetical Initial

Market Value of

Shares of Common

Stock Authorized

but Unissued and

Unreserved*

 
Pre-Reverse Stock Split  200,000,000   35,388,656   3,180,563   161,430,781  $29,638,692 
Post-Reverse Stock Split 1:20  200,000,000   1,769,433   159,028   198,071,539  $727,318,692 
Post-Reverse Stock Split 1:100  200,000,000   353,887   31,806   199,614,308  $3,664,918,691 

* Based on a hypothetical post-split stock price calculated by multiplying the closing stock price on October 18, 2023 of $0.1836 by the split ratio.

Treatment of Fractional Shares in the Reverse Stock Split

The Company does not intend to issue fractional shares in the event that a stockholder owns a number of shares of Common Stock that is not evenly divisible by the Reverse Stock Split ratio. If the Reverse Stock Split is effected, each fractional share of Common Stock will be rounded up to the nearest whole number.

Effective Time of the Reverse Stock Split

If the Reverse Stock Split Proposal is approved by our stockholders, the Reverse Stock Split would become effective, if at all, when the Reverse Stock Split Charter Amendment is accepted and recorded by the office of the Secretary of State of the State of Nevada. However, notwithstanding approval of the Reverse Stock Split Proposal by our stockholders, the Board will have the sole authority to elect whether or not and when to amend our Charter to effect the Reverse Stock Split.

Exchange of Share Certificates

If the Reverse Stock Split is effected, each certificate representing pre-Reverse Stock Split shares of Common Stock will be deemed for all corporate purposes to evidence ownership of post-Reverse Stock Split Common Stock at the effective time of the Reverse Stock Split. As soon as practicable after the effective time of the Reverse Stock Split, the Transfer Agent will mail a letter of transmittal to the Company’s stockholders containing instructions on how a stockholder should surrender its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock to the Transfer Agent in exchange for certificate(s) representing post-Reverse Stock Split shares of Common Stock. No certificate(s) representing post-Reverse Stock Split shares of Common Stock will be issued to a stockholder until such stockholder has surrendered all certificate(s) representing pre-Reverse Stock Split shares of Common Stock, together with a properly completed and executed letter of transmittal, to the Transfer Agent. No stockholder will be required to pay a transfer or other fee to exchange its, his or her certificate(s) representing pre-Reverse Stock Split shares of Common Stock for certificate(s) representing post-Reverse Stock Split shares of Common Stock registered in the same name.

Stockholders who hold uncertificated shares of Common Stock electronically in “book-entry” form will have their holdings electronically adjusted by the Transfer Agent (and, for beneficial owners, by their brokers or banks that hold in “street name” for their benefit, as the case may be) to give effect to the Reverse Stock Split. If any certificate(s) or book-entry statement(s) representing pre-Reverse Stock Split shares of Common Stock to be exchanged contain a restrictive legend or notation, as applicable, the certificate(s) or book-entry statement(s) representing post-Reverse Stock Split shares of Common Stock will contain the same restrictive legend or notation.

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Any stockholder whose share certificate(s) representing pre-Reverse Stock Split shares of Common Stock has been lost, stolen or destroyed will only be issued post-Reverse Stock Split Common Stock after complying with the requirements that the Company and the Transfer Agent customarily apply in connection with lost, stolen or destroyed certificates.

STOCKHOLDERS SHOULD NOT DESTROY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATES REPRESENTING PRE-REVERSE STOCK SPLIT SHARES OF COMMON STOCK UNTIL THEY ARE REQUESTED TO DO SO.

Appraisal Rights

Under the Nevada Revised Statutes, our stockholders are not entitled to appraisal or dissenter’s rights with respect to the Reverse Stock Split, and we will not independently provide our stockholders with any such rights.

Regulatory Approvals

The Reverse Stock Split will not be consummated, if at all, until after approval of the Company’s stockholders is obtained. The Company is not obligated to obtain any governmental approvals or comply with any state or federal regulations prior to consummating the Reverse Stock Split other than the filing of the Reverse Stock Split Charter Amendment with the Secretary of State of the State of Nevada.

Actual or Intrinsic Value

Stockholders should also keep in mind that the implementation of a Reverse Stock Split does not have an effect on the actual or intrinsic value of our business or a stockholder’s proportional ownership interest (subject to the treatment of fractional shares). However, should the overall value of our common stock decline after a Reverse Stock Split, then the actual or intrinsic value of shares held by stockholders will also proportionately decrease as a result of the overall decline in value.

Accounting Treatment of the Reverse Stock Split

If the Reverse Stock Split is effected, the par value per share of our Common Stock will remain unchanged at $0.0001. Accordingly, on the effective date of the Reverse Stock Split, the stated capital on the Company’s consolidated balance sheets attributable to our Common Stock will be reduced in proportion to the size of the Reverse Stock Split ratio, and the additional paid-in-capital account will be increased by the amount by which the stated capital is reduced. Our stockholders’ equity, in the aggregate, will remain unchanged. Per share net income or loss will be increased because there will be fewer shares of Common Stock outstanding. The Common Stock held in treasury will be reduced in proportion to the Reverse Stock Split ratio. The Company does not anticipate that any other accounting consequences, including changes to the amount of stock-based compensation expense to be recognized in any period, will arise as a result of the Reverse Stock Split.

Certain U.S. Federal Income Tax Consequences of the Reverse Stock Split

The following is a discussion of certain material U.S. federal income tax consequences of the Reverse Stock Split. This discussion is included for general information purposes only and does not purport to address all aspects of U.S. federal income tax law that may be relevant to stockholders in light of their particular circumstances. This discussion is based on the Code and current Treasury Regulations, administrative rulings and court decisions, all of which are subject to change, possibly on a retroactive basis, and any such change could affect the continuing validity of this discussion.

All stockholders are urged to consult with their own tax advisors with respect to the tax consequences of the Reverse Stock Split. This discussion does not address the tax consequences to stockholders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, partnerships, nonresident alien individuals, broker-dealers and tax-exempt entities, persons holding shares as part of a straddle, hedge, conversion transaction or other integrated investment, U.S. holders (as defined below) subject to the alternative minimum tax or the unearned income Medicare tax and U.S. holders whose functional currency is not the U.S. dollar. This summary also assumes that the pre-Reverse Stock Split shares of Common Stock were, and the post-Reverse Stock Split shares of Common Stock will be, held as a “capital asset,” as defined in Section 1221 of the Code.

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As used herein, the term “U.S. holder” means a holder that is, for U.S. federal income tax purposes:

●a citizen or resident of the United States;
●a corporation or other entity taxed as a corporation created or organized in or under the laws of the United States, any state thereof or the District of Columbia;
●an estate the income of which is subject to U.S. federal income tax regardless of its source; or
●a trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “U.S. persons” (as defined in the Code) have the authority to control all substantial decisions of the trust or (B) that has a valid election in effect to be treated as a U.S. person.

In general, no gain or loss should be recognized by a stockholder upon the exchange of pre-Reverse Stock Split Common Stock for post-Reverse Stock Split Common Stock. The aggregate tax basis of the post-Reverse Stock Split Common Stock should be the same as the aggregate tax basis of the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split. A stockholder’s holding period in the post-Reverse Stock Split Common Stock should include the period during which the stockholder held the pre-Reverse Stock Split Common Stock exchanged in the Reverse Stock Split.

As noted above, we will not issue fractional shares of Common Stock in connection with the Reverse Stock Split. In certain circumstances, stockholders who would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will automatically be entitled to receive an additional copyfraction of a share of Common Stock to round up to the next whole post-Reverse Stock Split share of Common Stock. The U.S. federal income tax consequences of the receipt of such an additional fraction of a share of Common Stock is not clear.

The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder. Each stockholder is urged to consult with such stockholder’s own tax advisor with respect to the tax consequences of the Reverse Stock Split.

Vote Required

The approval of the Reverse Stock Split Proposal requires the affirmative “FOR” vote of the majority of the voting power of the outstanding shares of Common Stock and Series H Preferred Stock present in person (which would include voting online at the virtual Annual Meeting) or represented by proxy at the Annual Meeting and entitled to vote on the proposal, voting together as a single class. Each of the failure to vote by proxy or to vote in person (which would include voting online at the virtual Annual Meeting), an abstention and a broker non-vote will have the same practical effect as shares voted against this proposal. A vote on this proposal will be considered a “routine” matter. Therefore, we do not expect any broker non-votes on this proposal and a failure to instruct your broker, bank or other nominee on how to vote your shares will not necessarily count as a vote against this proposal.

Board Recommendation

Our Board recommends a vote “FOR” the approval of the Reverse Stock Split Proposal.

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PROPOSAL 3:

RATIFICATION OF APPOINTMENT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee of the Board has approved the selection of Marcum LLP as our independent registered public accountants to audit our financial statements for the year ending December 31, 2023. We are asking that you ratify that appointment, although your ratification is not required. A Marcum LLP representative is expected to attend the Annual Meeting to answer appropriate questions and to make a statement if he or she desires.

The following table presents fees for professional services rendered by Marcum LLP during the years ended December 31, 2022 and December 31, 2021. Marcum LLP did not bill us for other services during those periods. All services that occurred during 2021, which is the period subsequent to Marcum LLP becoming our independent public accounting firm, were approved by the Audit Committee in accordance with the approval policy referred to below.

  Fiscal Year Ended December 31, 
  2022  2021 
Audit Fees $391,515  $150,861 
Audit-Related Fees (1) 97,875  107,000 
Tax Fees -  - 
All Other Fees -  - 
Total $489,390  $257,861 

(1)Fees incurred in conjunction with consents for various registration statements filed during years.

Audit fees consist of fees related to professional services rendered in connection with the audit of our annual financial statements. All other fees relate to professional services rendered in connection with the review of the quarterly financial statements.

Audit Committee Approval Policies and Procedures

The Audit Committee charter sets forth our policy regarding retention of the independent auditors, giving the Audit Committee responsibility for the appointment, replacement, compensation, evaluation and oversight of the work of the independent auditors. As part of this responsibility, our Audit Committee approves the audit and non-audit services performed by our independent auditors in order to assure that they do not impair the auditor’s independence from the Company. The Audit Committee has adopted a policy that sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditors may be approved.

Votes Required

Approval of Proposal 3 requires the affirmative vote of a majority of the shares entitled to vote and present in person or represented by proxy at the Annual Meeting. Abstentions are considered shares present and entitled to vote on this proposal and, thus, will have the same effect as a vote “AGAINST” this proposal.

The Board recommends you vote “FOR” the ratification of the selection of Marcum LLP as the independent registered public accounting firm for the Company for the year ending December 31, 2023.

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PROPOSAL 4:

APPROVAL OF THE ADJOURNMENT PROPOSAL

Background of and Rationale for the Adjournment Proposal

The Board believes that if the number of shares of the Company’s Common Stock and Series H Preferred Stock outstanding and entitled to vote at the Annual Meeting is insufficient to approve the Reverse Stock Split, it is in the best interests of the stockholders to enable the Board to continue to seek to obtain a sufficient number of additional votes to approve the Reverse Stock Split Proposal.

Shares of Series H Preferred Stock do not have any voting rights except with respect to the Reverse Stock Split Proposal and the Adjournment Proposal presented at this Annual Meeting or otherwise as required by law.

In the Adjournment Proposal, we are asking stockholders to authorize the holder of any such documentproxy solicited by the Board to vote in favor of adjourning or postponing the Annual Meeting or any shareholder who writesadjournment or postponement thereof. If our stockholders approve this proposal, we could adjourn or postpone the Company. Alternatively, if you share an address with another shareholderAnnual Meeting, and have received multiple copiesany adjourned session of the Annual Meeting, to use the additional time to solicit additional proxies in favor of the Reverse Stock Split Proposal.

Additionally, approval of the Adjournment Proposal could mean that, in the event we receive proxies indicating that a majority of the number of outstanding shares of our notice, proxy statementCommon Stock and annual report, you may contact usSeries H Preferred Stock, as counted to request deliverymirror the Common Stock votes cast, will vote against the Reverse Stock Split Proposal, we could adjourn or postpone the Annual Meeting without a vote on the Reverse Stock Split Charter Amendment and use the additional time to solicit the holders of those shares to change their vote in favor of the Reverse Stock Split Proposal.

Vote Required

The affirmative “FOR” vote of a single copy of these materials. Shareholders of record who currently receive multiple copiesmajority of the annual reportshares of Common Stock and proxy statement or Notice of Internet Availability at their address whoSeries H Preferred Stock present in person (which would prefer that their communications be householded, or shareholders of record who are currently participating in householding and would prefer to receive separate copies of our proxy materials, should also contact us. Any such written requests should be directed to the Companyinclude voting online at the following physical addressvirtual Annual Meeting) or email address Martin Galstyan c/o ToughBuilt Industries, Inc., 8669 Research Drive, Irvine, CA 92618; represented by proxy at the Annual Meeting and entitled to vote on this proposal is required to approve this proposal. Each of the failure to vote by proxy or to vote in person (which would include voting online at the virtual Annual Meeting) and a broker non-vote will have no effect on the Adjournment Proposal. An abstention will have the same practical effect as a vote against this proposal. As described above, the Adjournment Proposal is considered a “martin.g@toughbuilt.comroutine.” matter. Therefore, your broker, bank or other nominee may vote your shares without receiving instructions from you on this proposal and accordingly, we do not expect any broker non-votes on this proposal. A failure to instruct your broker, bank or other nominee on how to vote your shares will not necessarily count as a vote against this proposal.

Board Recommendation

Our Board recommends that you vote “FOR” the Adjournment Proposal.

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ANNUAL REPORT ON FORM 10-KDEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS

 

A copyDeadline for the Submission of Stockholder Proposals for Inclusion in our 2021Proxy Statement for our 2024 Annual Report, as filedMeeting

If any stockholder intends to present a proposal to be considered for inclusion in our proxy material for our 2024 Annual Meeting of Shareholders, the proposal must comply with the SEC, is availablerequirements of Rule 14a-8 of Regulation 14A under the Exchange Act and must be submitted in writing by notice delivered to shareholders without charge upon written request directed to Martin Galstyan c/oour Board at ToughBuilt Industries, Inc., 8669 Research Drive, Irvine, CA 92618, orAttention: Board of Directors. Any such proposal must be received at least 120 days before the anniversary of the prior year’s proxy statement (by August 13, 2024), unless the date of our 2024 Annual Meeting of Stockholders is changed by phone at (949) 528-3100. The Company makes available freemore than 30 days from December 11, 2024, in which case, the proposal must be received a reasonable time before we begin to print and mail our proxy materials.

To comply with the universal proxy rules, stockholders who intend to solicit proxies in support of charge on or through its website, www.toughbuilt.com,director nominees other than our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to such reports filed pursuant to Section 13(a) or 15(d) ofnominees must provide notice that sets forth the information required by Rule 14a-19 under the Exchange Act no later than October 12, 2024 (the 60th day prior to the first anniversary of the annual meeting for the preceding year’s annual meeting).

HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries, such as soonbrokers, to satisfy delivery requirements for Annual Meeting materials with respect to two or more stockholders sharing the same address by delivering a single set of Annual Meeting materials addressed to those shareholders. This process, commonly referred to as reasonably practicable after filing.“householding,” potentially provides extra convenience for shareholders and cost savings for companies. Because we utilize the “householding” rules for Annual Meeting materials, stockholders who share the same address will receive only one copy of the Annual Meeting materials, unless we receive contrary instructions from any stockholder at that address. If you prefer to receive multiple copies of the Annual Meeting materials at the same address you share with other stockholders, additional copies will be provided to you promptly upon request. If you are a stockholder of record, you may obtain additional copies at the same address you share with other stockholders by contacting Broadridge Financial Solutions, Inc., either by calling (866) 540-7095, or by writing to Broadridge Householding Department, 51 Mercedes Way, Edgewood, New York 11717 Eligible stockholders of record receiving multiple copies of the Annual Meeting materials can request householding by contacting Broadridge Financial Solutions, Inc. in the same manner. If you are a beneficial owner and hold your shares in a brokerage or custody account, you can request additional copies of the Annual Meeting materials at the same address you share with other stockholders or you can request householding by notifying your broker, bank or other nominee.

OTHER MATTERS

We know of no other matters to be submitted to the Annual Meeting. If any other matters properly come before the Annual Meeting, the intention of the persons named in the proxy to vote the shares they represent as our Board may recommend.

 

 By Order of the Board of Directors,Sincerely,
  
September 1, 2022/s/ Michael Panosian
 /s/ Michael Panosian
 Michael Panosian
 Chief Executive Officer President and Chairman of the Board
Irvine, California
October 30, 2023

 

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ANNEX A

 

CERTIFICATE OF AMENDMENT

OF

AMENDED AND RESTATED ARTICLES OF INCORPORATION OF

TOUGHBUILT INDUSTRIES, INC.

 

2022 EQUITY INCENTIVE PLANToughBuilt Industries, Inc., a corporation organized and existing under and by virtue of the provisions of the Nevada Revised Statutes (the “Corporation”), hereby certifies as follows:

1. The name of the Corporation is ToughBuilt Industries, Inc. (the “Corporation”).

2. Article 3 of the Corporation’s Amended and Restated Articles of Incorporation, as amended, is hereby amended to adding the following paragraph:

“Reverse Stock Split. Upon the effectiveness of the filing of this Certificate of Amendment (the “Effective Time”) each share of the Corporation’s common stock, $0.0001 par value per share (the “Old Common Stock”), either issued or outstanding or held by the Corporation as treasury stock, immediately prior to the Effective Time, will be automatically reclassified and combined (without any further act) into a smaller number of shares such that each [_____] (___) shares of Old Common Stock issued and outstanding or held by the Company as treasury stock immediately prior to the Effective Time is reclassified into one share of Common Stock, $0.0001 par value per share, of the Corporation (the “New Common Stock”) (the “Reverse Stock Split”). The Board of Directors shall make provision for the issuance of that number of fractions of New Common Stock such that any fractional share of a holder otherwise resulting from the Reverse Stock Split shall be rounded up to the next whole number of shares of New Common Stock. Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the number of shares of the New Common Stock into which such shares of Old Common Stock shall have been reclassified plus the fraction, if any, of a share of New Common Stock issued as aforesaid. The Reverse Stock Split shall have effect on the authorized number or par value of the capital stock of the Corporation.”

3. Except as set forth in this Certificate of Amendment of Articles of Incorporation, the Amended and Restated Articles of Incorporation, as amended, of the Corporation remains in full force and effect.

IN WITNESS WHEREOF, ToughBuilt Industries, Inc. has caused this Certificate of Amendment to the Amended and Restated Articles of Incorporation of Corporation to be signed by Michael Panosian, a duly authorized officer of the Corporation, on [__________] [__], 2023.

 

 1.PURPOSE

1.1Purpose

The purpose of the Plan is to secure for the Company and its stockholders the benefits inherent in share ownership by the employees, Consultants, and directors of the Company and its Affiliates who, in the judgment of the Board, will be largely responsible for its future growth and success. It is generally recognized that equity incentive plans of the nature provided for herein: (a) aid in retaining and encouraging individuals of exceptional ability because of the opportunity offered to them to acquire a proprietary interest in the Company; and (b) promote a greater alignment of interests between such persons and stockholders of the Company.

1.2Available Awards

Awards that may be granted under this Plan include:

(a)Options; and

(b)Restricted Stock Units.

2.INTERPRETATION

2.1Definitions

(a)“Affiliate” means any corporation in a chain or corporations or other entities in which each corporation or other entity has a “controlling interest” (as defined in U.S. Treasury Regulation § 1.409A-1(b)(5)(iii)(E)(1)) in another corporation or other entity in the chain, ending with the Company.

(b)“Award” means any right granted under this Plan, including Options and Restricted Stock Units.
By: 
 (c)Name:[INTENTIONALLY OMITTED].Michael Panosian

 (c)Title:“Blackout Period” means an interval of time during which the Company has determined, pursuant to the Company’s internal trading policies, that one or more Participants may not trade any securities of the Company because they may be in possession of undisclosed material information pertaining to the Company, or otherwise prohibited by law from trading any securities of the Company.

(d)“Board” means the board of directors of the Company.

(e)“Cashless Exercise Right” has the meaning set forth in Section 3.5 of this Plan.

(f)“Change of Control” means, in respect of the Company:

(i)if, as a result of or in connection with the election of directors, the people who were directors (or who were entitled under a contractual arrangement to be directors) of the Company before the election cease to constitute a majority of the Board, unless the directors have been nominated by management, corporate investors, or approved of by a majority of the previously serving directors;Chief Executive Officer

 

  A-1

(ii)any transaction at any time and by whatever means pursuant to which any Person or any group of two or more Persons acting jointly or in concert as a single control group or any Affiliate (other than a wholly-owned Subsidiary of the Company or in connection with a reorganization of the Company) or any one or more directors thereof hereafter “beneficially owns” (as defined in Section 13d of the Exchange Act) directly or indirectly, or acquires the right to exercise control or direction over, voting securities of the Company representing 50% or more of the then issued and outstanding voting securities of the Company, as the case may be, in any manner whatsoever;

(iii)the sale, assignment, lease, or other transfer or disposition of more than 50% of the assets of the Company to a Person or any group of two or more Persons acting jointly or in concert (other than a wholly-owned Subsidiary of the Company or in connection with a reorganization of the Company);

(iv)the occurrence of a transaction requiring approval of the Company’s stockholders whereby the Company is acquired through consolidation, merger, exchange of securities involving all of the Company’s voting securities, purchase of assets, amalgamation, statutory arrangement or otherwise by any Person or any group of two or more Persons acting jointly or in concert (other than a short-form amalgamation of the Company or an exchange of securities with a wholly-owned Subsidiary of the Company or a reorganization of the Company); or

(v)any sale, lease, exchange, or other disposition of all or substantially all of the assets of the Company other than in the ordinary course of business.

For the purposes of the foregoing, “voting securities” means Shares and any other shares entitled to vote for the election of directors and shall include any securities, whether or not issued by the Company, which are not shares entitled to vote for the election of directors but are convertible into or exchangeable for shares which are entitled to vote for the election of directors, including any options or rights to purchase such shares or securities. Notwithstanding the foregoing, as to any Award under the Plan that consists of deferred compensation subject to Section 409A of the Code, the definition of “Change in Control” shall be deemed modified to the extent necessary to comply with Section 409A of the Code.

(g)“Code” means the United States Internal Revenue Code of 1986, as amended, and any applicable United States Treasury Regulations and other binding guidance thereunder. Any reference to a section of the Code herein will be a reference to any successor or amended section of the Code.

(h)“Committee” has the meaning set forth in Section 7.1(a).

(i)“Company” means ToughBuilt Industries, Inc.

(j)“Consultant” means Persons who provide bona fide services to the Company, including an advisor, and such services are not in connection with the offer or sale of securities in capital-raising transactions, and do not directly or indirectly promote or maintain a market for the Company’s securities.

(k)“Deferred Payment Date” for a Participant means the date after the Restricted Period in respect of Restricted Stock Units which is the earlier of (i) the date which the Participant has elected to defer receipt of the underlying Shares in accordance with Section 4.5 of this Plan; and (ii) the Participant’s Separation Date.

(l)“Designated Affiliate” means direct and indirect Subsidiaries of the Company and any Person that is an Affiliate of the Company, in each case designated by the Committee from time to time as a Designated Affiliate for purposes of this Plan.

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(m)“Determination Date” means the latest possible date that will not jeopardize the qualification of an Award granted under the Plan as “performance-based compensation” under Section 162(m) of the Code.

(n)“Director Retirement” in respect of a Participant, means the Participant ceasing to hold any directorships with the Company, any Designated Affiliate and any entity related to the Company for after attaining a stipulated age in accordance with the Company’s normal retirement policy, or earlier with the Company’s consent.

(o)“Director Termination” means the removal of, resignation of, or failure to re-elect an Eligible Director (excluding a Director Retirement) as a director of the Company.

(p)“Disability” means permanent and total disability as defined in Section 22(e)(3) of the Code, provided that in the case of Awards other than Incentive Stock Options, the Committee in its discretion may determine whether a permanent and total disability exists in accordance with uniform and non-discriminatory standards adopted by the Committee from time to time.

(q)“Effective Date” has the meaning set forth in Section 6.7.

(r)“Eligible Consultant” means Consultants who are entitled to receive equity incentives as determined by the Committee.

(s)“Eligible Director” means a director of the Company or any Designated Affiliate who are, as such, eligible for participation in this Plan.

(t)“Eligible Employee” means an employee (including an officer) of the Company or any Designated Affiliate, whether or not they have a written employment contract with Company or the Designated Affiliate, determined by the Committee.

(u)“Eligible Person” means an Eligible Employee, Eligible Consultant, or Eligible Director.

(v)“Exchange” means The Nasdaq Stock Market LLC, or any successor principal stock exchange upon which the Shares may become listed.

(w)“Fair Market Value” means, as of any date, the value of the Shares determined as follows:

(i)if the Shares are listed on any established stock exchange or a national market system, including without limitation the Nasdaq Global Select Market, the Nasdaq Global Market, or the Nasdaq Capital Market of The Nasdaq Stock Market, its Fair Market Value will be the closing sales price for such Shares (or if no closing sales price was reported on that date, as applicable, on the last trading date such closing sales price was reported) as quoted on such exchange or system on the day of determination, as reported in The Wall Street Journal or such other source as the Committee deems reliable;

(ii)if the Shares is regularly quoted by a recognized securities dealer but selling prices are not reported, the Fair Market Value of a Share will be the mean between the high bid and low asked prices for the Shares on the day of determination (or, if no bids and asks were reported on that date, as applicable, on the last trading date such bids and asks were reported), as reported in The Wall Street Journal or such other source as the Committee deems reliable; or

(iii)in the absence of an established market for the Shares, or if such Shares is not regularly quoted or does not have sufficient trades or bid prices which would accurately reflect the actual Fair Market Value of the Shares, the Fair Market Value will be determined in good faith by the Committee upon the advice of a qualified valuation expert.

 A-3

(x)“Incentive Stock Option” means an Option granted under the Plan that by its terms qualifies and is otherwise intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and the regulations promulgated thereunder.

(y)“Insider” means a director, officer, or holder of 5% or more of the Shares at any date as determined by the Committee.

(z)“Market Price” such calculation of market price as may be determined by the Board.

(aa)“Non-qualified Stock Option” means an Option granted under the Plan that by its terms does not qualify or is not intended to qualify as an Incentive Stock Option.

(bb)“Option” means an option granted under the terms of this Plan, including Incentive Stock Options and Non-qualified Stock Options.

(cc)“Option Period” means the period during which an Option is outstanding.

(dd)“Option Shares” has the meaning set forth in Section 3.5 of this Plan.

(ee)“Optionee” means an Eligible Person to whom an Option has been granted under the terms of this Plan.

(ff)[INTENTIONALLY LEFT BLANK].

(gg)“Participant” means an Eligible Person who participates in this Plan.

(hh)“Performance Goals” means the attainment of performance goals relating to one or more business criteria within the meaning of Code Section 162(m) and may provide for a targeted level or levels of achievement including (i) earnings per Share, (ii) operating cash flow, (iii) operating income, (iv) profit after-tax, (v) profit before-tax, (vi) return on assets, (vii) return on equity, (viii) return on sales, (ix) revenue, and (x) total stockholder return.

(ii)“Person” includes any individual and any corporation, company, partnership, governmental authority, joint venture, association, trust, or other entity.

(jj)“Plan” means this Equity Incentive Plan, as it may be amended and restated from time to time.

(kk)“Redemption Notice” means a written notice by a Participant, or the administrator or liquidator of the estate of a Participant, to the Company stating a Participant’s request to redeem his or her Restricted Stock Units.

(ll)“Restricted Period” means any period of time that a Restricted Stock Unit is not vested and the Participant holding such Restricted Stock Unit remains ineligible to receive the relevant Shares or cash in lieu thereof, determined by the Board in its absolute discretion, and with respect to U.S. Taxpayers, the Restricted Stock Units remain subject to a substantial risk of forfeiture within the meaning of Section 409A of the Code, however, such period of time and, with respect to U.S. Taxpayers the substantial risk of forfeiture, may be reduced or eliminated from time to time and at any time and for any reason as determined by the Board, including, but not limited to, circumstances involving death or Disability of a Participant.

(mm)“Restricted Stock Unit” means a bookkeeping entry representing an amount equal to the Fair Market Value of one Share, granted pursuant to Section 4.1 of this Plan. Each Restricted Stock Unit represents an unfunded and unsecured obligation of the Company.

 A-4

(nn)“Restricted Stock Unit Grant Letter” has the meaning set forth in Section 4.3 of this Plan.

(oo)“Retirement” in respect of an Eligible Employee, means the Eligible Employee ceasing to hold any employment with the Company or any Designated Affiliate after attaining a stipulated age in accordance with the Company’s normal retirement policy, or earlier with the Company’s consent.

(pp)“Separation Date” means the date that a Participant ceases to be an Eligible Person.

(qq)“Stockholder Approval” means a majority of the votes attached to Shares held by stockholders of the Company.

(rr)“Shares” means the common stock, par value  of the Company.

(ss)“Subsidiary” means a “subsidiary corporation,” whether now or hereafter existing, as defined in Section 424(f) of the Code.

(tt)“Tax Obligations” means the amount of all withholding required under any governing tax law with respect to the payment of any amount with respect to the redemption of a Restricted Stock Unit, including amounts funded by the Company on behalf of previous withholding tax payments and owed by the Participant to the Company or with respect to the exercise of an Option, as applicable.

(uu)“Termination” means the termination of the employment or engagement of an Eligible Employee or Eligible Consultant with or without cause by the Company or a Designated Affiliate or the cessation of employment or engagement of the Eligible Employee or Eligible Consultant with the Company or a Designated Affiliate as a result of resignation or otherwise, other than the Retirement of the Eligible Employee.

(vv)“U.S. Securities Act” means the United States Securities Act of 1933, as amended.

(ww)“U.S. Taxpayer” means a Participant who is a U.S. citizen, U.S. permanent resident or other person who is subject to taxation on their income under the Code.

2.2Interpretation

(a)This Plan is created under and is to be governed, construed and administered in accordance with the laws of the State of Nevada applicable therein.

(b)Whenever the Board or Committee is to exercise discretion in the administration of the terms and conditions of this Plan, the term “discretion” means the sole and absolute discretion of the Board or Committee.

(c)As used herein, the terms “Part” or “Section” mean and refer to the specified Part or Section of this Plan, respectively.

(d)Where the word “including” or “includes” is used in this Plan, it means “including (or includes) without limitation.”

(e)Words importing the singular include the plural and vice versa and words importing any gender include any other gender.

(f)Unless otherwise specified, all references to money amounts are to Canadian dollars.

(g)Any Performance Goals may be used to measure the performance of the Company as a whole or a business unit of the Company and may be measured relative to a peer group or index. The Performance Goals may differ from Participant to Participant and from Award to Award. Prior to the Determination Date, the Committee will determine whether any significant element(s) will be included in or excluded from the calculation of any Performance Goal with respect to any Participant. The Committee may in its discretion grant Awards that are not intended to qualify as “performance-based compensation” under Section 162(m) of the Code to such Participants that are based on Performance Goals or other specific criteria or goals but that do not satisfy the definition of Performance Goals. Notwithstanding any other provision of the Plan, any Award which is granted to a Participant and is intended to constitute qualified performance based compensation under Code Section 162(m) will be subject to any additional limitations set forth in the Code (including any amendment to Section 162(m)) or any regulations and ruling issued thereunder that are requirements for qualification as qualified performance-based compensation as described in Section 162(m) of the Code, and the Plan will be deemed amended to the extent necessary to conform to such requirements.

 A-5

3.STOCK OPTIONS

3.1Participation

The Company may from time to time grant Options to Participants pursuant to this Plan.

3.2Price

The exercise price per Share of any Option shall be not less than 100% of the Market Price on the date of grant, provided that with respect to an Option granted to a U.S. Taxpayer, the exercise price per Share shall not be less than the Fair Market Value on the date of grant of the Option. Notwithstanding the foregoing, the Company may designate and exercise price less than the Fair Market Value on the date of grant if the Option: (i) is granted in substitution of a stock option previously granted by an entity acquired that is acquired by or merged with the Company or an Affiliate, or (ii) otherwise is structured to be exempt from, or to comply with, Section 409A of the Code, in the case of Options awarded to U.S. Taxpayers. In addition, in the case of an Incentive Stock Option granted to an Eligible Employee who, at the time the Incentive Stock Option is granted, owns shares representing more than 10% of the voting power of all classes of shares of the Company or any Parent or Subsidiary, the per Share exercise price will be no less than 110% of the Fair Market Value per Share on the date of grant. Notwithstanding the foregoing provisions of this Section 3.2, Options may be granted with a per Share exercise price of less than 100% of the Fair Market Value per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code.

3.3Grant of Options

Each Option will be designated in the Award agreement as either an Incentive Stock Option or a Non-qualified Stock Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value of the Shares with respect to which Incentive Stock Options are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds $100,000 (U.S.), such Options will be treated as Non-qualified Stock Options. For purposes of this Section 3.3, Incentive Stock Options will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted.

The Board, on the recommendation of the Committee, may at any time authorize the granting of Options to such Participants as it may select for the number of Shares that it shall designate, subject to the provisions of this Plan. The date of grant of an Option shall, unless otherwise determined by the Board, be (i) the date such grant was approved by the Committee for recommendation to the Board, provided the Board approves such grant; or (ii) for a grant of an Option not approved by the Committee for recommendation to the Board, the date such grant was approved by the Board.

Each Option granted to a Participant shall be evidenced by a stock option agreement with terms and conditions consistent with this Plan and as approved by the Board on the recommendation of the Committee (which terms and conditions need not be the same in each case and may be changed from time to time, subject to Section 6.8 of this Plan, and the approval of any material changes by the Exchange).

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In respect of Options granted to Participants pursuant to this Plan, the Company is representing herein and in the applicable stock option agreement that the Participant is a bona fide Eligible Person of the Company or a Designated Affiliate.

3.4Terms of Options

The Option Period shall be ten years from the date such Option is granted or such greater or lesser duration as the Board, on the recommendation of the Committee, may determine at the date of grant, and may thereafter be reduced with respect to any such Option as provided in Section 3.6 hereof covering termination of employment or engagement of the Optionee or death or Disability of the Optionee; provided, however, that at any time the expiry date of the Option Period in respect of any outstanding Option under this Plan should be determined to occur either during a Blackout Period imposed by the Company or within two business days following the expiry of the Blackout Period, the expiry date of such Option Period shall be deemed to be the date that is the tenth business day following the expiry of the Blackout Period. Moreover, in the case of an Incentive Stock Option granted to a Participant who, at the time the Incentive Stock Option is granted, owns Shares representing more than 10% of the total combined voting power of all classes of shares of the Company or any Parent or Subsidiary, the term of the Incentive Stock Option will be five years from the date of grant or such shorter term as may be provided in the Award agreement.

Unless otherwise determined from time to time by the Board, on the recommendation of the Committee, Options shall vest and may be exercised (in each case to the nearest full Share) during the Option Period annually over a two-year period, with one-eighth of the Options vesting on the date of grant, and an additional one-eighth of the Options vesting on the date which is each three months thereafter.

Except as set forth in Section 3.6, no Option may be exercised unless the Optionee is at the time of such exercise:

(a)in the case of an Eligible Employee, in the employ of the Company or a Designated Affiliate and shall have been continuously so employed or retained since the grant of the Option;

(b)in the case of an Eligible Consultant, a Consultant of the Company or a Designated Affiliate and shall have been such a Consultant continuously since the grant of the Option; or

(c)in the case of an Eligible Director, a director of the Company or a Designated Affiliate and shall have been such a director continuously since the grant of the Option.

The exercise of any Option will be contingent upon the Optionee having entered into a stock option agreement with the Company on such terms and conditions as have been approved by the Board, on the recommendation of the Committee, and which incorporates by reference the terms of this Plan. The exercise of any Option will, subject to Section 3.5, also be contingent upon receipt by the Company of cash payment of the full purchase price of the Shares being purchased.

Shares issuable upon exercise of the Options may be subject to a hold period or trading restrictions. In addition, no Optionee who is resident in the U.S. may exercise Options unless the Shares to be issued upon exercise of the Options are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

To the extent that the Committee determines it to be desirable to qualify Awards granted hereunder as “performance-based compensation” within the meaning of Section 162(m) of the Code, the Plan will be administered by a Committee of two (2) or more “outside directors” within the meaning of Section 162(m) of the Code.

To the extent desirable to qualify transactions hereunder as exempt under Rule 16b-3, the transactions contemplated hereunder will be structured to satisfy the requirements for exemption under Rule 16b-3. 

 A-7

3.5Cashless Exercise Right

Unless prohibited by the Exchange, and except with respect to Incentive Stock Options awarded to U.S. Taxpayers, Participants have the right (the “Cashless Exercise Right”), in lieu of the right to exercise an Option, to terminate such Option in whole or in part by notice in writing delivered by the Participant to the Company electing to exercise the Cashless Exercise Right and, in lieu of receiving the Shares (the “Option Shares”) to which such terminated Option relates, to receive the number of Shares, disregarding fractions, which is equal to the quotient obtained by:

(a)subtracting the applicable Option exercise price per Share from the Market Price per Share on the business day immediately prior to the exercise of the Cashless Exercise Right and multiplying the remainder by the number of Option Shares;

(b)subtracting from the amount obtained under subsection 3.5(a) that amount of Tax Obligations applicable to the Option Shares; and

(c)dividing the net amount obtained under subsection 3.5(b) by the Market Price per Share on the business day immediately prior to the exercise of the Cashless Exercise Right.

If a Participant exercises a Cashless Exercise Right in connection with an Option, it is exercisable only to the extent and on the same conditions that the related Option is exercisable under this Plan.

3.6Effect of Termination of Employment or Death or Disability

If an Optionee:

(a)dies or becomes disabled while employed by, a Consultant to or while a director of the Company or a Designated Affiliate, any Option that had vested and was held by him or her at the date of death or Disability shall become exercisable in whole or in part, but only by the person or persons to whom the Optionee’s rights under the Option shall pass by the Optionee’s will or applicable laws of descent and distribution. Unless otherwise determined by the Board, on the recommendation of the Committee, all such Options shall be exercisable only to the extent that the Optionee was entitled to exercise the Option at the date of his or her death or Disability and only for 12 months after the date of death or Disability or prior to the expiration of the Option Period in respect thereof, whichever is sooner;

(b)ceases to be employed by, or to act as a director of, or to be engaged as a Consultant of, the Company or a Designated Affiliate for cause, no Option held by such Optionee will, unless otherwise determined by the Board, on the recommendation of the Committee, be exercisable following the date on which such Optionee ceases to be so employed or engaged; and

(c)ceases to be employed by, or to or act as a director of, or to be engaged as a Consultant of, the Company or a Designated Affiliate for any reason other than cause then, unless otherwise determined by the Board, on the recommendation of the Committee, any Option that had vested and is held by such Optionee at the effective date thereof shall become exercisable for a period of up to 30 days thereafter or prior to the expiration of the Option Period in respect thereof, whichever is sooner.

3.7Reduction in Exercise Price

Any change to the exercise price of any Option shall be subject to the approval of the Board.

Stockholder Approval (as required by the Exchange) shall be obtained for any reduction in the exercise price of any Option granted under this Plan if the holder thereof is an Insider of the Company at the time of the proposed amendment.

 A-8

3.8Change of Control

In the event of a Change of Control, all Options outstanding shall vest immediately and be settled by the issuance of Shares or cash, or a combination of both Shares and cash, at the discretion of the Committee.

3.9Incentive Stock Options

(a)Maximum Number of Shares for Incentive Stock Options. Notwithstanding any other provision of this Plan to the contrary, the aggregate number of Shares available for Incentive Stock Options shall not exceed 10% of the number of Shares issued at such time, subject to adjustment pursuant to Section 6.3 of this Plan and subject to the provisions of Sections 422 and 424 of the Code.

(b)Designation of Options. Each stock option agreement with respect to an Option granted to a U.S. Taxpayer shall specify whether the related Option is an Incentive Stock Option or a Non-qualified Stock Option. If no such specification is made in the stock option agreement or in the resolutions authorizing the grant of the Option, the related Option will be a Non- qualified Stock Option.

(c)Special Requirements for Incentive Stock Options. In addition to the other terms and conditions of this Plan (and notwithstanding any other term or condition of this Plan to the contrary), the following limitations and requirements will apply to an Incentive Stock Option:

(i)An Incentive Stock Option may be granted only to an employee of the Company, or an employee of a Subsidiary of the Company within the meaning of Section 424(f) of the Code.

(ii)The aggregate Fair Market Value of the Shares (determined as of the applicable grant date) with respect to which Incentive Stock Options are exercisable for the first time by any U.S. Taxpayer during any calendar year (pursuant to this Plan and all other plans of the Company and of any Parent or Subsidiary, as defined in Sections 424(e) and (f) respectively of the Code) will not exceed US$100,000 or any other limitation subsequently set forth in Section 422(d) of the Code. To the extent that an Option that is designated as an Incentive Stock Option becomes exercisable for the first time during any calendar year for Shares having a Fair Market Value greater than US$100,000, the portion that exceeds such amount will be treated as a Non-qualified Stock Option.

(iii)The exercise price per Share payable upon exercise of an Incentive Stock Option will be not less than 100% of the Fair Market Value of a Share on the applicable grant date; provided, however, that the exercise price per Share payable upon exercise of an Incentive Stock Option granted to a U.S. Taxpayer who is a 10% Stockholder (within the meaning of Sections 422 and 424 of the Code) on the applicable grant date will be not less than 110% of the Fair Market Value of a Share on the applicable grant date.

(iv)No Incentive Stock Option may be granted more than 10 years after the earlier of (A) the date on which this Plan, or an amendment and restatement of the Plan, as applicable, is adopted by the Board; or (B) the date on which this Plan, or an amendment and restatement of this Plan, as applicable, is approved by the stockholders of the Company.

(v)An Incentive Stock Option will terminate and no longer be exercisable no later than 10 years after the applicable date of grant; provided, however, that an Incentive Stock Option granted to a U.S. Taxpayer who is a 10% Stockholder (within the meaning of Sections 422 and 424 of the Code) on the applicable grant date will terminate and no longer be exercisable no later than 5 years after the applicable grant date.

(vi)An Incentive Stock Options shall be exercisable in accordance with its terms under the Plan and the applicable stock option agreement and related exhibits and appendices thereto. However, in order to retain its treatment as an Incentive Stock Option for U.S. federal income tax purposes, the Incentive Stock Option must be exercised within the time periods set forth below. The limitations below are not intended to, and will not, extend the time during which an Option may be exercised pursuant to the terms of such Option.

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(A)For Incentive Stock Option treatment, if a U.S. Taxpayer who has been granted an Incentive Stock Option ceases to be an employee due to the Disability of such U.S. Taxpayer (within the meaning of Section 22(e) of the Code), such Incentive Stock Option must be exercised (to the extent such Incentive Stock Option is exercisable pursuant to its terms) by the date that is one year following the date of such Disability (but in no event beyond the term of such Incentive Stock Option).

(B)For Incentive Stock Option treatment, if a U.S. Taxpayer who has been granted an Incentive Stock Option ceases to be an employee for any reason other than the death or Disability of such U.S. Taxpayer, such Incentive Stock Option must be exercised (to the extent such Incentive Stock Option otherwise is exercisable pursuant to its terms) by such U.S. Taxpayer within three months following the date of termination (but in no event beyond the term of such Incentive Stock Option).

(C)For purposes of this Section 3.9(c)(vi), the employment of a U.S. Taxpayer who has been granted an Incentive Stock Option will not be considered interrupted or terminated upon (a) sick leave, military leave or any other leave of absence approved by the Company that does not exceed three months; provided, however, that if reemployment upon the expiration of any such leave is guaranteed by contract or applicable law, such three month limitation will not apply, or (b) a transfer from one office of the Company (or of any Designated Affiliate) to another office of the Company (or of any Designated Affiliate) or a transfer between the Company and any Designated Affiliate.

(vii)An Incentive Stock Option granted to a U.S. Taxpayer may be exercised during such U.S. Taxpayer’s lifetime only by such U.S. Taxpayer.

(viii)An Incentive Stock Option granted to a U.S. Taxpayer may not be transferred, assigned, pledged, hypothecated, or otherwise disposed of by such U.S. Taxpayer, except by will or by the laws of descent and distribution.

(ix)In the event the Plan is not approved by the stockholders of the Company in accordance with the requirements of Section 422 of the Code within 12 months of the date of adoption of the Plan, Options otherwise designated as Incentive Stock Options will be Non-qualified Stock Options.

(x)The Company shall have no liability to a U.S. Taxpayer or any other party if any Option (or any part thereof) intended to be an Incentive Stock Option is not an Incentive Stock Option.

4.RESTRICTED STOCK UNITS

4.1Participants

The Board, on the recommendation of the Committee, may grant, in its sole and absolute discretion, to any Participant, rights to receive any number of Restricted Stock Units as a discretionary payment in consideration of past services to the Company or as an incentive for future services, subject to this Plan and with such additional provisions and restrictions as the Board may determine.

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4.2Maximum Number of Shares

The aggregate maximum number of Shares available for issuance from treasury underlying Restricted Shares Units under this Plan, subject to adjustment pursuant to Section 6.3, shall not exceed the maximum number of Shares issuable under this Plan at the applicable time. Any Shares subject to a Restricted Stock Unit which has been granted under the Plan and which has been cancelled or terminated in accordance with the terms of the Plan without the applicable Restricted Period having expired will again be available under the Plan.

Such aggregate maximum number of Shares subject to Restricted Stock Units which have been granted under this Plan shall be subject to, applicable, any stock exchange or regulatory authority having jurisdiction over the securities of the Company.

4.3Restricted Stock Unit Grant Letter

Each grant of a Restricted Stock Unit under this Plan shall be evidenced by a grant letter (a “Restricted Stock Unit Grant Letter”) issued to the Participant by the Company. Such Restricted Stock Unit Grant Letter shall be subject to all applicable terms and conditions of this Plan and may be subject to any other terms and conditions (including without limitation any recoupment, reimbursement or clawback compensation policy as may be adopted by the Board from time to time) which are not inconsistent with this Plan and which the Board, on the recommendation of the Committee, deems appropriate for inclusion in a Restricted Stock Unit Grant Letter. The provisions of the various Restricted Stock Unit Grant Letters issued under this Plan need not be identical.

For purposes of qualifying grants of Restricted Stock Units as “performance-based compensation” under Section 162(m) of the Code, the Committee, in its discretion, may set restrictions based upon the achievement of Performance Goals. The Performance Goals will be set by the Committee on or before the Determination Date. In granting Restricted Stock Units that are intended to qualify under Section 162(m) of the Code, the Committee will follow any procedures determined by it from time to time to be necessary or appropriate to ensure the qualification of the Award under Section 162(m) of the Code (e.g., in determining the Performance Goals).

4.4Restricted Period

Concurrent with the determination to grant Restricted Stock Units to a Participant, the Board, on the recommendation of the Committee, shall determine the Restricted Period applicable to such Restricted Stock Units. In addition, at the sole discretion of the Board, at the time of grant, the Restricted Stock Units may be subject to performance conditions to be achieved by the Company or a class of Participants or by a particular Participant on an individual basis, within a Restricted Period, for such Restricted Stock Units to entitle the holder thereof to receive the underlying Shares or cash in lieu thereof.

4.5Deferred Payment Date

Any Participant who is not a U.S. Taxpayer may elect to defer to receive all or any part of the Shares, or cash in lieu thereof, underlying Restricted Stock Units until one or more Deferred Payment Dates. Any other Participants may not elect a Deferred Payment Date. 

4.6Prior Notice of Deferred Payment Date

Participants who elect to set a Deferred Payment Date must give the Company written notice of the Deferred Payment Date(s) not later than 30 days prior to the expiration of the Restricted Period. For certainty, Participants shall not be permitted to give any such notice after the day which is 30 days prior to the expiration of the Restricted Period and a notice once given may not be changed or revoked.

4.7Retirement or Termination during Restricted Period

In the event and to the extent of the Retirement or Termination and/or, as applicable, the Director Retirement or Director Termination of a Participant from all such roles with the Company during the Restricted Period, any Restricted Stock Units held by the Participant shall immediately terminate and be of no further force or effect; provided, however, that the Board shall have the absolute discretion to modify the grant of the Restricted Stock Units to provide that the Restricted Period shall terminate immediately prior to the date of such occurrence.

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4.8Retirement or Termination after Restricted Period

In the event and to the extent of the Retirement or Termination and/or, as applicable, the Director Retirement or Director Termination of the Participant from all such roles with the Company following the Restricted Period and prior to a Deferred Payment Date (as elected by a Participant who is not a U.S. Taxpayer), the Participant shall be entitled to receive, and the Company shall issue forthwith, Shares or cash in lieu thereof in satisfaction of the Restricted Stock Units then held by the Participant. The provisions of this Section 4.8 shall not apply to Participants who are Israeli taxpayers.

4.9Death or Disability of Participant

In the event of the death or Disability of a Participant, any Shares or cash in lieu thereof represented by Restricted Stock Units held by the Participant shall be immediately issued or paid by the Company to the Participant or legal representative of the Participant.

4.10Payment of Dividends

Subject to the absolute discretion of the Board, in the event that a dividend (other than a dividend payable in shares) is declared and paid by the Company on the Shares, a Participant may be credited with additional Restricted Stock Units. The number of such additional Restricted Stock Units, if any, will be calculated by dividing (a) the total amount of the dividends that would have been paid to the Participant if the Restricted Stock Units (including Restricted Stock Units in which the Restricted Period has expired but the Shares have not been issued due to a Deferred Payment Date) in the Participant’s account on the dividend record date had been outstanding Shares (and the Participant held no other Shares) by (b) the Market Price of the Shares on the date on which such dividends were paid. Additional Restricted Stock Units awarded pursuant to this Section 4.10 shall be subject to the same terms and conditions as the underlying Restricted Stock Units to which they relate.

4.11Change of Control

In the event of a Change of Control, all Restricted Stock Units outstanding shall vest immediately and be settled by the issuance of Shares or cash, or a combination of both Shares and cash, in each case in the discretion of the Committee, notwithstanding the Restricted Period and any Deferred Payment Date.

4.12Redemption of Restricted Stock Units

Except to the extent prohibited by the Exchange, upon expiry of the applicable Restricted Period (or on the Deferred Payment Date, as applicable), the Company shall redeem Restricted Stock Units in accordance with the election made in a Redemption Notice given by the Participant to the Company by:

(a)issuing to the Participant one Share for each Restricted Stock Unit redeemed provided the Participant makes payment to the Company of an amount equal to the Tax Obligation required to be remitted by the Company to the taxation authorities as a result of the redemption of the Restricted Stock Units;

(b)issuing to the Participant one Share for each Restricted Stock Unit redeemed and either (i) selling, or arranging to be sold, on behalf of the Participant, such number of Shares issued to the Participant as to produce net proceeds available to the Company equal to the applicable Tax Obligation so that the Company may remit to the taxation authorities an amount equal to the Tax Obligation; or (ii) receiving from the Participant at the time of issuance of the Shares an amount equal to the applicable Tax Obligation;

(c)subject to the discretion of the Company, paying in cash to, or for the benefit of, the Participant, the value of any Restricted Stock Units being redeemed, less any applicable Tax Obligation; or

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(d)a combination of any of the Shares or cash in Section 4.12(a), Section 4.12(b), or Section 4.12(c) above.

The Shares shall be issued and the cash, if any, shall be paid as a lump sum by the Company within ten business days of the date the Restricted Stock Units are redeemed pursuant to this Part 4. Restricted Stock Units of U.S. Taxpayers will be redeemed as soon as possible following the end of the Restricted Period (as set forth in the Restricted Stock Unit Grant Letter or such earlier date on which the Restricted Period is terminated pursuant to this Part 4), and in all cases by the end of the calendar year in which the Restricted Period ends, or if later, by the date that is 75 days following the end of the Restricted Period. A Participant shall have no further rights respecting any Restricted Stock Unit which has been redeemed in accordance with this Plan.

No Participant who is resident in the U.S. may receive Shares for redeemed Restricted Stock Units unless the Shares to be issued upon redemption of the Restricted Stock Units are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

4.13Rights as a Stockholder

A Participant receiving Restricted Stock Units shall have the rights of a stockholder only as to Shares, if any, actually issued to such Participant upon expiration of the applicable Restricted Period and satisfaction or achievement of the terms and conditions of the Award, and in accordance with the provisions of the Plan and the applicable Award agreement, and not with respect to Shares to which such Award relates but which are not actually issued to such Participant.

5.WITHHOLDING TAXES

5.1Withholding Taxes

The Company or any Designated Affiliate may take such steps as are considered necessary or appropriate for the withholding of any taxes or other amounts which the Company or any Designated Affiliate is required by any law or regulation of any governmental authority whatsoever to withhold in connection with any Award including, without limiting the generality of the foregoing, the withholding of all or any portion of any payment or the withholding of the issue of any Shares to be issued under this Plan, until such time as the Participant has paid the Company or any Designated Affiliate for any amount which the Company or Designated Affiliate is required to withhold by law with respect to such taxes or other amounts. Without limitation to the foregoing, the Board may adopt administrative rules under this Plan, which provide for the automatic sale of Shares (or a portion thereof) in the market upon the issuance of such Shares under this Plan on behalf of the Participant to satisfy withholding obligations under an Award.

6.GENERAL

6.1Number of Shares

The total number of shares of Common Stock reserved and available for issuance under the Plan shall be 1,350,000 shares of Common Stock. Shares of Common Stock under the Plan may consist, in whole or in part, of authorized and unissued shares or treasury shares. The number of shares of Common Stock available for issuance under the Plan shall automatically increase on the first trading day of January each calendar year during the term of the Plan, beginning with the calendar year 2023, resulting in the aggregate number of shares of Common Stock available under this Plan is equal to fifteen percent (15%) of the total number of shares of Common Stock outstanding on the last trading day in December of the immediately preceding calendar year. If any shares of Common Stock that have been granted pursuant to an Award cease to be subject to such Award or are forfeited or if any Award otherwise terminates without a payment being made to the Holder in the form of Common Stock, such shares shall again be available for distribution in connection with future grants and Awards under the Plan.

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6.2Lapsed Awards

If Awards are surrendered, terminated, or expire without being exercised in whole or in part, new Awards may be granted covering the Shares not issued under such lapsed Awards, subject to any restrictions that may be imposed by the Code.

6.3Adjustment in Shares Subject to this Plan

If the outstanding Shares shall at any time be changed or exchanged by the declaration of a stock dividend (bonus shares), stock split, combination or exchange of Shares, recapitalization, or any other like event by or of the Company, and as often as the same shall occur, then the number, class, and kind of the Shares subject to the Plan or subject to any Options therefore granted, and the exercise price, shall be appropriately and equitably adjusted so as to maintain the proportionate number of Shares, without changing the aggregate exercise price; provided, however, that no adjustment shall be made by reason of the distribution of subscription rights or a rights offering on outstanding Shares. Upon the occurrence of any of the foregoing, the class and the aggregate number of Shares issuable pursuant to the Plan (as set forth in Section 5 hereof), in respect of which Options have not yet been exercised, shall be appropriately adjusted. Except as expressly provided herein, no issuance by the Company of Shares of any class, or securities convertible into Shares of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares subject to an Option.

6.4Non-Transferability

Any Awards accruing to any Participant in accordance with the terms and conditions of this Plan shall not be transferable or assignable to anyone unless specifically provided herein. During the lifetime of a Participant all Awards may only be exercised by the Participant. Awards are non-transferable and non- assignable except by will or by the laws of descent and distribution.

6.5Employment

Nothing contained in this Plan shall confer upon any Participant any right with respect to employment or continuance of employment with the Company or any Affiliate or interfere in any way with the right of the Company or any Affiliate to terminate the Participant’s employment at any time. Participation in this Plan by a Participant is voluntary.

6.6Record Keeping

The Company shall maintain a register in which shall be recorded:

(a)the name and address of each Participant;

(b)the number of Awards granted to each Participant and relevant details regarding such Awards; and

(c)such other information as the Board may determine.

6.7Necessary Approvals

The issue of Shares under this Plan is prohibited until the date that the Company obtains approval of this Plan by Stockholder Approval (the “Effective Date”). Notwithstanding the foregoing, the Board may issue Awards prior to the Effective Date, with all such Awards subject to the following additional restrictions unless and until the occurrence of the Effective Date: (x) all Awards will be prohibited from being converted or exchanged for Shares; and (y) all Awards will terminate upon a Change of Control or upon either the stockholders of the Company or the Exchange failing to approve this Plan.

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6.8Amendments to Plan

The Board shall have the power to, at any time and from time to time, either prospectively or retrospectively, amend, suspend, or terminate this Plan or any Award granted under this Plan without stockholder approval, including, without limiting the generality of the foregoing: changes of a clerical or grammatical nature, changes regarding the persons eligible to participate in this Plan, changes to the exercise price, vesting, term, and termination provisions of the Award, changes to the Cashless Exercise Right provisions, changes to the authority and role of the Board under this Plan, and any other matter relating to this Plan and the Awards that may be granted hereunder, provided however that:

(a)such amendment, suspension, or termination is in accordance with applicable laws and the rules of the Exchange, and any such amendment has been approved by the Exchange;

(b)no amendment to this Plan or to an Award granted hereunder will have the effect of impairing, derogating from or otherwise adversely affecting the terms of an Award which is outstanding at the time of such amendment without the written consent of the holder of such Award;

(c)the expiry date of an Option Period in respect of an Option shall not be more than ten years from the date of grant of an Option except as expressly provided in Section 3.4;

(d)the Directors shall obtain Stockholder Approval of:

(i)any amendment to the number of Shares specified in Section 6.1;

(ii)any amendment to the limitations on Shares that may be reserved for issuance, or issued, to Insiders; or

(iii)any amendment that would reduce the exercise price of an outstanding Option other than pursuant to Section 6.3;

(iv)any amendment that would extend the expiry date of the Option Period in respect of any Option granted under this Plan except as expressly contemplated in Section 3.4; and,

(v)to the extent necessary and desirable to comply with applicable law or the rules of the Exchange.

If this Plan is terminated, the provisions of this Plan and any administrative guidelines and other rules and regulations adopted by the Board and in force on the date of termination will continue in effect as long as any Award or any rights pursuant thereto remain outstanding and, notwithstanding the termination of this Plan, the Board shall remain able to make such amendments to this Plan or the Award as they would have been entitled to make if this Plan were still in effect.

6.9No Representation or Warranty

The Company makes no representation or warranty as to the future market value of any Shares issued in accordance with the provisions of this Plan.

6.10Section 409A

It is intended that any payments under the Plan to U.S. Taxpayers shall be exempt from or comply with Section 409A of the Code, and all provisions of the Plan shall be construed and interpreted in a manner consistent with the requirements for avoiding taxes and penalties under Section 409A of the Code. Amendment, substitution, or termination, as permitted under the Plan, of Awards of U.S. Taxpayers will be undertaken in a manner to avoid adverse tax consequences under Section 409A of the Code. Notwithstanding the foregoing, the Company makes no assurance that Awards will satisfy the requirements of Section 409A of the Code. Participants remain solely liable for all taxes, penalties and interest that may arise as a result of the grant, exercise, vesting or settlement of Awards under the Plan.

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6.11Compliance with U.S. Securities Laws

The Board shall not grant any Awards that may be denominated or redeemed in Shares to residents of the U.S. unless such Awards and the Shares issuable upon exercise or redemption thereof are registered under the U.S. Securities Act or are issued in compliance with an available exemption from the registration requirements of the U.S. Securities Act.

6.12Compliance with Applicable Law, etc.

If any provision of this Plan or any agreement entered into pursuant to this Plan contravenes any legal or regulatory requirements relating to the administration of equity-based awards, including but not limited to any order, policy, by-law, or regulation of any regulatory body, any stock exchange or quotation system on which securities of the Company are listed or quoted, or the applicable laws of any country or jurisdiction where Awards are, or will be, granted under the Plan, then such provision shall be deemed to be amended to the extent required to bring such provision into compliance therewith.

6.13[INTENTIONALLY OMITTED.]

6.14Term of the Plan

This Plan shall be in effect upon the adoption by the Board of Directors and remain in effect until the tenth (10th) anniversary of the date the Board approves and adopts this Plan, unless terminated earlier by the Board. This Plan and all Awards issued hereunder will terminate immediately without any further action if the stockholder resolution required to trigger the Effective Date is not approved by the stockholders or if the Exchange determines not to approve this Plan.

7.ADMINISTRATION OF THIS PLAN

7.1Administration by the Committee

(a)Unless otherwise determined by the Board or set out herein, this Plan shall be administered by the Board’s Compensation Committee (the “Committee”) appointed by the Board and constituted in accordance with such Committee’s charter.

(b)The Committee shall have the power, where consistent with the general purpose and intent of this Plan and subject to the specific provisions of this Plan, to:

(i)adopt and amend rules and regulations relating to the administration of this Plan and make all other determinations necessary or desirable for the administration of this Plan. The interpretation and construction of the provisions of this Plan and related agreements by the Committee shall be final and conclusive. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any related agreement in the manner and to the extent it shall deem expedient to carry this Plan into effect and it shall be the sole and final judge of such expediency; and

(ii)otherwise exercise the powers delegated to the Committee by the Board and under this Plan as set forth herein.

7.2Board Role

(a)The Board, on the recommendation of the Committee, shall determine and designate from time to time the individuals to whom Awards shall be made, the amounts of the Awards and the other terms and conditions of the Awards.

(b)The Board may delegate any of its responsibilities or powers under this Plan to the Committee, provided that the grant of all Awards under this Plan shall be subject to the approval of the Board. No Award shall be exercisable in whole or in part unless and until such approval is obtained.

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(c)In the event the Committee is unable or unwilling to act in respect of a matter involving this Plan, the Board shall fulfill the role of the Committee provided for herein.

***

IN WITNESS WHEREOF, the undersigned authorized officer of ToughBuilt Industries, Inc. hereby certifies as of the date below that this ToughBuilt Industries, Inc. 2022 Equity Incentive Plan was duly adopted by the Company’s Board of Directors on _________________, 2022 and the stockholders of the Company on _____________, 2022.

Name:
Title:
Date:

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