Company registration number 12145664 (England and Wales)
TOUGHBUILT INDUSTRIES UK LIMITED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
PAGES FOR FILING WITH REGISTRAR
TOUGHBUILT INDUSTRIES UK LIMITED
CONTENTS
Page
Balance sheet
1
Notes to the financial statements
2 - 9
TOUGHBUILT INDUSTRIES UK LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2022
31 December 2022
- 1 -
2022
2021
as restated
Notes
$
$
$
$
Fixed assets
Tangible assets
4
485,037
231,339
Current assets
Stocks
6,480,796
4,189,348
Debtors
5
1,279,846
2,636,694
Cash at bank and in hand
111,871
1,100,220
7,872,513
7,926,262
Creditors: amounts falling due within one year
6
(12,561,584)
(9,638,945)
Net current liabilities
(4,689,071)
(1,712,683)
Net liabilities
(4,204,034)
(1,481,344)
Capital and reserves
Called up share capital
1
1
Profit and loss reserves
(4,204,035)
(1,481,345)
Total equity
(4,204,034)
(1,481,344)
The directors of the company have elected not to include a copy of the profit and loss account within the financial statements.true
These financial statements have been prepared and delivered in accordance with the provisions applicable to companies subject to the small companies regime.
The financial statements were approved by the board of directors and authorised for issue on 23 September 2024 and are signed on its behalf by:
Mr M Panosian
Director
Company registration number 12145664 (England and Wales)
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
- 2 -
1
Accounting policies
Company information
Toughbuilt Industries UK LImited is a private company limited by shares incorporated in England and Wales. The registered office is Memery Crystal, 165 Fleet Street, London, England, EC4A 2DY.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006 as applicable to companies subject to the small companies regime. The disclosure requirements of section 1A of FRS 102 have been applied other than where additional disclosure is required to show a true and fair view.
The financial statements are prepared in US Dollars $, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest $.
The financial statements have been prepared under the historical cost convention. The principal accounting policies adopted are set out below.
1.2
Going concern
These financial statements are prepared on the going concern basis. The directors have a reasonable expectation that the company will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the company's ability to continue as a going concern.
The company is dependent on continued support from its parent company Toughbuilt Industries Inc in order to meet its obligations. At the year end the parent company was owed $11,564,811. Whilst this debt is repayable on demand, the directors have received confirmation from the parent company that they will not take priority over the other creditors. On this basis, the directors consider it appropriate to prepare the financial statements on a going concern basis.
It is further noted that Toughbuilt Industries Inc shall disclose the fact that there is substantial doubt about the Company’s ability to continue as a going concern in its financial statements. The continuation of Toughbuilt Industries Inc as a going concern is dependent upon the continued financial support from its shareholders/investors, the ability of the Company to obtain necessary financing to continue operations and attainment of profitability.
1.3
Turnover
The principal activity of the company is that of marketing and distributing various home improvement and construction product lines for both the do-it-yourself and professional markets. The company's turnover is derived from this activity.
Turnover is recognised at the fair value of the consideration received or receivable for goods provided in the normal course of business, and is shown net of VAT and other sales related taxes. The fair value of consideration takes into account trade discounts, settlement discounts and volume rebates.
Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of the goods have passed to the buyer (usually on dispatch of the goods), the amount of revenue can be measured reliably, it is probable that the economic benefits associated with the transaction will flow to the entity and the costs incurred or to be incurred in respect of the transaction can be measured reliably.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 3 -
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives on the following bases:
Leasehold improvements
Over the term of the lease
Fixtures and fittings
25% Reducing balance basis
Computer equipment
33% Straight line basis
The gain or loss arising on the disposal of an asset is determined as the difference between the sale proceeds and the carrying value of the asset, and is credited or charged to profit or loss.
1.5
Impairment of fixed assets
At each reporting period end date, the company reviews the carrying amounts of its tangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the company estimates the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (or cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation decrease.
Recognised impairment losses are reversed if, and only if, the reasons for the impairment loss have ceased to apply. Where an impairment loss subsequently reverses, the carrying amount of the asset (or cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in profit or loss, unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.
1.6
Stocks
Stocks are stated at the lower of cost and estimated selling price less costs to complete and sell. Cost comprises direct materials and, where applicable, direct labour costs and those overheads that have been incurred in bringing the stocks to their present location and condition.
Stocks held for distribution at no or nominal consideration are measured at the lower of cost and replacement cost, adjusted where applicable for any loss of service potential.
At each reporting date, an assessment is made for impairment. Any excess of the carrying amount of stocks over its estimated selling price less costs to complete and sell is recognised as an impairment loss in profit or loss. Reversals of impairment losses are also recognised in profit or loss.
1.7
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 4 -
1.8
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from fellow group companies and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
1.9
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.10
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.11
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
1
Accounting policies
(Continued)
- 5 -
1.12
Leases
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
1.13
Foreign exchange
Transactions in currencies other than US Dollars $ are recorded at the rates of exchange prevailing at the dates of the transactions. At each reporting end date, monetary assets and liabilities that are denominated in foreign currencies are retranslated at the rates prevailing on the reporting end date. Gains and losses arising on translation in the period are included in profit or loss.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
In the directors' view, there are no significant judgements or estimates made.
3
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2022
2021
Number
Number
Total
26
18
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 6 -
4
Tangible fixed assets
Leasehold improvements
Fixtures and fittings
Computer equipment
Total
$
$
$
$
Cost
At 1 January 2022
251,914
22,773
274,687
Additions
310,412
36,294
25,411
372,117
At 31 December 2022
310,412
288,208
48,184
646,804
Depreciation and impairment
At 1 January 2022
33,982
9,366
43,348
Depreciation charged in the year
38,801
63,557
16,061
118,419
At 31 December 2022
38,801
97,539
25,427
161,767
Carrying amount
At 31 December 2022
271,611
190,669
22,757
485,037
At 31 December 2021
217,932
13,407
231,339
5
Debtors
2022
2021
Amounts falling due within one year:
$
$
Trade debtors
1,140,723
2,107,957
Other debtors
139,123
82,712
1,279,846
2,190,669
Deferred tax asset
446,025
1,279,846
2,636,694
6
Creditors: amounts falling due within one year
2022
2021
$
$
Trade creditors
451,644
276,543
Amounts owed to group undertakings
11,564,811
9,110,945
Taxation and social security
74,263
231,578
Other creditors
470,866
19,879
12,561,584
9,638,945
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 7 -
7
Audit report information
As the income statement has been omitted from the filing copy of the financial statements, the following information in relation to the audit report on the statutory financial statements is provided in accordance with s444(5B) of the Companies Act 2006:
The auditor's report was qualified and the auditor reported as follows:
Qualified opinion on financial statements
We have audited the financial statements of Toughbuilt Industries UK LImited (the 'company') for the year ended 31 December 2022 which comprise , the balance sheet and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion, except for the possible effects of the matter described in the Basis for qualified opinion section of our report, the financial statements:
give a true and fair view of the state of the company's affairs as at 31 December 2022 and of its loss for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for qualified opinion
We were not appointed as auditor of the company until after 31 December 2022 and thus did not observe the counting of physical stock at the end of the year. We were unable to satisfy ourselves by alternative means concerning the stock quantities held at 31 December 2022, which are included in the balance sheet at £6,480,796, by using other audit procedures. Consequently we were unable to determine whether any adjustment to this amount was necessary. In addition, the previous auditors were unable to physically verify the stock position at 31 December 2021 and were unable to satisfy ourselves by alternative means concerning the stock quantities of £4,189,348 held at 31 December 2021. Consequently we were unable to determine whether any adjustment to this amount at 31 December 2021 was necessary or whether there was any consequential effect on the cost of sales for the year ended 31 December 2022.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion.
Material uncertainty related to going concern
We draw attention to Note 1.2 in the financial statements, which indicates that the going concern of the company is reliant solely on the support of the parent company. As the parent company has expressed concerns over their ability to continue as a going concern, this may bring into question their ability to support the company. As stated in Note 1.2, these events or conditions, indicate that a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.
Senior Statutory Auditor:
V R Thayalan
Statutory Auditor:
Lawrence Grant LLP
Date of audit report:
24 September 2024
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
- 8 -
8
Operating lease commitments
Lessee
At the reporting end date the company had outstanding commitments for future minimum lease payments under non-cancellable operating leases, as follows:
2022
2021
$
$
749,617
9
Related party transactions
As at the year end date the company owed its parent company, Toughbuilt Industries, Inc, the sum of $11,564,811 (2021: $9,110,945).
During the year, the company purchased goods to the amount of $3,898,638 (2021: $5,932,592) from its parent company, Toughbuilt Industries, Inc.
10
Parent company
The immediate and ultimate parent company is Toughbuilt Industries, Inc, a company registered in the USA.
11
Prior period adjustment
Reconciliation of changes in equity
1 January
31 December
2021
2021
$
$
Adjustments to prior year
Foreign payroll tax creditor overstated
-
88,069
Equity as previously reported
(1,532,665)
(1,569,413)
Equity as adjusted
(1,532,665)
(1,481,344)
Analysis of the effect upon equity
Profit and loss reserves
-
88,069
Reconciliation of changes in (loss)/profit for the previous financial period
2021
$
Adjustments to prior year
Foreign payroll tax creditor overstated
88,069
Loss as previously reported
(36,748)
Profit as adjusted
51,321
TOUGHBUILT INDUSTRIES UK LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2022
11
Prior period adjustment
(Continued)
- 9 -
Notes to reconciliation
Foreign payroll tax creditor overstated
While performing our audit procedures on the opening balances, we became aware that the opening creditor for taxes and social security had been overstated in relation to foreign payroll taxes. To correct the position, a prior year adjustment was required to reduce the creditor and decrease the wages and salaries in the profit and loss account.