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iFabric Corp.

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iFabric Corp Reports Results for Its Second Quarter Ended March 31, 2019

Markham, Ontario--(Newsfile Corp. - May 14, 2019) - iFabric Corp. (TSX: IFA) ("iFabric" or the "Company"), today announced its financial results for its second quarter and six months ended March 31, 2019.

"Necessary steps have been taken to finalize the impact on areas of business we are no longer active in. In addition, there were significant one off expenditures that impacted the earnings and cash flow of the corporation this quarter. This included a successful defense of a patent infringement allegation against our best-selling bra. With these impediments behind us, and with growing commitments in all areas of the business, I believe we have positioned the company for an exciting future," concluded Hylton Karon.

Q2 2019 HIGHLIGHTS:

  • Revenues of $2,503,793 compared to $4,201,249 in Q2 2018, representing a decrease of $1,697,456 or 40%. Revenues in the Intimate Apparel division decreased by 60% or $2,025,725 to $1,339,797 from $3,365,522 in Q2 2018, whilst revenues in the Intelligent Fabrics division, increased by 36% or $290,654 to $1,100,783 from $810,129 in 2018. The decrease in Intimate Apparel revenue in Q2 2019 versus 2018 was primarily the result of the discontinuance of sleepwear products. This decrease was partially offset by increased revenues in the Intelligent Fabrics division during the second quarter of 2019 compared to 2019, mainly from initial performance apparel programs.
  • Net loss before tax of $514,732 in Q2 2019 compared to net earnings of $590,585 in 2018. The decrease in net earnings is largely attributable to decrease in revenue of $1,697,456 and a decrease in gross profit dollars of $1,162,103. The impact of these decreases was partially offset by lower share-based compensation costs as well as increased exchange gains in Q2 2019 versus Q2 2018.
  • Adjusted negative EBITDA of $456,076 compared to adjusted EBITDA of $707,527 in Q2 2018. This decrease was for the reasons discussed above.
  • Gross profit as a percentage of revenue was 37% in Q2 2019, compared to 50% in Q2 2018. The decrease in gross profit percentage is attributable to a numbers of factors, namely, a higher proportion of Intelligent Fabric segment sales at lower margins, in Q2 2019 versus Q2 2018, a packaging refresh in respect of the key products of the Intimate Apparel division, as well as incentives provided to a major customer of the Intelligent Fabrics division, in respect of initial finished performance apparel programs. Gross profit in dollars decreased by 55% or $1,162,103 to $934,811 in Q2 2019 compared to $2,096,914 in Q2 2018.
  • Net loss after tax attributable to shareholders was $386,487 ($0.015 per share basic and diluted) compared to net earnings attributable to shareholders of $371,076 in Q2 2018 ($0.014 per share basic and diluted).
  • Other comprehensive loss, being unrealized currency gains on the translation of foreign operations, amounted to $8,649 in Q2 2019, compared to other comprehensive earnings of $165,254 in Q2 2018. Total comprehensive loss amounted $395,593 in Q2 2019 compared to total comprehensive earnings of $535,314 in 2018.
  • Working capital decreased by $407,673 to $7,680,277 compared to $8,087,950 at the end of the previous quarter ended December 31, 2018,
  • Cash decreased by $763,945 to $2,649,274 compared to $3,413,219 at the end of the previous quarter ended December 31, 2018. Income tax payments and the loss for the quarter were the main factors contributing to the reduction in cash. The Company's bank operating line was unutilized as at March 31, 2019, leaving the full operating line of $3,750,000 available to fund operations.
  • Total liabilities at the end of Q2 2019 were $2,731,521 compared to $3,269,722 at the end of the previous quarter, representing a decrease of $538,201.
  • Shareholder Equity attributable to common shareholders was $9,899,650 compared to $10,275,966 at the end of the previous financial quarter representing a decrease of $376,316.

SIX MONTH HIGHLIGHTS:

  • Revenues decreased by $4,362,347 to $4,975,674 compared to $9,338,021 for the corresponding six months in 2018, representing a decrease of 47%. With respect to the reportable operating segments of the Company, revenue decreased by 61% or $4,201,198 in its Intimate Apparel division and revenue decreased by 8% or $198,763 in its Intelligent Fabrics division. As discussed above, the decrease in Intimate Apparel revenue which was mainly attributable to the discontinuance of sleepwear products. The lower revenues in the Intelligent Fabrics segment during the first six months of 2019 compared to 2018 was due to the absence of license revenue in 2019 compared to $320,000 received in 2018. The decrease was partially offset by revenues from new finished performance apparel programs.
  • Gross profit as a percentage of revenue decreased to 37% for the six months ended March 31, 2019 from 50% in the same period of 2018. The decrease in gross profit percentage is attributable to a numbers of factors, namely, a higher proportion of Intelligent Fabric division sales at lower margins, a packaging refresh in respect of the Intimate Apparel division's key products, as well as incentives provided to a major customer of the Intelligent Fabrics operating segment, in respect of initial finished performance apparel programs. Gross profit in dollars decreased by 61% or $2,867,688 to $1,816,419 for the year to date 2019 from $4,684,107 in the same period of 2018. The decrease in gross profit dollars was primarily caused by both the decrease in revenues and the decrease in gross margins.
  • Net loss attributable to iFabric's shareholders during the six months ended March 31, 2019 was $943,609 ($0.036 per share, basic and diluted) compared to net earnings attributable to shareholders of $1,321,556 for the six months ended March 31, 2018 ($0.051 per share, basic and $0.048 diluted). The reduction in earnings for the first two quarters of 2019 compared to 2018 is largely attributable to lower revenues, lower gross profit, and increased foreign exchange losses.
  • Other comprehensive earnings, being unrealized gains on the translation of foreign operations, amounted to $116,436 for the first six months of 2019 compared to $178,561 for the first six months of 2018. The total comprehensive loss amounted to $827,371 for the current six months compared to comprehensive earnings of $1,499,577 in 2018.

Hylton Karon provided the following update and outlook:

CORPORATE UPDATE & OUTLOOK:-

  • Following the first full year sales cycle of initial performance apparel programs at a major Canadian retailer, which exceeded budgeted sales by a wide margin, these programs have been renewed for 2019/20.
  • Our unique blending of technologies with our apparel manufacturing knowledge has excited an ever increasing range of customers. Both retailers and brands have increased their development requests. We believe this unique strategy will give rise to impressive growth in the years to come.
  • Clinical trials in respect of a combination of our Protx2 antimicrobial and RepelTX durable water repellant are being scheduled for late summer 2019, at one and potentially two major healthcare groups in the USA.
  • The US EPA (Environmental Protection Agency) registration for public health claims are anticipated around the same time the clinical trial results are published, before the end of calendar 2019. Together the results of the clinical trials and the EPA registration will serve as a powerful tools to expand our medical market business.
  • In response to customer demand, our technology team have added a class leading PFC (Perfluorocarbon) free version to our RepelTX DWR (durable water repellant) portfolio. Perfluorocarbons are extremely harmful to the environment and most major retailers and apparel manufacturers have announced their intention to move to PFC free repellants within the course of a few years, thus creating a large market opportunity for this technology. We will commence shipping this product before the end of calendar year 2019.
  • Launch of new products in the summer of 2019 in the core bra and accessories business, coupled with a packaging refresh, gives us confidence that this area of the business will resume being a profit contributor in the future.
  • We successfully defended a patent infringement allegation against our top selling bra. As a result of the outcome, we believe that additional sales opportunities exist for this product.

Complete Financial Statements are available on www.sedar.com

FINANCIAL HIGHLIGHTS

  Quarter Ended March 31 Six Months Ended March 31
  2019 2018      2019 2018
     $      $          $    $
Revenue 2,503,793 4,201,249 4,975,674 9,338,021
Income (loss) from operations (500,102) 660,362 (989,268) 1,887,693
Share based compensation (18,820) 44,494 (92,198) 89,977
Adjusted EBITDA *(Note) (456,076) 707,527 (969,311) 2,134,857
Net earnings (loss) before tax (514,732) 590,585 (1,141,886) 1,889,478
Net income (loss) after tax attributable to shareholders (386,487) 371,076 (943,609) 1,321,556
Other comprehensive earnings (loss) (8,649) 165,254 116,436 178,561
Total comprehensive earnings (loss) (395,593) 535,314 (827,371) 1,499,577
Net income (loss) per share - basic (0.015) 0.014 (0.036) 0.051
Net income (loss) per share - diluted (0.015) 0.014 (0.036) 0.048

 

*Note: Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and share based compensation.

ABOUT iFABRIC CORP:

Headquartered in Markham, Ontario, iFabric Corp www.ifabriccorp.com currently has 26.2 million shares issued and outstanding. Through its wholly-owned subsidiaries, Intelligent Fabric Technologies (North America) Inc. ("IFTNA") and Coconut Grove Pads Inc. ("Coconut Grove"), the Company offers a variety of products and services in both of its strategic divisions:

IFTNA is focused on performance apparel as well as proprietary chemical formulations that render fabrics, foams, plastics and numerous other surfaces intelligent, thereby improving the safety and well-being of the consumer.

Coconut Grove, operating as Coconut Grove Intimates, is a designer, manufacturer, distributor, licensor and licensee of ladies intimate apparel products and accessories.

FORWARD LOOKING STATEMENTS:

Forward-looking statements provide an opinion as to the effect of certain events and trends on the business. Certain statements contained in this news release constitute forward looking statements. The use of any words such as "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe" and similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on current expectations and various estimates, factors and assumptions and involve known and unknown risks, uncertainties and other factors. Forward-looking information includes, but is not limited to, statements with respect to the development potential of the Company's products.

Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Readers are cautioned not to place undue reliance on these statements as the Company's actual results, performance, or achievements may differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements if known or unknown risks, uncertainties or other factors affect the Company's business, or if the Company's estimates or assumptions prove inaccurate. Therefore, the Company cannot provide any assurance that forward-looking statements will materialize. The Company assumes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or any other reason except as required by applicable securities laws.

Any financial outlook or future oriented financial information in this news release, as defined by applicable securities legislation, has been approved by management of iFabric. Such financial outlook or future oriented financial information is provided for the purpose of providing information about management's reasonable expectations as to the anticipated results of its proposed business activities. Readers are cautioned that reliance on such information may not be appropriate for other purposes. The forward-looking statements contained in this press release are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise, unless so required by applicable securities laws.

FOR FURTHER INFORMATION, please contact:

Hilton Price, CFO
Tel: 647.465.6161
Email: hilton.price@rogers.com

Gary Perkins - Investor Relations
Tel: 416.882.0020
Email: garyperkins@rogers.com

Jean-François Dubé (Québec) - Investor Relations
Tel: 514.233.9551
Email: jfdube@mac.com

Website: www.ifabriccorp.com

Neither the TSX nor its Regulations Services Provider (as that term is defined in the policies of the TSX) accepts responsibility for the adequacy or accuracy of this press release.

To view the source version of this press release, please visit https://www.newsfilecorp.com/release/44756

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