SOURCE: HIT Technologies Inc.

HIT Technologies Inc.

November 29, 2016 08:00 ET

HIT Technologies Reports First Quarter Fiscal 2017 Results

Launches the HITCASE SHIELD and delivers operating expense reduction of 57%

VANCOUVER, BC--(Marketwired - November 29, 2016) - HIT Technologies Inc. (TSX VENTURE: HIT) ("HIT" or the "Company"), which designs, develops, manufactures and distributes the world's most advanced adventure products for iPhone, today reported its first quarter (Q1 F2017) financial and operating results for the quarter ended September 30, 2016, prepared in accordance with International Financial Reporting Standards (IFRS). All results are reported in Canadian dollars unless otherwise stated.

Selected Quarter and Annual Information

            
  Q1 Fiscal 2017 Q1 Fiscal 2016 September 30, 2016 June 30, 2016
Revenue $213,037  $406,751      
 % Increase over Prior Year (48%) 47%     
Gross Margin $66,233  $66,184      
 Gross Margin % 31% 16%     
Operating Expenses $437,575  $1,029,421      
(excluding non-cash and cost of sales) (57%) 223%     
 % change over Prior Year           
Adjusted EBITDA (Loss) (376,416) (962,714)     
 % change over Prior Year (61%) 247%     
Net (Loss) ($469,549) ($1,108,486)     
 Per share, Basic ($0.01) ($0.03)     
            
            
Cash and Cash Equivalents       125,773  368,018
Inventory       449,669  471,436
Net Working       (73,507) 328,939
 Capital/(Deficiency)           
Total Assets       1,246,766  1,663,854
Liabilities       871,303  861,156
            

"We are pleased with our progress towards our short-term goal of decreasing costs and long-term goals of both of broadening our product offerings and market penetration," said CEO Brooks Bergreen. "We have extended our product line into large new markets and continue to innovate by launching HITCASE SHIELD, the world's thinnest fully waterproof iPhone case. The SHIELD has already had a number of great industry reviews, and is launching in over sixty Best Buy Canada stores and other retailers starting in December 2016. We are excited about the prospects for this new category."

Continued Mr. Bergreen, "Our focus on innovation has also brought enhancements to our flagship HITCASE PRO and has also led to a faster development cycle (SHIELD for iPhone 7 was first to market among the competition after the iPhone 7 release). This has also enabled us to realize cost savings that have seen our gross margin percentage nearly double from Q1 last year. While the redesigned iPhone 7 launch delayed orders as retailers took a "wait and see" approach this year, which resulted in a year-on-year decline in sales, with our operating costs in check, a solid supply of finished inventory and more iPhone 7 products launching in January 2017, we are well poised to deliver growth with healthy margins in 2H F2017 as our retailers get back in full swing."

First Quarter Fiscal 2017 Financial and Operational Summary

* In July of Q1, the Company launched its new SHIELD case. The SHIELD is a thin, aluminum waterproof case for the iPhone 6/6s and iPhone 6plus/6splus, which extends the HITCASE brand into the everyday protective case market. The SHIELD's aluminum casing and unique HITCASE Shockseal provides shockproof and underwater protection to depths of 10 feet. SHIELD is thin, has a transparent back and comes in the colours of the iPhone, which is unique to the accessories market. Independent reviews of the SHIELD have been overwhelmingly positive and we are encouraged about the opportunity with this product. The SHIELD for iPhone 7 launched in Q2 fiscal 2017 and will begin shipping to retail stores in December 2016;

* Generated sales of $213,037 in Q1 F2017, down 48% from $406,751 in Q1 Fiscal 2016. The decline was primarily due to retailers and distributors awaiting launch of the iPhone 7 and subsequent launch of HITCASE offerings for iPhone 7 before refreshing their inventory. In addition, the prior year included the official launch of HITCASE PRO-6, which included a significant pre-order backlog from prior quarters, along with increased marketing spend and promotional discounts. As a result, the decline in sales was offset by gross margin gains and operating cost savings;

* Gross margin of $66,233 in Q1 F2017 was unchanged from Q1 last year despite the decline in sales as the gross margin percent increased to 31% compared to 16% last year;

* During the quarter, the Company further reduced operating expenditures (excluding non-cash items and cost of sales) to $437,575, a 57% reduction from Q1 F2016 and a 19% sequential reduction compared to Q4 F2016 levels. The Company continues to look for additional opportunities to realize further reductions while maintaining its ability to increase sales and distribution channels;

* Reported an Adjusted EBITDA loss of $376,416 for Q1 F2017, a 61% reduction from $962,714 in Q1 F2016;

* Closed the quarter with working capital deficiency of $73,507 including cash and cash equivalents of $125,773 and inventory of $449,668 at September 30, 2016;

* Subsequent to the quarter end, the Company completed private placements of secured convertible debentures and common shares for gross proceeds of $465,000.

Company Outlook
The Company expects its full lineup of iPhone 7 offerings to be available by January 2017, and expects retail and distribution sales to return to growth in 2H F2017 as refresh orders are placed. In addition, HIT expects the newly launched SHIELD to bring new retailers due to the mainstream market it addresses. HITCASE Shield for iPhone 7 was launched in November 2017 and the HITCASE PRO for iPhone 7 is expected to launch in January 2017.

The Company intends to continue managing operating expenses to balance current revenue and growth opportunities.

Non-IFRS Measures
Adjusted EBITDA is a non-IFRS measure and management defines this metric as the loss and comprehensive loss under IFRS, adjusted by adding back interest, taxes, amortization, and other non-cash expenses. Please review the reconciliation of Adjusted EBITDA to net income (loss) in the Company's MD&A for the corresponding period.

This press release should be read in conjunction with our unaudited interim Consolidated Financial Statements for the three months ended September 30, 2016 and the accompanying Management Discussion and Analysis, which can be found on SEDAR at www.sedar.com and on the Company's website http://www.hitcase.com/invest.

Forward Looking Statements
This news release contains certain "forward-looking information" within the meaning of applicable Canadian securities laws that are based on expectations, estimates and projections as at the date of this news release. The information in this release about the Company's anticipated use of available funds, and the future plans and objectives of the Company are forward-looking information.

Any statements that involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking information and are intended to identify forward-looking information.

This forward-looking information is based on reasonable assumptions and estimates of management of the Company at the time it was made, and involves known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. Such factors include, among others, global economic climate; dilution; the Company's limited operating history; future capital needs and uncertainty of additional financing; the competitive nature of the industry; currency exchange risks; the need for the Company to manage its planned growth and expansion; the effects of product development and need for continued technology change; protection of proprietary rights; the effect of government regulation and compliance on the Company and the industry; network security risks; the ability of the Company to maintain properly working systems; theft and risk of physical harm to personnel; reliance on key personnel; global economic and financial market deterioration impeding access to capital or increasing the cost of capital; and volatile securities markets impacting security pricing unrelated to operating performance. Although the Company has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. The Company undertakes no obligation to revise or update any forward-looking information other than as required by law.

About HIT Technologies Inc.
HIT Technologies, Inc. (TSX VENTURE: HIT) develops and markets a portfolio of products that transform Apple iPhones into high-performing, weather- and shock-resistant video cameras. Both its, flagship product, HITCASE PRO and its newer SNAP allows users to easily capture action photo and video content hands-free, using a variety of HIT Technologies' patented Railslide™ mounts that attach to virtually any surface. Swappable lenses and accessories provide a variety of perspectives otherwise unattainable while participating in adventure sports. HIT Technologies is headquartered in Vancouver, British Columbia, Canada and trades on the TSX Venture Exchange. For more information about HITCASE, visit www.HITCASE.com. Search #hitcase on Instagram to see some of the amazing images created by HITCASE customers.

Cautionary Statement
No stock exchange, securities commission or other regulatory authority has approved or disapproved the information contained herein. Neither the TSX-V nor its Regulation Services Provider (as that term is defined in the policies of the TSX-V) accepts responsibility for the adequacy of this release.

   
Hit Technologies Inc. (Formerly Friday Capital Inc.)  
Statements of Financial Position  
(Unaudited)  
(Expressed in Canadian dollars)  
          
   As at   As at  
   September 30,   June 30,  
   2016   2016  
          
Assets         
          
Current assets         
Cash  113,266   355,607  
Restricted cash  12,507   12,412  
Accounts receivable  28,868   40,355  
Other Receivables  1,684   23,217  
Government assistance and other receivables      65,887  
Inventory  449,668   471,436  
Prepaid expenses and deposits  163,231   190,768  
   769,224   1,159,682  
          
Property and equipment  253,520   290,114  
          
Intangible assets  224,022   214,058  
          
   1,246,766   1,663,854  
          
Liabilities         
          
Current liabilities         
Accounts payable and accrued liabilities  761,853   760,730  
Deferred revenue  73,597   62,786  
Current portion of lease liability  7,281   7,227  
          
   842,731   830,743  
          
Lease liability  28,572   30,413  
          
Shareholders' Equity         
          
Share capital  9,865,699   9,865,699  
Contributed surplus  880,625   838,311  
Deficit  (10,370,861 ) (9,901,312 )
          
   375,463   802,698  
          
   1,246,766   1,663,854  
       
 
Hit Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Operations and Comprehensive Loss
For the quarter ended September 30, 2016 & 2015
(Unaudited)
(Expressed in Canadian dollars)
       
       
       
   Quarter ended September 30
   2016  2015
          
Revenue  213,037   406,751  
Cost of sales  146,804   340,566  
          
   66,233   66,184  
Expenses         
Depreciation  50,819   53,346  
Share based compensation  42,314   92,426  
General and administrative  262,807   464,620  
Research and development  22,236   88,389  
Selling and marketing  152,532   476,411  
   530,708   1,175,193  
          
          
Loss before other income (expenses)  (464,475 ) (1,109,008 )
          
Other income (expenses)         
Finance costs  (2,302 ) (1,104 )
Foreign exchange loss  (2,772 ) 1,626  
   (5,073 ) 523  
          
          
Loss and comprehensive loss for the period  (469,549 ) (1,108,486 )
          
Basic and diluted loss per share  (0.01 ) (0.03 )
          
Weighted average shares outstanding  67,369,589   42,769,589  
          
             
Hit Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Changes in Shareholders' Equity/(Deficiency)
(Unaudited)
(Expressed in Canadian dollars)
             
   Share capital      
            
   Number  Amount Contributed Surplus DeficitTotal Shareholders' equity/(deficit)
   of shares  $ $ $ $
                
Balance - June 30, 2015  42,769,589  9,158,838 349,918 (6,643,364 )2,865,392  
                
 Loss for the period         (1,108,486 )(1,108,486 )
                
 Share based compensation expense       92,426    92,426  
                
Balance - September 30, 2015  42,769,589  9,158,838 442,344 (7,751,850 )1,849,332  
                
                
Balance - June 30, 2016  67,369,589  9,865,699 838,311 (9,901,312 )802,698  
                
 Loss for the period         (469,549 )(469,549 )
                
 Share based compensation expense       42,314    42,314  
                
Balance - September 30, 2016  67,369,589  9,865,699 880,625 (10,370,861 )375,463  
          
    
Hit Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Cashflow
Quarters ended September 30, 2016 & 2015
(Unaudited)
(Expressed in Canadian dollars)
  Quarter ended September 30
       
   2016  2015
          
Cash flows from/(used in) operating activities         
Loss for the period  (469,549 ) (1,108,486 )
Item not involving cash - depreciation  50,819   53,346  
Share based compensation  42,314   92,426  
Changes in non-cash working capital items         
Accounts receivable  11,487   14,218  
Other reveivable  21,533      
Government assistance and other receivable  65,887   (24,295 )
Inventory  21,768   (199,487 )
Accounts payable and accrued liabilities  1,123   (203,450 )
Deferred revenue  10,811   (79,927 )
Prepaid expenses and deposits  27,537   20,085  
          
   (216,269 ) (1,435,569 )
          
          
Cash flows from/(used in) investing activities         
Restricted cash  (95 ) (34,088 )
Acquisition of property and equipment  (12,615 ) (46,811 )
Acquisition of intangible assets  (11,575 ) (13,560 )
   (24,285 ) (94,459 )
          
          
Cash flows from/(used in) financing activities         
Lease liability  (1,787 ) (1,734 )
   (1,787 ) (1,734 )
          
Increase in cash  (242,341 ) (1,531,762 )
          
Cash - Beginning of period  355,607   2,789,135  
          
Cash - End of period  113,266   1,257,373  
       

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