SOURCE: HIT Technologies Inc.

HIT Technologies Inc.

October 28, 2016 18:37 ET

HIT Technologies Reports Fourth Quarter Fiscal 2016 Results

Delivers Q4 Sales growth of 96% and operating expense reduction of 51%

VANCOUVER, BC--(Marketwired - October 28, 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 fourth quarter (Q4 F2016) and annual (F2016) fiscal 2016 financial and operating results for the quarter and year ended June 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

                 
  Q4-Fiscal 2016  Q4-Fiscal 2015  Fiscal 2016  Fiscal 2015 
Revenue % Increase over Prior Year $262,897 96% $134,115  $1,720,128 68% $1,024,956 
Gross Margin Gross Margin %  37%  (10)%  32%  18%
Operating Expenses (excluding non-cash and cost of sales)  544,964   1,101,806   3,348,563   3,184,633 
Adjusted EBITDA (Loss)  (453,262)   (1,125,906)   (2,797,671)   (3,026,540) 
Net (Loss) Per share, Basic $0.01  $0.10  $0.07  $0.19 
                 
Cash and Cash Equivalents          368,018   2,919,781 
Inventory          471,435   314,854 
Net Working Capital/(Deficiency)          328,937   2,374,934 
Total Assets          1,663,852   4,038,677 
Liabilities          830,743   1,135,642 
                 

"We are pleased with our Q4 and annual sales momentum and progress against our strategic plan," said Brooks Bergreen, CEO of HIT Technologies. "Q4 HITCASE sales were up 162% year over year, more than offsetting declining sales of legacy products, which resulted in an overall increase in sales of 96%. Gross margins for both Q4 and the year were strong. In addition, due to the foundation we laid previously and the momentum the business generated this year we significantly reduced operating costs. The majority of our sales were driven by our online marketing activities and our ability to convert our fan base into purchasers resulted in HITCASE products making up 94% of total revenues. These conversions were complemented by repeat business from our boutique retailers."

Bergreen continued: "With our increased product offerings, we are starting to see our suite of HITCASE products start appealing to the mass market and demonstrate the continued sales growth this market can translate into. Overwhelmingly, we continue to garner positive feedback on our products which underscore the competitive advantages of our offering. In addition, the launch of iPhone 7 and the anticipation for our new offerings for it, we have seen an increase in interest from and opportunity with customers, retailers and distributors which we are now working toward converting to new revenue growth. However, as many distributors are waiting for the availability of HITCASE offerings for iPhone 7 before placing orders, we are expecting Q1-F2017 and Q2-F2017 sales to lag before returning to growth in Q3-F2017 and Q4-F2017. Earlier in the year, to improve our cash position, we completed a non-brokered private placement raising gross proceeds of $1,180,000. In addition, we reduced our workforce during the latter half of our fiscal year without impacting our ability to generate revenue. These changes allowed us to reduce salaries across the Company and significantly lower overall cash operating expenses. Between Q2 and Q3 operating expenses declined by 32% and a further 24% in Q4."

Fourth Quarter Fiscal 2016 Financial and Operational Highlights

  • HITCASE product sales, excluding legacy products, increased 162% compared to the corresponding quarter last year and increased 178% for the year.
  • Generated sales of $262,897 in Q4 F2016, up 96% from $134,412 in Q4 Fiscal 2015, reflecting HITCASE PRO-6, SNAP and accessories sales, products that were not available in Q4 2015. Due to seasonality, as expected Q4 sales were lower than our Q3 F2016 sales;
  • Gross margin for Q4 was 37% compared to (10)% in the corresponding quarter in the prior year and 32% for the year compared to 18% in the prior year;
  • During Q4 the Company scaled back its work force and reduced operating expenditures (excluding non-cash items and cost of sales) by 24% compared to Q3-F2016 levels. The Company continues to look for additional opportunities to realize further reductions;
  • Reported an Adjusted EBITDA loss of $453,262 for Q4 F2016, a 60% reduction from the loss of $1,125,906 in Q4 F2015;
  • Closed the quarter with working capital of $328,937 including cash and cash equivalents of $355,606 and inventory of $471,435 at June 30, 2016;
  • The Company completed a private placement in May 2016 raising gross proceeds of $1,180,000;
  • As part of Discovery Channel's Shark Week, an iPhone 6 equipped with a HITCASE PRO 6 was successfully used to livestream a shark dive off the coast of Florida. The livestream generated 80,000 comments, 4,500 shares and 6.4 million impressions over 2 days.
  • Subsequent to the Quarter end, the Company launched its new SHIELD case. The SHIELD is a thin, aluminum 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. The SHIELD for iPhone 7 is expected to launch in Q2 fiscal 2017.

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 Consolidated Financial Statements for the three and nine months ended March 31, 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
   June 30,  June 30,
   2016  2015
       
Assets      
       
Current assets      
Cash  355,605  2,789,135
Restricted cash  12,412  130,646
Accounts receivable  40,355  32,320
Other Receivables  23,217  44,917
Government assistance and other receivables  65,887  143,352
Inventory  471,435  314,854
Prepaid expenses and deposits  190,768  55,351
   1,159,679  3,510,575
       
Property and equipment  290,114  396,598
       
Intangible assets  214,058  131,504
       
   1,663,852  4,038,677
       
Liabilities      
       
Current liabilities      
Accounts payable and accrued liabilities  760,730  1,013,283
Deferred revenue  62,785  115,344
Current portion of lease liability  7,227  7,015
       
   830,743  1,135,642
       
Lease liability  30,413  37,643
       
Shareholders' Equity      
       
Share capital  9,865,699  9,158,838
Contributed surplus  838,311  349,918
Deficit  (9,901,314)  (6,643,364)
       
   802,697  2,865,392
       
   1,663,852  4,038,677
       
           
Hit Technologies Inc. (Formerly Friday Capital Inc.)           
Statements of Operations and Comprehensive Loss           
For the quarter and year ended June 30, 2016 & 2015           
(Unaudited)             
(Expressed in Canadian dollars)             
                  
                  
                  
   Quarter ended June 30   Year ended June 30  
   2016   2015   2016   2015  
                  
Revenue  262,897   134,115   1,720,128   1,024,956  
Cost of sales  164,577   147,484   1,168,795   839,391  
                  
   98,320   (13,368 ) 551,333   185,565  
Expenses                 
Depreciation  49,112   51,892   207,506   90,821  
Share based compensation  30,770   88,508   252,773   328,918  
General and administrative  286,286   295,553   1,683,140   1,329,754  
Loss on write off of equipment      48,054       48,054  
Research and development  101,753   116,315   326,381   317,851  
Selling and marketing  156,925   689,937   1,339,042   1,537,028  
   624,845   1,290,259   3,808,842   3,652,426  
                  
                  
Loss before other income (expenses)  (526,525 ) (1,303,627 ) (3,257,509 ) (3,466,861 )
                  
Other income (expenses)                 
Reverse takeover listing expense      (2,005,174 )     (2,005,174 )
Finance costs  (2,867 ) (4,414 ) (7,241 ) (12,502 )
Foreign exchange loss  (3,752 ) (6,318 ) 6,801   (14,970 )
   (6,619 ) (2,015,906 ) (441 ) (2,032,646 )
                  
                  
Loss and comprehensive loss for the period  (533,144 ) (3,319,534 ) (3,257,950 ) (5,499,507 )
                  
Basic and diluted loss per share  (0.01 ) (0.10 ) (0.07 ) (0.19 )
                  
Weighted average shares outstanding  55,745,413   33,420,396   46,004,658   28,540,144  
                  
 
Hit Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Changes in Shareholders' Equity/(Deficiency)
(Unaudited)
(Expressed in Canadian dollars)
                   
                   
                Share capital            
                   
                   
   Number  Amount  Subscription receipts  Contributed Surplus  Deficit  Total Shareholders' equity/(deficit)
   of shares  $  $  $  $  $
                   
Balance - June 30, 2013  70,000  200,035        (274,881)  (74,846)
                   
Shares issued pursuant to set off agreement  57,460  328,352           328,352
                   
Share split  22,672,540  -            
                   
Shares issued for cash  1,200,000  120           120
                   
Loss for the year  -  -        (868,976)  (868,976)
                   
Balance - June 30, 2014  24,000,000  528,507        (1,143,857)  (615,350)
                   
Shares issued for cash  200,000  50,000           50,000
                   
Shares issued pursuant to offset agreement  2,000,000  500,000           500,000
                   
Conversion of convertible notes to Class A Common shares (net of expenses)  4,374,990  1,370,001           1,370,001
                   
Issuance of subscription receipts (net)        4,864,713        4,864,713
                   
Exchange of Subscription receipts to Class A Common shares(net)  8,861,266  4,864,713  (4,864,713)        -
                   
Issuance of shares on reverse take over  3,333,333  1,845,617           1,845,617
                   
Share based compensation expense           328,918     328,918
                   
Warrants issued on reverse take over           21,000     21,000
                   
Loss for the year              (5,499,507)  (5,499,507)
                   
Balance - July 1,
2015
 42,769,589  9,158,838     349,918  (6,643,364)  2,865,392
                   
Share based compensation expense           252,773  -  252,773
                   
Loss for the period              (3,257,950)  (3,257,950)
                   
Shares issued towards financial advisory fee  1,000,000              -
                   
Private placement Units issued for cash, net of expenses of $373,919  23,600,000  706,861     235,620     942,481
                   
                   
                   
Balance - June 30, 2016  67,369,589  9,865,699     838,311  (9,901,314)  802,696
                   
  
Hit Technologies Inc. (Formerly Friday Capital Inc.)  
Statements of Cashflow  
Quarters and year ended June 30, 2016 & 2015  
(Unaudited)  
(Expressed in Canadian dollars)  
       
  Quarter ended June 30  Year ended June 30 
                  
   2016   2015   2016   2015  
                  
                  
Cash flows from/(used in) operating activities                 
Loss for the period  (533,144 ) (3,319,536 ) (3,257,950 ) (5,499,507 )
Item not involving cash - depreciation  49,112   51,892   207,506   90,821  
Interest expense      4,414       12,493  
Share based compensation  30,770   88,508   252,773   328,918  
Loss on write down of assets      48,054       48,054  
Reversed takeover listing expense      2,005,174       2,005,174  
Changes in non-cash working capital items                 
Accounts receivable  140,506   (14,835 ) (8,035 ) 2,450  
Other reveivable      (16,423 ) 21,700   (44,917 )
Government assistance and other receivable  173,208   (143,352 ) 77,465   (77,330 )
Inventory  112,926   (122,183 ) (156,581 ) (222,973 )
Accounts payable and accrued liabilities  (427,285 ) 284,742   (252,340 ) 141,863  
Deferred revenue  (30,771 ) 99,223   (52,559 ) 105,014  
Prepaid expenses and deposits  (171,956 ) 29,340   (135,417 ) (40,831 )
                  
   (656,635 ) (1,004,984 ) (3,303,439 ) (3,150,773 )
                  
                  
Cash flows from/(used in) investing activities                 
Restricted cash  41   (130,646 ) 118,234   (130,646 )
Cash acquired on acquistion      305,821       305,821  
Acquisition of property and equipment  (12,772 ) (160,485 ) (94,895 ) (292,838 )
Acquisition of intangible assets  (18,416 ) (9,419 ) (88,681 ) (52,731 )
   (31,147 ) 5,271   (65,341 ) (170,394 )
                  
                  
Cash flows from/(used in) financing activities                 
Advances (to)/from related parties      (95,821 )     (103,468 )
Interest paid      (4,414 )     (12,493 )
Lease liability  (1,828 )     (7,230 )    
Share capital issuance  942,481       942,481   50,000  
Net proceeds from convertible notes              1,370,001  
Net proceeds from subscription receipts      392,106       4,864,713  
Increase (decrease) in bank and other indebtedness              (99,893 )
   940,653   291,871   935,251   6,068,860  
                  
                  
Increase in cash  252,871   (707,842 ) (2,433,529 ) 2,747,693  
                  
Cash - Beginning of period  102,733   3,496,977   2,789,135   41,442  
                  
Cash - End of period  355,605   2,789,135   355,605   2,789,135  
                  

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