iFabric Corp.
TSX : IFA

August 11, 2016 08:30 ET

iFabric Corp Reports Third Quarter 2016 Results and Provides Operations Update and Outlook

MARKHAM, ONTARIO--(Marketwired - Aug. 11, 2016) - iFabric Corp. (TSX:IFA), hereinafter referred to as "iFabric" or the "Company", today announced its financial results for its third quarter and nine months ended June 30, 2016.

Q3 2016 HIGHLIGHTS:

  • Revenues of $2,999,317 compared to $3,700,502 in Q3 2015, a decrease of $701,185 or 19%. Revenues in the apparel division decreased by 23% or $806,595 to $2,662,904, primarily due to weak retail environments in the US and UK, increased end of season clearances, and unfavorable foreign currency fluctuations. Revenues in the intelligent fabrics division, increased by 51% or $104,439 to $310,813, primarily due to increased sales of antimicrobial products to major customers.
  • Operating loss of $87,247 compared to an operating profit of $624,683 during Q3 2015. The lower operating profit was mainly as a result of decreased sales in the Company's apparel division attributable to weak retail conditions in the USA and the UK.
  • Gross profit of $1,418,332 or 47% of sales compared to $2,167,728 or 59% in Q2 2015. The decrease in gross profit percentage was mainly due currency fluctuations and clearances of end of season merchandise at low margins in Q3 2016 compared to Q3 2015.
  • Net loss attributable to shareholders was $121,653 (or $0.005 per share basic and diluted) compared to net earnings attributable to shareholders of $206,806 in Q3 2015 (or $0.008 per share basic and diluted). The decrease in net earnings was mainly attributable to lower revenues and lower gross profit dollars as stated above.
  • Share based compensation costs in Q3 2016 were lower by $216,474 than in Q3 2015 as a result of previously issued stock options having fully vested.
  • Working capital amounted to $5,094,987 compared to $5,207,274 at March 31, 2016, a decrease of $112,287.
  • Shareholder equity attributable to shareholders was $7,568,805 down from $7,670,179 as at March 31, 2016.
  • Net operating bank debt was $734,879 compared to $503,925 as at March 31, 2016.
  • Long-term debt increased by $270,528 from $1,373,809 as at March 31, 2015 to $1,644,387 as at June 30, 2016. This increase in the Company's mortgage loan was used for extensive renovations to the company's premises to provide additional workspace for expansion as well as a more efficient work environment.

NINE MONTHS HIGHLIGHTS:

  • Revenues decreased by $594,030 to $9,400,354 compared to $9,994,384 for the corresponding nine months in 2015, representing a decrease of 6%. With respect to its two operating divisions, apparel revenues decreased by 10% or $946,962 while intelligent fabric revenues increased by 57% or $334,618.
  • Gross profit for the nine months ended June 30, 2106 was $4,704,993 (50% of sales) compared to $5,242,889 (52% of sales) for the same period in 2015.
  • The net loss attributable to shareholders for the nine months ended June 30, 2016 was $406,723 (or $0.016 per share basic and diluted) compared to earnings of $172,234 in the corresponding nine months of 2015 (or $0.007 per share basic and $0.006 diluted). The loss was mainly attributable to lower revenues, lower gross profit and foreign exchange losses as opposed to gains on foreign exchange in the corresponding period in 2015.

OPERATIONS UPDATE & OUTLOOK:

Hylton Karon, President and CEO of iFabric provided the following operations update for both strategic divisions:

Intelligent Fabrics

"Whilst we continued to see weakness in the retail apparel markets in the USA and UK in Q3 2016, there is a continued upward sales trend for the Intelligent Fabrics division. In fact, for the month of July 2016, record revenues of $573,000 were achieved by this division. I believe that the division remains on track to deliver chemical treatments for around 30 million yards of textiles in calendar 2016, as was previously announced by the Company, with the bulk of these sales to be recorded in the next two quarters ending September 30 and December 31, 2016 respectively," stated Mr. Hylton Karon, President and CEO.

"I am pleased to advise that in addition to its three core technologies, namely Protx2®, Dreamskin® and Enguard®, the Intelligent Fabrics division has also commenced marketing the following additional textile technologies, namely UVtx, FreshTx, DryTx and RepelTx. The Company's main objective in offering these additional formulations is to utilize them in combination with Protx2®, Dreamskin® and Enguard®, which results in unique products that provide a multiple of benefits to the user. The additional benefit to iFabric will be increased revenue from every sale involving a multiple of chemicals. Particularly in health care environments, the combination of water repellency and an antimicrobial allows for garments that repel liquids (for example, blood) and at the same time are able to kill bacteria. These combined attributes are optimal for the industry," added Mr. Karon.

"Notwithstanding the fact that EPA ("Environmental Protection Agency") regulatory efforts for enhanced claims continues to advance, products for the medical market have already been developed for certain medical customers and are expected to be in the market shortly," Mr. Karon further added.

Intimate Apparel

"Sales of Splendid® and Ella Moss® branded products across all market segments, including the Company's market segment, have been underperforming in recent months and on June 30, 2016, VF Corporation announced that it had signed a definitive agreement to sell its Contemporary Brands businesses (including its Splendid® and Ella Moss® brands) to Delta Galil Industries, Ltd. After much deliberation, on July 29, 2016, the Company decided not to renew its Splendid® and Ella Moss® license agreement and advised the licensor accordingly. With what the Company considered onerous and unrealistic requirements in terms of commitments to minimum sales and minimum royalties in order to renew the license agreement, the Company felt that the risks inherent in signing a new agreement with these terms were not acceptable.

Accordingly, with the exception of the clearing of end of season merchandise, marketing of Splendid® and Ella Moss® products will be discontinued at the end of calendar 2016. For the quarter ended June 30, 2016 sales of Splendid® and Ella Moss® branded product amounted to $475,000 or 16% of revenue compared to $980,000 or 26% of sales for the same quarter of 2015 representing a decrease of $505,000 or 51%. This decrease in sales was a major component of the decrease in revenue in Q3 2016 compared to Q3 2015 as discussed under the section "Revenues" above.

Given the high cost of product development and design, as well as margin and marketing support provided to major retailers for Splendid® and Ella Moss® programs, sales of Splendid® and Ella Moss® products do not currently provide a significant contribution to the earnings of iFabric. Accordingly, the discontinuance of Splendid® and Ella Moss® sales are not expected to have a material impact on future operations and earnings for the Intimate Apparel division. Instead, resources currently allocated to Splendid® and Ella Moss® brands will be reallocated to developing new products for and increasing sales of Maidenform® branded product, which enjoys a much higher level of market acceptance as well as a high level of marketing support from the Maidenform® licensor. By increasing its commitment to the Maidenform® brand and eliminating its underperforming brands, the Company anticipates that it will be able to replace future losses of Splendid® and Ella Moss® sales with increased Maidenform® sales at better margins, thus providing a more solid base from which to grow both sales and earnings. The initial season of the new Maidenform® sleepwear program will commence shipping at the end of Q4 2016.
Resources freed up from the discontinuance of Splendid® and Ella Moss® brands will be also be available to further expedite the marketing efforts of the Intelligent Fabrics division," concluded Mr. Karon.

ABOUT PROTX2™

PROTX2™provides long-term, effective control of microorganisms. Its efficacy and safety has been documented in numerous peer reviewed publications, trade articles and certified tests. It is durable to deterioration through repeated washing and is clinically proven to kill bacteria associated with hospital acquired infections. Medical facility uses for PROTX2™include bedding, curtaining, air filters, scrubs, masks, plastic components and most other surfaces.

ABOUT UVtx™

Textiles infused with UVtx™ provides apparel with a built in ultraviolet ("UV") light blocker. The UVtx™ formulation contains both UV reflecting and UV absorption elements, giving apparel treated with UVtx™ the ultraviolet protection factor ("UPF") strength of up to UPF 30. This allows the wearer of UVtx™ treated apparel to enjoy permanent sun protection without the need to apply sprays or lotions to the area covered by the garment. Testing has shown that UVtx treated textiles never lose efficacy.

ABOUT FreshTx™

FreshTx™ is a state of the art odour-absorbing technology, which is easily infused into textile products. FreshTx™ offers permanent protection against odours without the need to use sprays or perfumes. FreshTx™ uses naturally-occurring elements for effective results that are non-toxic and safe. Extremely durable, once applied, the properties of FreshTx™ are renewed with each wash, and are effective even when wet.

ABOUT DryTx™

DryTx™ moisture-wicking technology provides treated apparel with the ability to quickly draw moisture away from the skin and disperse perspiration across the fabric surface for faster evaporation.

An additional significant attribute of DryTx™ is its ability to be integrated into apparel in combination with the division's other product offerings, resulting in unique garments that provide superior performance characteristics for athletic apparel.

ABOUT RepelTX™

RepelTX™ is an environmentally friendly coating that is resistant to moisture. The RepelTX™ coating can be used on various surfaces including electronics and fabrics, which are then protected against water and moisture by simply treating them in a fluorinated solvent. The coating dries in just over one minute at room temperature, and it starts working immediately once set.

RepelTX™ offers the next generation in water repellency performance. RepelTX modifies fabric at the molecular level by permanently attaching hydrophobic 'hairs' to individual fibers that lift liquids, causing them to bead and roll right off the fabric surface. It features a hydrocarbon polymer which is both more ecologically friendly and economically smart compared to competing technologies. The result is a market leading performance, liquid repellency that is breathable, durable and fast drying.

Complete financial statements are available on www.sedar.com

FINANCIAL HIGHLIGHTS

FINANCIAL HIGHLIGHTS
Quarter Ended June 30 Nine Months Ended June 30
2016 2015 2016 2015
$ $ $ $
Revenue 2,999,317 3,700,502 9,400,354 9,994,384
Income (loss) from operations (87,247 ) 624,683 (243,584 ) 652,045
Share based compensation 16,280 232,754 101,943 442,130
EBITDA (80,139 ) 449,460 (318,222 ) 653,993
Net income (loss) after tax (121,962 ) 208,761 (404,433 ) 176,254
Net income (loss) after tax attributable to shareholder (121,653 ) 206,806 (406,723 ) 172,234
Net income (loss) per share - basic (0.005 ) 0.008 (0.016 ) 0.007
Net income (loss) per share - dliuted (0.005 ) 0.008 (0.016 ) 0.006

ABOUT iFABRIC CORP:

Headquartered in Markham, Ontario, iFabric Corp www.ifabriccorp.com currently has 25.9 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 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, accessories and sleepwear.

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.

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.

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