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Financial Position Remains Solid
MARKHAM, ON / ACCESSWIRE / June 9, 2020 / iFabric Corp. ("iFabric" or the "Company") (IFA.TO), today announced its financial results for its second quarter and six months ended March 31, 2020.
"Whilst the current COVID-19 pandemic affected iFabric in both its divisions, I am pleased to report that we acted quickly to contain any major damage to our operations and to preserve our operating assets", said Hylton Karon, President and CEO of iFabric. "With our recent positive testing of the efficacy of our flagship technology, PROTX2, in deactivating the COVID-19 causing virus, we are in the fortunate position of having a great opportunity to grow our business and at the same time to provide a much needed additional level of protection for frontline healthcare workers as well as communities at large", concluded Hylton Karon.
EFFECT OF THE COVID-19 PANDEMIC ON OPERATIONS - QUARTER ENDED MARCH 31, 2020
During the second quarter of 2020, the spread of the Coronavirus (COVID-19) had an impact on the Company's operations at different time points during the quarter.
At the beginning of the quarter, during the early stages of the COVID-19 pandemic, the Intelligent Fabrics division saw an impact not only to its revenues, but to its supply chains as well, particularly in China, which was the first country to initiate a lockdown. Large finished performance apparel programs which had been planned for launch during the spring have been delayed and rescheduled to the summer and fall seasons. This decrease in sales was partially offset by the roll out of a new finished apparel program in Canada in January, for which product had already been received. Towards the end of the quarter in March, restrictions in Asia had been lifted and sales in the region commenced returning to normal, however this was partially offset by a decrease in sales in North America as the COVID-19 pandemic and subsequent lockdowns took effect in this region. Whilst the revenues of the Intelligent Fabrics division showed a year over year increase, this increase was not as large as anticipated due to the global effect of the COVID-19 pandemic.
In the Intimate Apparel division, a negative impact on revenues was seen in March, towards the end of the quarter, as North America moved into a lockdown phase. The bulk of the revenues for this division are to North American retail customers. As mandated by their respective governments, many retailers have been forced to close their stores, which is expected to continue for a number of months. It is anticipated that the larger impact to the revenues of the Intimate Apparel Division will be seen in the third quarter, until such time as retailers are allowed to commence reopening their stores.
In response to these events, the Company has developed a number of comprehensive and evolving operational and risk management strategies to support the business for a future rebound in sales, particularly in its Intelligent Fabrics division.
The management of iFabric is of the opinion that it has made adequate provision in the Interim Financial Statements for the quarter and six months ended March 31, 2020, for all potential impairment to the Company's assets as a result of the COVID-19 pandemic. These adjustments did not have a material impact on the financial position of IFabric as at March 31, 2020.
Q2 2020 HIGHLIGHTS:
Revenues of $2,252,090 compared $2,503,793 in Q2 2019, representing a decrease of $251,703 or 10%. Revenues in the Intimate Apparel division decreased by 27% or $356,495 to $983,302 from $1,339,797 in Q2 2019, whilst revenues in the Intelligent Fabrics division, increased by 12% or $135,924 to $1,236,707 from $1,100,783 in 2019.
Net loss before tax of $534,517 in Q2 2020 compared to a net loss of $514,732 in 2019. Reduced operating expenses were offset by an increase in the bad debt provision due to the COVID-19 pandemic.
Adjusted negative EBITDA of $482,353 compared to adjusted negative EBITDA of $456,076 in Q2 2019.
Gross profit as a percentage of revenue was 37% in both Q2 2020 and 2019. Gross profit in dollars decreased by 10% or $93,188 as a result of the decrease in revenue in Q1 2020 compared to 2019
Net loss after tax attributable to shareholders was $481,746 ($0.018 per share basic and diluted) compared to a net after tax loss of $386,487in Q2 2019 ($0.015 per share basic and diluted).
Other comprehensive earnings, being unrealized currency gains on the translation of foreign operations, amounted to $401,858 in Q2 2020, compared to other comprehensive losses of $8,649 in Q2 2019 resulting in an increase of $410,507 due to the weak Canadian dollar at the end of the quarter. Total comprehensive losses amounted $77,578 in Q2 2019 compared to $395,593 in 2019.
Working capital decreased by $86,156 to $6,663,977 compared to $6,750,133 at the end of the previous quarter ended December 31, 2019. The calculation of working capital excludes a term loan of $1,224,593, which is shown as a current liability as required under International Financial Reporting Standards, as management intends renewing this loan on maturity.
Cash decreased by $856,897 to $2,086,451 compared to $2,943,348 at the end of the previous quarter ended December 31, 2019, mainly as a result of deposits paid to suppliers in respect of new performance apparel programs for a major retail customer. The Company's credit line was unutilized at the end of the current and previous quarters, leaving the full amount of $3,750,000 available to fund future business.
Shareholder Equity attributable to common shareholders was $9,027,131 compared to $9,095,407 at the end of the previous financial quarter representing a decrease of $68,276.
SIX MONTH HIGHLIGHTS:
Revenues decreased by $126,743 to $4,848,931 compared to $4,975,674 for the corresponding six months in 2019, representing a decrease of 3%. With respect to the reportable operating segments of the Company, revenue decreased by 20% or $531,110 in its Intimate Apparel division from $2,644,118 in 2019 to $2,113,008 in 2020. The decrease in sales was as mainly as a result of the effects of the COVID-19 pandemic at the end of the second quarter. In the Intelligent Fabrics division revenue increased 19% or $429,016 from $2,242,742 in 2019 to $2,671,758 in 2020. Increased chemical sales and new performance apparel programs accounted for the increase.
Gross profit as a percentage of revenue increased to 40% for the six months ended March 31, 2020 from 37% in the same period of 2019. The increase in gross profit percentage is mainly attributable increased chemical margins in the Intelligent Fabrics division. Gross profit dollars increased by 6% or $117,423 to $1,933,842 for the year to date in 2020 from $1,816,419 in the same period of 2019.
Net loss attributable to iFabric's shareholders during the six months ended March 31, 2020 was $427,935 ($0.016 per share, basic and diluted), compared to a net loss attributable to shareholders of $943,609 ($0.036 per share, basic and diluted). The reduction in losses of $515,674 for the first two quarters of 2020 compared to 2019, is largely attributable to an increase in gross margin contribution, a reduction in selling, general and administrative costs as well as increased foreign exchange gains.
Other comprehensive earnings, being unrealized gains on the translation of foreign operations, amounted to $175,077 for the first six months of 2020 compared to $116,436 for the first six months of 2019. The total comprehensive loss amounted to $248,135 for the current six months compared to $827,371 in 2019.
Complete Financial Statements are available on www.sedar.com
Quarter Ended March 31
Six Months Ended March 31
Earnings (loss) from operations
Share based compensation
Adjusted EBITDA *(Note)
Net earnings (loss) after tax
Net earnings (loss) after tax attributable to shareholders
Other comprehensive earnings (loss)
Total comprehensive earnings (loss)
Net earnings (loss) per share
*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 26.3 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 finished 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
Gary Perkins - Investor Relations
Jean-François Dubé (Québec) - Investor Relations
SOURCE: iFabric Corp.
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