HIT Technologies Reports Second Quarter Fiscal 2017 Results
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New HITCASE SHIELD well received, while cost control continued at 54% reduction
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E-mailVANCOUVER, BC -- (Marketwired) -- 03/02/17 -- 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 second quarter (Q2 F2017) financial and operating results for the quarter and six months ended December 31, 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
----------------------------------------------------------------------------
Q2- Fiscal Q2-Fiscal 6 months to 6 months to
2017 2016 December 31, December 31,
2016 2015
----------------------------------------------------------------------------
Revenue $239,015 $684,731 $452,052 $1,091,482
% Increase over Prior Year -65% -59%
----------------------------------------------------------------------------
Gross Margin 40% 37% 37% 29%
Gross Margin %
----------------------------------------------------------------------------
Operating Expenses $485,801 $1,057,448 $923,376 $2,086,869
(excluding non-cash and -54% -61%
cost of sales)
% change over Prior Year
----------------------------------------------------------------------------
Adjusted EBITDA (Loss) $(408,416) $(818,949) $(784,832) $(1.781,662)
% change over Prior Year -50% -56%
----------------------------------------------------------------------------
Net (Loss) $(0.01) $(0.02) $(0.01) $0.05)
Per share, Basic
----------------------------------------------------------------------------
December 31, June 30,
2016 2016
----------------------------------------------------------------------------
Cash and Cash Equivalents $96,404 $368,018
----------------------------------------------------------------------------
Inventory $440,721 $471,436
----------------------------------------------------------------------------
Net Working $(39,695) $328,939
Capital/(Deficiency)
----------------------------------------------------------------------------
Total Assets $1,221,959 $1,663,854
----------------------------------------------------------------------------
Liabilities $1,169,747 $861,156
----------------------------------------------------------------------------
"We are pleased to report that despite our reduced spend levels, and the resulting decrease in current period sales, we have managed to create our finest offering yet with the new HITCASE SHIELD," said Brooks Bergreen, Chairman and CEO of HITCASE. "With our tighter budget, we are laser focused on producing the best cases on the planet, and on aligning our go-to-market strategy to give us the best chance of success once our entire iPhone 7 line-up is ready for prime time. We did a limited production run for our new SHIELD in December 2017 to test the market and we've already had a great response from customers and media -- one reviewer hailing that at last we can have thin and attractive together with superior protection and waterproofness. We are proud of this new design and believe we are a standout in the market with SHIELD. In addition, we are very excited about our new HITCASE PRO-7 which is based on this same new design, and will be market-ready by next quarter."
Continued Mr. Bergreen, "With our iPhone 7 line-up coming on-line, we are looking forward to turning up our sales channels to position us for broader distribution in the coming fall and winter season. Importantly, we are executing on this vision against a backdrop of doing more with less by focusing where we have the best return on our investment to minimize our capital requirements."
Second Quarter Fiscal 2017 Financial and Operational Summary
- In December 2016, the Company launched its new SHIELD case for the iPhone 7 following on from its iPhone 6 version launch in Q1 on a limited shipment basis. The SHIELD is a thin, aluminum waterproof case for the iPhone 6/6s/7 and iPhone 6plus/6splus/7 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 positive;
- Generated sales of $239,015 in Q2 F2017, down 65% from $684,731 in Q2 Fiscal 2016. The decline was due to lower sales across all distribution channels and products as a result of reduced sales and marketing spend and limited production runs. A majority of sales for the quarter were via our direct online channels, which also contributed to higher gross margin percentages;
- Gross margin of $95,136 in Q2 F2017 was down from $250,529 generated in Q2 of last year due to decreased sales. The gross margin percent increased to 40% compared to 37% last year;
- During the quarter the Company reduced operating expenditures (excluding non-cash items and cost of sales) to $485,801, a 54% reduction from Q2 F2016. 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 $408,416 for Q2 F2017, a 50% reduction from $818,949 in Q2 F2016;
- During the quarter, the Company completed private placements of secured convertible debentures and common shares for gross proceeds of $465,000;
- Closed the quarter with a working capital deficiency $39,695 including cash and cash equivalents of $83,728 and inventory of $440,721 at December 31, 2016; and
- Subsequent to the quarter end, the Company completed private placements of secured convertible debentures and Units for gross proceeds of $362,000.
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 December 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.
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 products, HITCASE PRO and its newer SNAP, allow 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.
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.
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
December 31, June 30,
2016 2016
Assets
Current assets
Cash 83,728 355,607
Restricted cash 12,676 12,412
Accounts receivable 24,639 40,355
Other Receivables - 23,217
Government assistance and other receivables - 65,887
Inventory 440,721 471,436
Prepaid expenses and deposits 223,146 190,768
------------ ------------
784,910 1,159,682
Property and equipment 211,781 290,114
Intangible assets 225,268 214,058
------------ ------------
1,221,959 1,663,854
------------ ------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 788,549 760,730
Deferred revenue 28,720 62,786
Current portion of lease liability 7,336 7,227
------------ ------------
824,605 830,743
Lease liability 26,717 30,413
Convertible Notes 318,425 -
Shareholders' Equity
Share capital 9,977,667 9,865,699
Contributed surplus 941,978 838,311
Deficit (10,867,433) (9,901,312)
------------ ------------
52,212 802,698
------------ ------------
1,221,959 1,663,854
------------ ------------
HIT Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Operations and Comprehensive Loss
For the quarter and six months ended December 31, 2016 & 2015
(Unaudited)
(Expressed in Canadian
dollars)
Quarter ended December Six months ended
31 December 31
2016 2015 2016 2015
Revenue 239,015 684,731 452,052 1,091,482
Cost of sales 143,879 434,202 290,683 774,768
------------------------ ------------------------
95,136 250,529 161,368 316,714
40% 37% 36% 29%
Expenses
Depreciation 50,859 55,701 101,678 109,047
Share based compensation 37,297 79,773 79,611 172,199
General and
administrative 319,097 517,382 581,904 982,002
Research and development 23,818 79,659 46,054 168,049
Selling and marketing 142,885 460,407 295,418 936,818
------------------------ ------------------------
573,957 1,192,923 1,104,665 2,368,115
------------------------ ------------------------
Loss before other income
(expenses) (478,822) (942,394) (943,297) (2,051,401)
Other income (expenses)
Finance costs (12,196) (452) (14,498) (1,556)
Foreign exchange loss (5,555) (11,578) (8,327) (9,951)
------------------------ ------------------------
(17,751) (12,029) (22,824) (11,507)
------------------------ ------------------------
Loss and comprehensive
loss for the period (496,572) (954,423) (966,121) (2,062,908)
------------------------ ------------------------
Basic and diluted loss
per share (0.01) (0.02) (0.01) (0.05)
------------------------ ------------------------
Weighted average shares
outstanding 68,274,313 42,769,589 67,821,951 42,769,589
------------------------ ------------------------
HIT Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Changes in Shareholders' Equity/(Deficiency)
(Unaudited)
(Expressed in
Canadian dollars)
Share capital
Total
Shareholders'
equity /
(deficit)
Contributed
Number Amount Surplus 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 (2,062,909) (2,062,909)
Share based
compensation
expense 172,199 172,199
---------------------------------------------------------
Balance - December
31, 2015 42,769,589 9,158,838 522,117 (8,706,273) 974,682
---------------------------------------------------------
Balance - June 30,
2016 67,369,589 9,865,699 838,311 (9,901,312) 802,698
Loss for the
period (966,121) (966,121)
Share based
compensation
expense 79,611 79,611
Equity component
convertible
debenture 24,056 24,056
Private placement 1,800,000 90,000 90,000
Shares issued on
settlment of
amounts owing 439,359 21,968 21,968
---------------------------------------------------------
Balance - December
31, 2016 69,608,948 9,977,667 941,978 (10,867,433) 52,212
---------------------------------------------------------
HIT Technologies Inc. (Formerly Friday Capital Inc.)
Statements of Cashflow
Quarters & six months ended December 31, 2016 & 2015
(Unaudited)
Quarter ended Six months ended
(Expressed in Canadian dollars) December 31 December 31
2016 2015 2016 2015
Cash flows from/(used in)
operating activities
Loss for the period (496,572) (954,423) (966,121) (2,062,909)
Item not involving cash -
depreciation 50,859 55,701 101,678 109,047
Accretive interest expense on
convertible note 4,055 4,055
Share based compensation 37,297 79,773 79,611 172,199
Loss on write down of assets
Reversed takeover listing expense
Changes in non-cash working
capital items
Accounts receivable 4,228 (165,977) 15,716 (151,759)
Other reveivable 1,684 23,217
Government assistance and other
receivable (115,759) 65,887 (140,055)
Inventory 8,947 (185,498) 30,715 (384,985)
Accounts payable and accrued
liabilities 48,664 217,789 49,787 14,392
Deferred revenue (44,877) 10,276 (34,066) (69,651)
Prepaid expenses and deposits (59,915) (2,855) (32,378) 17,230
-------------------------------------------
(445,630) (1,060,973) (661,899) (2,496,491)
-------------------------------------------
Cash flows from/(used in)
investing activities
Restricted cash (169) (4,562) (264) (38,649)
Acquisition of property and
equipment (7,466) (25,993) (20,082) (72,804)
Acquisition of intangible assets (2,899) (35,993) (14,473) (49,553)
-------------------------------------------
(10,534) (66,548) (34,819) (161,006)
-------------------------------------------
Cash flows from/(used in)
financing activities
Lease liability (1,800) (1,801) (3,587) (3,587)
Share capital issuance 90,000 90,000
Net proceeds from convertible
notes 338,426 338,426
--------------------------------
426,626 (1,801) 424,839 (3,587)
-------------------------------------------
Increase/(decrease) in cash (29,538) (1,129,322) (271,879) (2,661,084)
Cash - Beginning of period 113,266 1,257,373 355,607 2,789,135
-------------------------------------------
Cash - End of period 83,728 128,051 83,728 128,051
-------------------------------------------
For additional investor information, contact:Brooks BergreenCEO HIT Technologies Inc.Email contact +1 416 815 0700www.hitcase.com/invest
Source: HIT Technologies Inc.
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