HIT Technologies Reports First Quarter Fiscal 2016 Results

- Company delivers revenue growth of 203% sequentially and 47% year-over-year -

VANCOUVER, Nov. 12, 2015 /CNW/ - HIT Technologies Inc. (TSXV: 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 fiscal 2016 (Q1 F2016) financial and operating results, prepared in accordance with International Financial Reporting Standards (IFRS). All results are reported in Canadian dollars unless otherwise stated.

First Quarter Fiscal 2016 Financial and Operational Highlights

  • Generated sales of $406,751, up 203% from $134,115 in Q4 F2015 and 47% from $275,909 in Q1 F2015;
  • Reported Adjusted EBITDA loss of $963,237, compared to $1,115,174 in Q4 F2015 and $277,419 for Q1 F2015;
  • Recorded cash and cash equivalents, including restricted cash, of $1,422,107 compared to $2,919,781 at June 30, 2015;
  • Grew social media Fan-Base to 359,000 followers, up 47% from 245,000 at the end of Q4 F2015, and subsequent to quarter end grew 14% to 410,000 by November 10, 2015;
  • Launched HITCASE PRO-6 on e-commerce sites in July 2015, and followed with limited retail distribution in August 2015;
  • Signed five new distribution agreements, covering the U.S., Australia, New Zealand and Mexico;
  • Awarded patent in September 2015 for Rail Mounting System for a Mobile Device Case, covering the HITCASE RailslideTM, which facilitates mounting of the mobile device to a variety of creative hands-free mounts;
  • Subsequent to quarter end, launched HITCASE SNAP for iPhone 6, 6s and 6 Plus. SNAP is a sleek, light and streamlined HITCASE that is designed for everyday adventures and that leverages the HITCASE lens and mounting system; and
  • Subsequent to quarter end, partnered with Best Buy Canada to sell HITCASE PRO, HITCASE SNAP, lenses and accessories through 192 Best Buy stores across Canada and online through BestBuy.ca beginning November 6, 2015.

"Our Q1 2016 top-line results demonstrate the impressive sales traction we are seeing for our new products," said Brooks Bergreen, CEO of HIT Technologies. "With the online launch of our HITCASE PRO-6 in the quarter, we drove a 47% increase in sales year-over-year and a more than 200% improvement sequentially.  The majority of these sales were from our online marketing activities and fan-base conversion, a positive sign that our strategy is working. We continue to progress our overall sales strategy, and are excited to have added a broad Canadian retail footprint with Best Buy to round out our go-to-market capabilities."

Bergreen continued: "Our brand strategy, which centers on adventure and creativity, and the many well-known athletes that act as HITCASE ambassadors are resonating with the market. Our fan base continues grow. We added more than 100,000 in the quarter and continue to see expansion post quarter-end. The bigger our online base gets, the larger the opportunity is to convert our fans into loyal customers over time. We are still in the early stages. However, with our expanded product portfolio, including our new SNAP, our increasing sales footprint, and rapidly growing fan base, we are well positioned to capture a sizable share of the estimated multi-billion dollar iPhone accessories and action camera markets. With iPhone shipments up 22% in Calendar year Q3 2015 through winning market share from Android, and with an estimated two-thirds of iPhone users having yet to upgrade to iPhone 6/6s, we believe we are expanding our market presence at the right time with the right product."

First Quarter Fiscal 2016 Financial Review
Revenue for Q1 F2016 was $406,751, a 47% improvement over $275,909 in Q1 F2015 and a 203% sequential increase over $134,115 in Q4 F2015. The year-over-year and sequential increase in revenue reflects strong online sales traction for the Company's HITCASE PRO-6, which it launched in the quarter. 

Gross margin for Q1 F2016 was 16% compared to 15% last year and 10% in Q4 F2015. The gross margin in Q1 F2016 and Q4 F2015 was low due to the Company's decision to use a high-cost just-in-time shipping strategy while it load tested its manufacturing and fulfillment processes, and to pay for expedited shipments to early adopter customers. This increased shipping costs to 41% of sales from 19% of sales in the prior year.  Conversely, the low margin in Q1 last year reflects a higher proportion of sales from low margin legacy products, a higher portion of sales via distributors and resellers, and a higher than usual unit cost from the previous HITCASE manufacturing partner.

Operating and other expenses for Q1 F2016 totaled $1,174,463 compared to $470,781 in Q1 F2015. The year-over-year increase reflects greater investment in: sales and marketing to build the Company's brand, increase market awareness and drive growth; research and development to support the Company's expanded product portfolio and drive continued innovation; and general and administration related to the Company's public listing and expanded organizational infrastructure. Operating and other expenses were $3,306,165 for Q4 F2015

Q1 F2016 Adjusted EBITDA loss was $963,237, compared to $277,419 for Q1 F2015 as a result of the Company's increased investments in the business to drive long-term growth, which were partially offset by the Company's year-over-year top-line improvement. Adjusted EBITDA loss improved sequentially from $1,115,174 for Q4 F2015.

Outlook
"Our Q1 F2016 sales growth was a positive indicator of the demand for our HITCASE offerings and the success of our go-to-market strategies," Bergreen added. "We are particularly pleased, as we constrained our production volumes in the quarter to optimize our design and manufacturing process. We wanted to evaluate the iPhone 6s launch to ensure we did not need to make any further product adjustments. As the iPhone 6s did not ship until the end of September, we continued to hold inventory to constrained levels into Q2 F2016. As a result, while we expect our retail launch and solid consumer demand to drive year-on-year and sequential sales growth in Q2 F2016, the rate of growth may be somewhat constrained by inventory levels."

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 months ended September 30, 2015 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. (TSXV: 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.)




Statement of Financial Position





(Unaudited)





(Expressed in Canadian dollars)







As at


As at



September 30


June 30,



2015


2015

 Assets 










 Current assets 





 Cash 


1,257,373


2,789,135

 Restricted cash  


164,734


130,646

 Accounts receivable 


18,102


32,320

 Government assistance and other receivables 


212,564


188,269

 Inventory 


514,341


314,854

 Prepaid expenses and deposits 


35,266


55,351



2,202,380


3,510,575






 Property and equipment  


391,467


396,598






 Intangible assets 


143,659


131,504








2,737,506


4,038,677






 Liabilities 










 Current liabilities 





 Accounts payable and accrued liabilities 


809,834


1,013,284

 Deferred revenue 


35,417


115,344

 Current portion of lease liability 


7,067


7,015








852,318


1,135,643






 Lease liability 


35,856


37,642






 Shareholders' Equity/(Deficiency) 










 Share capital 


9,158,838


9,158,838

 Contributed surplus 


442,344


349,918

 Deficit 


(7,751,850)


(6,643,364)








1,849,332


2,865,392








2,737,506


4,038,677

            

HIT Technologies Inc. (Formerly Friday Capital Inc.)

Statements of Operations and Comprehensive Loss

For the Quarter ended September 30

(Unaudited)

(Expressed in Canadian dollars)


















2015


2014



QTR


QTR






 Revenue 


406,751


275,909

 Cost of sales 


340,566


234,856








66,184


41,053






 Expenses 





 Depreciation 


53,346


11,787

 Share based compensation 


92,426


126,667

 General and administrative 


464,620


192,007

 Research and development 


88,389


30,431

 Selling and marketing 


476,411


96,034



1,175,193


456,926











 Loss before other income (expenses) 


(1,109,008)


(415,873)






 Other income (expenses) 





 Finance costs 


(1,104)


(5,453)

 Foreign exchange loss 


1,626


(8,432)



523


(13,885)











 Loss and comprehensive loss for the period 


(1,108,486)


(429,758)






 Basic and diluted loss per share 


(0.03)


(0.02)






 Weighted average shares outstanding 


42,769,589


24,733,333

            

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


Deficit


Total
Shareholders'
equity/(deficit)



of shares


$


$


$


$












 Balance - June 30, 2014 


24,000,000


528,507




(1,143,857)


(615,350)












 Loss for the period 








(429,758)


(429,758)












 Shares issued for cash 


200,000


50,000






50,000












 Shares issued pursuant to offset agreement 


2,000,000


500,000






500,000












 Share based compensation expense 






126,667




126,667

 Balance - September 30, 2014 


26,200,000


1,078,507


126,667


(1,573,615)


(368,441)


































 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

 

HIT Technologies Inc. (Formerly Friday Capital Inc.)

Statements of Cashflow

Quarters ended September 30

(Unaudited)





(Expressed in Canadian dollars)


QTR


QTR








2015


2014











 Cash flows from/(used in) operating activities 





 Loss for the period 


(1,108,486)


(429,758)

 Item not involving cash - depreciation 


53,346


11,787

 Interest expense 





 Share based compensation 


92,426


126,667

 Loss on write down of assets 





 Reversed takeover listing expense 





 Changes in non-cash working capital items 





 Accounts  receivable 


14,218


3,092

 Government assistance receivable 


(24,295)



 Inventory 


(199,487)


10,418

 Accounts payable and accrued liabilities 


(203,450)


(18,315)

 Deferred revenue 


(79,927)


4,902

 Prepaid expenses and deposits 


20,085


(23,538)








(1,435,569)


(314,745)











 Cash flows from/(used in) investing activities 





 Restricted cash 


(34,088)



 Cash acquired on acquistion 





 Acquisition of property and equipment 


(46,811)


(12,309)

 Acquisition of intangible assets 


(13,560)


(5,079)



(94,459)


(17,388)











 Cash flows from/(used in) financing activities 





 Advances (to)/from related parties 




65,500

 Interest paid 





 Lease liability 


(1,734)



 Share capital issuance 




50,000

 Net proceeds from convertible notes (note 11) 




797,814

 Net proceeds from subscription receipts (note 11) 





 Increase (decrease) in bank and other indebtedness 




(94,251)



(1,734)


819,063











 Increase in cash 


(1,531,762)


486,930






 Cash - Beginning of period 


2,789,135


41,442






 Cash - End of period 


1,257,373


528,372

 

SOURCE HIT Technologies Inc

For further information: For additional investor information, contact: Brooks Bergreen, CEO HIT Technologies Inc., invest@hitcase.com, +1 416 815 0700, www.hitcase.com/invest

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