HIT Technologies Reports Fourth Quarter Fiscal 2016 Results

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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

table-1“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 HitCase 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 atAs at
June 30,June 30,
20162015
Assets
Current assets
Cash355,6052,789,135
Restricted cash12,412130,646
Accounts receivable40,35532,320
Other Receivables23,21744,917
Government assistance and other receivables65,887143,352
Inventory471,435314,854
Prepaid expenses and deposits190,76855,351
1,159,6793,510,575
Property and equipment 290,114396,598
Intangible assets 214,058131,504
1,663,8524,038,677
Liabilities
Current liabilities
Accounts payable and accrued liabilities760,7301,013,283
Deferred revenue62,785115,344
Current portion of lease liability7,2277,015
830,7431,135,642
Lease liability 30,41337,643
Shareholders’ Equity
Share capital9,865,6999,158,838
Contributed surplus838,311349,918
Deficit(9,901,314)(6,643,364)
802,6972,865,392
1,663,8524,038,677
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 30Year ended June 30
2016201520162015
Revenue262,897134,1151,720,1281,024,956
Cost of sales164,577147,4841,168,795839,391
98,320(13,368)551,333185,565
Expenses
Depreciation49,11251,892207,50690,821
Share based compensation30,77088,508252,773328,918
General and administrative286,286295,5531,683,1401,329,754
Loss on write off of equipment48,05448,054
Research and development101,753116,315326,381317,851
Selling and marketing156,925689,9371,339,0421,537,028
624,8451,290,2593,808,8423,652,426
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 outstanding55,745,41333,420,39646,004,65828,540,144
 table2
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 30Year ended June 30
2016201520162015
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 – depreciation49,11251,892207,50690,821
Interest expense4,41412,493
Share based compensation30,77088,508252,773328,918
Loss on write down of assets48,05448,054
Reversed takeover listing expense2,005,1742,005,174
Changes in non-cash working capital items
Accounts receivable140,506(14,835)(8,035)2,450
Other reveivable(16,423)21,700(44,917)
Government assistance and other receivable173,208(143,352)77,465(77,330)
Inventory112,926(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 cash41(130,646)118,234(130,646)
Cash acquired on acquistion305,821305,821
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 issuance942,481942,48150,000
Net proceeds from convertible notes1,370,001
Net proceeds from subscription receipts392,1064,864,713
Increase (decrease) in bank and other indebtedness(99,893)
940,653291,871935,2516,068,860
Increase in cash252,871(707,842)(2,433,529)2,747,693
Cash – Beginning of period102,7333,496,9772,789,13541,442
Cash – End of period355,6052,789,135355,6052,789,135

For additional investor information, contact:

Brooks Bergreen
CEO
HIT Technologies Inc.
Email contact

+1 416 815 0700
www.hitcase.com/invest

Source: Marketwired (Canada) (October 28, 2016 – 6:37 PM EDT)

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