IFABRIC CORP.
CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2024 AND 2023
(EXPRESSED IN CANADIAN DOLLARS)
CONTENTS | |
AUDITORS' REPORT | |
1-4 | |
CONSOLIDATED | |
FINANCIAL STATEMENTS | |
Consolidated Statements of Financial Position | 5 |
Consolidated Statements of Earnings (Loss) and | |
Comprehensive Earnings (Loss) | 6 |
Consolidated Statements of Changes in Equity | 7 |
Consolidated Statements of Cash Flows | 8 |
Notes to Consolidated Financial | |
Statements | 9 - 29 |
Tel: 416 865 0200
Fax: 416 865 0882www.bdo.ca BDO Canada LLP 222 Bay Street
Suite 2200, P.O. Box 131 Toronto, ON M5K1H1 Canada
To the Shareholders of iFabric Corp.
Opinion
We have audited the consolidated financial statements of iFabric Corp. and its subsidiaries (the "Company"), which comprise the consolidated statements of financial position as at December 31, 2024 and 2023, and the consolidated statements of earnings (loss) and comprehensive earnings (loss), changes in equity and cash flows for the years then ended, and notes to the consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at December 31, 2024 and 2023, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards and International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRS Accounting Standards).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Consolidated Financial Statements section of our report. We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements of the current year. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue Recognition
Description of the key audit matter
The Company's revenues consist of intimate apparel for women and innovative products and treatments for application to textiles and other surfaces. The Company entered into an arrangement with a supplier whose related party also acted as a distributor, requiring a determination of whether revenue should be recognized on a principal or agent basis. Due to the significance of the revenue to the overall operating results of the Company and judgement in the assessment of whether the Company is acting as a principal or an agent, revenue recognition was determined to be a key audit matter requiring special audit consideration.
Please refer to Note 3 (c) to the consolidated financial statements for the Company's revenue recognition policy and Note 17 that includes revenue information by operating segments.
BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
How the key audit matter was addressed in the audit
Our audit procedures included but are not limited to a review of new revenue contracts and exclusive license agreements in effect during the fiscal year, including any modifications or amendments, for recognition and measurement in accordance with IFRS 15, including the assessment as principal or agent.
Other Information
Management is responsible for the other information. The other information comprises the information included in Management's Discussion and Analysis filed with the relevant Canadian Securities Commissions.
Our opinion on the consolidated financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
We obtained the Management's Discussion and Analysis prior to the date of this auditor's report. If, based on the work we will perform on this other information, we conclude that there is a material misstatement of this other information, we are required to report that fact to those charged with governance. We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
Auditor's Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
Evaluate the overall presentation, structure, and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision, and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this independent auditor's report is Richard Yeghiayan.
Chartered Professional Accountants, Licensed Public Accountants
Toronto, Ontario
March 28, 2025
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars)
December 31, | December 31, | |
As at | 2024 | 2023 |
ASSETS | ||
Current assets | ||
Cash | 2,058,156 | 1,571,744 |
Accounts receivable (note 4) | 10,811,834 | 7,815,579 |
Inventories (note 5) | 10,163,536 | 9,477,965 |
Income taxes recoverable | 20,439 | 47,110 |
Foreign exchange forward contracts (note 7) | 219,285 | 66,135 |
Prepaid expenses and deposits (note 6) | 1,058,147 | 899,874 |
Total current assets | 24,331,397 | 19,878,407 |
Non-current assets | ||
Due from related parties (note 8) | - | 49,748 |
Property, plant and equipment (note 9) | 3,122,705 | 3,168,721 |
Right-of-use assets (note 10) | 394,379 | 451,890 |
Deferred development costs (note 11) | 142,414 | 178,018 |
Deferred income taxes (note 12) | 1,443,200 | 2,132,100 |
Goodwill | 55,050 | 55,050 |
Total non-current assets | 5,157,748 | 6,035,527 |
Total assets | 29,489,145 | 25,913,934 |
LIABILITIES | ||
Current liabilities | ||
Accounts payable and accrued liabilities (note 14) | 4,374,022 | 3,067,423 |
Customer deposits | 66,450 | 77,813 |
Income taxes payable | 24,847 | 42,371 |
Current portion of lease liability (note 10) | 101,929 | 71,182 |
Current portion due to related parties (note 15) | 143,535 | 146,695 |
Current portion of car loan payable | 12,358 | 12,358 |
Bank loan payable (note 16) | 779,639 | 889,705 |
Total current liabilities | 5,502,780 | 4,307,547 |
Non-current liabilities | ||
Non-current portion of lease liability (note 10) | 350,698 | 397,482 |
Non-current portion of car loan payable | 8,069 | 21,898 |
Due to related parties (note 15) | 487,372 | 487,372 |
Total non-current liabilities | 846,139 | 906,752 |
Total liabilities | 6,348,919 | 5,214,299 |
Commitments (note 23) | ||
EQUITY | ||
Equity attributable to iFabric Corp. shareholders | ||
Capital stock (note 22) | 8,898,580 | 8,989,049 |
Reserves | 9,185,631 | 8,614,722 |
Retained earnings | 4,683,019 | 3,050,405 |
Accumulated other comprehensive earnings | 367,355 | 34,924 |
Total equity attributable to iFabric Corp. shareholders | 23,134,585 | 20,689,100 |
Non-controlling interest | 5,641 | 10,535 |
Total equity | 23,140,226 | 20,699,635 |
Total liabilities and equity | 29,489,145 | 25,913,934 |
Approved on behalf of the Board of Directors on March 28, 2025: | ||
Page 5 of 29 |
"Hylton Karon" Director
"Hilton Price" Director
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS) AND COMPREHENSIVE EARNINGS (LOSS) (Expressed in Canadian Dollars)
Twelve months | Fifteen months | |
December 31, | December 31, | |
For the period ending | 2024 | 2023 |
REVENUE | 27,327,390 | 28,398,742 |
COST OF SALES | 16,025,306 | 17,325,734 |
GROSS PROFIT | 11,302,084 | 11,073,008 |
EXPENSES | ||
General and administrative costs (note 18) | 6,084,190 | 6,880,939 |
Selling costs (note 18) | 2,527,044 | 2,987,146 |
Impairment provision - legal claim (note 4) | (361,980) | 3,842,153 |
Interest expense | 97,050 | 110,207 |
Depreciation of property, plant and equipment and right-of-use assets | 196,480 | 160,920 |
Amortization of deferred development costs | 35,604 | 26,820 |
Share-based compensation | 548,040 | 162,199 |
9,126,428 | 14,170,384 | |
EARNINGS (LOSS) FROM OPERATIONS | 2,175,656 | (3,097,376) |
OTHER EXPENSES (INCOME) | ||
Gain on foreign exchange | (53,037) | (106) |
Other | - | (17,800) |
Loss (gain) on disposal of property, plant and equipment | 217 | (7,827) |
Government grants | - | (8,866) |
(52,820) | (34,599) | |
EARNINGS (LOSS) BEFORE INCOME TAXES | 2,228,476 | (3,062,777) |
PROVISION (RECOVERY) OF INCOME TAXES (note 20) | ||
Current | 99,256 | 97,965 |
Deferred | 501,500 | (1,050,900) |
600,756 | (952,935) | |
NET EARNINGS (LOSS) | 1,627,720 | (2,109,842) |
NET EARNINGS (LOSS) ATTRIBUTABLE TO: | ||
iFabric Corp. shareholders | 1,632,614 | (2,107,522) |
Non-controlling interest | (4,894) | (2,320) |
1,627,720 | (2,109,842) | |
OTHER COMPREHENSIVE EARNINGS (LOSS) | ||
Items that will or may be reclassified to profit or loss | ||
Unrealized gain (loss) on translation of foreign operations | 332,431 | (224,187) |
TOTAL COMPREHENSIVE EARNINGS (LOSS) | 1,960,151 | (2,334,029) |
EARNINGS (LOSS) PER SHARE (note 21) | ||
Basic | 0.054 | (0.070) |
Diluted | 0.054 | (0.070) |
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IFABRIC CORP.
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Expressed in Canadian Dollars)
Attributable to iFabric Corp. shareholders
Reserves
Accumulated Other Capital stock Contributed surplus Options Retained earnings
Comprehensive Earnings (Loss)
Total Non-controlling interest
Total equity Balance at December 31, 2023 Total comprehensive earnings (loss) Deferred tax on share issue costs
Expiry of options/warrant extension (note 22) Share-based compensation
Balance at December 31, 2024
8,989,049 - (67,600) (22,869) - 6,434,584 - - 316,989 - 2,180,138 - - (294,120) 548,040 3,050,405 1,632,614 - - - 34,924 20,689,100 332,431 1,965,045 - - - (67,600) - 548,040 | 10,535 (4,894) - - - | 20,699,635 1,960,151 (67,600) - 548,040 |
8,898,580 6,751,573 2,434,058 4,683,019 367,355 23,134,585 | 5,641 | 23,140,226 |
10,535
Page 7 of 29
CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in Canadian Dollars)
Fifteen months | ||
For the year ended December 31 | 2024 | 2023 |
CASH WAS PROVIDED BY (USED IN) | ||
OPERATING ACTIVITIES | ||
Net earnings (loss) | 1,627,720 | (2,109,842) |
Items not affecting cash | ||
Interest on lease liability | 31,339 | 6,944 |
impairment provision - legal claim | - | 3,842,153 |
Depreciation of property, plant and equipment and right-of-use assets | 196,480 | 160,920 |
Amortization of deferred development costs | 35,604 | 26,820 |
Fair value adjustment on foreign exchange contracts | 154,806 | (50,800) |
Loss (gain) on disposal of property, plant and equipment | 217 | (7,827) |
Share-based compensation | 548,040 | 162,199 |
Deferred income tax provision | 501,500 | (1,050,900) |
3,095,706 | 979,667 | |
Changes in operatings assets and liabilities | ||
Accounts receivable | (2,996,255) | (798,250) |
Inventories | (685,571) | (124,765) |
Income taxes recoverable | 26,671 | (7,330) |
Prepaid expenses and deposits | (158,273) | 596,721 |
Foreign exchange forward contracts | (307,956) | (15,335) |
Due from related parties | 49,748 | 37,500 |
Accounts payable and accrued liabilities | 1,306,599 | 547,328 |
Customer deposits | (11,363) | (7,513) |
Deferred revenue | - | (13,090) |
Income taxes payable | (17,524) | (152,726) |
(2,793,924) | 62,540 | |
301,782 | 1,042,207 | |
FINANCING ACTIVITIES | ||
Due to related parties | (3,160) | 82,136 |
Share and warrant issuances (note 22) | - | 190,000 |
Repayment of (proceeds) from car loan | (13,829) | (12,484) |
Repayment of bank loan (note 15) | (110,066) | (248,999) |
Repayment of lease liability | (87,687) | (28,681) |
(214,742) | (18,028) | |
INVESTING ACTIVITIES | ||
Purchase of property, plant and equipment | (92,859) | (235,973) |
Proceeds on property, plant and equipment | 40,000 | 63,000 |
(52,859) | (172,973) | |
CHANGE IN CASH POSITION | 34,181 | 851,206 |
CASH, beginning of year | 1,571,744 | 944,725 |
Effect of foreign currency translation | 452,231 | (224,187) |
CASH, end of year | 2,058,156 | 1,571,744 |
Page 8 of 29 |
Twelve months
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the twelve months ended December 31, 2024 and fifteen months ended December 31, 2023 (Expressed in Canadian Dollars)
1. NATURE OF OPERATIONS
iFabric Corp. ("iFabric" or the "Company") is a Canadian public company, incorporated under the Alberta Business
Corporations Act and is domiciled in Canada. iFabric is listed on the Toronto Stock Exchange ("TSX") under the trading symbol "IFA". The head office is located at 525 Denison Street, Unit 1, Markham, Ontario, Canada.
The Company's principle activities relate to the business of designing and distributing women's intimate apparel as well as a range of complimenting accessories. The Company is also in the business of developing and distributing a range of innovative products and treatments that are suitable for application to textiles, plastics, liquids, and hard surfaces as well as finished performance apparel which integrate one or more such treatments. These products are designed to provide added benefits to the user in terms of protection and performance enhancements.
2. BASIS OF PREPARATION
(a) Statement of compliance
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards and International Accounting Standards as issued by the International Accounting Standards Board (IASB) and Interpretations (collectively IFRS Accounting Standards).
(b) Basis of measurement
These consolidated financial statements were prepared on a historical cost basis except for certain items which may be accounted for at fair value as further discussed in subsequent notes, using the significant accounting policies and measurement basis summarized below.
3. SUMMARY OF MATERIAL ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the periods presented, unless otherwise stated.
(a) Basis of consolidation
The consolidated financial statements include the accounts of iFabric Corp., and its wholly-owned subsidiaries:
(i) Coconut Grove Textiles Inc., which includes the consolidated accounts of:
a. Coconut Grove Pads Inc., a wholly-owned subsidiary;
b. 2074160 Ontario Inc., a 75%-owned subsidiary;
c. Intelligent Fabric Technologies (North America) Inc. a wholly-owned subsidiary, which includes the consolidated accounts of:
i. Intelligent Fabric Technologies Inc., a U.S. company and wholly-owned subsidiary;
ii. Intelligent Fabric Technologies (Taiwan), a Taiwanese branch office
(ii) Protx (Shanghai) Trading Co., Ltd., a company incorporated in China.
All inter-corporate balances and transactions have been eliminated on consolidation.
(b) Functional and presentation currency
These consolidated financial statements are presented in Canadian dollars.
The functional currency of the Coconut Grove Pads Inc., Protx (Shanghai) Trading Co., Ltd., and Intelligent Fabric Technologies (North America) Inc., is the United States Dollar ("USD") given the prevalence of USD transactions in operations. The functional currency of the parent company and remaining subsidiaries is Canadian dollars.
The results and financial position of the subsidiaries with USD functional currency are translated into Canadian dollars as follows:
i. Assets and liabilities are translated at the closing rate at the date of the statement of financial position;
ii. Income and expenses are translated at average exchange rates;
iii. All resulting exchange differences are recognized in other comprehensive income.
Page 9 of 29