IFabric : Earnings Document

IFABRIC CORP.

CONSOLIDATED

FINANCIAL STATEMENTS

SEPTEMBER 30, 2022 AND 2021

(EXPRESSED IN CANADIAN DOLLARS)

CONTENTS

AUDITORS' REPORT	1-3
CONSOLIDATED
FINANCIAL STATEMENTS
Consolidated Statements of Financial Position	4
Consolidated Statements of Earnings (Loss) and
Comprehensive Earnings	5
Consolidated Statements of Changes in Equity	6
Consolidated Statements of Cash Flows	7
Notes to Consolidated Financial
Statements	8 - 27

Tel: [phone]	BDO Canada LLP
Fax: [phone]	222 Bay Street
www.bdo.ca	Suite 2200, P.O. Box 131
	Toronto, ON M5K1H1 Canada

Independent Auditor's Report

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 September 30, 2022 and 2021, 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 a summary of significant accounting policies.

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as at September 30, 2022 and 2021, and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards ("IFRS").

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 period. 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 consists 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 principal and 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 16 that includes revenue information by operating segments.

How the key audit matter was addressed in the audit

Our audit procedures included but is 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 period 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 Michael Crolla.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario

December 28, 2022

IFABRIC CORP.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Expressed in Canadian Dollars)

	September 30,	September 30,
As at	2022	2021
ASSETS
Current assets
Cash	944,725	8,901,718
Accounts receivable (note 4)	7,017,329	6,452,896
Inventories (note 5)	9,353,200	3,015,010
Income taxes recoverable	39,780	90,521
Prepaid expenses and deposits (note 6)	5,338,748	4,734,352
Total current assets	22,693,782	23,194,497
Non-current assets
Due from related parties (note 7)	87,248	131,404
Property, plant and equipment (note 8)	3,110,330	2,942,104
Right-of-use assets (note 9)	52,548	54,168
Deferred development costs (note 10)	204,838	231,658
Deferred income taxes (note 11)	1,165,700	1,020,984
Goodwill	55,050	55,050
Total non-current assets	4,675,714	4,435,368
Total assets	27,369,496	27,629,865
LIABILITIES
Current liabilities
Accounts payable and accrued liabilities (note 13)	2,520,095	2,941,445
Customer deposits	85,326	151,315
Income taxes payable	195,097	256,426
Deferred revenue	13,090	25,609
Current portion of contract liability	-	180,509
Current portion of lease liability	19,208	30,613
Current portion due to related parties (note 14)	4,559	-
Current portion of car loan payable	12,792	-
Current portion of bank loan payable (note 15)	1,138,704	1,215,464
Total current liabilities	3,988,871	4,801,381
Non-current liabilities
Non-current portion of lease liability	33,340	20,855
Non-current portion of car loan payable	33,948	-
Due to related parties (note 14)	547,372	530,422
Total non-current liabilities	614,660	551,277
Total liabilities	4,603,531	5,352,658
Commitments (note 22)
EQUITY
Equity attributable to iFabric Corp. shareholders
Capital stock (note 21)	13,660,614	13,585,774
Reserves	3,675,458	3,264,746
Retained earnings	5,157,927	5,612,925
Accumulated other comprehensive earnings	259,111	(196,551)
Total equity attributable to iFabric Corp. shareholders	22,753,110	22,266,894
Non-controlling interest	12,855	10,313
Total equity	22,765,965	22,277,207
Total liabilities and equity	27,369,496	27,629,865

Approved on behalf of the Board of Directors on December 28, 2022:

"Hylton Karon"		"Hilton Price"
Director		Director

The accompanying notes are an integral part of these consolidated financial statements

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