iFresh, Inc.  Reports Second Quarter 2019 Financial Results

NEW YORK, Nov. 14, 2018 (GLOBE NEWSWIRE) — iFresh, Inc. (“iFresh” or “the Company”) (NASDAQ:IFMK), a leading Asian American grocery supermarket chain and online grocer, today announced its financial results for its second quarter ended September 30, 2018.

Mr. Long Deng, Chief Executive Officer and Chairman of iFresh, Inc., commented, “We are pleased to announce our results for the quarter ended September 30, 2018. During this quarter, we have been working diligently to continue building out three new store locations that have not yet opened. Our new stores will be located in Long Island, New York; North Miami, Florida; and Milford, Connecticut. We anticipate that completing these stores will allow us to increase our revenues, expand our geographic footprint, and enhance our purchasing power. We are also renovating our stores in Quincy and Boston, Massachusetts to improve our customers’ shopping experience.”

Mr. Deng continued, “We look forward to the coming quarters as we work with our partners to build on our improvements in mobile payment systems and other initiatives to bring the latest technology to the iFresh experience. We also anticipate building on our strong fresh seafood and produce offerings by beginning to offer new onsite fresh food preparation services in our supermarkets. We believe these improvements to our stores, along with the strategic sale or closure of underperforming stores, will both improve our financial results and enhance our customer experience.”  

Second Quarter of Fiscal 2019 Financial Highlights

• Net sales decreased by 9.2% to $30.28 million
• Gross profit decreased by 24.4% to $5.08 million
• Net loss was $4.17 million
• Adjusted EBITDA was a loss of $3.18 million or (10.5%) of sales
• Basic and diluted net loss per share was $0.28, compared to $0.005 for the second quarter of fiscal 2018 

Second Quarter of Fiscal 2019 Operational Highlights

• UnionPay now accepted at iFresh Stores for mobile payments.
• Distribution Agreement with Hainan Chunguang Foodstuff Co., Ltd. (“Chunguang”) to distribute Chunguang products in the eastern United States.
• Exclusive Distribution Agreement with Xiamen Yidong Intelligent Technology Co., Ltd (“Xiamen Yidong”) to sell Xiamen Yidong’s smart retail products in North America, South America, and Central America. 

Subsequent Events

• In October 2018, after the most recent reporting quarter, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company sold an aggregate of 1,275,000 shares of common stock in a registered direct offering and warrants to purchase up to approximately 1,170,000 shares of the Company’s Common Stock in a concurrent private placement, for gross proceeds of approximately $2.55 million.

Second Quarter of Fiscal 2019 Financial Results

Net sales

Net sales for the three months ended September 30, 2018 decreased by $3.06 million, or 9.2%, to $30.28 million from $33.34 million for the same period last year. The decrease in net sales was mainly due to the decrease in sales from both retail and wholesale segment.

	For the Three Months Ended September 30
	2018						2017
($ millions)	Revenue		Cost of Sales		Gross Margin		Revenue		Cost of Sales		Gross Margin
Retail segment	25.86		21.70		16.1%		26.75		21.62		19.2%
Wholesale segment	4.43		3.51		20.8%		6.59		5.00		24.1%
Total	30.28		25.21		16.8%		33.34		26.62		20.2%

Net sales from the retail segment decreased by $0.89 million, or 3.4%, to $25.86 million for the three months ended September 30, 2018 from $26.75 million for the same period last year. The decrease resulted mainly from our Quincy and Boston, Massachusetts stores, which have been engaged in ongoing lease improvements and are also facing more competition in their local markets. The Company believes this decline in sales is temporary.

Net sales from the wholesale segment decreased by $2.16 million, or 32.8%, to $4.43 million for the three months ended September 30, 2018 from $6.59 million for the same period last year. The decrease was attributable in part to decreases in sales to related parties, because our affiliate companies purchased an increased amount of fruits and vegetables from local farmers to supply more fresh goods to their customers.

Gross profit and gross margin

Total cost of sales decreased by $1.41 million, or 5.3%, to $25.21 million for the three months ended September 30, 2018 from $26.62 million for the same period last year. Gross profit decreased by $1.64 million, or 24.4%, to $5.08 million for three months ended September 30, 2018 from $6.72 million for the same period last year. Overall gross margin decreased by 3.4 percentage points to 16.8% for the three months ended September 30, 2018, compared to 20.2% for the same period last year.

For the retail segment, the total cost of sales decreased by $0.03 million, or 0.2%, to $19.69 million for the three months ended September 30, 2018 from $19.72 million for the same period last year. This change was in line with the decrease in sales for the three months ended September 30, 2018. Occupancy costs consist of store-level expenses such as rental expenses, property taxes, and other store specific costs. Occupancy costs increased by $0.12 million, or 6.2%, to $2.01 million for the three months ended September 30, 2018 from $1.89 million for the same period last year. The increase was mainly attributable to increased taxes and store specific costs and the rent for the iFresh E. Colonial, Inc. store. Gross margin decreased by 3.1 percentage points to 16.1% for the for the three months ended September 30, 2018 from 19.2% for the same period last year.

For the wholesale segment, the cost of sales decreased by $1.49 million, or 29.9%, to $3.51 million for the three months ended September 30, 2018 from $5.00 million for the same period last year. The decrease in cost of sales was on par with the decrease in sales. Gross margin decreased by 3.3 percentage points to 20.8% for the three months ended September 30, 2018 from 24.1% for the same period last year.

Loss from operations

Selling, general, and administrative increased by $1.53 million, or 20.2%, to $9.10 million for the three months ended September 30, 2018 from $7.57 million for the same period last year. The increase in selling, general, and administrative expenses was mainly attributable to $0.7 million of litigation loss we accrued in this quarter and $0.7 million in stock-based compensation for stock issued to employees.

Loss from operations was $4.03 million for the three months ended September 30, 2018, compared to $0.85 million for the same period last year.

Net loss

The Company incurred a net loss of $4.17 million for the three months ended September 30, 2018, compared to $0.07 million for the same period last year. Basic and diluted net loss per share was $0.28 for the three months ended September 30, 2018, compared to $0.005 for the same period last year.

EBITDA

Adjusted EBITDA was a loss of $3.18 million for the three months ended September 30, 2018, compared to EBITDA income of $ 0.72 million for the same period last year.

Non-GAAP Financial Measures

In addition to the Company’s U.S. GAAP results, this press release includes a discussion of EBITDA, a non-GAAP financial measure. The Company’s management defines Adjusted EBITDA as earnings before interest expense, income taxes, depreciation, and amortization expense, store opening costs, and non-recurring expenses. All of the omitted items are either (i) non-cash items or (ii) items that we do not consider in assessing the Company’s ongoing operating performance. Because Adjusted EBITDA omits non-cash items, the Company’s management believes that Adjusted EBITDA is less susceptible to variances in actual performance resulting from depreciation, amortization, and other non-cash charges and more reflective of other factors that affect its operating performance. iFresh’s management believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing the company’s financial measures with other specialty retailers, many of which present similar non-GAAP financial measures to investors.

	For the Three Months Ended September 30
($ millions)	2018		2017
Net loss	(4.17)		(0.07)
Interest expenses	0.40		0.21
Income tax provision	–		0.03
Depreciation	0.48		0.43
Amortization	0.10		0.12
Adjusted EBITDA	(3.18)		0.72

Six Months Ended September 30, 2018 Financial Highlights

• Net sales decreased by 6.8% to $61.37 million
• Gross profit decreased by 15.5% to $11.50 million
• Net loss was $6.04 million
• Adjusted EBITDA was a loss of $4.00 million or (6.5%) to sales
• Basic and diluted net loss per share was $0.42, compared to $0.03 for the six months ended September 30, 2017 

Six Months Ended September 30, 2018 Financial Results

Net sales

Net sales for the six months ended September 30, 2018 decreased by $4.50 million, or 6.8%, to $61.37 million from $65.87 million for the same period last year. The decrease in net sales was mainly due to the decrease in sales from both retail and wholesale segments.

	For the Six Months Ended September 30
	2018						2017
($ millions)	Revenue		Cost of Sales		Gross Margin		Revenue		Cost of Sales		Gross Margin
Retail segment	51.76		42.53		17.8%		53.11		42.46		20.1%
Wholesale segment	9.62		7.34		23.7%		12.76		9.80		23.2%
Total	61.37		49.87		18.7%		65.87		52.26		20.7%

Net sales from the retail segment decreased by $1.36 million, or 2.6%, to $51.76 million for the six months ended September 30, 2018 from $53.11 million for the same period last year. The decrease resulted mainly from our Quincy and Boston, Massachusetts stores, which have been engaged in ongoing lease improvement and are also facing more competition in their local markets. The Company believes the decline in sales is temporary. 

Net sales from the wholesale segment decreased by $3.14 million, or 24.6%, to $9.62 million for the six months ended September 30, 2018 from $12.76 million for the same period last year. The decrease was attributable in part to decreases in sales to related parties. This summer, the Company’s affiliate companies purchased fruit and vegetables from local farmers to supply more fresh goods to their customers.

Gross profit and gross margin

The total cost of sales decreased by $2.39 million, or 4.6%, to $49.87 million for the six months ended September 30, 2018 from $52.26 million for the same period last year. Gross profit decreased by $2.11 million, or 15.5%, to $11.50 million for the six months ended September 30, 2018 from $13.61 million for the same period last year. Overall gross margin decreased by 2.0 percentage points to 18.7% for the six months ended September 30, 2018, compared to 20.7% for the same period last year.

For the retail segment, total cost of sales consists of cost of sales and occupancy costs. Cost of sales increased by $0.06 million, or 0.2%, to $38.69 million for the six months ended September 30, 2018 from $38.62 million for the same period last year. The increase was due to a change in the Company’s purchasing policy for stores outside New York. In the summer, to provide customers with fresh fruit and vegetables, the Company’s retail stores increased purchases from local farms instead of purchasing directly from the Company’s wholesale subsidiaries, which increased its cost of sales. Occupancy costs consist of store-level expenses such as rental expenses, property taxes, and other store specific costs. Occupancy costs increased by $4,882, or 0.1%, to $3.84 million for the six months ended September 30, 2018 from $3.84 million for the same period last year. This change is due to normal business fluctuations. Gross margin decreased by 2.3 percentage points to 17.8% for the for the six months ended September 30, 2018 from 20.1% for the same period last year.

For the wholesale segment, the cost of sales decreased by $2.46 million, or 25.1%, to $7.34 million for the six months ended September 30, 2018 from $9.80 million for the same period last year. The decrease in cost of sales was consistent with the significant decrease of sales from the wholesale segment in 2017. Gross margin increased by 0.5 percentage points to 23.7% for the for the six months ended September 30, 2018 from 23.2% for the same period last year.

Loss from operations

Selling, general, and administrative expenses increased by $2.08 million, or 13.8%, to $17.18 million for the six months ended September 30, 2018 from $15.10 million for the same period last year. The increase in selling, general, and administrative expenses was mainly attributable to the accrual of legal expenses of $1.3 million as well as $0.7 million of stock compensation issued to employees for compensation.

Loss from operations was $5.68 million for the six months ended September 30, 2018, compared to $1.49 million for the same period last year.

Net loss

Net loss was $6.04 million for the six months ended September 30, 2018, compared to $0.38 for the same period last year. Basic and diluted net loss per share was $0.42 for the six months ended September 30, 2018, compared to $0.03 for the same period last year.

EBITDA

Adjusted EBITDA was a loss of $4.00 million for the six months ended September 30, 2018, compared to EBITDA income of $ 0.72 million for the same period last year.

Non-GAAP Financial Measures

The Company’s Adjusted EBITDA for the six months ended September 30, 2018 is summarized in the following chart:

	For the Six Months Ended September 30
($ millions)	2018		2017
Net loss	(6.04)		(0.38)
Interest expenses	0.64		0.38
Income tax provision	0.31		(0.26)
Depreciation	0.94		0.83
Amortization	0.14		0.16
Adjusted EBITDA	(4.00)		0.72

Financial Condition

As of September 30, 2018, the Company had cash and cash equivalents of $0.93 million, compared to $0.64 million as of March 31, 2018. Net cash used in operating activities was $5.86 million for the six months ended September 30, 2018, compared to $3.32 million for the same period last year. Net cash provided by investing activities was $0.37 million for the six months ended September 30, 2018, compared to net cash used in investing activities of $0.88 million for the same period last year. Net cash provided by financing activities was $5.78 million for the six months ended September 30, 2018, compared to $2.68 million for the same period last year.

In October 2018, after the most recent reporting quarter, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company sold an aggregate of 1,275,000 shares of common stock in a registered direct offering and warrants to purchase up to approximately 1,170,000 shares of the Company’s Common Stock in a concurrent private placement, for gross proceeds of approximately $2.55 million.

About iFresh, Inc.

iFresh Inc. (IFMK), headquartered in Long Island City, New York, is a leading Asian American grocery supermarket chain and online grocer. With nine retail supermarkets along the U.S. eastern seaboard (with additional stores in Glen Cove, Miami, and Connecticut opening soon), and two in-house wholesale businesses strategically located in cities with a highly concentrated Asian population, iFresh aims to satisfy the increasing demands of Asian Americans (whose purchasing power has been growing rapidly) for fresh and culturally unique produce, seafood, and other groceries that are not found in mainstream supermarkets. With an in-house proprietary delivery network, online sales channel, and strong relations with farms that produce Chinese specialty vegetables and fruits, iFresh is able to offer fresh, high-quality specialty produce at competitive prices to a growing base of customers. For more information, please visit: http://www.ifreshmarket.com/.

Forward-Looking Statements

This announcement contains forward-looking statements. Forward-looking statements provide our current expectations or forecasts of future events. Forward-looking statements include statements about our expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “ongoing,” “plan,” “potential,” “predict,” “project,” “will” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this announcement include, but are not limited to, statements regarding our disclosure concerning the Company’s operations, cash flows, financial position and dividend policy.

For more information, please contact:

At the Company:
iFresh, Inc.
Email: [email protected]

Investor Relations:
Tina Xiao
Ascent Investor Relations LLC
Phone: +1-917-609-0333
Email: [email protected]

iFRESH INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

		September 30,				March 31,
		2018				2018
ASSETS		(UNAUDITED)
Current assets:
Cash and cash equivalents		$	931,722			$	640,915
Accounts receivable, net			4,662,114				4,903,340
Inventories, net			10,919,032				10,905,484
Prepaid expenses and other current assets			2,218,595				1,925,893
Total current assets			18,731,463				18,375,632
Advances and receivables – related parties			6,719,740				10,019,688
Property and equipment, net			20,377,786				17,818,805
Intangible assets, net			1,100,003				1,166,669
Security deposits			1,233,601				1,247,106
Deferred income taxes			–				313,832
Total assets		$	48,162,593			$	48,941,732
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	13,545,161				15,561,956
Deferred revenue			587,173				326,459
Borrowings against lines of credit, current, net			22,040,298				17,044,486
Notes payable, current			113,423				135,203
Capital lease obligations, current			150,717				55,634
Accrued expenses			1,941,790				873,949
Taxes payable			–				1,606,504
Other payables, current			1,385,815				1,172,360
Total current liabilities			39,764,377				36,776,551
Notes payable, non-current			181,998				231,095
Capital lease obligations, non-current			475,354				70,724
Deferred rent			6,490,175				6,319,386
Other payables, non-current			82,200				78,500
Total liabilities			46,994,104				43,476,256
Commitments and contingencies
Shareholders’ equity
Preferred shares, $0.0001 par value, 1,000,000 shares authorized; none issued			–				–
Common stock, $0.0001 par value; 100,000,000 shares authorized; 14,849,497 and 14,220,548 shares issued and outstanding as of September 30, 2018 and March 31, 2018, respectively			1,485				1,422
Additional paid-in capital			11,173,127				9,428,093
Accumulated deficit			(10,006,123	)			(3,964,039	)
Total shareholders’ equity			1,168,489				5,465,476
Total liabilities and shareholders’ equity		$	48,162,593				48,941,732

iFRESH INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

		For the three months ended								For the six months ended
		September 30				September 30				September 30				September 30
		2018				2017				2018				2017
Net sales		$	29,421,093			$	30,764,800			$	59,092,916			$	60,892,655
Net sales-related parties			863,710				2,575,092				2,280,028				4,975,763
Total net sales			30,284,803				33,339,892				61,372,944				65,868,418
Cost of sales			22,451,875				22,765,456				44,054,792				44,468,196
Cost of sales-related parties			744,809				1,960,566				1,973,213				3,952,496
Retail occupancy costs			2,010,412				1,893,762				3,841,486				3,836,604
Gross profit			5,077,707				6,720,108				11,503,453				13,611,122
Selling, general and administrative expenses			9,103,577				7,570,836				17,179,018				15,101,905
Loss from operations			(4,025,870	)			(850,728	)			(5,675,565	)			(1,490,783	)
Interest expense, net			(399,123	)			(208,967	)			(644,826	)			(376,637	)
Other income			259,571				1,017,510				592,140				1,219,415
Loss before income taxes			(4,165,422	)			(42,185	)			(5,728,251	)			(648,005	)
Income tax provision (benefit)			–				27,336				313,833				(263,574	)
Net Loss		$	(4,165,422	)		$	(69,521	)		$	(6,042,084	)		$	(384,431	)
Net income (loss) per share:
Basic		$	(0.28	)		$	(0.005	)		$	(0.42	)		$	(0.03	)
Diluted		$	(0.28	)		$	(0.005	)		$	(0.42	)		$	(0.03	)
Weighted average shares outstanding:
Basic			14,709,437				14,166,922				14,543,995				14,298,678
Diluted			14,709,437				14,166,922				14,543,995				14,298,678

iFRESH INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

		For the six months ended
		September 30		September 30
		2018		2017
Cash flows from operating activities
Net loss		$(6,042,084)		$(384,431)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation expense		943,485		832,667
Amortization expense		135,103		157,916
Share-based compensation		744,413		136,409
Bad debt provision		233,448		–
Deferred income taxes (benefit)		313,832		(263,574)
Changes in operating assets and liabilities:
Accounts receivable		7,778		(1,073,869)
Inventories		(13,548)		(1,525,798)
Prepaid expenses and other current assets		(292,702)		(380,241)
Security deposits		13,505		(99,015)
Accounts payable		(2,016,792)		3,312,226
Deferred revenue		260,714		(5,267)
Accrued expenses		1,067,841		72,601
Taxes payable		(1,606,504)		(262,292)
Deferred rent		170,789		469,550
Other liabilities		217,215		(4,306,609)
Net cash used in operating activities		(5,863,507)		(3,319,727)
Cash flows from investing activities
Cash advanced to (received from) related parties		(1,490,431)		1,138,460
Cash received from repayment of related party receivables		4,790,380		–
Acquisition of property and equipment		(2,927,698)		(2,021,758)
Net cash provided by (used in) investing activities		372,251		(883,298)
Cash flows from financing activities
Borrowings against Term loan		3,950,000		1,050,000
Borrowings against lines of credit		1,750,000		2,500,000
Repayments on term loan		(772,625)		–
Repayments on lines of credit borrowings		–		(652,199)
Repayments on notes payable		(70,877)		(187,401)
Payments on capital lease obligations		(75,056)		(33,070)
Cash received from issuance of stock		1,000,621		–
Net cash provided by financing activities		5,782,063		2,677,330
Net increase (decrease) in cash and cash equivalents		290,807		(1,525,695)
Cash and cash equivalents at beginning of the period		640,915		2,550,819
Cash and cash equivalents at the end of the period		$931,722		$1,025,124
Supplemental disclosure of cash flow information
Cash paid for interest		$620,248		$327,900
Cash paid for income taxes		$1,606,504		–
Supplemental disclosure of non-cash investing and financing activities
Capital expenditures funded by capital lease obligations and notes payable		$772,675		$217,193