RYU Apparel Reports Second Quarter 2017 Results

VANCOUVER, Aug. 10, 2017 /CNW/ - RYU Apparel Inc. (TSX VENTURE: RYU & Frankfurt Stock Exchange: RYA) (the "Company"), creator of urban athletic apparel, is pleased to report its financial results for the six months ended June 30, 2017.

Revenue in the second quarter of 2017 was $641,231, 113% higher than revenue of $300,773 during the same period in 2016. Now into its second year of operations, the RYU team is encouraged with its sales record to date and a 46% gross profit for the quarter.

In Canadian dollars	Three months ended June 30, (unaudited)		Six months ended June 30, (unaudited)
	2017	2016	2017	2016
Revenue	$641,231	$300,773	$1,108,234	$560,500
Gross profit	$294,776	$139,185	$514,032	$274,179
Gross profit %	46%	46%	46%	49%

Second quarter 2017 results included additional revenue from the Company's new retail store locations in Downtown Vancouver and Park Royal South in West Vancouver whereas second quarter revenue in 2016 was comprised primarily of sales from the Flagship retail store and e-commerce sales.

During the six months ended June 30, 2017, the Company achieved the following milestones:

• RYU continues to show a balanced ratio of apparel sales between men and women at 46% and 54% respectively. By identifying an underserved gap in the industry for men, and developing the Beautiful Tough™ brand positioning that's resonating with women, RYU has achieved an enviable gender balance that is rare in the industry.
  
  
• As an omni-channel retailer, RYU currently has 17% of revenue from e-commerce with a target of reaching 30% by the end of 2018.
  
  
• RYU's retail store expansion plan is on target to have five stores open by the end of 2017. The Company currently has three stores in operation and two under construction. In addition to the opening of Park Royal South on March 28, 2017, management anticipates that the third quarter 2017 will see the opening of its first Toronto store on Queen Street West, and its first enclosed mall location at Metrotown in Vancouver.

Retail store expansion plan			Square Footage		Opening Date
Existing Stores
	Vancouver – West 4^th Avenue (Flagship)		3,200		November 2015
	Vancouver – Thurlow Street		1,100		November 2016
	Vancouver – Park Royal South		3,967		March 2017
New Stores Under Construction
	Vancouver – Metrotown		2,002		Q3 2017
	Toronto – Queen Street West		2,220		Q3 2017

Second quarter summary:

• Second quarter revenue of $641,231 compared with $300,773 in the same period in fiscal 2016. Revenue increased by 113% as it included sales from three versus one retail store and growth in e-commerce sales from its improved website that had higher visitor traffic than in early 2016.
  
  
• Second quarter revenue was adversely affected because of a shortage on key stock items and sizes due to higher than anticipated demand and after keeping inventory purchases to a minimum in 2016. In the first and second quarter of 2017, RYU started placing inventory deposits to fill the gaps, but deliveries did not begin until the end of the second quarter and such deliveries are expected to continue through the end of the third quarter of 2017. As a result, closing inventory as at June 30, 2017 increased 61% to $1,716,330 from $1,067,560 at December 31, 2016, and inventory deposits increased 369% to $539,276 from $115,017.
  
  
• Second quarter gross profit of $294,776 compared with $139,185 in the same period in fiscal 2016, an increase of 112%. Gross profit percentage of 46% was achieved in both the second quarter of 2017 and 2016.
  
  
• Second quarter expenses of $2,475,870 compared with $2,245,903 in the same period in fiscal 2016. The increase of 10% is primarily due to the expansion of our retail operations from one to three stores.
  
  
• Second quarter comprehensive loss was $2,181,094 compared with $1,680,184 in the same period in fiscal 2016. The loss was 30% higher due to the 2016 recovery of the warrant derivative of $261,241, a non-cash item, and the $165,283 gain on settlement of debt recognized in the first quarter of 2016. Without these outliers, comprehensive loss in the second quarter of 2017 and 2016 would have been $2,181,094 and $2,106,718 respectively. The $74,377 (4%) increase is due to higher retail store costs, the share based payments from the stock option grant in February 2017 and higher depreciation of leasehold improvements.
  
  
• The Company closed a non-brokered private placement, raising gross proceeds of $2,252,841 on June 22, 2017.

Year-to-date summary:

• Six month revenue of $1,108,234 compared with $560,500 in the same period in fiscal 2016. Revenue increased by 98% as it included sales from three versus one retail store and growth in e-commerce sales from its improved website that had higher visitor traffic than in early 2016. The Park Royal location opened March 2017.
  
  
• Six month revenue was adversely affected because of a shortage on key stock items and sizes due to higher than anticipated demand and after keeping inventory purchases to a minimum in 2016. In the first and second quarter of 2017, RYU started placing inventory deposits to fill the gaps, but deliveries did not begin until the end of the second quarter and such deliveries are expected to continue through the end of the third quarter of 2017. As a result, closing inventory as at June 30, 2017 increased 61% to $1,716,330 from $1,067,560 at December 31, 2016, and inventory deposits increased 369% to $539,276 from $115,017.
  
  
• Six month gross profit of $514,032 compared with $274,179 in the same period in fiscal 2016, an increase of 87%. Gross profit percentage of 46% in the six months ended June 30, 2017 was lower than gross profit of 49% in 2016 due to the difference in the weighted average cost of finished goods inventory and the amount of sales discounts applied in each period.
  
  
• Six month expenses of $4,802,273 compared with $4,176,593 in the same period in fiscal 2016. The increase of 15% is partially due to depreciation, foreign currency fluctuations and share based payments in relation to stock option grants. Without these three items, expenses increased $286,541 (7%) during the comparative periods, aligned with the increase in retail operations from one to three stores.
  
  
• Six month comprehensive loss was $4,280,537 compared with $2,420,290 in the same period in fiscal 2016. The loss was 77% higher due to the 2016 recovery of the warrant derivative of $1,267,504, a non-cash item, and the $214,620 gain on settlement of debt for two transactions that took place in 2016. Without these outliers, comprehensive loss during the six months ended June 30, 2017 and 2016 would have been $4,288,241 and $3,902,414 respectively. The $385,827 (10%) increase is due to the additional depreciation from the Thurlow and Park Royal stores, the share based payments from the stock option grant in February 2017 and foreign currency fluctuations.
  
  
• The Company closed a short form prospectus offering, raising gross proceeds of $3,734,441 on February 2, 2017 and a non-brokered private placement, raising gross proceeds of $2,252,841 on June 22, 2017.

For convenience, copies of the Company's unaudited condensed consolidated interim statements of financial position, comprehensive loss and cash flows for the periods discussed herein are attached to this news release.  Readers are encouraged to review such statements in their entirety, including the notes thereto, on SEDAR.  Full details of the Company's financial performance can be obtained by viewing the unaudited condensed consolidated interim financial statements and corresponding MD&A available on SEDAR.

For regular updates on RYU Apparel visit: http://ryu.com

About RYU
RYU Apparel Inc. is tailored innovation for the urban athlete. An award winning athletic apparel and accessories brand engineered for the fitness, training and performance of the multi-discipline athlete. Designed without compromise for comfort, style and durability, RYU exists to facilitate human performance. For more information, visit: http://ryu.com

On Behalf of the Board

RYU APPAREL INC.
"Marcello Leone"
Marcello Leone, CEO, President and Chairman of the Board
Tel: [phone]

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release contains forward-looking information that involve various risks and uncertainties regarding future events. Such forward-looking information can include without limitation statements based on current expectations involving a number of risks and uncertainties and are not guarantees of future performance of the Company, such as statements that: (i) the Company has a target of reaching 30% of revenue from e-commerce by the end of 2017; (ii) the expansion plan is to have five stores open by the end of 2017, and the intention to open the Toronto store on Queen Street West and the Company's first enclosed mall location in Metrotown within the third quarter of 2017; and (iii) deliveries of inventory are expected to continue through the end of the third quarter 2017. There are numerous risks and uncertainties that could cause actual results and the Company's plans and objectives to differ materially from those expressed in the forward-looking information, including the ability of the company to finance operations, the ability of the management team to execute on its business plan, risks in the apparel industry in general, and delays and risks associated with renovating and opening new store locations. Actual results and future events could differ materially from those anticipated in such information. These and all subsequent written and oral forward-looking information are based on estimates and opinions of management on the dates they are made and are expressly qualified in their entirety by this notice. Except as required by law, the Company does not intend to update these forward-looking statements.

RYU APPAREL INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
(Expressed in Canadian dollars)
As at
			June 30,  2017 (unaudited)		December 31,  2016
ASSETS
Current
	Cash		$	882,511	$	767,263
	Accounts receivable		98,367		82,297
	Inventory		1,716,330		1,067,560
	Prepaid expenses and deposits		669,531		263,912
			3,366,739		2,181,032
Non-current
	Deposits		163,216		172,521
	Property and equipment		1,802,438		1,439,500
	Intangible assets		2,324		6,549
			$	5,334,717	$	3,799,602
LIABILITIES AND EQUITY
Current
	Accounts payable		$	956,812	$	745,894
	Accrued liabilities		181,242		169,404
	Current portion of finance lease		14,417		14,779
	Deferred revenue		71,675		64,732
			1,224,146		994,809
Non-current
	Finance lease		53,932		63,296
	Derivative liability		-		7,703
			53,932		1,065,808
Equity
	Share capital		47,479,100		42,230,355
	Equity reserve		7,281,991		6,927,354
	Deficit		(50,771,546)		(46,491,009)
	Accumulated other comprehensive income		67,094		67,094
			4,056,639		2,733,794
			$	5,334,717	$	3,799,602

RYU APPAREL INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF COMPREHENSIVE LOSS - UNAUDITED
(Expressed in Canadian dollars)
		Three months ended June 30				Six months ended June 30
			2017		2016		2017		2016
Revenue		$	641,231	$	300,773	$	1,108,234	$	560,500
Cost of sales			346,455		161,588		594,202		286,321
Gross profit			294,776		139,185		514,032		274,179
			46%		46%		46%		49%
Expenses
	Depreciation		123,922		60,820		190,609		118,646
	Foreign exchange loss (gain)		7,539		16,479		33,514		(130,969)
	Interest and bank charges		6,151		46,556		36,317		107,213
	Investor relations		81,663		421,929		135,111		641,138
	Office and general		579,337		215,955		1,036,505		477,604
	Product creation		113,303		168,480		315,784		184,479
	Professional fees		165,604		379,527		188,004		833,445
	Salaries and benefits		906,320		808,388		1,660,789		1,394,021
	Selling and marketing		374,578		11,913		859,622		363,049
	Share-based payments		52,686		90,590		255,768		153,074
	Travel and entertainment		64,767		25,266		90,249		34,893
			(2,475,870)		(2,245,903)		(4,802,272)		(4,176,593)
Other items
	Gain on settlement of debt		-		165,283		-		214,620
	Recovery of warrant derivative liability		-		261,241		7,703		1,267,504
Comprehensive loss		$	(2,181,094)	$	(1,680,194)	$	(4,280,537)	$	(2,420,290)
Loss per share - Basic and diluted		$	(0.01)	$	(0.02)	$	(0.02)	$	(0.03)
Weighted average number of common
shares outstanding - basic and diluted			188,213,601		95,605,753		182,434,070		89,313,614

RYU APPAREL INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS - UNAUDITED
(Expressed in Canadian dollars)
For the six months ended June 30
				2017		2016
CASH FLOWS FROM OPERATING ACTIVITIES
	Net loss			$	(4,280,537)	$	(2,420,290)
	Items not affecting cash:
		Depreciation		190,609		118,646
		Share-based payments		255,768		153,074
		Foreign exchange		-		(69,299)
		Accrued interest		-		66,175
		Gain on settlement of debt		-		(214,620)
		Recovery of warrant derivative liability		(7,703)		(1,267,504)
	Changes in non-cash working capital
		Accounts receivable		(16,070)		144,202
		Inventory		(648,770)		(31,792)
		Prepaid expenses and deposits		(396,314)		(239,326)
		Accounts payable and accrued liabilities		169,733		425,308
		Deferred revenue		6,943		9,418
	Net cash flows used in operating activities			(4,726,341)		(3,326,008)
CASH FLOWS FROM INVESTING ACTIVITIES
		Property and equipment		(463,235)		(101,090)
	Net cash flows used in investing activities			(463,235)		(101,090)
CASH FLOWS FROM FINANCING ACTIVITIES
		Issuance of common shares		5,987,282		3,848,760
		Cash share issuance costs		(683,949)		(148,412)
		Short-term loans received		154,000		709,050
		Repayment of short-term loans		(154,000)		(836,208)
		Exercise of warrants		8,800		-
		Finance lease		(7,309)		(7,981)
	Net cash flows provided by financing activities			5,304,824		3,565,209
Change in cash				115,248		138,111
Cash – beginning				767,263		104,518
Cash – end				$	882,511	$	242,629
Cash paid for interest				$	697	$	4,208
Supplemental cash flow disclosure – non cash transactions
		Additions of property and equipment included in accounts payable		$	86,087	$	5,325
		Common shares issued for settlement of accounts payable		$	-	$	719,260
		Common shares issued for services		$	35,481	$	140,600
		Finders' warrants issued for share issuance costs		$	98,869	$	26,381

SOURCE RYU Apparel Inc.

Investor Relations, Contact: Anna Brazier, Investor Relations, 1-844-535-2880, [email protected], www.ryu.com; For Media inquiries, contact: Kelsi Carleton, 604-738-2220, [email protected]