Mr. Joseph Abbandonato reports

IMAFLEX INC. ANNOUNCES RESULTS FOR THE QUARTER ENDED JUNE 30, 2014

Imaflex Inc. has released results for the quarter ended June 30, 2014.

                                    FINANCIAL HIGHLIGHTS
                     (in thousands of dollars except per-share amounts)

                                                       Q2 2014  Q2 2013  YTD 2014  YTD 2013

Sales                                                   15,267   14,186    29,690    26,983  
Cost of sales (excluding amortization)                  13,297   12,371    26,341    23,394  
Gross profit (before amortization)                       1,970    1,815     3,349     3,589   
Gross profit (before amortization)                        12.9%    12.8%     11.3%     13.3%   
Amortization of production equipment                       307      273       619       538     
Gross profit                                             1,663    1,542     2,730     3,051   
Gross profit                                              10.9%    10.9%      9.2%     11.3%   
Expenses                                                 1,478    1,310     2,916     2,687   
FX loss (gain)                                             475     (289)       71      (457)   
Profit (loss) before income taxes                         (290)     521      (257)      821     
Provision for income taxes                                  65      125       155       195     
Profit (loss)                                             (355)     396      (412)      626     
Basic and diluted earnings (loss) per share             (0.008)   0.009    (0.009)    0.015   
EBITDA                                                     184      916       660     1,609   

The results include those of Imaflex Inc., located in Montreal, Que., its divisions Canguard Packaging and Canslit, located in Victoriaville, Que., and its wholly owned subsidiary, Imaflex USA Inc., located in Thomasville, N.C.

Sales

Sales increased by $1,081,000, or 7.6 per cent, in the second quarter of 2014 compared with 2013. This increase is mainly attributable to an improvement in the product mix as well as a shift in market dynamics which resulted in an increased average sales price per pound. The higher foreign exchange rate used to convert United States dollars to Canadian dollars when comparing with the second quarter of 2013 also contributed to the increase.

Over the six-month period, sales increased by $2,707,000 or 10 per cent, due to a higher average selling price of film as well as to the stronger U.S. dollar over the six-month period in 2014 compared with 2013. The company was able to achieve this growth despite the fact that sales of mulch film did not reach the expected volumes due to unfavourable weather in the southeast U.S. and volumes decreased compared with 2013. In the second quarter of 2014, shipments of mulch film increased compared with the first quarter of 2014 and, unless conditions further negatively impact crop preparation, management expects to have a strong demand for the remainder of the year.

Gross profit margin

In the second quarter of 2014, gross profit before amortization of production equipment increased by $155,000 compared with 2013 and gross profit margin increased from 12.8 per cent to 12.9 per cent. This is mainly due to a more favourable sales mix and to an increase in the average sales price per pound. The company's U.S. operations had a slightly lower gross profit as it prepares for growth; however, management anticipates improvements in the third quarter of 2014. The amortization of production equipment increased by $34,000 and the gross profit net of the amortization of production equipment increased by $121,000, from $1,542,000 in the second quarter of 2013 to $1,663,000 in the second quarter of 2014.

Over the six-month period, gross profit before amortization of production equipment decreased by $240,000 and gross profit margin decreased from 13.3 per cent for the six-month period in 2013 to 11.3 per cent in 2014. The improvements in the second quarter were offset by difficulties encountered in the first quarter of 2014: the difficult weather in the southeastern U.S. had a negative impact on the sale of mulch film, and sharp increases in the value of the U.S. dollar led to rapid increases in the cost of raw material, which the company absorbed for an important part of the first quarter. Amortization expense of production equipment increased by $81,000 and gross profit decreased from $3,051,000 in 2013 to $2.73-million in 2014.

Selling and administrative

Selling and administrative expenses increased by $129,000 in the second quarter of 2014 compared with 2013, and by $224,000 for the six-month period. In both cases, the increase is mainly attributable to an addition to the company's management midway in 2013, the impact of the stronger U.S. dollar on the expenses incurred in the company's U.S. operations as well as a higher level of sales leading to a higher commission expense. As a percentage of sales, however, selling and administrative expenses remained relatively stable at 8.6 per cent in the second quarter of 2014 compared with 8.4 per cent in 2013 and 8.9 per cent for the six-month periods in both 2013 and 2014.

Net income

Profit for the second quarter decreased from $396,000 in 2013 to a loss of $355,000 in 2014. This is mainly due to the large negative impact of foreign exchange as well as the increase in selling and administrative expenses. Although gross profit increased, these improvements were largely hidden by the important swing in foreign exchange, a large portion of which does not impact the company's cash flow. Despite the reported loss, the results show that management's strategy is starting to bring results after having suffered less than expected sales in the first quarter of 2014. Over the six-month period, profit was again negatively impacted by unfavourable foreign exchange and the weaker performance in the first quarter of 2014.

Capital resources

The company has an operating line of credit with its bankers to a maximum of $8.5-million, bearing interest at a rate of prime plus 1.85 per cent. The line of credit is secured by trade receivables and inventories. As at June 30, 2014, the company had drawn $7,832,998 on its line of credit ($7,438,682 as at Dec. 31, 2013). The company's working capital increased since Dec. 31, 2013, going from $143,234 to $2,347,510, mostly due to the inclusion of the long-term borrowings in both current and non-current liabilities, according to when the payments are due. During the first quarter of 2014, Imaflex refinanced a long-term debt in order to replenish working capital and settled the balance of purchase price on the business acquisition. Because the increase in trade payables and bank indebtedness were more than offset by the increase in trade receivables and inventories, management believes working capital is sufficient for its continuing operations. Management does not however exclude the possibility of obtaining additional financing in order to replenish working capital or specific capital projects if need be.

Management outlook

In this second quarter, management is pleased to report that the company is making headway on the many various segments, which together create the totality of its complex operations. In spite of the cold weather which negatively impacted the company's first quarter and the $764,000 negative foreign exchange variance between the second quarter results in 2013 and 2014, its operational performance is improving.

Management is also pleased to report that its strategic plan of creating long-term value at the expense of short-term profits is progressing, as the company makes progress in the agricultural film market. This long-term, value-creation strategy was always recognized by the company's bankers, but never more so than in the present. Both the company's long- and short-term lenders, institutions it has known and dealt with since Imaflex was founded, have once again confirmed their belief in management's strategic plans by facilitating the borrowing needs of the company at an overall lower cost.

Management is also pleased to report that it is in the midst of working with a few Fortune 500 companies on various projects. The company will comment on these developments via press release(s), once the preliminary objectives have been attained.

We seek Safe Harbor.