Fab-Form Industries Ltd. — Management Reports 2021

Apr 27, 2021

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MD&A For the year ended 31 December 2020

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FAB-FORM INDUSTRIES LTD. MANAGEMENT DISCUSSION & ANALYSIS

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For the year ended 31 December 2020

Construction budgets in 2020 changed dramatically due to an increase in lumber prices of over 130%. Housing demand also increased at the end of the year as a result of low interest rates, suspended construction activities due to Covid-19 were resumed in 2021. These change will be very positive for our products:

• Nudura ICF wall forms are now more cost effective than traditional plywood wall forms;

• Fastfoot is dramaticaly less expensive than dimensional lumber footing forms;

• Fast-Tube is slgnificantly less expensive than cardboard based column forms.

Demand for our proprietary products, especially Fastfoot® and Bracing increased by 31% and 10% respectively in 2020. Fastfoot increased due to contractors substituting the lower cost fabric over dimensional lumber. Our bracing increased due to builders switching to ICFs, discovering our cost effective bracing system. See section 1, for a detailed analysis of sales by product. This increase is very promision for 2021 given the quantitative easing induced by central banks, and the shift of housing demand to single family construction, both due to Covid-19.

Management believes strongly in the development of new products to grow the business. Section 8 details innovative eco-friendly products that are in the pipeline.

Lease agreements for premises leased in 2013 expire in July 2021. Management believes these will be renewed for a further five years. Accordingly, an addition to Right of Use Assets and Lease Liabilities of $463,240 is recognised on the balance sheet in accordance with IFRS 16.

As always, thank you, board members, shareholders, and progressive dealers and contractors for your continued support and commitment.

Sincerely

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Richard Fearn President and CEO 26 April 2021

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Don Russell Chief Financial Officer 26 April 2021

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

This discussion and analysis of the financial results of Fab-Form Industries Ltd. (“Fab-Form” or the “Company”) should be read in conjunction with the audited financial statements for the year 2020 and accompanying notes. The results reported herein have been prepared in accordance with International Financial Reporting Standards (IFRS) and are presented in Canadian dollars unless otherwise stated. Additional information relating to the Company can be found on the SEDAR (System for Electronic Document Analysis and Retrieval) website at www.sedar.com.

FORWARD-LOOKING STATEMENTS

Some statements contained in this MD&A constitute “forward-looking statements” as is defined in applicable securities laws. These statements include, without limitation, the success of developing, manufacturing, and distributing new products and other similar statements concerning anticipated future events, conditions, or results that are not historical in nature, and reflect management’s current estimates, beliefs, intentions, and expectations. These statements are not guaranteeing of future performance. The Company cautions that all forward-looking information is inherently uncertain, and that actual performance may be affected by several material factors, many of which are beyond the Company’s control. Such factors include, among others, risks and uncertainties relating to product development; the ability of the Company to obtain additional financing; the Company’s limited operating history; the need to comply with environmental and governmental regulations; potential defects in product performance; fluctuations in currency exchange rates; fluctuating prices of commodities; operating hazards and risks; competition; the uncertainty of capturing market share and other risks and uncertainties. Accordingly, actual future events, conditions, and results may differ materially from the estimates, beliefs, intentions, and expectations expressed or implied in the forward-looking information. These statements are made as of the Report Date and, except as required by law, the Company is under no obligation to update or alter any forward-looking information.

COMPANY DESCRIPTION

Fab-Form is a company domiciled in Canada and incorporated under the Company Act of British Columbia. The address of the Company’s head office is Unit 19, 1610 Derwent Way, Delta BC V3M 6W1. The Company develops, manufactures, and distributes proprietary technology to form concrete footings, columns, foundations, and walls for building structures. The Company also exclusively distributes Helix® micro rebar into the BC market and Nudura® insulating concrete form into the Lower Mainland market. The Company has traded on the TSX Venture Exchange (“TSXV” under the symbol FBF) since 2000.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

OPERATING RESULTS

Revenue Cost of sales Gross profit Other operating income/(expenses) Expenses General and administration Selling and marketing Total expenses Earnings from operations Finance cost Earnings before taxation Income tax expense Earnings Other comprehensive income Total comprehensive income	For the year ended 31 December 2020 2019 Change % $ $ $ 2,634,852 2,891,711 (256,859) (8.88) (1,794,776) (2,003,877) 209,101 (10.43) 840,076 887,834 (47,758) (5.38) 15,678 (10,280) 25,958 (252.51) (381,529) (255,918) (125,611) 49.08 (173,086) (170,921) (2,165) 1.27 (554,615) (426,839) (127,776) 29.94 301,139 450,715 (149,576) (33.19) 436 - 436 100.00 301,575 450,715 (149,140) (33.09) (81,426) (104,178) 22,752 (21.84) 220,149 346,537 (126,388) (36.47) - - - - 220,149 346,537 (126,388) (36.47)	For the Quarter ended 31 December
		2020 2019 Change %
		$ $ $ 574,278 554,701 19,577 3.53 (401,107) (338,533) (62,574) 18.48
		173,171 216,168 (42,997) (19.89) (14,312) (3,886) (10,426) 268% (161,773) (69,295) (92,479) 133.46 (36,028) (48,711) 12,683 (26.04)
		(197,801) (118,006) (79,796) 67.62
		(38,942) 94,276 (133,218) (141.31) 588 - 588 100.00
		(38,354) 94,276 (132,630) (140.68) 10,355 (8,300) 18,655 (224.76)
		(27,999) 85,976 (113,975) (132.57) - - - -
		(27,999) 85,976 (113,975) (132.57)

The Company made a net loss of $27,999 for the quarter ended compared to net profit of $85,978 in the previous year. Rebate income earned during the last quarter was reduced by $50,484 compared to 2019 and total administrative expenses increased due to payroll-related expenses. Other operating income during the year 2020 includes profit of $7,395 from sales of motor vehicles and unrealized exchange gains as compared to unrealized exchange losses in 2019.

Total sales for 2020 declined by 8.8% compared to 2019, primarily because of reduction or delaying projects due to economic conditions. (See section 1, for a detailed analysis of sales by product.

Earnings before income taxes and interest (EBIT) decreased by 33% compared to the year ended 31 Dec 2019. Net earnings for the year ended 31 Dec 2020 was $220,149 compared to $346,537 the previous year, a drop of 36.5%. Net assets attributable to shareholders increased by 13.8% at the year-end.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

1. Analysis of Revenue by Product

Bracing Fastfoot Fast-Pad Fast-Tube Helix ICF accessories Monopour Nudura ** Rentals Sundry income Used bracing & accessories	For theyear ended 31 December 2020 $ 2019 $ Change $ % 564,272 514,308 49,964 9.71 333,265 253,529 79,736 31.45 9,862 11,118 (1,257) (11.30) 15,175 19,506 (4,331) (22.20) 222,610 233,472 (10,862) (4.65%) 116,521 138,718 (22,195) (16.00) 44,243 62,450 (18,207) (29.15) 1,232,010 1,554,414 (322,404) (20.74) 75,656 83,166 (7,510) (9.03) - 3,490 (3,490) (100.00) 21,238 17,540 3,698 21.08 2,634,852 2,891,711 (256,859) (8.88)	For theQuarter ended 31 December
	2020 $	2020 $ 2019 $ Change $ %
	564,272	122,616 110,611 12,005 10.9 59,294 61,423 (2,129) (3.5) 2,466 7,596 (5,130) (67.5) 2,835 1,685 1,150 68.2 47,578 26,694 20,884 78.2 30,596 37,803 (7,207) (19.1) 7,353 12,437 (5,084) (40.9) 281,445 272,725 8,720 3.2 18,865 16,536 2,329 14.1 - 1,965 (1,965) (100.0) 1,230 5,226 (3,996) (76.5)
	333,265
	9,862
	15,175
	222,610
	116,521
	44,243
	1,232,010
	75,656
	-
	21,238
	2,634,852	574,278 554,701 19,577 3.5

The drop in annual sales of $256,859 can be attributed substantially to the decrease in Nudura sales of $322,404 (21%). Proprietary product sales increased during the year by $127,810 over 2019.

The fourth quarter sales in 2020, including Nudura, were similar to the corresponding quarter in 2019.

*Bracing Sales	2020 ($)	2019 ($)
Q1	63,602	71,262
Q2	156,350	173,545
Q3	221,704	158,890
Q4	122,616	110,611
Total	564,272	514,308

**Fastfoot sales	2020 ($)	2019 ($)
Q1	56,643	25,176
Q2	100,887	91,212
Q3	116,441	75,718
Q4	59,294	61,423
Total	333,265	253,529

*Nudura Sales	2020 ($)	2019 ($)
Q1	146,640	192,328
Q2	421,843	571,197
Q3	382,082	518,164
Q4	281,445	272,725
Total	1,232,010	1,554,414

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

Yearly Sales of Fab-Form Products

	2020 $	2019 $	2018 $	2017 $	2016 $
Bracing	564,272	514,308	377,299	293,116	313,745
Fastfoot	333,265	253,529	257,012	235,780	163,812
Fast-pad	9,862	11,118	5,760	12,734	11,325
Fast-Tube	15,175	19,506	11,572	12,647	14,072
Monopour	44,243	62,450	41,615	67,384	40,915

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Over the last five years, sales of Fab-Form products have increased significantly as shown in the table above. It is anticipated that this trend will continue as the construction industry becomes more eco-conscious.

2. Analysis of cost of sales

Total direct product COGS Indirect product COGS Waste disposal Packing materials Depreciation production equipment and tools Warehouse lease rental Variable overhead Total indirect product COGS	For theyear ended 31 December 2020 2019 Change % $ $ $ 1,731,117 1,944,399 (213,282) (10.97) 933 251 682 271.71 2,818 1,694 1,124 66.41 7,350 9,632 (2,282) (23.69) 37,694 37,820 (126) (0.33) 14,864 10,081 4,783 47.45 63,659 59,478 4,181 7.03 1,794,776 2,003,877 (209,101) (10.43)	For thequarter ended 31 December
		2020 2019 Change %
		$ $ $ 386,277 321,141 65,136 20.28 313 224 89 39.73 439 86 353 410.47 387 3,902 (3,515) (90.08) 9,144 9,461 (317) (3.35) 4,547 3,718 829 22,29
		14,830 17,391 (2,561) (14.72)
		401,107 338,533 62,574 18.48

Cost of sales for the year ended 31 Dec 2020 decreased by 10.43% compared to the year ended 31 Dec 2019, due to the drop in sales.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

3. Analysis of Administration Expenses

Amortization & depreciation Office rental amortisation Patent & TM maintenance fees Professional Fees Pubco expenses General expenses Wages and benefits Telecommunications & computers Credit Card Processing fees Provision/(reversal) for expected credit losses Total administrative expenses	For theyear ended 31 December 2020 2019 Change % $ $ $ 2,164 3,544 (1,380) (38.94) 21,409 21,022 387 1.84 285 665 (380) (57.14) 30,330 26,667 3,663 13.74 23,504 28,487 (4,983) (17.49) 20,443 13,729 6,714 48.90 224,343 110,079 114,264 103.80 19,771 21,332 (1,561) (7.32) 24,894 26,375 (1,481) (5.62) 14,387 4,018 10,369 258.06 381,529 255,918 125,611 49.08	For thequarter ended 31 December
		2020 2019 Change %
		$ $ $ 577 1,035 (458) (44.25) 5,395 5,239 156 2.98 71 71 - - 8,662 5,782 2,880 49.81 13,348 17,608 (4,260) (24.19) 5,931 4,838 1,093 22.59 121,640 22,577 99,063 438.78 4,952 4,823 129 2.67 5,306 7,074 (1,768) (25.00) (4,109) 248 4,357 1,757
		161,773 69,295 92,478 133.46

Administration expenses increased by 49% during the year compared to 2019. The increase was due to recruitment of additional staff to finance and administration department and additional compensation to Chief Executive Officer.

4. Analysis of Selling and Marketing Expenses

Bracing Fastfoot Fast-Pad Fast-Tube Helix Monopour Nudura Other Total selling & marketing	For theyear ended 31 December 2020 2019 Change % $ $ $ 57,764 48,585 9,179 18.89 37,820 20,088 17,732 88,27 5,453 - 5,453 100.00 7,440 9,946 (2,506) (25.20) 1,094 1,215 (121) (9.96) 2,599 4,268 (1,669) (39,10) 60,916 85,519 (24,603) (28.77) - 1,300 (1,300) (100.00) 173,086 170,921 2,165 1.26%	For thequarter ended 31 December
		2020 2019 Change %
		$ $ $ 8,679 14,834 (6,155) (41,49) 7,776 5,974 1,802 30.16 - - - 100.00 482 4,515 (4,033) (89.32) 419 135 284 210.37 702 1,298 (596) (45,92) 17,970 21,955 (3,985) (18.14) - - - -
		36,028 48,711 (12,683) (26.04)

The marketing budget was shifted from Nudura to Fastfoot and Bracing products to improve the marketing effectiveness. Vancouver ICF website was made mobile friendly as well as an improved menu to highlight the ICF-related content, especially installation and training.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

5. Liquidity, Cash Flow Position and Going Concern

The Company generated $518,606p from operating activities in 2020 compared to $515,759 in 2019. There were no material cashflows from investing activities during the year and cash outflow from financing activities remained flat over 2019.

Cash and cash equivalents at year end increased by $421,499. Total cash and cash equivalents at the year end was $1,299,653 compared to $878,154 at the end of 2019. The Company is debt-free and has financial liquidity and flexibility.

The financial statements have been prepared based on accounting policies applicable to a going concern. This basis presumes that funds will be available to finance future operations and that the realization of assets and settlement of liabilities, contingent obligations, and commitments will occur in the ordinary course of business of the Company.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

6. Performance of Shares on TSXV Exchange

There was continued investor interest in the shares of the Company during the year, as shown by the table below:

	2020	2019	2018	2017	2016
Share price over the last five years
 Highestprice during theyear	$0.55	$0.55	$0.99	$0.69	$0.42
 Lowestprice during theyear	$0.155	$0.27	$0.33	$0.215	$0.06
 Last traded Price	$0.39	$0.40	$0.37	$0.61	$0.20
Market capitalisation as of 31 December	$3,440,601	$3,528,822	$3,264,160	$5,381,454	$1,764,411
Net assets as of 31 December	$1,809,147	$1,588,998	$1,242,461	$558,692	$340,170
**Net assetsper share ***	$0.21	$0.18	$0.14	$0.068	$0.042
Number of transactions	145	151	192	208	111
Number of shares traded	1,127,302	1,120,311	1,411,106	2,712,699	2,196,607

• adjusted for private placement in 2018.

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Net asset attributable to common shareholders of the company has increased by 13.8% compared to corresponding net assets in 2019.

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FAB-FORM INDUSTRIES LTD.

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MANAGEMENT DISCUSSION & ANALYSIS

For the year ended 31 December 2020

7. Corporate Social Responsibilities

Federal and provincial governments introduced several programs, grants, and subsidies to support those who have been significantly impacted by the pandemic. The construction industry was impacted by lower housing starts. Despite the challenges, management made the decision to not seek any form of financial assistance from the government. It was Fab-Form’s contribution to those in society suffering from the pandemic.

Fastfoot was designed to reduce lumber usage, protect against ground water penetration into the concrete, and prevents cement contamination of the ground water. Builders and developers use our products to enact positive change to the environment.

8. Introduction of Eco-friendly Products

The technical team is currently developing a new product called “Fab-Slab”. The management expects to release this product at the end of 2021 or 2022 assuming all testing and development activities have been successfully concluded.

Management is currently improving the Fast-Tube fabric so that stretching and twisting is minimized. Management believes Fast-Tube is the future of forming concrete columns around the world.

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BUILDING GREEN from the ground up

Additional financial information on the Company can be found on SEDAR at www.sedar.com.

Approved

“Board of Directors”

26 April 2021

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FAB-FORM INDUSTRIES LTD.

FURTHER INFORMATION

FAB-FORM INDUSTRIES LTD., headquartered in Delta BC, is a manufacturer and distributor of green and cost-effective concrete forming products for the building industry. Its common shares trade on the Toronto Venture Exchange under the symbol “FBF”.

For additional information, please contact:

Joey Fearn Chief Operating Officer joey@fab-form.com

Rick Fearn

President, CEO rick@fab-form.com

Don Russell Chief Financial Officer don@fab-form.com

Vishwanath Kumar

Corporate Secretary vish@fab-form.com

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INDUSTRIES LTD.

Unit 19, 1610 Derwent Way Delta, BC V3W 6W1, Canada (604)596-3278

Shareholders and interested investors should visit:

www.fab-form.com/investor/overview.php www.vancouvericf.com www.steelfiberswest.com

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