GINSMS Announces Financial Results for the Three and Twelve Months Ended December 31, 2017 and Provides Financial Forecasts for Year 2018

CALGARY, Alberta, Feb. 13, 2018 (GLOBE NEWSWIRE) — GINSMS Inc. (TSXV:GOK) (“GINSMS” or the “Corporation”) has announced its financial results for the fourth quarter and twelve months ended December 31, 2017.

The annual audited financial statements of the Corporation for the twelve months ended December 31, 2017 are currently under audit and in the process of preparation. As required under Canadian securities law regulations, the Corporation will be disclosing and filing on SEDAR its annual audited financial statements and the related management’s discussion and analysis (“MD&A”) of the Corporation will be ready within 120 days after the end of its year end of December 31, 2017.

This financial disclosure was done in advance of the filing of the audited financial statements of the Corporation to allow GINSMS’ ultimate holding company, Beat Holdings Limited (“BHL”), a public company in Japan, formerly known as Xinhua Holdings Limited, to use certain of GINSMS’ financial information in the preparation of BHL’s financial statements and announcements.

The Corporation’s financial information for the twelve months ended December 31, 2017 is prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Highlights include:

  • Revenue of $7,386,673 for the twelve-month period ended December 31, 2017 as compared to $6,479,185 for the twelve-month period ended December 31, 2016.
  • Revenue of $1,959,794 for the three-month period ended December 31, 2017 as compared to $1,665,011 for the three-month period ended December 31, 2016.
  • Gross Profit of $767,895 for the twelve-month period ended December 31, 2017 as compared to gross profit of $1,043,789 for the twelve-month period ended December 31, 2016.
  • Gross Profit of $199,443 for the three-month period ended December 31, 2017 as compared to gross profit of $251,135 for the three-month period ended December 31, 2016.
  • Operating expenses and finance costs decreased from $2,551,304 for the twelve-month period ended December 31, 2016 to $1,892,691 for the twelve-month period ended December 31, 2017.
  • Operating expenses and finance costs decreased from $680,307 for the three-month period ended December 31, 2016 to $506,535 for the three-month period ended December 31, 2017.
  • Net loss of $1,124,717 for twelve-month period ended December 31, 2017 as compared to a net loss of $1,507,635 for twelve-month period ended December 31, 2016.
  • Net loss of $307,059 for three-month period ended December 31, 2017 as compared to a net loss of $429,983 for three-month period ended December 31, 2016.
  • The cloud-based application-to-person messaging service (the “A2P messaging”) that was introduced in March 27, 2014 has generated revenue of $1,693,797 and $6,276,759 for the three-month and twelve-month periods ended December 31, 2017, respectively.

Selected Profit and Loss Information

                 
Financial Highlights Three-month
period ended
December 31,
2017
(Unaudited)
  Three-month
period ended
December 31,
2016
(Unaudited)
  Twelve-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2016
(Audited)
 
 

Revenues $

       
A2P Messaging Service 1,693,797   1,359,032   6,276,759   5,459,386  
Software Product & Services 265,997   305,979   1,109,914   1,019,799  
  1,959,794   1,665,011   7,386,673   6,479,185  
         
Cost of sales $        
A2P Messaging Service 1,481,905   1,214,421   5,698,701   4,695,023  
Software Product & Services 278,446   199,455   920,077   740,373  
  1,760,351   1,413,876   6,618,778   5,435,396  
 

Gross profit $

       
A2P Messaging Service 211,892   144,611   578,058   764,363  
Software Product & Services (12,449 ) 106,524   189,837   279,426  
  199,443   251,135   767,895   1,043,789  
 

Gross margin %

       
A2P Messaging Service 12.5 % 10.6 % 9.2 % 14.0 %
Software Product & Services (4.7 )% 34.8 %  17.1 % 27.4 %
  10.2 % 15.1 % 10.4 % 16.1 %
         
Adjusted EBITDA(1) $ (17,711 ) (150,958 ) (250,700 ) (455,475 )
Adjusted EBITDA margin (0.9 )% (9.1 )% (3.4 )% (7.0 )%
Net earnings (loss) $ (307,059 ) (429,983 ) (1,124,717 ) (1,507,635 )
Net earnings (loss) margin (15.7 )% (25.8 )% (15.2 )% (23.3 )%
Net earnings (loss) per share $        
  Basic (0.002 ) (0.003 ) (0.008 ) (0.011 )
  Diluted N/A   N/A   N/A   N/A  
                 
  1. Adjusted EBITDA is a non-IFRS measure which does not have any standardized meaning under IFRS. Adjusted EBITDA is related to cash earnings and is defined for these purposes as earnings before income taxes, depreciation and amortization (in both cost of sales and general and administration expenses), interest expenses and also excludes certain non-recurring or non-cash expenditure. This non-IFRS measure is not recognized under IFRS and accordingly, shareholders are cautioned that this measure should not be construed as an alternative to net income determined in accordance with IFRS. The non-IFRS measure presented is unlikely to be comparable to similar measure presented by other issuers. The Corporation believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the Corporation can use to fund working capital requirements, service interest and principal debt repayment and fund future growth initiatives.

Cost of Sales

         
 

 

 

Three-month
period ended
December 31,
2017
(Unaudited)
Three-month
period ended
December 31,
2016
(Unaudited)
Twelve-month
period ended
December 31,
2017
(Unaudited)
Twelve-month
period ended
December 31,
2016
 (Audited)
         
Amortization        
– Development expenditures 84,883 29,180 167,291 116,271
Depreciation        
– Property, plant and equipment 8,679 6,569 22,903 36,007
Salaries and wages 172,462 151,949 657,176 486,678
Subcontractor costs 1,481,807 1,217,683 5,702,920 4,699,725
Software and hardware 4,878 4,739 27,079 56,211
Others 7,642 3,756 41,409 40,504
  1,760,351 1,413,876 6,618,778 5,435,396
         

Operating Expenses and Finance Costs

                 
 

 

 

Three-month
period ended
December 31,
2017
(Unaudited)
  Three-month
period ended
December 31,
2016
(Unaudited)
  Twelve-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2016
 (Audited)
 
         
Salaries and wages 180,886   189,229   715,827   923,961  
Director fees 40,000   40,000   40,000   40,000  
Professional fees 75,323   66,573   339,362   329,742  
Foreign exchange (gain)/loss (39,450 ) 79,400   (130,096 ) 95,904  
Other general & administrative expenses 53,955   62,640   236,205   261,935  
Allowance/(Reversal of allowance) for doubtful accounts   (8,249 ) 7,489   (8,249 )
Depreciation        
– Property, plant and equipment 292   1,292   1,438   11,234  
Interest expenses 142,862   249,422   629,799   896,777  
Impairment loss on property, plant and equipment 52,444     52,444    
Loss on disposal of property, plant and equipment 223     223    
  506,535   680,307   1,892,691   2,551,304  
                 

Selected Balance Sheet Information            

       
    December 31,
2017

(Unaudited)
$
  December 31,
2016

(Audited)
$
 
 

Current Assets

     
Accounts receivable   1,238,898   1,822,661  
Other receivables, prepayments and deposits   158,429   164,182  
Bank and cash balances   340,765   139,808  
    1,738,092   2,126,651  
Non-Current Assets      
Property, plant and equipment   36,769   35,660  
Development expenditures   297,436   464,779  
 

TOTAL ASSETS

  2,072,297   2,627,090  
       
Current Liabilities      
Accounts payable and accrued liabilities   1,539,484   2,096,917  
Advances from related parties   475,620   756,079  
Promissory note payable   484,000   436,000  
Loan from a related party   284,217   261,273  
Current tax liabilities   601   5,317  
    2,783,922   3,555,586  
Non-Current Liabilities      
Loans from related parties   4,170,273   3,740,061  
Deferred tax liability   1,153   1,208  
         
TOTAL LIABILITIES     6,955,348   7,296,855  
       
Equity      
Share capital   11,415,709   10,484,429  
Deficit   (16,517,730 ) (15,395,462 )
Accumulated other comprehensive income   227,905   248,035  
Total deficiency attributable to equity shareholders   (4,874,116 ) (4,662,998 )
Non-controlling interest   (8,935 ) (6,767 )
TOTAL DEFICIENCY   (4,883,051 ) (4,669,765 )
       
TOTAL LIABILITIES & EQUITY   2,072,297   2,627,090  
       
       

Total assets of GINSMS including cash, accounts receivable, other receivables, prepayment and deposits, property, plant and equipment and development expenditures as at December 31, 2017 amounted to $2,072,297 compared to $2,627,090 as at December 31, 2016.  Bank and cash balances amounted to $340,765 as at December 31, 2017 increased by 143.7% compared to $139,808 as at December 31, 2016. The increase was mainly due to proceed from private placement by the immediate parent during the twelve months ended December 31, 2017. The cash flow from financing activities improved from $416,760 for the twelve months ended December 31, 2016 to $663,765 for the twelve months ended December 31, 2017. The cash flow used in operating activities reduced from $513,936 for the twelve months ended December 31, 2016 to $328,535 for the twelve months ended December 31, 2017.

Selected Liquidity and Capital Resources Information

         
 Financial Highlights Three-month
period ended
December 31,
2017
(Unaudited)
  Three-month
period ended
December 31,
2016
(Unaudited)
  Twelve-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2016
 (Audited)
 
         
Cash, beginning of period/year 121,245   106,047   139,808   310,805  
         
Operating activities        
Net loss for the period/year (307,059 ) (429,983 ) (1,124,717 ) (1,507,635 )
Current tax expense 9   845     2,317  
Deferred tax expense/(credit) (79 ) 35   (79 ) (2,197 )
Interest expenses 142,862   249,422   629,799   896,777  
Foreign currency exchange (gain)/loss (39,450 ) 79,400   (130,096 ) 95,904  
Allowance/(Reversal of allowance) for doubtful accounts   (8,249 ) 7,489   (8,249 )
Loss on disposal of property, plant and equipment 223     223    
Impairment loss on property, plant and equipment 52,444     52,444    
Amortization & depreciation 93,854   37,041   191,632   163,512  
Changes in working capital items 325,843   72,853   44,772   (66,264 )
Income tax paid   (599 )   (88,101 )
Net cash generated from/(used in) operating activities 268,647   765   (328,533 ) (513,936 )
Financing activities        
Advances from related parties 38,120   67,007   241,024   320,835  
Repayment of advance from a related party (2,335 ) (56,369 ) (494,542 ) (123,104 )
Loans from related parties       219,029  
Repayment of loan from a related party     (13,997 )  
Proceed from private placement     931,280    
Net cash generated from financing activities 35,785   10,638   663,765   416,760  
Investing activities        
Development expenditures     (112 ) (2,865 )
Purchase of property, plant and equipment (58,951 ) (684 ) (77,783 ) (29,667 )
Net cash used in investing activities (58,951 ) (684 ) (77,895 ) (32,532 )
Effect of exchange rate changes on cash held in foreign currencies (25,961 ) 23,042   (56,380 ) (41,289 )
         
Increase/(Decrease) in cash 219,520   33,761   200,957   (170,997 )
         
Cash, end of period/year 340,765   139,808   340,765   139,808  
                 

SEGMENTED INFORMATION

a) Revenue by customers
         

     
  Twelve-month period ended
December 31, 2017
(Unaudited)
Twelve-month period ended
December 31, 2016
(Audited)
  $ % of total
revenue
$ % of total
revenue
Customer A 3,768,390 51.0 387,597 6.0
Next five top customers        
Customer B 1,631,089 22.1 1,395,637 21.5
Customer C 730,873 9.9 408,837 6.3
Customer D 297,052 4.0 1,234,139 19.0
Customer E 284,623 3.9 398,248 6.1
Customer F 157,614 2.1 73,932 1.1
All other customers 517,032 7.0 2,580,795 40.0
Total 7,386,673 100.0 6,479,185 100.0
         

         
         
b) Revenue by geographical location (by location of operations)

     
  Twelve-month period ended
December 31, 2017
(Unaudited)
Twelve-month period ended
December 31, 2016
(Audited)
  $ % of total
revenue
$ % of total
revenue
Singapore 4,823,833 65.3  3,228,246 49.8
United Arab Emirates 297,307 4.0 1,234,139 19.0
Other Asia countries 363,684 4.9 332,934 5.1
Europe 252,680 3.4 259,479 4.0
United States 1,631,399 22.1 1,397,145 21.6
Other regions 17,770 0.3 27,242 0.5
Total 7,386,673 100.0 6,479,185 100.0
         

c) Total assets by geographical location

     
  As at December 31, 2017
(Unaudited)
As at December 31, 2016
(Audited)
  $ % of total
assets
$ % of total
assets
Singapore 1,136,630 54.9 2,054,528 78.2
United Arab Emirates 9,088 0.4 10,494 0.4
Other Asia countries 825,580 39.8 408,701 15.6
Europe 38,582 1.9 12,255 0.5
United States 35,802 1.7 109,930 4.2
Other regions 26,615 1.3 31,182 1.1
Total 2,072,297 100.0 2,627,090 100.0
         


d) Financial information by business segments

         
  Messaging Software
products and
services
Unallocated Total
  $ $ $ $
Twelve-month period ended
  December 31, 2017 (Unaudited)
       
Revenue 6,276,759   1,109,914     7,386,673  
Intersegment revenue   303,700     303,700  
Amortization and depreciation   (191,632 )   (191,632 )
Interest income 3   67     70  
Interest and finance expenses (301,816 ) (240,134 ) (87,849 ) (629,799 )
Income tax credit   79     79  
Segment profits/(losses) 307,607   (1,146,508 ) (285,816 ) (1,124,717 )
Additions to segment non-current assets   77,895     77,895  
         
At December 31, 2017 (Unaudited)        
Segment assets 1,278,905   773,948   19,444   2,072,297  
Segment liabilities (4,144,320 ) (1,752,317 ) (1,058,711 ) (6,955,348 )
         

         
  Messaging Software
products and
services
Unallocated Total
  $ $ $ $
Twelve-month period ended
  December 31, 2016 (Audited)
       
Revenue 5,459,386   1,019,799     6,479,185  
Intersegment revenue   348,241     348,241  
Amortization and depreciation (14 ) (163,478 ) (20 ) (163,512 )
Interest income 3   47     50  
Interest and finance expenses (440,771 ) (359,656 ) (96,350 ) (896,777 )
Income tax expense   (120 )   (120 )
Segment profits/(losses) 177,405   (1,309,326 ) (375,714 ) (1,507,635 )
Additions to segment non-current assets   32,532     32,532  
         
At December 31, 2016 (Audited)        
Segment assets 1,668,101   932,918   26,071   2,627,090  
Segment liabilities (4,417,575 ) (1,923,647 ) (955,633 ) (7,296,855 )
         
         

Outlook

The Corporation announces its financial forecasts for the twelve months ending December 31, 2018. The information included in this news release represents management’s guidance as approved on February 13, 2018. The financial outlook was prepared for BHL, the ultimate holding company of the Corporation, for its public company reporting obligations in Japan.

The material factors and assumptions used to develop the financial outlook include:

  1. Continued business from the Corporation’s major customers. The actual gross margin of Software Products and Services achieved 17.1% for the year ended December 31, 2017 and with the expected increased revenue earned from business with key customers of the Corporation, the forecasted gross margin range of 11.8% to 16.0% in 2018 is reasonable and achievable. The gross margin from the key customers usually earns more than 15%.
     
  2. The actual traffic growth rate of A2P business for the year ended December 31, 2017 declined by 7.6% compared to the year ended December 31, 2016. The North Asia region experienced stiff competition and the growth from this region was affected. However, the Corporation earned much more business from the South East Asia region in 2017 than forecasted. Revenue for the year ended December 31, 2017 increased by 15.0% but the gross margin declined to 9.2% compared with the revenue and gross margin for the year ended December 31, 2016. Gross margin earned from the South East Asia region is always lower than the North East region. With the increase in business from the South East Asia region, the Corporation succeeded to negotiate lower cost with its suppliers and this will likely improve the gross margin. Management believes that a 3% traffic growth is a conservative forecast growth rate. This growth rate takes into consideration the growth rate of the other regions that did not grow as much as the South East Asia region.
     
  3. No significant changes in the environment (including competition) where the Corporation operates that will significantly affect the pricing of the Corporation’s services resulting in changes of the gross margin for the various business segments.
     
  4. Timely completion and launch of certain additional value-added services for the Corporation’s A2P customers.
     
  5. Except for the interest expense on loans from related parties, the expenses were forecasted to increase in line with the forecasted 4.16% inflation in 2018. Interest expenses were computed based on interest rate of 12% per annum on the estimated outstanding loans in 2018.
     
  6. Continued ability to obtain financing through loans and cash advances to support the sales operations of the Corporation.

The purpose of this financial outlook is to allow the Corporation’s ultimate holding company, BHL, to make reference and/or to use such outlook in its own financial disclosure. The operation of GINSMS is a major part of the growth strategy of BHL. As such, BHL believes that disclosing such information would be useful for its shareholders. Consequently readers of this press release are cautioned that the financial outlook of GINSMS concerning its net earnings and net assets positions is forward looking information and may not be appropriate for other purposes.

         
Financial Highlights Forecast Forecast Forecast Forecast
($) Jan – Mar
2018
Apr – Jun
2018
Jul – Sep
2018
Oct – Dec
2018
 
Revenues $
       
A2P Messaging Service 1,693,912   1,867,404   2,081,312   2,254,804  
Software Product & Services 297,700   297,700   297,700   297,700  
  1,991,612   2,165,104   2,379,012   2,552,504  
         
Cost of sales $        
A2P Messaging Service 1,460,457   1,601,731   1,766,100   1,907,374  
Software Product & Services 261,645   262,427   258,268   249,951  
  1,722,102   1,864,158   2,024,368   2,157,325  
 
Gross profit $
       
A2P Messaging Service 233,455   265,673   315,212   347,430  
Software Product & Services 36,055   35,273   39,432   47,749  
  269,510   300,946   354,644   395,179  
 
Gross margin %
       
A2P Messaging Service 13.8 % 14.2 % 15.1 % 15.4 %
Software Product & Services 12.1 %  11.8 % 13.2 % 16.0 %
  13.5 % 13.9 % 14.9 % 15.5 %
         
Selling, general and administrative expenses (303,647 ) (303,647 ) (303,647 ) (303,647 )
         
Operating loss (34,137 ) (2,701 ) 50,997   91,532  
         
Non-operating income        
Non-operating expenses (146,976 ) (151,065 ) (153,269 ) (156,530 )
         
Ordinary loss (181,113 ) (153,766 ) (102,272 ) (64,998 )
         
Extraordinary gains        
Extraordinary losses        
         
Loss before tax and non-controlling interest (181,113 ) (153,766 ) (102,272 ) (64,998 )
         
Income taxes        
Non-controlling interest        
         
Net loss for the period (181,113 ) (153,766 ) (102,272 ) (64,998 )
Adjusted EBITDA 6,904   39,123   88,662   120,879  
  1. Adjusted EBITDA is a non-IFRS measure which does not have any standardized meaning under IFRS. Adjusted EBITDA is related to cash earnings and is defined for these purposes as earnings before income taxes, depreciation and amortization (in both cost of sales and general and administration expenses), interest expenses and also excludes certain non-recurring or non-cash expenditure. This non-IFRS measure is not recognized under IFRS and accordingly, shareholders are cautioned that this measure should not be construed as an alternative to net income determined in accordance with IFRS. The non-IFRS measure presented is unlikely to be comparable to similar measure presented by other issuers. The Corporation believes that Adjusted EBITDA is a meaningful financial metric as it measures cash generated from operations which the Corporation can use to fund working capital requirements, service interest and principal debt repayment and fund future growth initiatives.
  2. Non-operating income included interest income and other non-operating income. Non-operating expenses included loss on foreign exchange and interest expense.

About GINSMS

GINSMS is a mobile technology and services company focusing on 2 areas namely its A2P Messaging Service and its Software Products and Services. GINSMS operates a cloud-based A2P messaging service that allows the termination of SMS to mobile subscribers of more than 200 mobile operators globally. GINSMS also develops and distribute innovative software products and services for mobile operators and enterprises and have successfully deployed more than 100 solutions worldwide. GINSMS has offices in China, Singapore, Hong Kong, Malaysia and Indonesia.

Forward Looking Statements

Certain information included in this press release may contain forward-looking statements. Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may”, ”could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe”, or “continue” or the negative thereof or variations thereon or similar terminology. These statements are not historical facts, but reflect management’s current beliefs and are based on information currently available to management regarding future results and events. Particularly, these forward-looking statements are based on management’s estimate of future events based on technological advances relating to the Corporation’s services, current market conditions and past experiences of management in relation to how certain contracts will affect revenues. Forward-looking statements, by their very nature, involve significant risks, uncertainties and assumptions.

A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to dependence on major customers, system failures, delays and other problems, increasing competition, security and privacy breaches, dependence on third-party software and equipment, adequacy of network reliance, network diversity and backup systems, loss of significant information, insurance coverage, capacity limits, rapid technology changes, market acceptance, decline in volume of attractions, retention of key members of the management team, success of expansion into Chinese and other Asian markets, credit risk, consolidation of existing customers, dependence on required licenses, economy and politics in countries where the Corporation operates, conflicts of interest and residency of directors and officers. Although the Corporation has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results to differ from those anticipated, estimated or intended. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, the Corporation cannot assure the reader that actual results will be consistent with these forward-looking statements.

In particular, forward-looking statements include the following assumptions:

  • Management’s belief that the availability of 3G/4G services in China and the rest of the world will continue to create demand for the Corporation’s software products and services.
  • Management’s belief that the future growth in messaging is in the area of A2P Messaging Service and the Corporation’s investment in this area will create a viable and profitable business in the future.
  • Management’s belief that the Corporation is able to generate sufficient amounts of cash through operations and financing activities to fulfil the working capital requirements of its present operations.

These forward-looking statements are made as of the date of this press release and the Corporation assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by law. Accordingly, readers should not place undue reliance on the forward-looking statements. Forward looking statements are presented in this news release for the purpose of assisting investors and others in understanding certain key elements of our expected fiscal 2018 financial results, as well as our objectives, strategic priorities and business outlook for fiscal 2018, and in obtaining a better understanding of the Corporation’s anticipated operating environment. Readers are cautioned that such information may not be appropriate for other purposes. All forward-looking statements contained in this press release are qualified by this cautionary statement.

For further information, please contact:

GINSMS Inc.
Joel Chin, CEO
Tel: +65-6441-1029
Email: investor.relations@ginsms.com

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.