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 HighlightsThree-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 Service1,693,797 1,359,032 6,276,759 5,459,386 
Software Product & Services265,997 305,979 1,109,914 1,019,799 
 1,959,794 1,665,011 7,386,673 6,479,185 
     
Cost of sales $    
A2P Messaging Service1,481,905 1,214,421 5,698,701 4,695,023 
Software Product & Services278,446 199,455 920,077 740,373 
 1,760,351 1,413,876 6,618,778 5,435,396 
 

Gross profit $
    
A2P Messaging Service211,892 144,611 578,058 764,363 
Software Product & Services(12,449)106,524 189,837 279,426 
 199,443 251,135 767,895 1,043,789 
 

Gross margin %
    
A2P Messaging Service12.5%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)
  DilutedN/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 expenditures84,88329,180167,291116,271
Depreciation     
- Property, plant and equipment8,6796,56922,90336,007
Salaries and wages172,462151,949657,176486,678
Subcontractor costs1,481,8071,217,6835,702,9204,699,725
Software and hardware4,8784,73927,07956,211
Others7,6423,75641,40940,504
 1,760,3511,413,8766,618,7785,435,396
     

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 wages180,886 189,229 715,827 923,961 
Director fees40,000 40,000 40,000 40,000 
Professional fees75,323 66,573 339,362 329,742 
Foreign exchange (gain)/loss(39,450)79,400 (130,096)95,904 
Other general & administrative expenses53,955 62,640 236,205 261,935 
Allowance/(Reversal of allowance) for doubtful accounts- (8,249)7,489 (8,249)
Depreciation     
- Property, plant and equipment292 1,292 1,438 11,234 
Interest expenses142,862 249,422 629,799 896,777 
Impairment loss on property, plant and equipment52,444 - 52,444 - 
Loss on disposal of property, plant and equipment223 - 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 HighlightsThree-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/year121,245 106,047 139,808 310,805 
     
Operating activities    
Net loss for the period/year (307,059)(429,983)(1,124,717)(1,507,635)
Current tax expense9 845 - 2,317 
Deferred tax expense/(credit)(79)35 (79)(2,197)
Interest expenses142,862 249,422 629,799 896,777 
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 equipment223 - 223 - 
Impairment loss on property, plant and equipment52,444 - 52,444 - 
Amortization & depreciation93,854 37,041 191,632 163,512 
Changes in working capital items325,843 72,853 44,772 (66,264)
Income tax paid- (599)- (88,101)
Net cash generated from/(used in) operating activities268,647 765 (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 activities35,785 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 cash219,520 33,761 200,957 (170,997)
     
Cash, end of period/year340,765 139,808 340,765 139,808 
         

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 A3,768,39051.0387,5976.0
Next five top customers    
Customer B1,631,08922.11,395,63721.5
Customer C730,8739.9408,8376.3
Customer D297,0524.01,234,13919.0
Customer E284,6233.9398,2486.1
Customer F157,6142.173,9321.1
All other customers517,0327.02,580,79540.0
Total7,386,673100.06,479,185100.0
     

         
         
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
Singapore4,823,83365.3 3,228,24649.8
United Arab Emirates297,3074.01,234,13919.0
Other Asia countries363,6844.9332,9345.1
Europe252,6803.4259,4794.0
United States1,631,39922.11,397,14521.6
Other regions17,7700.327,2420.5
Total7,386,673100.06,479,185100.0
     

c) Total assets by geographical location

   
 As at December 31, 2017
(Unaudited)
As at December 31, 2016
(Audited)
 $% of total
assets
$% of total
assets
Singapore1,136,63054.92,054,52878.2
United Arab Emirates9,0880.410,4940.4
Other Asia countries825,58039.8408,70115.6
Europe38,5821.912,2550.5
United States35,8021.7109,9304.2
Other regions26,6151.331,1821.1
Total2,072,297100.02,627,090100.0
     


d) Financial information by business segments

     
 MessagingSoftware
products and
services
UnallocatedTotal
 $$$$
Twelve-month period ended
  December 31, 2017 (Unaudited)
    
Revenue6,276,759 1,109,914 - 7,386,673 
Intersegment revenue- 303,700 - 303,700 
Amortization and depreciation - (191,632)- (191,632)
Interest income3 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 )
     


     
 MessagingSoftware
products and
services
UnallocatedTotal
 $$$$
Twelve-month period ended
  December 31, 2016 (Audited)
    
Revenue5,459,386 1,019,799 - 6,479,185 
Intersegment revenue- 348,241 - 348,241 
Amortization and depreciation(14)(163,478)(20)(163,512)
Interest income3 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 HighlightsForecastForecastForecastForecast
($)Jan – Mar
2018
Apr – Jun
2018
Jul – Sep
2018
Oct – Dec
2018
 
Revenues $
    
A2P Messaging Service1,693,912 1,867,404 2,081,312 2,254,804 
Software Product & Services297,700 297,700 297,700 297,700 
 1,991,612 2,165,104 2,379,012 2,552,504 
     
Cost of sales $    
A2P Messaging Service1,460,457 1,601,731 1,766,100 1,907,374 
Software Product & Services261,645 262,427 258,268 249,951 
 1,722,102 1,864,158 2,024,368 2,157,325 
 
Gross profit $
    
A2P Messaging Service233,455 265,673 315,212 347,430 
Software Product & Services36,055 35,273 39,432 47,749 
 269,510 300,946 354,644 395,179 
 
Gross margin %
    
A2P Messaging Service13.8%14.2%15.1%15.4%
Software Product & Services12.1% 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 EBITDA6,904 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.