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GINSMS Announces Financial Results for the Three and Twelve Months Ended December 31, 2018 and Provides Financial Forecasts for Year 2019

CALGARY, Alberta, Feb. 13, 2019 (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, 2018.

The annual audited financial statements of the Corporation for the twelve months ended December 31, 2018 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, 2018.

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, 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, 2018 is prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Highlights include:

Selected Profit and Loss Information

Financial Highlights Three-month
period ended
December 31,
2018
(Unaudited)
  Three-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2018
(Unaudited)
  Twelve-month
period ended
December 31,
2017
(Audited)
 

Revenues $

       
A2P Messaging Service 793,221   1,693,797   4,142,212   6,276,759  
Software Product & Services 292,517   265,997   1,212,736   1,109,914  
  1,085,738   1,959,794   5,354,948   7,386,673  
         
Cost of sales $        
A2P Messaging Service 705,448   1,481,905   3,790,352   5,698,701  
Software Product & Services 221,741   278,446   926,472   920,077  
  927,189   1,760,351   4,716,824   6,618,778  

Gross profit $

       
A2P Messaging Service 87,773   211,892   351,860   578,058  
Software Product & Services 70,776   (12,449 ) 286,264   189,837  
  158,549   199,443   638,124   767,895  

Gross margin %

       
A2P Messaging Service 11.1 % 12.5 % 8.5 % 9.2 %
Software Product & Services 24.2 % (4.7 )% 23.6 % 17.1 %
  14.6 % 10.2 % 11.9 % 10.4 %
         
Adjusted EBITDA(1) $ (150,207 ) (17,711 ) (812,726 ) (250,700 )
Adjusted EBITDA margin (13.8 )% (0.9 )% (15.2 )% (3.4 )%
Net earnings (loss) $ (281,084 ) (307,059 ) (1,203,132 ) (1,124,717 )
Net earnings (loss) margin (25.9 )% (15.7 )% (22.5 )% (15.2 )%
Net earnings (loss) per share $        
Basic (0.002 ) (0.002 ) (0.008 ) (0.008 )
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,
2018
(Unaudited)
  Three-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2018
(Unaudited)
  Twelve-month
period ended
December 31,
2017
 (Audited)
 
                 
Amortization                
– Development expenditures   84,883   40,838   167,291  
Loss on written off of                
development expenditures     255,304    
Depreciation                
– Property, plant and equipment 6,500   8,679   25,867   22,903  
Salaries and wages 200,291   172,462   792,781   657,176  
Subcontractor costs 707,339   1,481,807   3,543,691   5,702,920  
Software and hardware 9,908   4,878   43,230   27,079  
Others 3,151   7,642   15,113   41,409  
  927,189   1,760,351   4,716,824   6,618,778  
                 

Operating Expenses and Finance Costs

 

 

Three-month
period ended
December 31,
2018
(Unaudited)
  Three-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2018
(Unaudited)
  Twelve-month
period ended
December 31,
2017
 (Audited)
 
         
Salaries and wages 193,450   180,886   695,457   715,827  
Directors’ fees 40,000   40,000   40,000   40,000  
Professional fees 75,453   75,323   330,142   339,362  
Foreign currency exchange loss/(gain) 27,426   (39,450 ) 189,073   (130,096 )
Other general & administrative expenses 47,155   53,955   236,779   236,205  
Allowance for doubtful debts 26,104     26,104   7,489  
Depreciation        
– Property, plant and equipment 144   292   1,026   1,438  
Interest expenses 134,289   142,862   427,812   629,799  
Gain on disposal of development expenditures (108,971 )   (108,971 )  
Loss on written-off of property, plant and equipment 4,098   52,667   4,098   52,667  
  439,148   506,535   1,841,520   1,892,691  
                 

Selected Balance Sheet Information

  December 31,
2018

(Unaudited)
$
  December 31,
2017

(Audited)
$
 

Current Assets

   
Accounts receivable 664,031   1,238,898  
Other receivables, prepayments and deposits 98,760   158,429  
Bank and cash balances 267,951   340,765  
  1,030,742   1,738,092  
Non-Current Assets    
Property, plant and equipment 35,486   36,769  
Development expenditures   297,436  

TOTAL ASSETS

1,066,228   2,072,297  
     
Current Liabilities    
Accounts payable and accrued liabilities 1,210,856   1,539,484  
Advances from related parties 398,659   475,620  
Promissory note payable 532,000   484,000  
Loan from a related party 348,009   284,217  
Current tax liabilities 588   601  
  2,490,112   2,783,922  
Non-Current Liabilities    
Loans from related parties 4,624,623   4,170,273  
Deferred tax liability 1,188   1,153  
     
TOTAL LIABILITIES 7,115,923   6,955,348  
     
Equity    
Share capital 11,415,709   11,415,709  
Deficit (17,717,269 ) (16,517,730 )
Accumulated other comprehensive income 264,252   227,905  
Total deficiency attributable to equity shareholders (6,037,308 ) (4,874,116 )
Non-controlling interest (12,387 ) (8,935 )
TOTAL DEFICIENCY (6,049,695 ) (4,883,051 )
     
TOTAL LIABILITIES & EQUITY 1,066,228   2,072,297  
     
     

Total assets of GINSMS including cash, accounts receivable, other receivables, prepayment and deposits, property, plant and equipment and development expenditures as at December 31, 2018 amounted to $1,066,228 compared to December 31, 2017 amounted to $2,072,297.  Bank and cash balances amounted to $267,951 as at December 31, 2018 a decrease of 21.4% compared to $340,765 as at December 31, 2017. This decrease was mainly due to cash flow used in the operation of the Corporation. The cash flow from financing activities deteriorated from $663,765 for the twelve months ended December 31, 2017 to net cash flow used in financing activities of $86,159 for the twelve months ended December 31, 2018. The cash flow used in operating activities reduced from $328,533 for the twelve months ended December 31, 2017 to $71,036 for the twelve months ended December 31, 2018.

Selected Liquidity and Capital Resources Information

Financial Highlights Three-month
period ended
December 31,
2018
(Unaudited)
  Three-month
period ended
December 31,
2017
(Unaudited)
  Twelve-month
period ended
December 31,
2018
(Unaudited)
  Twelve-month
period ended
December 31,
2017
 (Audited)
 
         
Cash, beginning of period/year 245,855   121,245   340,765   139,808  
                 
Operating activities        
Net loss for the period/year (281,084 ) (307,059 ) (1,203,132 ) (1,124,717 )
Current tax expense/ (credit)   9   (384 )  
Deferred tax expense /(credit) (244 ) (79 ) 120   (79 )
Interest expenses 134,289   142,862   427,812   629,799  
Foreign currency exchange (gain)/loss 27,425   (39,450 ) 189,073   (130,096 )
Allowance for doubtful accounts 26,104     26,104   7,489  
Loss on written-off of property, plant and equipment 4,098   52,667   4,098   52,667  
Gain on disposal of development expenditures (108,971 )   (108,971 )  
Impairment of development expenditures     255,304    
Amortization and depreciation 6,644   93,854   67,731   191,632  
Changes in working capital items 128,198   325,843   270,825   44,772  
Income tax refund     384    
Net cash generated from/(used in) operating activities (63,541 ) 268,647   (71,036 ) (328,533 )
Financing activities        
Advances from related parties 1,403   38,120   110,058   241,024  
Repayment of advance from a related party (9,002 ) (2,335 ) (196,217 ) (494,542 )
Repayment of loan from a related party       (13,997 )
Proceed from private placement       931,280  
Net cash generated from/(used in) financing activities (7,599 ) 35,785   (86,159 ) 663,765  
Investing activities        
Purchase of property, plant and equipment (9,392 ) (58,951 ) (29,282 ) (77,783 )
Development expenditures     (5,232 ) (112 )
Proceed from disposal of development expenditures 114,200     114,200    
Net cash generated from/(used in) investing activities 104,808   (58,951 ) 79,686   (77,895 )
Effect of exchange rate changes on cash held in foreign currencies (11,572 ) (25,961 ) 4,695   (56,380 )
         
Increase/(Decrease) in cash 22,096   219,520   (72,814 ) 200,957  
         
Cash, end of period/year 267,951   340,765   267,951   340,765  
                 

SEGMENTED INFORMATION

a) Revenue by customers

  Twelve-month period ended
December 31, 2018
(Unaudited)
Twelve-month period ended
December 31, 2017
(Audited)
  $   % of total
revenue
  $   % of total
revenue
 
Customer A 1,956,474   36.5   3,768,390   51.0  
Next five top customers                
Customer B 894,287   16.7   730,873   9.9  
Customer C 676,709   12.6   1,631,089   22.1  
Customer D 386,821   7.2      
Customer E 326,912   6.1   84,113   1.1  
Customer F 165,551   3.1   284,623   3.9  
All other customers 948,194   17.8   887,585   12.0  
Total 5,354,948   100.0   7,386,673   100.0  
                 

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

  Twelve-month period ended
December 31, 2018
(Unaudited)
Twelve-month period ended
December 31, 2017
(Audited)
  $   % of total
revenue
  $   % of total
revenue
 
Singapore 3,071,621   57.4   4,823,833   65.3  
United Arab Emirates 71,529   1.3   297,307   4.0  
Other Asia countries 818,249   15.3   363,684   4.9  
Europe 323,578   6.0   252,680   3.4  
United States 1,064,223   19.9   1,631,399   22.1  
Other regions 5,748   0.1   17,770   0.3  
Total 5,354,948   100.0   7,386,673   100.0  
                 

c) Total assets by geographical location

  As at December 31, 2018
(Unaudited)
As at December 31, 2017
(Audited)
  $   % of total
assets
  $   % of total
assets
 
Singapore 236,281   22.2   1,136,630   54.9  
United Arab Emirates 18,762   1.8   9,088   0.4  
Other Asia countries 526,649   49.4   825,580   39.8  
Europe 39,714   3.7   38,582   1.9  
United States 239,946   22.5   35,802   1.7  
Other regions 4,876   0.4   26,615   1.3  
Total 1,066,228   100.0   2,072,297   100.0  
                 

d) Financial information by business segments

  Messaging Software
products and
services
Unallocated Total
  $ $ $ $
Twelve-month period ended
  December 31, 2018 (Unaudited)
       
Revenue 4,142,212   1,212,736     5,354,948  
Intersegment revenue   618,445     618,445  
Amortization and depreciation   67,731     67,731  
Interest income 199   188     387  
Interest and finance expenses 291,099   51,186   85,527   427,812  
Income tax credit   264     264  
Segment profits/(losses) 611,957   (1,407,755 ) (407,334 ) (1,203,132 )
Additions to segment non-current assets   34,514     34,514  
         
At December 31, 2018 (Unaudited)        
Segment assets 537,395   526,617   2,216   1,066,228  
Segment liabilities (3,574,336 ) (2,349,687 ) (1,191,900 ) (7,115,923 )
         
         

  Messaging Software
products and
services
Unallocated Total
  $ $ $ $
Twelve-month period ended
  December 31, 2017 (Audited)
       
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 expense   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 (Audited)        
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 )
         
         

Outlook

The Corporation announces its financial forecasts for the twelve months ending December 31, 2019. The information included in this news release represents management’s guidance as approved on February 13, 2019. 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 23.6% for the year ended December 31, 2018 and with the expected increased revenue earned from business with key customers of the Corporation, the forecasted gross margin of 45.6% in 2019 is reasonable and achievable. The man-hour rates in 2019 have been adjusted substantially to be in line with prevailing market rates as the management noted the old man-hour rates in 2018 were understated.
     
  2. The actual traffic growth rate of A2P business for the year ended December 31, 2018 declined by 30.9% compared to the year ended December 31, 2017. The North Asia region experienced stiff competition and the growth from this region was affected. The Corporation also lost one key customer from the South East Asia region in Q2 2018. Revenue for the year ended December 31, 2018 decreased by 34.0% and the gross margin decreased marginally by 0.7% compared with the revenue and gross margin for the year ended December 31, 2017. Gross margin earned from the South East Asia region is always lower than the North East Asia region. With the decrease in business from both South East Asia and North Asia regions, the Corporation will likely have lower traffic, revenue and gross margin in 2019. Management believes that the forecast revenue and gross margin is conservative and reasonable.
     
  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 customers.
     
  5. Except for the interest expense on loans from related parties, the expenses were forecasted to increase in line with the forecasted 3.9% inflation in 2019. Interest expenses were computed based on interest rate of 12% per annum on the estimated outstanding loans in 2019.
     
  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
2019
Apr – Jun
2019
Jul – Sep
2019
Oct – Dec
2019
         
Revenues $        
A2P Messaging Service 649,867   658,024   666,284   674,647  
Software Product & Services 343,569   343,569   343,569   343,569  
  993,436   1,001,593   1,009,853   1,018,216  
         
Cost of sales $        
A2P Messaging Service 604,642   612,231   619,916   627,698  
Software Product & Services 186,286   186,771   186,858   187,297  
  790,928   799,002   806,774   814,995  
Gross profit $        
A2P Messaging Service 45,225   45,793   46,368   46,949  
Software Product & Services 157,283   156,798   156,711   156,272  
  202,508   202,591   203,079   203,221  
Gross margin %        
A2P Messaging Service 7.0 % 7.0 % 7.0 % 7.0 %
Software Product & Services 45.8 % 45.6 % 45.6 % 45.5 %
  20.4 % 20.2 % 20.1 % 20.0 %
         
Selling, general and administrative expenses (237,509 ) (332,826 ) (237,509 ) (237,509 )
         
Operating loss (35,001 ) (130,235 ) (34,430 ) (34,288 )
         
Non-operating income (1)        
Non-operating expenses (1) (136,420 ) (140,190 ) (144,074 ) (148,076 )
         
Ordinary loss (171,421 ) (270,425 ) (178,504 ) (182,364 )
         
Extraordinary gains        
Extraordinary losses        
         
Loss before tax and non-controlling interest (171,421 ) (270,425 ) (178,504 ) (182,364 )
         
Income taxes        
Non-controlling interest        
         
Net loss for the period (171,421 ) (270,425 ) (178,504 ) (182,364 )
Adjusted EBITDA (2) (31,733 ) (126,482 ) (30,591 ) (30,009 )
                 

(1)  Non-operating income included interest income and other non-operating income. Non-operating expenses included loss on foreign exchange and interest expense.

(2)  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.

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:

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 2019 financial results, as well as our objectives, strategic priorities and business outlook for fiscal 2019, 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.