CALGARY, ALBERTA -- (Marketwired) -- 02/13/17 -- GINSMS Inc. (TSX VENTURE: GOK) ("GINSMS" or the "Corporation") has announced its financial results for the fourth quarter and twelve months ended December 31, 2016.
The annual audited financial statements of the Corporation for the twelve months ended December 31, 2016 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, 2016.
This financial disclosure was done in advance of the filing of the audited financial statements of the Corporation to allow GINSMS' ultimate holding company, Xinhua Holdings Limited ("Xinhua"), a public company in Japan, to use certain of GINSMS' financial information in the preparation of Xinhua's financial statements and announcements.
The Corporation's financial information for the twelve months ended December 31, 2016 is prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB").
Highlights include:
-- Revenue of $6,479,185 for the twelve-month period ended December 31,
2016 as compared to $3,888,690 for the nine-month period ended December
31, 2015.
-- Revenue of $1,665,011 for the three-month period ended December 31, 2016
as compared to $1,486,851 for the three-month period ended December 31,
2015.
-- Gross Profit of $1,043,789 for the twelve-month period ended December
31, 2016 as compared to gross profit of $429,264 for the nine-month
period ended December 31, 2015.
-- Gross Profit of $251,135 for the three-month period ended December 31,
2016 as compared to gross profit of $189,673 for the three-month period
ended December 31, 2015.
-- Operating expenses and finance costs decreased from $2,765,465 for the
nine-month period ended December 31, 2015 to $2,551,304 for the twelve-
month period ended December 31, 2016.
-- Operating expenses and finance costs decreased from $803,803 for the
three-month period ended December 31, 2015 to $680,307 for the three-
month period ended December 31, 2016.
-- Net loss of $1,507,635 for twelve-month period ended December 31, 2016
as compared to a net loss of $2,432,182 for nine-month period ended
December 31, 2015.
-- Net loss of $429,983 for three-month period ended December 31, 2016 as
compared to a net loss of $707,289 for three-month period ended December
31, 2015.
-- The cloud-based application-to-person messaging service (the "A2P
messaging") that was introduced in March 27, 2014 has generated revenue
of $1,359,032 and $5,459,386 for the three-month and twelve-month
periods ended December 31, 2016, respectively.
Selected Profit and Loss Information
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Three-month Three-month Twelve-month Nine-month
period ended period ended period ended period ended
December 31, December 31, December 31, December 31,
Financial 2016 2015 2016 2015
Highlights (Unaudited) (Unaudited) (Unaudited) (Audited)
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Revenues $
A2P Messaging
Service 1,359,032 1,195,023 5,459,386 3,069,374
Software Product &
Services 305,979 291,828 1,019,799 819,316
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1,665,011 1,486,851 6,479,185 3,888,690
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Cost of sales $
A2P Messaging
Service 1,214,421 1,047,554 4,695,023 2,792,424
Software Product &
Services 199,455 249,624 740,373 667,002
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1,413,876 1,297,178 5,435,396 3,459,426
---------------------------------------------------------
Gross profit $
A2P Messaging
Service 144,611 147,469 764,363 276,950
Software Product &
Services 106,524 42,204 279,426 152,314
---------------------------------------------------------
251,135 189,673 1,043,789 429,264
---------------------------------------------------------
Gross margin %
A2P Messaging
Service 10.6% 12.3% 14.0% 9.0%
Software Product &
Services 34.8% 14.5% 27.4% 18.6%
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15.1% 12.8% 16.1% 11.0%
---------------------------------------------------------
Adjusted EBITDA(1)
$ (150,958) (383,247) (455,475) (904,932)
Adjusted EBITDA
margin (9.1)% (25.8)% (7.0)% (23.3)%
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Net earnings (loss)
$ (429,983) (707,289) (1,507,635) (2,432,182)
Net earnings (loss)
margin (25.8)% (47.6)% (23.3)% (62.5)%
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Net earnings (loss)
per share $
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Basic (0.003) (0.005) (0.011) (0.029)
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Diluted (0.003) (0.005) (0.011) (0.029)
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(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, the accretion on
obligations 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
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Three-month Three-month Twelve-month Nine-month
period ended period ended period ended period ended
December 31, December 31, December 31, December 31,
2016 2015 2016 2015
(Unaudited) (Unaudited) (Unaudited) (Audited)
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Amortization
- Development
expenditures 29,180 28,695 116,271 86,571
Depreciation
- Property, plant and
equipment 6,569 9,289 36,007 27,482
Salaries and wages 151,949 126,307 486,678 419,443
Subcontractor costs 1,217,683 1,046,494 4,699,725 2,802,416
Software & hardware 4,739 65,952 56,211 69,167
Others 3,756 20,441 40,504 54,347
----------------------------------------------------
1,413,876 1,297,178 5,435,396 3,459,426
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Operating Expenses and Finance Costs
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Three-month Three-month Twelve-month Nine-month
period ended period ended period ended period ended
December 31, December 31, December 31, December 31,
2016 2015 2016 2015
(Unaudited) (Unaudited) (Unaudited) (Audited)
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Salaries and wages 189,229 169,942 923,961 500,667
Director fees 40,000 40,000 40,000 40,000
Professional fees 66,573 343,925 329,742 536,415
Foreign exchange
loss/(gain) 79,400 (8,220) 95,904 134,333
Other general &
administrative
expenses 62,640 65,257 261,935 236,834
(Write
back)/allowance for
doubtful debts (8,249) 18,056 (8,249) 18,056
Depreciation
(expense)
- Property, plant and
equipment 1,292 3,204 11,234 9,791
Interest expenses 249,422 171,639 896,777 471,005
Accretion on
obligations - - - 818,364
-------------------------------------------------------
680,307 803,803 2,551,304 2,765,465
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Selected Balance Sheet Information
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December 31, December 31,
2016 2015
(Unaudited) (Audited)
$ $
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Current Assets
Accounts receivable 1,822,661 1,536,894
Other receivables, prepayments and deposits 164,182 136,588
Bank and cash balances 139,808 310,805
------------------------------
2,126,651 1,984,287
Non-Current Assets
Property, plant and equipment 35,660 53,156
Development expenditures 464,779 576,986
------------------------------
TOTAL ASSETS 2,627,090 2,614,429
------------------------------
------------------------------
Current Liabilities
Accounts payable and accrued liabilities 2,096,917 1,844,293
Advance from a related party 756,079 556,370
Promissory note payable 436,000 400,000
Loans from related parties 261,273 -
Current tax liabilities 5,317 89,885
------------------------------
3,555,586 2,890,548
Non-Current Liabilities
Loans from related parties 3,740,061 2,943,129
Deferred tax liability 1,208 3,321
------------------------------
TOTAL LIABILITIES 7,296,855 5,836,998
Equity
Share capital 10,484,429 10,484,429
Reserves - -
Deficit (15,395,462) (13,889,187)
Accumulated other comprehensive income 248,035 187,496
------------------------------
Total equity (deficiency) attributable to
equity shareholders (4,662,998) (3,217,262)
Non-controlling interest (6,767) (5,307)
------------------------------
TOTAL EQUITY (DEFICIENCY) (4,669,765) (3,222,569)
TOTAL LIABILITIES & EQUITY 2,627,090 2,614,429
------------------------------
------------------------------
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Total assets of GINSMS including cash, accounts receivable, other receivables, prepayment and deposits, property, plant and equipment and development expenditures as at December 31, 2016 amounted to $2,627,090 compared to $2,614,429 as at December 31, 2015. Bank and cash balances amounted to $139,808 as at December 31,2016 decrease by 55% compared to $310,805 as at December 31, 2015. The decrease was mainly due to operating loss and getting fewer loans from the related parties in the twelve months ended December 31, 2016 as the Corporation relied more on the cash flow from its operations. The cash flow from financing activities is $416,760 for the twelve months ended December 31, 2016 compared to $864,627 for the nine months ended December 31, 2015.
Selected Liquidity and Capital Resources Information
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Financial Highlights Three-month Three-month Twelve-month Nine-month
period ended period ended period ended period ended
December 31, December 31, December 31, December 31,
2016 2015 2016 2015
(Unaudited) (Unaudited) (Unaudited) (Audited)
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Cash, beginning of
period 106,047 127,232 310,805 515,208
Operating activities
Net loss for the
period (429,983) (707,289) (1,507,635) (2,432,182)
Current tax expense 845 93,411 2,317 93,411
Deferred tax
expense/(recovery) 35 (15) (2,123) 2,570
Interest expenses 249,422 171,639 896,777 471,005
Foreign currency
exchange
loss/(gain) 79,400 (8,220) 95,904 134,333
(Write
back)/allowance for
doubtful debts (8,249) 18,056 (8,249) 18,056
Accretion on
convertible
debentures - - - 818,364
Amortization &
depreciation 37,041 41,187 163,512 123,844
Changes in working
capital items 72,853 195,733 (66,264) (83,859)
Income tax paid (599) (4,963) (88,101) (4,963)
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Net cash generated
from/(used in)
operating
activities 765 (200,461) (513,862) (859,421)
--------------------------------------------------------
Financing activities
Advance from a
related party 67,007 290,787 320,835 680,248
Repayment of advance
from a related
party (56,369) - (123,105) (102,994)
Loans from related
parties - 55,242 219,030 287,373
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Net cash generated
from financing
activities 10,638 346,029 416,760 864,627
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Investing activities
Development
expenditures - (16,260) (2,865) (47,036)
Purchase of
property, plant and
equipment (684) (5,461) (29,667) (19,628)
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Net cash used in
investing
activities (684) (21,721) (32,532) (66,664)
--------------------------------------------------------
Effect of exchange
rate changes on
cash held in
foreign currencies 23,042 59,726 (41,363) (142,945)
--------------------------------------------------------
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(Decrease)/increase
in cash 33,761 183,573 (170,997) (204,403)
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--------------------------------------------------------
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Cash, end of period 139,808 310,805 139,808 310,805
--------------------========================================================
SEGMENTED INFORMATION
a) Revenue by customers
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Twelve-month period
ended Nine-month period ended
December 31, 2016 December 31, 2015
(Unaudited) (Audited)
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% of total % of total
$ revenue $ revenue
------------------------------------------------
Customer A 1,939,640 29.9 1,541,256 39.6
Next five top customers
Customer B 1,395,637 21.5 543,441 14.0
Customer C 1,234,139 19.0 713,375 18.3
Customer D 408,837 6.3 390,340 10.0
Customer E 398,248 6.1 270,061 6.9
Customer F 387,597 6.0 - -
All other customers 715,087 11.2 430,217 11.2
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Total 6,479,185 100.0 3,888,690 100.0
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b) Revenue by geographical location (by location of operations)
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Twelve-month period
ended Nine-month period ended
December 31, 2016 December 31, 2015
(Unaudited) (Audited)
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% of total % of total
$ revenue $ revenue
------------------------------------------------
Singapore 3,228,246 49.8 2,283,942 58.8
United Arab Emirates 1,234,139 19.0 713,375 18.3
Other Asia countries 332,934 5.1 166,539 4.3
Europe 259,479 4.0 123,137 3.2
United States 1,397,145 21.6 552,740 14.2
Other regions 27,242 0.5 48,957 1.2
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Total 6,479,185 100.0 3,888,690 100.0
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c) Total assets by geographical location
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As at December 31, 2016 As at December 31, 2015
(Unaudited) (Audited)
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% of total % of total
$ assets $ assets
--------------------------------------------------
Singapore 2,054,528 78.2 1,918,993 73.4
United Arab Emirates 10,494 0.4 31,636 1.2
Other Asia countries 408,701 15.6 549,122 21.0
Europe 12,255 0.5 34,066 1.3
United States 109,930 4.2 39,116 1.5
Other regions 31,182 1.1 41,496 1.6
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Total 2,627,090 100.0 2,614,429 100.0
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d) Financial information by business segments
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Software
products and
Messaging services Unallocated Total
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$ $ $ $
Twelve-months period
ended December 31, 2016
(Unaudited)
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 profit / (loss) 177,405 (1,309,326) (375,714) (1,507,635)
Additions to segment
non-current assets - 32,532 - 32,532
At December 31, 2016
(Unaudited)
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)
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Software
products and
Messaging services Unallocated Total
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$ $ $
Nine-month period ended
December 31, 2015
(Audited)
Revenue 3,069,374 819,316 - 3,888,690
Intersegment revenue - 115,828 - 115,828
Amortization and
depreciation (375) (123,380) (89) (123,844)
Interest income 4 30 - 34
Interest and finance
expenses (259,971) (211,034) (818,364) (1,289,369)
Income tax expense - (95,981) - (95,981)
Segment losses (45,159) (1,082,895) (1,304,128) (2,432,182)
Additions to segment
non-current assets - 66,664 - 66,664
At December 31, 2015
(Audited)
Segment assets 1,360,033 1,220,699 33,697 2,614,429
Segment liabilities (3,467,382) (1,769,000) (600,616) (5,836,998)
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Outlook
The Corporation announces its financial forecasts for the twelve months ending December 31, 2017. The information included in this news release represents management's guidance as approved on February 13, 2017. The financial outlook was prepared for Xinhua Holdings Limited, the ultimate holding company of the Corporation, for its reporting obligations in Japan.
The material factors and assumptions used to develop the financial outlook include:
a. Continued business from the Corporation's major customers. The actual
gross margin of Software Products and Services achieved 27.4% for the
year ended December 31, 2016 and with the expected increased revenue
earned from business with key customers of the Corporation, the
forecasted gross margin range of 26.1% to 26.6% in 2017 is reasonable
and achievable. The gross margin from the key customers usually earns
more than 24%.
b. The actual growth rate of A2P business for the three months ended
December 31, 2016 was 12.2% compared to the three months ended September
30, 2016. The North Asia region experienced the largest growth rate and
the revenue from this region commanded the high margin earned. 3%
monthly growth is a conservative forecast growth rate so as to take into
consideration of the other regions that did not grow as much as the
North Asia region.
c. 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.
d. Timely completion and launch of certain additional value-added services
for the Corporation's A2P customers.
e. 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 2017. Interest expenses were computed based on interest
rate of 24% per annum on the estimated outstanding loans in 2017.
f. Continued ability to obtain financing through loans and cash advances to
support the sales operations of the Corporation.
In addition, the Corporation expects to record net earnings in the financial year ending December 2020 (instead of 2019 as announced on March 30, 2016) and recover from its current negative net asset position by the end of the 2022 financial year (instead of 2020 as announced on March 30, 2016). This is due to slower growth than originally expected resulting from the loss of a major customer sending A2P messages to China and also the delay in obtaining the necessary financing to grow the business. The purpose of this financial outlook is to allow the Corporation's ultimate holding company, Xinhua, 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 Xinhua. As such, Xinhua 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.
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Financial Highlights Forecast Forecast Forecast Forecast
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Jan - Mar Apr - Jun Jul - Sep Oct - Dec
($) 2017 2017 2017 2017
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Revenues $
A2P Messaging Service 1,520,785 1,594,773 1,668,761 1,742,749
Software Product & Services 314,369 314,410 314,410 314,410
--------------------------------------------
1,835,154 1,909,183 1,983,171 2,057,159
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Cost of sales $
A2P Messaging Service 1,323,954 1,386,830 1,450,414 1,513,998
Software Product & Services 230,854 231,571 231,571 232,246
--------------------------------------------
1,554,808 1,618,401 1,681,985 1,746,244
--------------------------------------------
Gross profit $
A2P Messaging Service 196,831 207,943 218,347 228,751
Software Product & Services 83,515 82,839 82,839 82,164
--------------------------------------------
280,346 290,782 301,186 310,915
--------------------------------------------
Gross margin %
A2P Messaging Service 12.9% 13.0% 13.1% 13.1%
Software Product & Services 26.6% 26.3% 26.3% 26.1%
--------------------------------------------
15.3% 15.2% 15.2% 15.1%
--------------------------------------------
Selling, general and
administrative expenses (380,872) (380,872) (380,872) (380,872)
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Operating loss (100,526) (90,090) (79,686) (69,957)
Non-operating income - - - -
Non-operating expenses (259,641) (274,994) (283,221) (295,884)
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Ordinary loss (360,167) (365,084) (362,907) (365,841)
Extraordinary gains - - - -
Extraordinary losses - - - -
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Loss before tax and non-
controlling interest (360,167) (365,084) (362,907) (365,841)
Income taxes - - - -
Non-controlling interest - - - -
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Net loss for the period (360,167) (365,084) (362,907) (365,841)
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Adjusted EBITDA (61,226) (50,115) (39,711) (29,307)
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(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, the accretion on
obligations 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 2017 financial results, as well as our objectives, strategic priorities and business outlook for fiscal 2017, 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.
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.
Contacts:
GINSMS Inc.
Joel Chin
CEO
+65-6441-1029
investor.relations@ginsms.com
