GINSMS Inc. — Annual Report 2020

Feb 11, 2021

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NEWS RELEASE

GINSMS ANNOUNCES FINANCIAL RESULTS FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2020 AND PROVIDES FINANCIAL FORECASTS FOR YEAR 2021

Calgary, Alberta, February 11, 2021 – GINSMS Inc. (TSXV: GOK) (“GINSMS” or the “Corporation”) has announced its financial results for the fourth quarter and twelve months ended December 31, 2020.

The annual audited financial statements of the Corporation for the twelve months ended December 31, 2020 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, 2020.

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, 2020 is prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

Highlights include:

• Revenue of $2,823,335 for the twelve-month period ended December 31, 2020 as compared to $2,638,717 for the twelve-month period ended December 31, 2019.

• Revenue of $684,260 for the three-month period ended December 31, 2020 as compared to Revenue of $633,951 for the three-month period ended December 31, 2019

• Gross Profit of $1,031,565 for the twelve-month period ended December 31, 2020 as compared to gross profit of $726,394 for the twelve-month period ended December 31, 2019.

• Gross Profit of $281,754 for the three-month period ended December 31, 2020 as compared to gross profit of $228,164 for the three-month period ended December 31, 2019.

• Operating expenses and finance costs decreased from $1,041,952 for the twelve-month period ended December 31, 2019 to $1,034,124 for the twelve-month period ended December 31, 2020.

• Operating expenses and finance costs decreased from $316,617 for the three-month period ended December 31, 2019 to $194,419 for the three-month period ended December 31, 2020.

• Net loss of $3,508 for twelve-month period ended December 31, 2020 as compared to a net loss of $315,311 for twelve-month period ended December 31, 2019.

• Net profit of $85,094 for three-month period ended December 31, 2020 as compared to a net loss of $87,334 for three-month period ended December 31, 2019 .

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Selected Profit and Loss Information

Financial Highlights	Three-month period ended December 31, 2020 (Unaudited)	Three-month period ended December 31, 2019 (Unaudited)	Twelve-month period ended December 31, 2020 (Unaudited)	Twelve-month period ended December 31, 2019 (Audited)
Revenues $				1,589,957 1,048,760
A2P Messaging Service	241,944	321,329	1,386,756
Software Product & Services	442,316	312,622	1,436,579
	684,260	633,951	2,823,335	2,638,717
				1,292,061 620,262
Cost of sales $
A2P Messaging Service	220,288	234,705	1,102,704
Software Product & Services	182,218	171,082	689,066
	402,506	405,787	1,791,770	1,912,323
Gross profit $				297,896 428,498
A2P Messaging Service	21,656	86,624	284,052
Software Product & Services	260,098	141,540	747,513
	281,754	228,164	1,031,565	726,394
Gross margin %				18.7% 40.9%
A2P Messaging Service	9.0%	27.0%	20.5%
Software Product & Services	58.8%	45.3%	52.0%
	41.2%	36.0%	36.5%	27.5%
				(183,524) (7.0)%
Adjusted EBITDA(1)$ Adjusted EBITDA margin	94,018 13.7%	(56,041) (8.8)%	10,641 0.4%
Net earnings profit/(loss) $ Net earningsprofit/(loss)margin	85,094 12.4%	(87,334) (13.8)%	(3,508) (0.1)%	(315,311) (11.9)%
Net earnings profit/(loss) per share $				(0.21) N/A
Basic (in Canadian cents)	0.06	(0.06)	(0.002)
Diluted	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 and income. 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.

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Cost of Sales

	Three-month period ended December 31, 2020 (Unaudited)	Three-month period ended December 31, 2019 (Unaudited)	Twelve-month period ended December 31, 2020 (Unaudited)	Twelve-month period ended December 31, 2019 (Audited)
				19,819 9,466 581,141 1,293,792 279 7,826
Depreciation - Property, plant and equipment Loss on written off of suspended project costs	5,087	5,411 -	22,469
	-		-
Salaries and wages	188,818	164,997	675,716
Subcontractor costs	208,427	234,015	1,091,158
Software and hardware	-	37	147
Others	174	1,327	2,280
	402,506	405,787	1,791,770	1,912,323

Operating Expenses and Finance Costs

	Three-month period ended December 31, 2020 (Unaudited)	Three-month period ended December 31, 2019 (Unaudited)	Twelve-month period ended December 31, 2020 (Unaudited)	Twelve-month period ended December 31, 2019 (Audited)
				485,726 40,000 273,470 (68,688) 202,911 6,131 (12,959) 2,732 15,017 91,081 - 6,531
Salaries and wages	199,835	175,992	496,128
Directors’ fees	10,000	40,000	40,000
Professional fees	52,610	58,081	272,101
Foreign currency exchange loss/(gain) Other general & administrative expenses	(118,487)	(25,332) 37,729	20,192
	34,221		137,577
Allowance for doubtful debts	515	-	2,083
Reversal of allowance for doubtful debts	-	-	-
Depreciation
- Property, plant and equipment	1,596	1,550	6,217
- Right-of-use assets Interest expenses Loss on written-off of property, plant and equipment Lease interest on right-of-use assets	10,892	3,749 23,275 - 1,573	44,340
	-		-
	-		-
	3,237		15,486
	194,419	316,617	1,034,124	1,041,952

Selected Balance Sheet Information

The figures reported below are based on the unaudited consolidated financial statements of the Corporation which have been prepared in accordance with IFRS.

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		December 31, 2020 (Unaudited) $	December 31, 2019 (Audited) $
Current Assets			360,885 82,133 194,411
Accounts receivable		557,834
Other receivables, prepayments and deposits		76,576
Bank and cash balances		296,312
		930,722	637,429 120,385 50,859
Non-Current Assets
Right-of-use assets		73,331
Property, plant and equipment		39,999
TOTAL ASSETS		1,044,052	808,673
			670,400 887,512 4,168,840 40,071 580,000 590
Current Liabilities
Accounts payable and accrued liabilities		749,061
Advances from related parties		1,100,130
Loan from a related party		4,933,186
Lease liabilities		38,717
Promissory note payable		580,000
Current tax liabilities		1,490
		7,402,584	6,347,413 824,628 76,777
Non-Current Liabilities
Loans from related parties		-
Lease liabilities		34,629
			7,248,818
TOTAL LIABILITIES		7,437,213
			11,415,709 (18,032,088) 189,253
Equity
Share capital		11,415,709
Deficit		(18,034,210)
Accumulated other comprehensive income		239,449
Total deficiency attributable to equity shareholders		(6,379,052)	(6,427,126) (13,019)
Non-controlling interest		(14,109)
TOTAL DEFICIENCY		(6,393,161)	(6,440,145) 808,673
TOTAL LIABILITIES & EQUITY		1,044,052

Total assets of GINSMS including cash, accounts receivable, other receivables, prepayment and deposits, property, plant and equipment and right-of-use assets as at December 31, 2020 amounted to $1,044,052 compared to December 31, 2019 amounted to $808,673. Bank and cash balances amounted to $296,312 as at December 31, 2020 an increase of 52.4% compared to $194,411 as at December 31, 2019. This increase was mainly due to decrease of cash flow used in the operation of the Corporation. The cash flow used in operating activities is $7,787 for the twelve months ended December 31, 2020 against the cash flow used in operating activities of $477,633 for the twelve months ended December 31, 2019. The lower cashflow used in the operating activities is partially offset by the lower cash flow generated from financing activities which was $166,183 for the twelve months ended December 31, 2020 as compared to $469,503 for the twelve months ended December 31, 2019.

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Selected Liquidity and Capital Resources Information

Financial Highlights	Three-month period ended December 31, 2020 (Unaudited) $ Three-month period ended December 31, 2019 (Unaudited) $	Three-month period ended December 31, 2020 (Unaudited) $ Three-month period ended December 31, 2019 (Unaudited) $	Twelve-month period ended December 31, 2020 (Unaudited) $ Twelve-month period ended December 31, 2019 (Audited) $	Twelve-month period ended December 31, 2020 (Unaudited) $ Twelve-month period ended December 31, 2019 (Audited) $
			194,411 267,951 (3,508) (315,311) - (1,034) 949 787 - 91,081 15,486 6,531 20,192 (68,688) 2,083 6,131 - (12,959) - 9,466 28,686 22,551 44,340 15,017 (100,529) (223,887) (15,486) (6,531) (787)
Cash, beginning of period/year Operating activities Net profit/(loss) for the period/year Deferred tax expenses/(credit) Current tax expenses Interest expenses on other borrowings Interest expenses on lease liabilities Foreign currency exchange (gain)/loss Allowance for doubtful debts Reversal of allowance for doubtful debts Loss on written off of suspended project costs Depreciation of property, plant and equipment Depreciation of right-of-use assets Changes in working capital items Interest expenses on lease liabilities Income tax paid Net cash generated from / (used in) operating activities Financing activities Advances from related parties Repayment of advance from a related party Principal elements of lease payments Net cash (used in) / generated from financing activities Investing activities Purchase of property, plant and equipment Net cash used in investing activities Effect of exchange rate changes on cash held in foreign currencies Increase/(Decrease) in cash	264,303	159,798 (87,334) (1,119) - 23,275 1,573 (25,332) - - - 6,961 3,749 (51,331) (6,531) -	194,411
	85,094		(3,508)
	1,292		-
	949		949
	-		-
	3,237		15,486
	(118,487)		20,192
	515		2,083
	-		-
	-		-
	6,683		28,686
	10,892		44,340
	104,274		(100,529)
	(3,237)		(15,486)
	-
	91,212	(136,089)	(7,787)	(477,633)
		220,628 (26,929) (4,314)		570,806 (82,758) (18,545)
	2,000		212,377
	(845)		(2,690)
	(8,600)		(43,504)
	(7,445)	189,385	166,183	469,503
		(6,012)		(37,579)
	(7,226)		(18,732)
	(7,226)	(6,012)	(18,732)	(37,579)
	(44,532)	(12,671)	(37,763)	(27,831)
	32,009	34,613	101,901	(73,540)
Cash, end ofperiod/year	296,312	194,411	296,312	194,411

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SEGMENTED INFORMATION

a) Revenue by customers

)Revenue by customers
	Twelve-month period ended December 31, 2020 (Unaudited)	Twelve-month period ended December 31, 2019 (Audited)
Customer A	$ % of total revenue	$ % of total revenue
	967,115 34.3	715,735 27.1 306,676 11.6 508,608 19.3 301,059 11.4 44,289 1.7 134,064 5.1 628,286 23.8
Next five top customers
Customer B	466,487 16.5 418,707 14.8
Customer C
Customer D	233,917 8.3
Customer E	201,072 7.1
Customer F All other customers	164,597 5.8 371,440 13.2
Total	2,823,335 100.0	2,638,717 100.0

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

	Twelve-month period ended December 31, 2020 (Unaudited)	Twelve-month period ended December 31, 2019 (Audited)
Singapore	$ % of total revenue	$ % of total revenue
	1,228,385 43.5	778,854 29.5 441,679 16.7 289,087 11.0 234,651 8.9 815,840 30.9 78,606 3.0
Indonesia	293,055 10.4
Other Asia countries	160,856 5.7
Europe	225,155 8.0
United States	885,199 31.4
Other regions	30,685 1.0
Total	2,823,335 100.0	2,638,717 100.0

c) Total assets by geographical location

) Total assets by geographical location
	As at December 31, 2020 (Unaudited)	As at December 31, 2019 (Audited)
Singapore Indonesia	$ % of total assets	$ % of total assets
	45,245 4.3 586,881 56.2	83,739 10.4 435,139 53.8 205,461 25.4 11,512 1.4 51,005 6.3 21,817 2.7
Other Asia countries	381,092 36.5
Europe	5,006 0.5
United States	20,717 2.0
Other regions	5,111 0.5
Total	1,044,052 100.0	808,673 100.0

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d) Financial information by business segments

	Messaging Software products and services Unallocated Total
Twelve-month period ended December 31, 2020 (Unaudited) Revenue Intersegment revenue Amortization and depreciation Interest income Interest and finance expenses Income tax expense Segment profits/(losses) Additions to segment non-current assets At December 31, 2020 (Unaudited) Segment assets Segment liabilities	$ $ $ $ 1,386,756 1,436,579 - 2,823,335 - 11,382 - 11,382 - 73,026 - 73,026 1 200 - 201 - 15,486 - 15,486 - 949 - 949 255,253 (102,672) (156,089) (3,508) - 18,732 - 18,732 195,671 846,158 2,223 1,044,052 (3,730,960) (1,386,298) (2,319,958) (7,437,216)
	Messaging Software products and services Unallocated Total
Twelve-month period ended December 31, 2019 (Audited) Revenue Intersegment revenue Amortization and depreciation Interest income Interest and finance expenses Income tax credit Segment profits/(losses) Additions to segment non-current assets At December 31, 2019 (Audited) Segment assets Segment liabilities	$ $ $ $ 1,589,957 1,048,760 - 2,638,717 - 364,701 - 364,701 - 37,568 - 37,568 119 267 - 386 - 6,531 91,081 97,612 - 247 - 247 583,856 (104,342) (794,825) (315,311) - 37,579 - 37,579 171,894 636,021 758 808,673 (3,119,501) (2,971,487) (1,157,830) (7,248,818)

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Outlook

The Corporation announces its financial forecasts for the twelve months ending December 31, 2021. The information included in this news release represents management’s guidance as approved on February 11, 2021. 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:

• a. Continued business from the Corporation’s major customers. The actual gross margin of Software Products and Services achieved 36.5% for the year ended December 31, 2020 and with the expected decrease in revenue earned from business with key customers of the Corporation, the forecasted gross margin of 22.3% in 2021 is reasonable and achievable. The man-hour rates in 2020 have been adjusted substantially to be in line with prevailing market rates hence the increment in man-hour rates in 2021 will be at reduced rate while the salary increments factored in the 2021 budget. Management believes that the forecast revenue and gross margin is conservative and reasonable.

• b. The actual traffic growth rate of A2P business for the year ended December 31, 2020 declined by 40.3% compared to the year ended December 31, 2019. Both the North Asia and South East Asia region experienced stiff competition and the growth from this region was affected. The Corporation also adjusted the prices to improve gross margin but that also resulted in a decrease in traffic from customers. Revenue for the year ended December 31, 2020 decreased by 12.8% but annual gross margin increased marginally to 20.5% compared with gross margin of 18.7% for the year ended December 31, 2019. The actual gross margin for the quarter ended December 31, 2020 of 9.0% showed that the gross margin declined steeply as the Corporation experienced delayed impact of the coronavirus (COVID-19) outbreak in the second half year of 2020. The extent that the coronavirus (COVID19) outbreak will spread widely and its impact on our result will depend on future developments, which are highly uncertain and unpredictable. Although uncertain at this time, the outbreak could impede our ability to sell, grow and attract new customers. A number of our employees travel frequently to establish and maintain relationships with our customers. Although we continue to monitor the situation and may adjust our current policies as more information and guidance become available, suspending travel, not doing business in-person, and employees government imposed quarantined or sanitary public health authority imposed closures could negatively impact our operations and marketing efforts and also challenge our ability to enter into new customer contracts in a timely manner, which in turn could harm our business performance.

• 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, except what is disclosed in note b above.

• d. Timely completion and launch of certain additional value-added services for the Corporation’s customers.

• e. The related parties agreed to convert their interest-bearing loans and notes payable to interest-free loans with effect from the year 2019 / 2020, no interest expense expected in 2021.

• f. 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 expected gross margin and revenue is forward looking information and may not be appropriate for other purposes.

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Financial Highlights	Forecast Forecast Forecast Forecast
($)	Jan – Mar 2021 Apr – Jun 2021 Jul – Sep 2021 Oct – Dec 2021
Revenues $ A2P Messaging Service Software Product & Services Cost of sales $ A2P Messaging Service Software Product & Services Gross profit $ A2P Messaging Service Software Product & Services Gross margin % A2P Messaging Service Software Product & Services Selling, general and administrative expenses	175,868 178,076 180,311 182,574 299,632 299,632 299,633 299,633
	475,500 477,708 479,944 482,207
	150,173 152,058 153,966 155,898 206,706 206,706 206,706 207,226
	356,879 358,764 360,672 363,124
	25,695 26,018 26,345 26,676 92,926 92,926 92,927 92,407
	118,621 118,944 119,272 119,083
	14.6% 14.6% 14.9% 14.6% 31.0% 31.0% 31.0% 30.8%
	24.9% 24.9% 24.9% 24.7%
	(236,149) (236,149) (236,149) (236,149)
Operating loss Non-operating income(1) Non-operating expenses(1)	(117,528) (117,205) (116,877) (117,066) - - - - (4,791) (4,791) (4,791) (4,791)
Ordinary loss Extraordinary gains Extraordinary losses	(122,319) (121,996) (121,668) (121,857) - - - - - - - -
Loss before tax and non-controlling interest Income taxes Non-controlling interest	(122,319) (121,996) (121,668) (121,857) - - - - - - - -
Net loss for theperiod	(122,319) (121,996) (121,668) (121,857)
Adjusted EBITDA(2)	(100,428) (100,105) (99,777) (99,966)

(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 and income. 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

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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 forwardlooking 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, effect of the COVID-19 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 Corporation’s software products and services are expected to take on a different focus based on an outsourcing model approach leveraging on the lower cost base in Indonesia and Malaysia. Therefore the revenue for the software segment in Indonesia and Malaysia should continue to increase. 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

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elements of our expected fiscal 2020 and 2021 financial results, as well as our objectives, strategic priorities and business outlook for fiscal 2020 and 2021, 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.

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