GSTechnologies Ltd (LON:GST), the fintech company, has announced the Company’s interim results for the six months ended 30 September 2022.
Period Highlights
| · | First full reporting period following the completion of the acquisition of Angra Limited (“Angra”) in February 2022, a UK-based foreign exchange and payment services company. During the period, Angra traded profitably, in line with the Board’s expectations |
| · | Completion of the acquisition of UAB Glindala (“Glindala”), a holder of a Crypto Currency Exchange Licence registered in Lithuania, in August 2022 |
| · | Agreement entered into to dispose of EMS Wiring Systems Pte Ltd (“EMS”), a non-core loss-making business, to a member of its management team |
| · | GS Money Stablecoin Regulatory Sandbox application process commenced |
| · | Net loss for the period of US$1,153,000 (H1 2021: US$1,094,000 loss) as EMS continued to underperform and the Company invested in developing its GS Money solutions |
| · | As of 30 September 2022, the Company had US$3,334,000 in cash and cash equivalents (30 September 2021: US$2,749,000) |
Post Period Highlights
| · | Group’s transition to focus purely on next-generation digital money solutions achieved with the completion of the disposal of EMS, just after the period end, on 5 October 2022 |
| · | GS20 Exchange soft launched in November 2022 |
Chairman’s Statement
I’m pleased to present on behalf of the board of directors of GST the interim report of the Company for the six months ended 30 September 2022.
The period was again one of significant progress for the Group as it focused on the Company’s plans to launch a borderless neobanking platform providing next-generation digital money solutions. In particular, the agreement to dispose of EMS, completed just after the period end, will enable the Group to focus solely on its stated strategy as a ‘pure play’ fintech group and has removed a non-core loss making business from the Group.
EMS, based in Singapore, provides wireless, electronic cabling, security, and other solutions to clients operating in the infrastructure development space. In the period it saw revenues decline and it continued to be loss making, as a limited number of new contracts were won and trading conditions remained difficult. The binding agreement entered into on 17 July 2022 has subsequently seen EMS disposed of to Teo Chiah Chiu Raphael (“Raphael Teo”), the Chairman of EMS. The consideration paid was the transfer to the Company, by way of a share buyback, 60,000,000 ordinary shares of no par value in GST held by him (the “Consideration Shares”). At the closing mid-price of 1.09p of the Company’s shares on 15 July 2022, the Consideration Shares were valued at £654,000 and they represented approximately 3.87 per cent. of the Company’s issued share capital. The Company intends to hold the Consideration Shares in treasury for future issue or cancellation in due course.
The primary focus for the Group has, since early 2021, been on the ‘GS Fintech’ subsidiaries in the UK and Singapore and the Company’s expansion into blockchain related technologies applied to the financial services sector, specifically its plans to launch a borderless neobanking platform providing next-generation digital money solutions. During the period the Company has made significant progress in implementing its stated strategy to roll-out a suite of offerings under its GS Money banner based on three initial use-cases: international money transfers, borderless accounts, and private stablecoin.
Following the completion of the acquisition of Angra, a UK-based foreign exchange and payment services company, announced on 8 March 2022, Angra has been successfully integrated within the Group and was a consolidated subsidiary throughout the period.
Angra, which operates under the AngraFX brand name, is an established Financial Conduct Authority (“FCA”) approved Authorised Payment Institution (“API”), conducting fast, secure, and low-cost foreign exchange business and payment services internationally, the first pillar of GS Money. Angra has provided the Group with an operating business in the UK and an API licence in order to be able to connect to traditional banking payment systems and agent networks, operate a remittance business in the UK and ultimately grow revenues from the stablecoin network and applications that are being developed. During the period Angra traded profitably, in line with the Board’s expectations.
On 24 August 2022, the Company completed the acquisition of Glindala, a holder of a Crypto Currency Exchange Licence, registered in Lithuania. Glindala’s Crypto Currency Exchange Licence is supervised by the Lithuanian Financial Crime Investigation Service (“FCIS”) and it covers two types of crypto activities, cryptoasset exchange services, both crypto-fiat and crypto-crypto, and cryptoasset depository wallet services, including generating and storing encrypted client keys. The Company believes the exchange will be a significant enabler for its GS Money stablecoin business and will integrate well with Angra.
Following the acquisition of Glindala, GST entered into an agreement with an exchange infrastructure technology partner to provide the technology and software to run the exchange and integrate it with the Company’s other offerings. Post period end, on 16 November 2022, the Company was pleased to announce the soft launch of its cryptoasset exchange, the GS20 Exchange. Glindala was also renamed to GS Fintech UAB, trading as the GS20 Exchange. GS Fintech UAB is being led by Shayne Tan, the Company’s COO, who has been appointed as the CEO of the GS20 Exchange.
The GS20 cryptoasset exchange, based in Lithuania, will focus on offering spot trading and over-the-counter trading desk services for popular cryptoassets, such as Bitcoin, Ethereum and USDT, and other regulated stablecoins, to a controlled group of retail account holders, as well as a select number of institutional participants, including existing customers of Angra. The GS20 Exchange is not a pure cryptocurrency exchange, so users can expect to see greater technology integration with regulated stablecoins as well as the introduction of more convenient onramp and offramp services for those stablecoins in due course. During the soft launch period, participants have full access to the GS20 Exchange, serving as its first official users.
Those accepted by GS20 Exchange to take part in its soft launch and commence trading on the platform are required to give feedback on their experience using the exchange. This feedback is already providing substantive data which is allowing the GST team to better assess users’ needs for the development of the finalised user experience of the GS20 cryptoasset exchange.
As a further key pillar of the stablecoin activities that the Group intends to carry out in strategic jurisdictions, including the UK, the Company appointed Pinsent Masons LLP as its legal advisor to assist with the Company’s stablecoin application for admission to the FCA Regulatory Sandbox. Founded on the precept that innovation and technology can benefit consumers and the financial services industry, the FCA Regulatory Sandbox provides a production environment for firms to test innovative propositions in the market with real consumers.
The Pinsent Masons team have been advising on the application to the FCA, which has made substantial progress, including refining GS Fintech’s stablecoin business plan and ensuring the proposed technical and operational procedures are compliant with all electronic money and relevant payments regulations in the UK.
Utilising the FCA Regulatory Sandbox is designed is to encourage more participants to experiment with the Company’s fiat-linked (full-reserve backed) stablecoins, that were launched in late November 2021, and conduct stress tests in the stablecoin-based payment system, in a similar manner to how it performs in the banking world. Ultimately, the Company’s goal is to be the first publicly quoted company to obtain an electronic money institution licence from the FCA to issue stablecoins and provide trusted stablecoin-based payments services to the UK market and beyond.
Summary
GS Money is intended to make cross-border payments quick and affordable to an addressable market of millions of participants by netting and settling trades through its stablecoin-based payments network. With the acquisition of Angra, the Group now has an FCA approved API conducting fast, secure, and low-cost foreign exchange business and payment services internationally, and the first pillar of GS Money in place. In 2023 we will be looking to grow revenues substantially from this business via the stablecoin network and applications that are being developed.
Unlocking the demand for a large user base also requires a platform that can meet the clearing and settlement needs of both retail and institutional customers with high compliance and security standards. The acquisition of Glindala and subsequently its transformation into the GS20 Exchange has provided such a platform.
With the Angra and GS20 Exchange platforms in place, the FCA Regulatory Sandbox application being progressed, and further progress being made on the development of the Company’s GS Money solutions, coupled with the disposal of EMS, GST has come a long way in a short period of time. We are now a focused, ‘pure play’ fintech group with a solid platform on which build and to role out our GS Money solutions. We will also continue to explore any further value enhancing acquisition opportunities that may become available and that can assist with accelerating the development of the Group.
Whilst we will continue to invest in developing the Group’s stablecoin-based cross-border payments network, with a firm focus on minimising costs, the disposal of EMS has removed a significant drag on our finances. I therefore believe there is a very bright future for GST and I look forward to reporting on our further progress in the coming months.
Tone Kay Kim GOH
Chairman
Financial Highlights
· Despite the contribution from Angra, the continued poor performance of EMS resulted in a decrease in revenue for H1 2022 to US$1,799,000 (H1 2021: US$2,261,000).
· As of 30 September 2022, the Company had US$3,334,000 in cash and cash equivalents (30 September 2021: US$2,749,000).
· Net loss for the period of US$1,153,000 (H1 2020: US$1,094,000 loss). Despite the positive contribution from Angra, the poor performance of EMS in the period was the major contributing factor to the increased net loss for the period.
