GINSMS Inc.
TSX VENTURE : GOK

GINSMS Inc.

August 29, 2012 23:43 ET

GINSMS Inc.-Performance Highlights for the Three Months Ended June 30, 2012

CALGARY, ALBERTA--(Marketwire - Aug. 29, 2012) - GINSMS Inc. ("GINSMS" or the "Company") (TSX VENTURE:GOK) has announced its financial results for the first quarter ended June 30, 2012.

PERFORMANCE HIGHLIGHTS FOR THE THREE MONTHS ENDED JUNE 30, 2012

  • A decline in revenue, an increase in professional fees, salaries and notably professional and consultancy fees due its planned acquisition of Inphosoft Group Pte Ltd, resulted in a loss of $45,035 for the three-month period ended June 30, 2012. This represents a drop of 391% compared to a net income of $16,509 for the corresponding quarter the previous year. EBITDA was also affected dropping by 146.6% to a negative $22,544.

  • The decline in revenue combined with an increase in the cost of sales resulted in a drop in gross margin to 55% in the three-month period ended June 30, 2012, compared to 64.4% in the same quarter the previous year.

  • Volume of inter-SMS traffic for the three-month period ended June 30, 2012 was down by 29.4% to 23,784,375 million from the same period the previous year. When compared to the previous quarter ended March 31, 2012, traffic is down 4.9%.

  • Despite the loss for the last quarter, liquidity was only mildly affected with a working capital of $609,457 as at June, 30 2012, compared to a working capital of $614,907 as at March 31, 2012. With the substantial change in the balance between current assets and current liabilities, principally the result of accounts payable dropping by 70%, the working capital ratio improved from 5.1 times to one to 15 times to one.

SECTION 1.4: RESULTS OF OPERATIONS

Financial
Highlights
Three-month
period ended
June 30,
(Unaudited)
Year ended
March 31,
(Audited)
2012 2011 2012 2011
Revenues $
157,089

181,810

686,934

785,615
Cost of sales $ (70,724) (64,689) (268,454) (347,184)
Gross profit $
Gross margin
86.365
55.0%
117,121
64.4%
418,480
60.9%
438,431
55.8%
EBITDA (1) $
EBITDA margin
(22,544)
(14.4)%
48,372
26.6%
(345,348)
(50.3)%
15,847
2.0%
Net earnings $
Net earnings margin
(48,035)
(30.6)%
16,509
9.1%
(493,704)
(71.9)%
(96,536)
(12.3)%
(1) EBITDA is a non-GAAP measure related to cash earnings and is defined for these purposes as earnings before income taxes, depreciation and amortization (share-based compensation included).

Revenue for the first quarter ending June 30, 2012 was $157,089, representing a reduction of 13.6% over revenue of $181,810 reported during the same three-month period the previous year. The reduction in revenue is due essentially to a 29.4% drop in SMS traffic during the quarter, compared to the corresponding quarter the previous year. Note that in comparison with the immediately preceding quarter ending March 31, 2012, revenue is virtually unchanged dropping by only 1% while traffic continued to show a slight downward bias.

As mentioned in more detail before, GINSMS believes that the lower trend in SMS traffic is partly caused by cellphone users migrating to MIM applications such as Research in Motion's BBM, Apple's Imessage or other cross-platform mobile messaging applications such as WhatsApp, IM+, Skype or Google Talk.

Net income for the quarter dropped by 391% to a loss of $48,035. This is due to three main factors (i) a 3.5 fold increase in professional fees (ii) an increase of 67.4% in consultancy fees and (iii) an increase in salaries and wages of 40.2%. The length and complexity of the negotiations leading to the acquisition of Inphosoft and the requirements and conditions imposed by the TSXV on GINSMS to complete the acquisition of Inphosoft have resulted in a substantial increase in the professional fees of GINSMS over the past several quarters. Salaries and wages were up by 40.2%, the result principally of an increase in the workload due to the planned acquisition of Inphosoft, necessitating an adjustment in compensation. Finally cost of sales was up by 9.3% reflecting higher costs for the operation and maintenance of the IOSMS platform.

EBITDA (earnings before interest, taxes, depreciation and amortization) is a useful indicator in measuring the Company's ability to sustain long term viable operations while resources are used to grow the Company in a difficult environment. EBITDA for the three-month period ended June 30, 2012 amounted to a negative $22,544 compared to a positive EBITDA of $48,372 for the corresponding period the previous year. The incidence on net earnings resulting from the increase in both professional and consultancy as well as the increase in salaries and wages this past quarter is the main reason for the drop in EBITDA.

As a result of the loss for the year, liquidity contracted with cash on hand as at June 30, 2012 amounting to $455.010, compared to $548,752 at year end. Nevertheless, working capital changed only moderately dropping by less than 1% to $609,452. With the substantial drop off in accounts payable, the working capital ratio improved from 5.1 times to one to 15 times to one.

With the addition of Inphosoft, the Company will be able to immediately introduce a series of VAS that will enhance GINSMS' product offering and transform it into an innovative revenue-powering mobile service and solution provider. GINSMS expects that the acquisition will boost its revenue in Hong Kong and create renewed interest on its IOSMS platform. The acquisition of Inphosoft will result in synergies and immediate cost savings as Inphosoft is expected to take over software maintenance work associated by the Company's IOSMS platform.

Forward-Looking Information

Certain information included in this press release may constitute forward-looking statements. Forward-looking statements generally can be identified by the use of terms such as "may", "could", "will", "expect", "intend", "estimate", "anticipate", "believe" or "continue" or the negative thereof or variations thereon or similar terminology. 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, without limitation, the risks factors discussed in the section entitled "Risk Factors" in GINSMS's long form prospectus dated November 12, 2009 which is available under GINSMS's profile on SEDAR at www.sedar.com. Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, GINSMS cannot assure the reader that actual results will be consistent with these forward-looking statements. These assumptions are further described in GINSMS's management discussion & analysis for the three and twelve-month periods ended March 31, 2011, which is also available on SEDAR at www.sedar.com. These forward looking statements are made as of the date hereof and GINSMS 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.

About GINSMS

GINSMS owns 100% of Global Edge Technology, a technology company focused on providing inter-operator short messaging services to mobile telecom operators in Hong Kong. GINSMS's stated business objective to become a leading short messaging service ("SMS") and data hubbing service provider to mobile network operators in Hong Kong and China and to establish an international SMS and value added services business.

Contact Information

  • GINSMS Inc.
    Raymond Richard
    Corporate Secretary
    450-466-2921