GINSMS Inc.
TSX VENTURE : GOK

GINSMS Inc.

February 28, 2011 17:59 ET

GINSMS Reports Financial Results for Three and Nine-Month Periods Ended December 31, 2010

CALGARY, ALBERTA--(Marketwire - Feb. 28, 2011) - GINSMS Inc. ("GINSMS" or the "Company") (TSX VENTURE:GOK) has announced its financial results for its third quarter and nine months ended December 31, 2010.

Performance Highlights for the Three and Nine Month Periods Ended December 31, 2010

  • Revenue for the first nine months of fiscal year 2011 at $606,073 dropped slightly by 3.6 % as compared with the first nine months of fiscal year 2010 at $628,383.
  • Inter-SMS traffic for the first nine months of fiscal year 2011 at 101,088,105 is up 8% over that of the corresponding period in fiscal year 2010 at 93,592,869.
  • GINSMS is in a good financial position and has no debt. Cash on hand for the first nine months of fiscal year 2011 of $508,386 is up considerably from the cash position at the end of fiscal year 2010 at $444,271 although down from the December 31, 2009 total of $662,953.
  • As at December 31, 2010, less than tenth of 1% of accounts receivable were 91 days or more. The Company's accounts payable have been reduced substantially from $258,089 as at March 31, 2010 to $69,474 as at December 31, 2010, a decline of $188,615, or 73.1%. In addition, the majority of accounts payable that were 91 days or more overdue have been reduced to $12,465 as of December 31, 2010, as opposed to $171,599 at the end of March 2010.
  • The Company recorded a net loss of $8,690 during the quarter ended December 31, 2010, and a net loss of $35,920 for the nine months ended December 31, 2010, compared to net earnings of $96,284 and $225,243 respectively.

Results of Operations

         
  Three-month period ended   Nine-month period ended  
Financial Highlights December 31,   December 31,  
  (Unaudited)   (Unaudited)  
   
  2010   2009   2010   2009  
   
Revenues 195,221   215,587   606,073   628,383  
Cost of sales (79,079 ) (68,163 ) (258,339 ) (235,045 )
Gross profit $ 116,142   147,424   347,734   393,338  
Gross margin 59.5 % 68.4 % 57.4 % 62.6 %
EBITDA $ 4,705   103,059   50,163   269,755  
EBITDA margin 2.4 % 47.8 % 8.3 % 42.9 %
Net earnings $ (8,690 ) 96,284   (35,920 ) 225,243  
Net earnings N/A   44.7 % N/A   35.8 %

Three Month Period

Revenue for the third quarter of fiscal year 2011 at $195,221 was down $20,366, or 9.6%, over the $215,587 reported during the same period in fiscal year 2010. This is due mainly to a drop in inter-SMS traffic of 8.6% in the third quarter as compared to the same period in fiscal year 2010. In addition, gross profit for the three months ended December 31, 2010 at $116,142 was down $31,282 or 21.2% from a gross profit of $147,424 for the corresponding period in fiscal year 2010. This was primarily due to a 16% rise in cost of sales mainly attributed to an increase in costs related to the operation of the online platform system.

For the quarter ended December 31, 2010, GINSMS recorded a net loss of $8,690, compared to net income of $96,284 in the third quarter of fiscal year 2010. This was due largely to the significant increase in SG&A expenses and an increase in cost of sales, as explained below.

Overall expenses for the quarter ended December 31, 2010 totaled $137,889, representing an increase of $86,974 or 170.8% over the $50,915 reported for the third quarter ended December 31, 2009. This is primarily attributable to higher consultancy and legal fees, much of it temporary in nature, resulting from efforts made to identify opportunities for growth organically and through third parties, higher rent and the necessary accounting adjustments and reporting activities performed by consultants as required by Canadian regulatory agencies.

EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended December 31, 2010 amounted to $4,705, compared to EBITDA of $103,059 during the same period ended December 31, 2009. The decrease in EBITDA can be attributed to lower revenue combined with a higher cost of sales which can be expected to stabilize over the next several quarters. Lower EBITDA is also attributable to the sharp rise in SG&A expenses as summarized above.

Nine Month Period

Revenue for the first nine months of fiscal year 2011 totalled $606,073, down only marginally from the $628,383 reported for the same period in fiscal year 2010. Gross profit for the year-to-date in fiscal year 2011 was $347,734 versus $393,338 for the corresponding period in fiscal year 2010, a decrease of $45,604 or 11.6%, due to the increase in cost of sales. EBITDA for the nine-month period ended December 31, 2010 was $50,163 versus $269,755 for the corresponding period in fiscal year 2010, owing to the sharp rise in SG&A expenses, primarily consulting and professional charges, as well as an increase in rent and payroll relating to the opening of the new office in Guangzhou in July of 2010.

For the nine months ended December 31, 2010, GINSMS recorded a net loss of $35,920 as compared to earnings of $225,243 for the first nine months ended December 31, 2009, owing to a 3.6% decline in sales, a 9.1% increase in cost of sales, and a 140.8% increase in SG&A expenses, spanning the second and third quarters of fiscal 2011. In addition to the explanations above, the increase in SG&A also reflects the charge made to earnings in connection with the Company's investment in a new contract with a service provider which provides maintenance services for the new marketing platform called the "eM K- Matrix". Acquired earlier this year, this eM K-Matrix platform is an SMS e-mail based service providing small and medium-sized enterprises the opportunity to create bulk SMS and e-mail campaigns. The CI feature (Comparative Insight) of the eM K-Matrix platform allows users to get feedback on their email campaigns. It has the ability to automatically check with the various popular internet chat forums and provide information on how people react to a particular campaign. This service is expected to provide a significant incentive to attract traffic in the future.

Amortization of capital assets rose 19.0% from $22,236 in the third quarter ended December 31, 2009 to $26,452 in the third quarter ended December 31 2010. Year-to-date, amortization totaled $80,397, up $10,587, or 15.2% over the $69,810 reported at the end of December 2009. The small increase occurred as a result of the installation of the Company's new operating system and related equipment. The table below outlines the changes in the major categories:

The Company's balance sheet continues to reflect a healthy financial position with a strong cash and liquidity position overall with working capital improving from $549,289 at March 31, 2010 to $579,300 at December 31, 2010. The mix of current assets is better balanced, further enhancing the liquidity position of the Company. The accounts receivables are of very good quality and aging is excellent with only a minor amount in excess of 90 days.

Shareholders' equity as at December 31, 2010 amounted to $1,242,469, down slightly from the $1,296,531 recorded as at December 31, 2009, the result mainly of a net loss of $35,920 and further additions of non-cash foreign exchange charges of $18,142 as reflected in the statement of comprehensive loss. The total non-cash such comprehensive loss as at December 31, 2010 aggregates at $183,874.

While the Company cannot assure the reader that actual results will be consistent with statements about its future, the Company is optimistic about the following assumptions:

  • That the availability of 3G services in China will boost the demand for data-related services;
  • That the Company's IOSMS technology offers the best alternative for efficient and low-cost deliver of SMS; 
  • That the Company will be able to maintain relatively stable and competitive pricing for its customers. 
  • That the Company is expected to continue maintaining a strong balance sheet with adequate working capital to finance its expansion in the Hong Kong and China mainland markets.

Subsequent to the quarter, the inter-operator short message service ("IOSMS") contracts have been renewed with features which management is confident will result in increased traffic and revenue in subsequent periods.

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' long form prospectus dated November 12, 2009 which is available under GINSMS' 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' management discussion & analysis for the three and nine-month periods ended December 31, 2009, 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' 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.

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