GINSMS Inc.
TSX VENTURE : GOK

GINSMS Inc.

November 29, 2010 22:35 ET

GINSMS Reports Financial Results for Three and Six-Month Periods Ended September 30, 2010

CALGARY, ALBERTA--(Marketwire - Nov. 29, 2010) - GINSMS Inc. ("GINSMS" or the "Corporation") (TSX VENTURE:GOK) has announced its financial results for its second quarter and six months ended September 30, 2010.

Highlights

  • Revenue for the first six months of fiscal 2011 remains on par with the first six months of fiscal 2010 at $410,852 this year versus $412,796 a year ago.
  • Cash on hand as at September 30, 2010 of $515,939 is up more than $71,000 from the June 30 31, 2010 total of $454,922., and is up significantly - $431,716 – over the $84,223 reported as of September 30, 2009.
  • Inter-SMS traffic for the first six months of fiscal 2011 at 133,320,799 is up more than 75,000,000 over the corresponding period in fiscal 2010.
  • The Corporation recorded a net loss of $66,778 during the quarter ended September 30, 2010, and a net loss of $27,230 for the six months ended September 30, 2010.
CONSOLIDATED REVENUE  
         
  Three-month period ended September 30,   Six-month period ended September 30,  
  2010   2009   2010   2009  
Revenues $ 202,065   208,541   410,852   412,796  
Cost of sales (113,916 ) (61,718 ) (179,260 ) (166,882 )
  Gross Margin $ 88,449   146,823   231,592   245,914  
  Gross Margin % 43.8   70.4   56.7   59.6  
EBITDA(1) (30,884 ) 108,013   45,458   166,696  
  EBITDA Margin %     51.8   11.1   40.4  
  Net Earnings (Loss) $ (66,778 ) 94,780   (27,230 ) 128,959  
  Net Earnings %     45.4       31.2  
   
(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. This metric should not be considered in isolation or as a substitute for net earnings which is also reported herein but is made relevant by the fact that there is a substantial difference in the capital structure of the Corporation from one period to another, distorting the comparability of net earnings.  

Financial Review – Quarterly and Year-to-date

Revenue for the second quarter of fiscal 2011 at $202,065 was down $6,476, or 3.1% over the $208,541 reported during the same period in fiscal 2010 and down approximately $6,700 from the first quarter of fiscal 2011. This is due mainly to a drop in inter-SMS traffic in the second quarter as compared to the same period in fiscal 2010. In addition, gross margin for the three months ended September 30, 2010 was down some $58,374 or 39.7% to $88,449 over the fiscal 2010 second quarter total of $146,823. EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended September 30, 2010 at ($30,884) was also down substantially from the $108,013 reported during the same period in fiscal 2010.

The decrease in gross margin can be attributed to the sharp rise in the cost of sales ("COS") during the second quarter of fiscal 2011, which increased nearly $52,000 or 84.1% when compared to the second quarter of fiscal 2010. The increase principally reflects the charge made to earnings in connection with the corporation'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.

Revenue for the first six months of fiscal 2011 totalled $410,852, down only marginally from the $412,796 reported for the same period in fiscal 2010. Gross margin for the year to date in fiscal 2011 was $231,592 versus $245,914, a decrease of $14,322 or 5.8%. EBITDA for the six-month period ended September 30, 2010 was also down, to $45,458 compared to $203,985 in fiscal 2010 – a decrease of $158,527 or 77.7%. The reason for the decline in EBITDA was the sharp rise in selling and general and administrative costs, which rose to $186,134 for the first six months of fiscal 2010 versus $79,218 for the same period in fiscal 2010. This is principally due to a substantial increase in legal fees incurred by the Corporation related to the expansion of the Corporation's business in the China market and an increase in consultancy fees for services which typically are required by a public company.

For the quarter ended September 30, 2010, GINSMS recorded a net loss of $66,778, compared to net income of $94,780 in the second quarter of fiscal 2010. This was due largely to the significant increase in selling and general and administrative expenses which rose from $61,880 in the second quarter of fiscal 2010 to $146,541 during the second quarter of fiscal 2011. This is largely attributable to general and administrative expenses which as explained above were due to a substantial increase in legal fees incurred by the Corporation related to the expansion of the Corporation's business in the China market and an increase in consultancy fees for services which typically are required by a public company.

For the six months ended September 30, 2010, GINSMS recorded a net loss of ($27,230) compared to net income of $128,959 for the first six months of fiscal 2010. 

Total assets, including cash, accounts receivable, prepaid expenses, property and equipment and other assets (deposit), at the end of the second quarter of fiscal 2011 totalled $1,545,477 down more than $107,400 over the $1,652,884 in assets reported at the end of fiscal 2010, and down almost $190,000 over the $1,735,354 reported at the end of the first quarter of fiscal 2011.

The reasons for the decrease this quarter include a decline in accounts receivable to $197,101 (versus $317,196 at the end of fiscal 2010) and a decrease in the value of the Corporation's property and equipment to $280,971 compared to $323,548 at the end of the year.

Shareholders' equity for the quarter ended September 30, 2010 is up slightly over fiscal 2010 year-end to $1,305,133 compared to $1,296,531, although retained earnings were down from $147,175 at year end to $119,945. An improvement in the accumulated comprehensive loss to ($129,900) from ($165,732) offset the drop in retained earnings.

The table below sets out the Corporation's assets and shareholders' equity for the six months ended September 30, 2010 and the year ended March 31, 2010:

CONSOLIDATED ASSETS  
     
Current Assets As at September 30, 2010 As at March 31, 2010
  (Unaudited) (Audited)
     
  Cash $ 515,939 $ 444,271
  Account receivable 197,101 317,196
  Prepaid expenses 86,432 103,739
Fixed Assets    
  Property & equipment $ 280,971 $ 323,548
  Deferred costs
  Other assets(1) 465,034 464,130
Total Assets 1,545,477 1,652,884
   
SHAREHOLDERS' EQUITY  
     
Share capital $ 929,386 $ 929,386
Warrants 385,702 385,702
Accumulated comprehensive loss (129,900) (165,732)
Retained earnings 119,945 147,175
  1,305,133 1,296,531
     
Total Shareholders' Equity 1,545,477 1,652,884
     
(1)On December 29, 2009, the Corporation, through GET, entered into a sale and purchase agreement with Nice Plan Development Limited ("Nice Plan") for the purchase of a new e-mail and SMS platform enabling, among other things, the Corporation to support multiple interface connections and SMS deliveries to over 1,000 countries. Under the agreement, Nice Plan may be requested, at the discretion of the Corporation, to provide support services, including maintenance of the e-mail and SMS platform. In addition, under the agreement, the Corporation paid a refundable deposit of $3,500,000 (CDN $465,034) to Nice Plan. The deposit was to be applied towards payment of the purchase price of the new system if the Corporation was to declare itself satisfied with the system's performance on or before April 1, 2010. Shortly following delivery of the new system, the Corporation notified Nice Plan that it was not satisfied with the system and required Nice Plan to make certain modifications to the system software to optimize its performance. To date, Nice Plan has yet to fully complete and deliver the requested modifications.Consequently, the payment of $3,500,000 (CDN $465,034) has been accounted for as a deposit on the balance sheet of the Corporation as at September 30, 2010. The Corporation expects Nice Plan to fully reimburse the $3,500,000 deposit.

Going forward, management is confident that it will be able to increase its market of SMS traffic in Hong Kong and penetrate the market for inbound traffic into China, which would impact directly and favourably on profit margins. The most immediate and significant challenge for the Corporation is to grow revenues back to historical levels through higher traffic in Hong Kong. As mentioned previously, drawbacks in this area in fiscal 2010 were due to some system routing changes in two of GINSMS' major customers. Current trends indicate that the Corporation is making satisfactory progress as traffic is up significantly for the first six months of fiscal 2011 when compared to the same period in fiscal 2010 (133,320,799 versus 58,116,544). Management expects that the acquisition of a license in late July of this year to operate a Wholly Owned Foreign Enterprise ("WOFE") in China will result in a positive impact to the Corporation.

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 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'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