GINSMS Inc. Announces Financial Results For The Second

GINSMS Inc. Announces Financial Results For The Second quarter ended
September 30, 2012 
CALGARY, ALBERTA -- (Marketwire) -- 11/29/12 -- GINSMS Inc. ("GINSMS"
or the "Company") (TSX VENTURE:GOK) has announced its financial
results for the second quarter ended September 30, 2012. 
PERFORMANCE HIGHLIGHTS FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER
30, 2012 


 
--  The acquisition of Inphosoft Group Pte Ltd ("Inphosoft") was completed
    on September 28, 2012. GINSMS consolidated balance sheet as at September
    30, 2012 includes the accounts of Inphosoft Group Pte Ltd and its
    subsidiaries for the first time. 
    
--  A decline in revenue, an increase in general expenses, notably
    professional fees due the acquisition of Inphosoft, resulted in a net
    loss of $425,148 for the three-month period ended September 30, 2012.
    This represents a drop of 890% compared to a net loss of $42,951 for the
    corresponding quarter the previous year. EBITDA was also affected
    dropping from a deficit of $12,273 to a deficit of $399,109. For the six
    months ended September 30, 2012, GINSMS showed a decline in revenue of
    15.7% to $306,997. EBITDA recorded a negative $421,653, compared to
    $36,099 in the comparable period the previous year. 
    
--  The decline in revenue combined with a slight increase in the cost of
    sales resulted in a drop in gross margin to 55.2% in the three-month
    period ended September 30, 2012, compared to 64.7% in the same quarter
    the previous year. Gross margin for the six-month period dropped to
    55.1%, from 64.5% in the same quarter the previous year. 
    
--  Volume of inter-SMS traffic for the three-month period ended September
    30, 2012 was down by 29.1% to 23,784,375 million from the same period
    the previous year. When compared to the previous quarter ended June 30,
    2012, traffic is up 2.5%. As explained before GINSMS believes that this
    downward trend in SMS traffic is partly caused by cellphone users
    migrating to mobile instant messaging ("MIM") applications such as
    Research in Motion's BlackBerry Messenger ("BBM"), Apple's Imessage or
    other cross-platform mobile messaging applications such as WhatsApp.
    This migration enables smart phone users to send MIM using device data
    channel or WI-FI. 
    
--  Excluding Inphosoft's opening balance sheet, liquidity was materially
    affected by the unusual amount of professional fees incurred for the
    acquisition of Inphosoft resulting in drop in working capital of
    $418,274 to $196,633. With the acquisition of Inphosoft, working capital
    improved by 15.4% to $709,492 with cash on of $714,599. The working
    capital ratio stood at 1.6 times to one as at September 30, 2012,
    compared to 5.1 times to one as at March 31, 2012.
    
 
SECTION 1.4: RESULTS OF OPERATIONS                                          
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                               Three-month period                           
                                            ended     Six-month period ended
Financial Highlights                September 30,              September 30,
                                      (Unaudited)                (Unaudited)
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                               2012          2011        2012         2011  
                                                                            
Revenues $                  149,908       182,444     306,997      364,254  
Cost of sales $             (67,216)      (64,461)   (137,940)    (129,150) 
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Gross profit $               82,692       117,983     169.057      235,104  
Gross margin                   55.2%         64.7%       55.1%        64.5% 
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EBITDA (1) $               (399,109)      (12,273)   (421,653)      36,099  
EBITDA margin                (266.2)%        (6.7)%    (137.3)%        9.9% 
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Net earnings $             (425,148)      (42,951)   (473,183)     (26,442) 
Net earnings margin          (283.6)%       (23.5)%    (154.1)%       (7.3)%
 
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). 

 
Financial Review for the Three- and Six-Month Period ended September
30, 2012 
Revenue for the second quarter ending September 30, 2012 was
$149,908, representing a reduction of 17.8% over revenue of $182,444
reported during the same three-month period the previous year. The
reduction in revenue is due essentially to a 29.1% 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 June 30, 2012, revenue dropped by only 4.5%,
reflecting a slight increase in traffic of 2.5%, compensated by the
dampening effect the bundle program may have on net revenue depending
on the level of traffic generated by each customer. 
For the six-month period ended September 30, 2012, revenue dropped by
15.7% to $306,997, compared to the corresponding period the previous
year. The drop manifested as SMS traffic during the six-month period
of the current fiscal year dropped by an average of about 10 million
SMS. This is a significant drop given that the latest available
statistics from the office of the Telecommunication Authority (OFTA)
in Hong Kong covering the periods up to and including August 2012
continue to show a considerable increase in all categories of
customers in the 2G to 4G space. In spite of this, however, overall
traffic of both sent and received short messages are trending
downward. During August of 2012 the average traffic sent and received
per mobile customers averaged 32 and 42 messages respectively. This
is down from an average of 46 and 55 messages respectively for all of
2011. 
As mentioned 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. This migration enables smart phone users
to send MIM using device data channel or WI-FI at a fraction of the
cost required to send an SMS. Given the conditions in the market and
the potential for new competitors to enters the space for the
delivery of SMS in Hong Kong,, management does not anticipate traffic
going through GINSMS proprietary platform to improve in the
foreseeable future or even beyond. 
As mentioned in the previous MD&A, management anticipated this
downward trend in SMS traffic and initiated discussions with
Inphosoft Group Pte Ltd ("Inphosoft"), a Singapore IT mobile
middleware solutions developer for MNOs, financial institutions,
media companies and enterprises which provides innovative mobile data
services and solutions. These discussions ended with the acquisition
on September 28, 2012 of Inphosoft for a total consideration of $11.3
million, $10.
5 million of which paid via the issuance of $10.5
million in convertible debentures. 
With the acquisition, management intends to focus its attention
mainly on the enterprise market to tap the potential growth of mobile
advertising and machine-to machine applications. The timing of the
acquisition is critical to allow GINSMS to extract the benefit of a
platform that has been losing ground to both the competition and
market trends in the delivery of SMS not only in the Company's market
but worldwide. Steps have already been taken to minimize operating
costs in operating the platform and a strategy is being developed to
advance the cause of Company's new focus on mobile advertising and
the machine-to- machine space. This new focus is now more relevant
today given that there are new competitors showing an interest in the
IOSMS market in Hong Kong and this could intensify the competition
for SMS traffic even more. 
The net loss for the quarter ended September 30, 2012 amounted to
$425,148 representing an increase of 890% compared to the loss of
$42,951 recorded during the same quarter the previous year. This is
due mainly to a 6.4 fold increase in professional fees which amounted
to $376,706 for the period. An increase of 37.9% in salaries and
wages to $39,003 and of 107% in general and administrative expenses
to $38,884 also contributed to the loss. 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. In addition to the legal, accountancy and
audit fees, professional fees include fees for the retention of the
services of an agent, namely Raymond James Ltd to act as sponsor for
the Company, and the fees of a business valuation firm, namely BDO
Canada LLP to provide a valuation of Inphosoft, as required by the
TSX Venture Exchange. The increase in general and administrative
expenses is related to the stamp duty levied by the Inland Revenue
Authority of Singapore in connection with the transfer of the shares
of Inphosoft upon the closing of the transaction. 
The net loss of the six-month period ended September 30, 2012 was
$473,183, compared to a net loss of $26,442 for the corresponding
period the previous year. The reasons for the increase are the same
as those explained for the second quarter as described above with
professional increasing by 508% to$402,464, salaries and wages
increasing by 39.1% and general and administrative expenses
increasing by 77.8% to $55,300. 
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 September 30, 2012 amounted to a negative
$399,109 compared to a negative EBITDA of $12,273 for the
corresponding period the previous year. For the six-month period also
ended on September 30, 2012, EBITDA was a negative $421,653, compared
to a positive $36,099 for the same period the previous year. The
incidence on net earnings resulting from the drop in revenue, the
increase principally in professional but also in salaries and wages
and general and administrative are the main reasons for the drop in
EBITDA for both period. 
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. Since September 28, 2012 with
the acquisition of Inphosoft Group Pte Ltd, a company whose
activities consists in providing mobile data service and solutions,
GINSMS will be focusing more on enterprise messaging needs comprising
mainly of mobile marketing and machine-to-machine applications. 
Neither 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. 
Contacts:
GINSMS Inc.
Raymond Richard
Corporate Secretary
450-466-2921
 
 
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