GOK Ginsms Inc

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) 
----------------------------------------------------------------------------
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.


FOR FURTHER INFORMATION PLEASE CONTACT: 
GINSMS Inc.
Raymond Richard
Corporate Secretary
450-466-2921

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