GINSMS Inc. (TSX VENTURE:GOK) has announced its financial results for the fourth
quarter and year ended March 31, 2013.
PERFORMANCE HIGHLIGHTS FOR THE THREE AND TWELVE MONTHS ENDED MARCH 31, 2013:
-- The acquisition of Inphosoft Group Pte Ltd ("Inphosoft") was completed
on September 28, 2012. GINSMS's income statement for the quarter ended
March 31, 2013 includes the operating results of Inphosoft Group Pte Ltd
and its subsidiaries resulting in total revenue of $518,678, compared to
$158,652 for the corresponding quarter the previous year.
-- Activities for the three-month period ended March 31, 2013 resulted in a
net loss of $717,852, including a non-realized exchange gain of $15,486
and a non-cash charge to earnings of $307,994 representing accretion on
obligations related to the convertible debentures and promissory notes
issued in connection with the acquisition of Inphosoft. For the quarter
ended March 31, 2012, the Company recorded a net loss of $367,239. For
the twelve months to March 31, 2013, the net loss was $1,534,662,
compared to a loss of $493,704 for the same period the previous year.
For the twelve-month period, the increase in net loss including a non-
realized exchange gain of $63,799 and a non-cash charge to earnings of
$654,904 representing accretion on obligations related to the
convertible debentures and promissory notes issued in connection with
the acquisition of Inphosoft.
-- EBITDA of negative $183,325 for the quarter ended March 31, 2013. This
is an improvement of $142,662 compared to EBITDA of negative $325,987
during the corresponding quarter the previous year. For the twelve-month
period, EBITDA was a negative $561,057, compared to a negative EBITDA of
$345,348 for the corresponding period the previous year. The lower
EBITDA principally reflect much higher losses due to lower revenue
generated by the IOSMS platform and, principally but not exclusively,
substantially higher professional fees due to the acquisition of
Inphosoft.
-- Volume of inter-SMS traffic for the three-month period ended March 31,
2013 was down by 46.4% to 13,419,073 million from the same period the
previous year. When compared to the previous quarter ended December 31,
2012, traffic is down 33.3%. GINSMS believes that this downward trend in
SMS traffic is largely caused by cellphone users migrating to mobile
instant messaging ("MIM") applications and the removal of bundle fees in
the new agreements signed with the mobile network operators that came
into effect on the 1st March 2013.
-- Liquidity improved considerably with cash on hand of $965,917, up 76.0%
from March 31, 2012. Net current assets as at March 31, 2013 were
$797,995, compared to $614,907 as at March 31, 2012.
RESULTS OF OPERATIONS
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Three-month period Twelve-month period
ended ended
March 31, March 31,
Financial Highlights (Audited) (Audited)
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2013 2012 2013 2012
Revenues $ 518,678 158,652 1,302,915 686,934
Cost of sales $ (154,237) (71,378) (400,908) (268,454)
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Gross profit $ 364,441 87,274 902,007 418,480
Gross margin % 70.3% 55.0% 69.2% 60.9%
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EBITDA (1) $ (183,325) (325,987) (561,057) (345,348)
EBITDA margin (35.3%) (205.5)% (43.1)% (50.3)%
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Net earnings $ (717,852) (367,239) (1,534,662) (493,704)
Net earnings margin (138.4)% (231.5)% (117.8)% (71.9)%
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Net earnings (loss) per share
$
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Basic (0.02) (0.01) (0.04) (0.01)
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Diluted (0.02) (0.01) (0.04) (0.01)
1. EBITDA is a non-GAAP measure related to cash earnings and is defined for
these purposes as earnings before income taxes, depreciation,
amortization (share-based compensation included) and the accretion on
obligations.
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Consolidated as at Consolidated as at
March 31, 2013 March 31, 2012
(Audited)(1) (Audited)(1)
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Total assets $ 6,686,027 883,952
Total liabilities $ 7,056,584 157,577
Shareholders' equity $ (370,557) 726,375
1. The figures reported above are based on the consolidated financial
statements of the Company which have been prepared in accordance with
international Financial Reporting.
Financial Review for the Three- and Twelve-Month Period ended March 31, 2013
The table below outlines the changes in the major categories:
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Three months Three months Twelve months Twelve months
March 31, March 31, March 31, March 31,
2013 2012 2013 2012
$ $ $ $
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Selling, General &
Admin 563,252 413,261 1,526,863 763,828
Amortization 233,791 26,148 327,092 103,077
Net Earnings (loss)
per share
Basic (0.02) (0.01) (0.04) (0.01)
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Diluted (0.02) (0.01) (0.04) (0.01)
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Revenue for the fourth quarter ending March 31, 2013 was $518,678, representing
an increase of 226.9%, compared to $158,652 during the corresponding quarter the
previous year. 115.6% of the increase is due to the inclusion for the first time
of the revenue from Inphosoft in the consolidated statement of income as revenue
from the Company's IOSMS activities, taken separately, declined by 35.5%. The
decline in the revenue generated from the IOSMS platform is due to the less
favourable terms of the contracts signed with mobile network operators that came
into effect on 1st March 2013 as well as a 46.4% drop in SMS traffic during the
quarter ended March 31, 2013, compared to the corresponding quarter the previous
year. Note that in comparison with the immediately preceding quarter ending
December 31, 2012, revenue dropped by 26.9%.
For the twelve-month period ended March 31, 2013 revenue increased by 89.7% to
$1,302,915, compared to the same period the previous year. 122.3% of the
increase in revenue came from Inphosoft as revenue from the IOSMS platform
dropped by 20.0%. The drop manifested as SMS traffic during the twelve-month
period under review dropped by approximately 40 million SMS or 32.7%. This is a
significant drop given that the latest available statistics from the Office of
the Communications Authority (OFCA) in Hong Kong covering the periods up to and
including April 2013 continue to show a considerable increase in all categories
of customers in the 2G to 3G/4G space. In spite of this, however, overall
traffic of both sent and received short messages are trending downward. By way
of an example, during April of 2013, the average traffic sent and received per
mobile customers averaged 25 and 34 messages respectively. This is the fifth
consecutive monthly decline. For all of 2012 the average traffic sent and
received averaged 24 and 33 messages respectively.
GINSMS believes that the lower trend in SMS traffic is partly caused by
cellphone users migrating to OTT (over-the-top) applications such as Research in
Motion's BBM, Apple's Imessage or other cross-platform mobile messaging
applications such as WhatsApp, Line, WeChat, IM+, Skype or Google Talk. This
migration enables smart phone users to send messages using device data channel
or WI-FI. Given that most smart phone users now have inclusive data plans they
can forward their messages at a fraction of the cost required to send an SMS.
Also, as reported in previous quarters, during the last two years, Hong Kong
MNOs have been upgrading their networks causing network downtimes and
interruptions. Toward the end of 2012, over 93% of mobile customers were
connected via 3G/4G networks, up from 84% two years earlier. Finally, aggressive
relay fee promotions adopted by GINSMS' competitors added additional downward
pressure on SMS traffic volume
Inphosoft is now GINSMS' main subsidiary. GINSMS' consolidated results for the
quarter ended March 31, 2013 comprise a full three months of operations from
Inphosoft. Revenue from Inphosoft during that period aggregated $416,360 and is
broken down as follow: Professional Services - $122,020 (29.3%), License fees -
$110,976 (26.7%), and Support and Maintenance (S&M) -$183,364 (44.0%).
Professional Services essentially represent contract work provided customers for
an array of software services and solutions including software installation
services, software customization services, or the design and development of
bespoke software solutions for customers.
The net loss for the quarter ended March 31, 2013 amounted to $717,852, compared
to a loss of $367,239 during the same quarter the previous year. The loss for
the fourth quarter this fiscal year includes a net foreign exchange gain of
$15,486 and a non-cash charge to earnings of $307,994 representing accretion on
obligations related to the convertible debentures and promissory notes issued in
connection with the acquisition of Inphosoft. EBITDA for the fourth quarter
ended March 31, 2013 amounted to negative $183,325 but reflected a substantial
improvement over EBITDA for the corresponding period the previous year which
showed a deficit of $325,987. These results underline a much improved gross
profit picture with gross income increasing by 317.6% to $364,441, the result of
substantially higher gross profit margins at Inphosoft which, on a fully
consolidated basis, translate into a gross margin of 70.3%, compared to 55.0%
during the corresponding quarter the previous year.
Other than lower revenue generated by the IOSMS platform and the impact the
foreign exchange gain have had on the results of the Company for the quarter
ended March 31, 2013, the loss of $717,852 reported during the period reflects
higher operating expenses albeit more than offset, as mentioned above, by a much
higher gross income. With Inphosoft, salaries and wages jumped by 548.4% to
$334,769, professional fees are dropped by 47.2% to $136,554, and general and
administrative expenses are up 334.0% to $82,673. Consultancy fees incurred a
substantial decrease of 89.0% to $9,256. Excluding Inphosoft, a relatively
significant drop of $187,563 in professional fees is noted, reflecting lower
legal fees in particular following the completion of the acquisition at the end
of the second quarter. The consolidation of Inphosoft also resulted in higher
amortization charges which amounted to $53,791, compared to $26,148 for the
corresponding quarter the previous year.
For the twelve months ended March 31, 2013 the Company incurred a net loss of
$1,534,662, compared to a loss of $493,704 during the corresponding period the
previous year. Notwithstanding much lower revenue generated by the IOSMS
platform, this is due mainly to a 59.9% increase in professional fees which
amounted to $648,860 for the period, the bulk of it (62.0%) incurred by the
Company before the acquisition and which, in addition to the legal, accountancy
and audit fees, also includes 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 in connection with the
acquisition of Inphosoft. Also contributing to the loss is an increase of 334.3%
in wages combined with an increase in general and administrative expenses of
186.3%. Much of these increases are due to the acquisition of Inphosoft as
increases in wages and general and administrative expenses before the
acquisition were relatively more modest overall. It should be noted that the
company benefited from the absence of any share compensation charges which in
the twelve-month period in fiscal 2012 amounted to $43,729 and lower income
taxes of $9,941 overall. With Inphosoft, the amortization charges during the
twelve-month period ended March 31, 2013, increased by 217.3% to $327,092.
For the twelve-month period ended on March 31, 2013, EBITDA was a negative
$561,057, compared to a negative $345,348 for the same period the previous year.
This is the result of the substantial losses recorded due to the acquisition of
Inphosoft reflecting the unusually high professional fees incurred in connection
with it. The prevalence of these fees was at its highest during the first six
months of this fiscal year as the acquisition closed just at the end of the
quarter ended September 30, 2012.
About GINSMS
GINSMS is a mobile technology and services company focusing on 4 areas namely
Telecom Platforms and Products, Mobile Advertising, Mobile Messaging and Mobile
Applications. GINSMS conducts research and development and also establishes
partnerships to develop and distribute innovative products and services
globally. Through its wholly owned subsidiaries in Singapore, Hong Kong,
Malaysia and Indonesia, GinSMS has successfully deployed more than 100 solutions
globally. GINSMS also operates a short message service ("SMS") hub that provides
inter-operator messaging services to mobile telecom operators in Hong Kong and
messaging services to enterprises in Asia. Through its Right Here Media brand,
GINSMS provides a one-stop mobile advertising service to advertisers. These
services include the development of creative mobile advertising campaigns for
advertisers, the provision of technology to execute these campaigns and the
placement of advertisements on mobile advertising networks.
Forward Looking Statements
This news release includes certain forward-looking statements that are based
upon current expectations, which involve risks and uncertainties associated with
GINSMS' business and the environment in which the business operates. Any
statements contained herein that are not statements of historical facts may be
deemed to be forward-looking, including those identified by the expressions
"anticipate", "believe", "plan", "estimate", "expect", "intend", and similar
expressions to the extent they relate to GINSMS or its management. The
forward-looking statements are not historical facts, but reflect GINSMS' current
expectations regarding future results or events. These forward-looking
statements are subject to a number of risks and uncertainties that could cause
actual results or events to differ materially from current expectations,
including the matters discussed under "Risks Factors" in GINSMS' Filing
Statement filed on August 29, 2012 with the regulatory authorities. GINSMS
assumes no obligation to update the forward-looking statements, or to update the
reasons why actual results could differ from those reflected in the
forward-looking statements unless required by law.
NEITHER THE 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.
FOR FURTHER INFORMATION PLEASE CONTACT:
GINSMS Inc.
Joel Chin
CEO
+65-6441-1029
investor.relations@ginsms.com
Ginsms (TSXV:GOK)
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