2011-05-26 08:30:00 CEST
2011-05-26 08:30:05 CEST
REGULATED INFORMATION
GeoSentric Oyj - Interim report (Q1 and Q3)
INTERIM REPORT 1-3/2011
GEOSENTRIC OYJ Q1 2011 INTERIM REPORT 26.5.2011 at 09:30
INTERIM REPORT 1-3/2011
Contents
1. Summary of key figures and results
2. Operational overview
3. Material events in the period
4. Material events after the end of the period
5. Review of the financial position and the financial results
6. Sufficient liquidity
7. Future outlook
8. Assessment of significant operational risks
9. Review of R&D activities
10. Investments
11. Personnel and organization
12. Environmental issues
13. Financing and structural arrangements
14. Board authorization
15. Company's shares and shareholders
16. About the Company
17. Financial Statements, Q1 2011 (not audited)
1. Summary of key figures and results
The key figures summarizing the Group's financial position and financial
results from continuing operations were as follows (teuros unless indicated
otherwise):
In period 1-3/2011 1-3/2010 2010
Net sales 29 0 54
Operating Result -1500 -3280 -9536
Basic earnings per share (eur) -0.00 -0.00 -0.01
At the end of the period
Total assets 1335 4512 1420
Shareholders' equity -17163 -5882 -15024
Total liabilities 18498 10394 16444
2. Operational overview
GeoSentric is a developer and provider of solutions, products and technologies
for location based services and LBS-enabled social networks. It develops a
leading geo-integration platform for mobile devices, personal navigation
devices, web browsers, and other internet-connected devices, which provides
applications and bundled ODM/OEM solutions for consumer and B2B markets, built
on the convergence of location based services, social networking, search,
mobile & Web 2.0 technologies. Its intellectual property is delivered as
software and services in products which include the GyPSii product platform
(“GyPSii”).
The business model for the GyPSii platform services and applications is via
embedded licensing of IPR in terms of software technology and branded
trademarks, and downstream revenue generation from services which generate
advertising and subscription revenue. Thus during the reporting period Q1 2011
the Group continued its focus on securing partnerships with the major
distribution partners to integrate product on to their new devices and services
and to broaden the range of GyPSii supported devices. Major marketing and
launch plans during Q1 2011 by the distribution partners, and by GyPSii itself,
have driven increased volumes of GyPSii users.
The total net sales of the Group from the continuing operations of the GyPSii
services in Q1 2011 were 29 teuros, up from 0 teuros total net sales from
continuing operation in Q1 2010. The Group disposed of its TWIG handset
business at the end of the 2010 financial year so all of these revenues from
continuing operations derive from the GyPSii business and represent revenues
from advertising delivered to the increasing numbers of GyPSii users and IPR
licensing.
As recently announced, the Company has engaged in a co-operation agreement in
China with a major media company, Sina, resulting in the launch of Sina's new
Weilingdi product on March 4, 2011. To support the successful and timely launch
of this new product to the Chinese market, the Company has focused all its
available resources in this co-operation project. The consequence of this has
been decline in short-term revenue from Company's own GyPSii products in China.
Therefore the reported revenue in Q1 2011 of 29 teuros was below the Q4 2010
reported revenue of 39 teuros.
Total operating expenses from continuing operations were significantly lower in
the reporting period compared to the prior period, going to 1529 teuros in Q1
2011, from 3280 teuros in Q1 2010, a 53% decrease. This was mainly driven by
the Group consolidating its development, business development and marketing
efforts in China while decreasing personnel and related costs in the rest of
world. In addition the intangible assets/IPR that was booked on the acquisition
of GeoSolutions BV in 2007, which was being written off over a three year
period, was fully written off by the end of Q1 2010. This resulted in a lower
amortization charge in Q1 2011 of 0 teuros compared to a charge of 500 teuros
in Q1 2010.
As a result, the total result before taxes from continuing operations was -2305
teuros in Q1 2011, versus -3598 teuros in Q1 2010, a 36% decrease in the loss.
Earnings per share from continuing operations for the reporting period were
-0.00 euros per share.
The Group realized an overall loss from its discontinued operations (its TWIG
business) in the financial year 2010 of 1987 teuros (Q1 2010: loss of 269
teuros). This is comprised of an operating loss of 1743 teuros in the financial
year 2010 (Q1 2010: loss of 269 teuros) plus a net loss on disposal of the
assets and liabilities of the TWIG business of 244 teuros which was realized in
Q4 2010.
3. Material events in the period
The main events in the period 1-3/2011 were as follows:
In January 2011, the Company concluded an agreement, effective as of December
31, 2010, on the terms and conditions of the purchase of the Group's former
TWIG business with its then current management team. The actual purchaser was a
newly established company, Twig Com Oy, majority held by the MBO team (“Twig
Com”).
The parties agreed that the purchase price is a nominal EUR 1.00. However, as a
part of the consideration and an integral part of the transaction, Twig Com
assumes all liabilities and obligations with regards to the transferring
business, including in relation to its employees and assets. Together with the
liabilities that Twig Com assumes, the book value of the transaction for
GeoSentric was approximately 0.3M€, being the net book value of transferred
assets and liabilities. The following are the main terms of the agreement:
· The purchase transaction is for a nominal consideration of EUR 1.00,
is effective as of 31 December 2010 and comprises of all TWIG mobile handset
related inventories, fixed assets, manufacturing rights, trademarks, agreements
and employees
· The net book value of the TWIG inventory being transferred is
approximately EUR 225,000
· All relevant GeoSentric IPR's and third party IPR's are licensed
royalty free in perpetuity to Twig Com to enable continued production and
support of the TWIG products
· Twig Com has assumed all GeoSentric's liabilities, obligations and
other responsibilities related to the TWIG mobile handset business including
all product warranty responsibilities
· 14 TWIG employees are transferring their employment from GeoSentric
to Twig Com including the MBO leadership team of Jukka Nieminen, Tomi Raita and
Jouko Laine
· Twig Com has assumed all TWIG trade payables and receivables as of 31
December 2010 and has taken over the TWIG factory and office lease
The TWIG divestiture will have significant impact on the Company's financial
performance in the short term as the TWIG business has been the main revenue
generating business of the Company. As a result, although GyPSii revenue is
expected to grow in 2011 compared to 2010, overall revenue for 2011 will be
significantly lower than in the previous year. However, the cash flow effect of
the TWIG disposal is estimated to be approximately €1m positive for the 2011.
In pursuance of the signing of the business purchase agreement Mr. Tomi Raita
resigned from the position of the Company's Managing Director, and the Board of
Directors has nominated board member Winston Guillory as GeoSentric's new
Managing Director.
In January 2011, the Company agreed with its lead investor to extend the
current financing structure with an additional financing of a maximum aggregate
amount of 1.8M€ for the primary purpose of financing and supporting its GyPSii
operations in China. The additional financing was raised in two tranches both
received in January 2011 through the Company's wholly owned Dutch subsidiary
GeoSolutions Holdings N.V. on the same terms as agreed and approved by the
Annual General Meeting held on June 30, 2010. The Company has already before
placed the shares and assets of the Company and GeoSolutions Holdings N.V. and
its subsidiaries as a first ranking security to the financing, which security
will cover also this additional financing.
In connection with the additional financing the Board of Directors of the
Company has also, by virtue of the authorization granted by the Annual General
Meeting, decided to issue at maximum 144,000,000 special rights to the lead
investor, entitling them alternatively to convert their loan notes in
GeoSolutions Holdings N.V. directly into the shares of GeoSentric, as agreed in
the loan terms for the original 6M€ financing in June 2010.
In February 2011 Andy Van Dam resigned from the Board of Directors for personal
reasons.
In March 2011, the Company's wholly owned Chinese subsidiary entered into a
Cooperation Agreement with Sina (Beijing) Information Technology Co., Ltd.,
whose parent company, Sina Corp. is listed on the US NADAQ market under the
symbol (SINA). The Cooperation Agreement provides for development, marketing
and distribution co-operation between the two companies for a newly launched"Welingdi" Location Based Services (“LBS”) and Social Networking Services
(“SNS”) service in China. Under this agreement, GeoSentric and Sina have
jointly developed the new “Weilingdi” service and Sina will actively market it
to its 100m+ "Weibo" application users. The "Weilingdi" service combines Sina's
exclusive content such as entertainment, lifestyle information and VIP assets
built on top of the existing "Lingdi" service launched by GeoSentric last year.
This Cooperation Agreement is a vital step forward in progressing discussions
for a deeper relationship between the two companies potentially resulting in a
joint venture agreement but it is not expected to provide immediate short-term
revenue to the group.
4. Material events after the end of the period
In April 2011 the Board received a proposal for short-term financing from
Company's lead investor (“Proposal”). The Proposal sets the terms and
conditions on which the lead investor is willing to commit to further funding
for the business of the Group. According to the Proposal the lead investor
would convert its existing preferred convertible notes (“Notes”) issued by
GeoSolutions Holdings N.V. (“GHNV”) into the shares of GHNV, leaving the
Company as a minority shareholder in GHNV with approximately a 21%
shareholding. The conversion of Notes would be followed by further
capitalization of GHNV in a form of rights offering (“GHNV Offering”), which
could lead to further dilution of Company's ownership in GHNV down to a 7%
level if the Company did not participate in the GHNV Offering to its pro-rata
share, corresponding to an investment of approximately 1M€. To raise the
required funds to participate in the GHNV Offering the Company needs to arrange
a share issue (“GSOY Offering”).
Under the Proposal the lead investor has also undertaken to provide the Group
with further short term financing of 0.6M€ in a form of new Notes issued by
GHNV, which financing the Company has now raised. Pursuant to the Proposal,
this financing was directed 250 teuros to GHNV and its subsidiaries providing
this sub-group with financing through to the end of April and 350 teuros to the
Company giving the Company runway through Q2 2011 and time to arrange the GSOY
Offering to raise funds for participating in the GHNV Offering and guaranteeing
the sufficient liquidity of the Company in the medium term. The Company
estimates that to achieve the above goal it should raise in the GSOY Offering
approximately 1.8M€. In case of a successful GSOY Offering the Company would
still hold a substantial share of approximately 21% of GHNV, which holds all
the GyPSii business assets, and would retain the ability to enjoy the future
upside potential of the business. As the Company has recently announced to the
markets, the GyPSii business is now starting to show some positive development
in China, especially through co-operation with Sina. The Company's own
operations would be reduced to a minimum and its sole business would be holding
the GHNV shares.
On the other hand, if the GSOY Offering was unsuccessful and the required funds
were not raised, the lead investor has undertaken to provide GHNV sufficient
funding through the GHNV Offering, itself subscribing part of the Company's
prorata entitlement, and offering the rest to other potential investors.
According to the Proposal, in this case, GHNV would give the Company a secured
loan, supported by the lead investor, securing the minimum capital requirements
of the Company until approximately mid 2012 and the Company would be left
holding approximately 7% of GHNV shares. Any further funding of the Company
would then be subject to support from the Company's shareholders.
The Board of the Company has discussed the Proposal in depth with the lead
investor to secure the best possible terms for the Company's shareholders and
other stakeholders and acknowledges that it is the only secure proposal for
funding that the Company had, at the time, been made aware of. The Board has
also assessed the proposal and concluded that it represents a better
alternative for the shareholders of the Company compared to putting the Company
into liquidation. Therefore, the Board of Directors approved the Proposal and
raised the first part of the funding, i.e. 0.6M€ in accordance with the terms
of the Proposal. The Board had called an Extraordinary General Meeting to have
been held on May 12, 2011 to confirm the approval of the Proposal by the Board
of Directors except as regards to above mentioned 0.6M€ financing raised
already prior to Extraordinary General Meeting. However before commencement of
the meeting, the Board decided to adjourn the Extraordinary General Meeting to
a later date as certain of the larger shareholders informed that they wished to
receive more information about the lead investors' financing proposal and the
Company's future business outlook in order to be able make a more informed
decision. To that end, the Company announced in May 2011, that the full text of
the Proposal and other supporting materials had been posted onto the Company's
website. Some of the larger shareholders also informed that they might present
an alternative financing proposal to the extended meeting and the preparation
of these proposals will require some additional time and discussions with the
lead investor.
Due to the cancellation of the Company's Extraordinary General Meeting to have
been held on May 12, 2011 and the subsequent delay in implementing the GHNV
Offering and GSOY Offering according to the Proposal, the Company has agreed
with its lead investor that there will be a re-allocation of the 600 teuros
short term funds already raised in April. Part of the funds previously
allocated to maintaining the liquidity of the Company has now been allocated to
GHNV and its subsidiaries such that both GeoSentric and GHNV together with its
subsidiaries now have sufficient liquidity through to the end of May 2011.
5. Review of the financial position and the financial results
The Company has during the period retained solidity and liquidity.
The key figures summarizing the Group's financial position and financial
results from continuing operations were as follows (teuros unless indicated
otherwise):
In period 1-3/2011 1-3/2010 2010
Net sales 29 0 54
Operating Result -1500 -3280 -9536
Basic earnings per share (eur) -0.00 -0.00 -0.01
At the end of the period
Total assets 1335 4512 1420
Shareholders' equity -17163 -5882 -15024
Total liabilities 18498 10394 16444
Cash 737 2141 892
6. Sufficient liquidity
The Company has, during the reporting period, retained sufficient liquidity.
As noted above, the Company has in April 2011 received a funding proposal from
its lead investor which provides for the short term funding of the Group. The
funding proposal would result in the parent company losing control of its
subsidiaries with its own operations being reduced to that of a shell holding
company. The proposal provides time and funding for the parent company to
participate in a subsequent funding round of its current immediate subsidiary,
GeoSolutions Holdings NV, in which case it could retain approximately a 21%
stake in the subsidiaries. If the Company is not able to raise additional funds
from its shareholders and participate in this subsidiary funding round, the
parent company's stake would be reduced to approximately 7%. In this case the
funding proposal provides for an intercompany loan to be made available from
the current subsidiary company to the parent company to fund its reduced
operations through to approximately mid 2012. After that it would need to look
to its shareholders for further funding. The funding proposal has been approved
by the Company's Board and has been referred to an EGM for shareholder
confirmation of this approval. As noted above the EGM has been cancelled
pending clarifications about the proposal requested by certain shareholders and
pending further discussions being held concerning possible alternative funding
proposals that certain of the larger shareholders are preparing. If the
shareholders do not confirm their approval for the proposal and no alternative
and acceptable funding proposals are forthcoming, it is likely that the Company
could be declared insolvent.
7. Future Outlook
Market Outlook
There are over 4 billion mobile phone units in the market and over 1 billion
new phones shipped every year. Internet Access, camera, location capabilities,
and 3rd party application support has become standard on most devices.
GyPSii's applications are supported on the 7 major mobile platforms and allow
the Group to address not only the fast growing smartphone market (lead by
iPhone and Android) but also the feature phone market, which by industry polls
in 2009 represents substantial percentage of the mobile phones in the world
today.
With the widespread adoption of mobile internet and the ability to provide
location/GPS information in real-time, the market has created new revenue
opportunities around delivering location aware mobile advertising, promotional
offers and couponing to consumers. GyPSii's expertise, technologies, and
partnerships have positioned them to exploit this market opportunity on a very
broad scale.
Business Development Outlook
The Group's business outlook and identified revenue during 2011 is based on
expanding its current level of business subscription, advertising sales and IPR
licensing.
The main focus of business development and the primary element for the business
model and revenue generation is rapid growth of the GyPSii membership base that
utilizes GyPSii's two main products in China, “Tuding” and “Weilingdi”. This
growth is being achieved almost exclusively in China by existing and developing
partnerships with Mobile Operators (MO), Original Equipment Manufacturers
(OEM), Original Device Manufacturers (ODM), Personal Navigation Device
Manufacturers (PND) and leading mobile and Internet commerce companies as well
as direct marketing campaigns by GyPSii. GyPSii membership has grown
significantly during 2010 and early 2011 and has climbed to a total subscriber
base of almost 3,250,000 registered users with a substantial and growing base
of recurring monetizeable users. This membership base has begun to produce
advertising revenues and the Company is targeting to grow these revenues during
2011 and beyond.
A second element of GyPSii's growing revenue base began with the development of
its Open APIs (OeX) at the beginning of 2010. The Group has furthered business
development opportunities with strategic service providers to deliver OeX into
non-emerging markets. This approach allows GyPSii to reduce the risk and
overhead associated with business development efforts in non-target markets
while assessing geographies that may prove to be long-term opportunistic for
the Company. Outside of China, GyPSii is developing partnerships for use of its
LBS and SNS software platform “OEX”. During 2010 an agreement was signed
licensing OEX to a major PND provider in the United States. This agreement
provides for monthly recurring revenue based on total usage. GyPSii will
attempt to develop further partnerships for the licensing of OEX in 2011.
The third element of the GyPSii revenue strategy in 2011 was established by the
launch of its new service offering that focuses on providing for Small and
Medium Businesses (SMB) with location-based services and platforms. The “GyPSii
CRM Platform” provides SMB's with a toolset for creating, managing and
delivering promotional incentives to their customer base at a much lower
distribution cost. The self-service platform gives business owners the ability
to create customized coupon campaigns and discount programs for consumers that
are delivered directly to their mobile devices. Using its location-based
technology the GyPSii CRM Platform can assist businesses in converting these
consumers to loyal customers by incentivizing them at the Point of Sale (POS)
with relevant discounts and rewards. Additionally, the GyPSii CRM Platform
collects, analyzes and produces detailed reports on customer interactions at
the point of sale, granting businesses a new level of insight into marketing
and promotional spending that they have never had before. The GyPSii CRM
service “lingdi” was launched in China at the end of 2010. During 2011 this
service will be available for use by Small and Medium Businesses for a monthly
recurring subscription fee. To date no revenues have been earned from this
service as it is in an early launch phase.
During 2010, the Company consolidated its efforts into developing the Chinese
market. Efforts in prior years to penetrate the markets in the United States
and Europe proved too costly for the Company to sustain compared to the
operating cash available. Therefore, during 2010 and continuing into 2011, the
Company began consolidating operating, development, business development and
marketing resources into China with significant staff reductions elsewhere in
the world. This has resulted in a significant reduction in monthly operating
costs within the Group At the same time the Company began to focus its products
and services almost entirely in China. This decision has resulted in
significant increases in member acquisition and usage of the GyPSii products
within China. This member growth led directly to the growth of page views and
hence the generation of advertising revenues. This significant growth during
2010 establishes the ability to further grow the monetization of page views
with advertising in 2011. In anticipation of and following the Cooperation
Agreement noted below, the Company has been focussing all of its marketing and
development efforts towards the newer products and this has resulted in a
decline in advertising and related revenues in China.
As noted earlier, in March 2011, the Company's wholly owned Chinese subsidiary
entered into a Cooperation Agreement with Sina (Beijing) Information Technology
Co., Ltd., whose parent company, Sina Corp. is listed on the US NADAQ market
under the symbol (SINA). The Cooperation Agreement provides for development,
marketing and distribution co-operation between the two companies for a newly
launched "Welingdi" Location Based Services (“LBS”) and Social Networking
Services (“SNS”) service in China. Under this agreement, GeoSentric and Sina
have jointly developed the new “Weilingdi” service and Sina will actively
market it to its 100m+ "Weibo" application users. The "Weilingdi" service
combines Sina's exclusive content such as entertainment, lifestyle information
and VIP assets built on top of the existing "Lingdi" service launched by
GeoSentric last year. This Cooperation Agreement is a vital step forward in
progressing discussions for a deeper relationship between the two companies
potentially resulting in a joint venture agreement. These discussions are
continuing well and, although a final agreement has not yet been reached, it is
likely that the agreement, if concluded, would result in Sina taking a 60%
controlling stake in the Group's Chinese subsidiary in return for a cash
investment into that business.
8. Assessment of significant operational risks
The global financial crisis and current global recession have had and may
continue to have a negative impact also on the business of the Group. As
announced previously, the Company expected to see positive development in
GyPSii generated revenues starting from the last quarter of 2009. Continued
financing negotiations and, especially during the year 2009, the global
financing crisis have shifted the revenue expectations of GyPSii, yet revenues
have started to be generated in 2010 and the Company expects to see further
GyPSii generated revenues during 2011. The Company is also exploring additional
business development opportunities including partnering arrangements with local
media partners, which could lead to accelerated user adoption.
There is no certainty of the success regarding the implementation and
realisation of the business plan. According to the business strategy, the Group
is pursuing entrance also to new business segments with competitive situations
new to it, or which may be only in the early market phase. Unless the Group is
able to successfully respond to these developments it may significantly impair
the Group´s operating results.
A key driver of the business model is sufficient and sufficiently rapid growth
of users of the services, and the speed of adoption of mobile, UGC and location
based advertising of which the Group has no certainty. Advertising budgets are
under pressure with major brands and advertisers in certain areas and this
could have an adverse affect on the adoption of mobile and location based
advertising in 2011 and beyond.
The most significant risk relating to the business plan is the sustained growth
of members. As the Company's business model is driven by the acquisition and
retention of new members, possible delays in funds available to the Company to
drive marketing efforts of their new products to the markets and therefore the
acquisition of new members, may have an adverse effect on the development of
the Company's business by decelerating the distribution and subscriber-adoption
rate of the Company's products and services.
Since 1997, the Company has not paid dividends. In the future, the re-payments
of capital and other preferred loans will restrict the possibility to
distribute dividends. The total amount of loans as at 31 March 2011 was 25413
teuros at nominal value. Regarding future dividend payments, there is also
uncertainty about the ability of the Company to accrue distributable capital.
According to the financial statements of the Company, there was no
distributable capital in the latest balance sheet of the Company.
The Group´s business plan has been prepared by assuming that the Group´s result
and cashflow will improve significantly. The Group's financing plan also
assumes additional external financing to be received, which financing has not
yet been agreed to. Should the result and cashflow essentially fail to meet the
planned figures, or the new financing be delayed, or the amount of financing
turn out to be insufficient to meet the Group's capital needs, this might force
the Company to introduce further significant cost cutting measures, which could
also have a material effect on the execution on the Company's current business
plan in the short term, and also cause an insolvency risk.
There are significant financial risks related to the Company's business,
competition and industry and it is possible that investors may lose all or a
part of their invested capital.
Schroders & Co Limited and investor groups led by Horizon Group and GeoHolding
B.V., have influence on GeoSentric. The Company trusts that the regulation and
information obligation binding public companies, supported by the compliance
with the corporate governance recommendations, together with the continuous
external auditing activity maintained by a skilled and reputable auditing firm
suffice to pre-empt a misuse of control power.
9. Review of R&D-activities
The volume of the Group's R&D activities during the reporting period was
significant due to the on-going R&D-programs by means of which the Group
intends to significantly expand its business over the next few years. No
capitalizations were made.
The Group maintains R&D units primarily in Portsmouth, RI (USA) and Shanghai
(China).
Additionally, GyPSii server facilities are maintained in the US and China at
present, with continued upgrades planned in the future.
10. Investments
Gross investments in period 1-3/2011 were 23 teuros (18 teuros in the period
1-3/2010). In the full year 2010 gross investments were 40 teuros.
11. Personnel and organization
The number of employed personnel in the Group in period 1-3/2011 averaged 72,
of which 10, at most, were affected by alternate forced leaves. The alternate
forced leave program, agreed in autumn 2007 to apply for the time being,
continues also in 2011.
12. Environmental issues
The Company pays for its products a statutory recycling fee and has organised
the recycling of disposed materials contractually through Jalopinta Ky.
Altogether, the Group´s operations cause no significant environmental impact.
13. Financing and structural arrangements
In January 2011, the Company agreed with its lead investor to extend the
current financing structure with an additional financing of a maximum aggregate
amount of 1.8M€ for the primary purpose of financing and supporting its GyPSii
operations in China. The additional financing was raised in two tranches both
received in January 2011 through the Company's wholly owned Dutch subsidiary
GeoSolutions Holdings N.V. on the same terms as agreed and approved by the
Annual General Meeting held on June 30, 2010. The Company has already before
placed the shares and assets of the Company and GeoSolutions Holdings N.V. and
its subsidiaries as a first ranking security to the financing, which security
will cover also this additional financing.
The financing arrangements and negotiations after the end of the reporting
period have been described above in section ”Material events after the end of
the period”.
14. Board authorization
The Annual General Meeting convened on June 30, 2010 authorized the Board to
increase the share capital by maximum of 4,000,000 euros and share amount by
maximum of 850,000,000 new shares, option rights or special rights. The
authorization is valid for two (2) years from the date of the Annual General
Meeting. At the same time all the other authorizations were terminated.
At the end of the reporting period the remaining amount of Board's
authorization was 4,000,000 euros and 663,902,000 shares corresponding to 71.84
% of the currently registered share amount and 22.73 % shares after all shares
and instruments entitled to shares, effecting a corresponding immediate
dilution to existing shareholdings (including current authorization).
15. Company's shares and shareholders
The shares of GeoSentric Oyj are listed on the NASDAQ OMX Helsinki (NASDAQ OMX:
GEO1V) and issued in the book entry system held by Euroclear Finland, address
PL 1110, FIN-00101 Helsinki, Finland. The ISIN-code of the share is FI
0009004204. The Company's shares have been on the surveillance list since
February 11, 2003.
The Company and its subsidiaries do not have any Company´s shares owned by or
administered on behalf of the Company.
At the end of the reporting period the Company's registered share capital was
8,955,761.65 Euros, consisting of 924,656,354 shares.
16. About the Company
GeoSentric is a developer of location-based technologies, delivering products
and services with a market-leading mobile digital lifestyle application and
geo-mobility social networking platform: connecting people, places and
communities across networks and devices. GyPSii provides a geo-location social
networking platform and services for mobile and web Internet-connected devices,
and provides applications and bundled ODM/OEM solutions, built on the
convergence of location based services, social networking, search, mobile & Web
2.0 technologies. For more information, visit www.geosentric.com or
www.gypsii.com or www.gypsii.com.cn.
© 2011 GeoSentric Oyj. All rights reserved.
Based in Salo, Finland and Amsterdam, The Netherlands, GeoSentric operates
offices in North America, Europe and Asia Pacific.
GeoSentric (NASDAQ OMX Helsinki-GEO1V) is listed on the NASDAQ OMX Exchange in
Helsinki. The Company has been on the surveillance list since February 2003.
GEOSENTRIC OYJ
For more information, please contact: investors@gypsii.com
Distribution:
NASDAQ OMX Helsinki
Principal news media
GEOSENTRIC OYJ INTERIM REPORT 1Q/2011 (Unaudited)
GROUP STATEMENT OF COMPREHENSIVE INCOME
1000 EUR Note 1Q/2011 1Q/2010 2010
Continuing operations
Net sales 29 0 54
Cost of goods sold 5 0 0 0
-------------------------
-------------------------
Gross margin 29 0 54
Other operating income 0 0 0
General & Administrative expenses 5 570 677 2673
Research & Development expenses 5 573 1898 4671
Sales & Marketing expenses 5 386 705 2246
-------------------------
-------------------------
Operating result -1500 -3280 -9536
Financial income 1 2 78
Financial expenses -806 -320 -1783
-------------------------
-------------------------
Result before taxes -2305 -3598 -11241
Income taxes 116 99 -146
-------------------------
-------------------------
Result for the period from continuing operations -2189 -3499 -11387
Discontinued operations
Result for the period from discontinued 4 0 -269 -1987
operations
-------------------------
-------------------------
Result for the period -2189 -3768 -13374
Translation difference -4 -22 -13
-------------------------
-------------------------
Comprehensive income -2193 -3790 -13387
Earnings per share, eur:
Basic earnings per share, continuing operations -0,00 -0,00 -0,01
Basic earnings per share, discontinued -0,00 -0,00
operations
Diluted earnings per share have not been computed because dilution effect would
improve the key figure.
GROUP STATEMENT OF FINANCIAL POSITION
1000 EUR Note 31.3.2011 31.3.2010 31.12.2010
ASSETS
Non-current assets
Property, plant and equipment 70 217 82
Goodwill 216 216 216
Other intangible assets 1 7 1
Other financial assets 5 66 5
Deferred tax assets 0 0 0
---------------------------------
---------------------------------
292 506 304
Current assets
Inventories 0 914 0
Trade receivables and other receivables 306 947 224
Prepaid expenses 0 4 0
Cash and cash equivalents 737 2141 892
---------------------------------
--------------------------------- 1043 4006 1116
Total assets 1335 4512 1420
EQUITY AND LIABILITIES
Shareholders´equity
Share capital 6 8956 8951 8956
Share premium account 6 13631 13631 13631
Translation difference 118 113 122
Invested distributable equity account 6 30912 30603 30912
Retained earnings -70780 -59180 -68645
---------------------------------
---------------------------------
Total shareholders´ equity -17163 -5882 -15024
Non-current liabilities
Deferred tax liabilities 0 0 0
Interest-bearing debt 8 15086 7152 13112
---------------------------------
---------------------------------
15086 7152 13112
Current liabilities
Trade payables and other payables 3299 2303 3219
Provisions 0 37 0
Interest bearing debt 8 113 902 113
---------------------------------
---------------------------------
3412 3242 3332
Total liabilities 18498 10394 16444
Total shareholders´ equity and 1335 4512 1420
liabilities
GROUP CASH FLOW STATEMENT
1000 EUR 1Q/2011 1Q/2010 2010
Cash flow from operations
Result for the period -2189 -3768 -13374
Adjustments 264 892 1505
Changes in working capital:
Change of trade and other receivables -82 -245 482
Change of inventories 0 302 761
Change of trade and other liabilities 80 -331 548
Paid interests 0 -630 -630
Received interest payments 1 1 18
Cash flow from operations, net -1926 -3779 -10690
Cash flow from investments, net -23 -19 46
Cash flow from financing
Proceeds from issue of share capital 0 0 67
Transaction expenses of share issues 0 0 -3
Transaction expenses of loans -6 0 -467
Proceeds from long term borrowings, equity 0 0 0
Proceeds from long term borrowings, liability 1800 0 6000
Net cash flow from financing 1794 0 5597
Change in cash -155 -3798 -5047
Cash at beginning of period 892 5939 5939
Cash at end of period 737 2141 892
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY
Share Translatio Share Inv. Accrued Total
capital n premium distrib. result (1000e
(1000eu difference account equity (1000eur ur)
r) (1000eur) (1000eur) account )
(1000eur)
Shareholders´ 8951 135 13631 30603 -55556 -2236
equity
31.12.2009
Items booked 0 -22 0 0 0 -22
directly into
shareholders´
equity
Result for the 0 0 0 0 -3768 -3768
period
--------------------------------------------------------------
--------------------------------------------------------------
Comprehensive 0 -22 0 0 -3768 -3790
income
Booked expense of 0 0 0 0 144 144
stock options to
key personnel
and partners
Equity portions 0 0 0 0 0 0
of liabilities
--------------------------------------------------------------
--------------------------------------------------------------
Shareholders´ 8951 113 13631 30603 -59180 -5882
equity 31.3.2010
Shareholders´ 8956 122 13631 30912 -68645 -15024
equity
31.12.2010
Items booked 0 -4 0 0 0 -4
directly into
shareholders´
equity
Result for the 0 0 0 0 -2189 -2189
period
--------------------------------------------------------------
--------------------------------------------------------------
Comprehensive 0 -4 0 0 -2189 -2193
income
Booked expense of 0 0 0 0 54 54
stock options to
key personnel
and partners
Equity portions 0 0 0 0 0 0
of liabilities
--------------------------------------------------------------
--------------------------------------------------------------
Shareholders´ 8956 118 13631 30912 -70780 -17163
equity 31.3.2011
KEY FIGURES, ALL OPERATIONS
1Q/2011 1Q/2010 2010
Net sales, 1000 EUR 29 607 1851
Operating result, 1000 EUR -1500 -3549 -11523
Result before taxes, 1000 EUR -2305 -3867 -13228
Gross investments, 1000 EUR 23 19 40
Average personnel 72 130 116
Earnings per share, EUR -0,00 -0,00 -0,01
Equity per share, EUR -0,02 -0,01 -0,02
Weighted average number of shares in period, 1000 pcs 624462 897926 903645
Number of shares at the end of the period, 1000 pcs 924656 897926 922156
1. BASE INFORMATION OF THE COMPANY
GeoSentric is a developer and provider of solutions, products and technologies
for location based services and LBS-enabled social networks. It develops a
leading geo-integration platform for mobile devices, personal navigation
devices, web browsers, and other internet-connected devices, which provides
applications and bundled ODM/OEM solutions for consumer and B2B markets, built
on the convergence of location based services, social networking, search,
mobile & Web 2.0 technologies. Its intellectual property is delivered as
software and services in products which include the GyPSii product platform
("GyPSii"). The company has deep expertise and technology IP in User Generated
Content Management, Location Based Services, Open Social Networking,
Ad-Targeting and Integration, for Social Media markets and users on mobile
phones, the web, personal navigation and internet connected devices. Based in
Salo, Finland, and Amsterdam, The Netherlands, GeoSentric operates offices in
North America, Europe and Asia Pacific. GeoSentric is listed in NASDAQ OMX
Helsinki Ltd (NASDAQ OMX: GEO1V).The parent company of the group is GeoSentric
Oyj (formerly Benefon Oyj). The registered domicile is Salo, Finland, with
street address Meriniitynkatu 11, 24100 Salo, Finland, and mail address PL 84,
FIN-24101 Salo, Finland. A copy of the group financial statements is available
at the internet address www.geosentric.com or at the company head office at
address Meriniitynkatu 11, FIN-24100 Salo, Finland.
2. ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS
Foundation:
The group interim report has been prepared in accordance with International
Financial Reporting Standards ("IFRS") and has been prepared to the accounting
standard IAS 34, Interim Reports. An interim report shall be read together with
the financial statements for year 2010.
Accounting principles:The utilised principles of preparation are identical with those utilised by the
Group in financial statements for year 2010. IASB has published new standards
and interpretations and changes in existing standards, application of which is
mandatory on 1.1.2011 or thereafter, and which the group has not adopted
earlier voluntarily. The group will adopt the following standards (and their
amendments) and interpretations from 1.1.2011 onwards: Change to IAS 32,
Financial instruments: presentation method - Classification of Rights Issues.
Change concerns booking of options, subscription rights or other rights
regarding shares made in other currency than issuer´s functional currency.
IFRIC 19, Liquidation of financial debt with equity terms instruments.
Interpretation make clearer booking in case that issues to creditor equity
terms instruments to liquidate financial debt. Changes to interpretation IFRIC
14, Payments in advance based minimum funding demand. The group has not this
kind of payments. Reformed IAS 24, Information regarding related party in
financial statements. The group is specifying definition of related party. IFRS
9, Financial instruments (in force 1.1.2013 or in beginning account period
after it). Valuation methods simplifies and classification changes. Numbers
from previous period need not correct if standard takes to use before 1.1.2012
beginning account period. Standard is not yet accepted to apply in EU.
Improvements to IFRSs -changes. Small changes without material effect to
financial statement.
3. SEGMENT INFORMATION
The group has only one distinct segment, location based services. Its share of
net sales has been 100% in the period and in the reference period.
4. DISCONTINUED OPERATIONS
The group divested on December 2010 its TWIG mobile handset business through
MBO by oral agreement. The majority of business transferred to Twig Com Oy on
December 31, 2010 and the parties signed a business purchase agreement on
January 10, 2011.
The result of business, result of divesting and share of cash flows are
presented below:
1000 EUR 1Q/2011 1Q/2010 2010
Result of TWIG mobile handset business
Net sales 0 607 1797
Cost of goods sold 0 -492 -1823
Other operating income 0 0 4
General & Administrative expenses 0 -22 -425
Research & Development expenses 0 -101 -366
Sales & Marketing expenses 0 -261 -930
Income taxes of discontinued operations 0 0 0
-----------------------------
-----------------------------
Profit before/after taxes 0 -269 -1743
Result of divesting before/after taxes -244
Income taxes of divesting 0
-----------
-----------
Result for the period from discontinued operations -1987
General & Administrative expenses
Cash flow of TWIG mobile handset business
Cash flow from operations -1031
Cash flow from investments 45
Effect of Twig mobile handset business divesting
to
financial position of group 31.12.2010
Fixed assets 24
Other intangible assets 1
Other financial assets 20
Inventories 223
Trade receivables and other receivables 192
Prepaid expenses 5
Trade payables and other payables -184
Provisions -37
-----------
-----------
Assets and liabilities total 244
Purchase price in cash 0
5. COSTS BY CATEGORY
1000 EUR 1Q/2011 1Q/2010 2010
Increase/decrease in inventories of finished products 0 178 375
Impairment loss in inventories 0 0 455
Use of raw materials and consumables 0 191 571
Total expense of direct employees 0 123 422
------------------------
------------------------
Cost of goods sold total 0 492 1823
Discontinued operations 0 -492 -1823
Total expense of indirect employees 1002 2103 6993
Redundancy provision 0 0 509
Depreciations 35 545 682
Other operating expenses 492 1016 3371
------------------------
------------------------
Expenses by cost category, total 1529 3664 11555
Discontinued operations 0 -384 -1965
------------------------
------------------------
Continuing operations 1529 3280 9590
6. SHAREHOLDERS´ EQUITY
Number Share Share premium Invested distributed Total
of capital account equity account (1000eu
shares (1000eur) (1000eur) (1000eur) r)
(1000)
31.12.2010 922156 8956 13631 30912 53499
Share issue 2500 0
free
7.1.2011
--------------------------------------------------------------------
--------------------------------------------------------------------
31.3.2011 924656 8956 13631 30912 53499
According to the Company´s articles of association registered there is no
maximum for the shares and there is only one category of shares at the Company.
Also the clause about maximum amount of share capital has been removed. The
shares carry no nominal value. All outstanding shares are fully paid.
7. OPTION RIGHTS
Special right:
The Board decided to issue 2.500.000 shares without price to Raymond Kalley as
part of the agreed placement fee of drawn loans. The shares have been
registered in trade register on 7.1.2011.
Cost of options booked in the period according to IFRS 2. Consideration is
given as options. The counter-item of costs bookings is income statement is
shareholders´equity.
1000 EUR 1Q/2011 1Q/2010 2010
Key persons 54 35 160
Board 0 57 74
Other interest groups 0 52 52
-----------------------
-----------------------
Total 54 144 286
8. FINANCIAL LIABILITIES
1000 EUR Nominal loan value 1Q/2011 1Q/2011 1Q/2010 2010
Non-current:
Loan 2008 10000 2196 2604 2392
Loan 2009 7500 4965 4548 4853
Loan 2010 6000 6066 0 5867
Loan 2011 1800 1859 0 0
------------------------
------------------------
Non-current total 15086 7152 13112
Current:
Cbl 2004A 113 113 113 113
Loan 2008 0 789 0
------------------------ ------------------------
Current total 113 902 113
Convertible bond loan 2004A:
This loan with a nominal principal of 1130 teuros was raised on year 2004 and
was converted during the conversion period before 31.12.2008 in all 1017
teuros. The remaining amount of loan is 113 teuros. The interest is 4%. No
interest was paid. The loan capital, interest and other benefit may be paid in
case of dismantling or bankruptcy of company only with priority after the other
creditors. The principal may be returned otherwise only providing that a full
coverage for the bound equity and other non-distributable items in the
confirmed financial statements for the latest expired financial year is
retained. Interest or other benefits may be paid only in case the paid amount
may be used for profit distribution in the confirmed balance sheet for latest
expired financial period.
Financing round 2008:
The subscription period of the loan note for raising a maximum amount of 16,000
teuros ended on May 15, 2009 and the total amount of subscription was 10,000
teuros. The maximum amount of new shares to be subscribed by virtue of the
subscribed note is 94,339,622. As a result of the note the Company´s share
capital may increase by a maximum of 943 teuros. The annual interest of the
loan is 12.5 %, paid twice a year, however interest of period 1.7.-31.12.2009
was paid in January 2010. The loan will end on August 25, 2013. Effective it
was agreed that interest payments are suspended and all interest will accrue
and roll up until maturity.
Financing round 2009:
The subscription period of the loan note for raising a maximum amount of 25,000
teuros was originally to end on March 31, 2010, but has been extended until the
end of the year 2010. The group has received and withdrawn the investment
commitment of 7,500 teuros during the year 2009. The loan note was raised by
the subsidiary GeoSolutions Holdings N.V. (GHNV"). The loan note entitles to
subscribe shares of GHNV. The amount of shares will in all events be less than
half of GHNV´s outstanding shares and share capital. Alternatively the
investors have the option to convert their notes into GeoSentric´s shares
corresponding the same proportional amount of fully diluted shares as the
investor otherwise would have received of GHNV´s shares. The note will expire
in five years. As a precondition for the investment the Company has agreed to
pay an industry standard placement fee of up to 6% of the amount raised. The
note accrues interest at the rate of 5% p.a. Which shall be deferred until
redemption of conversion. The conversion rate shall be calculated based on the
lower of the market capitalisation of GeoSentric at March 31, 2010, the market
capitalisation at the date of conversion and the valuation implied by an
external financing round or bid, all discounted by 50%. In the event that the
notes have not been redeemed or converted by the maturity date or in the event
of insolvency, a further 15% discount shall be applied to the conversion rate.
The note is secured by a pledge over the share capital of GeoSentric and GHNV
and over other assets of the group.
Financing round 2010:
The 2010 loan note has the same terms as the 2009 note except that the note
accrues interest at the rate of 12% p.a. and is for a maximum amount of 6,000
teuros of which 2,500 teuros has been drawn on June 30, 2010 and 2,500 teuros
on September 1, 2010 and 1,000 teuros on November 10, 2010.
Financing round 2011:
The 2011 loan note has the same terms as the 2009 note except that the note
accrues interest at the rate of 12% p.a. and is for a maximum amount of 1,800
teuros, all of which was drawn down in January 2011.
9. COLLATERAL COMMITMENTS AND CONTINGENCIES
1000 EUR 1Q/2011 1Q/2010 2010
Collateral for own liabilities:
Pledged non-current financial assets 5 5 5
Pledged current financial assets 0 58 0
10. RELATED PARTY TRANSACTIONS
The parent and subsidiary company relations in the group were as follows:
Parent company GeoSentric Oyj. Subsidiaries with parent company ownership and
voting rights of 100 % are GeoSolutions Holdings N.V., and its through (100%)
subsidiaries GeoSolutions B.V., GeoSentric (UK) Ltd., GyPSii (Shanghai) Co Ltd.
and GyPSii Inc..
Related party transactions have been presented in the Financial Statements from
year 2010. No essential changes have taken place in the reporting period.
11. EVENTS AFTER THE END OF THE PERIOD
In April 2011, as part of an overall funding proposal received from the
Company's lead investor, the 2011 loan note was further extended by an
additional 600 teuros on the same terms, all of which amount was drawn down in
April. The proposal, which was approved by the Board in April, would, if
implemented, lead to the Company losing control of GHNV and the group operating
subsidiaries, as more fully described in the Operating Report.
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