2012-04-30 11:45:00 CEST
2012-04-30 11:45:07 CEST
REGULATED INFORMATION
GeoSentric Oyj - Financial Statement Release
FINANCIAL STATEMENTS RELEASE FOR FINANCIAL YEAR 2011
GEOSENTRIC OYJ STOCK EXCHANGE RELEASE April 30, 2012 at 12:45
FINANCIAL STATEMENTS RELEASE FOR FINANCIAL YEAR 2011
The Annual Report 2011 of GeoSentric Oyj has been published on the Company's
web site. The Annual Report is available at www.geosentric.com.
Contents
1. Summary of key figures and results
2. Review of October - December 2011
3. Operational overview
4. Material events in the year 2011
5. Material events after the end of the financial year
6. Review of the financial position and the financial results
7. Sufficient Liquidity
8. Outlook
9. Assessment of significant operational risks
10. Review of R&D activities
11. Investments
12. Personnel and organization
13. Environmental issues
14. Group structure
15. Board of Directors and auditors
16. Board authorization
17. Financing and structural arrangements
18. Company's shares and shareholders
19. Board proposal regarding the handling of the result
20. Notice
IMPORTANT NOTICE: During the reporting period a number of material transactions
took place, which have a material impact on the Company's outlook and ownership
structure. In September 2011, GHNV concluded a joint venture agreement with a
major media company in China becoming a minority 40% shareholder in its
previously wholly owned Chinese subsidiary. The Company also arranged a
directed share offering, having a material dilution affect.
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 10-12/2011 2011 10-12/2010 2010
Net sales 0 49 39 54
Operating Result -248 12739 -1752 -9536
Basic earnings per share (eur) 0.00 0.01 -0.00 -0.01
At the end of the period
Total assets 1171 1420
Shareholders' equity 931 -15024
Total liabilities 240 16444
2. REVIEW OCTOBER -DECEMBER 2011
During the reporting period Q4/2011 the Company decided by virtue of the
authorization granted by the Annual General Meeting on June 29, 2011 to arrange
directed share offering (“GSOY Offering”) to its largest shareholders, however
restricted to less than 100. The GSOY Offering was primarily intended to allow
the Company to participate in the second tranche of the GHNV Offering by
investing pro rata share of €1m to GHNV and to support the working capital
needs of the Company. The Company's largest shareholders were offered the
opportunity to subscribe Company's new shares at the subscription price of
€0.0004 reflecting the Company's stock price in OMX Nordic Exchange Helsinki
(€0.01) at that time with a discount of 96 %. The subscription price was same
for all subscribers. The targeted amount to be raised was €1.25 million.
Due to the short time schedule, the GSOY Offering was executed in three
separate tranches during October 2011 and November, 2011. During such
subscription period the Company raised a total amount of €1,026,236 by issuing
an aggregate amount of 2,565,590,000 new shares, representing approximately
277.5 % of the outstanding shares and votes before the GSOY Offering and
approximately 42.7 % of the fully diluted shares and votes before the GSOY
Offering.
As result of the GSOY Offering, the Company was able to participate fully in
the second and final tranche of the GHNV Offering by investing €1 million in
GHNV. In addition, as agreed and approved at the Company's EGM, the Company
repaid on November 4, 2011 fully the Convertible Bond Loan 2008-B by
transferring to Schroder & Co. Ltd the agreed number of GHNV shares. After
subscribing all the GHNV shares for the total amount of €1m and repaying the
Convertible Bond Loan 2008-B, the Company's shareholding in GHNV resulted to
approximately 24%. As agreed, GHNV may issue an option pool to its Board and
management of up to 15% of its issued share capital. This may decrease the
Company's ownership of GHNV down to approximately 21%.
3.OPERATIONAL REVIEW
The Company has not had direct operational activities of its own since
disposing of the TWIG business at the end of 2010 and all of its indirect
operational activities were under GeoSolutions Holdings N.V. (“GHNV”) and its
respective subsidiaries, the Company acting as a holding company.
As described in more detail in Section 4, “Material events in the year 2011”,
during the period Q3 the Company became a minority shareholder in its former
subsidiary GHNV with approximately a 15% holding. As further described in
Section 4, the Company concluded in Q4, after a directed rights offering to its
largest shareholders, a €1m investment in GHNV and repaid the €10M Convertible
Bond Loan 2008-B. These transactions together increased the Company's holding
in GHNV to approximately 24%. As a result of the above-mentioned transactions
the Company continues as a holding company for its shareholding in GHNV but
instead of holding 100% of GHNV it holds approximately 24%.
GHNV carries on its business as a developer and provider of solutions, products
and technologies for location based services and LBS-enabled social networks.
GHNV develops a leading geo-integration platform for mobile 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 and as an application development platform and services,
which include the GyPSii product platform (“GyPSii”).
The business model for the GyPSii platform services and applications is via
licensing of intellectual property in terms of software technology and branded
trademarks, and revenue generation from services which generate advertising and
subscription revenue.
The total net sales from continuing operations of the Company, which during the
financial year included 100% of GHNV's operations up to the date of
de-consolidation (August 4, 2011), were 49 teuros in year 2011, compared to 54
teuros total net sales from continuing operation in year 2010. The Company
disposed of its TWIG handset business at the end of the 2010 financial year so
all revenues from continuing operations derive from the GyPSii business and
represent revenues from intellectual property licensing and advertising
delivered to GyPSii users.
As announced in March 2011, the Company engaged, via GHNV, in a co-operation
agreement in China with a major public media company, Sina Corp. The agreement
resulted in the launch of Sina's new Weilingdi product on March 4, 2011. Later,
in June 2011, the Company announced that GHNV had signed an agreement with Sina
to take the necessary next steps to create a joint venture with Sina Corp. to
address the Chinese market and this joint venture was successfully created in
September 2011. To support the successful and timely launch of the new
Weilingdi product to the Chinese market and to secure the finalisation of the
joint venture arrangements, the Company focused all its available resources
into this co-operation project. The consequence of this was a decline in
revenue from GyPSii products.
A significant (non-cash, non-recurring) gain of 16690 teuros was booked as
“other operating income” in Q3 2011 as a result of the de-consolidation of the
GHNV sub-group on August 4, 2011. This transaction is described in more detail
in Section 4, “Material events in the year 2011”. The gain arises because the
Company no longer consolidates the net liabilities of the GHNV sub-group but
instead carries its investment in GHNV as an “Investment in Associate Company”
as a new line item in the Non-Current Assets section of its group balance
sheet, valued at an estimated fair market value. Also included within the
Company's result before taxes in 2011 is -231 teuros representing the Company's
estimated share of the net profit after taxes of GHNV, prepared on a
consolidated basis. Management has estimated the net profit after taxes on an
IFRS basis, as GHNV now prepares its group accounts on the basis of Dutch GAAP.
As a result of the repayment of the Convertible Bond Loan 2008-B, the Company
realised in Q4 a one-time gain of 4264 teuros, which was booked as financial
income.
Total operating expenses from continuing operations decreased 58% in the
financial year compared to the prior year, decreasing to 4000 teuros in 2011
from 9590 teuros in 2010. This was mainly driven by two factors. First, the
de-consolidation of the GHNV sub-group from August 4, 2011. Second, prior to
the de-consolidation, there was considerable effort made to re-focus GHNV's
product development, business development and marketing efforts into China.
This resulted in a significant decrease in 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 2011 of 0 teuros compared to a charge of 500
teuros in 2010.
As a result of the above factors, the total result before taxes from continuing
operations saw a significant improvement of 14836 teuros in 2011, versus -11387
teuros in 2010. Earnings per share from continuing operations for the financial
year were 0.01 euros per share.
The Company realized an overall loss from its discontinued operations (its TWIG
business) in the financial year 2010 of 1987 teuros.
4. MATERIAL EVENTS IN THE YEAR 2011
The main events in the financial year 2011 were as follows:
Decisions by the AGM
At the Company's Annual General Meeting (“AGM”) on June 29, 2011 as extended to
July 1, 2011, the meeting approved the 2010 audited financial statements of the
Group (which ceased to be a group on August 4, 2011 due to de-consolidation of
the GHNV sub-group), agreed to re-elect the auditors, Ernst & Young, to set the
auditors' remuneration and the compensation of the Board's non-executive
directors as disclosed in the market bulletin at the time and agreed to
discharge the members of the Board and the Managing Director from liability. In
addition, the meeting resolved that the number of Board members shall be three
and elected Michael Po, Victor Franck and Jeffrey Crevoiserat to the board,
with a subsequent Board meeting later electing Victor Franck as Chairman and
Michael Po as Managing Director. Further, the general meeting confirmed the
Board's prior approval of the terms of the lead investor's financing Proposal
as described below “Financing arrangements”. Finally the meeting granted
authorization to the Board to issue up to 5,000,000,000 new shares, option
rights or special rights entitling to shares in the Company.
Financing arrangements
Earlier in the year (April 2011) the Board received a financing proposal from
the Company's lead investor, Schroder & Co. Ltd (“Proposal”) regarding further
funding for the business of the Group. The main terms of the Proposal included:
1) the conversion of the existing preferred convertible notes (“Notes”) issued
by GHNV into shares of GHNV; 2) a rights offering by GHNV (“GHNV Offering”) to
its shareholders resulting in material dilution of the Company's shareholding
in GHNV (especially if the Company did not participate in the GHNV Offering to
its pro-rata share) corresponding to an investment of approximately €1 million;
and 3) to raise the required funds to participate in the GHNV Offering the
Company planned to arrange its own share issue (“GSOY Offering”).
After lengthy and detailed discussions between the parties, in August 2011, the
Company confirmed that full agreement had been reached between Schroder & Co.
Ltd and a group of the Company's largest shareholders, concerning the manner of
execution of the Proposal described above, introducing some changes to the
terms of the Proposal, and the planned support and participation of this group
of largest shareholders in this planned financing. Separately, the Company
called an Extraordinary General Meeting (“EGM”) of shareholders to be held on
September 8, 2011 to approve certain aspects of the financing package and full
details of the package were released with the EGM call on August 16, 2011.
On August 3, 2011, Schroder & Co. Ltd, GHNV and the Company entered into a
Subscription and Shareholders Agreement (“SSA”) in respect of GHNV, which,
amongst other things, provided the Company with additional minority shareholder
rights protection in respect of its ownership of GHNV. On August 4, 2011, the
first part of the Proposal, which was already approved at the Company's AGM on
June 29, 2011 as extended to July 1, 2011, was implemented and involved
Schroder & Co. Ltd converting its existing Notes plus accrued interest as
issued by GHNV, into the shares of GHNV. The conversion left the Company as a
minority shareholder in GHNV with approximately a 20% shareholding. The SSA
provided for this conversion of Notes to be followed by further capitalizations
of GHNV in the form of rights offerings (“GHNV Offerings”). As agreed in the
SSA, Schroder & Co. Ltd fully subscribed for an initial 750 teuros in a first
tranche of the GHNV Offering and GHNV paid to the Company a fee of 150 teuros.
The SSA provided that this fee, together with a further fee of 350 teuros, to
be paid to the Company following the second tranche of the GHNV offering in
October, would be non-refundable if the Company fully subscribed for its agreed
share of the GHNV Offering amounting to an investment in GHNV of €1 million.
These transactions in August 2011 secured the Company and GHNV cash runway
until the end of September 2011. Following this first tranche of the GHNV
Offering, the Company's ownership in GHNV became approximately 15%. As a result
of the conversion and the fact that the Company owns a minority percentage of
GHNV, the Company has, as from August 4, 2011, been no longer consolidating its
previously wholly owned subsidiaries but is applying the equity method of
accounting for its investment in GHNV in its group accounts. This has the
effect of reducing its reported group accounts revenues and costs in 2011.
In September 2011, the Company secured shareholder approval at the EGM for the
required elements of the financing package including approval for the repayment
of the €10 million Convertible Bond Loan 2008-B issued by the Company. It also
confirmed that, to raise the required funds to participate in the GHNV
Offerings, the Company was arranging a directed share issue (“GSOY Offering”)
to its largest shareholders. The GSOY Offering was primarily intended to allow
the Company to participate in the planned second tranche of the share offering
of GHNV, its previously wholly owned subsidiary (now an associate company). The
GSOY Offering was also intended to finance operations of the Company into 2013.
The second tranche of the GHNV share offering, which was agreed to be executed
on 14 October 2011 at the latest, was intended to raise €2 million directed
equally to Schroder & Co. Ltd and to the Company, each being entitled to
subscribe for new GHNV shares for the amount of €1 million. The key terms of
the GSOY Offering were announced in September to be as follows:
-- Target amount to be raised: €1.25 million with a minimum amount of 250
teuros
-- Shares to be issued at a 96% discount to the current quoted market price of
€0.01
-- Targeted initially to known individual shareholders (or consortia) owning
5,000,000 or more shares (approximately 0.54%), so that the number of
subscribers shall be less than 100; below this ownership level at the
discretion of the Board
The Company also announced that it was planning to execute a reverse share
split after the GSOY Offering in ratio of approximately ten to one to improve
the marketability and liquidity of the Company's shares.
On October 12, 2011, it was announced that the Company had raised a total
amount of 757 teuros in a first tranche of the GSOY Offering by issuing a total
amount of 1,893,750,000 new shares at €0.0004 per share. In addition, the
Company received a short-term convertible loan for the amount of 250 teuros
(“Loan”) from one of its largest shareholders. The Loan could, at the option of
the note holder, before October 31, 2011, be repaid in cash or converted into
shares or special subscription rights on the same terms as the GSOY Offering
providing that, at all times, the total amount raised in the GSOY Offering
shall remain at least €1 million. On October 14, 2011, the aforementioned funds
raised in the first tranche of the GSOY Offering, including the Loan, enabled
the Company to subscribe for all the new GHNV shares offered to it in the
second tranche of the GHNV Offering for the amount of €1 million.
On October 24, 2011, it was announced that the Company had resolved to issue a
further 643,750,000 new shares at €0.0004 per share in a second tranche of the
GSOY Offering thereby raising 257.5 teuros and making the total amount raised
in the GSOY Offering 1,015 teuros. This amount included 22.75 teuros as Loan
conversion. The remaining part of the Loan of 227.25 teuros was retained as a
short-term loan on the same terms as described above except that its end date
was extended until November 30, 2011. Subsequently, on November 18, 2011, at
the election of the note holder, the Loan was repaid in full.
On November 10, 2011, the Company announced that it had resolved to issue a
further 28,090,000 new shares to participants at €0.0004 per share in a third
and final tranche of the GSOY Offering, thereby raising 11.24 teuros and making
the total amount raised in the GSOY Offering 1,026 teuros, roughly 250 teuros
short of the desired 1,250 teuros. The total 2,565,590,000 new shares issued
in the GSOY Offering outlined above represented approximately 277.5 % of the
outstanding shares and votes before the issue and 73.5% of the Company's
outstanding shares and votes after the issue and approximately 42.7% of the
fully diluted shares and votes.
As referred to above, the Company participated fully in the second and final
tranche of the GHNV Offering as agreed in the SSA by investing €1 million in
GHNV. In addition, as agreed in the SSA and approved at the EGM, it has, on
November 4, 2011 fully repaid the Convertible Bond Loan 2008-B by transferring
to Schroder & Co. Ltd the agreed number of GHNV shares. After subscribing all
the shares offered to it in the second tranche of the GHNV share offering and
repaying the Convertible Bond Loan 2008-B, the Company's shareholding in GHNV
has increased to approximately 24%. As agreed in the SSA, GHNV may issue an
option pool to its Board and management of up to 15% of its issued share
capital. This may decrease the Company's ownership of GHNV down to
approximately 21%. Further, as agreed in the SSA, the Minority Rights Agreement
and other security agreements in favour of Schroder & Co. Ltd have, on October
28, 2011, been terminated. As a result of the repayment of the Convertible Bond
Loan 2008-B, the Company realised in Q4 a one-time gain of 4264 teuros.
The Company had intended to call an Extraordinary General Meeting as soon as
the new shares issued in the GSOY Offering had been registered in the Trade
Register to decide on a proposed reverse stock split in the ratio of
approximately ten to one to improve the marketability and liquidity of the
Company's shares. Due to technical reasons not attributable to the Company, the
planned reverse stock split cannot be affected until the new shares issued in
the GSOY Offering have been listed following the publication of a Prospectus.
This process can take several months and accordingly the Company must wait
until this has been completed before implementing the planned reverse stock
split.
Other arrangements
As noted in previous bulletins and quarterly reports, the Company's then wholly
owned Chinese subsidiary (through GHNV), GyPSii (Shanghai) Co. Ltd. (“GSSH”)
had, on March 18, 2011 signed a Cooperation Agreement with Sina (Beijing)
Information Technology Co., Ltd., whose parent company, Sina Corp. is listed on
the US NASDAQ market under the symbol (SINA). The Cooperation Agreement
provided for development, marketing and distribution cooperation between the
two companies for a newly launched "Weilingdi" Location Based Services (“LBS”)
and Social Networking Services (“SNS”) service in China. Under this agreement,
GSSH and Sina would jointly develop the new “Weilingdi” service and Sina would
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 GSSH in 2010. The Cooperation Agreement was a vital step forward in
progressing discussions about a deeper relationship between the two companies
working towards the goal of a joint venture agreement. The Company had
concluded that, in order to be able to exploit the potential of the Chinese
market, it was necessary to partner with an established local partner who can
bring large numbers of local users and also local marketing expertise and
financing.
Further to this Cooperation Agreement with Sina, in June 2011, the Company
announced that GHNV had signed an agreement with Sina Hong Kong Ltd (“Sina HK”)
for both companies to take the necessary next steps towards establishing a
Joint Venture (“JV”) between GSSH and Sina HK. Once the necessary preconditions
for completion had been fulfilled, Sina HK would invest approximately €4.5m
into GSSH by way of newly created share capital thereby obtaining a 60%
controlling interest in GSSH. Sina would then contribute to the JV its 100M+"Weibo" user base, marketing resources and distribution channels to promote the
new products and data center services. GSSH, as the JV, will then exclusively
operate all of Sina's LBS and SNS services in China. It will then continue to
develop and progress the initiatives outlined by the two companies in March 18,
2011 Cooperation Agreement, specifically the delivery of the "Weilingdi" and
“Tuding” products. GHNV has granted in June 2011, through its then wholly owned
Dutch subsidiary, GeoSolutions BV, to GSSH an exclusive royalty free license to
use the GyPSii IP within China and will enjoy joint IP ownership rights to all
new or enhanced IP created by GSSH plus exclusive royalty free rights to use
such IP outside of China. The JV will be one of the largest social networks of
mobile consumers and merchants in China and will also be focused on providing
merchants with a robust set of tools to improve customer loyalty and
relationship management and consumers with financially incentive driven mobile
applications.
In July 2011, the Company announced that, as a result of the agreement
described above with Sina to form the JV in China using the Company's then GHNV
wholly owned Chinese subsidiary, GSSH, as the vehicle, Sina had provided
advance funding to GSSH, pursuant to implementing the JV agreement, of 400
teuros. This was sufficient to finance GSSH through to the expected date of
final government approval and final creation of the JV, which was expected to
take place before the end of Q3. This cash advance indirectly extended the cash
runway for the remaining group outside of China to the end of July 2011.
In September 2011, it was announced that the Company had been informed by GHNV
that the necessary pre-conditions for completion of the JV have been fulfilled,
including obtaining Chinese government and regulatory approval. As a result,
Sina HK had invested approximately €4.5 million, inclusive of the advance
funding received earlier in June, into GSSH by way of newly created share
capital thereby obtaining a 60% controlling interest in GSSH forming the JV.
This investment secured the JV's operations through 2012 and beyond.
It should be noted that, as a result of the implementation of the funding
package for the Company as outlined above, the Company now owns a minority
percentage of GHNV, the former parent company of GSSH, which in turn owns 40%
of GSSH. It is expected that GHNV will not be consolidating the results of the
JV (i.e. GSSH) in its group accounts but will apply the equity method of
accounting to its 40% investment. Current projections indicate that the JV will
not be profitable in its initial user acquisition phase and it may be several
years before there may be dividends flowing from the JV to GHNV and further
from GHNV to the Company.
Legal Proceedings
Magi.tel has continued its litigation in Italy against the Company despite the
fact that, pursuant to the Finnish Corporate Reorganization Act, any Magi.tel
liability ceased on 19 March 2004 when Turku Court approved the GeoSentric Oyj
/ Benefon Oyj reorganization program. In any case, any claims or damages
sustained by the Company related to this litigation should be indemnified
and/or reimbursed by TWIG Com Oy, which acquired the TWIG business operations
from the Company. The Company does not have any other pending or threatening
legal proceedings, which the Company would consider to have material impact on
the Company's financial position or profitability.
5. MATERIAL EVENTS AFTER THE END OF THE FINANCIAL YEAR
The Company released on January 16, 2012 that the amount of €1,026,000, raised
in a directed offering closed in November 2011, was €224,000 short of the
Company's targeted amount to be raised in the offering of €1.25 million and
that it had been continuing to explore all options available to it to ensure
that it had sufficient liquidity to secure its operations through 2012 and
beyond and as previously announced, Company's current cash resources are
sufficient to finance the business into Q1 2012 and any alternative funding
options should therefore be completed by the end of Q1 2012. As announced on
February 20, 2012, the Company tried to raise a convertible loan note of at
minimum €350,000 and at maximum €500,000 from its major shareholders. However,
as reported on February 20 and 27 and further on March 6 and 9, the major
holders were not interested to subscribe for the secured loan note offered by
the Company.
Then on March 6, 2012, as first announced to the markets, the Company received
a non-binding funding offer of €250,000 from an independent advisory business
representing a number of individual investors. After a difficult negotiation
process as reported to the markets at various times during March and April
2012, the Company and the above-referred independent advisory business finally
found a solution that did not require that certain pre-conditions be met, which
at the earlier phase of the process had already once stopped the execution of
the proposal. The offer of 350 teuros of secured funding, which secures
Company's funding through 2012 into 2013, was announced to the markets on April
23, 2012. The funding, secured by the GHNV shares held by the Company, will be
confirmed by the Annual General Meeting estimated to be held in June 2012.
During the negotiations the trading was suspended as of April 3, 2012 on the
request of the Company due to the Company´s inability to secure additional
funding by April 3, 2012. At the same time the Company informed that the Board
was left with no choice other than start preparing the process for inviting the
shareholders' meeting to decide on the placing of the company into liquidation.
However, as result of successful negotiations with respect to the 350 teuros
funding described above, the Company did not need to invite the shareholders to
decide on the placing of the company into liquidation but instead shall convene
the Annual General Meeting as stated above.
6. REVIEW OF THE FINANCIAL POSITION AND THE FINANCIAL RESULTS
The Company has during the financial year 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 10-12/2011 2011 10-12/2010 2010
Net sales 0 49 39 54
Operating Result -248 12739 -1752 -9536
At the end of the period
Basic earnings per share (eur) 0.00 0.01 -0.00 -0.01
At the end of the period
Total assets 1171 1420
Shareholders' equity 931 -15024
Total liabilities 240 16444
Cash 131 892
7. SUFFICIENT LIQUIDITY
The Company has, during the financial year, retained sufficient liquidity.
As noted above, the Company secured incoming new equity investment totalling
1,026 teuros in the GSOY Offering. This amount was 224 teuros short of the
Company's targeted amount to be raised in the GSOY Offering of €1.25 million.
In October, as agreed in the SSA (Subscription and Shareholders Agreement in
respect of GHNV, as explained above), the Company invested €1 million in GHNV
shares as part of the second tranche of the GHNV Offering. As a result and as
agreed in the SSA, the Company received a non refundable fee from GHNV in
October of 350 teuros and secured confirmation that the 150 teuros fee received
from GHNV in August, following the first tranche of the GHNV Offering, was also
non-refundable. As a result of the above transactions, and in particular the
fact that the amount raised in the GSOY Offering was short of the targeted
amount, the Company was forced to continue exploring any other funding options
available to it. As announced on April 23, 2012, the Company has now succeeded
to secure a commitment for an additional €350,000 secured funding from an
advisory business that secures the Company's funding through 2012 and into
2013.
8. OUTLOOK
Market Outlook
Due to forming the JV with Sina and refocus of the GHNV development, sales and
marketing activities into China, the future business outlook of the Company's
associate company, GHNV, is almost completely focused on the China market. In
partnership with Sina, China's third largest internet company, the immediate
focus is to leverage the now very large +200M Sina user base to spread the use
of the GyPSii platform and applications to as many mobile phone users as
possible over the next few years. The JV will combine the IP of GeoSolutions
B.V., a 100% owned subsidiary of GHNV, with Sina's large user base, marketing
and sales activities to develop the China market for the Tuding and Weilingdi
products and the GyPSii Location Based Services Platform. Seeding this market
should give rise to opportunities in 2013 and beyond for income to the JV based
on advertising, IP licensing and small to medium business subscriptions. The
China market for mobile technology is experiencing extremely rapid growth
compared to the rest of the world. This is expected to continue alongside
China's economic expansion well into the decade. This strong growth of mobile
technology is a natural pull for the Sina and GyPSii products.
Outside of China, GHNV is exploring opportunities to leverage its IP and
products in other developing countries with similar user demographics and
similarly strong smart phone growth as China. This involves creating other
potential partnerships with a business model similar to the JV with Sina.
Financial and Business Development Outlook
Following the conversion of the Notes into the shares of GHNV by Schroder & Co.
Ltd, as described in Section 4 above, the Company's currently remaining
business comprises solely its minority holding in GHNV. This in turn is
currently focussed mainly on its holding in its wholly owned Chinese
subsidiary, GSSH. And this in turn, as described above, has now become a JV
with Sina addressing the Chinese market. As further stated above, the current
projections indicate that the JV will not be profitable in its initial phase
and it may be several years before there may be dividends flowing from the JV
to the Company via GHNV. Unless the Company decides to start some new
operational activities of its own, it is likely that the Company will not
generate any income of its own and will not recognise dividend income from the
JV until the JV turns profitable or becomes liquid through merger or
acquisition and starts to distribute profits. Therefore, despite minimal
operational costs, the Company is likely to make losses through this period.
The Company may also sell part or all of its holding in GHNV in the future,
which may generate an accounting and distributable profit.
During 2010 and 2011, the Group 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 had been consolidating operations, development, business development
and marketing resources into China, with significant staff reductions elsewhere
in the world.
As a result of the business consolidation, the main focus of business
development and the primary element for the business model and revenue
generation in China is rapid growth of the GyPSii membership base, in
partnership with Sina that utilizes GyPSii's two main products in China,
“Tuding” and “Weilingdi”. This growth is being achieved exclusively in China
primarily through its Joint Venture with Sina as well as through direct
marketing campaigns by GyPSii. GyPSii membership has grown significantly during
2010 and 2011 and has climbed to a total subscriber base of almost 5,500,000
registered users with a substantial and growing base of active recurring users.
A second element of GyPSii's strategy began with the development of its Open
APIs (OeX) at the beginning of 2010. This approach allows GyPSii to reduce the
risk and overhead associated with business development efforts and at the same
time tap into the rapidly expanding base of mobile applications that have need
for GyPSii functionality. In partnership with Sina, GSSH has developed and
deployed an Application Programming Interface (API) set in the Chinese market.
This has resulted in a rapid rise in the GyPSii user base.
Outside of China, GyPSii is exploring 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 the 2012.
9. ASSESSMENT OF SIGNIFICANT OPERATIONAL RISKS
As a result of the financial arrangements described in Section 4 above, the
Company became a minority shareholder in GHNV with its currently approximately
24% holding. As a minority shareholder of GHNV the Company does not have the
control over the activities of GHNV and is dependent on the actions of the
other shareholders of GHNV. The Company's future value and cash flow is
currently highly dependent on the success of GSSH's business and JV in China.
There is no certainty that these efforts will succeed.
As agreed in the SSA, GHNV may issue an option pool to its Board and management
of up to 15% of its issued share capital. This may decrease the Company's
current ownership of GHNV down to approximately 21%.
The global financial crisis and current global recession have had and may
continue to have a negative impact also on the GyPSii business although the
business is now almost exclusively focussed on China, which continues to enjoy
strong economic growth.
There is no certainty of the success regarding the implementation and
realisation of the GHNV business plan. According to the business strategy, GHNV
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 GHNV is able
to successfully respond to these developments it may significantly impair its
operating results affecting consequently to operating results of the Company.
A key driver of the GHNV 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 there is no certainty.
Since 1997, the Company has not paid dividends and, in the future, there may be
restrictions on the ability to distribute dividends. 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 balance sheet of the Company. The
total amount of loans was 113 teuros at nominal value. The Company plans to
convert with shares the remaining portion of the CBL 2004A loan.
The Company´s business plan has been prepared by assuming that the Company can
derive long-term value from it's holding in GHNV but this potential value
creation is uncertain. The Company's financing plan assumes that the additional
€350K external financing as explained in section “material events after the end
of the reporting period” is required to fund the Company into Q1 2013. In
addition, the Company will need further external funding to secure sufficient
liquidity in the long term (past Q1 2013) and also to enable further
investments in GHNV. Should the new financing be delayed or prove to be
unavailable, this could cause an insolvency risk and/or further dilution of
Company's holding in GHNV. The Company's go-forward budget and cash sufficiency
estimates have been prepared assuming further decreased cost levels. Should the
actual cost levels be higher, the Company would need to raise additional
external capital and the availability of this additional capital is uncertain.
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, have influence
on GeoSentric. As a result of the directed share offering closed in November
2011, Jeffrey Crevoiserat, a Board member of the Company, has a substantial
holding in the Company. 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.
10. REVIEW OF R&D ACTIVITIES
Prior to the de-consolidation of GHNV, the volume of the Group's R&D activities
during the reporting period was significant due to the on-going R&D-programs in
China. No capitalizations were made.
Prior to the de-consolidation of GHNV, the Group's main R&D unit was in
Shanghai (China). Additionally, GyPSii server facilities were maintained in the
US and China. After the de-consolidation of GHNV, no further R & D activity has
been undertaken by the Company.
11. INVESTMENTS AND FINANCING
Gross investments in year 2011 were 1043 teuros, of which 1000 teuros was used
to purchase shares in the GHNV Rights Offering. In the year 2010 gross
investments were 40 teuros.
12. PERSONNEL AND ORGANIZATION
The number of employed personnel in the Group in year 2011 averaged 44, of
which 10, at most, were affected by forced leaves. At the end of 2011 the
Company employed a total of three employees in addition to managing director.
13. ENVIRONMENTAL ISSUES
The Company's operations cause no significant environmental impact.
14. BOARD OF DIRECTORS AND AUDITORS
According to the Company's articles of association the Board of Directors
consists of not less than three (3) but no more than nine (9) ordinary members.
The term of the members of the Board of Directors begins at the end of the
Annual General Meeting of shareholders and expires at the end of the next
Annual General Meeting of the shareholders following the election.
The Annual General Meeting on June 29, 2011 as extended to July 1, 2011
resolved that the number of Board members is three. The Board consists of
Victor Franck (Chairman), Michael A. Po and Jeffrey Crevoiserat.
The Company has established committees to enhance the preparation of matters
falling within the competence of the Board. The committees are 1) Audit and
Finance Committee; 2) Corporate Governance and Nominations Committee; 3)
Compensation Committee; and 4) Strategic Options Committee.
In financial year 2011, the audit firm Ernst & Young Oy continued to serve as
the ordinary auditor of the Company, with Mr. Erkka Talvinko, CPA, as the
responsible auditor.
15. GROUP STRUCTURE
As a result of de-consolidation of GHNV sub-group on August 4, 2011 the Company
ceased to be a part of the Group. The Company's only external holding is its
approximately 24% holding in GHNV, an associated company.
16. BOARD AUTHORIZATION
The Annual General Meeting convened on June 29, 2011 as extended to July 1,
2011 authorized the Board to increase the share capital by maximum of 5,000,000
euros and share amount by maximum of 5,000,000,000 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 financial year the remaining amount of Board's authorization,
as granted by the extended meeting on July 1, 2011, was 5,000,000 euros and
2,434,410,000 shares corresponding to 69.75 % of the registered share amount at
the end of financial year and 68 % shares after all shares and instruments
entitled to shares, effecting a corresponding immediate dilution to existing
shareholdings (including current authorization).
17. STRUCTURAL ARRANGEMENTS AND CHANGES IN AMOUNTS OF SHARES
On October 12, 2011, it was announced that the Company had raised a total
amount of 757 teuros in a first tranche of the GSOY Offering by issuing a total
amount of 1,893,750,000 new shares at €0.0004 per share. In addition, the
Company received a short-term convertible loan for the amount of 250 teuros
(“Loan”) from one of its largest shareholders. The Loan could, at the option of
the note holder, before October 31, 2011, be repaid in cash or converted into
shares or special subscription rights on the same terms as the GSOY Offering
providing that, at all times, the total amount raised in the GSOY Offering
shall remain at least €1 million. On October 14, 2011, the aforementioned funds
raised in the first tranche of the GSOY Offering, including the Loan, enabled
the Company to subscribe for all the new GHNV shares offered to it in the
second tranche of the GHNV Offering for the amount of €1 million.
On October 24, 2011, it was announced that the Company had resolved to issue a
further 643,750,000 new shares at €0.0004 per share in a second tranche of the
GSOY Offering thereby raising 257.5 teuros and making the total amount raised
in the GSOY Offering 1,015 teuros. This amount included 22.75 teuros as Loan
conversion. The remaining part of the Loan of 227.25 teuros was retained as a
short-term loan on the same terms as described above except that its end date
was extended until November 30, 2011. Subsequently, on November 18, 2011, at
the election of the note holder, the Loan was repaid in full.
On November 10, 2011, the Company announced that it had resolved to issue a
further 28,090,000 new shares to participants at €0.0004 per share in a third
and final tranche of the GSOY Offering, thereby raising 11.24 teuros and making
the total amount raised in the GSOY Offering 1,026 teuros, roughly 250 teuros
short of the desired 1,250 teuros. The total 2,565,590,000 new shares issued in
the GSOY Offering outlined above represent approximately 277.5 % of the
outstanding shares and votes before the issue and 73.5% of the Company's
outstanding shares and votes after the issue and approximately 42.7% of the
fully diluted shares and votes.
As referred to above, the Company participated fully in the second and final
tranche of the GHNV share offering as agreed in the SSA by investing €1 million
in GHNV. In addition, as agreed in the SSA and approved at the EGM, it has, on
November 4, 2011 fully repaid the Convertible Bond Loan 2008-B by transferring
to Schroder & Co. Ltd the agreed number of GHNV shares. After subscribing all
the shares offered to it in the second tranche of the GHNV share offering and
repaying the Convertible Bond Loan 2008-B, the Company's shareholding in GHNV
has increased to approximately 24%. As agreed in the SSA, GHNV may issue an
option pool to its Board and management of up to 15% of its issued share
capital. This may decrease the Company's ownership of GHNV down to
approximately 21%. Further, as agreed in the SSA, the Minority Rights Agreement
and other security agreements in favour of Schroder & Co. Ltd have, on October
28, 2011, been terminated. As a result of the repayment of the Convertible Bond
Loan 2008-B, the Company realised in Q4 a one-time gain of 4264 teuros.
As a conclusion the amount of registered securities of the Company changed over
the reporting year as follows:
Number of registered shares on 1.1.2011 922,156,354
--------------------------------------------------------
New shares issued in directed share issue 2,568,090,000
--------------------------------------------------------
Number of registered shares on 31.12.2011 3,490,246,354
--------------------------------------------------------
The financing arrangements and latest developments have been described in more
detail above in sections ”Material events in the year 2011” and “Material
events after the end of the financial year”.
18. 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. As of April 3, 2012 the trading with Company's shares has
been suspended on the request of the Company.
The Company does not have any Company´s shares owned by or administered on
behalf of the Company.
At the end of the financial year the Company's registered share capital was
8,955,761.65 Euros, consisting of 3,490,246,354 shares.
The number of outstanding shares in the beginning of the financial year 2011
was 924,656,354.
As of 31.12.2011 according to share register of the Euroclear Finland
shareholders who hold their shares under a name of a nominee own a total amount
of 712,140,067 shares corresponding 20.40 % of the Company's registered shares
and votes. It should be noted that the above nominee registered holdings do not
include the new 2,565,590,000 issued in the Company's directed share issue in
November 2011 as those shares have not yet been publicly listed and therefore
form a separate species of shares with equal rights to the old shares.
Shareholder Shares % of votes and
shares
--------------------------------------------------------------------------------
Nordea Pankki Suomi Oyj (custodian shares) 490,560,498 14.06 %
--------------------------------------------------------------------------------
Skandinaviska Enskilda Banken (custodian 203,469,023 5.83 %
shares)
--------------------------------------------------------------------------------
Svenska Handelsbanken AB (custodian shares) 18,110,546 2.04 %
--------------------------------------------------------------------------------
TOTAL 712,140,067 20.40 %
--------------------------------------------------------------------------------
According to information received by the Company during the reporting year, the
holdings of the following shareholders are (including the the new 2,565,590,000
issued in the Company's directed share issue in November 2011):
Shareholder Shares % of votes and shares
----------------------------------------------------------------
Ansa Group 468,377,779 13.42 %
----------------------------------------------------------------
Nobolles Investments Limited 616,107,806 17.65 %
----------------------------------------------------------------
The number of fully diluted shares as of 31.12.2011 was as follows:
Registered listed shares 924,656,354
----------------------------------------------------
Registered un-listed shares 2,565,590,000
----------------------------------------------------
Registered rights entitling to shares 90,718,555
----------------------------------------------------
Board authorization 2,434,410,000
----------------------------------------------------
TOTAL 6,015,374,909
----------------------------------------------------
The Company's all issued instruments including authorization entitled to shares
together correspond to approximately 172.35 % of the share amount after all
instruments entitled to shares issued by the Company and board authorization,
effecting a corresponding direct dilution to existing holdings.
19. BOARD PROPOSAL REGARGING THE HANDLING OF THE RESULT
The Board proposes to the Annual General Meeting that no dividend is
distributed and that the profit for the period is booked to the prior years´
result account.
20. NOTICE
The Company's financial statements release has been prepared according to the
accounting standard IAS 34, Interim Reports. The accounting principles for the
financial statements have been presented in the Financial Statements 2011
published on April 30, 2012. The information presented in this report has been
audited.
In the Notes to the Financial Statements there is more detailed and additional
information about the Company's operations in the financial year 2011.
It should be noted that certain statements herein which are not historical
facts are based on management's best assumptions and beliefs in light of the
information currently available to it.
According to Finnish Securities Market Act, Chapter 2, Section 10 c, GeoSentric
Oyj has published the annual summary of the stock exchange releases and
announcements published during the year 2011. The summary is available at:
www.geosentric.com.
GeoSentric Oyj
For more information, please contact: investors@gypsii.com
Distribution:
NASDAQ OMX Helsinki
Principal news media
GROUP STATEMENT OF COMPREHENSIVE INCOME
1000 EUR Note 4Q/2011 2011 4Q/2010 2010
Continuing operations
Net sales 0 49 39 54
Cost of goods sold 6 0 0 0 0
--------------------------------
--------------------------------
Gross margin 0 49 39 54
Other operating income 5 0 16690 0 0
General & Administrative expenses 6 240 1969 665 2673
Research & Development expenses 6 8 1224 672 4671
Sales & Marketing expenses 6 0 807 454 2246
--------------------------------
--------------------------------
Operating result -248 12739 -1752 -9536
Financial income 7 4264 4265 1 78
Financial expenses -37 -2066 -683 -1783
Share of Associate Company result 8 -265 -231 0 0
--------------------------------
--------------------------------
Result before taxes 3714 14707 -2434 -11241
Income taxes 0 129 -30 -146
--------------------------------
--------------------------------
Result for the period from continuing 3714 14836 -2464 -11387
operations
Discontinued operations
Result for the period from discontinued 4 0 0 -209 -1987
operations --------------------------------
--------------------------------
Result for the period 0 0 -209 -1987
Translation difference 2 -34 142 -13
--------------------------------
--------------------------------
Comprehensive income 2 -34 -67 -2000
Earnings per share, eur:
Basic earnings per share, continuing 0,00 0,01 -0,00 -0,01
operations
Diluted earnings per share, continuing 0,00 0,01 -0,00 -0,01
operations
Basic earnings per share, discontinued -0,00 -0,00
operations
GROUP STATEMENT OF FINANCIAL POSITION
1000 EUR Note 31.12.2011 31.12.2010
ASSETS
Non-current assets
Property, plant and equipment 2 82
Goodwill 0 216
Other intangible assets 0 1
Investment in Associate Company 8 988 0
Other financial assets 0 5
Deferred tax assets 0 0
-----------------------
-----------------------
990 304
Current assets
Inventories 0 0
Trade receivables and other receivables 50 224
Prepaid expenses 0 0
Cash and cash equivalents 131 892
-----------------------
-----------------------
181 1116
Total assets 1171 1420
EQUITY AND LIABILITIES
Shareholders´equity
Share capital 9 8956 8956
Share premium account 9 13631 13631
Translation difference 0 122
Invested distributable equity account 9 29056 30912
Retained earnings -50712 -68645
-----------------------
-----------------------
Total shareholders´ equity 931 -15024
Non-current liabilities
Deferred tax liabilities 0 0
Interest-bearing debt 11 0 13112
0 13112
Current liabilities
Trade payables and other payables 127 3219
Provisions 0 0
Interest bearing debt 11 113 113
-----------------------
-----------------------
240 3332
Total liabilities 240 16444
Total shareholders´ equity and liabilities 1171 1420
GROUP CASH FLOW STATEMENT
1000 EUR 2011 2010
Cash flow from operations
Result for the period 14836 -13374
Adjustments -16282 1505
Changes in working capital:
Change of trade and other receivables 174 482
Change of inventories 0 761
Change of trade and other liabilities -3092 548
Paid interests 0 -630
Received interest payments 501 18
Cash flow from operations, net -3863 -10690
Cash flow from investments, net -1043 46
Cash flow from financing
Proceeds from issue of share capital 1026 67
Transaction expenses of share issues 0 -3
Transaction expenses of loans -31 -467
Proceeds from long term borrowings, equity 0 0
Proceeds from long term borrowings, liability 3150 6000
Net cash flow from financing 4145 5597
Change in cash -761 -5047
Cash on January 1 892 5939
Cash on December 31 131 892
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 -13 0 0 0 -13
directly into
shareholders´
equity
Result for the 0 0 0 0 -13374 -13374
period
--------------------------------------------------------------
--------------------------------------------------------------
Comprehensive 0 -13 0 0 -13374 -13387
income
Share issue, cash 5 0 0 62 0 67
Share issue 0 0 0 -3 0 -3
expenses
Booked expense of 0 0 0 0 285 285
stock options to
key personnel
and partners
Equity portions 0 0 0 250 0 250
of liabilities
--------------------------------------------------------------
--------------------------------------------------------------
Shareholders´ 8956 122 13631 30912 -68645 -15024
equity
31.12.2010
Items booked 0 -122 0 0 88 -34
directly into
shareholders´
equity
Result for the 0 0 0 0 14836 14836
period
--------------------------------------------------------------
--------------------------------------------------------------
Comprehensive 0 -122 0 0 14924 14802
income
Share issue, cash 0 0 0 1026 0 1026
Share issue 0 0 0 0 0 0
expenses
Booked expense of 0 0 0 0 127 127
stock options to
key personnel
and partners
Equity portions 0 0 0 -2882 2882 0
of liabilities
--------------------------------------------------------------
--------------------------------------------------------------
Shareholders´ 8956 0 13631 29056 -50712 931
equity
31.12.2011
KEY FIGURES, ALL OPERATIONS
4Q/2011 2011 4Q/2010 2010
Net sales, 1000 EUR 0 49 413 1851
Operating result, 1000 EUR -248 12739 -1961 -11523
Result before taxes, 1000 EUR 3714 14707 -2643 -13228
Gross investments, 1000 EUR 1000 1043 10 40
Average personnel 3 44 89 116
Earnings per share, EUR 0,00 0,01 -0,00 -0,01
Equity per share, EUR 0,00 0,00 -0,02 -0,02
Weighted average number of shares in period, 1352255 1031507 920802 903645
1000 pcs
Number of shares at the end of the period, 3490246 3490246 922156 922156
1000 pcs
1. BASE INFORMATION OF THE COMPANY
Prior to August 4, 2011, GeoSentric wholly owned its subsidiary, GeoSolutions
Holdings NV ("GHNV"). On August 4, 2011, its holding in GHNV became a minority
holding and GeoSentric´s sole business then became holding its minority
investment in GHNV. GHNV 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").
It 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.
GeoSentric is based in Salo, Finland. GeoSentric is listed in NASDAQ OMX
Helsinki Ltd (NASDAQ OMX: GEO1V). Trading has been suspended as of April 3,
2012.The parent company of the group is GeoSentric 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.
According Finnish Companies Act, the shareholders have possibility to accept or
reject the financial statements, even the General Meeting is after financial
statements is released. General Meeting has also possibility to make decision
about changing financial statements.
2. ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS
Accounting principles:
The group financial statement bulletin has been prepared in accordance with
International Financial Reporting Standards ("IFRS") and has been prepared to
the accounting standard IAS 34, Interim Reports. Information is based to
audited financial statement for year 2011.
Accounting principles:
The used preparation principles have been presented in the Financial Statements
from year 2011.
Since 1.1.2011 the group has applied the following new standards and
interpretations: 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. No effect on the group financial statements.
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. No effect on the group financial
statements. 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 has
specified definition of related party. 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 2011 4Q/2010 2010
Result of Twig mobile handset business
Net sales 0 374 1797
Cost of goods sold 0 -229 -1823
Other operating income 0 3 4
General & Administrative expenses 0 146 -425
Research & Development expenses 0 -59 -366
Sales & Marketing expenses 0 -200 -930
Income taxes of discontinued operations 0 0 0
---------------------
---------------------
Profit before/after taxes 0 35 -1743
General & Administrative expenses
Result of divesting before/after taxes 0 -244 -244
Income taxes of divesting 0 0 0
---------------------
---------------------
Result for the period from discontinued operations 0 -209 -1987
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. OTHER OPERATING INCOME
As a result of the de-consolidation of GHNV, the Company realized a one time,
non cash gain of 16690 teuros.
6. COSTS BY CATEGORY
1000 EUR 4Q/2011 2011 4Q/2010 2010
Increase/decrease in inventories of finished 0 0 36 375
products
Impairment loss in inventories 0 0 0 455
Use of raw materials and consumables 0 0 144 571
Total expense of direct employees 0 0 49 422
------------------------------
------------------------------
Cost of goods sold total 0 0 229 1823
Discontinued operations 0 0 -229 -1823
Total expense of indirect employees 66 2370 1314 6993
Redundancy provision 0 0 0 509
Depreciations 0 66 41 682
Other operating expenses 182 1564 793 3371
------------------------------
------------------------------
Expenses by cost category, total 248 4000 2148 11555
Discontinued operations 0 0 -357 -1965
------------------------------
------------------------------
Continuing operations 248 4000 1791 9590
7. FINANCIAL INCOME
As a result of the repayment of CBL2008B, the Company realized a one time, non
cash gain of 4264 teuros.
8. INVESTMENT IN ASSOCIATE COMPANY
1000 EUR
Value of investment at beginning of August 2011 463
Additions 1000
Subtractions -244
Share of result, August-December 2011 -231
---------
---------
Value of investment at end of period 988
Domicile of GeoSolutions Holdings N.V. is Holland.
GeoSentric´s interest was 24% at the end of December 2011.
Assets at end of period 4947
Liabilities at end of period 163
Net sales, August-December 2011 17
Result, August-December 2011 -868
9. SHAREHOLDERS´ EQUITY
Number of Share Share Invested Total
shares capital premium distribut. (1000e
(1000) (1000eur) account equity acc ur)
(1000eur) (1000eur)
31.12.2009 897926 8951 13631 30603 53185
Share issue free 23750 0
4.10.2010
Share issue, cash 480 5 62 67
26.11.2010
Costs of share -3 -3
issues
Equity components 250 250
separated from
liabilities
--------------------------------------------------------------
--------------------------------------------------------------
31.12.2010 922156 8956 13631 30912 53499
Share issue free 2500 0
7.1.2011
Share issue, cash 2565590 1026 1026
16.12.2011
Equity components -2882 -2882
separated from
liabilities
--------------------------------------------------------------
--------------------------------------------------------------
31.12.2011 3490246 8956 13631 29056 51643
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.
10. OPTION RIGHTS
The Company carries fourteen on-going stock option programs. In all of these,
one option right entitles to subscribe for one new share of the Company.
Option program 2007-1:
The Board decided on 27.4.2007 by virtue of authorisation by annual general
meeting on 16.4.2007 to issue a maximum of 9,778,500 option rights to key
persons of GeoSolutions. Option rights are divided into nine categories. The
share subscription period have begun and will end depending on the option
category between 27.4.2012 and 7.4.2014. EGM on 10.9.2007 decided to amend
share subscription price to 0.045 euros. Of the option rights 4,961,000 pcs
have become null and void.
Option program 2007-2:
The Board decided on 7.5.2007 by virtue of authorisation by annual general
meeting on 16.4.2007 to issue 666,667 option rights to Killarney Partners in
relation to directed share issue. Share subscription price is 0.15 euros. Share
subscription period have ended on 31.5.2011, shares have not paid.
Option program 2007-3:
The Board decided on 21.5.2007 by virtue of authorisation by annual general
meeting on 16.4.2007 to issue a maximum of 3,375,000 option rights to Tradewind
Investment and Biggles Ltd in relation to directed share issue. Share
subscription price is 0.15 euros. Share subscription period have ended on
30.6.2011, shares have not paid.
Option program 2007-7:
The Board decided on 19.11.2007 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 3,367,500 option rights to
certain key persons of the Company. Share subscription price is 0.07 euros.
Share subscription period have ended on 19.11.2011, shares have not paid.
Option program 2008-1:
The Board decided on 15.2.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 4,451,632 option rights to
certain key persons of the Company. The Board decided on 20.11.2008 to extend
the share subscription period until 19.2.2012. Share subscription price is 0.06
euros. Of the subscribed option rights 2,651,632 pcs have returned and
nullified.
Option program 2008-2:
The Board decided on 18.4.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 577,000 option rights to
certain key persons of the Company. Share subscription period have begun and
will end on 31.12.2012. Share subscription price is 0.06 euros. Option rights
have returned and nullified.
Option program 2008-3:
The Board decided on 16.5.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 24,500,000 option rights to
the members of the Board of the Company. Every Board member is entitled to
subscribe for a maximum of 3.500.000 option rights. Option rights were granted
as part of the incentive program approved by the annual general meeting of
16.5.2008. Share subscription period have begun and will end on 31.12.2012.
Share subscription price is 0.045 euros. Of the subscribed option rights
17,500,000 pcs have returned and nullified.
Option program 2008-4:
The Board decided on 15.8.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 2,877,000 option rights to
certain key persons of the Company. Option rights have been divided into D and
E series and further into 16 sub-categories. Share subscription period has been
staged by sub-category such that the options shall vest on quarterly basis. The
share subscription period begins no earlier than 15.12.2008 but no later than
15.12.2012 and ends with all options on 15.12.2013. Share subscription price is
0,06 euros. Option rights have returned and nullified
Option program 2008-5:
The Board decided on 20.11.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 9,505,000 option rights to
key persons of the Group. Option subscription period has ended and total of
9,479,500 pcs were subscribed. Option rights are divided into 5 separate series
as decided by the Board. The options in each series shall vest on quarterly
basis during four year period. Share subscription period begins no earlier than
1.1.2009 but no later than on 1.1.2010. The share subscription period for each
option series ends after six (6) years from the first vesting date, however on
1.1.2016 at the latest. The share subscription price for each series is
determined to equal the trade volume weighted average share price of the
Company share (GEO1V) in NASDAQ OMX during the 30 days period preceding the
first vesting quarter of the series i.e. on December 2008 (0,0346€). Of the
subscribed option rights 6,479,500 pcs have returned and nullified.
Option program 2008-6:
The Board decided on 20.11.2008 by virtue of authorisation by extraordinary
general meeting on 10.9.2007 to issue a maximum of 495,000 option rights to
certain key persons of the Company. The options shall vest on quarterly basis
during four year period and are divided in to 16 sub-categories. Share
subscription period begins on 1.1.2009 and ends on 1.1.2015. The share
subscription price is determined to equal the trade volume weighted average
share price of the Company share (GEO1V) in NASDAQ OMX during 30 days period
preceding the first vesting quarter of the series i.e. on December 2008
(0,0346€). Of the subscribed option rights 472,500 pcs have returned and
nullified.
Option program 2009-2:
The Board decided in its meeting on May 15, 2009 to adopt Option Plan 2009-2
and issue a total amount of 24,500,000 option rights to the members of the
Board of Directors without charge by virtue of the authorization granted by the
AGM on May 15, 2009. The options may be subscribed into corresponding amount of
new shares during the share subscription period ending on December 31, 2013
with a share subscription price of 0.045 euros per share. Of the subscribed
option rights 14,000,000 pcs have returned and nullified.
Option program 2009-3:
The Board decided in its meeting on August 13, 2009 to adopt Option Plan 2009-3
and issue a total amount of 1,500,000 option rights to the secretary of the
Board of Directors without charge under the same terms and conditions as Option
Plan 2009-2 directed to the Board members. The options may be subscribed into
corresponding amount of new shares during the share subscription period ending
on December 31, 2013 with a share subscription price of 0.045 euros per share.
Option rights have returned and nullified
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 2011 2010
Key persons 127 160
Board 0 74
Other interest groups 0 52
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Total 127 286
11. FINANCIAL LIABILITIES
1000 EUR Nominal loan value 2011 2011 2010
Non-current:
Loan 2008 0 0 2392
Loan 2009 0 0 4853
Loan 2010 0 0 5867
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Non-current total 0 13112
Current:
Cbl 2004A 113 113 113
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 loan note with a nominal principal of 10,000 teuros was raised on year
2008. The loan note entitled to subscribe shares of GeoSentric. The loan ended
on August 25, 2013. The annual interest was 12.5 %. Effective it was agreed
that interest payments are suspended on January 2010 and all interest accrued
and rolled up until maturity. The loan with accrued interest paid using GHNV
shares in the beginning of November 2011.
Financing round 2009:
The loan note with a nominal principal of 7,500 teuros was raised on year 2009.
The loan note was raised by the subsidiary GeoSolutions Holdings N.V. (GHNV").
The loan note entitled to subscribe shares of GHNV or alternatively the
investors had the option to convert it into GeoSentric´s shares. The note
expired in five years. The note accrued interest at the rate of 5 % p.a. which
deferred until redemption of conversion. The note secured by a pledge over the
share capital of GeoSentric and GHNV and over other assets of the group. The
note with accrued interest converted to GHNV´s shares in the beginning of
August 2011.
Financing round 2010:
The 2010 loan note had the same terms as the 2009 note except that the note
accrued interest at the rate of 12% p.a. This loan note with a nominal
principal of 6,000 teuros was raised on year 2010. The note with accrued
interest converted to GHNV´s shares in the beginning of August 2011.
Financing round 2011:
The 2011 loan note had the same terms as the 2009 note except that the note
accrued interest at the rate of 12% p.a. This loan note with a nominal
principal of 3,150 teuros was raised on year 2011, of which was drawn 1,800
teuros in January 2011, 600 teuros in April 2011 and 750 teuros in June 2011.
The note with accrued interest converted to GHNV´s shares in the beginning of
August 2011.
The above convertible loans has been divided in the financial statements into
equity and debt as required by IAS 32. The deviation is based on careful
evaluation of the actual and contractual terms of the convertible loan as well
as judgments made by the management of the group.
The part of the convertible loan presented as debt consist of the discounted
present value of the future interest payments not avoidable to the group
regardless of the conversion. The remaining interest and main part of the
convertible loan is presented as equity, as the management of the group
considers using the conversion right as highly probable. The part of the loan
presented as debt will be amortized during the contractual maturity of the
loan.
The discount interest rate used in valuation of the debt part of the
convertible loan is based on the interest rate the group could expect to
negotiate for a corresponding loan from third parties. The interest rate used
consist of risk free interest rate and of a group specific risk premium. Risk
premium estimated by management was 5 %. Effective loan interests range from
16,2 to 28,3 %.
12. COLLATERAL COMMITMENTS AND CONTINGENCIES
1000 EUR 2011 2010
Contingent liability 0 0
Collateral for own liabilities:
Pledged non-current financial assets 0 5
13. RELATED PARTY TRANSACTIONS
The parent and subsidiary company relations in the group were to beginning of
August 2011 as follows: Parent company GeoSentric Oyj. Subsidiaries with parent
company ownership and voting rights of 100 % were GeoSolutions Holdings N.V.,
and its through (100%) subsidiaries GeoSolutions B.V., GyPSii (Shanghai) Co
Ltd. and GyPSii Inc.. GeoSentric (UK) Ltd was sold in June 2011. In August 2011
the parent company´s interest in GHNV was reduced to a minority holding of
approximately 15%, and it was 24% at the end of December 2011.
1000 EUR 2011 2010
Employee benefits of the management:
Salaries and bonuses 685 2070
Pension payments 47 53
Other costs 484 865
Cost of granted option rights to management and other key persons 127 234
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Total 1343 3222
Annual General Meeting on June 29, 2011 and extended meeting on July 1, 2011
elected the following persons to the Board: Michael Po, Jeffrey Crevoiserat and
Victor Franck. The Board elected Victor Franck was Chairman. Michael Po was
elected as the Managing Director of GeoSentric on July 8, 2011. The related
party comprised also other members of the Board and the top team during the
year 2011. Related party transactions have been presented in the Financial
Statements from year 2011.
14. GOING CONCERN
As noted below (see note 31) the Company has received a funding proposal from
an independent advisory business which provides for the funding of the Company
through 2012 and into 2013. The funding proposal has been approved by the
Company ́s Board and has been referred to an AGM to be held by the end of June
2012 for shareholder approval. If the shareholders do not approve the proposal
and no alternative and acceptable funding proposal are forthcoming, it is
likely that the Company would be declared insolvent. If the proposal is
approved by the AGM it will, according to management's forecast secure
Company's working capital needs through 2012 and into 2013.The management
forecast used is based on the 2012 business plan, budget and availability of
external funding. The management has also assessed the valuation of
GeoSolutions Holdings N.V.'s shares in the Company's balance sheet and
concluded that based on the valuation applied in the most recent financing
round of GeoSolutions Holdings N.V. closed in Q3 2011, its business plan and
the recent development of GyPSii business in China, as further explained in the
Operating Report, the shares of GeoSolutions Holdings N.V. carry at least the
book value they have in the Balance Sheet of the Company.
15. EVENTS AFTER THE END OF THE PERIOD
The Company has received in April 2012 a financing offer for the amount of 350t
euros from an independent advisory business, which proposal the Board of
Directors has accepted. The proposal is still subject to final approval by the
Company's Annual General Meeting to be held by the end of June 2012. The
Company has already received the first tranche of financing satisfying its
imminent working capital needs. The remaining financing will secure Company's
working capital needs through 2012 and into 2013. The financing is secured by
the shares of GeoSolutions Holdings owned by the Company. The investor is in
addition entitled to receive special subscription rights entitling to Company's
shares to the amount agreed in the financing terms and a one-off investment fee
payable in Company's shares to be issued to the investor without charge after
Annual General Meeting approval.
BOARD PROPOSAL TO THE GENERAL MEETING FOR MEASURES REGARDING THE LOSS OF THE
PERIOD
The Company has no distributable assets.
The result of the period of the parent company is 10,967,965.56 euros (FAS).
The Board proposes to the General Meeting that no dividend is distributed and
that profit for the period is booked on the account of Retained earnings.
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