CALGARY, ALBERTA--(Marketwire - Feb. 28, 2012) -GINSMS Inc. ("GINSMS" or the "Company") (TSX VENTURE:GOK) has announced its financial results for its third quarter ended December 31, 2011.

PERFORMANCE HIGHLIGHTS FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2011

• During the nine-month period ended December 31, 2011, GINSMS incurred substantially higher professional fees resulting from its planned acquisition of Inphosoft Group Pte Ltd, a Singapore IT mobile middleware solutions developer for mobile network operators ("MNOs"), financial institutions, media companies and enterprises, for a total consideration of $11.6 million. As explained below, this increase in professional fees combined with lower revenue had a major impact on both net earnings and cash flow.
  
  
• Volume of inter-SMS traffic for the three-month period was down by 13.8% to 28.2 million from the same period the previous year. When compared to the previous quarter ended September 30, 2011, traffic is down by 17.9%. GINSMS believes that this downward trend in SMS traffic is, in part, caused by cellphone users migrating to smart phones and mobile instant messaging ("MIM") applications (see details below).
  
  
• Gross margin declined slightly during the quarter to 58.6% from 59.5% during the corresponding quarter the previous year. For the nine-month period, however, gross margin improved from 57.4% during the corresponding period the previous year to 62.7%.
  
  
• Liquidity remained stable during the third quarter of fiscal 2012 with a working capital of $957,340 as at December 31, 2011, compared to $957,343 as at March 31, 2011. The working capital ratio improved from 12.3 times at year-end to 18.9 as at December 31, 2011.
  
  

Financial Review for the Three- and Nine-Month Periods ended December 31, 2011

Revenue for the third quarter ending December 31, 2011 was $164,028, representing a reduction of 16.0% over revenue of $195,221 reported during the same three-month period the previous year. The reduction in revenue was caused by two main factors: (i) a 13.6% drop in SMS traffic; and (ii) a more than three-fold increase in professional fees.

As explained in more detail under "Summary of Quarterly Results" in the MD&A, GINSMS believes that the lower trend in SMS traffic is partly caused by cellphone users migrating to MIM applications such as Research in Motion's BBM, Apple's Imessage or other cross-platform mobile messaging applications such as WhatsApp, IM+, Skype or Google Talk. This migration enables smart phone users to send MIM using device data channel (3G/Edge) or WI-FI. Given that most smart phone users now have inclusive data plans they can forward their MIM at a fraction of the cost required to send an SMS. Also, as reported in previous quarters, during the last two years, Hong Kong MNOs have been upgrading their networks from 2G to 3G causing network down time and interruptions. Finally, aggressive relay fee promotions adopted by GINSMS' competitors added additional downward pressure on SMS traffic volume.

With the addition of Inphosoft, the Company will be able to immediately introduce a series of VAS that will enhance GINSMS' product offering and transform it into an innovative revenue-powering mobile service and solution provider. GINSMS expects that the acquisition will boost its revenue in Hong Kong and create renewed interest on its IOSMS platform. The acquisition of Inphosoft will result in synergies and immediate cost savings as Inphosoft is expected to take over software maintenance work associated by the Company's IOSMS platform.

The length and complexity of the negotiations leading to the acquisition of Inphosoft and the requirements and conditions imposed by the TSXV on GINSMS to complete the acquisition of Inphosoft have resulted in a substantial increase in the professional fees incurred by GINSMS which jumped from $10,279 in the third quarter of fiscal 2011 to $81,225 during the third quarter of the current fiscal year. The increase in professional fees accounted for 71% of the increase in the loss of $100,023 recorded in the third quarter this year. These were partly offset by a declined in general and administrative expenses which dropped by 58.8% to $15,921. The drop in general and administrative expenses is due principally to the elimination of third-party investor relation related services, such as the preparation of the Company's management discussion and analysis reports which is now performed exclusively in-house. A non-cash charge of $8,300 related to a share-based compensation program adopted during the second quarter of this fiscal year also contributed to the Company's losses. Depreciation, salaries and wages were virtually unchanged.

For the nine-month period ended December 31, 2011, revenue dropped by 12.8% to $528,282, compared to the corresponding period the previous year. The drop in revenues is a direct consequence of the 4.7% decline in SMS traffic experienced during the nine-month period ended December 31, 2011. As mentioned previously, GINSMS believes that this downward trend in SMS traffic is partly caused by cellphone users migrating to MIM applications allowing users to forward their MIM at a fraction of the cost required to send an SMS. In addition, Hong Kong MNOs have been upgrading in the last year their 2G networks to 3G causing network down time and interruptions.

Net losses for the nine-month period this fiscal year were $126,465, an increase of 252% over the losses of $35,920 recorded during the corresponding quarter the previous year. Gross profit increased from 57.4% to 62.7% accompanied by a 23.7% drop in the cost of sales due in large part to the cancellation of the purchase of the K-Matrix eM e-mail marketing platform which did not meet the Company's expectations. The main reason for the increase in losses was the substantial increase in professional expenses incurred by the Company with respect to the acquisition of Inphosoft which soared by 97.5% to $147,438. This increase in professional expenses was partly offset by the elimination of third-party investor relation services and a 25.4% reduction in general and administrative expenses to $47,026. Share-based compensation costs of $14,300 also negatively affected results, offset, in part, by lower salaries and wages which dropped 6.3% to $85,944.

EBITDA (earnings before interest, taxes, depreciation and amortization) is a useful indicator in measuring the Company's ability to sustain long term viable operations while resources are used to grow the Company in a difficult environment. EBITDA for the three-month period ended December 31, 2011 amounted to a negative $55,460, compared to a positive EBITDA of $4,705 for the corresponding period the previous year. For the nine-month period also ended on December 31, 2011, EBITDA ended with a more moderate loss of $19,361, compared to a positive $50,163 in the corresponding period the previous year. The drop in EBITDA is due, in part, to lower earnings from operations and, in part, to the non-cash share-based compensation charge of $8,300 and $14,300 taken, respectively, in the three-month and nine-month periods ended December 31, 2011.

The completion of the transaction with Inphosoft is subject to a number of conditions including but not limited to the filing of a Filing Statement, the submission of a sponsorship report and a business valuation report.