GEOSENTRIC OYJ STOCK EXCHANGE BULLETIN March 31, 2010 at 15:45
FINANCIAL STATEMENTS RELEASE FOR FINANCIAL YEAR 2009
The Annual Report 2009 of GeoSentric Oyj has been published and is available at
company's website, www.geosentric.com. GeoSentric's Corporate Governance
Statement, which is separate from the Operating Report by the Board of
Directors, is also available at www.geosentric.com.
- Summary of key figures
- Review of October - December 2009
- Operational overview
- Material events in the year 2009
- Material events after the end of the financial year
- Review of the financial position and the financial results
- Sufficient Liquidity
- Outlook
- Assessment of significant operational risks
- Review of R&D-activities
- Change in Accounting Practices
- Investments and financing
- Personnel and organization
- Environmental issues
- Board of Directors and auditors
- Group Structure
- Board authorization
- Structural arrangements and changes in amounts of shares
- Company shares and shareholders
- Board proposal for distribution of profit
SUMMARY OF KEY FIGURES
Key figures summarizing the Group's financial position and financial results
(teuros if not indicated otherwise):
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| In period 4Q/2009 2009 4Q/2008 2008 |
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| Net sales 475 2491 1164 4374 |
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| Operating result -3697 -15538 -3255 -11919 |
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| Basic earnings |
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| per share (eur) -0.00 -0.02 -0.00 -0.01 |
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| At the end of period |
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| Total assets 8893 16805 |
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| Shareholders´ equity -2236 10053 |
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| Total liabilities 11129 6752 |
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REVIEW OF OCTOBER - DECEMBER 2009
The development of the GyPSii platform and services continued strongly through
the fourth quarter. TWIG sales declined substantially over the period as the
TWIG Discovery Pro GSM/GPRS/GPS handset (for the safety and security market) and
the TWIG Locator tracking device (for the asset and vehicle tracking market)
reached the end of their product lives. The Company succeeded in closing the
first 7.5M€ tranche of financing to support its business plan.
In October the Company, along with China Unicom's launch activities, announced
the launch of the iPhone with GyPSii/Unispace branded mobile application
pre-loaded (bundled before point of purchase on the iPhone) into the Chinese
market. Unispace is the China Unicom 3G brand and the only social networking
application provided under the brand into China on iPhone is powered by GyPSii.
In November the Company announced its partnership with China Unicom to launch
the new consumer-focused 3G mobile lifestyle service - Unispace powered by
GyPSii, for iPhone customers offered via Shanghai Unicom.
The GyPSii growth strategy is building distribution through partnerships, like
device manufacturers, aligning GyPSii products with distribution partnership
phone products, leveraging distribution launches, promotion of devices and in
sequence build out monetization from revenue sharing such as advertising and
fees from OEM/ODM relationships.
GyPSii has been executing on the distribution deal and product alignment phases,
and has moved into distribution launch and promotion phase, which will lead to
market penetration and monetization into 2010.
The Extraordinary General Meeting (EGM) of the company convened on November 17,
2009. The EGM authorized the Board of Directors to decide upon raising of new
financing up to EUR 25,000,000 through the Company's fully owned Dutch
subsidiary GeoSolutions Holdings N.V. (“Offering”). The purpose of the Offering
is to secure the working capital needs of the group and support the execution of
the business plan. The Offering shall be implemented by issuance of convertible
notes entitling to subscription of GeoSolutions Holdings N.V's shares to a
limited number of selected investors. The conversion rate will be based on
valuation exceeding GeoSentric's current stock price in the stock exchanges and
accordingly the maximum amount of new shares to be issued by virtue of possible
conversions would in all events be less than half of GeoSolutions Holdings N.V's
outstanding shares and share capital. The investors may also be offered an
option to convert their notes into GeoSentric's shares alternatively. In such
conversions the number of GeoSentric's shares received would be the same
proportional amount of fully diluted shares as the investor otherwise would have
received of the GeoSolutions Holdings N.V's shares.
The Extraordinary General Meeting's authorization is part of the previously
announced fund raising process enabling the Company to close the required
additional external financing in one or several tranches by end of March 2010.
The Board decided in its meeting on November 22, 2009 upon the Offering as
authorized by the EGM. First investment commitment of EUR 7,500,000 has been
received from the lead investor participating in the Offering. The Board of
Directors has accepted the commitment in its meeting on November 22, 2009 by
virtue of the authorization granted by the Annual General Meeting on May 15,
2009 and the Extraordinary General Meeting on November 17, 2009. The loan
matures in five years starting from 31 March, 2010 or closing of the Offering,
whichever comes earlier. The commitment was drawn down in November.
The Offering was originally decided to continue until March 31st 2010, which now
has been extended by the end of the year 2010 as described in section “Material
events after the end of the financial year below”. The final terms of the
financing will be confirmed upon closing and shall be applied to the lead
investor as well. The terms shall be published after their confirmation. The
Company is engaged in negotiations with multiple potential investors and sees it
likely that the Offering will be successful and that it's able to retain
sufficient liquidity in all circumstances.
As precondition for the investment the Company has agreed to pay an industry
standard placement fee, which shall be paid partially in cash and partially in
Company shares. The amount of the fee shall depend on final terms of the
Offering to be confirmed.
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”)
together with ready-to-use integrated GPS/GSM devices for navigation and object
tracking and customisable software solutions for industry specific uses
(“TWIG”). In addition, GeoSentric offers Internet-based locating services with
which the user may locate other GeoSentric devices. The GyPSii platform and TWIG
product line complement each other and enable GeoSentric to utilize its overall
intellectual property rights to software and services in an efficient manner
with delivery of products and services to two different markets, GyPSii
offerings to the geo social networking/LBS sector and TWIG offerings to the
LBS/B2B sector.
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 advertising revenue generation from the platform in
partnerships with mobile operators and carriers. Thus during the reporting
period 2009 the Group continued its focus on securing contracts with the major
distribution partners to integrate product on to their new devices and services.
Major marketing and launch plans during 2009 by the distribution partners have
driven significant volumes of GyPSii users on a global basis, which is also
expected to have a positive impact on revenues from GyPSii during 2010. The
global financial crisis has delayed the launches of certain new products by some
of the company's distribution partners. This has caused some lag to the
company's business plans but has not had any significant effect on the future
outlook for GyPSii business.
The total net sales of the Group in 2009 were 2491 teuros, substantially down
(-43.0%) on total net sales in 2008 of 4374 teuros, while the total cost of
sales in 2009 were also down from that of the prior year 2008, going to 2141
teuros from 3006 teuros, a 28.8% reduction. Revenue in the calendar year 2009
was substantially all from the TWIG product and TWIG IP. The revenue reduction
was caused by a decline in sales of the older Discovery Pro product which was
not offset by the newly launched Protector product. The gross margin for the
reporting period was 350 teuros (14.1%), compared to a gross margin of 1368
teuros (31.3%) for the prior year 2008. This reduction reflects further price
erosion in the Twig product line up together with a Twig inventory write down of
approximately 500 teuros as the TWIG Discovery products reach the end of their
market lives.
Total operating expenses were substantially higher in the reporting year
compared to the prior year, going to 15890 teuros, from 13322 teuros in 2008, a
19.3% increase. This was mainly driven by increases in R & D personnel related
to the development of GyPSii products and services and to increased sales and
marketing expenditure and personnel again in relation to the GyPSii products and
services.
As a result, total result before taxes was -16187 teuros in 2009, versus -11865
teuros in the prior year, a 36.4% decrease. Earnings per share for the reporting
period were -0.02 euros per share.
Strategy update
The Company adopted a new strategy in 2007 to fully leverage the acquisition of
GeoSolutions B.V. At the core of the strategy was the integration of the GyPSii
platform across the product portfolio of the Group Companies for mobile social
networking and geo-mobility. This strategy positioned the Group Companies to
exploit the fast growing global markets of Internet enabled mobile phones
needing location based services.
According to the strategy the Group targets the mass-market consumer space
through a multi-tiered go-to-market distribution strategy for social networks
including internet portals, mobile OEM's and mobile networks and Operators. This
go-to-market strategy will build a scaled network of customers, distributors,
licensees and alliances to propagate the Group business. Consequently, the Group
has focused on business partnerships, product development and marketing. The
main achievements in implementing the strategy since 2007 have been as follows:
- building the global service infrastructure;
- broadening the range of GyPSii supported devices, which is an essential
element in Group's strategy and introducing OEx;
- several important distribution partnerships with world's leading mobile
manufacturers and mobile operators: Samsung, LG, Lenovo, Huawei, Garmin, China
Mobile, China Telecom, China Unicom, Genasys and Intel relationships
- worldwide recognition by receiving multiple industry awards;
- exponential growth rate in number of GyPSii users and page views
The above mentioned achievements are indicative of the global market's selection
and adoption of the GyPSii overall platform and have created a solid basis for
achieving a critical mass of users for GyPSii and also for future revenue
generation.
The Group is now moving to a new phase in executing its strategy as the GyPSii
business is moving from intensive product partnership development/product and
infrastructure development/market penetration phase to monetization phase while
TWIG products are reaching the end of their product lives. The target is to
expand GyPSii user base and strengthen Group's solvency by focusing the product
portfolio and improving performance and profitability. Actions to be adopted in
the near future may include following:
- critical assessment of the Company's cost structure and commencing necessary
measures;
- harmonizing, rationalizing and simplifying Group's operations;
- focusing the product portfolio;
- continuing to penetrate emerging markets
In moving to the new phase in executing the strategy and the business plan, the
Group expects to achieve critical user base and see positive development in
GyPSii generated revenues during 2010.
The strategy surrounding our 2010 operating plan for the Group is centered on
four main areas: The first is branding GyPSii to grow our footprint globally,
especially in the emerging markets which are ripe for a service like GyPSii. The
second is revenue acceleration by monetizing our footprint with multiple sources
of revenue (advertising and subscription). The third is to continue our
intellectual property and product feature innovation and grow our partner
eco-system. The execution of this strategy is simply to capitalize on our signed
deals in 2009 which provide less risk to achieving our financial goals, as they
provide subscription revenue streams in addition to ad revenue streams.
Predictability is greatly enhanced with this revenue mix. This was a core focus
in contract negotiations to make the business less ad dependent in the near
term. The fourth area is centered on improving the productivity of the company
by restructuring its global footprint into more cost effective geographies such
as China and India. This will have a major impact of reducing costs throughout
the 2010 year.
MATERIAL EVENTS IN THE YEAR 2009
During the year 2009, the Group has continued its efforts to broaden the range
of GyPSii supported devices, which is an essential element in Group's business
plan. As GyPSii's revenue model is based on income from embedded and upstream
licensing of IPR, subscription fees and advertising, broadening the range of
supported devices, entering into agreements with major distribution partners and
introduction of OEx has created a solid basis for achieving a critical mass of
users for GyPSii and also for future revenue generation, even though those
events haven't had material effect on company's financial performance during
2009.
The highlights of the year were as follows:
Detailed Information on GyPSii services and related agreements-
The company entered in several important agreements for the deployment of
GyPSii-platform based services:
At the Mobile World Congress in Barcelona in February 2009, the Company
announced a strategic partnership with LG Electronics of Korea, to embed
GyPSii's location-enabled mobile digital lifestyle application on a range of
mobile devices. LG Electronics and GyPSii will share advertising and sponsorship
revenues generated by users of GyPSii on the new LG devices. The range will
first launch across Windows Mobile devices, closely followed by Android and
java-enabled devices.
Also at the 2009 Mobile World Congress, the Company announced the launch of
OpenExperience API (OEx), the premier all-inclusive platform for incorporating
location-based social networking functionality into embedded mobile clients and
applications. The Company demonstrated select services of OEx on the soon to be
released GyPSii native application support for the iPhone at Mobile World
Congress, in Barcelona. OEx supports a whole new “user experience” on mobile
devices, as seen on the iPhone and other embedded mobile and internet connected
device platforms. OEx allows GyPSii partners to enhance their own products and
services with the rich location-specific features, content and community of the
GyPSii mobile social network. In using the API, partners can leverage GyPSii's
vast international infrastructure and immediately offer new services to their
customer base. OEx powers GyPSii's own mobile social network and is currently in
use by industry leaders Samsung, Navteq and Garmin to offer enhanced services to
their customers.
In April the Company announced that the Group's GyPSii mobile social networking
application was available as a free download from the Samsung Mobile Application
Store, which was launched in January 2009
(http://applications.samsungmobile.com). This will further extend the
accessibility of the GyPSii application to potentially many millions of users.
In May, the Company announced GyPSii native application support for the iPhone,
which can now be downloaded from the Apple iPhone Application Store, extending
penetration into the fastest growing mobile phone sector, smart phones, to over
30M iPhone/iTouch active mobile internet users.
In July the Company announced its partnership with China Unicom's Shanghai
Unicom for GyPSii to become the premier mobile social networking solution in
China for its new consumer 3G SNS service, UniSpace. This enables more than 5
million Shanghai Unicom customers to download GyPSii directly on to their mobile
devices from the UniSpace website, and access will expand to all 130M China
Unicom Subscribers in 2009 and 2010.
In August the Company added advertising network partner MadHouse, one of the
largest advertising networks in China, to supply advertising to the GyPSii
platform and users in China.
In September the Company announced that GyPSii functionality will be delivered
to Garmin customers on the pre-installed Garmin Ciao service on the latest
Garmin portable navigation device, the “nuvi 1690”.
In September the Company added a completely new product to support the fast
growing Android (Google Phone OS) market, with several new design and technology
innovations, thus opening the subscriber base to many more devices.
In September the Company announced a relationship with WeFI, a high speed open
Wi-Fi network with 30M access points, to promote download of GyPSii via their
Wi-Fi portal access points to their users.
In September the Company announced a completely new Java based product aimed at
the mass market java based phones, adding support for over 100 additional phones
from Nokia, Sony Ericsson and other phone manufacturers.
In October the Company, along with China Unicom's launch activities, announced
the launch of the iPhone with GyPSii/Unispace branded mobile application
pre-loaded (bundled before point of purchase on the iPhone) into the Chinese
market. Unispace is the China Unicom 3G brand and the only social networking
application provided under the brand into China on iPhone is powered by GyPSii.
In November the Company announced its partnership with China Unicom to launch
the new consumer-focused 3G mobile lifestyle service - Unispace powered by
GyPSii, for iPhone customers offered via Shanghai Unicom.
Other events in 2009 included:
As described in section “Review of October - December 2009” the Extraordinary
General Meeting (EGM) of the company convened on November 17, 2009. The EGM
authorized the Board of Directors to decide upon raising of new financing up to
EUR 25,000,000 through the Company's fully owned Dutch subsidiary GeoSolutions
Holdings N.V. (“Offering”). The first investment commitment of EUR 7,500,000 was
received and drawn down from the lead investor participating in the Offering in
November 2009. The Offering was originally decided to continue until March 31st
2010, which now has been extended by the end of the year 2010 as described in
section “Material events after the end of the financial year below”.
TWIG business
In February 2009, the Company announced the launch of its new, next generation,
location-centric GPS/GSM personal protection device: the TWIG Protector, created
to protect lone workers, the vulnerable and those needing access to emergency
care, the TWIG Protector is shock and water resistant, light and extremely easy
to use. In addition it can communicate with all TWIG™ devices and support
systems using both SMS and GPRS Mobile Phone Telematics Protocol. This latest
addition to TWIG portfolio supports the efficient utilization of company's core
IPRs and revenue generation from TWIG products. Sales of TWIG Protector started
in June in selected markets and market roll-out was continued in second half of
2009.
The business of the Company's TWIG unit declined substantially over the year as
the TWIG Discovery Pro GSM/GPRS/GPS handset (for the safety and security market)
and the TWIG Locator tracking device (for the asset and vehicle tracking market)
reached the end of their product lives.
Legal Proceedings
The Company made a settlement in the previously reported dispute with its US
distributor for TWIG products whereby both parties have agreed to drop all
claims against each other in return for a payment from the US distributor to the
Company of US$ 215,000 and the return of all TWIG Discovery units to the
Company.
The Company does not have any pending or threatening legal proceedings which the
Company would consider to have material impact on the Company's financial
position or profitability.
MATERIAL EVENTS AFTER THE END OF THE FINANCIAL YEAR
In February 2010, at Mobile World Congress (MWC) in Barcelona Spain the company
announced the following new applications and partnerships:
Tweetsii - GyPSii announced Tweetsii, a killer new Twitter application to
connect people with places and networks by growing the Twitter experience and
grounding it in the real world with multimedia and geo-location to support a
free exchange of content and ideas. Tweetsii is a radical new way to use social
media and the Internet that breaks down the barrier between the real world and
digital world. The application stems from GyPSii's core mission “Connect,
Create, Share” and seeks to energize a people-powered index of the world,
supported by real time user created content, that is shared and accessed when
it's most useful - while users are out, shaking it up in the real world.
Tweetsii is a ready-to-use app for current Twitter users.
OpenDeveloper - GyPSii announced a plan to open their API to the developer
community with OpenDeveloper, a premier source of next generation technologies
to connect people; create, share and search content; and monetize applications
with contextual advertising. OpenDeveloper seeks to accelerate innovation in
the mobile and social media ecosystem by arming developers with powerful
technologies to create sticky apps. As consumers are increasingly eager to
connect with mobile technologies the API will enable developers to get creative
in the pursuit of compelling new solutions.
China Telecom - GyPSii has been selected to be the branded China Telecom
solution “le tu”, (Happy Trails in English) powered by GyPSii to be launched on
and around 2010 Shanghai Expo with China Telecom Shanghai Telecom. GyPSii will
deliver “le tu”, powered by GyPSii OEx API and distribution through China
Telecom. The initial deployment will be to Shanghai during 2010 Shanghai Expo,
in and around May 1, 2010. Subsequent deployment geographies include 14 other
provinces including Jiangsu, Zhejiang, Fujian, Shandong, Hainan, Shanxi, Anhui,
Jiangxi, Henan, Hubei, Hunan, Guangxi, Guizhuo and Yuan. This partnership will
supply GyPSii with subscription and advertising revenue into the China Telecom
subscriber base that is estimated to be a 65M subscriber market size.
Genasys/Telefonica - GyPSii has been selected to be the exclusive LBS social
media partner in Telefonica's application portfolio in Latin America. The
agreement provides both subscription and advertising revenue to GyPSii for a 5
year term. GyPSii will deliver Movistar “Powered by GyPSii” WebTop, WAP site and
handheld apps into the approximately 130 million subscriber base supported by
Telefonica in Latin America.
Intrinsyc - GyPSii and Intrinsyc will be going to market with a social network
and navigation application. The application will provide a compelling integrated
mapping, navigation and social content solution to their current customer base,
operators and into new navigation markets, incremental to GyPSii's core mobile
lifestyle markets. The agreement provides 2 revenue streams for GyPSii, the
first includes a support services fee per user. The second calls out an
advertising split for all advertisements served within the social mapping and
navigation application.
China Ad Partners - GyPSii announced several important on-line and mobile
advertising and coupon distribution partners in China.
Working with Shanghai coupon provider Kubang, GyPSii connects users with coupons
for nearby restaurants that the user views alongside user-created content on the
GyPSii network. If the user searches “food” for example they might receive a
coupon for a nearby restaurant. This not only adds value to the user experience
but also drives transaction and referrals for the restaurant on GyPSii.
GyPSii has also partnered with leading Chinese mobile advertising network
MADhouse to help deliver inventory for major global and regional brands. GyPSii
has other deals in place with Admob, search engine company Baidu, and CHANet,
the leading mobile marketing affiliate network in China.
In addition, GyPSii continues to expand its extensive index of Points of
Interest for GyPSii users to search and explore. Content relationships with
5757577 and Gudumani connect GyPSii users with new restaurant and dining POIs:
Avantouch for theatre information: and City8 for travel POI. This additional
content enhances the GyPSii user experience, providing more information and
greater choice for members to access and use on their mobile device.
In the Magi.Tel case the Finnish Enforcement Authority approved Company's appeal
against enforcement of the decision of the Court of First Instance of Rome and
ruled that the respective payment has lapsed in its entirety due to the
Company's earlier reorganization program.
As announced on March 31, 2010 the Company has decided to extend its current
financing round until the end of the year 2010 and targets to close at minimum
6M€ additional external financing during the Q2 2010.
REVIEW OF THE FINANCIAL POSITION AND THE FINANCIAL RESULTS
The Company has during the period retained solidity and liquidity.
Key figures summarizing the Group's financial position and financial results
(teuros if not indicated otherwise):
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| In period 2009 2008 2007 |
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| Net sales 2491 4374 4435 |
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| Operating result -15538 -11919 -18726 |
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| Operating result (%) -624 -272 -422 |
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| At the end of period |
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| Total assets 8893 16805 17360 |
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| Shareholders´ equity -2236 10053 12737 |
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| Total liabilities 11129 6752 4623 |
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The Company has agreed with its main investor to delay the payment of accrued
interest on its loans, which had a positive impact of 630 k€ on the Company's
cash position at the end of the reporting period.
Sufficient liquidity
The Company has, during the reporting period, retained sufficient liquidity.
However, the Company's working capital is not sufficient for the next twelve
(12) months without raising additional external financing. To secure sufficient
liquidity in all circumstances, the Company has decided upon an extended
financing round as is described in more detail in the section “Material events
in the year 2009”. The original target was to close the financing round by March
31, 2010, which deadline now has been extended until the end of the year 2010.
The financing round has been more challenging than expected before due to very
challenging atmosphere in the financing markets globally, adding also lag to the
execution of the company's business plan and moving revenue expectations in the
future accordingly.
Unless Company's near term cashflow improves significantly the Company will need
to raise at minimum 6M€ of external financing during the Q2 2010 to secure
sufficient liquidity. Despite the challenges in the fund raising the Company has
been able to create significant business potential and is currently engaged in
ongoing discussions with its key shareholders and investors to explore the
different financing alternatives. With the new financing, the Company would
retain sufficient liquidity through the next twelve (12) months period.
OUTLOOK
Over the past year plus the Group has signed agreements with global leaders in
mobile technology and GPS navigation: Samsung as the #2 provider of mobile
handsets, LG as the #3 provider, which has now grown to over 10% of market
share, and Garmin as the #1 provider of GPS products. Further, the agreement
with MyNet and China Mobile is indicative of the global market's selection and
adoption of the GyPSii overall platform. The Intel relationship as part of the
reference platform for Atom-based processor MID devices is also a strategic and
significant milestone for the Group. The Group also has deep device support for
Nokia supported platforms built on the Symbian operating systems, like the
recently introduced, 5th Edition Touch based device, Nokia 5800 and future
devices expected in 2010, and added support for lower end Java based platforms
for Symbian S40 and MIDP from other manufacturers like Samsung, Sony Ericsson
and LG These material agreements continue to establish GyPSii as a leading
platform, applications and services provider for the geo-social networking,
mobility, and internet advertising markets.
The recent announcement with China Unicom to use GyPSii as the mobile social
networking application of choice, branded under their SG Brand Unispace for
iPhone and their other mobile phones, extends GyPSii deeper into the DNA of our
partners and their potential subscriber bases.
GyPSii is further establishing distribution with major global players in the
phone and MID (mid internet devices) markets. The market is blurring between
smart phones, MID devices, even low end feature phones on Java, and new entrants
that are pushing the price down for entry point for what was seen as mid to high
level mobile devices, making them available for purchase by the mass market in
the US, Europe and Asia. This trend continues with the recent entries on Android
supported by multiple phones manufacturers and operators, with approximately 18
plus Android based devices to hit the market in early 2010. GyPSii is now
supporting Android as it emerges as a serious alternative for device
manufacturers to the development of home grown proprietary platforms, lightly
supported Linux variants and established competitive platforms like Windows
Mobile and Symbian.
The move onto platforms like Android is further evidence of the adoption and
convergence of smartphones and feature phones into platforms that are being
pushed aggressively by phone manufacturers and operators, and being adopted by
the developer community.
The GyPSii business is moving from intensive product development phase to market
penetration phase. As the revenues derive from embedded licensing of IPR and
downstream advertising revenue generation, the growth of both the number of
GyPSii users and the devices supported by GyPSii in the markets are crucial for
the commercial success of the business. Despite the global financial crisis the
company has seen steady growth rate in the number of GyPSii users and managed to
close several important distribution partnership deals with world's leading
mobile manufacturers and operators. As announced before, the company expected to
see positive development in GyPSii generated revenues starting from early 2010.
Ongoing financing negotiations and global financing crisis have slightly shifted
the revenue expectations of GyPSii further to the future. Yet revenues have
started to be generated during 2009 and the company expects to see accelerated
positive development in GyPSii generated revenues during 2010.
TWIG product demand has declined substantially as the TWIG Discovery reaches the
end of its product life and the newer TWIG Protector has so far been
disappointing in terms of new sales achievement. The TWIG Discovery Pro
GSM/GPRS/GPS handset is targeted at the safety and security market and the TWIG
Locator tracking unit for the asset and vehicle tracking market.
ASSESSMENT OF SIGNIFICANT OPERATIONAL RISKS
The global financial crisis and current global recession may have a negative
impact also on the business of the Group. The Group's business model is partner
driven and possible delays in partners' launching their new products to the
market may have an adverse effect on the development of the Group's business by
decelerating the distribution and user-adoption rate of the Group's services.
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
being reduced by all major brands and advertisers and this could have an adverse
affect on the adoption of mobile and location based advertising in 2010 and
beyond.
In addition, the Company carries a limited risk connected with the TWIG product
inventory. Should the Company not be able to sufficiently protect its industrial
rights and other intangible assets, its competitive position may suffer. It is
also possible that other parties may bring action against the Company on grounds
of alleged infringement of industrial or intellectual property rights and,
should they be successful, the Company may be obligated to pay significant
compensation.
Since 1997, the Company has not paid dividends. In the future, the re-payments
of capital loans will restrict the possibility to distribute dividends. The
total amount of loans as at 31 December 2009 was 17613 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. Should the result and cashflow
essentially fail to meet the planned figures, the Group´s financing plan may
turn out to be insufficient causing a need to secure additional financing. The
Company has already decided upon new financing round. Should the minimum amount
of the new financing described above in the section “Sufficient liquidity” be
delayed beyond Q2 2010 this would enforce the Company to introduce significant
cost cutting plan, which would also have material effect on execution on
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.
GeoHolding B.V., and investor groups led by Horizon Group and Schroders & Co
Limited have influence on GeoSentric, each of them separately. 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
REVIEW OF R&D-ACTIVITIES
The volume of the group's R&D activities were 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 has R&D units in Salo (Finland), Amsterdam (the Netherlands), Windsor
(UK), Warwick, RI (USA) and Shanghai (China).
Additionally, GyPSii server facilities are maintained in the US, China and the
Netherlands at present, with continued upgrades and new locations planned in the
future.
The development of R&D costs in years 2007-2009 was the following:
--------------------------------------------------------------------------------
| Year | R&D costs | % of sales | of which | % of sales |
| | teuros | | capitalized | |
| | | | teuros | |
--------------------------------------------------------------------------------
| 2007 | 5797 | 130.7 | 0 | 0 |
--------------------------------------------------------------------------------
| 2008 | 6088 | 139.2 | 0 | 0 |
--------------------------------------------------------------------------------
| 2009 | 8211 | 329.6 | 0 | 0 |
--------------------------------------------------------------------------------
INVESTMENTS AND FINANCING
Gross investments in financial period were 208 teuros. In year 2008 gross
investments were 119 teuros and in year 2007 they were 6283 teuros, which amount
almost entirely came from the GeoSolutions acquisition.
PERSONNEL AND ORGANIZATION
The number of employed personnel at GeoSentric in 2009 averaged 120, of which
35, at most, were affected by alternate forced leaves. The alternate forced
leave program, agreed to in autumn 2007 to apply for the time being, continued
in 2008 and 2009 and will continue also in 2010. The average number of personnel
in year 2008 was 94 and in year 2007 it was 83.
The members of the management team of the Company are: Dan Harple (Executive
Chairman), Tomi Raita (Senior Vice President & Managing Director, EMEA) Michael
Po (General Manager, Senior Vice President, Engineering), Rich Pizzarro (Senior
Vice President & Chief Technology Officer), Bruce Hathaway (Senior Vice
President, Finance, Controller and Corporate Secretary), Robin Halliday (Chief
Financial Officer), Shane Lennon (Senior Vice President, Marketing and Product
Management), Jack Early (Senior Vice President, Global Matrix Operations), Jeff
Lin (Managing Director, Asia Pacific), Jay Cahill (Vice President, Strategic
Accounts), Sam Critchley (Vice President, Products) Adrian Anderson (Vice
President, Strategic Partnerships), Gavin Nicol (Vice President, Principal
Architect) and Jukka Nieminen (Vice President, Services & Solutions).
Thor Johnson, SVP of Media Markets and member of the management team resigned
from the Company as of April 2, 2009. Due to the resignation Jay Cahill joined
the management team responsible for the Strategic Partner Relations. The
employment of Thor Jonson, SVP Media Markets, with the Company ended in June
2009 and the employment of Bill Conners, SVP Sales & Business Development, with
the Company ended during Q3/2009.
ENVIRONMENTAL ISSUES
The Company changed into a no-lead manufacturing process according to so called
ROHS-directive during summer 2006. The Company pays for its products a statutory
recycling fee and has organized the recycling of disposed materials
contractually through Jalopinta Ky. Altogether, the Company's operations cause
no significant environmental impact.
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 Board consists of Daniel Harple (Chairman), Gary Bellot, Raymond Kalley,
Michael Vucekovich, Andy van Dam, Winston Guillory and Hans van der Velde. Board
member David Francis resigned from the Board of Directors effective as of March
13, 2009 due to personal reasons not connected to the Company. On 15 May 2009 Mr
Raymond Kalley was elected to the Board. Mr Kalley has extensive management
experience and a background in mergers and acquisitions and general corporate
development.
GeoSentric Oyj's Board of Directors decided in March to establish committees to
enhance the preparation of matters falling within the competence of the Board.
The established committees are 1) Audit and Finance Committee; 2) Corporate
Governance and Nominations Committee; 3) Compensation Committee; and 4)
Strategic Options Committee.
In financial year 2009, 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. Audit firm PricewaterhouseCoopers continued as the deputy
auditor of the Company.
GROUP STRUCTURE
In addition to the parent company, GeoSentric Oyj, the group comprises of 100 %
owned subsidiaries, GyPSii (Shanghai) Co. Ltd, GeoSolutions B.V., GyPSii Inc.,
GeoSolutions Holdings N.V. (formerly Benefon Solutions B.V.) and GeoSentric
(UK) Ltd. (formerly Benefon (UK) Ltd).
The company completed a restructuring of its group structure during the year to
achieve a more efficient operation model. Under the restructuring all
GeoSentric's subsidiaries are held under its Dutch subsidiary, GeoSolutions
Holding N.V. (formerly Benefon Solutions B.V). The restructuring did not have
any effect on company's assets and liabilities.
GeoSentric (UK) Ltd., GyPSii (Shanghai) Co., Ltd., GeoSolutions B.V. and GyPSii
Inc. are primarily engaged with the GyPSii business. GyPSii (Shanghai) Co., Ltd.
has a primary focus for market development in Asia. Further, product quality
assurance, testing, and multi-lingual review are assisted by the Shanghai team.
GeoSentric Oyj is the group parent company and is engaged in the TWIG-products
and provides R&D services to the GyPSii-products and services. GeoSolutions
Holdings N.V. is a semi dormant holding company.
BOARD AUTHORIZATION
The Annual General Meeting convened on May 15, 2009 authorized the Board to
increase the share capital by maximum of 3,000,000 euros and share amount by
maximum of 300,000,000 new shares. The authorization is valid for two (2) years
from the date of the Annual General Meeting. At the same all the other
authorizations were terminated.
At the end of the reporting period the remaining amount of Board's authorization
was 2,705,000.00 euros and 270,500,000 shares corresponding to 30.12 % of the
currently registered share amount and 18.88 % shares after all shares and
instruments entitled to shares, effecting a corresponding immediate dilution to
existing shareholdings.
STRUCTURAL ARRANGEMENTS AND CHANGES IN AMOUNTS OF SHARES
The Board decided during reporting period to adopt Option Plans 2009I-IV and
issue an aggregate amount of 32,500,000 option rights to the key resources and
members of the Board of Directors without charge. The option rights have been
subscribed.
The Board option subscription period of Option Plan 2008-V has ended on December
31, 2009. Of the reserved amount, a total of 9,479,500 options have been
allotted.
The Board of Directors has accepted new financing amounting up to EUR 25,000,000
at maximum and accepted investment commitment of EUR 7,500,000 by the lead
investor as described in more detail above in section 4 “Material events in the
year 2009”.
More information upon the option programs is available in Note 23 “Option
Rights” of the Financial Statements.
During the financial year the Company's share capital remained unchanged. The
share amount was increased with a total amount of 2,830,189 new shares
registered into the Finnish Trade Register on Febraury 5, 2009. The free share
issue directed to an advisor of the Board was based on the decision by the Board
of Directors on November 20, 2008.
As a conclusion the amount of securities of the Company changed over the
reporting year as follows:
--------------------------------------------------------------------------------
| Number of registered shares on 1.1.2009 | 895,096,165 |
--------------------------------------------------------------------------------
| New shares issued in directed share issue | 2,830,189 |
--------------------------------------------------------------------------------
| New shares issued in securities conversions | 0 |
--------------------------------------------------------------------------------
| Number of registered shares on 31.12.2009 | 897,926,354 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Loan | Amount /EUR | Entitled shares | Mature Date |
--------------------------------------------------------------------------------
| 2004A | 112,762.57 | 0 | 31.12.2008 |
--------------------------------------------------------------------------------
| 2008B | 10,000,000 | 94,339,622 | 25.8.2013 |
--------------------------------------------------------------------------------
CAPITAL LOANS
The Company did not raise any new capital loans in 2009.
The loan decided on February 26, 2004 and remaining 112,762.57 euros has been
matured and entitles no longer new shares of the Company. Until now, no payments
have been made of the Loan. The loan will accrue a fixed annual interest of 4 %
also paid on mentioned date of June 30 of each year providing that the
requirements set in the Companies´ Act regarding interest payments on equity
loans are met. Until now, no interest has been paid on the loan.
COMPANY 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.
The company's share capital on December 31, 2009, was 8,950,961.65 euros,
consisting of 897,926,354 shares. The number of outstanding shares in the
beginning of the financial year 2009 was 895,096,165.
As of 31.12.2009 according to share register of the Euroclear Finland
shareholders who hold their shares under a name of a nominee own a total amount
of 778,880,207 shares corresponding 86.74 % of the Company's shares and votes
--------------------------------------------------------------------------------
| Shareholder | Shares | Vote and share % |
--------------------------------------------------------------------------------
| Nordea Pankki Suomi Oyj | 492,665,496 | 54.87 % |
| (custodian shares) | | |
--------------------------------------------------------------------------------
| Skandinaviska Enskilda | 261,694,243 | 29.14 % |
| Banken (custodian shares) | | |
--------------------------------------------------------------------------------
| Svenska Handelsbanken AB | 24,520,468 | 2.73 % |
| (custodian shares) | | |
--------------------------------------------------------------------------------
| TOTAL | 778,880,207 | 86.74 % |
--------------------------------------------------------------------------------
During the year the company received a flagging notice from GeoHolding.
According to the notice, the threshold of GeoHolding could increase from 27.97 %
to a maximum of 31.90 % by virtue of option rights. In addition the threshold of
GeoHolding and its beneficial shareholder, Dan Harple, could raise together up
to a maximum of 32.80 % of the registered share amount and votes, comprising of
aggregate amount of 251,171,068 shares and 43,418,055 option rights.
The number of fully diluted shares as of 31.12.2009 was as follows:
--------------------------------------------------------------------------------
| Registered listed shares | 897,926,354 |
--------------------------------------------------------------------------------
| Registered rights entitling to | 264,161,464 |
| shares | |
--------------------------------------------------------------------------------
| Un-registered shares | 0 |
--------------------------------------------------------------------------------
| Board authorization | 270,500,000 |
--------------------------------------------------------------------------------
| TOTAL | 1,432,587,818 |
--------------------------------------------------------------------------------
The Company's all issued instruments entitled to shares together correspond to a
maximum of 29.42 % of the Company's registered number of shares and
approximately 18,44 % of the share capital after all instruments entitled to
shares issued by the Company and board authorization, effecting a corresponding
direct dilution to existing holdings.
SHAREHOLDINGS OF THE BOARD MEMBERS AND MANAGING DIRECTOR
The share holdings and potential holdings by virtue of instruments entitling to
share subscriptions of the Board members and managing director, including the
holdings by controlled corporations, are as follows:
--------------------------------------------------------------------------------
| Person | Direct shares | Securities | Total securities |
| | | entitling to | |
| | | shares | |
--------------------------------------------------------------------------------
| Bellot, Gary | 323,571 | 7,000,000 | 7,323,571 |
--------------------------------------------------------------------------------
| Kalley, Raymond | 2,830,189 | 5,000,000 | 7,830,189 |
--------------------------------------------------------------------------------
| Guillory, Winston | - | 7,000,000 | 7,000,000 |
--------------------------------------------------------------------------------
| *Harple, Daniel | 248,673,068 | 46,918,055 | 295,591,123 |
--------------------------------------------------------------------------------
| Tomi Raita | 2,564 | 1,700,000 | 1,702,564 |
--------------------------------------------------------------------------------
| Van Dam, Andries | - | 7,205,000 | 7,205,000 |
--------------------------------------------------------------------------------
| Van der Velde, | 1,190,476 | 7,000,000 | 8,190,476 |
| Johannes | | | |
--------------------------------------------------------------------------------
| Vucekovich, | 1,691,397 | 7,000,000 | 8,691,397 |
| Michael | | | |
--------------------------------------------------------------------------------
* Held on behalf of GeoHolding, B.V.
RELATED PARTY TRANSACTIONS
As a part of the terms relating to the investors investment to the Note,
previous financing round arranged in August-September 2007 and simultaneously
agreed restructuring of Company's ownership, the Board approved an incentive
carve-out agreement entered into with key senior managers who are holders in
GeoHolding B.V. for a successfully completed exit transaction. The incentive
carve-out is based on the valuation of the Company in pre-defined exit events,
requiring shareholders' approval to take place, and may not exceed 10 percent of
the valuation. The agreement shall be valid until July 31, 2017.
As part of the Offering described in more detail above in section 4 “Material
events in the year 2009” the Company has entered into an advisory agreement with
Raymond Kalley subject to financial services in the Offering. Based on the loan
of 7,500 teuros raised in the Offering, Raymond Kalley was paid a total amount
of 225 teuros in cash as part of the agreed introductory fee in the Offering.
The introductory fee to be paid in shares shall depend on the final terms which
shall be confirmed upon closing of the Offering.
More information upon the related party transactions is available in Note 30 of
the Financial Statements.
BOARD PROPOSAL REGARDING THE HANDLING OF THE RESULT
The Board proposes to the Annual General Meeting that no dividend is distributed
and that the loss for the period is booked to the prior years´ result account.
Annual General Meeting is scheduled to be held May 14, 2010. The notice of the
meeting, including the Board of Directors' proposals to the Annual General
Meeting, will be published as a separate stock exchange release.
NOTICE
The GeoSentric'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 2009
published on March 31, 2010. 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 2009.
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 2009. The summary is available at:
www.geosentric.com.
In Salo March 31, 2010
GeoSentric Oyj
The Board of Directors
GROUP STATEMENT OF COMPREHENSIVE INCOME
--------------------------------------------------------------------------------
| 1000 EUR | Note | 4Q/2009 | 2009 | 4Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales | | 475 | 2491 | 1164 | 4374 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cost of goods sold | 4 | 419 | 2141 | 664 | 3006 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gross margin | | 56 | 350 | 500 | 1368 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating | | 2 | 2 | 0 | 35 |
| income | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| General & | 4 | 790 | 3111 | 1128 | 3874 |
| Administrative | | | | | |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Research & | 4 | 1945 | 8211 | 1593 | 6088 |
| Development | | | | | |
| expenses | | | | | |
--------------------------------------------------------------------------------
| Sales & Marketing | 4 | 1020 | 4568 | 1034 | 3360 |
| expenses | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating result | | -3697 | -15538 | -3255 | -11919 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income | | 0 | 74 | 190 | 330 |
--------------------------------------------------------------------------------
| Financial expenses | | -231 | -723 | -195 | -276 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Result before | | -3928 | -16187 | -3260 | -11865 |
| taxes | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income taxes | | 110 | 409 | 110 | 492 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Result for the | | -3818 | -15778 | -3150 | -11373 |
| period | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Translation | | 8 | 11 | 124 | 124 |
| difference | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Comprehensive | | -3810 | -15767 | -3026 | -11249 |
| income | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per | | | | | |
| share, eur | | | | | |
--------------------------------------------------------------------------------
| Basic earnings per | | -0,00 | -0,02 | -0,00 | -0,01 |
| share, eur | | | | | |
--------------------------------------------------------------------------------
Diluted earnings per share have not been computed because dilution effect would
improve the key figure.
GROUP STATEMENT OF FINANCIAL POSITION
--------------------------------------------------------------------------------
| 1000 EUR | Note | 31.12.2009 | 31.12.2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| ASSETS | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current assets | | | |
--------------------------------------------------------------------------------
| Property, plant and equipment | | 240 | 194 |
--------------------------------------------------------------------------------
| Goodwill | | 216 | 216 |
--------------------------------------------------------------------------------
| Other intangible assets | | 510 | 2520 |
--------------------------------------------------------------------------------
| Other financial assets | | 66 | 64 |
--------------------------------------------------------------------------------
| Deferred tax assets | | 0 | 0 |
--------------------------------------------------------------------------------
| | | 1032 | 2994 |
--------------------------------------------------------------------------------
| Current assets | | | |
--------------------------------------------------------------------------------
| Inventories | | 1216 | 1405 |
--------------------------------------------------------------------------------
| Trade receivables and other | | 696 | 1816 |
| receivables | | | |
--------------------------------------------------------------------------------
| Prepaid expenses | | 10 | 836 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | | 5939 | 9754 |
--------------------------------------------------------------------------------
| | | 7861 | 13811 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | | 8893 | 16805 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shareholders´equity | | | |
--------------------------------------------------------------------------------
| Share capital | 5 | 8951 | 8951 |
--------------------------------------------------------------------------------
| Share premium account | 5 | 13631 | 13631 |
--------------------------------------------------------------------------------
| Translation difference | | 135 | 124 |
--------------------------------------------------------------------------------
| Invested distributable equity | 5 | 30603 | 28039 |
| account | | | |
--------------------------------------------------------------------------------
| Retained earnings | | -55556 | -40692 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total shareholders´ equity | | -2236 | 10053 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | | |
--------------------------------------------------------------------------------
| Deferred tax liabilities | | 128 | 638 |
--------------------------------------------------------------------------------
| Interest-bearing debt | 7 | 7061 | 3394 |
--------------------------------------------------------------------------------
| | | 7189 | 4032 |
--------------------------------------------------------------------------------
| Current liabilities | | | |
--------------------------------------------------------------------------------
| Trade payables and other | | 2634 | 1977 |
| payables | | | |
--------------------------------------------------------------------------------
| Provisions | | 37 | 62 |
--------------------------------------------------------------------------------
| Interest bearing debt | 7 | 1269 | 681 |
--------------------------------------------------------------------------------
| | | 3940 | 2720 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | | 11129 | 6752 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total shareholders´ equity and | | 8893 | 16805 |
| liabilities | | | |
--------------------------------------------------------------------------------
GROUP CASH FLOW STATEMENT
--------------------------------------------------------------------------------
| 1000 EUR | 2009 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from operations | | |
--------------------------------------------------------------------------------
| Result for the period | -15778 | -11373 |
--------------------------------------------------------------------------------
| Adjustments | 3991 | 3384 |
--------------------------------------------------------------------------------
| Changes in working capital: | | |
--------------------------------------------------------------------------------
| Change of trade and other receivables | 1946 | 362 |
--------------------------------------------------------------------------------
| Change of inventories | -295 | 1416 |
--------------------------------------------------------------------------------
| Change of trade and other liabilities | 632 | -454 |
--------------------------------------------------------------------------------
| Paid interests | -930 | -2 |
--------------------------------------------------------------------------------
| Received interest payments | 145 | 118 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from operations, net | -10289 | -6549 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from investments, net | -208 | -119 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from financing | | |
--------------------------------------------------------------------------------
| Proceeds from issue of share capital | 0 | 1 |
--------------------------------------------------------------------------------
| Transaction expenses of share issues | -68 | -99 |
--------------------------------------------------------------------------------
| Transaction expenses of loans | -750 | 0 |
--------------------------------------------------------------------------------
| Proceeds from long term borrowings, equity | 2591 | 6038 |
--------------------------------------------------------------------------------
| Proceeds from long term borrowings, | 4909 | 3962 |
| liability | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash flow from financing | 6682 | 9902 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in cash | -3815 | 3234 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash on January 1 | 9754 | 6520 |
--------------------------------------------------------------------------------
| Cash on December 31 | 5939 | 9754 |
--------------------------------------------------------------------------------
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY
--------------------------------------------------------------------------------
| | Share | Translat | Share | Inv. | Accrued | Total |
| | capital | ion | premium | distribu | result | (1000eur |
| | (1000eur | differen | account | ted | (1000eur | ) |
| | ) | ce | (1000eur | equity | ) | |
| | | (1000eur | ) | account | | |
| | | ) | | (1000eur | | |
| | | | | ) | | |
--------------------------------------------------------------------------------
| Shareholde | 5246 | 0 | 14652 | 23695 | -30856 | 12737 |
| rs´ equity | | | | | | |
| 31.12.2007 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Item | 0 | 124 | 0 | 0 | 0 | 124 |
| booked | | | | | | |
| directly | | | | | | |
| into | | | | | | |
| shareholde | | | | | | |
| rs´ equity | | | | | | |
--------------------------------------------------------------------------------
| Result for | 0 | 0 | 0 | 0 | -11373 | -11373 |
| the period | | | | | | |
--------------------------------------------------------------------------------
| Comprehens | 0 | 124 | 0 | 0 | -11373 | -11249 |
| ive income | | | | | | |
--------------------------------------------------------------------------------
| Share | 6 | 0 | 0 | 99 | 0 | 105 |
| issue, | | | | | | |
| cash | | | | | | |
--------------------------------------------------------------------------------
| Share | 1022 | 0 | -1021 | 0 | 0 | 1 |
| issue, | | | | | | |
| special | | | | | | |
| rights | | | | | | |
--------------------------------------------------------------------------------
| Conversion | 2677 | 0 | 0 | -1694 | 0 | 983 |
| of | | | | | | |
| convertibl | | | | | | |
| e bonds | | | | | | |
| into | | | | | | |
| shares | | | | | | |
--------------------------------------------------------------------------------
| Share | 0 | 0 | 0 | -99 | 0 | -99 |
| issue | | | | | | |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Booked | 0 | 0 | 0 | 0 | 1537 | 1537 |
| expense of | | | | | | |
| stock | | | | | | |
| options to | | | | | | |
| key | | | | | | |
| personnel | | | | | | |
| and | | | | | | |
| partners | | | | | | |
--------------------------------------------------------------------------------
| Equity | 0 | 0 | 0 | 6038 | 0 | 6038 |
| portions | | | | | | |
| of | | | | | | |
| liabilitie | | | | | | |
| s | | | | | | |
--------------------------------------------------------------------------------
| Shareholde | 8951 | 124 | 13631 | 28039 | -40692 | 10053 |
| rs´ equity | | | | | | |
| 31.12.2008 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items | 0 | 11 | 0 | 0 | 0 | 11 |
| booked | | | | | | |
| directly | | | | | | |
| into | | | | | | |
| shareholde | | | | | | |
| rs´ equity | | | | | | |
--------------------------------------------------------------------------------
| Result for | 0 | 0 | 0 | 0 | -15778 | -15778 |
| the period | | | | | | |
--------------------------------------------------------------------------------
| Comprehens | 0 | 11 | 0 | 0 | -15778 | -15767 |
| ive income | | | | | | |
--------------------------------------------------------------------------------
| Share | 0 | 0 | 0 | -68 | 0 | -68 |
| issue | | | | | | |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Booked | 0 | 0 | 0 | 0 | 914 | 914 |
| expense of | | | | | | |
| stock | | | | | | |
| options to | | | | | | |
| key | | | | | | |
| personnel | | | | | | |
| and | | | | | | |
| partners | | | | | | |
--------------------------------------------------------------------------------
| Equity | 0 | 0 | 0 | 2632 | 0 | 2632 |
| portions | | | | | | |
| of | | | | | | |
| liabilitie | | | | | | |
| s | | | | | | |
--------------------------------------------------------------------------------
| Shareholde | 8951 | 135 | 13631 | 30603 | -55556 | -2236 |
| rs´ equity | | | | | | |
| 31.12.2009 | | | | | | |
--------------------------------------------------------------------------------
KEY FIGURES
--------------------------------------------------------------------------------
| | 4Q/2009 | 2009 | 4Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales, 1000 EUR | 475 | 2491 | 1164 | 4374 |
--------------------------------------------------------------------------------
| Operating result, 1000 EUR | -3697 | -15538 | -3255 | -11919 |
--------------------------------------------------------------------------------
| Result before taxes, 1000 | -3928 | -16187 | -3260 | -11865 |
| EUR | | | | |
--------------------------------------------------------------------------------
| Gross investments, 1000 EUR | 8 | 208 | 14 | 119 |
--------------------------------------------------------------------------------
| Average personnel | 126 | 120 | 101 | 94 |
--------------------------------------------------------------------------------
| Earnings per share, EUR | -0,00 | -0,02 | -0,00 | -0,01 |
--------------------------------------------------------------------------------
| Equity per share, EUR | -0,00 | -0,00 | 0,01 | 0,01 |
--------------------------------------------------------------------------------
| Weighted average number of | 897926 | 897651 | 895096 | 779047 |
| shares in period, 1000 pcs | | | | |
--------------------------------------------------------------------------------
| Number of shares at the end | 897926 | 897926 | 895096 | 895096 |
| of the period, 1000 pcs | | | | |
--------------------------------------------------------------------------------
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")
together with ready-to-use integrated GPS/GSM devices for navigation and object
tracking and customisable software solutions for industry specific uses
(“TWIG”). 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. According Finnish Companies
Act, the shareholders has 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
Foundation:
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 2009.
Accounting principles:
The used preparation principles have been presented in the Financial Statements
from year 2009.
Since 1.1.2009 the group has applied the following new standards and
interpretations:
IAS 23, cost of liabilities. The renewed standard prescribes that in the
purchase cost of a commodity fulfilling the conditions are included the
immediate cost of related liabilities. No effect on the Group.
IFRIC 13, Customer Loyalty Programmes. Group operations do not include pertinent
transactions.
IAS 1, Presentation of the financial statements. The change affects the
terminology and the presentation format of some accounts. IFRS 2, Share-based
payments. The change affects the definition of the fair value of equity-based
instruments.
IAS 1, Presentation of the financial statements and IAS 32, Financing
instruments: presentation format. The changes may cause the re-classification as
equity of certain equity-based financing instruments. Changes for "Improvements
to IFRS". Small changes relate to 34 different standards but they have no
significant effects on the financial statements.
Changes for IFRIC 9. Re-assessment of embedded derivative and IAS 39, Financial
instruments: recognition and measurement - Embedded derivatives. No effect on
the Group.
IFRIC 15, Agreements for the Construction of Real Estate. No effect on the
Group.
IFRIC 16, Hedges of a Net Investment in a Foreign Operation.No effect on the
Group.
IFRS 8, Business segments. No essential effect on the information because there
is only one business segment.
IFRS 7, Financial instruments: information to be presented in the financial
statements. The changes were given due to the international financing crisis and
concern the re-classification of certain financial assets. The Group holds no
such financial assets that ought to be re-classified.
3. SEGMENT INFORMATION
The group has only one distinct segment, location based services and devices
utilising them. Its share of net sales has been 100% in the period and in the
reference period.
4. COSTS BY CATEGORY
--------------------------------------------------------------------------------
| 1000 EUR | 4Q/2009 | 2009 | 4Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Increase/decrease in | 97 | -164 | 196 | 1290 |
| inventories of finished | | | | |
| products | | | | |
--------------------------------------------------------------------------------
| Impairment loss in | 98 | 484 | 0 | 0 |
| inventories | | | | |
--------------------------------------------------------------------------------
| Use of raw materials and | 84 | 1288 | 261 | 808 |
| consumables | | | | |
--------------------------------------------------------------------------------
| Total expense of direct | 140 | 533 | 207 | 908 |
| employees | | | | |
--------------------------------------------------------------------------------
| Cost of goods sold total | 419 | 2141 | 664 | 3006 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total expense of indirect | 2100 | 8710 | 2199 | 7263 |
| employees | | | | |
--------------------------------------------------------------------------------
| Depreciations | 550 | 2172 | 538 | 2133 |
--------------------------------------------------------------------------------
| Other operating expenses | 1105 | 5008 | 1018 | 3926 |
--------------------------------------------------------------------------------
| Expenses by cost category, | 3755 | 15890 | 3755 | 13322 |
| total | | | | |
--------------------------------------------------------------------------------
5. SHAREHOLDERS´ EQUITY
--------------------------------------------------------------------------------
| | Number | Share | Share | Invested | Total |
| | of | capital | premium | distribut | (1000eur) |
| | shares | (1000eur) | account | ed equity | |
| | (1000) | | (1000eur) | account | |
| | | | | (1000eur) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 31.12.2008 | 895096 | 8951 | 13631 | 28039 | 50621 |
--------------------------------------------------------------------------------
| Share issue free | 2830 | | | | 0 |
| 5.2.2009 | | | | | |
--------------------------------------------------------------------------------
| Cost of share | | | | -68 | -68 |
| issues | | | | | |
--------------------------------------------------------------------------------
| Equity components | | | | 2632 | 2632 |
| separated from | | | | | |
| liabilities | | | | | |
--------------------------------------------------------------------------------
| 31.12.2009 | 897926 | 8951 | 13631 | 30603 | 53185 |
--------------------------------------------------------------------------------
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.
6. OPTION RIGHTS
The Company carries nineteen on-going stock option programs. In all of these,
one option right entitles to subscribe for one new S-share of the Company.
Option program 2008-5:
The Board decided on 20.11.2008 by virtue of authorisation by Extraordinary
General Meeting on 10.9.2007 to adopt new option plan and 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 respective series.
--------------------------------------------------------------------------------
| Series | Amount | Share subscription price |
| | | (€) |
--------------------------------------------------------------------------------
| Series 2009Q1: | 5578500 | 0,0346 € |
--------------------------------------------------------------------------------
| Series 2009Q2: | 69000 | 0,0305 € |
--------------------------------------------------------------------------------
| Series 2009Q3: | 2130000 | 0,0403 € |
--------------------------------------------------------------------------------
| Series 2009Q4: | 195000 | 0,0471 € |
--------------------------------------------------------------------------------
| Series 2010Q1: | 1507000 | 0,0432 € |
--------------------------------------------------------------------------------
Option program 2009-1:
The Board decided in its meeting on May 14, 2009 to adopt Option Plan 2009-1 and
issue a total amount of 3,000,000 option rights by virtue of the authorization
granted by the EGM on September 10, 2007. The options are directed to the
Board´s advisors without charge as decided by the Board. The options may be
subscribed into corresponding amount of new shares during the share subscription
period ending on December 31, 2012 with a share subscription price of 0.045
euros per share. Option rights have been subscribed when issued.
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. Option rights have been
subscribed when issued.
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 been subscribed when issued.
Option program 2009-4:
The Board decided in its meeting on November 13, 2009 to adopt Option Plan
2009-4 and issue a total amount of 3,500,000 option rights to the financial
advisor without charge. The options may be subscribed into corresponding amount
of new shares during the share subscription period ending on February 17, 2015
with a share subscription price of 0.0475 euros per share.
Special right:
The Board decided to issue 2.830.189 shares without price to Raymond Kalley as
part of the agreed advisor fee. The shares have been registered in trade
register on 5.2.2009.
Shares without charge:
Based to the loan of 7.500.000 eur raised by the subsidiary GeoSolutions
Holdings N.V., the Board has agreed as preconditions for the investment to pay
and industry standard placement fee which shall be paid partially in cash and
partially in company´s shares. The amount of fee shall depend on the final terms
of financing round to be confirmed.
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 | 2009 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Key persons | 276 | 385 |
--------------------------------------------------------------------------------
| Board | 557 | 989 |
--------------------------------------------------------------------------------
| Other interest groups | 81 | 163 |
--------------------------------------------------------------------------------
| Total | 914 | 1537 |
--------------------------------------------------------------------------------
7. FINANCIAL LIABILITIES
--------------------------------------------------------------------------------
| 1000 EUR | Nominal | | 2009 | | 2008 |
| | loan | | | | |
| | value | | | | |
| | 2009 | | | | |
--------------------------------------------------------------------------------
| Non-current: | | | | | |
--------------------------------------------------------------------------------
| Loan 2008 | 10000 | | 2605 | | 3394 |
--------------------------------------------------------------------------------
| Loan 2009 | 7500 | | 4456 | | 0 |
--------------------------------------------------------------------------------
| Non-current | | | 7061 | | 3394 |
| total | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current: | | | | | |
--------------------------------------------------------------------------------
| Cbl 2004A | 113 | | 113 | | 113 |
--------------------------------------------------------------------------------
| Loan 2008 | | | 1156 | | 568 |
--------------------------------------------------------------------------------
| Current | | | 1269 | | 681 |
| total | | | | | |
--------------------------------------------------------------------------------
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 representing approximately 10.51 % of the
registered share amount and 8.11 % of all outstanding securities. 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 until January 2010. The loan will end on
August 25, 2013.
Financing round 2009:
The subscription period of the loan note for raising a maximum amount of 25,000
teuros, originally decided to end on March 31, 2010, has been extended until the
end of the year 2010. The group has received and withdrawn the investment
commitment of 7,500 teuros. The loan note was raised by the subsidiary
GeoSolutions Holdings N.V. The loan note entitles to subscribe shares of
GeoSolutions. The amount of shares will in all events be less than half of
GeoSolution´s outstanding shares and share capital. Alternatively the investors
may be offered 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 GeoSolution´s shares. The note will
expire in five years. The final terms shall be confirmed after closing the
offering. As precondition for the investment the Company has agreed to pay an
industry standard placement fee. The amount of fee depends on the final terms of
the offering.
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 is 5 %. Effective loan interests range from 16,2 to 16,8 %.
8. COLLATERAL COMMITMENTS AND CONTINGENCIES
--------------------------------------------------------------------------------
| 1000 EUR | 2009 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Contingent liability | 0 | 0 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Collateral for own liabilities: | | |
--------------------------------------------------------------------------------
| Pledged non-current financial assets | 5 | 44 |
--------------------------------------------------------------------------------
| Pledged current financial assets | 57 | 57 |
--------------------------------------------------------------------------------
9. 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..
The management on 31.12.2009 comprised seven Board members and fifteen other
managers. The Board members were Daniel Harple, Michael Vucekovich, Gary Bellot,
Andy van Dam, Hans van der Velde, Winston Guillory and Raymond Kalley. The top
team comprised Daniel Harple, Tomi Raita, Michael Po, Rich Pizzarro, Bruce
Hathaway, Robin Halliday, Shane Lennon, Jack Early, Jeff Lin, Sam Critchley,
Gavin Nicol, Jay Cahill, Jukka Nieminen and Adrian Anderson. The Managing
Director has been Tomi Raita.
Close circle events have been presented in the Financial Statements from year
2009.
10. IMPAIRMENT TESTING AND GOING CONCERN ASSESSMENT
The Group has tested its tangible fixed assets, goodwill and the IPR acquired as
part of the acquisition of GeoSolutions BV. The method used in the testing is
the value in use and the whole group has been considered to represent the cash
generating unit subject to testing. The carrying value tested comprised of
tangible fixed assets 240 t€, goodwill and other intangibles 226 t€ and the IPR
500 t€, totalling 966 t€.
The test showed no impairment of the tested assets.
The following assumptions were used in the testing. The cash flow estimate is
based on the management forecast for the years 2010-2013.
Aggregate operating cash flow in 2010-2013:21.2 m€
Discount rate used 20 %
Sensitivity analysis
The following changes in each of the assumptions individually applied would
decrease the value in use to the carrying value of the tested assets.
Decrease in annual operating cash flows: 2.9 m€
Increase in discount rate used 36 %
The management forecast used is based on the 2010 business plan, the planned
revenue models and identified revenue sources and availability of external
financing if the revenue from operations is inadequate to meet the working
capital needs. The business model and main sources of revenue are expected to
come via subscription and advertising sales in partnership with mobile operators
and original equipment manufacturers (OEMs). The key element for the business
model and revenue generation is sufficient and sufficiently rapid growth of
GyPSii members which shall be achieved by penetrating emerging location-based
solution markets via Mobile Operators (MO), Original Equipment Manufacturers
(OEM), Original Device Manufacturers (ODM) and Personal Navigation Device
Manufacturers (PND) worldwide. In this past year, the Company has seen continued
success in penetrating additional large OEMs with distribution agreements for
“GyPSii” to be embedded on a large volume of devices in the coming two years.
OEM partners for GyPSii now include LG, Samsung, Lenovo and Huawei. The
distribution of GyPSii on devices manufactured by our OEM partners is estimated
to be far above 300 million devices over the life of the contracts. GyPSii's
other major distribution channel, Mobile Operators, also realized significant
advancements during the year with the signing of new partnerships with China
Telecom and Genasys/Telefonica. The addition of China Telecom to the previous
established relationships with China Mobile and China Unicom have cemented
GyPSii as the dominant mobile social network in China by capturing all three of
the major Mobile Operators in China with a combined subscriber base of several
hundred million. The Company's new agreement with Genasys/Telefonica, expands
the GyPSii distribution channel into Latin America with a five-year exclusive
relationship. These partnerships are indicative of the global market selection
and adoption of the GyPSii platform and service for the geo-social networking,
mobility and Internet advertising markets. Although the revenue generation of
GyPSii represented a minority of the net revenues for the year 2009, GyPSii
membership has grown to over 1.7 million and continues to grow at a rate of over
200,000 members per month. This exponential growth in the membership base has
driven commensurate usage of the GyPSii application, thereby accelerating the
monthly page views to nearly 30 million per month. This is significant growth
during 2009 and establishes the ability to monetize the page views with
advertising in 2010.
The most significant risk relating to the business plan is the sustained growth
of distribution and members. As the Company's business model is partner driven,
possible delays in partner's launching their new products to the markets 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.
The Company's management reporting systems are highly developed enabling the
management to monitor the progress of the business and financial performance
against business plan and budget on a continuous basis. The management evaluates
on a regular basis the distribution channels, performance, scope and focus of
the business plan in order to insure continuity and success. Based on the
assessment of current and planned activities and the interest expressed by the
market supporting the business plan and the management forecast by virtue of the
up-to-date reports, the board assesses the Company to be a going concern.
11. EVENTS AFTER THE END OF THE PERIOD
The Company has decided to extend its current financing round from the original
deadline of March 31, 2010 until the end of the year 2010 and is engaged in
continuous discussions with its key shareholders and investors to explore the
financing alternatives to guarantee sufficient liquidity in all circumstances.
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 -4,183,103.69 euros (FAS).
The Board proposes to the General Meeting that no dividend is distributed and
that loss for the period is booked on the account of Retained earnings.