GEOSENTRIC OYJ INTERIM REPORT May 25, 2009 at 12:00
INTERIM REPORT 1-3/2009
Contents
1. Summary of key figures and results
2. Operational overview
3. Material events in the period
4. Material events after the end of the period
5. Review of the financial position and the financial results
6. Sufficient liquidity
7. Outlook
8. Assessment of significant operational risks
9. Review of R&D activities
10. Investments
11. Personnel and organization
12. Environmental issues
13. Financing and structural arrangements
14. Board authorization
15. Company's shares and shareholders
16. About the Company
17. Financial Statements, Q1 2009 (not audited)
1. Summary of key figures and results
The key figures summarizing the Group's financial position and financial results
were as follows (teuros unless indicated otherwise):
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| In period | Q1/2009 | Q1/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales | 939 | 1085 | 4374 |
--------------------------------------------------------------------------------
| Operating Result | -3827 | -2710 | -11919 |
--------------------------------------------------------------------------------
| Basic earnings per share (eur) | -0.00 | -0.00 | -0.01 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| At the end of the period | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 13303 | 14623 | 16805 |
--------------------------------------------------------------------------------
| Shareholders' equity | 6430 | 10430 | 10053 |
--------------------------------------------------------------------------------
| Total liabilities | 6873 | 4193 | 6752 |
--------------------------------------------------------------------------------
2. Operational overview
GeoSentric is a developer and provider of solutions, products and technologies
for location based services and mobile and web-based 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 (IPR) 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 Q1/2009 the Group focused on securing contracts with the major
distribution partners to integrate products on to their new devices and
services. Major marketing and launch plans for 2009 by all the distribution
partners are expected to drive significant volumes of GyPSii users on a global
basis, which is also expected to have a positive impact on revenues from GyPSii
during the second half of 2009. The global financial crisis has delayed the
launches of new products by company's distribution partners. This has caused
some lag to company's business plans but has not had any significant effect on
the future outlook of GyPSii business.
The total net sales of the Group in Q1/2009 were 939 teuros, slightly down
compared to the total net sales in Q1/2008 of 1085 teuros, while the total cost
of sales in Q1/2009 were substantially reduced from that of the prior period in
Q1/2008, going to 600 teuros from 827 teuros, a 27.4% reduction. The revenue in
Q1/2009 was substantially from the Twig products and IP with also GyPSii, as
expected, continuing to generate minor revenues. The gross margin for the
reporting period was strong, at 339 teuros (36.1%), compared to a gross margin
of 258 teuros (23.8%) for Q1/2008.
Total operating expenses were increased in the reporting period compared to the
prior year period, going to 4166 teuros in Q1/2009, from 2970 teuros in Q1/2008,
a 40.2% 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.
The total earnings before taxes were -3920 teuros in Q1/2009, versus -2710
teuros in Q1/2008, a 41.2% decrease. Earnings per share for the reporting period
were -0.00 Euros per share.
3. Material events in the period
During the period 1-3/2009, the Group has continued its efforts to broaden the
range of GyPSii supported devices, which is an essential element in Group's
business plan. In February the Company announced that its GyPSii mobile social
networking application was now available on over 25 more Nokia devices,
including the flagship N96 and N95 products.
At Mobile World Congress in Barcelona, 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 Mobile World Congress, the Company announced the launch of
OpenExperience Services Platform (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 Service,
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.
As GyPSii's revenue model is based on income from embedded and 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 at the same for future revenue generation, even though those events haven't
had material effect on company's financial performance yet during the first
quarter of 2009.
In February 2009, the Company announced the launch of its new, next generation,
location-centric GPS/GSM personal protection device: the TWIG Protector. This
latest addition to TWIG portfolio supports the efficient utilization of
company's core IPRs and revenue generation from TWIG products.
4. Material events after the end of the period
The Company made significant announcements after the end of the period
concerning its Annual General Meeting and its GyPSii geo-social networking
platform and service.
After the reporting period the company announced that the Group's GyPSii mobile
social networking application was available as a 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, GyPSii announced GyPSii native application support for the iPhone, and
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.
The Court of First Instance in Rome has given a decision relating to the dispute
between the Company and an Italian company Magi.tel regarding an alleged patent
infringement. The Company has appealed the judgment on 21 April 2009 and is
awaiting the Court's decision relating to its appeal. Relating to the claim
brought against it in the US by a distributor for its TWIG Discovery mobile
phones seeking to terminate the issued purchase order the company considers it
has received a binding purchase order and has continued in pursuing fulfillment
of the purchase order in all suitable manners.
Company's Annual General Meeting (AGM) convened in Helsinki on Friday 15 May
2009. The AGM confirmed the financial statements and resolved to discharge from
liability the members of the Board and the Managing Director for the financial
year 2008. In addition, the AGM resolved to adopt the proposal by the Board of
Directors that no dividend shall be paid for 2008. The AGM resolved that that
the number of Board members is seven (7) and elected the following persons to
the Board: Mr. Daniel Harple (Chairman), Mr. Michael Vucekovich, Mr. Gary
Bellot, Mr. Andy van Dam, Mr. Winston Guillory, Mr. Hans van der Velde and Mr.
Raymond Kalley. The meeting fee for each Board and committee meeting was decided
to be 1,500 euros.
The AGM re-elected Ernst & Young as the auditor of the Company with Erkka
Talvinko (CPA) as the auditor in charge.
The AGM authorized the Board to decide upon increase in share capital and the
issuance of new shares as well as special rights entitling to shares, against or
without payment, such that the maximum amount of increase is 3,000,000 euros and
the maximum number of new shares is 300,000,000. The decisions adopted by the
AGM are described in more detail in the stock exchange release published on 15
May.
The AGM amended company's Articles of Association according to Board's proposal
such that the notice to the General Meeting shall be published no later than
twenty-one (21) days before the date of the General Meeting, instead of earlier
seventeen (17) days.
5. Review of the financial position and the financial results
The Company has during the period retained solidity and liquidity.
The key figures summarizing the Group's financial position and financial results
were as follows (teuros unless indicated otherwise):
--------------------------------------------------------------------------------
| In period | Q1/2009 | Q1/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales | 939 | 1085 | 4374 |
--------------------------------------------------------------------------------
| Operating Result | -3827 | -2710 | -11919 |
--------------------------------------------------------------------------------
| Basic earnings per share (eur) | -0.00 | -0.00 | -0.01 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| At the end of the period | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | 13303 | 14623 | 16805 |
--------------------------------------------------------------------------------
| Shareholders'' equity | 6430 | 10430 | 10053 |
--------------------------------------------------------------------------------
| Total liabilities | 6873 | 4193 | 6752 |
--------------------------------------------------------------------------------
| Cash | 7167 | 5256 | 9754 |
--------------------------------------------------------------------------------
6. Sufficient liquidity
Report on sufficient liquidity in period 4/2009-6/2010
The cash flow projection below assumes that the sales targets set in the Group's
internal financial projections for the financial years 2009 and 2010 are met.
These projections are highly dependent on timely deliveries and the sales
success and market take-up of the Group's products and services.
--------------------------------------------------------------------------------
| Cash Flow Statement 4/2009-6/2010 | million euros |
--------------------------------------------------------------------------------
| Cash flow from operations | -3.6 |
--------------------------------------------------------------------------------
| Share/ debt subscription payments | 0.0 |
--------------------------------------------------------------------------------
| Investments | -0.1 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in cash | -3.7 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash in the beginning of the period | 7.2 |
--------------------------------------------------------------------------------
| Cash at the end of the period | 3.5 |
--------------------------------------------------------------------------------
7. Future Outlook
Over the past 18 months the Group has signed agreements with global leaders in
mobile technology and GPS navigation: Samsung as the #2 provider of mobile
handsets, and Garmin as the #1 provider of GPS products. Further, the agreement
with MyNet/China Unicom 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 2009. 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. GyPSii
was selected as the Most Innovative application for Symbian for 2008.
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 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 to purchase by the mass market in the US, Europe and Asia. This trend
continues with the recent entries by Android and RIM devices. GyPSii will be
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. GyPSii will be
updating the iPhone application for full native support in Q2, which will expand
reach into the most advanced mobile web user base.
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. The company expects to see positive
development in GyPSii generated revenues starting from the latter quarter of
2009.
The TWIG product demand has remained in a steady and stable state focused on the
TWIG Discovery Pro GSM/GPRS/GPS handset which is targeted at the safety and
security market and the TWIG Locator tracking unit for the asset and vehicle
tracking market. Customers continue to place orders for these unique devices and
the Company continues to provide reliable quality product shipments and
delivery. The recently announced new Twig Protector product which is a next
generation, ruggedized, location-centric personal protection device will further
enhance the Group's product range.
8. 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 development 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 2009 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 March 2009 was 10113 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.
9. Review of R&D-activities
The volume of the Group´s R&D activities continued to be 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 capitalisations 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.
10. Investments
Gross investments in period 1-3/2009 were 14 teuros. In the full year 2008 gross
investments were 119 teuros. There were no new investments made into the Company
and no new sources of finance established in the period 1-3/2009.
11. Personnel and organization
The number of employed personnel at GeoSentric in period 1-3/2009 averaged 108,
of which 28, at most, were affected by alternate forced leaves. The alternate
forced leave program, agreed in autumn 2007 to apply for the time being,
continues also in 2009.
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.
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.
Thor Johnson, SVP of Media Markets and member of the management team has
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.
12. Environmental issues
The Company pays for its products a statutory recycling fee and has organised
the recycling of disposed materials contractually through Jalopinta Ky.
Altogether, the Group´s operations cause no significant environmental impact.
13. Financing and structural arrangements
As previously disclosed, the Company decided to raise a maximum amount of EUR
16,000,000 (“Issue”) by issuing a loan note which includes a specific option
right. The Company received and accepted in 2008 a commitment for a total amount
of 10,000,000 euros and the subscription period for the Issue has now ended on
May 15, 2009. The maximum amount of new shares to be subscribed by virtue of the
note is 94,339,622.
In addition the issued amount of 2,830,189 shares directed to an advisor of the
Board as part of his advisory fee was registered into the Finnish Trade Register
on February 5, 2009. Thus the registered share amount was increased to
897,926,354.
After the reporting period the Board decided in its meeting on May 14, 2009 to
adopt Option Plan 2009-I and issue a total amount of 3,000,000 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.
The Board decided in its meeting on May 15, 2009 to adopt Option Plan 2009-II
and issue a total amount of 24,500,000 option rights to the members of the Board
of Directors without charge. 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.
The company is also preparing a restructuring of its group structure to achieve
a more efficient operation model. In the planned restructuring all GeoSentric's
subsidiaries would be centered under its Dutch subsidiary, GeoSolutions Holding
N.V. The restructuring does not have any effect on company's assets and
liabilities.
14. Board authorization
The Extraordinary General Meeting convened on September 10, 2007, authorized the
Board to increase share capital by a maximum of 8,000,000 euros. At the end of
the reporting period the remaining amount of this authorization, valid until
September 10, 2009, was 2,273,050.69 euros and 224,474,880 shares.
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 date of this report the remaining authorization is 2,755,000 euros and
275,500,000 shares.
15. Company's shares and shareholders
The shares of GeoSentric Oyj are listed on the NASDAQ OMX Helsinki (NASDAQ OMX:
GEO1V) and issued in the book entry system held by Euroclear Finland, address PL
1110, FIN-00101 Helsinki, Finland. The ISIN-code of the share is FI 0009004204.
The Company's shares have been on the surveillance list since February 11, 2003.
The Company and its subsidiaries do not have any Company´s shares owned by or
administered on behalf of the Company.
At the end of the reporting period company's registered share capital was
8,950,961.65 euros, consisting of 897,926,354 shares.
During the reporting period 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.
16. About the Company
GeoSentric is a developer of location-based technologies, delivering products
and services with a market-leading mobile digital lifestyle application and
geo-mobility social networking platform: connecting people, places and
communities across networks and devices. GyPSii provides a geo-location social
networking platform and services for mobile and web Internet-connected devices,
and provides applications and bundled ODM/OEM solutions for consumer and B2B
markets, built on the convergence of location based services, social networking,
search, mobile & Web 2.0 technologies. For more information, visit
www.geosentric.com or www.gypsii.com or www.gypsii.com.cn.
© 2009 GeoSentric Oyj. All rights reserved.
Based in Salo, Finland and Amsterdam, The Netherlands, GeoSentric operates
offices in North America, Europe and Asia Pacific.
GeoSentric (NASDAQ OMX Helsinki-GEO1V) is listed on the Nasdaq OMX Exchange in
Helsinki. The company has been on the surveillance list since February 2003.
GEOSENTRIC OYJ
For more information, please contact: investors@gypsii.com
Distribution:
Nasdaq OMX Helsinki
Principal news media
GEOSENTRIC OYJ INTERIM REPORT 1Q/2009 (Unaudited)
GROUP STATEMENT OF COMPREHENSIVE INCOME
--------------------------------------------------------------------------------
| 1000 EUR | Note | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales | | 939 | 1085 | 4374 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cost of goods sold | 4 | 600 | 827 | 3006 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Gross margin | | 339 | 258 | 1368 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Other operating income | | 0 | 4 | 35 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| General & | 4 | 835 | 977 | 3874 |
| Administrative | | | | |
| expenses | | | | |
--------------------------------------------------------------------------------
| Research & Development | 4 | 2120 | 1375 | 6088 |
| expenses | | | | |
--------------------------------------------------------------------------------
| Sales & Marketing | 4 | 1211 | 620 | 3360 |
| expenses | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Operating result | | -3827 | -2710 | -11919 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Financial income | | 77 | 40 | 330 |
--------------------------------------------------------------------------------
| Financial expenses | | -170 | -47 | -276 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Result before taxes | | -3920 | -2717 | -11865 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Income taxes | | 126 | 127 | 492 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Result for the period | | -3794 | -2590 | -11373 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Translation difference | | 4 | 0 | 124 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Comprehensive income | | -3790 | -2590 | -11249 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Earnings per share, | | | | |
| eur | | | | |
--------------------------------------------------------------------------------
| Basic earnings per | | -0,00 | -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 | 31.3.2009 | 31.3.2008 | 31.12.2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| ASSETS | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current assets | | | | |
--------------------------------------------------------------------------------
| Property, plant and | 15 | 179 | 217 | 194 |
| equipment | | | | |
--------------------------------------------------------------------------------
| Goodwill | 16 | 216 | 216 | 216 |
--------------------------------------------------------------------------------
| Other intangible assets | 16 | 2018 | 4028 | 2520 |
--------------------------------------------------------------------------------
| Other financial assets | 17 | 66 | 64 | 64 |
--------------------------------------------------------------------------------
| Deferred tax assets | 18 | 0 | 0 | 0 |
--------------------------------------------------------------------------------
| | | 2479 | 4525 | 2994 |
--------------------------------------------------------------------------------
| Current assets | | | | |
--------------------------------------------------------------------------------
| Inventories | 19 | 1865 | 2400 | 1405 |
--------------------------------------------------------------------------------
| Trade receivables and | 20 | 1784 | 1667 | 1816 |
| other receivables | | | | |
--------------------------------------------------------------------------------
| Prepaid expenses | | 8 | 775 | 836 |
--------------------------------------------------------------------------------
| Cash and cash equivalents | 21 | 7167 | 5256 | 9754 |
--------------------------------------------------------------------------------
| | | 10824 | 10098 | 13811 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total assets | | 13303 | 14623 | 16805 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| EQUITY AND LIABILITIES | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shareholders´equity | | | | |
--------------------------------------------------------------------------------
| Share capital | 5 | 8951 | 7045 | 8951 |
--------------------------------------------------------------------------------
| Share premium account | 5 | 13631 | 14652 | 13631 |
--------------------------------------------------------------------------------
| Translation difference | | 128 | 0 | 124 |
--------------------------------------------------------------------------------
| Invested distributable | 5 | 28012 | 22074 | 28039 |
| equity account | | | | |
--------------------------------------------------------------------------------
| Retained earnings | | -44292 | -33341 | -40692 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total shareholders´ | | 6430 | 10430 | 10053 |
| equity | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Non-current liabilities | | | | |
--------------------------------------------------------------------------------
| Deferred tax liabilities | | 511 | 1021 | 638 |
--------------------------------------------------------------------------------
| Interest-bearing debt | 7 | 3394 | 0 | 3394 |
--------------------------------------------------------------------------------
| | | 3905 | 1021 | 4032 |
--------------------------------------------------------------------------------
| Current liabilities | | | | |
--------------------------------------------------------------------------------
| Trade payables and other | | 2225 | 2201 | 1977 |
| payables | | | | |
--------------------------------------------------------------------------------
| Provisions | | 62 | 104 | 62 |
--------------------------------------------------------------------------------
| Interest bearing debt | 7 | 681 | 867 | 681 |
--------------------------------------------------------------------------------
| | | 2968 | 3172 | 2720 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total liabilities | | 6873 | 4193 | 6752 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total shareholders´ | | 13303 | 14623 | 16805 |
| equity and liabilities | | | | |
--------------------------------------------------------------------------------
GROUP CASH FLOW STATEMENT
--------------------------------------------------------------------------------
| 1000 EUR | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from operations | | | |
--------------------------------------------------------------------------------
| Result for the period | -3794 | -2590 | -11373 |
--------------------------------------------------------------------------------
| Adjustments | 259 | 605 | 3384 |
--------------------------------------------------------------------------------
| Changes in working capital: | | | |
--------------------------------------------------------------------------------
| Change of trade and other | 860 | 572 | 362 |
| receivables | | | |
--------------------------------------------------------------------------------
| Change of inventories | -460 | 418 | 1416 |
--------------------------------------------------------------------------------
| Change of trade and other | 248 | -230 | -454 |
| liabilities | | | |
--------------------------------------------------------------------------------
| Paid interests | 0 | 0 | -2 |
--------------------------------------------------------------------------------
| Received interest payments | 71 | 40 | 118 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from operations, | -2816 | -1185 | -6549 |
| net | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from investments, | -14 | -47 | -119 |
| net | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash flow from financing | | | |
--------------------------------------------------------------------------------
| Proceeds from issue of share | 0 | 0 | 1 |
| capital | | | |
--------------------------------------------------------------------------------
| Transaction expenses of | -27 | -32 | -99 |
| share issues | | | |
--------------------------------------------------------------------------------
| Proceeds from long term | 0 | 0 | 6038 |
| borrowings, equity | | | |
--------------------------------------------------------------------------------
| Proceeds from long term | 0 | 0 | 3962 |
| borrowings, liability | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net cash flow from financing | -27 | -32 | 9902 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Change in cash | -2857 | -1264 | 3234 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Cash in the beginning of the | 9754 | 6520 | 6520 |
| period | | | |
--------------------------------------------------------------------------------
| Cash at the end of the | 7167 | 5256 | 9754 |
| period | | | |
--------------------------------------------------------------------------------
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS´ EQUITY
--------------------------------------------------------------------------------
| | Share | Translat | Share | Inv. | Accrued | Total |
| | capital | ion | premium | distrib. | result | (1000eur |
| | (1000eu | differen | account | equity | (1000eur | ) |
| | r) | ce | (1000eu | account | ) | |
| | | (1000eur | r) | (1000eur | | |
| | | ) | | ) | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shareholders | 5246 | 0 | 14652 | 23695 | -30856 | 12737 |
| ´ equity | | | | | | |
| 31.12.2007 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items booked | 0 | 0 | 0 | 0 | 0 | 0 |
| directly | | | | | | |
| into | | | | | | |
| shareholders | | | | | | |
| ´ equity | | | | | | |
--------------------------------------------------------------------------------
| Result for | 0 | 0 | 0 | 0 | -2590 | -2590 |
| the period | | | | | | |
--------------------------------------------------------------------------------
| Comprehensiv | 0 | 0 | 0 | 0 | -2590 | -2590 |
| e income | | | | | | |
--------------------------------------------------------------------------------
| Share | 6 | 0 | 0 | 99 | 0 | 105 |
| issues, cash | | | | | | |
--------------------------------------------------------------------------------
| Conversion | 1793 | 0 | 0 | -1714 | 0 | 79 |
| of | | | | | | |
| convertible | | | | | | |
| bonds into | | | | | | |
| shares | | | | | | |
--------------------------------------------------------------------------------
| Share issue | 0 | 0 | 0 | -32 | 0 | -32 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Booked | 0 | 0 | 0 | 0 | 105 | 105 |
| expense of | | | | | | |
| stock | | | | | | |
| options to | | | | | | |
| key | | | | | | |
| personnel | | | | | | |
| and partners | | | | | | |
--------------------------------------------------------------------------------
| Equity | 0 | 0 | 0 | 26 | 0 | 26 |
| portions of | | | | | | |
| liabilities | | | | | | |
--------------------------------------------------------------------------------
| Shareholders | 7045 | 0 | 14652 | 22074 | -33341 | 10430 |
| ´ equity | | | | | | |
| 31.03.2008 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Shareholders | 8951 | 124 | 13631 | 28039 | -40692 | 10053 |
| ´ equity | | | | | | |
| 31.12.2008 | | | | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Items booked | 0 | 4 | 0 | 0 | 0 | 4 |
| directly | | | | | | |
| into | | | | | | |
| shareholders | | | | | | |
| ´ equity | | | | | | |
--------------------------------------------------------------------------------
| Result for | 0 | 0 | 0 | 0 | -3794 | -3794 |
| the period | | | | | | |
--------------------------------------------------------------------------------
| Comprehensiv | 0 | 4 | 0 | 0 | -3794 | -3790 |
| e income | | | | | | |
--------------------------------------------------------------------------------
| Share issue | 0 | 0 | 0 | -27 | 0 | -27 |
| expenses | | | | | | |
--------------------------------------------------------------------------------
| Booked | 0 | 0 | 0 | 0 | 194 | 194 |
| expense of | | | | | | |
| stock | | | | | | |
| options to | | | | | | |
| key | | | | | | |
| personnel | | | | | | |
| and partners | | | | | | |
--------------------------------------------------------------------------------
| Shareholders | 8951 | 128 | 13631 | 28012 | -44292 | 6430 |
| ´ equity | | | | | | |
| 31.3.2009 | | | | | | |
--------------------------------------------------------------------------------
KEY FIGURES
--------------------------------------------------------------------------------
| | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Net sales, 1000 EUR | 939 | 1085 | 4374 |
--------------------------------------------------------------------------------
| Operating result, 1000 EUR | -3827 | -2710 | -11919 |
--------------------------------------------------------------------------------
| Result before taxes, 1000 EUR | -3920 | -2717 | -11865 |
--------------------------------------------------------------------------------
| Gross investments, 1000 EUR | 14 | 47 | 119 |
--------------------------------------------------------------------------------
| Average personnel | 108 | 87 | 94 |
--------------------------------------------------------------------------------
| Earnings per share, EUR | -0,00 | -0,00 | -0,01 |
--------------------------------------------------------------------------------
| Equity per share, EUR | 0,02 | 0,02 | 0,01 |
--------------------------------------------------------------------------------
| Weighted average number of shares | 896826 | 596607 | 779047 |
| in period, 1000 pcs | | | |
--------------------------------------------------------------------------------
| Number of shares at the end of the | 897926 | 704532 | 895096 |
| period, 1000 pcs | | | |
--------------------------------------------------------------------------------
NOTES TO THE GROUP INTERIM REPORT
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 (former Benefon Oyj). The registered domicile is Salo, Finland,
with street address Meriniitynkatu 11, 24100 Salo, Finland, and mail address PL
84, FIN-24101 Salo, Finland. A copy of the group financial statements is
available at the internet address www.geosentric.com or at the company head
office at address Meriniitynkatu 11, FIN-24100 Salo, Finland.
2. ACCOUNTING PRINCIPLES FOR THE FINANCIAL STATEMENTS
Foundation:
The group interim report has been prepared in accordance with the International
Financial Reporting Standards ("IFRS") and has been prepared according to the
accounting standard IAS 34, Interim Reports. An interim report shall be read
together with the financial statements for year 2008.
Accounting principles:
The utilised principles of preparation are identical with those utilised by the
Group in financial statements for year 2008.
IASB has published new standards and interpretations and changes in existing
standards, application of which is mandatory on 1.1.2009 or thereafter, and
which the group has not adopted earlier voluntarily. The group will adopt the
following standards (and their amendments) and interpretations from 1.1.2009
onwards:
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 to standards IFRS 1, First application of the IFRS-standards and IAS 27,
Group financial statements and separate financial statements. They concern only
firms applying the IFRS for the first time. 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.
3. SEGMENT INFORMATION
The primary reported segments of the group comprise business segments. At the
moment, there is 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 | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Increase/decrease in inventories | 184 | 372 | 1290 |
| of finished products | | | |
--------------------------------------------------------------------------------
| Use of raw materials and | 281 | 285 | 808 |
| consumables | | | |
--------------------------------------------------------------------------------
| Total expense of direct employees | 135 | 170 | 908 |
--------------------------------------------------------------------------------
| Cost of goods sold total | 600 | 827 | 3006 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Total expense of indirect | 2195 | 1404 | 7263 |
| employees | | | |
--------------------------------------------------------------------------------
| Depreciations | 529 | 530 | 2133 |
--------------------------------------------------------------------------------
| Other operating expenses | 1442 | 1038 | 3926 |
--------------------------------------------------------------------------------
| Expenses by cost category, total | 4166 | 2972 | 13322 |
--------------------------------------------------------------------------------
5. SHAREHOLDERS´ EQUITY
--------------------------------------------------------------------------------
| | Number | Share | Share | Invested | Total |
| | of | capital | premium | distribut | (1000eur) |
| | shares | (1000eur) | (1000eur) | ed equity | |
| | (1000) | | | account | |
| | | | | (1000eur) | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| 31.12.2008 | 895096 | 8951 | 13631 | 28039 | 50621 |
--------------------------------------------------------------------------------
| Share issue free | 2830 | | | | 0 |
| Kalley 5.2.2009 | | | | | |
--------------------------------------------------------------------------------
| Costs of share | | | | -27 | -27 |
| issues | | | | | |
--------------------------------------------------------------------------------
| 31.03.2009 | 897926 | 8951 | 13631 | 28012 | 50594 |
--------------------------------------------------------------------------------
According to the Company´s new articles of association registered on 10.12.2007,
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
Option program 2008-5:
According to the terms and conditions the maximum of 9,505,000 option rights
shall be allotted to the key recourses of the GeoSentric group during the option
subscription period, which ends on December 31, 2009. Of the received amount, a
total of 5,647,500 options have been allotted before end of reporting period.
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.
Cost of options booked in the period according to IFRS 2. Consideration is given
as options. The counter-item of costs bookings is income statement is
shareholders´equity.
--------------------------------------------------------------------------------
| 1000 EUR | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Key persons | 91 | 64 | 385 |
--------------------------------------------------------------------------------
| Board | 76 | 0 | 989 |
--------------------------------------------------------------------------------
| Other interest | 27 | 41 | 163 |
| groups | | | |
--------------------------------------------------------------------------------
| Total | 194 | 105 | 1537 |
--------------------------------------------------------------------------------
7. FINANCIAL LIABILITIES
--------------------------------------------------------------------------------
| 1000 EUR | Nominal loan | 1Q/2009 | 1Q/2008 | 2008 |
| | value 1Q/2009 | | | |
--------------------------------------------------------------------------------
| Non-current: | | | | |
--------------------------------------------------------------------------------
| Loan 2008 | 10000 | 3394 | 0 | 3394 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Current: | | | | |
--------------------------------------------------------------------------------
| Cbl 2004A | 113 | 113 | 867 | 113 |
--------------------------------------------------------------------------------
| Loan 2008 | | 568 | 0 | 568 |
--------------------------------------------------------------------------------
| Current | | 681 | 867 | 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 interest is 4%. No interest was paid. The loan capital, interest and other
benefit may be paid in case of dismantling or bankruptcy of the 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 Board has decided to raise a maximum of 16,000 teuros by issuing a loan with
an attached special right to use the loan receivable for payment of share
subscriptions in set-off. The minimum rate of conversion is 0.106 euros and the
maximum number of shares subscribed by virtue of the loan is 150,302,466. The
annual interest of the loan is 12.5 %, paid twice a year. The loan period will
end on 25.8.2013. The Board has received and accepted an investment commitment
of 10,000 teuros, of which 2,800 teuros was raised on 3.9.2008 and 7,200 teuros
on 13.10.2008.
8. COLLATERAL COMMITMENTS AND CONTINGENCIES
--------------------------------------------------------------------------------
| 1000 EUR | 1Q/2009 | 1Q/2008 | 2008 |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Contingent liability: | | | |
--------------------------------------------------------------------------------
| Debt to banks with | 0 | 1745 | 0 |
| interest until 31.12. | | | |
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
| Collateral for own | | | |
| liabilities: | | | |
--------------------------------------------------------------------------------
| Chattel mortgage as | 0 | 12068 | 0 |
| collateral for own | | | |
| liability | | | |
--------------------------------------------------------------------------------
| Pledged non-current | 46 | 44 | 44 |
| financial assets | | | |
--------------------------------------------------------------------------------
| Pledged current financial | 57 | 373 | 57 |
| assets | | | |
--------------------------------------------------------------------------------
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 B.V., GeoSentric (UK) Ltd., GyPSii
(Shanghai) Co. Ltd., GyPSii Inc. and Benefon Solutions B.V..
Inner circle transactions have been presented in the financial statements for
year 2008. No essential changes have taken place in the reporting period.
Board member David Francis has resigned from the Board of Directors effective as
of March 13, 2009 due to personal reasons not attributable to the company.
10. EVENTS AFTER THE END OF THE PERIOD
1) Annual General Meeting
GeoSentric Oyj's Annual General Meeting was held on Friday May 15, 2009. The
general meeting confirmed the financial statements of the company and the Group,
and released the Board members and the Managing Director from liability for the
year of 2008. The Annual General Meeting decided that no dividend would be paid
for the financial year. Following Board members were elected to the Board:
Daniel Harple, Michael Vucekovich, Gary Bellot, Andy van Dam, Hans van der
Velde, Winston Guillory and Raymond Kalley. The Board meeting elected Daniel
Harple as Chairman.
Ernst & Young Oy, Authorized Public Accountants, was selected to continue as the
company's Auditor with Erkka Talvinko as responsible Auditor.
The Annual General Meeting 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 date of this report the remaining authorization is 2,755,000 euros and
275,500,000 shares.
Additional information of the Annual General Meetings decisions are disclosed on
the stock exchange release published on May 15, 2009
2) Structural arrangements
After the reporting period the Board decided in its meeting on May 14, 2009 to
adopt Option Plan 2009-I and issue a total amount of 3,000,000 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.
The Board decided in its meeting on May 15, 2009 to adopt Option Plan 2009-II
and issue a total amount of 24,500,000 option rights to the members of the Board
of Directors without charge. 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.
The subscription period of the loan note for raising a maximum amount of EUR
16,000,000 ended on May 15, 2009 and the total amount of subscription was EUR
10,000,000. The maximum amount of new shares to be subscribed by virtue of the
subscribed note is 94,339,622. As a result of the Note, company's share capital
may increase by a maximum of EUR 943,396.22. More information from the stock
exchange release published on May 15, 2009.
