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GINSMS Inc. Announces Its Financial Results for Its Fourth Quarter and Year Ended March 31, 2011

CALGARY, ALBERTA — (Marketwire) — 07/27/11 — GINSMS Inc. (“GINSMS” or the “Company”) (TSX VENTURE: GOK) has announced its financial results for its fourth quarter and year ended March 31, 2011.

POSITIVE EBITDA of $15,847 LEAVES GINSMS WITH STRONGER LIQUIDITY POSITION DESPITE LOSS FOR THE YEAR – COMPANY GRANTS STOCK OPTIONS TO ITS DIRECTORS

Performance Highlights for the Three and Twelve Month Periods Ended March 31, 2011

Results of Operations

Three Month Period

Revenue for the fourth quarter of fiscal year 2011 ending March 31, 2011 were $179,542, representing a drop of 20.3% over revenue of $225,256 reported during the same three month period in fiscal year 2010. This is attributable mainly to the decline in inter-SMS traffic.

Indeed, as you can see from the table below, SMS traffic for the fourth quarter of fiscal 2011 dropped by 3,259,047, a decline of 9.4% from the corresponding quarter the previous year. The decline was not unexpected due to the fact that two major mobile operators were going through some temporary modifications of their transmission facilities at that time. As a result of this, gross margin declined to 50.5% in the quarter ended March 31, 2011, compared to 54.9% in the quarter ended March 31, 2010 as the drop in revenue more than offset the drop in the cost of sales, which shows an encouraging decline of $12,699 or 12.5%.

The decline in the cost of sales manifested despite the effect of the final amortization of the electronic marketing K Matrix platform, which had to be abandoned due to the high costs of implementing the data mining CI (competitive Intelligence) software program on a large scale. Note that the unproductive K Matrix platform was kept up active until the end of the fourth quarter of fiscal 2011.

Lower costs of sales are important, however, because once SMS traffic bounces back, it means that the operating performance of the Company may be expected to build up strength. If expenses continue to be kept in check, better bottom-line may result. The drop in the cost of sales is attributable to lower operating and maintenance charges in hosting and running the IOSMS platform on rented premises and lower lease line rental fees to connect with mobile network operators.

The company recorded a net loss for the fourth quarter of fiscal 2011 of $60,616, which is an improvement over the loss of $78,068 for the same quarter of fiscal 2010. This improvement reflects lower general and administrative expenses. In turn, lower general and administrative expenses were due to a let up in consultancy and professional fees down 55.9% from the quarter ended March 31, 2010 when the Company continued to absorb the cost related to going public in November 2009. Audit and printing costs were also considerably lower as well.

As a result of the Company going public in late December 2009, general and administrative expenses in throughout 2010 and in particular during the last quarter of 2010 were indeed unusually high. If not for the gain on foreign transactions of $37,429 that occurred on the payment by a related Hong Kong company of several Canadian denominated invoices at the time, the imbalance in total expenses between the two quarters would have been much more evident. As management of the Company became more experienced in managing the obligations imposed upon a public company, expenses were managed within more conservative parameters and, absent unforeseen events, this is expected to continue in the foreseeable future.

EBITDA (earnings before interest, taxes, depreciation and amortization) for the three months ended March 31, 2011 were a negative $34,316, compared to a negative EBITDA of $13,017 for same period in fiscal year 2010. The deterioration in EBITDA over the corresponding period in fiscal year 2010 is essentially all attributable to lower revenue as all other parameters have improved. Cost of sale is down, expenses are down even when the foreign exchange gain referred to above is taken into account in the comparable quarter of fiscal 2010. At the time when the company was renegotiating its contract agreement with the mobile operators in the fourth quarter of fiscal 2011, two major operators were going through a restructuring of the network related to SMS transmission; resulting in lower SMS traffic overall. Management believes that the situation has returned to normal and that SMS transmissions may be expected to improve in the first quarter of fiscal 2012 leading to increase revenue.

Twelve Month Period

Revenue for the full year in fiscal 2011 totalled $787,615, down 8.0% from the $853,639 reported for in the full year in fiscal 2010. Gross profit for the year-to-date in fiscal year 2011 was $438,431 versus $517,050 for the corresponding period in fiscal year 2010, a decrease of $78,619 or 15.2%. Although lower, the reduction in the cost of sales were not enough to compensate for the 8% drop in revenue resulting in lower profit margin of 55.8%, compared to 60.6% in fiscal 2010.

Lower revenues were due to the effect of the bundle fees on SMS traffic which, depending on the level of traffic in anyone particular period, could and did have a negative effect on net charges. The formula is geared toward encouraging usage as the incremental cost element of operating the IOSMS platform due to higher traffic is virtually nil given the large capacity of the platform. When the volume of traffic over the threshold of the bundle is relatively small, a loss in margin and revenue can occur even if traffic increases overall. This environment permeated in fiscal 2011 as total SMS traffic did increase but only marginally by 0.1% to 132,519,383, compared to 128,283,047 in fiscal 2010.

Higher cost of sales in fiscal 2011 caused mainly as a result of the effect of the amortization of the cost of the K Matrix platform which was abandoned once the Company realized that the cost of implementing the data mining CI (competitive Intelligence) software program on a large scale was too high. The total cost of the platform was around $93,000. The additional cost of eliminating the platform from the balance sheet was partly compensated by lower maintenance cost related to hosting just one IOSMS platform instead of two, as was the case for part of fiscal 2010 as well as lower lease line fees. Management is confident that the operating costs will stabilize but at a lower level than in the past.

Although much lower, EBITDA for the twelve-month period ended March 31, 2011 remained encouragingly positive at $15,847, compared to a positive EBITDA of $272,424 for the corresponding period the previous year. Given the difficult environment of the past fiscal year, which is characterized with lower SMS traffic and much higher general and administrative expenses (see details below), the fact that the Company continues to generate a positive cash flow is demonstrating resiliency in the face of adverse conditions and this is considered encouraging by the Company. These adverse conditions included several one-time events such the effect on operations of having two major operators moving to a new transmission platform as mentioned above or new infrastructure and the forsaking of a marketing platform such as K Matrix at a cost of about $93,000 in fiscal 2011.

Given the conditions described above, the net loss for the year ended March 31, 2011 was $96,536, compared to net income of $147,175 recorded in the year ended March 31, 2010. In addition to the drop in revenue and the slightly higher cost of sales, the results of operations in fiscal 2011 were impacted by the increase in general and administrative expenses which grew from $282,055 to $422,584 the previous fiscal year, an increase of 49.8%.

Fiscal 2011 is the first full year of operation of the Company since becoming a public company and the large increase in SG&A reflect in large measure the new conditions and new realities besetting all public companies. Being a public company comes with new governance and reporting responsibilities for the benefit of the investor at large and entail methods of reporting that are more extensive and onerous compared to a private company. During the past fiscal year ended March 31, 2011, the Company has sought and paid for legal advice for an acquisition it had contemplated but which has not matured to any definitive conclusion. It also sought and paid for the assistance of an investor relations firm but results were also not conclusive and the related mandate was terminated. Many new projects were entertained including the formation of a WOFE in China to facilitate the Company-s expansion in this market. New value-added services were tentatively launched through the acquisitions of two new marketing platforms, which, unfortunately, did not turn into income-producing assets and had to be abandoned. As a result, general and administrative expenses including professional and legal fees all rose considerably. Listing fees and full-year salaries for staff, consultancy fees of the senior officers of the Company and additional travel also account for a good portion of the increase in overall expenses.

Finally, the Company announces that its Board of Directors approved under the terms of the Corporation-s stock option plan the grant of options to acquire an aggregate of 1,375,000 common shares of the Corporation at an exercise price of $0.10 per share to its five directors. The stock options will vest over a period of two years with one half of the options vesting every anniversary date of the grant for the next two years and expiring ten years from the date of the grant. Prior to the grant of options, the Corporation had 43,337,499 common shares outstanding.

Forward-Looking Information

Certain information included in this press release may constitute forward-looking statements. Forward-looking statements generally can be identified by the use of terms such as “may”, “could”, “will”, “expect”, “intend”, “estimate”, “anticipate”, “believe” or “continue” or the negative thereof or variations thereon or similar terminology. Forward-looking statements, by their very nature, involve significant risks, uncertainties and assumptions. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, without limitation, the risks factors discussed in the section entitled “Risk Factors” in GINSMS-s long form prospectus dated November 12, 2009 which is available under GINSMS-s profile on SEDAR at . Although the forward-looking statements contained herein are based upon what management believes to be reasonable assumptions, GINSMS cannot assure the reader that actual results will be consistent with these forward-looking statements. These assumptions are further described in GINSMS-s management discussion & analysis for the three and twelve-month periods ended March 31, 2011, which is also available on SEDAR at . These forward looking statements are made as of the date hereof and GINSMS assumes no obligation to update or revise them to reflect new events or circumstances except as may be required by law. Accordingly, readers should not place undue reliance on the forward-looking statements.

About GINSMS

GINSMS owns 100% of Global Edge Technology, a technology company focused on providing inter-operator short messaging services to mobile telecom operators in Hong Kong. GINSMS-s stated business objective to become a leading short messaging service (“SMS”) and data hubbing service provider to mobile network operators in Hong Kong and China and to establish an international SMS and value added services business.

Contacts:
GINSMS Inc.
Raymond Richard
Corporate Secretary
450-466-2921

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