GEOSENTRIC OYJ BULLETIN March 27, 2008 at 18:50 FINANCIAL STATEMENTS ANNOUNCEMENT FOR THE YEAR 2007 This report does not contain any material changes to the advance report published on March 6, 2008. The annual reports are available at www.geosentric.com. Contents Essential events during the financial year Essential events after the end of the financial year Assessment and key figures about the financial position and result Assessment about likely future development Assessment about significant operational risks Review of the volume of R&D-activities Investments Personnel Environmental issues Company´s organisation, top management and auditors Structural arrangements Financing arrangements Capital loans Convertible loans Option rights Company´s shares and shareholders Board´s share issue authority Board proposal for measures concerning handling of the result 1. Essential events during the financial year General The most essential events in 2007 were the acquisition of GeoSolutions B.V. and ensuing financing and shareholding arrangements and changes in business strategy and focus, structure and management of the Company. Operational overview GeoSolutions/GyPSii GyPSii development accelerates The Company accelerated its engineering efforts and geo-social engineering platform focus in 2007. Deliverables were accomplished in interoperable mobile device support and extended development of the GyPSii platform. Data center architecture and development was ramped to include the full-live public beta of the GyPSii social networking site. Further plans and specifications were made for additional data center support in the Company's Shanghai location and in India. Full International Multi-lingual releases On November 9, 2007, the Company announced that its GyPSii webtop client is available for users in ten different languages - US English, UK English, German, Spanish, French, Italian, Korean, Russian, Simplified Chinese and Traditional Chinese. The GyPSii webtop's extended language support comes as consumer demand increases for the GyPSii application and service from users in different countries around the world. Subscribers can now use the site for social networking, sharing user-generated content, friend-finding and accessing location based content, services and points of interest - all in their own language. The current public beta Microsoft-Certified Windows Mobile client is accessible in English and Simplified Chinese, with the other languages targeted to roll out over the coming quarter. GyPSii rolled out the Windows Mobile client in September in a public beta program, for users to test the application in the real world. The Symbian & J2ME Blackberry mobile clients are currently being user tested in private beta, with impending announcements. GyPSii is current in testing with several large telecomm OEM's and network operators on various mobile operating platforms, in global geographies. GyPSii Symbian application accredited by Nokia On November 23, 2007, the Company announced that its GeoSolutions Business Unit had confirmed that the Symbian version of its flagship GyPSii application had been accredited by Nokia for its N95 and 6110 Navigator mobile phones. GyPSii combines - in a web-based application - a social networking platform, location-based news and services such as search and friend-finder, and user generated content-creation and sharing. Designed specifically for use on a mobile phone, the GyPSii platform is already compatible with Windows Mobile devices and by adding Symbian and Nokia support, GyPSii is now available on the vast majority of mobile phones and almost any Internet connected device. GyPSii for Nokia and Windows Mobile is available for download at the company's website (www.gypsii.com). TWIG In 2007, focus points of the Company´s TWIG business unit operations and product development were continuing market launches of TWIG Discovery Pro and TWIG Locator products and further upgrading of their functionalities, on one hand, and introduction of TWIG Web Finder on the other hand. TWIG Discovery Pro GSM/GPRS/GPS handset is targeted for safety and security market and TWIG Locator tracking unit for asset and vehicle tracking market. Both products were successfully launched in various European countries during 2007. The TWIG Web Finder is a service for tracking vehicles and other mobile assets as well as for securing persons. The location of mobile objects can be seen on detailed street maps on three continents. The service enables users of TWIG products also to receive locations on normal mobile phones as address information. Further features include alarm reception, history functions, sending of SMS and GPRS messages and workstation operation from multiple sites. The TWIG tracking solutions are made with easy use and competitive prices in mind. No extra installation is required. Further credits and service extensions can be conveniently purchased at the TWIG eShop. Shanghai The Shanghai subsidiary has a primary focus for market development in Asia. Further, product quality assurance, testing, and multi-lingual review is assisted by the Shanghai team, led by Jeff Lin, Managing Director, China Operations. Essential events in detail GeoSolutions acquisition The Company announced on March 5, 2007, that it has signed a letter of intent to acquire GeoSolutions BV, a developer of location-based technologies, products, and services for mobile and Internet-connected devices. This start-up firm employs 13 people and it did not have activities in 2006. The actual share exchange agreement was signed on April 27, 2007. The acquisition was finalised in July 2007 when the shares issued in the acquisition, realised as a share exchange, were listed for public trading at Helsinki Exchanges. The first part of the purchase price agreed in the terms of the Share Exchange Agreement entered into with GeoHolding B.V. was paid by issuing 21,000,000 new investment series shares at the closing. In addition to the First Issue, in accordance with the Share Exchange Agreement, the Board decided to issue a maximum of 9,000,000 new investment series shares for subscription by GeoHolding without charge. Decisions by the Annual General Meeting The Annual General Meeting of Benefon Oyj confirmed the income statement and the balance sheet of the company from the financial period of year 2006, resolved that the loss from the period shall be booked on the previous years' profit/loss account and no dividend is paid and resolved to discharge from liability the members of the Board and the CEO. The General Meeting resolved further that the number of Board members is six and elected the following persons to the Board: Peter Bamford, Brian Katzen, Jeffrey Crevoiserat, Juha Kiikeri, Simon Wilkinson and Daniel Harple. The General Meeting resolved further to keep the number of ordinary auditors at one and re-elected Ernst & Young Oy as the ordinary auditor with Mr. Erkka Talvinko, CPA, acting as the responsible auditor, and Mr. Veikko Soinio, CPA, as the deputy auditor. The Annual General Meeting approved the purchase of the entire share capital of GeoSolutions B.V. through a share exchange in accordance with the proposal of the Board. The Board was also authorized to decide on increasing the share capital and issuing new shares, option rights and specific rights such that the maximum amount of share capital increase is EUR 1,902,500 and number of issued new investment series shares 190,250,000. Daniel Harple as Executive Chairman On June 28, 2007, the Company informed about resignations of the Board Chairman Peter Bamford and Board member Simon Wilkinson and about election of Daniel Harple as the Executive Chairman. Office in Shanghai In May 2007, the Company opened in Shanghai an office with a planned personnel of 15. The task of the said new business unit is to adapt the Company´s product range for the local conditions. New TWIG service The Company announced on May 4, 2007, that it offers a free introductory TWIG Web Finder service subscription with purchase of TWIG Locator GPS/GSM tracking device. The TWIG Web Finder is a service for tracking vehicles and other mobile assets as well as for securing persons. Company Strategic Focus In June, the Company announced several strategic initiatives to fully leverage the recent acquisition. At the core of the strategy is the integration of the GeoSolutions platform across the product portfolio of the Company. Change of the Company name As announced by the Company on June 28, 2007, the Board of the Company has decided that the name of the Company will be changed into GeoSentric Oyj. The reason for the name change is a desire to make the name of the Company to better match with the new business according to the Company´s renewed strategy. Listing prospectus issued in July On July 24, 2007, the Company published the prospectus approved by the Finnish Financial Supervision (”FSA”), prepared for listing new shares at Helsinki Exchanges for public trading issued in the share exchange of GeoSolutions acquisition, in the eighth financing tranche and in the set-off issue. The Prospectus is available for downloading now at the Company website www.geosentric.com. Decisions by September Extraordinary General Meeting The Extraordinary General Meeting of Benefon Oyj convened on September 10, 2007, decided to confirm the remaining part of the financing and the main terms and conditions thereof in accordance with the proposal of the Board. The Board was also authorised to decide on increasing the share capital and issuing new shares, option rights and specific rights such that the maximum amount of share capital increase is EUR 8,000,000 and number of issued new investment series shares 800,000,000. The share capital can be increased by means of using the premium fund or invested unrestricted equity fund for the increase. The authorisation entitles the Board to deviate from the pre-emptive right of shareholders and also accept set-off or other consideration in kind as a payment for the shares, option rights or specific rights. The shares can also be issued without payment provided that there is an especially weighty financial reason for this as required by the Companies Act. The Board has the right to decide the terms of any issue by virtue of the authorization for all other parts. The authorisation is valid for two years from the date of the Extraordinary General Meeting. The authorisation granted by the Annual General Meeting of April 16, 2007 remains to be valid. Extraordinary General Meeting resolved also that the number of Board members remains to be six and elected the following new persons to the Board: David Francis, Gary Bellot and Michael Vucekovich. Daniel Harple, Jeffrey Crevoiserat and Juha Kiikeri shall continue as the members of the Board. Decisions by November Extraordinary General Meeting - Company name change finalised The Extraordinary General Meeting of the Company on November 16, 2007, resolved in accordance with proposal of the Board to alter the Articles of Association in its entirety and at the same change the Company's business name to GeoSentric Oyj. The official registration of the altered Articles of Association with the name change was received on December 10, 2007, from which date the official name of the Company has been GeoSentric Oyj. The Extraordinary General Meeting of the Company on November 16, 2007 also resolved to merge Company's two different share series into one with equal rights, remove clauses limiting the minimum and maximum amount of share capital and number of shares and to change the right to represent the company granting the right to sign for the company to the Chairman and CEO, both alone, and to the majority of the Board together. 2. Essential events after the end of the financial year Launch of GyPSii on Blackberry Devices A bulletin was released 06 February 2008 announcing the availability of the GyPSii mobile application on the Blackberry smartphone product family from Research in Motion (RIM). GyPSii announces launch of China Mobile Social Network with Dopod Club A bulletin was released on 07 February 2008 announcing the partnership with China's leading online community, Dopod Club, (www.club.dopod.com). GyPSii announces India distribution deal with Broadway A bulletin was released 11 February 2008 announcing a signed agreement with India's Broadway Pvt Ltd., to offer the full suite of GyPSii services and applications into the Indian market. With over 233 million mobile subscribers and growing at over 8 million per month, India is the world's second largest and fastest growing mobile market. GyPSii announces partnership with NAVTEQ A bulletin was released on 12 February, 2008, announcing the signing of an agreement between the world's leading mapping data provider, NAVTEQ, and GeoSentric. GyPSii announces partnership in China with China Unicom and Shanghai Rannuo A bulletin was released 20 February, 2008, announcing the signing of an agreement between GyPSii, China Unicom and Shanghai Rannuo, for the largest mobile social networking global launch on-record, the 2008 Beijing Olympics. GyPSii announces launch on Apple iPhone devices A bulleting was released 05 March 2008, announcing the availability of the GyPSii applications on the innovative industry-leading Apple iPhone product line. Listing prospectus supplement publicized The Company announced on January 23, 2008, that it is publicising the listing prospectus supplement, needed for listing for public trading of the shares that were issued in the financing arrangements of autumn 2007 as detailed above. With the same, the Company released some information in the said supplement not made public before, and informed that the said shares will be applied for public trading on approximate January 25, 2008. A convertible loan converted into shares On January 29, 2008, the Company informed that by virtue of convertible loan 2007G-J a total of 93,653,333 new shares of the Company have been subscribed for, and that the shares will be registered on approximate January 31, 2008, and applied for public trading at Helsinki Exchanges as soon as practically possible. After the registration, the total number of GeoSentric shares is 618,236,440. GyPSii platform wins in NAVTEQ Global LBS Challenge The Company announced on March 10, 2008 that it was awarded with third runner up award in NAVTEQ LBS Challenge, a contest in which over 300 companies competed. Issue of new shares and increase in share capital in March The Company announced on March 19, 2008, that the Company's Board of Directors has decided to raise additional financing of EUR 131,000 by issuing a maximum of 582,222 new shares and convertible bond loan entitling to subscribe a maximum of 2,328,889 new shares according to the respective terms and conditions disclosed in bulletin released on September 10th 2007. All the shares and convertible bond have been subscribed at the same. The Company announced further that the Board has decided to adopt new option plan by issuing a maximum of 4,451,632 new option rights to certain key resources of the company. Each option right entitles its holder to subscribe for one (1) new share at subscription price of EUR 0.06 during the subscription period which ends on December 31st 2010. Subscription period for the option rights ends on December 31st 2009. Finally, the Company announced that a total of 85,713,390 shares of the Company were subscribed for on February 2008 by virtue of convertible bond loans 2004A and 2007G-I. As a result of the share subscriptions, the Company's share capital was increased by EUR 857,133.90. The new shares subscribed for were registered in the trade register on March 20th 2008 and applied for listing at OMX together with the Company's existing shares as soon as practically possible. After the registration of the now announced share capital increases, the total number of GeoSentric shares is 704,532,052. 3. Assessment and key figures regarding the financial position and result The Company continued to operate at a loss. Notwithstanding, due to the equity based financing arrangements during the year, the Company retained reasonable solidity and liquidity situation. Key figures characterising the Company´s financial position and result (IFRS): Financial year 2007 2006 2005 Net sales (teuros) 4435 6959 7562 Operating result (teuros) -18726 -11543 -3398 Operating result (% of net sales) -422 -166 -45 Yield on shareholders´ equity (%) -161 -286 n/a Solidity (%) 75 61 -47 4. Assessment about likely future development The outlook for 2008 appears to be strong for the GyPSii platform, both in its ability to drive subscribers and in the ability to generate partnerships. More detail is covered in the next section, Developments after the end of the reporting period. The GyPSii Business team has a focus in 2008 of generating significant volumes of users on a global basis. Revenue generation is planned to come 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. TWIG product demand at this point, appears to be steady state focused on TWIG Discovery Pro GSM/GPRS/GPS handset which is targeted for safety and security market and the TWIG Locator tracking unit for asset and vehicle tracking market. The market continues to develop in both of the focused sectors, and, activity after the reporting period has generated business potentials that may have a material positive impact on 2008 results. 5. Assessment about significant operational risks There are significant financial risks related to the Company´s business, competitivenes and industry and it is possible that the investor will lose all or a part of the invested capital. The current refocused business plan of GeoSentric is factually in the beginning of its life cycle. Therefore, there is no certainty of the success regarding the implementation and realisation of the business plan. According to the renewed business strategy, the Company is pursuing entrance also to new business segments with competitive situation new to it, or which may be only in the early market phase. Unless the Company is able to successfully respond to this development it may significantly impair the Company´s operating result. A key issue about the business model of GeoSolutions is sufficient and sufficiently rapid growth of users of the services, of which the Company has no certainty. The Company´s sales and result may be endangered also if its products or service solutions will not fulfill the quality, safety or other requirements by customers, officials or by itself, or if it is not able to deliver them in agreed schedule. In addition, the Company carries a special risk due to the still significant size of TWIG product inventory. Should the implemented measures undertaken by the Company in response prove insufficient, the Company will need to make new write-offs which would impair the operating result. The new strategy of the Company and focusing the TWIG product offering to B2B customers may affect on demand of older TWIG product targeted to consumer markets and have adverse effect on orders received earlier for these products. Should the Company not be able to sufficiently protect our industrial rights and other intangible assets, its competitive position may suffer. It is also possible that other parties will sue the Company on grounds of alleged infringement of industrial rights and, should they be successful, the Company may be obligated to pay significant compensations. As made public by the Company, it is involved in a patent case in Italy, in which the Company has forcefully refuted all claims made towards the Company. The financial statements of the Company have been prepared on going-concern principle. The Company´s business plan has been prepared by assuming that the Company´s result and cashflow will improve significantly. Should the result and cashflow essentially fail to meet the planned figures, the Company´s financing plan may turn out to be insufficient causing a need to acquire additional financing. 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 per December 31, 2007 was about 3068 teuros at nominal value, consisting solely of the convertible bond loans issued by the Company. Regarding future dividend payments, there is also uncertainty about the ability of the Company to accrue distributable capital. According to the latest financial statements of the Company, there was no distributable capital in the balance sheet of the Company. All members of the Board of Directors are dependent on the Company or on a shareholder. Investor groups led by GeoHolding B.V., Horizon House Ltd, Schroders Private Bank and Octagon Solutions Ltd use significant influence in GeoSentric, each of them separately. Shares held by GeoHolding B.V. correspond to 29,99 % of the registered shares of the Company. With using all of its special rights, holding of GeoHolding B.V. may increase to 41,4 % of shares after conversion. Review of the volume of R&D-activities In the financial year, the volume of the Company´s R&D activities in relation to the net sales was high due to the on-going R&D-programs by means of which the Company intends to significantly expand its business over the next few years. The Company has own R&D units in Salo (Finland), Amsterdam (the Netherlands), Windsor (UK), Warwick (USA) and Shanghai (China). The development of R&D costs in years 2005-2007 was the following: R&D costs Of which capitalised Year teuros % of sales teuros % of sales 2005 2726 36.0 0 0.0 2006 5510 79.2 4163 59.8 2007 3933 88.7 0 0.0 7. Investments Gross investments in financial period were 6283 teuros, which amount almost entirely came from GeoSolutions acquisition. In year 2006 gross investments were 4393 teuros and in year 2005 they were 40 teuros. 8. Personnel The number of employed personnel at GeoSentric in 2007 averaged 83, of which 42, at most, were affected by alternate forced leaves. The alternate forced leave program, agreed in autumn 2007 to apply for the time being, continue also in 2008. The average number of personnel in year 2006 was 82 and in year 2005 it was 76. 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 organised the recycling of disposed materials contractually through Jalopinta Ky. Altogether, the Company´s operations cause no significant environmental impact. 10. The Company´s organisation, top management and auditors The Board of Directors of the Company comprised five members in the beginning of the year and six members at the year end. The number of Board members was increased in the Annual General Meeting convened on April 16, 2007. Mr. Brian Katzen served as the Chairman of the Board in period 1.1.2007-16.4.2007 and Mr. Peter Bamford from 16.4.2007 until 28.6.2007 on which date Mr. Daniel Harple was elected as the Executive Chairman of the Company. As the Company´s CEO in the financial year served Mr. Tomi Raita. The Company´s organisation was expanded and re-arranged with the acquisition of GeoSolutions B.V. There are now three business units in the Company: GyPSii in Amsterdam, TWIG in Salo and Shanghai unit. In financial year 2005, the audit firm Ernst & Young Oy has served as the ordinary auditor of the Company, with Mr. Tapio Ali-Tolppa, CPA, as the responsible auditor, and Mr. Veikko Soinio, CPA, as the deputy auditor. In financial years 2006 and 2007, the audit firm Ernst & Young Oy continued to serve as the ordinary auditor of the Company, but with Mr. Erkka Talvinko, CPA, as the responsible auditor. Mr. Veikko Soinio, CPA, continued to serve as the deputy auditor. In addition, in the Extraordinary General Meeting convened on November 16, 2007, audit firm PriceWaterhouseCoopers Oy was elected as the second deputy auditor of the Company. Mr. Ali-Tolppa has served as the responsible auditor of the Company in years 1996-1999 and thereafter again from year 2001 until May 2006, when Mr. Erkka Talvinko, CPA, was elected as the responsible auditor for Ernst & Young Oy. Mr. Soinio has served as the responsible auditor of the Company from year 1997 until 21.5.2003 when the number of responsible auditors in the Company was decided to be reduced to one, and he was elected as the deputy auditor. 11. Structural arrangements In addition to acquisition of GeoSolutions B.V., detailed in section 1 above, the Company established in Netherlands a holding company Benefon Solutions B.V., to which the shares of GeoSolutions B.V. were transferred, and in Shanghai a marketing company GyPSii Information Technology (Shanghai) Corp. In addition, the Company has a U.K. subsidiary Benefon UK Ltd. and GeoSolutions B.V. a US subsidiary GyPSii Inc. The Company´s French subsidiary Ismap S.A. was closed. 12. Financing arrangements Financing program in the first half year The Company announced on January 12, 2007, that it had agreed with Octagon Solutions Limited about extending the financing commitment between the parties announced on September 28, 2006, to cover also the agreed additional financing. Accordingly the Board decided to raise the sixth tranche of 400,000 euros on January 12, 2007, seventh tranche of 1,290,000 euros on February 27, 2007, extended seventh tranche of 561,000 euros on March 15, 2007, first part of eight trance of 400,000 euros on May 8, 2007 and the second part of eight trance of 1,350,000 euros on June 4, 2007. To enable the Company to extend the financing program, the extraordinary general meeting of the Company convened on February 1, 2007, granted an authorization to the Board to decide on the increase of share capital by a maximum of EUR 526,832.71 and on issue of new investment series shares, option rights or specific rights in terms of Article 1 of Chapter 10 of the Companies Act in one or more installments such that the maximum number of new investment series shares issued is 52,683,271. Through the above described financing tranches from sixth to eighth the Company issued in total 18,915,105 shares, 16,232,118 convertible bonds, each convertible to one new Company's share, and 4,041,667 option rights, each entitling to subscribe for one new share, as in more detailed described in the respective stock exchange releases. The Annual General Meeting of the Company convening on 16.4.2007 cancelled the above detailed authorization granted by the Extraordinary General Meeting of February 1, 2007 for the unused part while it authorized the Board to decide on increasing the share capital and issuing new shares, option rights and specific rights such that the maximum amount of share capital increase is EUR 1,902,500 and number of issued new investment series shares 190,250,000. The authorization is valid for two years from the date of the Annual General Meeting. Set-off issue The Company announced on May 23, 2007 that it has decided to arrange a directed set off issue for a total maximum amount of EUR 1,134,181.20 to the Company's certain creditors. The maximum number of new investment series shares offered for subscription was 7,974,724 and subscription price was between EUR 0.12 and EUR 0.26 per share. Financing program in the second half year The Company informed on August 21, 2007, that the Company´s Board had accepted the terms for the financing package of a total of approximately 9.575 million euros negotiated with investors and consisting of new investment series shares of the company and a convertible bond loan. The agreed financing was conditional for restructuring the ownership of the Company by issuing new investment series shares to GeoHolding B.V. without charge in order to correct the erraneous valuation of the acquisition of GeoSolutions B.V. on April 27, 2007. At first the Board decided to raise a maximum of EUR 4,950,000 by virtue of authorization granted by the Annual General Meeting of April 16, 2007, by offering new investment series shares and convertible bond loan to certain investors. The rest of the financing, totaling a maximum of EUR 4,050,000 was decided to be raised subject to Extraordinary General Meeting of September 10, 2007 granting new authorization needed also for the said directed free share issue to GeoHolding B.V. Accordingly, the Board decided to issue new investment series shares and convertible bond loan for a total maximum of EUR 4,950,000 to investors accepted by the Board. The maximum number of new investment series shares offered for subscription was 22,000,000 and subscription price EUR 0.18 per share. In addition, each subscribed share entitled investors to subscribe for four convertible notes with a principal value of 0.01125 each. Therefore, the maximum principal amount of the convertible loan is EUR 990,000 and the maximum number of new investment series shares that can be subscribed for by virtue of the loan was 88,000,000. According to the conditions set by the investors for the financing, the Company issued new investment series shares and option rights to GeoHolding B.V without charge in order to restructure the acquisition of GeoSolutions B.V. executed on April 27th 2007 and to increase the fully diluted ownership of GeoHolding B.V. up to 30 % as agreed with the investors. Company's financing arrangements completed On November 14, 2007, the Company informed that it had decided to raise the remaining part of the 9.575 million euro financing package announced on September 10, 2007 by offering new investment series shares of the Company and a convertible loan as agreed with the committed investors and to accept the related subscriptions. By accepting the financing of 9,575,000 euro, according to its terms, the Company had committed to issue new investment series shares, special rights and options rights in free issues directed to GeoHolding B.V. to increase its fully diluted holding share. Therefore, the maximum amount of issued new investment series shares is 264,785,555 comprising 1) 127,308,932 new investment series shares, 2) 102,171,068 special rights according to the companies´ act chapter 10 section and 3) 35,305,555 option rights. The Company´s share capital was simultaneously increased by 0.01 euros for each issued share by transferring a corresponding amount from share premium account into share capital. In addition, by virtue of authorization granted to it by the Extraordinary General Meeting on September 10, 2007, the Board of the Company decided to arrange a set-off issue of a total maximum of 265,000.00 euros directed to certain creditors as follows. The set-off issue consisted of a maximum of 1,177,777 new investment series shares and of a convertible loan of 53,000.00 euros, entitling its bearer to subscribe for a total maximum of 4,711,111 new investment series shares. 13. Capital loans The Company did not raise any new capital loans in 2007. 14. Convertible loans The extraordinary general meeting of the Company convened on 26.2.2004 decided about a convertible bond loan on equity terms Benefon 2004A for the amount of 1,130,440.73 euros which was subscribed by a total of eight investors in the investor group led by Octagon Solutions Ltd. and a total of six private investors being part of the management of the Company or customers of the Company. The convertible bond loan may be converted in the period of 1.6.2004-31.12.2008 into a total maximum of 113,044,073 new shares GEO1V of the Company. Of the convertible bond loan Benefon 2004A, until now, an amount of 175,502.69 euros has been converted into a total of 17,550,269 new investment series shares of the Company. The remaining loan totalling 954,938.04 euros may be converted by December 31, 2008 into a total maximum of 95,493,804 new shares of the Company. In 2007 the following convertible bond loans were converted into Company shares in full: Convertible Bond Loan: Loan Amount: Converted Shares: 2006A 290,000.00€ 5,800,000 2006B 300,000.00€ 6,000,000 2006C 290,000.00€ 5,800,000 2007A 50,000.00€ 555,556 2007B 2,950,000.00€ 21,071,429 2007C 302,343.75€ 6,046,875 2007D 131,484.35€ 2,629,687 2007E 40,000.00€ 1,600,000 The Board of the Company decided on 4.6.2007 to direct convertible loan 2007F for a total maximum of 135,000 euros. The maximum number of shares that may be subscribed for by virtue of the loan by December 31, 2012 is 5,400,000. The Board of the Company decided on September 10, 2007 to direct convertible loan 2007G for a total maximum of 990,000 euros for subscription to certain investors accepted by the Board. The loan entitles its holders to subscribe for a maximum of 88,000,000 shares by December 31, 2012. The Board of the Company decided on October 19, 2007 to direct convertible loan 2007H for a total maximum of 990,000 euros for subscription to certain investors accepted by the Board. The loan entitles its holders to subscribe for a maximum of 82,222,221 shares by December 31, 2012. The Board of the Company decided on November 14, 2007 to direct to certain creditors of the Company a convertible loan 2007I of a total maximum of 53,000.00 euros, entitling its holders to subscribe for a total maximum of 4,711,111 new shares until 31.12.2012. The Board of the Company decided on December 10, 2007, to issue a convertible loan Benefon 2007J, with a maximum capital of 9,900 euros. The loan may be converted into a maximum of 880,000 new shares of the Company. Part of the convertible bond loans 2004A and 2007G-I have been converted into shares during the first quarter of 2008 as described in section 2 above. 15. Option rights The Company has issued the following option rights: Option rights Benefon 2004A Option decision: EGM 26.2.2004, registered 16.12.2004 Option amount: 39,597,988 pcs In book entry system: Since 23.9.2005 Subscriber: Options have been subscribed for holding by Octagon Capital Limited Options given: By Board decisions to a total of 35 parties a total of 35,800,000 options. Options not given: 3,797,988 pcs Share subscription period: 1.12.2004-31.12.2009 Share subscription price: 0.14 euros per share Used for share subscription: 3,100,000 pcs Option rights Benefon 2005A Option decision: EGM 5.9.2005, registered 8.9.2005 Option amount: 1,500,000 pcs In book entry system: From 15.2.2006 Subscriber: Tomi Raita, CEO Share subscription period: 15.12.2008-31.12.2012 Share subscription price: 0.10 euros per share Used for share subscription: None Option rights Benefon 2006A Option decision: Board on authority by AGM on 24.5.2006, registered 17.11.2006 Option amount: 2,175,000 pcs In book entry system: No Subscriber: Luben Limited Share subscription period: 2.1.2007-31.12.2012 Share subscription price: 0.10 euros per share Used for share subscription: None Option rights Benefon 2006B Option decision: Board on authority by AGM on 24.5.2006, registered 17.11.2006 Option amount: 2,250,000 pcs In book entry system: No Subscriber: Luben Limited Share subscription period: 2.1.2007-31.12.2012 Share subscription price: 0.10 euros per share Used for share subscription: None Option rights Benefon 2007-1 Option decision: Board on authority by AGM on 16.4.2007 Option amount: 9,778,500 pcs In book entry system: No Subscriber: Key persons of GeoSolutions B.V., not yet subscribed for Share subscription begins: 27.4.2007-7.4.2009 Share subscription ends: 27.4.2012-7.4.2014 Share subscription price: 0.045 euros per share Used for share subscription: None Option rights Benefon 2007-2 Option decision: Board on authority by AGM on 16.4.2007 Option amount: 666,667 pcs In book entry system: No Subscriber: Killarney Partners Share subscription begins: 18.5.2007 Share subscription ends: 31.5.2011 Share subscription price: 0.15 euros per share Used for share subscription: None Option rights Benefon 2007-3 Option decision: Board on authority by AGM on 16.4.2007 Option amount: 3,375,000 pcs In book entry system: No Subscriber: Tradewind Investments and Biggles Ltd Share subscription begins: 4.6.2007 Share subscription ends: 30.6.2011 Share subscription price: 0.15 euros per share Used for share subscription: None Option rights Benefon 2007-6 Option decision: Board on authority by EGM on 10.9.2007 Option amount: 35,305,555 pcs In book entry system: No Subscriber: GeoGolding B.V. Share subscription begins: 19.10.2007 Share subscription ends: 2.1.2013 Share subscription price: 0.045 euros per share Used for share subscription: None Special rights Benefon 2007-I Decision: Board on authority by EGM on 10.9.2007 Rights amount: 102,171,068 pcs In book entry system: No Subscriber: GeoHolding B.V. Share subscription begins: 19.10.2007 Share subscription ends: 2.1.2013 Share subscription price: 1 euros per 100,000 shares Used for share subscription: None Option rights Benefon 2007-7 Option decision: Board on authority by EGM on 10.9.2007 Option amount: 3,367,500 pcs In book entry system: No Subscriber: Certain key persons of the Company, not yet subscribed for Share subscription begins: 19.11.2007 Share subscription ends: 19.11.2009 Share subscription price: 0.07 euros per share Used for share subscription: None The effects of the option programs and the special right program in the financial statements are detailed in section ”22 Option Rights” of the notes to the financial statements. Company´s shares and shareholders The shares of GeoSentric Oyj (GEO1V) are listed at the Helsinki Exchanges (OMX The Nordic Exchange) on the Small Cap-list and issued in the book entry system held by the Finnish Central Securities Depository, address PL 110, FIN-00131 Helsinki, Finland. The ISIN-code of the share is FI 0009004204. Company's share has been on surveillance list since February 11, 2003. The Company has not issued shares that are not included in the shareholders´ equity. The Company or its subsidiaries do not have the Company´s shares owned by or administered for the Company. The number of shares of the Company (GEO1V) on December 31, 2007, was 524.583.107, all fully paid. The number of outstanding shares in the beginning of the financial year 2007 was 263.416.356. Shareholdings exceeding 1 % as of 31.12.2007 according to share register of the Finnish Central Securities Depository -------------------------------------------------------------------------------- | Shareholder | Shares | Voteshare % | -------------------------------------------------------------------------------- | Halyard Oy + Jorma | 6.621.251 | 1,24 % | | Nieminen | | | -------------------------------------------------------------------------------- | Jonninen Henry | 8.087.057 | 1,54 % | -------------------------------------------------------------------------------- | Skandinaviska Enskilda | 32.596.614 | 6,21 % | | Banken (custodian shares) | | | -------------------------------------------------------------------------------- | Nordea Pankki Suomi Oyj | 208.940.340 | 39,82 % | | (custodian shares) | | | -------------------------------------------------------------------------------- | TOTAL | 256.245.262 | 48,84 % | -------------------------------------------------------------------------------- Other shareholdings exceeding 1 % than those in the above table to the best knowledge of the Company (custodian shares) -------------------------------------------------------------------------------- | Shareholder | Shares | Voteshare % | -------------------------------------------------------------------------------- | GeoHolding B.V | 157.308.932* | 29,99 % * | -------------------------------------------------------------------------------- | Luben Limited | 53.034.569*** | 10,11 % *** | -------------------------------------------------------------------------------- | Nobolles Investment + | 29.624.580 *** | 5,65 % *** | | Octagon Solutions | (26.633.183 + | (5,08 % + 0,57 %) | | | 2.991.397) | | -------------------------------------------------------------------------------- | Ashland Partners | 23.404.358**** | 4,46 % **** | -------------------------------------------------------------------------------- | Schroders Private Bank | 22.220.000* | 4,24 % * | -------------------------------------------------------------------------------- | Horizon Group | 20.555.555* | 3,92 % * | -------------------------------------------------------------------------------- | MMA Invs Ltd (together | 16.930.861** | 3,23 % ** | | Luben Limited + MMA Invs | (69.965.430) | (13,34 %) | | Ltd) | | | -------------------------------------------------------------------------------- | Boris Trust | 13.097.122*** | 2,50 % *** | -------------------------------------------------------------------------------- | Octagon Situations | 12.411.112** | 2,37 % **(8,01 %) | | (together Nobolles + | (42.035.692) | | | Octagon) | | | -------------------------------------------------------------------------------- | Killarney Partners | 12.422.874**** | 2,37 % **** | -------------------------------------------------------------------------------- | Villiers Securities | 8.247.545*** | 1,57 % *** | -------------------------------------------------------------------------------- | Vanguard Ltd | 6.479.909*** | 1,26 % *** | | | | | -------------------------------------------------------------------------------- | Tradewind Investment | 6.518.882*** | 1,24 % *** | -------------------------------------------------------------------------------- | TOTAL | 369.257.508 | 70,39 % | -------------------------------------------------------------------------------- * Investor Issue and Free Issue and bulletin 5.9.2007. By virtue of special rights, share holding of GHBV may rise to 41.4 % of post-conversion shares. The figures are based on the best knowledge of the Company. ** Bulletins 15.2.2007, 5.9.2007 (flaggings) and share register per 31.8.2007. *** Share register per 6.11.2007, bulletin 5.9.2007 (flaggings). **** Financing round spring 2007, bulletin 5.9.2007 (flaggings). -------------------------------------------------------------------------------- | Total inner circle | 354.407.693 | 66,17 % | | holdings according to | | | | Companies´ Act | | | -------------------------------------------------------------------------------- | Total shares in the | 524.583.107 | 100,00 % | | Company | | | -------------------------------------------------------------------------------- Ownership dilution At the date of this report the number of shares in fully diluted situation was the following: -------------------------------------------------------------------------------- | Registered listed shares | 524.583.107 | -------------------------------------------------------------------------------- | Registered unlisted shares | 179.948.945 | -------------------------------------------------------------------------------- | Registered options, convertible | 322.508.212 | | bonds and special rights | | -------------------------------------------------------------------------------- | TOTAL | 1.027.040.264 | -------------------------------------------------------------------------------- By virtue of the remaining granted authorisation the Board may issue a maximum of 415,561,535 new shares, corresponding to a maximum of 58.98% of the Company´s registered shares and 40.46% of the shares after all shares and instruments entitling to shares, effecting a corresponding immediate dilution to existing shareholdings. The Company´s all issued instruments entitling to shares together correspond to a maximum of 45.78 % of the Company´s registered number of shares and approximately 31.40 % of the share capital after all instruments entitling to shares issued by the Company, effecting a corresponding direct dilution to existing holdings. 17. Equity issue authority of the Board As detailed in section 12 above, the Board holds an authorisation granted by the annual general meeting convened on 16.4.2007 to increase share capital by a maximum of 1,902,500 euros. Of this authorisation, valid until 16.4.2009, was unused about 8.440 euros as of 31.12.2007 and at the date of this report. In addition, the extraordinary general meeting convened on September 10, 2007 authorised the Board to increase share capital by a maximum of 8,000,000 euros. Of this authorisation, valid until September 10, 2009, was unused about 4,147,175 euros as of 31.12.2007. After the decisions to increase share capital announced on March 19, 2008, detailed in section 2 above, the remaining amount of this authorisation was 4,155,615.35 euros at the date of this report. 18. Board proposal regarding the handling of the result The Board proposes to the general meeting that no dividend is distributed and that the loss of the period is booked on the prior years´ result account. -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | | GEOSENTRIC OYJ | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | | | | 2007 | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | GROUP INCOME | | | | | | | | STATEMENT | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1000 | | | | | 4Q/200 | 2007 | 4Q/200 | 2006 | | EUR | | | | | 7 | | 6 | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Net | | | | | 892 | 4435 | 3055 | 6959 | | sales | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Other | | | | 29 | 61 | 10 | 25 | | operating | | | | | | | | | income | | | | | | | | -------------------------------------------------------------------------------- | Increase (+)/decrease (-) in | | | | | | | inventories | | | | | | -------------------------------------------------------------------------------- | of finished | | | | -386 | -691 | 1939 | 2625 | | products | | | | | | | | -------------------------------------------------------------------------------- | Production | | | | 0 | 0 | 0 | 0 | | for own use | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Use of raw materials and | | -377 | -4246 | -4033 | -7190 | | consumables | | | | | | -------------------------------------------------------------------------------- | Total expense of | | | -1567 | -6429 | -1484 | -4915 | | employees | | | | | | | -------------------------------------------------------------------------------- | Depreciations | | | | -775 | -4013 | -504 | -563 | -------------------------------------------------------------------------------- | Impairment | | | | 0 | -440 | -872 | -872 | | loss | | | | | | | | -------------------------------------------------------------------------------- | Other operating | | | -1366 | -7403 | -6324 | -11775 | | expenses | | | | | | | -------------------------------------------------------------------------------- | Capitalised R&D | | | 0 | 0 | 500 | 4163 | | expenses | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Operating | | | | -3550 | -18726 | -7713 | -11543 | | result | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Financial | | | | 43 | 69 | 41 | 145 | | income | | | | | | | | -------------------------------------------------------------------------------- | Financial | | | | -19 | -353 | -35 | -162 | | expenses | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Result before | | | | -3526 | -19010 | -7707 | -11560 | | taxes | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Income taxes | | | | 127 | 382 | 0 | 0 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Result for | | | | -3399 | -18628 | -7707 | -11560 | | the period | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | GROUP BALANCE SHEET | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | 1000 | | | | | | 31.12.2 | | 31.12.2 | | EUR | | | | | | 007 | | 006 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | ASSET | | | | | | | | | | S | | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current | | | | | | | | | assets | | | | | | | | -------------------------------------------------------------------------------- | Property, plant and | | | | 199 | | 244 | | equipment | | | | | | | -------------------------------------------------------------------------------- | Development | | | | | 0 | | 2841 | | costs | | | | | | | | -------------------------------------------------------------------------------- | Goodw | | | | | | 216 | | 0 | | ill | | | | | | | | | -------------------------------------------------------------------------------- | Other | | | | | 4531 | | 32 | | intangible | | | | | | | | | assets | | | | | | | | -------------------------------------------------------------------------------- | Other | | | | | 62 | | 61 | | financial | | | | | | | | | assets | | | | | | | | -------------------------------------------------------------------------------- | Deferred tax | | | | | 0 | | 0 | | assets | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | 5008 | | 3178 | -------------------------------------------------------------------------------- | Current | | | | | | | | | assets | | | | | | | | -------------------------------------------------------------------------------- | Inven | | | | | | 2818 | | 6194 | | torie | | | | | | | | | | s | | | | | | | | | -------------------------------------------------------------------------------- | Trade receivables and other | | | 2049 | | 4585 | | receivables | | | | | | -------------------------------------------------------------------------------- | Prepaid | | | | | 965 | | 898 | | expenses | | | | | | | | -------------------------------------------------------------------------------- | Cash and cash | | | | 6520 | | 2542 | | equivalents | | | | | | | -------------------------------------------------------------------------------- | | | | | | | 12352 | | 14219 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total assets | | | | | 17360 | | 17397 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | EQUITY AND | | | | | | | | LIABILITIES | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Shareholders´ | | | | | | | | | equity | | | | | | | | -------------------------------------------------------------------------------- | Share capital | | | | | 5246 | | 2634 | -------------------------------------------------------------------------------- | Share issue | | | | | 0 | | 400 | -------------------------------------------------------------------------------- | Share premium account | | | | 14652 | | 15936 | -------------------------------------------------------------------------------- | Invested distributable equity | | | 23695 | | 4866 | | account | | | | | | -------------------------------------------------------------------------------- | Retained | | | | | -30856 | | -13415 | | earnings | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total shareholders´ | | | | 12737 | | 10421 | | equity | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Non-current | | | | | | | | | liabilities | | | | | | | | -------------------------------------------------------------------------------- | Deferred tax | | | | | 1148 | | 0 | | liabilities | | | | | | | | -------------------------------------------------------------------------------- | Interest | | | | | 0 | | 2319 | | bearing debt | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | 1148 | | 2319 | -------------------------------------------------------------------------------- | Current | | | | | | | | | liabilities | | | | | | | | -------------------------------------------------------------------------------- | Trade payables and other | | | 2431 | | 4500 | | payables | | | | | | -------------------------------------------------------------------------------- | Provi | | | | | | 104 | | 157 | | sions | | | | | | | | | -------------------------------------------------------------------------------- | Interest | | | | | 940 | | 0 | | bearing debt | | | | | | | | -------------------------------------------------------------------------------- | | | | | | | 3475 | | 4657 | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total | | | | | 4623 | | 6976 | | liabilities | | | | | | | | -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- | Total shareholders´equity and | | | 17360 | | 17397 | | liabilities | | | | | | -------------------------------------------------------------------------------- GeoSentric Oyj Board of Directors