GEOSENTRIC OYJ STOCK EXCHANGE RELEASE September 19, 2011 at 13:40
JOINT VENTURE IN CHINA COMPLETED BETWEEN PREVIOUSLY WHOLLY OWNED SUBSIDIARY (NOW ASSOCIATE COMPANY) AND MAJOR CHINESE MEDIA COMPANY
As previously reported on June 26, 2011, the Company’s then wholly owned Chinese subsidiary, GyPSii (Shanghai) Co. Ltd. (“GSSH”) in March, 2011 entered into a Cooperation Agreement with Sina (Beijing) Information Technology Co., Ltd., whose parent company, Sina Corp. is listed on the US NASDAQ market under the symbol (SINA). The Cooperation Agreement provided for development, marketing and distribution cooperation between the two companies for a newly launched "Weilingdi" Location Based Services (“LBS”) and Social Networking Services (“SNS”) service in China. Under the agreement, GSSH and Sina jointly developed a new “Weilingdi” service and Sina has been actively marketing it to its 100m+ "Weibo" application users. The "Weilingdi" service combines Sina's exclusive content such as entertainment, lifestyle information and VIP assets built on top of the existing "Lingdi" service launched by GSSH last year. The Cooperation Agreement was seen as a vital step forward in progressing discussions about a deeper relationship between the two companies potentially resulting in a joint venture agreement.
In June 2011, the Company announced that its then wholly owned subsidiary (now associate company), GeoSolutions Holdings NV (“GHNV”), had signed an agreement with Sina Hong Kong Ltd (“Sina HK”) for both companies to take the necessary next steps towards establishing a Joint Venture (“JV”) between GHNV and Sina HK. The Company has now been informed by GHNV that the necessary preconditions for completion of the JV have been fulfilled, including obtaining Chinese government and regulatory approval. As a result Sina HK has invested approximately EURO 4.5m, including the advance funding received earlier in June, into GSSH by way of newly created share capital thereby obtaining a 60% controlling interest in GSSH. This investment will secure JV’s operations until the end of 2012 and beyond.
Under the JV agreement, Sina is contributing to the JV its 100M+ "Weibo" user base, marketing resources and distribution channels to promote the new products and data center services. GSSH will exclusively operate all of Sina’s LBS and SNS services in China. It will continue to develop and progress the initiatives outlined by the two companies in the Cooperation Agreement, specifically the delivery of the "Weilingdi" and “Tuding” products. GHNV has granted, through its wholly owned Dutch subsidiary, GeoSolutions BV, to GSSH an exclusive royalty free license to use the GyPSii IP within China and will enjoy joint IP ownership rights to all new or enhanced IP created by GSSH plus exclusive royalty free rights to use such IP outside of China. The JV represents the largest social network of mobile consumers and merchants in China and will be focused on providing merchants with a robust set of tools to improve customer loyalty and relationship management and consumers with financially incentive driven mobile applications.
It should be noted that, as a result of the Company’s previously announced funding program, the Company is now a minority holder in GHNV, which in turn is now a 40% holder in GSSH. GHNV will not be consolidating the results of the JV in its group accounts but will apply the equity method of accounting to its 40% investment. This will have the effect of reducing its reported consolidated revenues and costs in 2011 and beyond. Current projections indicate that the JV will not be profitable in its initial phase and it may be several years before there may be dividends flowing from the JV to GHNV and further on to the Company.
GeoSentric Oyj
For more information, please contact: investors@gypsii.com
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