Diversinet Corp.
OTC Bulletin Board : DVNTF

Diversinet Corp.

August 11, 2005 08:30 ET

Diversinet Corp. Announces Second Quarter 2005 Financial Results

TORONTO, ONTARIO--(CCNMatthews - Aug. 11, 2005) -

Company Focuses on Execution as it Launches its MobiSecure Strong Authentication Solution and Significantly Expands Distribution Through OEM Agreement with VeriSign

Diversinet Corp. (OTCBB:DVNTF), a leading provider of mobile device security and authentication solutions for the mobile data and on-line ecosystems, today announced its second quarter 2005 results. Revenues for the quarter were $330,000, compared to $611,000 in the second quarter of 2004. In January 2005 Diversinet began to focus on the evolving protection and trust needs of mobile users. These financial results reflect this shift in focus and time is now required to rebuild the sales and marketing efforts of the company as well as the customer base. The net loss for the quarter was $1,458,000, or $0.08 per share, compared to the 2004 second quarter loss of $1,347,000 or $0.11 per share. Included in the Q2 net loss are stock-based compensation, depreciation and amortization expenses of $522,000 ($349,000 in Q2 2004). Cash used in continuing operations for the second quarter was $661,000, a decrease from the $884,000 used in the second quarter of 2004 and $789,000 in the first quarter of 2005.

In the second quarter of 2005, Diversinet entered into an OEM licensing agreement with VeriSign, Inc. to deliver its OATH-compliant suite of mobile tokens and mobile authentication services for distribution by VeriSign with the VeriSign® Unified Authentication solution. By licensing Diversinet's MobiSecure soft token product suite for the VeriSign Unified Authentication solution, VeriSign will provide enterprises, banks, online service providers and retailers with a cost-effective means to provide strong authentication protection to their customers, business partners and employees.

"Since we refocused the company in January of 2005, there has been an enthusiastic industry response to the opportunity to use our MobiSecure products and services to protect corporate profits, brand equity, and consumer confidence in on-line services," said Nagy Moustafa, CEO of Diversinet. "MobiSecure is proving to be an effective and low-cost strong authentication solution upon which businesses can develop innovative solutions to address the threat of identity theft."

"Diversinet is delivering the business infrastructure and product solutions that customers need to address the challenges of identity theft, phishing and on-line fraud," said Kashif Hassan, President of Diversinet. "The licensing agreement with VeriSign provides distribution channels and validation services that complement our growing line of MobiSecure soft token products and associated provisioning and management services. We believe that we are still on schedule to deliver pilot activity in the second half of 2005."

Diversinet's second quarter 2005 highlights also include:

- The Company launched the industry's first open mobile security platform to support standards-based strong authentication for mass-market deployments. Diversinet MobiSecure Tokens and MobiSecure Authentication Service Center (MASC) are designed to protect individuals, companies and enterprises from security threats such as identity theft and online fraud. MobiSecure Tokens eliminate the need for consumer and enterprise users to carry additional hard tokens, USB toggles or smart cards with smart card readers for two-factor authentication. The MobiSecure suite of soft tokens are available on all intelligent mobile device platforms, including Microsoft, RIM, Symbian, Palm and Java-based phones, as well as personal computers running Microsoft Windows 98, 2000 and XP operating systems.

- The Company appointed international telecommunications veteran Brian Barry to its Board of Director and security expert Steve Sigmond of BlueStream Ventures to its Advisory Board.

- The Company continued its strong support of the Open AuTHentication (OATH) industry alliance for mobile-optimized strong authentication solution delivery, successfully showing its own MobiSecure soft token products interoperating with services from other OATH members at Digital ID World in San Francisco and InfoSecurity Canada in Toronto.

As a leading mobile and on-line authentication service provider, Diversinet provides enterprises, banks, online service providers and retailers with cost effective, mobile-optimized strong authentication products and services that reduce identity theft and improve brand trust. Diversinet MobiSecure solutions leverage more than 2 billion consumer and enterprise mobile devices and PCs as strong authentication tokens.

About Diversinet (OTCBB:DVNTF)

Diversinet is a leading provider of mobile device security and authentication solutions for the mobile data ecosystem. Diversinet products and services allow users to protect their identity, data and device for personal communications and commercial transactions. The Diversinet MobiSecure suite of mobile tokens and MobiSecure Authentication Service Center enable application providers, mobile network operators and security service providers to rapidly develop, deploy and manage secure mobile data services for the over 2 billion mobile device and PC users worldwide. MobiSecure is the industry's first open mobile security platform to support OATH-compliant strong authentication on mobile devices and networks. For more information about the initiative for Open AuTHentication (OATH) visit www.openauthentication.org. Connect with Diversinet Corp. at www.diversinet.com.

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this press release (as well as information included in oral statements or other written statements made or to be made by the company) contains statements that are forward-looking, such as statements relating to anticipated future revenues of the company and success of current product offerings. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of the company. For a description of additional risks and uncertainties, please refer to the company's filings with the Securities and Exchange Commission.



Diversinet Corp.
CONSOLIDATED BALANCE SHEETS
(in United States dollars)
(Unaudited)

June 30, December 31,
2005 2004
(restated note 3)
$ $
---------------------------------------------------------------------

ASSETS
Current
Cash and cash equivalents 446,296 723,498
Short-term investments 905,932 2,000,000
Accounts receivable 176,667 290,239
Other receivables 64,459 35,700
Prepaid expenses 191,151 187,653
Current assets of discontinued
operations (note 3) - 512,992
---------------------------------------------------------------------
Total current assets 1,784,505 3,750,082
---------------------------------------------------------------------
Capital assets, net 541,432 593,673
Purchase technology, net 31,416 125,667
Customer assets, net 385,896 551,280
Goodwill 1,894,692 2,286,932
---------------------------------------------------------------------
Total assets 4,637,941 7,307,634
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable 232,905 147,084
Accrued liabilities 468,031 478,781
Notes payable - 4,611
Deferred revenue 196,500 165,343
Current liabilities of
discontinued operations (note 3) 96,986 676,414
---------------------------------------------------------------------
Total current liabilities 994,422 1,472,233
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Shareholders' equity
Share capital 52,469,844 52,445,135
Cumulative translation adjustment (1,520,721) (1,520,721)
Share purchase warrants 2,927,399 2,830,929
Contributed surplus 1,709,712 1,265,549
Deficit (51,942,715) (49,185,491)
---------------------------------------------------------------------
Total shareholders' equity 3,643,519 5,835,401
---------------------------------------------------------------------
Total liabilities and
shareholders' equity 4,637,941 7,307,634
---------------------------------------------------------------------
---------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.


Diversinet Corp.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(in United States dollars)
(Unaudited)
Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
(restated (restated
note 3) note 3)
$ $ $ $
---------------------------------------------------------------------

REVENUE 329,514 611,147 683,925 1,464,347
Cost of sales 216,270 390,362 461,738 826,683
---------------------------------------------------------------------
Gross margin 113,244 220,785 222,187 637,664

EXPENSES
Research and
development 303,607 310,862 581,154 641,951
Sales and marketing 352,227 390,591 668,962 778,595
General and
administrative 747,963 601,351 1,262,023 1,343,316
Depreciation and
amortization 177,408 200,019 351,695 399,870
---------------------------------------------------------------------
1,581,205 1,502,823 2,863,834 3,163,732
---------------------------------------------------------------------
Loss before the
following (1,467,961) (1,282,038) (2,641,647) (2,526,068)
Foreign exchange
gain (11,441) (14,160) (18,527) (23,958)
Interest income (3,716) (2,901) (12,665) (9,230)
---------------------------------------------------------------------
Loss from continuing
operations (1,452,804) (1,264,977) (2,610,455) (2,492,880)
Loss from
discontinued
operations (note 3) (5,195) (82,233) (146,769) (197,239)
---------------------------------------------------------------------
Loss for the period (1,457,999) (1,347,210) (2,757,224) (2,690,119)
---------------------------------------------------------------------

Deficit, beginning
of period (50,484,716)(43,011,558)(49,185,491)(41,481,762)
Adjustment for
change in
accounting for
stock-based
compensation - - - (186,887)
Loss for the period (1,457,999) (1,347,210) (2,757,224) (2,690,119)
Deficit, end of
period (51,942,715)(44,358,768)(51,942,715)(44,358,768)
---------------------------------------------------------------------

Loss per share
Basic and diluted
loss per share
from continuing
operations (0.08) (0.11) (0.14) (0.21)
Basic and diluted loss
per share (0.08) (0.11) (0.14) (0.22)
Weighted average
common shares
outstanding 19,247,556 11,881,901 19,213,493 12,055,217

See accompanying notes to interim consolidated financial statements.


Diversinet Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In United States dollars)
(Unaudited)

Three months ended Six months ended
June 30 June 30
2005 2004 2005 2004
$ $ $ $
---------------------------------------------------------------------

OPERATING ACTIVITIES
Loss from continuing
operations (1,452,804) (1,264,977) (2,610,455) (2,492,880)
Add (deduct) items
not requiring an
outlay of cash:
Depreciation and
amortization 177,408 200,019 351,695 399,870
Stock-based
compensation expense 344,681 149,257 580,833 334,541
Changes in non-cash
working capital items
related to operations:
Accounts receivable
and other
receivables 99,958 (85,438) 84,813 (109,248)
Prepaid expenses 18,883 34,586 36,702 251,924
Accounts payable and
accrued liabilities 115,834 (34,322) 75,071 (543,252)
Deferred revenue 35,000 116,645 31,157 (25,695)
---------------------------------------------------------------------
Cash used in continuing
operations (661,040) (884,230) (1,450,184) (2,184,740)
Cash provided by
(used in)
discontinued
operations (30,179) 19,337 179,036 25,384
---------------------------------------------------------------------
Cash used in operations (691,219) (864,893) (1,271,148) (2,159,356)
---------------------------------------------------------------------

FINANCING ACTIVITIES
Issue of common
shares, common
purchase options,
warrants for cash (71,191) 3,026 (55,691) 1,887,740
Notes payable - (4,353) (4,611) (6,250)
---------------------------------------------------------------------
Cash provided by
(used in) financing
activities (71,191) (1,327) (60,302) 1,881,490
---------------------------------------------------------------------

INVESTING ACTIVITIES
Decrease (increase)
in short-term
investments 594,273 298,641 1,094,068 294,117
Net addition of
capital assets (37,571) (2,215) (39,820) (6,677)
---------------------------------------------------------------------
Cash provided by
investing activities 556,702 296,426 1,054,248 287,440
---------------------------------------------------------------------

Net increase (decrease)
in cash and cash
equivalents during
the period (205,708) (569,794) (277,202) 9,574

Cash and cash
equivalents, beginning
of the period 652,004 1,126,902 723,498 547,534

---------------------------------------------------------------------
Cash and cash
equivalents, end of
the period 446,296 557,108 446,296 557,108
---------------------------------------------------------------------

See accompanying notes to interim consolidated financial statements.


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