Diversinet Corp. Announces Fiscal 2005 Annual Results
24 February 2006
Diversinet Corp. (OTC Bulletin Board: DVNTF), a leading provider of mobile-enabled personal authentication and security solutions, today announced its fiscal 2005 results.
For the year ended December 31, 2005, Diversinet reported revenue of $1,101,000 compared to revenue of $2,603,000, for the year ended December 31, 2004. The Company reported a net loss of $7,109,000 or $(0.35) per share for the year ended December 31, 2005, compared to a net loss of $7,517,000 or $(0.62) per share for the year ended December 31, 2004. Included in the December 31, 2005 net loss are non-cash items of $986,000 in stock-based compensation expense, depreciation and amortization of $540,000 and $2,225,000 in goodwill and customer asset impairment charges, totaling $3,751,000 or 53% percent of the net loss.
The Company recorded revenues of $159,000 in the three months ended December 31, 2005, compared to $419,000, in the same period in the prior year. The net loss for the three months ended December 31, 2005 was $1,030,000, compared to a net loss for the same quarter in fiscal 2004 of $4,166,000. Included in the three months ended December 31, 2005 net loss are non-cash items of $182,000 in stock-based compensation expense, $48,000 for depreciation and amortization, totaling $225,000 or 22% percent of the net loss.
The Company had $1,356,000 in cash as of December 31, 2005. Cash used in continuing operations during the three months ended December 31, 2005 amounted to $1,191,000 compared to $747,000 for the fourth quarter of 2004. Included in the quarterly 2005 cash usage were one time payments of $256,000. We believe that cash usage in the first half of 2006 will be reduced as a result of increased revenue directly related to the success of our new strategic focus, cost reduction measures and the elimination of one time charges. The Company also expects to receive approximately $150,000 in the first half of 2006 related to its Scientific Research & Experimental Development claim from the Ontario government.
In January 2005 Diversinet re-launched its corporate strategy and began to focus on the evolving protection, trust and provisioning needs of mobile users. These financial results reflect this shift in focus and the time required to build up our distribution channel and corresponding customer base. Recently, the Company announced a licensing, development and support agreement with RSA Security Inc. that will result in minimum revenues of $2.2 million to Diversinet over three years. We believe that this type of partnership confirms that our new strategic focus is being well received in the marketplace.
"2005 was a transition year as we changed our strategic focus, we believe 2006 should be a very exciting year for Diversinet as we expect to begin active pilot and customer activity in the second half of 2006 with many of our channel partners and customers. We will also continue our focus on building out our distribution channels and adding new technology features." said Nagy Moustafa, Diversinet's CEO.
Outlined below are the key milestones the Company has achieved since its relaunch in January 2005:
-- Divested non strategic assets in February to focus on our core
strategy;
-- Launched the industry's first open mobile security platform in April to
support open standards-based strong authentication for mass market
deployments;
-- Launched MobiSecure soft tokens for PC's and laptops in June;
-- Entered into an OEM relationship with Verisign in June to deliver an
OATH compliant suite of mobile tokens and mobile authentication
services;
-- Entered into an agreement with SanDisk, the world's largest supplier of
flash data storage card products, in September to include MobiSecure on
SanDisk's TrustedFlash(TM) cards;
-- Entered into an agreement with Gemplus, a world leading provided of
smart card solutions, in September to integrate MobiSecure OATH-
compliant mobile authentication solutions within Gemplus solutions for
wireless carriers;
-- Magna Entertainment Corp.(MEC), North America's largest horse track
operator, in October selected MobiSecure to secure MEC customers mobile
betting transactions. MobiSecure will allow MEC to strongly
authenticate bettors whether they use cellular, WiFi, Internet or on-
track devices. Diversinet's product will also support geo-fencing and
age verification, two important issues in the regulation of mobile
betting;
-- Announced a multi-token "credential wallet" in October that allows
users to access multiple credentials though a single token, eliminating
the need for a hard token "necklace" of individual tokens for various
services;
-- Released in December an advanced provisioning server allowing end users
to order a soft token, download it over the air, install it and test
it, all without direct involvement of their service provider.
MobiSecure Authentication Service Center (MASC) promises to
revolutionize the strong authentication business by reducing deployment
complexity and cost to the point where large-scale consumer deployments
become economically feasible;
-- Announced a partnership with Oberthur Card Systems, the third largest
SIM manufacturer in the world, in February 2006 to develop SIM-based
two factor authentication solutions for wireless operators and
financial services providers; and,
-- Entered into a license agreement in February 2006 to provide mobile
device and PC based software tokens and integrated provisioning
services to RSA Security Inc. The Company's MobiSecure soft token
suite and MobiSecure Authentication Service Center (MASC) will be
integrated into RSA Security's products and services, enabling the
downloading, provisioning and management of RSA Security's mobile and
PC-based soft tokens.
About Diversinet (OTCBB: DVNTF)
Diversinet is a leading provider of personal authentication and security solutions for the wireless world. The company's software and services protect user identity and provide secure access for new, innovative consumer and business applications using a variety of mobile phones, Personal Digital Assistants (PDAs) and personal computers. Diversinet's highly scaleable, open mobile security platform enables enterprises and service providers to rapidly develop, deploy and manage next-generation wireless security services. MobiSecure is the industry's first open mobile security platform to support OATH-compliant strong authentication on mobile devices and personal computers. Connect with Diversinet Corp. at http://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)
As at December 31 2005 2004
Assets
Current assets:
Cash and cash equivalents $1,355,562 $723,498
Short-term investments -- 2,000,000
Accounts receivable 66,039 290,239
Other receivables 1,266 35,700
Prepaid expenses 117,245 187,653
Current assets of discontinued
operations (note 3) -- 512,992
Total current assets 1,540,112 3,750,082
Capital assets, net (note 4) 473,010 593,673
Purchased technology, net of accumulated
amortization of $nil, (2004-$251,333) -- 125,667
Customer assets net of accumulated
amortization of $nil, (2004-$441,024) -- 551,280
Goodwill (notes 2b) -- 2,286,932
Total assets $2,013,122 $7,307,634
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $153,100 $147,084
Accrued liabilities (note 5) 226,679 478,781
Notes payable -- 4,611
Deferred revenue 79,000 165,343
Current liabilities of discontinued
operations (note 3) -- 676,414
Total current liabilities 458,779 1,472,233
Shareholders' equity:
Share capital (note 6):
Authorized:
Unlimited common shares
Issued and outstanding:
24,316,691 (19,157,941 - 2004)
common shares 54,347,652 52,445,135
Contributed surplus 2,521,422 1,265,549
Cumulative translation adjustment (1,520,721) (1,520,721)
Share purchase warrants (note 6) 2,500,977 2,830,929
Deficit (56,294,987) (49,185,491)
Total shareholders' equity 1,554,343 5,835,401
Future operations (note 1)
Commitments and contingencies (note 10)
Total liabilities and shareholders' equity $2,013,122 $7,307,634
Diversinet corp.
Consolidated Statements of Earnings and Deficit
(In United States dollars)
Year ended December 31 2005 2004 2003
Revenue $1,101,104 $2,602,894 $1,394,630
Cost of sales 562,987 1,426,922 416,776
Gross margin 538,117 1,175,972 977,854
Expenses:
Research and development 1,241,599 1,153,758 1,275,598
Sales and marketing 1,289,940 1,195,434 1,720,459
General and administrative 2,301,032 2,369,025 1,731,345
Depreciation and amortization 539,770 920,323 662,762
Goodwill impairment charge
(note 2b) 1,894,690 2,500,000 --
Customer asset impairment
charge 330,768 -- --
7,597,799 8,138,540 5,390,164
Loss before the following (7,059,682) (6,962,568) (4,412,310)
Foreign exchange loss 10,586 28,386 324,365
Interest income and other
income (31,632) (15,598) (23,493)
Loss from continuing
operations (7,038,636) (6,975,356) (4,713,182)
Loss from discontinued
operations (note 3) (70,860) (541,486) (245,569)
Loss for the year (7,109,496) (7,516,842) (4,958,751)
Deficit, beginning of year (49,185,491) (41,481,762) (36,523,011)
Adjustment for cumulative
effect of change in
accounting for stock based
compensation (note 2o) -- (186,887) --
Deficit, end of year $(56,294,987) $(49,185,491) $(41,481,762)
Basic and diluted loss
per share from
continuing operations $(0.34) $(0.57) $(0.67)
Basic and diluted loss
per share $(0.35) $(0.62) $(0.71)
Weighted average number
of common shares 20,578,427 12,144,565 7,022,447
Diversinet corp.
Consolidated Statements of Cash Flows
(In United States dollars)
For the year ended
December 31 2005 2004 2003
Cash provided by (used in):
Operating activities:
Loss for the year from
continuing operations $(7,038,636) $(6,975,356) $(4,713,182)
Items not involving cash:
Depreciation and
amortization 539,770 920,323 662,762
Goodwill impairment
charge (note 2b) 1,894,690 2,500,000 --
Customer asset
impairment charge 330,768 -- --
Stock-based compensation
expense 986,257 760,916 825,010
Unrealized foreign
exchange loss -- -- 477,210
Change in non-cash
operating working capital:
Accounts receivable 224,200 15,615 1,645,298
Other receivables 34,434 23,777 (82,028)
Prepaid expenses 70,408 184,554 10,655
Accounts payable 6,016 (182,896) (1,766,591)
Accrued liabilities (252,102) (571,658) 829,068
Deferred revenue (86,343) (312,106) (152,162)
Cash used in continuing
operations (3,290,538) (3,636,831) (2,263,960)
Cash provided by
discontinued operations (92,042) 94,858 1,280,081
Cash used in operations (3,382,580) (3,541,973) (983,879)
Financing activities:
Issue of common shares,
common share purchase
options and warrants
for cash 1,842,183 4,565,503 2,920,746
Notes payable (4,611) (17,456) (879,448)
Proceeds from sale of
discontinued operations 250,000 -- --
Repayment of promissory
notes payable -- (50,000) --
Bank indebtedness -- -- (240,979)
Cash provided by financing
activities 2,087,572 4,498,047 1,800,319
Investing activities:
Proceeds of disposition
of short-term investments 2,000,000 (756,040) (269,777)
Acquisitions, net of
cash received -- -- (541,084)
Net (addition) disposal
of capital assets (72,928) (24,070) 42,085
Cash provided by (used in)
investing activities 1,927,072 (780,110) (768,776)
Increase in cash and
cash equivalents 632,064 175,964 47,664
Cash and cash equivalents,
beginning of year 723,498 547,534 499,869
Cash and cash equivalents,
end of year $1,355,562 $723,498 $547,533
Supplementary non-cash
financing and investing
activities:
Issue of warrants
on acquisitions $-- $-- $1,044,640
Issue of common shares
on acquisitions -- -- 4,959,875
Issuance of shares in
settlement of debt -- 400,000 -- SOURCE Diversinet Corp. Web site: http://www.diversinet.com
Source: prnewswire
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