Diversinet Reports Third Quarter 2005 Financial Results.TORONTO -- New Channel and Customer Wins Broaden Distribution for MobiSecure Product Suite Diversinet Corp. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). :DVNTF), a leading provider of personal authentication (1) Verifying the integrity of a transmitted message. See message integrity, e-mail authentication and MAC. (2) Verifying the identity of a user logging into a network. and security solutions for the wireless world, today announced its financial results for third quarter of 2005. During the third quarter of 2005 Diversinet continued its strategic focus on building a distribution network for the mass-market provisioning and management of its MobiSecure(TM) soft tokens, designed to protect individuals, companies and enterprises from online security threats. Revenues for the third quarter of 2005 were $258,000, compared to $720,000 in the third quarter of 2004. Cash used in continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the third quarter was $650,000, a decrease from the $705,000 used in the third quarter of 2004 and $661,000 in the second quarter of 2005. The net loss for the third quarter of 2005 was $3,323,000, or $0.17 per share, compared to a net loss of $660,000 or $0.05 per share in the third quarter of 2004. Included in the third quarter net loss are stock-based compensation, depreciation and amortization, goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges and customer asset impairment charges of $2,589,000 ($358,000 in Q3 2004). In early 2005, Diversinet deemphasized its professional service efforts to focus primarily on its MobiSecure suite of products. In February 2005 Diversinet sold the assets of DSS (1) (Digital Signature Standard) A National Security Administration standard for authenticating an electronic message. See RSA and digital signature. (2) (Digital Satellite S , its systems integration provider, and during the third quarter Diversinet wrote off all the remaining goodwill and customer assets for Caradas, its smart card solution division. With the completion of a $2 million private placement in September, cash and cash equivalents at September 30, 2005 were $2,570,000. "We are very focused and strategically well positioned to deliver mass-market provisioning of our MobiSecure soft token authenticators onto any mobile phone, PDA (Personal Digital Assistant) A handheld computer for managing contacts, appointments and tasks. It typically includes a name and address database, calendar, to-do list and note taker, which are the functions in a personal information manager (see PIM). or PC and through any network to combat phishing Pronounced "fishing," it is a scam to steal valuable information such as credit card and social security numbers, user IDs and passwords. Also known as "brand spoofing," an official-looking e-mail is sent to potential victims pretending to be from their ISP, bank or retail establishment. , identity theft, online fraud and identity misrepresentation misrepresentation In law, any false or misleading expression of fact, usually with the intent to deceive or defraud. It most commonly occurs in insurance and real-estate contracts. False advertising may also constitute misrepresentation. worldwide." states Nagy Moustafa, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Diversinet. Current market and industry trends indicate the need for consumer-based strong authentication adoption is rapidly evolving. Governments globally are mandating strong authentication for online banking to combat fraud such as phishing and identity theft. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. a recent article in the Washington Post, 2.4 million consumers reported losing money directly because of phishing attacks. The U.S. Federal Trade Commission logged 635,000 consumer complaints for fraud and identity theft last year, with 61% for fraud and 39% for identity theft. Additionally, as a result of the recent Federal Financial Institutions Examination Council The Federal Financial Institutions Examination Council, or FFIEC, is a formal interagency body of the United States government empowered to prescribe uniform principles, standards, and report forms for the federal examination of financial institutions by the Board of (FFIEC FFIEC Federal Financial Institutions Examination Council ) report "Authentication in an Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the Banking Environment", jointly released with the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000. (FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). ), banks and other financial institutions offering consumers the ability to conduct transactions over the Internet are expected to deploy some form of two-factor authentication The use of two independent mechanisms for authentication; for example, requiring a smart card and a password. The combination is less likely to allow abuse than either component alone. See authentication. to meet these new federal security requirements by the end of 2006. Diversinet's low-cost, highly scaleable mass-market MobiSecure product offerings will be an attractive solution for broad-based consumer strong authentication deployments. Diversinet's unique combination of client software and wireless provisioning services enables the issuance and management of mobile device authentication tokens A security device given to authorized users who keep them in their possession. To log into the network, the security "card" or "token" may be read directly like a credit card, or it may display a changing number that is typed in as a password. and also create a technology platform from which Diversinet can provide an entirely new and powerful set of capabilities in the mobile e-commerce environment in the form of digital identities, digital permissions and wireless wallets. Based on channel partner and customer feedback, a variety of wireless wallet See digital wallet. types could be provisioned by Diversinet including: authentication wallets for soft tokens; credential credential verb To determine or verify titles, qualifications, documents, completion of required training, and continuing education, in those persons who function in a professional or official capacity–eg, ER physician, neurosurgeon, etc. Cf Credentials. wallets for age verification and identity cards; payment wallets for stored value, credit, and debit card debit card, card that allows the cost of goods or services that are purchased to be deducted directly from the purchaser's checking account. They can also be used at automated teller machines for withdrawing cash from the user's checking account. permissions; and loyalty wallets for advertising, rewards and coupon permissions. Diversinet is well positioned to benefit from these emerging opportunities. Third quarter 2005 channel and customer highlights include: - The Company entered into an agreement with SanDisk(R) Corporation, the world's largest supplier of flash data storage card products, to include MobiSecure on SanDisk's TrustedFlash(TM) Cards. The solution is part of SanDisk's initiative to add to the capabilities of its flash cards beyond storage. - The Company entered into an agreement with Gemplus, a world-leading provider of smart card solutions, to integrate Diversinet's MobiSecure OATH-compliant mobile authentication solutions within Gemplus solutions for wireless carriers. The product is slated to launch in early 2006. - Magna Entertainment Corp. (MEC MEC Ministério da Educação (Ministry of Education) MEC Ministerio de Educación y Ciencia (Spain: Ministry for Education and Science) MEC Mountain Equipment Co-Op ), North America's number one owner and operator of horse racetracks, selected MobiSecure to secure MEC customers' mobile betting transactions. MobiSecure will allow MEC to strongly authenticate (1) To verify (guarantee) the identity of a person or company. To ensure that the individual or organization is really who it says it is. See authentication and digital certificate. (2) To verify (guarantee) that data has not been altered. 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. The Company's corporate developments highlights include: - The Company completed a $2 million oversubscribed Refers to connecting more users to a system than can be fully supported if all of them were using it at the same time. Networks and servers are almost always designed with some amount of oversubscription, counting on the fact that everybody does not need the service simultaneously. private placement funding, which included new institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. . In total, Company insiders purchased 45% of the shares offered. Net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). will be used for working capital purposes, commercialization activities and enhanced product development with channel partners and direct customers. - The Company introduced a two-factor authentication multi-token wallet for Symbian OS An open standard operating system for data-enabled mobile phones (smartphones) from Symbian Ltd., London (www.symbian.com). It supports Java, PC synchronization, Bluetooth local wireless access and GPRS packet-switched data. phones. Diversinet's MobiSecure Multi-Token Wallet allows consumers to load as many strong authentication credentials CREDENTIALS, international law. The instruments which authorize and establish a public minister in his character with the state or prince to whom they are addressed. If the state or prince receive the minister, he can be received only in the quality attributed to him in his credentials. as they need into their Symbian OS mobile phones. - The Company announced Over-The-Air (OTA (Over The Air) Refers to any wireless system such as AM/FM radio and network television that uses open space as its transmission medium. ) provisioning and lifecycle management services for OATH-compliant soft tokens. MASC MASc, n.pr See Master of Ayurvedic Science. offers secure OTA provisioning of multiple credentials with the MobiSecure Multi-Token Wallet; efficient OTA provisioning auto-detect features that determines the user's device type without requiring any input from the user; enhancements for automated au·to·mate v. au·to·mat·ed, au·to·mat·ing, au·to·mates v.tr. 1. To convert to automatic operation: automate a factory. 2. OTA provisioning and end-user life-cycle management; and capabilities to embed em·bed also im·bed v. em·bed·ded, em·bed·ding, em·beds v.tr. 1. To fix firmly in a surrounding mass: embed a post in concrete; fossils embedded in shale. specific user information into any MobiSecure soft token at the time of provisioning to significantly enhance its value in consumer applications for age verification, loyalty programs and mobile payments. Diversinet's MobiSecure products and services leverage more than two billion mobile devices and PCs as strong authentication tokens. Diversinet's MobiSecure soft tokens and Mobile Authentication Service Center (MASC) offerings are available on the leading intelligent mobile device platforms, including Symbian, Microsoft, RIM, Palm and Java-based phones as well as on personal computers running Microsoft Windows See Windows. (operating system) Microsoft Windows - Microsoft's proprietary window system and user interface software released in 1985 to run on top of MS-DOS. Widely criticised for being too slow (hence "Windoze", "Microsloth Windows") on the machines available then. operating system operating system (OS) Software that controls the operation of a computer, directs the input and output of data, keeps track of files, and controls the processing of computer programs. . Additionally, the Company is extending its reach into innovative consumer appliances by supporting SanDisk flash-memory cards and Gemplus SIM card SIM card abbr (= subscriber identity module card) → carte f SIM SIM card n (Tel) (= Subscriber Identity Module card) → SIM-Karte f mobile enabled devices. 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 Security services are state institutions for the provision of intelligence, primarily of a strategic nature, but also including protective security intelligence. Examples include the Security Service (MI5) and the Secret Intelligence Service (MI6) in the United Kingdom, and the . Diversinet's technology effectively simplifies what had previously been a very complex set of technical problems in both information security and wireless data communications data communications, application of telecommunications technology to the problem of transmitting data, especially to, from, or between computers. In popular usage, it is said that data communications make it possible for one computer to "talk" with another. . MobiSecure is the industry's first open mobile security platform to support OATH-compliant strong authentication on mobile devices and personal computers. For more information about the initiative for Open AuTHentication Initiative for Open Authentication (OATH) is an industry-wide collaboration to develop an open reference architecture using open standards to promote the adoption of strong authentication. (OATH) visit www.openauthentication.org. Connect with Diversinet Corp. at www.diversinet.com. The Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 provides a "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " for forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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)
September 30, December 31,
2005 2004
(restated note 3)
$ $
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ASSETS
Current
Cash and cash equivalents 2,569,891 723,498
Short-term investments - 2,000,000
Accounts receivable 115,630 290,239
Other receivables 50,000 35,700
Prepaid expenses 84,191 187,653
Current assets of discontinued
operations (note 3) - 512,992
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Total current assets 2,819,712 3,750,082
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Capital assets, net 514,934 593,673
Purchased technology, net - 125,667
Customer assets, net - 551,280
Goodwill - 2,286,932
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Total assets 3,334,646 7,307,634
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Accounts payable 220,604 147,084
Accrued liabilities 495,323 478,781
Notes payable - 4,611
Deferred revenue 151,500 165,343
Current liabilities of
discontinued operations (note 3) 41,746 676,414
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Total current liabilities 909,173 1,472,233
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Shareholders' equity
Share capital 54,346,152 52,445,135
Cumulative translation adjustment (1,520,721) (1,520,721)
Share purchase warrants 2,986,543 2,830,929
Contributed surplus 1,878,889 1,265,549
Deficit (55,265,390) (49,185,491)
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Total shareholders' equity 2,425,473 5,835,401
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Total liabilities and
shareholders' equity 3,334,646 7,307,634
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---------------------------------------------------------------------
See accompanying notes to interim consolidated financial statements.
Diversinet Corp.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(in United States dollars)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
(restated (restated
note 3) note 3)
$ $ $ $
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REVENUE 258,148 719,578 942,073 2,183,925
Cost of sales 88,722 333,207 550,460 1,159,890
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Gross margin 169,426 386,371 391,613 1,024,035
EXPENSES
Research and
development 350,782 302,035 931,936 943,986
Sales and marketing 267,406 279,223 936,368 1,057,818
General and
administrative 535,784 500,964 1,797,807 1,844,280
Depreciation and
amortization 140,214 188,070 491,909 587,940
Goodwill impairment
charge (note 2) 1,894,690 - 1,894,690 -
Customer asset
impairment charge
(note 2) 330,768 - 330,768 -
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3,519,644 1,270,292 6,383,478 4,434,024
---------------------------------------------------------------------
Loss before the
following (3,350,218) (883,921) (5,991,865) (3,409,989)
Foreign exchange
loss (27,477) (25,348) (8,950) (1,390)
Interest income 6,804 1,350 19,469 10,580
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Loss from continuing
operations (3,370,891) (907,919) (5,981,346) (3,400,799)
Income (loss) from
discontinued
operations (note 3) 48,216 247,444 (98,553) 50,205
---------------------------------------------------------------------
Loss for the period (3,322,675) (660,475) (6,079,899) (3,350,594)
---------------------------------------------------------------------
Deficit, beginning
of period (51,942,715)(44,358,768) (49,185,491) (41,481,762)
Adjustment for
change in
accounting for
stock-based
compensation - - - (186,887)
Loss for the
period (3,322,675) (660,475) (6,079,899) (3,350,594)
---------------------------------------------------------------------
Deficit, end of
period (55,265,390)(45,019,243) (55,265,390) (45,019,243)
---------------------------------------------------------------------
---------------------------------------------------------------------
Loss per share
Basic and diluted
loss per share
from continuing
operations (0.17) (0.07) (0.31) (0.28)
Basic and diluted
loss per share (0.17) (0.05) (0.31) (0.28)
Weighted average
common shares
outstanding 19,525,767 12,232,941 19,318,729 12,114,891
See accompanying notes to interim consolidated financial statements.
Diversinet Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In United States dollars)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2005 2004 2005 2004
$ $ $ $
---------------------------------------------------------------------
OPERATING ACTIVITIES
Loss from continuing
operations (3,370,891) (907,919) (5,981,346) (3,400,799)
Add (deduct) items
not requiring an
outlay of cash:
Depreciation and
amortization 140,214 188,070 491,909 587,940
Goodwill impairment
charge (note 2) 1,894,690 - 1,894,690 -
Customer asset
impairment charge
(note 2) 330,768 - 330,768 -
Stock-based
compensation
expense 223,355 170,265 804,188 504,805
Changes in
non-cash working
capital items
related to
operations:
Accounts
receivable and
other receivables 75,496 202,690 160,309 93,442
Prepaid expenses 86,860 5,010 123,562 256,934
Accounts payable
and accrued
liabilities 14,991 (32,790) 90,062 (576,043)
Deferred revenue (45,000) (330,656) (13,843) (356,349)
---------------------------------------------------------------------
Cash used in
continuing
operations (649,517) (705,330) (2,099,701) (2,890,070)
Cash provided by
(used in)
discontinued
operations (2,023) 44,564 177,013 69,948
---------------------------------------------------------------------
Cash used in
operations (651,540) (660,766) (1,922,688) (2,820,122)
---------------------------------------------------------------------
FINANCING ACTIVITIES
Issue of common
shares, common
purchase options,
warrants for
cash 1,896,374 - 1,840,683 1,887,740
Notes payable - (8,143) (4,611) (14,393)
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Cash provided by
(used in)
financing
activities 1,896,374 (8,143) 1,836,072 1,873,347
---------------------------------------------------------------------
---------------------------------------------------------------------
INVESTING ACTIVITIES
Decrease
(increase) in
short-term
investments 905,932 499,173 2,000,000 793,290
Net addition of
capital assets (27,171) (15,684) (66,991) (22,361)
---------------------------------------------------------------------
Cash provided by
investing
activities 878,761 483,489 1,933,009 770,929
---------------------------------------------------------------------
---------------------------------------------------------------------
Net increase
(decrease) in cash
and cash
equivalents during
the period 2,123,595 (185,420) 1,846,393 (175,846)
Cash and cash
equivalents,
beginning of the
period 446,296 557,108 723,498 547,534
---------------------------------------------------------------------
Cash and cash
equivalents, end
of the period 2,569,891 371,688 2,569,891 371,688
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See accompanying notes to interim consolidated financial statements.
Diversinet Corp. (OTC Bulletin Board OTC Bulletin Board An electronic quotation listing of the bid and asked prices of OTC stocks that do not meet the requirements to be listed on the NASDAQ stock-listing system. :DVNTF) |
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