ANYONE STILL THINK THE DEVIANTONE IS NOT PURE CRAP?
Diversinet Corp. Announces Third Quarter 2004 Results
Tuesday November 9, 8:01 am ET
Continued Progress Towards 2004 Strategic Objectives
TORONTO--(BUSINESS WIRE)--Nov. 9, 2004-- Diversinet Corp. (OTCBB:DVNTF - News), a leading provider of security management products for the mobile data ecosystem, today announced its third quarter 2004 results. Revenues for the quarter were $1,730,000, compared to $1,748,000 in the second quarter of 2004. Revenues for the nine months ended September 30, 2004 were $5,665,000, down nine percent from $6,190,000 in 2003. These revenues continue to be dominated by professional services provided in the United States.
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The net loss for the quarter was $660,000, down from the second quarter of 2004 loss of $1,347,000 and the first quarter of 2004 loss of $1,343,000. For the nine months ended September 30, 2004, the net loss was $3,351,000 or $0.28 per share, compared to a net loss for the same period in fiscal 2003 of $2,694,000 or $0.48 per share. The decreased loss per share is largely due to the increase in issued shares resulting from the June 2003 and January 2004 placements. Cash used in operations for the third quarter was $666,000 and a decrease from the $794,000 used in the second quarter of 2004 and the $1,379,000 used in the first quarter of 2004. EBITDA(a) before stock-based compensation expense and gain on disposition of promissory note for the quarter was $(471,000) compared to $(997,000) in the second quarter of 2004 and $(960,000) for first quarter of 2004. Cash and short term investments at quarter end was $972,000 compared to $1,663,000 in June 2004 and $2,463,000 in March 2004. During the second quarter of 2004, the company implemented cost reductions in operating expenses which are now being seen in the third quarter results, a $237,000 operating expense savings.
"Our early adopter customers and partners have demonstrated increased interest in mobile security management, aligned with the capabilities of the Passport Trust Platform," said Nagy Moustafa, president and CEO of Diversinet. "We continue to make progress in simplifying the delivery of mobile device security with the Passport Trust Platform, envisioning the balance of our revenue base to begin shifting towards core mobile security revenues through 2005."
During the quarter, Diversinet has continued to focus upon embedding the Passport(TM) Trust Platform into the mobile data ecosystem through implementing a partnership centered go-to-market strategy with:
Application Providers: 3rd party, ASP providers, enterprise owners.
Device Providers: Handset, operating system, and chip providers.
Service Providers: Wireless carriers, security providers.
As the major players in the ecosystem, application providers, device providers, and service providers all have need to incorporate security management into their offerings, Diversinet remains positioned as a leading provider of such infrastructure and is highly focused upon enabling these market players.
Diversinet has made progress towards key strategic objectives during the quarter by establishing customer relationships and advancing partnerships for distribution of the Passport Trust Platform as follows:
BlackBerry Secure Email Solution Pilot: Diversinet established a contract with a major North American financial institution for a secure email pilot using BlackBerry devices from RIM. This pilot utilizes Diversinet's Passport Trust Platform Provisioning Server and Mobile Client to enable secure end-to-end email for an internal community of business users. The Diversinet offering enables the financial institution's users to comply with regulatory issues around privacy and security of email communications on mobile devices.
VeriSign and Diversinet Collaborate for Strong Authentication on Mobile Devices: VeriSign and Diversinet showcased the industry's first one-time password (OTP) authentication solution on the RIM BlackBerry® Handheld based on the OATH Reference Architecture utilizing Verisign's Unified Authentication Services. Strong authentication, which requires users to possess additional, physical hardware in addition to a password, is an essential component in protecting against the various forms of security attacks prevalent today. With over 1 billion individuals globally already carrying mobile devices, the mobile phone becomes a natural and ubiquitous platform for strong authentication. Demonstrations of this solution were held in late October at the CTIA Wireless IT and Entertainment conference and the Digital ID World conference, confirming market receptiveness towards strong authentication using a mobile device.
CITIC Pacific Strategic Partnership for Greater China: Diversinet announced a sales and marketing agreement with CPCNet, a CITIC Pacific company, for distribution of the Passport Trust Platform throughout Greater China. This agreement allows CPCNet to distribute Diversinet Passport Trust Platform products while providing Diversinet with potential revenue streams through license deals, subscription pricing, and/or transaction services. As a result of sound progress with CPCNet within this quarter, Diversinet has consolidated its Asian operations within CPCnet.
The company is currently engaged in a private placement to raise additional equity capital to meet its development and operational needs.
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.
(a) EBITDA is defined as operating revenues less cash operating expenses and therefore reflects earnings before interest, taxes, depreciation and amortization. Diversinet uses EBITDA, among other measures, to assess the operating performance of its ongoing business, and applies the use of such measure consistently from quarter to quarter. The term EBITDA does not have a standardized meaning prescribed by Canadian generally accepted accounting principles (GAAP) and therefore may not be comparable to similarly titled measures presented by other companies. EBITDA should not be construed as the equivalent of net cash flows from operating activities.
Diversinet Corp.
CONSOLIDATED BALANCE SHEETS
(in United States dollars)
September 30 December 31
2004 2003
$ $
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(Unaudited)
ASSETS
Current
Cash and cash equivalents 521,670 722,569
Short-term investments 450,670 1,243,960
Accounts receivable 615,156 1,081,760
Other receivables 69,797 85,748
Prepaid expenses 127,279 375,009
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Total current assets 1,784,572 3,509,046
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Capital and intangible assets,
net 1,605,209 2,182,531
Goodwill 5,311,932 5,311,932
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Total assets 8,701,713 11,003,509
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LIABILITIES AND SHAREHOLDERS'
EQUITY
Current
Accounts payable 765,413 899,644
Accrued liabilities 689,751 1,351,400
Current portion of promissory note - 300,000
Notes payable 7,674 28,192
Deferred revenue 121,100 477,449
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Total current liabilities 1,583,938 3,056,685
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Promissory note - 300,000
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Total liabilities 1,583,938 3,356,685
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Shareholders' equity
Share capital 51,508,222 49,191,482
Cumulative translation
adjustment (1,520,721) (1,520,721)
Share purchase warrants 1,467,972 1,331,652
Contributed surplus 681,545 126,173
Deficit (45,019,243) (41,481,762)
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Total shareholders' equity 7,117,775 7,646,824
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Total liabilities
and shareholders' equity 8,701,713 11,003,509
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Diversinet Corp.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
(in United States dollars)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
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REVENUE 1,730,191 2,606,000 5,665,081 6,189,602
Cost of sales 1,091,756 1,957,469 4,143,848 4,877,853
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Gross margin 638,435 648,531 1,521,233 1,311,749
EXPENSES
Research and
development 302,035 425,904 943,986 828,879
Sales and marketing 411,549 374,807 1,463,918 1,273,708
General and
administrative 395,427 485,773 1,541,015 1,534,765
Stock based
compensation 170,265 - 504,805 -
Depreciation and
amortization 191,984 80,284 599,683 422,308
Other (note 3) (171,000) - (171,000) -
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1,300,260 1,366,768 4,882,407 4,059,660
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Loss before the
following (661,825) (718,237) (3,361,174) (2,747,911)
Interest (income) (1,350) (17,215) (10,580) (53,522)
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Loss for the period (660,475) (701,022) (3,350,594) (2,694,389)
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Basic and diluted
loss per share (0.05) (0.07) (0.28) (0.48)
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Weighted average
common shares
outstanding 12,232,941 10,022,471 12,114,891 5,667,528
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Deficit, beginning
of period (44,358,768) (37,857,055) (41,481,762) (35,863,688)
Adjustment for
cumulative effect
of change in
accounting for
stock based
compensation - - (186,887) -
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Adjusted deficit,
beginning
of period (44,358,768) (37,857,055) (41,668,649) (35,863,688)
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Loss for the
period (660,475) (701,022) (3,350,594) (2,694,389)
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Deficit, end of
period (45,019,243) (38,558,077) (45,019,243) (38,558,077)
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Diversinet Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in United States dollars)
(Unaudited)
Three months ended Nine months ended
September 30 September 30
2004 2003 2004 2003
$ $ $ $
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OPERATING ACTIVITIES
Loss for the period (660,475) (701,022) (3,350,594) (2,694,389)
Add (deduct) items
not requiring an
outlay of cash:
Depreciation and
amortization 191,984 80,284 599,683 422,308
Stock-based
compensation
expense 170,265 - 504,805 -
Other (note 3) (171,000) (171,000)
Unrealized foreign
exchange loss - 128,272 - 166,664
Changes in non-cash
working capital
items related to
operations:
Accounts receivable
and other
receivables 366,405 207,246 482,555 1,794,867
Prepaid expenses 2,686 88,991 247,730 284,057
Accounts payable
and accrued
liabilities (229,162) 65,439 (795,880) (121,970)
Deferred revenue (337,154) 83,350 (356,349) 90,920
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Cash used in
operating
activities (666,451) (47,440) (2,839,050) (57,543)
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FINANCING ACTIVITIES
Issue of common
shares, common
purchase options,
warrants for cash
net of issuance
costs - - 2,337,740 2,759,581
Notes payable (9,018) 12,257 (20,518) (924,565)
Deferred financing
costs - - (13,474)
Promissory notes
payable - (25,180) (450,000) (110,513)
Bank indebtedness - - - (240,979)
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Cash provided by
(used in) financing
activities (9,018) (12,923) 1,867,222 1,470,050
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INVESTING ACTIVITIES
Short-term
investments 499,173 668,863 793,290 (817,839)
Net of cash received
(paid) on
acquisitions - (299,992) - (541,371)
Net addition,
disposal to capital
assets (15,684) 74,052 (22,361) 109,344
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Cash provided by
(used in) investing
activities 483,489 442,923 770,929 (1,249,866)
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Net increase in cash
and cash equivalents
during the period (191,980) 382,560 (200,899) 162,641
Cash and cash
equivalents,
beginning of the
period 713,650 279,950 722,569 499,869
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Cash and cash
equivalents, end of
the period 521,670 662,510 521,670 662,510
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Contact:
Diversinet Corp.
David Hackett, CFO
(416) 756-2324
www.diversinet.com
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Source: Diversinet Corp. |
