| [August 12, 2004] |
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Diversinet Corp. Announces Second Quarter 2004 Results
TORONTO --(Business Wire)-- Aug. 12, 2004 -- Continued Progress Towards 2004 Strategic Objectives Outlined
Diversinet Corp. (OTCBB:DVNTF), a leading provider of security management products for the mobile data ecosystem, today announced its second quarter 2004 results. Revenues for the quarter were $1,748,000, slightly lower than the $1,778,000 in revenues for the first quarter of 2004. Revenues for the six months ended June 30, 2004 were $3,935,000, up 10 percent from $3,584,000 in 2003. These revenues continue to be dominated by professional services.
The net loss for the quarter was $1,346,000, in line with the first quarter 2004 loss of $1,343,000. For the six months ended June 30, 2004, the net loss was $2,690,000, or $0.22 per share, compared to a net loss for the same period in fiscal 2003 of $1,993,000, or $0.58 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 second quarter was $794,000 and a decrease from the $1,379,000 used in the first quarter of 2004. EBITDA(a) before stock-based compensation expense for the quarter was $(996,000) compared to $(960,000) for the first quarter of 2004. Cash at quarter end was $1,663,000 compared to $2,463,000 in March 2004. During the second quarter of 2004, reductions in operating expense were implemented which are expected to translate into a $250,000 expense savings in each of the third and fourth quarters of 2004.
During the second quarter, Diversinet announced the availability of its highly anticipated Passport Trust Platform(TM), an expanded version of its flagship wireless data security infrastructure product suite that speeds the deployment of next-generation mobile data applications. Along with a new software development kit, the Passport Trust Platform features a number of innovative platform components that simplify the provisioning of wireless credentials and reduce the effort needed to ensure the security and integrity of mobile payments, messaging, data access, gaming and wagering, high-value content download, enterprise mobile workforce and other wireless data applications.
Diversinet has made progress towards key strategic objectives during the quarter by establishing and advancing partnerships for incorporation of the Passport Trust Platform as follows:
- BlackBerry S/MIME Solutions: Diversinet demonstrated an innovative platform for provisioning security credentials to BlackBerry devices from Research in Motion (RIMM), and has received initial interest in piloting this solution from two North America-based organizations. Diversinet anticipates these pilots to be started in late third quarter of 2004. These pilots establish the foundation for the start of secure email service revenues in early 2005. As Diversinet anticipates that nearly 25 percent of enterprises will require S/MIME-based secure email solutions within the coming year, substantiated by results from Osterman Research, this solution area remains a strong area of focus.
- Outercurve Licensing: Diversinet entered into a technology and marketing agreement with OuterCurve Technologies, a leading provider of wireless handheld business solutions. Through the agreement, Outercurve has licensed Diversinet's Passport Trust Platform, and is integrating it with its InfoEdge On-Demand(TM) information delivery architecture for the BlackBerry(R) wireless platform from Research In Motion. It will provide secure, PKI-based wireless access to a variety of corporate data applications such as wireless market data, document access, CRM, research notes and financial news.
- Application Provider Licensing: Diversinet has also reached agreement with a Beijing-based application service provider to license the Passport Trust Platform, and integration work is scheduled to start in Q4 2004.
- CITIC Pacific Strategic Partnership for Greater China: Diversinet has established 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 beginning in early 2005.
"Early adopter customers in both the North American and Asian markets 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. "Diversinet continues to make progress in enabling the wireless data ecosystem with the Passport Trust Platform, laying the foundation for 2005 revenues."
About Diversinet
Diversinet is a leading provider of wireless data security management products and services to application, device, and service providers. The company's flagship product, the standards-based Passport(TM) Trust Platform, provides strong end-to-end security for wireless applications and other infrastructure services, enabling Diversinet customers and partners to achieve trust across the mobile data ecosystem, as well as higher productivity and new revenue channels. Passport ensures the security and integrity of wireless data transactions such as mobile payments, messaging, data access, gaming and wagering, high-value content download, enterprise mobile work force and other applications. Passport enables application developers, wireless carriers, service providers and manufacturers of mobile devices, operating systems, SIM/OTA platforms and DRM platforms to implement secure wireless data services more quickly and at significantly lower cost.
Diversinet's customers and partners include Visa, Fleet Credit Card Services, First National Bank, Hongkong Post, and Research in Motion (RIM). Diversinet is headquartered in Toronto, Canada, with offices in Boston, MA, Fremont, CA, and Hong Kong, SAR. For more information, visit 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.
(a) EBITDA is defined as operating revenues less 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. -0- *T Diversinet Corp. CONSOLIDATED BALANCE SHEETS (in United States dollars) June 30 December 31 2004 2003 $ $ --------------------------------------------------------------------- --------------------------------------------------------------------- (Unaudited) ASSETS Current Cash and cash equivalents 713,650 722,569 Short-term investments 949,843 1,243,960 Accounts receivable 996,198 1,081,760 Other receivables 55,160 85,748 Prepaid expenses 129,965 375,009 --------------------------------------------------------------------- Total current assets 2,844,816 3,509,046 --------------------------------------------------------------------- Capital and intangible assets, net 1,781,509 2,182,531 Goodwill 5,311,932 5,311,932 --------------------------------------------------------------------- Total assets 9,938,257 11,003,509 --------------------------------------------------------------------- --------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Accounts payable 807,628 899,644 Accrued liabilities 876,697 1,351,400 Current portion of promissory note 150,000 300,000 Notes payable 16,692 28,192 Deferred revenue 458,254 477,449 --------------------------------------------------------------------- Total current liabilities 2,309,271 3,056,685 --------------------------------------------------------------------- Promissory note - 300,000 --------------------------------------------------------------------- Total liabilities 2,309,271 3,356,685 --------------------------------------------------------------------- --------------------------------------------------------------------- Shareholders' equity Share capital 51,529,222 49,191,482 Cumulative translation adjustment (1,520,721) (1,520,721) Share purchase warrants 1,430,171 1,331,652 Contributed surplus 549,082 126,173 Deficit (44,358,768) (41,481,762) --------------------------------------------------------------------- Total shareholders' equity 7,628,986 7,646,824 --------------------------------------------------------------------- Total liabilities and shareholders' equity 9,938,257 11,003,509 --------------------------------------------------------------------- --------------------------------------------------------------------- See accompanying notes to interim consolidated financial statements. Diversinet Corp. CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT (in United States dollars) (Unaudited) Three months ended June 30 Six months ended June 30 2004 2003 2004 2003 $ $ $ $ --------------------------------------------------------------------- REVENUE 1,747,984 1,777,982 3,934,890 3,583,602 Cost of sales 1,398,832 1,528,192 3,052,092 2,920,384 --------------------------------------------------------------------- Gross margin 349,152 249,790 882,798 663,218 EXPENSES Research and development 310,862 108,792 641,951 402,975 Sales and marketing 519,303 644,048 1,052,369 898,901 General and administrative 515,908 292,704 1,145,588 1,048,992 Stock based compensation 149,257 - 334,540 - Depreciation and amortization 203,933 251,066 407,699 342,024 --------------------------------------------------------------------- 1,699,263 1,296,610 3,582,147 2,692,892 --------------------------------------------------------------------- Loss before the following (1,350,111) (1,046,820) (2,699,349) (2,029,674) Interest (income) (2,901) (5,228) (9,230) (36,307) --------------------------------------------------------------------- --------------------------------------------------------------------- Loss for the period (1,347,210) (1,041,592) (2,690,119) (1,993,367) --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- --------------------------------------------------------------------- Basic and diluted loss per share (0.11) (0.28) (0.22) (0.58) --------------------------------------------------------------------- --------------------------------------------------------------------- Weighted average common shares outstanding 12,228,533 3,682,977 12,055,217 3,453,865 --------------------------------------------------------------------- --------------------------------------------------------------------- Deficit, beginning of period (43,011,558)(36,815,463) (41,481,762) (35,863,688) Adjustment for change in accounting for stock based compensation - - (186,887) - --------------------------------------------------------------------- Adjusted deficit (43,011,558)(36,815,463) (41,668,649) (35,863,688) --------------------------------------------------------------------- Loss for the period (1,347,210) (1,041,592) (2,690,119) (1,993,367) --------------------------------------------------------------------- --------------------------------------------------------------------- Deficit, end of period (44,358,768)(37,857,055) (44,358,768) (37,857,055) --------------------------------------------------------------------- --------------------------------------------------------------------- See accompanying notes to interim consolidated financial statements. Diversinet Corp. CONSOLIDATED STATEMENTS OF CASH FLOWS (in United States dollars) (Unaudited) Three months ended June 30 Six months ended June 30 2004 2003 2004 2003 $ $ $ $ --------------------------------------------------------------------- OPERATING ACTIVITIES Loss for the period (1,347,210) (1,041,592) (2,690,119) (1,993,367) Add (deduct) items not requiring an outlay of cash: Depreciation and amortization 203,933 251,066 407,699 342,024 Stock-based compensation expense 149,257 - 334,541 - Unrealized foreign exchange loss - (37,267) - 39,332 Changes in non-cash working capital items related to operations: Accounts receivable and other receivables (7,201) (2,120) 116,150 1,587,621 Prepaid expenses 44,951 137,370 245,044 195,066 Accounts payable and accrued liabilities 39,316 43,600 (566,719) (187,409) Deferred revenue 123,145 (6,767) (19,195) 7,570 --------------------------------------------------------------------- Cash used in operating activities (793,809) (655,710) (2,172,599) (9,163) --------------------------------------------------------------------- --------------------------------------------------------------------- FINANCING ACTIVITIES Issue of common shares, common purchase options, warrants for cash and share consolidation costs 3,026 2,764,076 2,337,740 2,758,641 Notes payable (6,978) (62,826) (11,500) (936,822) Deferred financing costs - 9,551 - (13,474) Promissory notes payable - (85,333) (450,000) (85,333) Bank indebtedness - - - (240,979) --------------------------------------------------------------------- Cash provided by (used in) financing activities (3,952) 2,625,468 1,876,240 1,482,033 --------------------------------------------------------------------- --------------------------------------------------------------------- INVESTING ACTIVITIES Short-term investments 298,641 (2,503,064) 294,117 (1,486,702) Acquisition, net of cash received - (27,286) - (241,379) Additions to capital assets (2,215) 35,292 (6,677) 35,292 --------------------------------------------------------------------- Cash provided by (used in) investing activities 296,426 (2,495,058) 287,440 (1,692,789) --------------------------------------------------------------------- --------------------------------------------------------------------- Net increase in cash and cash equivalents during the period (501,335) (525,300) (8,919) (219,919) Cash and cash equivalents, beginning of the period 1,214,985 805,250 722,569 499,869 --------------------------------------------------------------------- Cash and cash equivalents, end of the period 713,650 279,950 713,650 279,950 --------------------------------------------------------------------- --------------------------------------------------------------------- See accompanying notes to interim consolidated financial statements. *T
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