OTCBB: DVNTF

FOR IMMEDIATE RELEASE:

DIVERSINET CORP. ANNOUNCES
SECOND QUARTER 2005 FINANCIAL RESULTS

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

TORONTO, Canada, August 11, 2005 – 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

 

 

 

 

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

 

 

 

 

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 June 30

Six months ended June 30

 

 

2005

2004

2005

2004

 

 

 

(restated note 3)

 

(restated 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 June 30

Six months ended 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