UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER PURSUANT TO RULE 13A-16 AND L5D-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
(DECEMBER 13, 2001)
DIVERSINET CORP.
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(Name of Registrant)
2225 Sheppard Avenue East, Suite 1700, Toronto, Ontario M2J 5C2
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(Address of principal executive offices)
1. Press Release
2. Quarter ended October 31, 2001
3. Management's Discussion and Analysis of Financial Condition and Results of
Operations - Quarter ended October 31, 2001
Indicate by check mark whether the Registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
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Indicate by check mark whether the Registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
YES NO XXX
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 6-K to be signed on its behalf by the
undersigned, thereunto duly authorized
DIVERSINET CORP. - SEC FILE NO.0-23304
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(REGISTRANT)
DATE: DECEMBER 13, 2001 BY: /s/ RICHARD PALMER
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RICHARD PALMER, VICE PRESIDENT & CFO
DIVERSINET
# OF SHARES ISSUED AND OUTSTANDING
26,413,876
FOR IMMEDIATE RELEASE:
DIVERSINET CORP. ANNOUNCES
FOURTH QUARTER FISCAL 2001 RESULTS
TORONTO, CANADA - DECEMBER 12, 2001 - Diversinet Corp. (NASDAQ Small Cap: DVNT),
a leading provider of m-commerce security infrastructure solutions, today
announced its fourth quarter fiscal 2001 results.
On October 8, 2001, Diversinet achieved a significant milestone in its
development when Hongkong Post, using Diversinet's security technology
solutions, launched the world's first Certificate Authority service offering
wireless digital certificates for community-wide use.
In addition to the launch of the Hongkong Post's new Mobile e-Cert service,
during the fourth quarter Diversinet signed a number of agreements with
application developers and application solution providers in the Hong Kong
market. These companies have been developing secure wireless stock trading and
gaming applications for the Hong Kong market.
The Asia-Pacific region represents a significant growth opportunity for the
Company. The progress in the Hong Kong market will serve as a model for future
development in the region.
Also during the quarter, Diversinet was selected through a competitive tender
process by a group representing operators, to be the prime contractor to develop
a secure wireless digital certificate solution for the next generation of
WAP-enabled phones. Next-generation WAP phones are expected to begin shipping in
volume in the spring of 2002. The association, comprised of representatives from
these operators, has a mandate to ensure that maximum benefit can be achieved
from these new devices.
During the quarter, the Company also completed a restructuring, reducing cash
requirements for future operations. The cost reduction measures were taken as a
result of the Company's decision to focus its activities primarily on the fast
growing Asian and European wireless markets. This initiative will allow the
Company to save approximately $6 million in costs on an annualized basis, while
ensuring resources are in place for continued growth.
The Company recorded revenues of $276,000 in the three months ended October 31,
2001, compared to $1,143,000, in the same period in the prior year. The net loss
for the three months ended October 31, 2001 was $3,404,000, or $(0.13) per
share, compared to a net loss for the same quarter in fiscal 2000 of $3,795,000,
or $(0.16) per share.
For the twelve months ended October 31, 2001, Diversinet reported revenue of
$1,221,000 compared to revenue of $2,636,000, for the twelve months ended
October 31, 2000. The Company reported a net loss of $18,900,000, or $(0.72) per
share, for the twelve months ended October 31, 2001, compared to a net loss of
$15,027,000, or $(0.64) per share, for the same period last year. The increased
net loss in fiscal 2001 is attributable to reduced revenue and increased
operating costs compared to the prior year.
The Company had $6,150,000 in cash and short-term investments as of October 31,
2001. Cash resources consumed in the quarter, including expenditures related to
the Company's activities, amounted to $3,882,000, in line with Management's
expectations. Management is continuing with its cash preservation initiatives
implemented in the fourth quarter of fiscal 2001. Commencing in the first
quarter of fiscal 2002, the Company expects cash requirements, including capital
expenditures, to decline to approximately 70% of the amount required in the
fourth quarter of fiscal 2001. However, the Company anticipates the need for
additional future financing to support its continued growth and development.
"The Company has made significant progress in the Asia-Pacific region, creating
a strong initial base in the Hong Kong market," said Nagy Moustafa, President &
CEO of Diversinet. "As the market develops, it will serve as a model for future
expansion of the Company's operations. The agreements we secured in the fourth
quarter underscore our leadership in the Hong Kong market and our commitment to
the Asian market to develop security for mobile commerce services."
During the fourth quarter of fiscal 2001, the Company furthered activities in
the North American and European markets, entering into agreements with
application developers for the development of secure wireless financial and
gaming applications. The Company is also continuing to work closely with
e-Scotia on the implementation of the Company's security solutions in the
e-Scotia environment.
Furthering its technological lead and broad device coverage, Diversinet
introduced a second wireless security offering for the Microsoft Windows Powered
Pocket PC platform. Diversinet's new Passport Mobile Client for Microsoft Pocket
Internet Explorer browser software provides security for web-based Pocket PC
applications, enabling users to securely connect and use digital signatures and
encryption with Web-enabled applications. Diversinet was invited by Microsoft to
showcase this new solution at the October 4, 2001, Pocket PC 2002 Launch.
The Company is in an early stage in an emerging market and its present revenues
are predominantly from license sales and related Professional Services and
software products revenue. Accordingly, the Company's revenues can fluctuate
widely from one period to the next, and results from one period may not be
indicative of future prospects.
INVESTOR TELECONFERENCE CALL
Diversinet's executive team will hold a conference call Thursday, December 13,
2001 at 8:30 a.m. Eastern Time to discuss fourth quarter fiscal 2001 results.
Interested parties should contact Sandra Lemaitre, Diversinet Corp., at
416-756-2324, ext.324 for the dial-in-number and are encouraged to listen to the
live call from the home page and investor relation's portion of the Company's
Web site: http://www.diversinet.com. In order to hear this conference call on
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the website, your computer must be appropriately configured. The webcast will be
available for 90 days.
ABOUT DIVERSINET CORP.
Diversinet is a leading developer of advanced wireless security software,
enabling mobile e-commerce (m-commerce) services with its wireless security
infrastructure solutions. Diversinet's client/server security software
facilitates digital signatures, authentication and encryption with PKI products
specifically designed to perform optimally in wireless environments and devices.
In October of 2001, Diversinet enabled the launch of the first public
Certification Authority in the world to offer mobile individual and business
digital certificates for consumer use. For more information on Diversinet, visit
the company's web site at www.diversinet.com.
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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.
FOR INQUIRIES
Diversinet Corp.
Sandra Lemaitre
Tel: (416) 756-2324, ext.324
Email: pr@dvnet.com
CONSOLIDATED FINANCIAL STATEMENTS
DIVERSINET CORP.
For the Three and Twelve Months Ended October 31, 2001
(Unaudited)
DIVERSINET CORP.
CONSOLIDATED BALANCE SHEETS
[in Canadian dollars]
As at October 31, 2001
2001 2000
$ $
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ASSETS
CURRENT
Cash and cash equivalents 3,061,844 23,192,586
Short term investments 3,087,680 -
Trade receivable 274,521 1,657,748
Other receivable 99,469 154,644
Prepaid expenses 596,105 567,470
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TOTAL CURRENT ASSETS 7,119,619 25,572,448
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Capital assets, net 2,496,738 1,855,966
Purchased technology, net - 723,975
Deferred development costs, net - 618,726
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9,616,357 28,771,115
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable 1,191,117 420,140
Accrued liabilities 2,329,269 3,421,380
Deferred revenue 43,843 83,336
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TOTAL LIABILITIES 3,564,229 3,924,856
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SHAREHOLDERS' EQUITY
Share capital 53,992,992 53,887,264
Contributed surplus 97,500 97,500
Deficit (48,038,364) (29,138,505)
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TOTAL SHAREHOLDERS' EQUITY 6,052,128 24,846,259
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9,616,357 28,771,115
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DIVERSINET CORP.
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
[in Canadian dollars]
Three and twelve months ended October 31, 2001
(Unaudited)
THREE MONTHS OCTOBER 31 TWELVE MONTHS OCTOBER 31
2001 2000 2001 2000
$ $ $ $
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REVENUE 276,217 1,143,023 1,220,981 2,636,180
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EXPENSES
Research and development 1,318,521 2,141,046 6,906,566 5,888,028
Sales and marketing 671,981 1,356,545 7,256,432 5,435,378
General and administrative 660,084 990,589 4,029,236 4,185,431
Depreciation and amortization 318,607 612,846 1,888,147 2,603,589
Severance costs 730,000 - 730,000 -
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3,699,193 5,101,026 20,810,381 18,112,426
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Loss before the following (3,422,976) (3,958,003) (19,589,400) (15,476,246)
Interest income, net (18,948) (412,848) (689,541) (699,038)
================================================================== ============================
Loss from continued operations (3,404,028) (3,545,155) (18,899,859) (14,777,208)
Loss from discontinued operations - (250,000) (250,000)
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Loss for the period (3,404,028) (3,795,155) (18,899,859) (15,027,208)
================================================================== ============================
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LOSS PER SHARE (0.13) (0.16) (0.72) (0.64)
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WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 26,413,876 23,717,762 26,376,480 23,534,438
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DEFICIT, BEGINNING OF PERIOD (44,634,336) (25,343,350) (29,138,505) (14,111,297)
Loss for the period (3,404,028) (3,795,155) (18,899,859) (15,027,208)
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DEFICIT, END OF PERIOD (48,038,364) (29,138,505) (48,038,364) (29,138,505)
================================================================== ============================
DIVERSINET CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
[in Canadian dollars]
Three and twelve months ended October 31, 2001
(Unaudited)
THREE MONTHS OCTOBER 31 TWELVE MONTHS OCTOBER 31
2001 2000 2001 2000
$ $ $
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OPERATING ACTIVITIES
Loss for the period (3,404,028) (3,545,155) (18,899,859) (14,777,208)
Add (deduct) items not requiring an outlay of cash:
Depreciation and amortization 318,607 612,846 1,888,147 2,603,589
Foreign exchange gain on debenture (78,864)
Interest on debenture 4,833
Changes in non-cash working capital
items related to operations:
Accounts receivable and other receivables (610) (1,064,048) 1,438,402 (1,624,543)
Prepaid expenses 13,477 (103,793) (28,635) (375,698)
Accounts payable and accrued liabilities (330,866) (529,514) (321,134) 894,377
Deferred Revenue 15,803 136,259 (39,493) 232,100
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CASH USED IN OPERATING ACTIVITIES (3,387,617) (4,493,405) (15,962,572) (13,121,414)
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FINANCING ACTIVITIES
Issue of common shares, common share
purchase options and warrants for cash 3,834,355 105,728 30,674,246
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CASH PROVIDED BY FINANCING ACTIVITIES - 3,834,355 105,728 30,674,246
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INVESTING ACTIVITIES
Short term investments (3,087,680) (3,087,680)
Additions to capital assets (494,149) (538,516) (1,186,218) (1,763,658)
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CASH USED IN INVESTING ACTIVITIES (3,581,829) (538,516) (4,273,898) (1,763,658)
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NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS DURING THE PERIOD (6,969,446) (1,197,566) (20,130,742) 15,789,174
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 10,031,290 24,390,152 23,192,586 7,403,412
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CASH AND CASH EQUIVALENTS,
END OF THE PERIOD 3,061,844 23,192,586 3,061,844 23,192,586
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DIVERSINET CORP.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(Amounts expressed in Canadian dollars)
Three and twelve months ended October 31, 2001
Diversinet Corp. (the "Company"), an Ontario corporation, develops and markets
security software products, utilizing public-key infrastructure technology, for
wireless mobile e-commerce applications, such as banking, stock trading, gaming
and health care.
1. BASIS OF PRESENTATION:
In the opinion of management, the unaudited consolidated financial statements of
the Company have been prepared on a consistent basis with the October 31, 2000
audited consolidated financial statements and include all material adjustments,
consisting of normal recurring adjustments, necessary to present fairly the
financial position of the Company at October 31, 2001 and the results of
operations and cash flows for the three and twelve months ended October 31, 2001
in accordance with Canadian generally accepted accounting principles (GAAP).
The disclosures contained in these unaudited interim consolidated financial
statements do not include all requirements of generally accepted accounting
principles for annual financial statements. The unaudited interim consolidated
financial statements should be read in conjunction with the annual consolidated
financial statements for the year ended October 31, 2000.
2. FUTURE OPERATIONS:
These consolidated financial statements have been prepared on a going concern
basis, which assumes the Company will continue in operation in the foreseeable
future and be able to realize assets and satisfy liabilities in its normal
course of business. Certain conditions and events exist that cast doubt on the
Company's ability to continue as a going concern.
The company has incurred significant losses and used significant amounts of cash
in operating activities in recent years.
Continued operations depend upon the Company's ability to generate future
profitable operations and/or obtain additional financing to fund future
operations and, ultimately, to generate positive cash flow from operating
activities . There can be no assurance that the Company will be successful in
obtaining additional financing.
Should the Company be unable to generate positive cash flow from operations or
secure additional financing in the foreseeable future, the application of the
going concern principle for financial statement reporting purposes may no longer
be appropriate. These financial statements do not include any adjustments
related to the valuation or classification of recorded asset amounts or the
amounts or classification of liabilities that may be necessary should the
Company be unable to continue as a going concern.
3. ASIAN OPERATIONS:
On June 4, 2001, the Company entered into an agreement with an Asian company to
establish a joint venture to conduct certain of the Company's Asian activities.
Each party holds a 50% interest in the joint venture. These financial
statements reflect the Company's proportionate interest in the joint venture's
assets, liabilities, revenues and expenses.
The following amounts included in the consolidated financial statements
represent the Company's proportionate interest in the joint venture:
OCTOBER 31
2001
$
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Accounts receivable 9,622
Fixed assets 523,138
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Total assets 532,760
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Accounts payable 600,649
Accrued liabilities 14,378
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Total liabilities 615,027
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Expenses (483,472)
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Loss (483,472)
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Canadian GAAP requires the proportionate consolidation of interests in joint
ventures. Interests in joint ventures are generally accounted for on the equity
basis under United States GAAP. The use of proportionate consolidation affects
certain assets, liabilities, revenues and expense accounts as well as cash flow
from operations, compared to those amounts that would be reported under United
States GAAP, however there is no impact on loss for the period or shareholders'
equity. Under United States GAAP, total revenue would have been $276,217 for
the three months and $1,420,914 for the twelve months ended October 31, 2001.
The increased revenue under the equity method is the result of sales by the
Company to the joint venture that are eliminated when using the proportionate
consolidation method required under Canadian GAAP.
During fiscal 2001, the Company recognized revenue of $199,925 from sales to the
joint venture. As at October 31, 2001, the Company had contributed approximately
$401,000 into the joint venture. The Company has to date committed to contribute
an additional $615,000 to the joint venture for the Company's proportionate
share of the joint venture requirements. This amount is expected to be
contributed within the next six months.
4. SEGMENTED INFORMATION:
The Company operates in a single reportable operating segment, that being the
sale of security software and related services. For all periods reported,
significantly all the assets related to the Company's operations were located in
Canada. In the three months ended October 31, 2001, a significant proportion of
revenue, defined as customers comprising 10% or more of total revenue, was
generated from two customers. In the three months ended October 31, 2000, three
customers each contributed in excess of 10% of total revenue for this period,
although none were the same customers as in the three months ended October 31,
2001. In the twelve months ended October 31, 2001, three customers each
accounted for greater than 10% of revenue. In the twelve months ended October
31, 2000, there were two significant customers although none were the same
customers as in the twelve months ended October 31, 2001.
Revenue is attributable to geographic location based on the location of the
customer, as follows:
THREE MONTHS TWELVE MONTHS
OCTOBER 31 OCTOBER 31
2001 2000 2001 2000
$ $ $ $
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Sales
United States 21,794 504,473 294,650 1,464,630
Asia 31,100 668,880
Canada 186,083 213,295 308,000
Other 37,240 638,550 44,156 863,550
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276,217 1,143,023 1,220,981 2,636,180
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5. As at October 31, 2001, the following were outstanding:
Number of common shares
26,413,876
Number of common share options outstanding under the
Company's stock option plan 3,674,256
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - QUARTER AND YEAR ENDED OCTOBER 31, 2001
Operating Results
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The Company recorded revenues of $276,000 in the three months ended October 31,
2001, compared to $1,143,000, in the same period in the prior year. The net
loss for the three months ended October 31, 2001 was $3,404,000 compared to a
net loss for the same quarter in fiscal 2000 of $3,795,000. The Company
reported a net loss of $18,900,000, for the twelve months ended October 31,
2001, compared to a net loss of $15,027,000, for the same period last year. The
increased net loss in fiscal 2001 is attributable to reduced revenue compared to
the same period in the prior year and increased operating costs during the
period. The Company completed operating cost reductions in the fourth quarter
of 2001 reflected in the decline in expenses from operations to $3,699,000 in
the three months ended October 31, 2001 as compared to $5,101,000 in the same
period in the prior year.
For the twelve months ended October 31, 2001, Diversinet reported revenue of
$1,221,000 compared to revenue of $2,636,000, for the twelve months ended
October 31, 2000. The information technology slowdown has resulted in a deferral
of purchases by the Company's potential customers throughout the year resulting
in reduced revenue compared to the prior year. The Company generated 55% of its
revenue from the Asian region, 24% from the United States, and 17% from Canada
during the fiscal year 2001.
Research and development expenses increased to $6,907,000 in the twelve months
ended October 31, 2001 from $5,888,000 in the twelve months ended October 31,
2000 resulting primarily from wages, occupancy, and travel costs which were
higher on average than in the prior year. Research and development expenses
declined to $1,319,000 in the three months ended October 31, 2001 from
$2,141,000 in the comparable period in the prior year due to the consolidation
of personal in the Toronto office. This also resulted in a reduction to travel
and occupancy costs from the fourth quarter of 2001.
Sales and marketing expenses were $7,256,000 in the twelve months ended October
31, 2001 compared to $5,435,000 in the twelve months ended October 31, 2000.
Sales and marketing expenses in the three months ended October 31, 2001 declined
to $672,000 as compared to $1,357,000 in the three months ended October 31,
2000. During the fourth quarter sales and marketing staff in North America were
reduced as the Company refocused its efforts in the Hong Kong and European
markets where the Company has been achieving success.
General and administrative expenses were $4,029,000 for the twelve months ended
October 31, 2001 as compared to $4,185,000 for the twelve months ended October
31, 2000. For the three months ended October 31, 2001, general and
administrative expenses were $660,000 compared to $991,000 for the three months
ended October 31, 2000. Declining expenses over the year and the fourth quarter
are the result of continuing operating cost controls absent the effect of
foreign exchange translation.
Depreciation and amortization expense in the twelve months ended October 31,
2001 decreased to $1,888,000 from $2,604,000 in the comparable period in 2000.
Depreciation and amortization for the three months ended October 31, 2001
amounted to $319,000 compared to $613,000 in the three months ended October 31,
2000. The Company's deferred development costs are now fully amortized and the
reduction in additions to capital assets due to the consolidation of offices has
resulted in reduced amortization for both the year and the quarter.
Liquidity and Capital Resources
- -------------------------------
Cash and cash equivalents combined with short-term investments amounted to
$6,150,000 as at October 31, 2001. Cash resources were $10,031,000 at July 31,
2001 and $23,193,000 at October 31, 2000. Cash utilization for the fourth
quarter was $3,882,000, including $494,000 for additions to capital assets.
Cash utilization was in accordance with management's expectations. The Company
expects that cash requirements for the first quarter of fiscal 2002, excluding
capital expenditures, will be approximately 60% of the total amount required in
the fourth quarter of fiscal 2001. The Company anticipates the need for future
financing to support its continued growth and development, and to successfully
implement its business plan.
Risks and Uncertainties
- -----------------------
The ability of the Company to continue operations is dependent on the
commercialization of its security infrastructure products and the Company's
ability to obtain additional financing to fund future operations. In addition
there are risks associated with the fact that the Company has limited experience
in the wireless internet security software field and the Company is subject to
the risks inherent in this business. The Company is dependent on the adoption
of transaction-based applications over wireless networks as an accepted method
of commerce. Our licensing revenues are dependent on our customers' acceptance
and use of our software products and we expect our sales cycle to be lengthy.
Due to the early stage in our marketplace, it is difficult to accurately
forecast future revenues.