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
(MARCH 26, 2002)
DIVERSINET CORP.
_______________________________________________________________________
(Name of Registrant)
2225 Sheppard Avenue East, Suite 1700, Toronto, Ontario M2J 5C2
________________________________________________________________________
(Address of principal executive offices)
1. First Quarter Fiscal 2002 Results
2. Management Discussion & Analysis - Quarter Ended January 31, 2002
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
---------- ----------
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
--------------------------------------
(REGISTRANT)
DATE: MARCH 26, 2002 BY: /s/ NAGY MOUSTAFA
----------------------------------------
NAGY MOUSTAFA, PRESIDENT & CEO
DIVERSINET
# OF SHARES ISSUED AND OUTSTANDING
26,413,876
FOR IMMEDIATE RELEASE:
DIVERSINET CORP. ANNOUNCES
FIRST QUARTER FISCAL 2002 RESULTS
TORONTO, CANADA - MARCH 26, 2002 - DIVERSINET CORP. (NASDAQ Small Cap: DVNT), a
leading provider of m-commerce security infrastructure solutions, today
announced its first quarter fiscal 2002 results.
The net loss for the three months ended January 31, 2002 was reduced to
$1,725,000, or $(0.07) per share, from a net loss for the same quarter in fiscal
2001 of $5,437,000, or $(0.21) per share. The reduced net loss in fiscal 2002 is
primarily attributable to the reduction in headcount that was completed during
September 2001, together with continued strict cost controls throughout the
quarter. Revenues of $174,000 were recorded in the three months ended January
31, 2002 compared to $571,000 for the first quarter of fiscal 2001.
Operating expenses decreased for the fourth consecutive quarter, improving from
$3,699,000 for the three months ended October 31, 2001 to $1,938,000 for the
three months ended January 31, 2002. Over the past several quarters, the Company
has reduced operating expenses by approximately $17,000,000 on an annualized
basis and is continuing its efforts to further reduce operating cash
requirements. The Company ended the quarter with $3,783,000 in cash.
The cost reduction measures and resultant decreased operating expenses will
enable the Company to reach a break-even point more rapidly when the recurring
revenue stream commences scaling in size. However, the Company recognizes that
additional capital will be required prior to reaching a cash-flow positive
position and active exploration of financing alternatives is currently underway.
The Company achieved a number of milestones during the first quarter of 2002 as
it continued the implementation of its security solutions infrastructure in the
Hong Kong market. Diversinet's technology was used to enable the world's first
mobile operator Registration Authority and facilitate the successful launch of a
PKI-enabled wireless stock trading application.
In January 2002, the leading mobile operator in Hong Kong, Hutchison Telecom,
was appointed by the Hongkong Post Office as the first certified Registration
Authority for the registration of Hongkong Post Mobile e-Cert digital
certificates to mobile users, providing an additional channel for consumers to
purchase digital certificates.
Heracle Technologies' mBroker wireless stock trading application, which was
formally launched in January 2002, utilizes the Hongkong Post Mobile e-Cert for
its critical security component. While still at an early stage, the Company
began, in February, to see the start of recurring revenue through the first
sales of Mobile e-Certs for Heracle's mBroker application. The Company
anticipates that when active marketing of the service commences through the 15
brokerage houses already signed up, certificate sales will accelerate.
"The commercial launch of Heracle's wireless stock trading application marks a
very significant milestone in Diversinet's path to being the leader in the
wireless security market," said Nagy Moustafa, President and CEO of Diversinet
Corp. "The launch not only marks the achievement of a complete wireless security
infrastructure in Hong Kong, it is also the start of the Company's recurring
revenue stream."
In the first quarter of 2002, the Company announced an agreement to license its
PKI toolkit to iMerchants Ltd. for use in their wireless retail banking
solution. iMerchants is actively marketing its solution to retail banks in Hong
Kong.
Implementation activities are continuing at e-Scotia, the e-commerce subsidiary
of Scotia Bank, as the Company strives to replicate its successful Hong Kong
infrastructure implementation in Canada.
Mr. David Hackett was appointed as Chief Financial Officer effective March 26,
2002. Mr. Hackett replaces Mr. Richard Palmer who left the Company to pursue
other opportunities. Mr. Hackett has more than 14 years of solid finance
experience in high-tech and entertainment industries. Previously, Mr. Hackett
was CFO of Aucxis Corp., a technology and service provider to electronic
marketplaces, where he oversaw start-up operations, public financing and
acquisitions. Mr. Hackett has also held senior financial management positions at
EveryWare Development, Alliance Atlantis Communications and Entertainment
Information Services Ltd. Mr. Hackett is a CA and holds an MBA from the
University of Western Ontario.
The assumption of the role of CFO by Mr. Hackett will further strengthen the
Company's management team and position it for continued expansion and stronger
future growth.
CONSOLIDATED BALANCE SHEETS
[in Canadian dollars]
(Unaudited)
JANUARY 31 October 31
2002 2001
$ $
- -------------------------------------------------------------------------
ASSETS
CURRENT
Cash and cash equivalents 3,783,018 3,061,844
Short-term investments - 3,087,680
Accounts receivable 108,574 274,521
Other receivables 52,584 99,469
Prepaid expenses 419,291 596,105
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TOTAL CURRENT ASSETS 4,363,467 7,119,619
- -------------------------------------------------------------------------
Capital assets, net 2,384,064 2,496,738
- -------------------------------------------------------------------------
TOTAL ASSETS 6,747,531 9,616,357
=========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT
Accounts payable 679,425 1,191,117
Accrued liabilities 1,690,388 2,329,269
Deferred revenue 50,548 43,843
- -------------------------------------------------------------------------
TOTAL LIABILITIES 2,420,361 3,564,229
=========================================================================
SHAREHOLDERS' EQUITY
Share capital 53,992,992 53,992,992
Contributed surplus 97,500 97,500
Deficit (49,763,322) (48,038,364)
- -------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 4,327,170 6,052,128
=========================================================================
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 6,747,531 9,616,357
=========================================================================
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
[in Canadian dollars]
Three months ended January 31, 2002
(Unaudited)
THREE MONTHS JANUARY 31
2002 2001
$ $
- -----------------------------------------------------------
REVENUE 174,452 570,655
- -----------------------------------------------------------
EXPENSES
Research and development 647,618 2,197,827
Sales and marketing 431,591 2,353,586
General and administrative 736,452 1,172,424
Depreciation and amortization 121,876 623,419
- -----------------------------------------------------------
1,937,537 6,347,256
Loss before the following (1,763,085) (5,776,601)
Interest income (38,127) (339,820)
===========================================================
LOSS FOR THE PERIOD (1,724,958) (5,436,781)
===========================================================
LOSS PER SHARE (0 07) (0 21)
===========================================================
WEIGHTED AVERAGE
COMMON SHARES OUTSTANDING 26,413,876 26,358,151
===========================================================
DEFICIT, BEGINNING OF PERIOD (48,038,364) (29,138,505)
Loss for the period (1,724,958) (5,436,781)
- -----------------------------------------------------------
DEFICIT, END OF PERIOD (49,763,322) (34,575,286)
===========================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS
[in Canadian dollars]
Three months ended January 31, 2002
(Unaudited)
THREE MONTHS JANUARY 31
2002 2001
$ $
- -------------------------------------------------------------------------------
OPERATING ACTIVITIES
Loss for the period (1,724,958) (5,436,781)
Add (deduct) items not requiring an outlay of cash:
Depreciation and amortization 121,876 623,419
Changes in non-cash working capital
items related to operations:
Accounts receivable and other receivables 212,832 691,831
Prepaid expenses 176,814 (561,646)
Accounts payable and accrued liabilities (1,150,573) (352,367)
Deferred Revenue 6,705 92,343
- -------------------------------------------------------------------------------
CASH USED IN OPERATING ACTIVITIES (2,357,304) (4,943,201)
===============================================================================
FINANCING ACTIVITIES
Issue of common shares, common share
purchase options and warrants for cash - 33,264
- -------------------------------------------------------------------------------
CASH PROVIDED BY FINANCING ACTIVITIES - 33,264
===============================================================================
INVESTING ACTIVITIES
Short-term investments 3,087,680 -
Additions to capital assets (9,202) (475,765)
- -------------------------------------------------------------------------------
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 3,078,478 (475,765)
===============================================================================
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS DURING THE PERIOD 721,174 (5,385,702)
CASH AND CASH EQUIVALENTS,
BEGINNING OF THE PERIOD 3,061,844 23,192,586
===============================================================================
CASH AND CASH EQUIVALENTS,
END OF THE PERIOD 3,783,018 17,806,884
===============================================================================
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.
Network Computing's Mobile Observer recently listed Diversinet as one of the top
50 public companies in the mobile and wireless industries. 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 MORE INFORMATION:
DIVERSINET CORP.
Sandra Lemaitre
Tel: (416) 756-2324,ext.324
Email: pr@diversinet.com
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATING RESULTS
Quarter ended January 31, 2002 compared to quarter ended January 31, 2001
We reported an improved net loss of $1,725,000 for the quarter ended January 31,
2002 compared to a net loss of $5,437,000 in the prior year's first quarter. The
decreased net loss in the first quarter of 2002 is attributable to cost
reduction measures. We completed operating cost reductions in the fourth quarter
of 2001 that resulted in a decline in expenses from operations during fiscal
2002 compared to fiscal 2001.
For the quarter ended January 31, 2002, we reported revenue of $174,000 compared
to revenue of $571,000 for the quarter ended January 31, 2001. We are operating
in an evolving and unpredictable market and accordingly have and may continue to
experience wide fluctuations in our revenues.
Research and development expenses decreased to $648,000 in the three months
ended January 31, 2002 from $2,198,000 in three months ended January 31, 2001
resulting primarily from wages, occupancy, and travel costs due to head count
reductions completed in the last quarter of fiscal 2001.
Sales and marketing expenses were $432,000 in the first quarter of fiscal 2002
compared to $2,354,000 in the first quarter of fiscal 2001. The Company
continues to focus its efforts in the Asian and European markets. The launch of
the Hongkong Post's Mobile e-Cert in fiscal 2001 and the appointment of
Hutchinson as the first Registration Authority have generated interest in our
products in the Asian region. We expect that activity in this region will
continue to increase during the remainder of fiscal 2002.
General and administrative expenses were $736,000 for the first quarter of 2002
compared to $1,172,000 incurred during the first quarter of 2001. This decline
in expenses during fiscal 2002 was the result of continuing operating cost
controls.
Depreciation and amortization expense in the first quarter of fiscal 2002
decreased to $122,000 from $623,000 in the first quarter of fiscal 2002. The
Company's deferred development and purchased technology costs are now fully
amortized and the reduction in additions to capital assets has resulted in
reduced amortization for the quarter.
LIQUIDITY AND CAPITAL RESOURCES
Quarter ended January 31, 2002 compared to quarter ended January 31, 2001
Cash used in operating activities was $2,357,000 in the quarter ended January
31, 2002, a decline of 52% from the amount used in the same period of the prior
year. Cash used during the quarter was comprised of the net loss of $1,725,000,
plus a decrease in accounts payable and accrued liabilities of $1,151,000,
offset by a decrease in receivables of $213,000, a decrease in prepaid expenses
of $177,000, an increase in deferred revenue of $7,000 and depreciation and
amortization of $122,000. Cash used in operating activities was $4,943,000 in
the quarter ended January 31, 2001, attributable to the net loss of $5,437,000,
plus a decrease in accounts payable and accrued liabilities of $352,000 and an
increase in prepaid expenses of $562,000, offset by a decrease in receivables of
$692,000, an increase in deferred revenue of $92,000 and depreciation and
amortization of $623,000.
There were no financing activities in the quarter ended January 31, 2002. Cash
provided by financing activities in the quarter ended January 31, 2001, was
$33,000 as a result of proceeds received from issuing common shares under an
employee stock option exercise.
Cash provided by investing activities in the quarter ended January 31, 2002
consisted of $9,000 spent on capital asset additions and the sale of a
$3,088,0000 short-term investment. Cash used in investing activities in the
quarter ended January 31, 2001 was $476,000 attributable to capital assets
additions.
We believe that our cash and cash equivalents as at January 31, 2002 of
$3,783,000 will not be sufficient to meet our short-term working capital
requirements for the remainder of the fiscal year. We plan to raise additional
amounts to meet our working capital requirements through private or public
financings, strategic relationships or other arrangements. However, additional
funding may not be available on terms attractive to us, or at all. If we enter
into strategic relationships to raise additional funds, we may be required to
relinquish rights to certain of our technologies. Our failure to either raise
capital when needed or to generate revenues would leave us with insufficient
resources to continue our business.
RISKS AND UNCERTAINTIES
Our Company is subject to a number of risks and uncertainties that could cause
actual results to differ materially from those predicted or anticipated. These
risks are described in our annual Form 20-F filed with the SEC in the United
States and filed on SEDAR in Canada. We encourage you to review these filings in
order to evaluate an investment in our securities. Some key risks that could
cause actual results to differ materially from those predicted or anticipated
are listed below.
Financial resources: Our ability to continue operations during the next fiscal
year will be dependent on our ability to obtain additional financing. Although
we have made progress in developing our products and have completed initial
consumer deployments, our revenue from operations is not sufficient to cover our
operating expenses at present and is unlikely to be sufficient within fiscal
2002. We have obtained funding for operations from private equity placements in
the past, but there is no assurance we will be able to do so again in the near
future despite the progress of the business. Our failure to either raise
capital when needed or to generate revenues would leave us with insufficient
resources to continue our business.
Commercial deployment: The ability of the Company to continue operations is also
dependent on the acceptance of its security products and the adoption of
transaction-based applications over wireless networks as an accepted method of
commerce in sufficient volume for us to generate enough revenues to fund our
expenses and capital requirements. The wireless mobile commerce market is in a
very early stage and it may not develop to a sufficient level to support our
business.
Market conditions: The general economic conditions may have a significant impact
on our ability to generate sales for our products. During fiscal 2001, we
experienced decreased activity from our potential customers and generally the
adoption of wireless services has not proceeded as rapidly as previously
expected. As a result, our revenue declined significantly from fiscal 2001
levels and may decline even further in the near future.
Foreign exchange: Our functional currency is the Canadian dollar. Sales
generated outside Canada are generally denominated in U.S. dollars. During
fiscal 2001, we incurred most of our expenses in Canadian dollars, but we also
incurred a significant portion of our expenses in foreign currencies including
U.S. dollars, Pound Sterling and Hong Kong dollars. Changes in the value of
these currencies relative to the Canadian dollar may result in currency gains
and losses that may have an adverse effect on our operating results. During
fiscal 2001 we maintained a portion of our cash resources in U.S. dollar term
deposits. Upon completion of our cost reductions during September 2001, our
exposure to U.S. expenses was significantly reduced and we transferred our
remaining U.S. dollar cash resources to Canadian dollar deposits.
Employees: During September we substantially reduced our headcount and curtailed
certain sales and marketing activities, particularly in the United States.
Substantial workforce reductions may have a detrimental effect on the morale of
remaining employees, impeding their performance levels. In addition, our ability
to attract potential new employees in the future may suffer if our reputation
was hurt by this staff reduction.
Litigation: Our Company has been named as a defendant in various proceedings
arising in the course of our Company's activities and arising from transactions
relating to a previous business operated by our Company. Litigation arising from
these matters may be time consuming, distracting and expensive. An adverse
resolution to any of these proceedings may have a material adverse impact on our
business and financial condition.