Diversinet Corp. Reports Fourth Quarter and Fiscal 2010 Results

Mar 04, 2011, 08:45 ET from Diversinet Corp.

TORONTO, March 4 /PRNewswire-FirstCall/ - Diversinet Corp. (TSXV: DIV) (OTCBB: DVNTF), a leader in "connected and protected" mobile healthcare communications, reported its fourth quarter and fiscal 2010 results for the period ended December 31, 2010. All dollar amounts are in U.S. dollars. Effective for the 2010 fiscal year, the company has adopted U.S. generally accepted accounting principles ("U.S. GAAP") for the presentation of its consolidated financial statements for Canadian and U.S. reporting requirements, and in this release has restated comparative historical periods accordingly.

"In 2010, Diversinet advanced the commercial introduction of its secure mobile health care solutions, highlighted by new commercial and government contracts," said Albert Wahbe, Diversinet's chairman and CEO. "We also released new mobile health products and enhancements, obtained important new patents, and furthered our more focused mobile health strategy."

Q4 and Fiscal 2010 Financial Highlights
Revenues for the fourth quarter were $106,000 compared to $2.1 million in the same year-ago period. Revenues for the full year were $4.9 million compared to $8.0 million in 2009. Revenues in 2010 included $3.7 million from AllOne Mobile Corporation ("AllOne") versus $6.5 million in 2009. In June 2010 Diversinet reached a settlement with AllOne and its parent company, AllOne Heath Group, whereby Diversinet's 2008 license and revenue share agreement with AllOne was ended and AllOne paid Diversinet $4 million to settle any future obligations. In addition, the parent company of AllOne returned for cancellation all of the common shares of Diversinet it owned, totaling nearly 7 million shares. This represented a reduction of approximately 14% of Diversinet's issued and outstanding common shares. The stock-purchase agreement between the parent company and Diversinet, including certain common share put rights and board representation rights was also terminated. Diversinet retained complete ownership and control over the intellectual property it developed during its relationship with AllOne.

Net loss for the fourth quarter was $1.5 million or $(0.04) per share, compared to the year-ago quarter of $406,000 or $(0.01) per share. Fourth quarter 2010 net loss included non-cash items of $129,000 in stock-based compensation expense and $17,000 in depreciation, and a foreign exchange gain of $91,000. This compares with non-cash items in the year-ago quarter of $448,000 in stock-based compensation and $20,000 in depreciation, and a foreign exchange gain of $138,000.

Net income for the year was $1.9 million or $0.04 per share, unchanged from $1.9 million or $0.04 per share in 2009. Included in the full-year net income were non-cash items of $3.1 million related to the canceled shares discussed above, $659,000 in stock-based compensation and $66,000 in depreciation, and a foreign exchange gain of $190,000. This compares with non-cash items in 2009 of $1.2 million in stock-based compensation and $76,000 in depreciation, and a foreign exchange gain of $1.3 million.

Cash and cash equivalents totaled $12.5 million at December 31, 2010, as compared to the previous year's balance of $12.7 million.

2010 Operational Highlights

  • In 2010, Diversinet significantly advanced the capabilities of its secure mobile health product offering. The company introduced MobiSecure® SMS, which allows healthcare organizations and providers to exchange sensitive information with customers over a wider range of mobile devices and service plans while maintaining a secure and trusted environment. Diversinet also introduced Release 4.0 of MobiSecure Publisher, which features new advanced personalization tools ideally suited to healthcare organizations. With MobiSecure's turn-key capability, this customization now can be accomplished without undergoing extensive product development and testing, while also maintaining feature flexibility, security and branding.

  • Diversinet was awarded three patents designed to provide wireless carriers, device vendors and other members of the mobile ecosystem advanced methods for resolving two of the industry's biggest problems: security and fragmentation. With the addition of these three patents, Diversinet's intellectual property portfolio has 15 patents in the U.S., Canada and Israel, with 33 patents pending.

  • Mark Trigsted was appointed to the new position of Executive Vice President, Healthcare, with responsibilities for global business development and sales. Trigsted is leading the expansion of Diversinet's partner network and customer base in the growing market for mobile healthcare applications. To support him, the company added three U.S.-based sales executives with deep and diverse healthcare-IT experience.

  • In June, Col. Ronald Poropatich, M.D., the deputy director of the U.S. Army's Telemedicine and Advanced Technology Research Center (part of the U.S. Army Medical Research and Materiel Command), presented the results of the Army's mCare program to the U.S. House of Representatives' Veterans Affairs Health Subcommittee. mCare is the Army's mobile health application for wounded warriors, powered by Diversinet's MobiSecure platform. In November, following the successful conclusion of the one-year pilot program, the Army awarded Diversinet a five-year contract to support expansion of mCare. Under this contract, the Army licensed MobiSecure SMS for the first time.

Subsequent to year-end, Diversinet's board of directors renewed CEO Wahbe's employment agreement for an additional year (until March 31, 2012). The board believes his leadership will continue to be important to Diversinet's success in the healthcare marketplace.

"As we begin 2011, we remain focused on the key elements of the our mobile health strategy, which includes introducing new products and product enhancements to support mobile health applications, and expanding our network of healthcare partners," said Wahbe, "and we are already seeing results. Based on the strong progress of our Mihealth pilot program, which is providing a secure mobile personal health record application to patients of Blue Sky Family Health, we recently entered into a five-year, $5 million exclusive Canadian reseller agreement with Mihealth Global Systems for our MobiSecure health solutions. This new relationship enables us to focus on the large opportunities emerging in the U.S., while Mihealth Global Systems serves Canada and other international markets."

About Diversinet
Diversinet Corp. (TSX Venture: DIV, OTCBB: DVNTF) provides a patented and proven secure application platform that enables healthcare organizations to rapidly deploy HIPAA-compliant mobile healthcare (mHealth) applications to anyone, anytime, anywhere, on mobile devices. Diversinet's MobiSecure® platform helps payers and providers meet growing needs for safe, convenient, on-the-go storage and sharing of personal health data. Connect with Diversinet Corp. at www.diversinet.com. Its tagline is "Healthcare. Connected and Protected."

The Private Securities Litigation Reform Act of 1995 and Canadian securities laws provide a "safe harbour" 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 the 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 available at www.sec.gov and Canadian securities regulatory authorities available at www.sedar.com.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.


Consolidated Balance Sheets
(In United States dollars)

As at December 31   2010   2009
Current assets:        
  Cash and cash equivalents $    12,458,750 $     12,667,842
  Accounts receivable, net   75,150   79,717
  Prepaid expenses   52,773   35,182
  Total current assets   12,586,673   12,782,741
  Property and equipment, net   180,983   218,126
Total assets   12,767,656 $     13,000,867
Liabilities and Shareholders' Equity        
Current liabilities:        
  Accounts payable $      143,253 $          148,531
  Accrued liabilities   562,994   296,255
  Deferred revenue   45,167   134,000
  Total current liabilities   751,414   578,786
Contingently puttable common stock   -   5,000,000
Shareholders' equity:        
  Share capital:        
    Unlimited common shares        
  Issued and outstanding:        
  42,285,171 (48,335,872 - 2009)        
    common shares   85,583,198   94,276,106
  Additional paid-in capital   19,346,409   7,940,124
  Share purchase warrants   21,242   7,732
  Deficit   (91,413,886)   (93,281,160)
  Accumulated other comprehensive income:        
    Cumulative translation adjustment   (1,520,721)   (1,520,721)
  Total shareholders' equity   12,016,242   7,422,081
Total liabilities and shareholders' equity $    12,767,656 $     13,000,867

Consolidated Statements of Net Income (Loss) and Comprehensive Income (Loss)
(In United States dollars)

For the year ended December 31 2010 2009 2008
Revenues $   4,931,834 $    7,972,929 $    4,614,790
Cost of revenues 22,860 175,138 307,946
Gross margin 4,908,974 7,797,791 4,306,844
Research and development 3,112,225 3,351,742 2,601,833
Sales and marketing 1,783,211 1,448,000 1,862,337
General and administrative 1,888,908 2,326,380 2,512,454
Depreciation 65,788 75,559 154,881
  6,850,132 7,201,681 7,131,505
Income (loss) before the undernoted: (1,941,158) 596,110 (2,824,661)
Foreign exchange gain 190,448 1,253,375 655,020
Interest income 57,277 61,314 220,308
Other income 3,560,707 - -
Net income (loss) for the year and comprehensive net income (loss) 1,867,274 1,910,799 (1,949,333)
Basic and diluted earnings (loss) per share $    0.04 $    0.04 $    (0.04)
Weighted average common shares outstanding 45,029,121 47,191,669 44,454,008
Weighted average fully diluted common shares outstanding 45,029,121 47,295,515 44,454,008

Consolidated Statements of Cash Flows
(In United States dollars)

For the year ended December 31   2010   2009   2008
Cash provided by (used in):            
Operating activities:            
  Net income (loss) for the year $ 1,867,274 $ 1,910,799 $ (1,949,333)
  Items not involving cash:            
    Depreciation   65,788   75,559   154,881
    Foreign exchange gain   (167,297)   (1,151,363)   (590,836)
    Other income   (3,060,707)   -   -
    Stock-based compensation expense   658,991   1,195,570   1,389,323
  Changes in non-cash working capital:            
    Accounts receivable   4,567   (79,717)   122,687
    Prepaid expenses   (17,591)   22,164   5,759
    Accounts payable   (5,278)   (19,547)   (81,424)
    Accrued liabilities   266,738   (215,706)   (219,500)
    Deferred revenue   (88,833)   (2,512,356)   2,515,395
  Cash provided by (used in) operations   (476,348)   (774,597)   1,346,952
Financing activities:            
  Issue of common shares and warrants for cash   128,604   254,075   1,773,500
  Cash provided by financing activities   128,604   254,075   1,773,500
Investing activities:            
  Purchase of property and equipment   (28,645)   (38,421)   (30,152)
  Cash used in investing activities   (28,645)   (38,421)   (30,152)
Foreign exchange gain on cash held in foreign currency   167,297   1,151,363   590,836
Net increase (decrease) in cash and cash equivalents   (209,092)   592,420   3,681,136
Cash and cash equivalents, beginning of year   12,667,842   12,075,422   8,394,286
Cash and cash equivalents, end of year $ 12,458,750 $ 12,667,842 $ 12,075,422
Supplemental cash flow information:            
  Interest received   57,277   61,314   220,308
Supplemental disclosure relating to non-cash financing and investing activities:            
  Issuance of shares to employees and Board   284,750   414,188   588,489
Cash and cash equivalents is comprised of:            
  Cash   443,684   563,471   762,266
  Cash equivalents   12,015,066   12,104,371   11,313,156
   $ 12,458,750 $ 12,667,842 $ 12,075,422

SOURCE Diversinet Corp.