Diversinet Corp. Reports Fourth Quarter and Fiscal 2009 Results

Annual Revenues Increase to $8 Million, Achieves Annual Net Income of $1.9 Million or $0.04 Per Share

TORONTO, Feb. 26 /CNW/ - Diversinet Corp. (TSX Venture: DIV, OTCBB: DVNTF), a leading provider of secure application platforms for the mobile world, reported its fourth quarter and fiscal 2009 results for the period ended December 31, 2009. All dollar amounts are in U.S. dollars.

"Fiscal 2009 marked another important year for Diversinet as we continued our transition from primarily research and development to actual sales and marketing of one of the most feature-rich and capable secure application platforms for the mobile world," said Albert Wahbe, Diversinet's CEO.

2009 Financial Highlights

Revenues for the fourth quarter increased 8% to $2.1 million from $1.9 million in the same period a year ago. Revenue for the year increased 73% to $8.0 million from $4.6 million in 2008. Revenues in 2009 included $6.5 million from the license and revenue share agreement with AllOne Mobile Corporation ("AllOne") signed in the third quarter of 2008.

Net loss for the quarter was $406,000 or $(0.01) per share, compared to net income in the same year-ago quarter of $272,000 or $0.01 per share. Fourth quarter 2009 net loss included non-cash items of $448,000 in stock-based compensation expense and $20,000 in depreciation and amortization, and a foreign exchange gain of $138,000. This compares to non-cash items in the same year-ago quarter of $598,000 in stock-based compensation and $76,000 in depreciation and amortization, and a foreign exchange gain of $616,000.

Net income for the year was $1.9 million or $0.04 per share, compared to a net loss of $1.9 million or $(0.04) per share in 2008. Included in the full year net income were non-cash items of $1.2 million in stock-based compensation and $76,000 in depreciation and amortization, and a foreign exchange gain of $1.3 million. This compares to non-cash items in 2008 of $1.4 million in stock-based compensation and $155,000 in depreciation and amortization, and a foreign exchange gain of $655,000.

Cash and cash equivalents totaled $12.7 million at December 31, 2009, an increase of $592,000 from the prior year.

    
    2009 Operational Highlights

    -   In April, the AllOne Mobile Secured by Diversinet product that
        utilizes Diversinet's MobiSecure Wallet and Vault won the Info
        Security Products Guide's 2009 Global Product Excellence Award for
        Security Solution for Health.

    -   In May, the MyHealth Mobile and AllOne Mobile secured by Diversinet
        applications were approved and are now available on the Verizon BREW
        application deck for download.  Also in May, the AllOne Mobile
        secured by Diversinet product went live, with a mobile consumer
        direct PHR (personal health record) solution available through
        Microsoft's HealthVault.com.

    -   In June, Diversinet was awarded an additional United States patent
        (No. 7,555,460) entitled, "Payment System and Method Using Tokens."
        This patent provides a method for collecting payment over the
        Internet by a third party for services using secure digital tokens
        issued by a third party.  The new patent addresses several security
        and fraud issues related to the use of credit card payments over the
        internet.  Diversinet's patent portfolio includes six patents in the
        U.S., two in Canada, and four in Israel, with 24 patents pending.

    -   Also in June, AllOne Mobile secured by Diversinet products went live
        on the iTunes App Store: AllOne Mobile and mCare.  The mCare
        application was designed for a U.S.  Army pilot program that creates
        a challenge response secure session with the wounded warrior for
        real-time interactive feedback.  The AllOne Mobile direct-to-consumer
        application for Microsoft's HealthVault became available in August.

    -   Following the successful implementation of our U.S. Army pilot the
        pilot metrics were expanded.  AllOne Mobile's platform is expected to
        support the rehabilitation needs of up to 10,000 soldiers in a phased
        implementation over the next year.

    -   In December, Diversinet furthered its industry leading innovation in
        software-based authentication by expanding its offering to include
        time-based OTP for its MobiSecure SoftToken.  The technology is based
        on the TOTP Oath specification.  Diversinet's MobiSecure SoftToken is
        available for mobile, PC, SMS and as a web browser plugin.  It also
        supports a wide variety of mobile platforms like J2ME, Blackberry,
        Windows Mobile, iPhone and Android.  MobiSecure SoftTokens are now
        available for both time-based or event-based algorithms.

    -   In December 2009, AllOne Mobile commenced discussions with Diversinet
        to renegotiate its license and revenue sharing agreement.  In January
        2010, the company received notice from AllOne Mobile that it has
        commenced a legal proceeding in Pennsylvania seeking the termination
        of the agreement upon payment of $3,000,000.  The company believes
        the amounts due under the agreement, if terminated at this time, are
        substantially greater than the amount claimed.
    

About Diversinet

Diversinet Corp. (TSX Venture: DIV, OTCBB: DVNTF) is a leading provider of secure application platforms for the mobile world utilizing wireless authentication and access solutions that secure the personal identity, transactions and data of consumers over almost any mobile phone or handheld device. Diversinet's reliable, end-to-end MobiSecure Wallet and Vault products provide global, secure and cost effective applications to mobilize personal health records, financial services transactions and identity protection management. Connect with Diversinet Corp. at www.diversinet.com.

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 anticipated future revenues of the company and success of current product offerings and the agreement with AllOne Mobile Corporation. Such forward-looking information involves important risks and uncertainties, including the uncertainty of the outcome of the proceedings initiated by AllOne, 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.

    
    Diversinet Corp.
    Consolidated Balance Sheets
    (In United States dollars)
    Unaudited

    -------------------------------------------------------------------------
    As at December 31                                     2009          2008
    -------------------------------------------------------------------------
    Assets
    Current assets:
     Cash and cash equivalents                    $ 12,667,842  $ 12,075,422
     Accounts receivable, net                           79,717             -
     Prepaid expenses                                   35,182        57,346
    -------------------------------------------------------------------------
     Total current assets                           12,782,741    12,132,768
    -------------------------------------------------------------------------

     Property and equipment, net                       218,126       255,264
    -------------------------------------------------------------------------
    Total assets                                  $ 13,000,867  $ 12,388,032
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and Shareholders' Equity
    Current liabilities:
      Accounts payable                            $    148,531  $    168,078
      Accrued liabilities                              296,255       511,961
      Deferred revenue                                 134,000     2,646,356
    -------------------------------------------------------------------------
      Total current liabilities                        578,786     3,326,395
    -------------------------------------------------------------------------

    Shareholders' equity:
      Share capital:
      Authorized:
        Unlimited common shares
      Issued and outstanding:
      48,135,872 (47,031,935 - 2008)
       common shares                                69,187,052    68,099,993
      Contributed surplus                            7,965,227     7,596,686
      Share purchase warrants                            7,732        13,687
      Deficit                                      (63,217,209)  (65,128,008)
      Accumulated other comprehensive income:
        Cumulative translation adjustment           (1,520,721)   (1,520,721)
    -------------------------------------------------------------------------
      Total shareholders' equity                    12,422,081     9,061,637
    -------------------------------------------------------------------------
    Total liabilities and shareholders' equity    $ 13,000,867  $ 12,388,032
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Diversinet Corp.
    Consolidated Statements of Net Income (Loss),
    Comprehensive Income (Loss) and Deficit
    (In United States dollars)
    Unaudited

    -------------------------------------------------------------------------
    For the year ended December 31          2009          2008          2007
    -------------------------------------------------------------------------

    Revenues                        $  7,972,929  $  4,614,790  $  4,536,983
    Cost of revenues                     175,138       307,946       239,878
    -------------------------------------------------------------------------
    Gross margin                       7,797,791     4,306,844     4,297,105

    Expenses:
    Research and development           3,351,742     2,601,833     2,265,755
    Sales and marketing                1,448,000     1,862,337     1,780,991
    General and administrative         2,326,380     2,512,454     3,738,545
    Depreciation and amortization         75,559       154,881       119,647
    -------------------------------------------------------------------------
                                       7,201,681     7,131,505     7,904,938
    -------------------------------------------------------------------------

    Income (loss) before
     the undernoted:                     596,110    (2,824,661)   (3,607,833)

    Foreign exchange gain (loss)       1,253,375       655,020       (71,106)
    Interest income                       61,314       220,308       245,968
    -------------------------------------------------------------------------
    Net income (loss) for the year
     and comprehensive net income
     (loss)                            1,910,799    (1,949,333)   (3,432,971)

    Deficit, beginning of year       (65,128,008)  (63,178,675)  (59,745,704)
    Net income (loss) for the year     1,910,799    (1,949,333)   (3,432,971)
    -------------------------------------------------------------------------
    Deficit, end of year            $(63,217,209) $(65,128,008) $(63,178,675)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted earnings
     (loss) per share               $       0.04  $      (0.04) $      (0.09)
    Weighted average common
     shares outstanding               47,191,669    44,454,008    36,872,086
    Weighted average fully diluted
     common shares outstanding        47,295,515    44,454,008    36,872,086
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Diversinet Corp.
    Consolidated Statements of Cash Flows
    (In United States dollars)
    Unaudited

    -------------------------------------------------------------------------
    For the year ended December 31          2009          2008          2007
    -------------------------------------------------------------------------

    Cash provided by (used in):

    Operating activities:
      Net income (loss) for
       the year                     $  1,910,799  $ (1,949,333) $ (3,432,971)
      Items not involving cash:
        Depreciation and
         amortization                     75,559       154,881       119,647
        Foreign exchange gain         (1,151,363)     (590,836)            -
        Stock-based compensation
         expense                       1,195,570     1,389,323     1,542,743
                                   ------------------------------------------
                                       2,030,565      (995,965)   (1,770,581)

      Changes in non-cash working
       capital:
        Accounts receivable              (79,717)      122,687        31,422
        Prepaid expenses                  22,164         5,759        77,976
        Accounts payable                 (19,547)      (81,424)       77,211
        Accrued liabilities             (215,706)     (219,500)      190,901
        Deferred revenue              (2,512,356)    2,515,395      (807,589)
    -------------------------------------------------------------------------
      Cash provided by (used in)
       operations                       (774,597)    1,346,952    (2,200,660)

    Financing activities:
      Issue of common shares
       and warrants for cash             254,075     1,773,500     5,559,548
    -------------------------------------------------------------------------
      Cash provided by financing
       activities                        254,075     1,773,500     5,559,548

    Investing activities:
      Purchase of property and
       equipment                         (38,421)      (30,152)     (110,917)
    -------------------------------------------------------------------------
      Cash used in investing
       activities                        (38,421)      (30,152)     (110,917)
    -------------------------------------------------------------------------

    Foreign exchange gain (loss)
     on cash held in foreign
     currency                          1,151,363       590,836             -

    -------------------------------------------------------------------------
    Net increase in cash and cash
     equivalents                         592,420     3,681,136     3,247,971

    Cash and cash equivalents,
     beginning of year                12,075,422     8,394,286     5,146,315

    -------------------------------------------------------------------------
    Cash and cash equivalents,
     end of year                    $ 12,667,842  $ 12,075,422  $  8,394,286
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     information:
      Interest received                   61,314       220,308       245,968
    -------------------------------------------------------------------------

    Supplemental disclosure
     relating to non-cash
     financing and investing
     activities:
      Issuance of shares to
       employees and Board               414,188       588,489       797,159
      Issuance of shares for public
       relations services                      -             -        61,545
    -------------------------------------------------------------------------

    Cash and cash equivalents
     is comprised of:
      Cash                               563,471       762,266       857,609
      Cash equivalents                12,104,371    11,313,156     7,536,677
    -------------------------------------------------------------------------
                                    $ 12,667,842  $ 12,075,422  $  8,394,286
    -------------------------------------------------------------------------
    

SOURCE Diversinet Corp.

For further information: For further information: Company Contact, Diversinet Corp., David Hackett, Chief Financial Officer, (416) 756-2324 ext. 275, dhackett@diversinet.com; Investor Relations, Liolios Group, Inc., Ron Both, Managing Director, (949) 574-3860 ext 1710, rboth@liolios.com

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