Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following Management’s Discussion and Analysis (“MD&A”), is intended to help the reader understand the results of operations and financial condition of Diversinet Corp. (“Diversinet” or the “Company”). The MD&A should be read in combination with our audited consolidated financial statements and the accompanying notes. We report our audited consolidated financial statements in accordance with Canadian generally accepted principles (“GAAP”). All dollar amounts in this MD&A are in United States, or U.S. dollars unless otherwise stated.

Certain statements in this MD&A contain words such as “could”, “expects”, “may”, “anticipates”, “believes”, “intends”, “estimates”, “plans”, and other similar language and are considered forward-looking statements or information under applicable securities laws. These statements are based on our current expectations, estimates, forecasts and projections about the operating environment, economies and markets in which we operate which we believe are reasonable but which are subject to important assumptions, risks and uncertainties and may prove to be inaccurate. Consequently, our actual results could differ materially from our expectations set out in this MD&A. In particular, see the Risk and Uncertainties section of this report and our annual report for the year ended December 31, 2008 for factors that could cause actual results or events to differ materially from those contemplated in forward-looking statements. Unless required by applicable securities laws, we disclaim any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this report which is as at March 2, 2009.

Please find enclosed the Consolidated Balance Sheets as at December 31, 2008 and 2007, the Consolidated Statements of Loss, Comprehensive Income (Loss) and Deficit and the Consolidated Statements of Cash Flows for the years ending December 31, 2008, 2007 and 2006, and the Notes to Consolidated Financial Statements for Diversinet Corp. Our financial statements have been prepared in accordance with Canadian generally accepted accounting principals (GAAP). These principles conform in all material respect with U.S. GAAP except as described in Note 12 to our consolidated statements. All financial figures are in U.S. dollars unless otherwise noted. The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report.

The differences between line items under Canadian GAAP and those under U.S. GAAP are not significant. These differences relate to differences in accounting for stock-based compensation.

Overview: Our Business and Strategy

Founded in 1997 and based in Toronto, Canada, Diversinet is a provider of personal authentication and security solutions for the wireless world. Our software and solutions protect user identity and provide secure access for consumer and business applications using a variety of mobile phones, Personal Digital Assistants (“PDA”) and personal computers. Our scaleable, open mobile security platform enables enterprises and service providers to rapidly develop, deploy and manage next-generation wireless security services. Our technology simplifies what had previously been a complex set of technical problems in both information security and wireless data communications. In January 2007, Diversinet introduced new application solutions, MobiSecure Wallet and Vault, to focus on the evolving protection and trust needs of mobile users. These financial results reflect this shift in focus and the time required to build up a customer base under this new strategy and a rebuilding of the sales and marketing strategy of the Company.

Diversinet’s MobiSecure soft tokens and MobiSecure Authentication Service Center (“MASC”) enable heath care service providers, identity management service providers, financial service providers, mobile network operators and security service providers to rapidly develop, deploy and manage secure on-line services for mobile device and personal computer users worldwide. Our MobiSecure soft tokens are securely provisioned and managed by MASC and are available on the leading intelligent mobile device platforms, including Symbian, Microsoft, RIM, Palm and Java-based phones as well as on personal computers running Microsoft Windows.

Diversinet’s MobiSecure Wallet is a client-side secure container application, which can access or hold confidential personal information, such as user identification and access information via fax, email and SMS. It operates in concert with the MobiSecure Vault, a server-side secure container application, and allows a user to access a host of personal information files. Personal health records, financial information, payment information, entertainment or loyalty information can be accessed in real time, directly from a user’s mobile phone or other hand-held access device. The MobiSecure Vault provides large file storage and backup to the MobiSecure Wallet and is accessible through web service interfaces and adaptors.

Diversinet’s combination of client software and wireless provisioning services enables the issuance and management of mobile device authentication tokens and also creates a technology platform from which we can provide an entirely new and powerful set of capabilities in the mobile e-commerce environment in the form of digital identities, digital permissions and wireless wallets. In addition to providing mobile device security and provisioning solutions, Diversinet deploys an experienced professional services team for application development, consulting, training and technical support.

In September 2008, Diversinet entered into a five year license and revenue sharing agreement with AllOne Mobile Corporation (“AllOne”), a wholly owned subsidiary of AllOne Health Group, Inc. (“AHG”), who in turn is a wholly owned subsidiary of Hospital Service Association of Northeastern Pennsylvania (“HSA”) to cross license certain software and share revenues from the worldwide sales. (HSA currently owns approximately 15% of Diversinet’s common shares.) The parties have agreed to work exclusively on a worldwide basis with each other in sales activities for the combined software in the mobile personal health records and information market. Under the five year agreement, Diversinet will receive $39.5 million as a minimum commitment from AllOne. The agreement may be cancelled after the third year if, through no fault of either party, there are changes in market conditions, law or regulation, or technology obsolescence. This agreement replaces the agreement with AllOne Health Group, Inc. signed in August 2007. Also during the third quarter of 2008, Diversinet completed a $500,000 statement of work for AllOne in regards to work done for the TEPR (Towards the Electronic Patient Record) conference in May 2008.

In July 2008, Diversinet’s common shares were posted for trading on the TSX Venture Exchange on Tier 1 as a technology issuer under the symbol DIV. Diversinet continues to trade on the OTCBB under the symbol of DVNTF.

During the second quarter two of our customers successfully launched their applications that are using Diversinet’s Wallet and Vault technology. Intersections Inc., a leading global provider of consumer and corporate identity risk management services announced Mobile Lockbox, a major enhancement to the Identity Guard® Total Protection service. MobiSecure™ Wallet and Vault mobile secure encrypted access solution is at the heart of the offering. AHG, a leading health productivity and services company, offering integrated health and information solutions to improve the health and well being of individuals, businesses and organizations announced the AllOne MobileSM service for initial use by AllOne’s parent company, HSA and its health plans. The new service offering was demonstrated at the 24th annual TEPR (Towards Electronic Patient Records) Conference in May.

In May 2007 we entered into a three year license and value added reseller (“VAR”) agreement with Intersections Inc. (“Intersections”) for our MobiSecure Wallet and MobiSecure Vault mobile secure access solutions. In December 2008, we amended the license and VAR agreement to change the contract term to November 2010. This amendment provides for decreased minimum license fees over the next two years of $850,000 and $1,310,000 respectively, payable quarterly in advance. The minimum license fees clause is cancellable after March 1, 2010 upon 90 days notice. Therefore the last two payments of $325,000 in each of June and September 2010 could be terminated upon written notice from Intersections.

During the second quarter of 2007, Albert Wahbe, the Company’s Chairman, was appointed Chief Executive Officer. In April 2008, Mr. Wahbe entered into a three year employment agreement, renewable for a further one year period at the discretion of the Board of Directors. Mr. Wahbe’s compensation consists of salary of up to Cdn$300,000 in the first year and up to Cdn$450,000 in subsequent years and is payable through the issuance of up to 300,000 Diversinet common shares annually and bonus of up to up to Cdn$200,000 in the first year and up to Cdn$300,000 in subsequent years and is payable through the issuance of up to 200,000 Diversinet common shares annually as determined by Diversinet’s Board of Directors. Mr. Wahbe is also entitled to reimbursement of up to Cdn$6,000 per month in expenses. Furthermore in April 2008, Mr. Wahbe received options to purchase 1,500,000 common shares at $0.55 per share, vesting annually in arrears over a four year period. During the first quarter of 2008 Mr. Wahbe received 50,000 options. During 2008 Mr. Wahbe received 300,000 common shares (75,000 per quarter) in compensation as CEO and 200,000 common shares as a bonus. On June 30, 2008 Mr. Wahbe exercised 2,300,000 share purchase warrants at $0.75 per share for gross proceeds of $1,725,000. A further 2,300,000 share purchase warrants at $0.90 expired unexercised.

In August 2007 we completed a private placement of 6,756,757 Diversinet common shares at $0.74 per share, for gross proceeds of $5,000,000 to Hospital Service Association of Northeastern Pennsylvania, d/b/a Blue Cross of Northeastern Pennsylvania (“BCNEPA”). William Reed, executive vice president of BCNEPA has joined the Diversinet board of directors. As at December 31, 2008, BCNEPA owned 6,856,757 common shares, representing approximately 15% of the issued and outstanding common shares of the Company.

On June 30, 2006, we completed a private placement of 6,680,001 units, at $0.60 per unit, for gross proceeds of $4,008,000. Each unit was comprised of one common share and one common share purchase warrant. One half of the warrant was exercisable to purchase one common share for each whole warrant at a price of $0.75, the other half warrant at $0.90, and expired in June 30, 2008. This transaction was effected as a private placement in accordance with Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. We used the net proceeds for working capital and general corporate purposes.

On July 26, 2006, we completed a private placement of 1,538,463 units, at $0.65 per unit, for gross proceeds of $1,000,000 and issued 96,154 units for consulting services related to the private placement. Each unit was comprised of one common share and one common share purchase warrant. The warrants were exercisable to purchase one common share for each whole warrant at a price of $1.00 and expired unexercised on July 26, 2008. This transaction was effected as a private placement in accordance with Rule 506 of Regulation D promulgated under the Securities Act of 1933, as amended. We used the net proceeds for working capital and general corporate purposes.

Selected Annual Information

The selected annual information presented below is based on the audited consolidated financial statements.

Year ended December 31, 2008 compared to year ended December 31, 2007

For the years ending December 31, 2008 and 2007, we reported revenue of $4,615,000 and $4,537,000, respectively. We generated 96% (92% in 2007) of our revenues from the United States, 3% (3% in 2007) from the Asia Pacific region, 1% (1% in 2007) from Canada and nil% (4% in 2007) from other areas during the year ended December 31, 2008. During 2008, we generated 22% (35% in 2007) of our revenue from consulting services and 78% (65% in 2007) from licensing. We currently generate our revenues from a small number of customers. The timing of signing customer contracts and the revenue recognition associated with the customer contracts results in volatility in our revenues and operating income. In December 2006 we entered into a consulting and licensing agreement with BCNEPA. During 2007, this agreement has generated revenue of $1,000,000 for the delivery of the solution to BCNEPA, including 100,000 tokens. This agreement was superseded concurrently with the signing of the AllOne agreement. In May 2007 we entered into a license and VAR agreement to provide our MobiSecure Wallet and MobiSecure Vault mobile secure access solution to Intersections. During 2008 this agreement generated revenues of $1,407,000 ($844,000 in 2007). In August 2007 we entered into a license and revenue sharing agreement with AllOne Health Group Inc. to bundle certain software and share revenues from the sales of the combined software and a statement of work to develop certain features for the product. During 2008 these agreements generated revenues of $833,000 ($2,093,000 in 2007).

In September 2008 we entered into a license and revenue share agreement with AllOne Mobile Corporation. The Agreement replaces a three year licensing agreement entered into with AllOne Health Group Inc. in August 2007. AllOne is a subsidiary of AHG who in turn is a subsidiary of HSA. Under the terms of the Agreement, Diversinet has provided an exclusive worldwide right to AllOne to sub-license certain Diversinet software in combination with AllOne’s software, in the mobile personal health record market. The Agreement has a term of five years and may be cancelled after the third year if, through no fault of either party, market conditions, law or regulation, or technology make the combined software product obsolete or unable to be sold. Over the term of the Agreement, Diversinet is required to provide second and third level support as well as two major product upgrades per year. Under the terms of the Agreement, Diversinet is to receive a minimum commitment fee of $5.5 in the first year, $7 million in years two and three and $10 million in years four and five. The Company recognizes revenue in accordance with Statement of Position (“SOP”) 97-2, Software Revenue Recognition, issued by the American Institute of Certified Public Accountants (“AICPA”) in October 1997 as amended by SOP 98-9 issued in December 1998. The Company has concluded that the Company’s commitment to deliver major product upgrades meets the definition of an unspecified additional software product under SOP 97-2. If an arrangement includes unspecified additional software products, SOP 97-2 specifies that the entire arrangement would be accounted for as a subscription. Under subscription accounting, the relevant total fee would be recognized ratably over the non-cancelable term of the arrangement not to exceed amounts received or receivable, beginning with the delivery of the first product. During 2008 this agreement generated $2,167,000 in revenue.

During 2008, 95% of our revenue came from three customers (87% in 2007). While we are endeavouring to increase our customer base, the market that we operate in is still in an evolving stage and our revenue base is still quite small. Therefore, it is reasonable to expect that our revenue may continue to be concentrated among relatively few customers for the near future. For 2009, we expect to have minimum revenues from AllOne of $6,500,000 and from Intersections of $955,000, for a total of $7,455,000. For health care sales, initial amounts received are allocated to AllOne until the minimum commitment fee is met, after which Diversinet and AllOne share revenues according to the agreement.

Our cost of revenues primarily represents the direct costs associated with customer support, training and implementation, and consulting services related to services performed under contract with our customers. There are no significant costs associated with the manufacturing of our software. The Company does not allocate any indirect costs such as facilities, sales commissions and administrative costs to cost of revenues. Costs of revenues were $308,000 (gross margin of 93%) for the year ended December 31, 2008 compared to $240,000 (gross margin of 95%) for 2007. The Company is able to effectively redeploy its employees between its research and development projects, sales and marketing activities and customer service contracts on a continuous basis, thereby the cost of revenues only represents costs related to employees while they are actively involved in performing services under contracts.

Research and development expenses includes compensation of software development teams working on the continuing enhancement of our products, quality assurance and testing activities as well as legal costs incurred for patent registration activities and direct administrative costs incurred by the department. The Company does not include an allocation of general operating expenses to its research and development expenses. Research and development expenses were $2,602,000 for the year ended December 31, 2008 compared to $2,266,000 for 2007. The increase in research and development costs in 2008 was largely due to the increase of 12% in head count (from 25 to 28 people) in this department. In 2008, product developments costs of $252,000 ($165,000 in 2007) were reallocated from research and development to cost of revenues as the development department redeployed its resources to perform professional services work to modify our products as required under our customer agreements.

Sales and marketing expenses include compensation of sales (salary and commissions) and marketing personnel, public relations and advertising, trade shows, marketing materials and direct operating expenses incurred by the sales and marketing department. The Company does not include an allocation of general operating expenses in its sales and marketing expenses. Sales and marketing expenses were $1,862,000 for the year ended December 31, 2008 compared to $1,781,000 for 2007. The increase in sales and marketing expenses in 2008 is partly due to a $110,000 termination fees for a Director’s consulting agreement, $203,000 in contractor’s fees, offset by a decrease of $275,000 in commission expenses.

General and administrative expenses include compensation expenses for corporate personnel and other general and administrative expenses such as facilities, travel and professional costs. Corporate personnel include executive officers, financial planning and control, legal, human resources and corporate administrative staff. General and administrative expenses were $2,512,000 for the year ended December 31, 2008 compared to $3,739,000 for 2007. Included in the December 31, 2008 general and administrative expenses is $1,389,000 ($1,543,000 for 2007) relating to stock-based compensation expenses. Under GAAP, the Company is required to estimate the fair value of stock-based compensation granted to employees and to expense the fair value over the estimated vesting period of the stock options and warrant grants. The year over year decrease is partially due to the $512,000 severance payment to our former CEO and $391,000 relating to the Instant Publisher litigation settlement in 2007.

Depreciation and amortization expense was $155,000 for the year ended December 31, 2008 compared to $120,000 for 2007. The increase in depreciation in 2008 is due to the write down of certain assets.

Foreign exchange gains were $655,000 for the year ended December 31, 2008 compared to a loss of $71,000 for the year ended December 31, 2007. During 2008, the U.S./Canadian dollar exchange rate fluctuated from approximately 0.99 to 1.21. During October 2008, we exchanged $10,000,000 into Cdn$12,940,000. From the conversion date to year end, the Canadian dollar appreciated $0.048, largely resulting in the gain. As the majority of our expenses are in Canadian dollars, and with the appreciation of the US/Cdn foreign exchange rate, we believe that this exchange was a prudent decision to match the longer term requirement for Canadian dollars to meet ongoing Canadian dollar expenses. We earned interest and other income of $220,000 during 2008 compared to $246,000 for 2007 through investing our excess cash.

We reported a net loss for the year ended December 31, 2008 of $1,949,000 compared to $3,433,000 for 2007. These net losses include stock-based compensation expense relating to the issuance of options and warrants of $1,389,000 and $1,543,000 during 2008 and 2007, respectively. The 2008 net loss includes the gain from foreign exchange of $655,000. The net loss of 2007 includes the one time severance expense of $512,000 related to the former CEO and $391,000 relating to a litigation settlement. Loss per share for 2008 was $0.04 compared to $0.09 in 2007 based on a diluted weighted average of 44,454,000 and 36,872,000 common shares, respectively.

Unaudited quarter ended December 31, 2008 compared to the unaudited quarter ended December 31, 2007

For the quarter ending December 31, 2008, we reported revenue of $1,924,000 compared to $1,352,000 for the quarter ended December 31, 2007. During the quarter, we generated 3% (23% in 2007) of our revenue from consulting services and 97% (77% in 2007) from licensing. The higher revenue for the 2008 quarter was due to the delivery of tokens to AllOne under the September 2008 license and revenue sharing agreement representing $1,625,000 in revenue.

Cost of revenues were $2,000 (gross margin of 100%) for the quarter ended December 31, 2008 compared to $73,000 (gross margin of 95%) for the same quarter in 2007. The decrease is due to the allocation of development costs to cost of revenues related to the redeployment of employees to complete customer projects of $1,900 in Q4 2008 and $55,000 in Q4 2007 respectively.

Research and development expenses were $823,000 for the quarter ended December 31, 2008 compared to $696,000 for the same period of 2007. The Q4 2008 results include an increase of the headcount from 25 to 28 and an employee bonus accrual of $244,000 (2007 - $164,000). Sales and marketing expenses were $474,000 for the quarter ended December 31, 2008 compared to $801,000 for the same period of 2007. The decrease in sales and marketing expenses in Q4 2008 was due primarily to the decrease in salaries and commission of $394,000. The Q4 2008 expenses were $971,000 compared to $1,181,000 for the same period in 2007. The decrease of general and administrative expenses in largely due to $271,000 in 2007 bonuses paid in shares included in G&A.

Depreciation and amortization expense was $76,000 for the quarter ended December 31, 2007 compared to $33,000 for the same period of 2006. The increase of depreciation in Q4 2008 is the result of the write off of certain computer assets.

We reported a net income of $272,000 for the quarter ended December 31, 2008 compared to a net loss of $1,326,000 for the quarter ended December 31, 2007. The net income per share was $0.01 for the quarter ended December 31, 2008 and $(0.03) quarter ended December 31, 2007 based on a weighted average of 46,125,000 and 42,075,000 common shares, respectively.

Year ended December 31, 2007 compared to year ended December 31, 2006

For the years ending December 31, 2007 and 2006, we reported revenue of $4,537,000 and $1,667,000, respectively. We generated 92% (84% in 2006) of our revenues from the United States, 3% (12% in 2006) from the Asia Pacific region, 1% (2% in 2006) from Canada and 4% (2% in 2006) from other areas during the year ended December 31, 2007. During 2007, we generated 35% (94% in 2006) of our revenue from consulting services and 65% (6% in 2006) from licensing. With the launch of MobiSecure Wallet and Vault product suite in early 2007, we were able to increase product license revenues compared to 2006. In December 2006 we entered into a consulting and licensing agreement with BCNEPA. During 2007, this agreement generated revenue of $1,000,000 for the delivery of the solution to BCNEPA, including 100,000 tokens. This agreement was terminated concurrently with the signing of the AllOne agreement. In May 2007 we entered into a license and VAR agreement to provide our MobiSecure Wallet and MobiSecure Vault mobile secure access solution to Intersections. During 2007 this agreement generated revenues of $844,000. In August 2007 we entered into a license and revenue sharing agreement with AllOne to bundle certain software and share revenues from the sales of the combined software and a statement of work to develop certain features for the product. During 2007 these agreements have generated revenues of $2,093,000. During 2006 we began and completed work on the RSA Security development product. We applied a zero gross margin percentage of completion method for this development agreement, providing us with $845,000 in revenues and $845,000 in cost of revenues in fiscal 2006. During Q4 2006 we signed an agreement with BCNEPA under which we had invoiced $900,000 included in ‘deferred revenue’ on the balance sheet. This agreement was terminated with the signing of the AllOne agreement, however we recognized this revenue during 2007 as we delivered the MASC license and the associated tokens to BCNEPA.

During 2007, 87% of our revenue came from three customers (78% in 2006 from three different customers). While we are endeavouring to increase our customer base, the market that we operate in is still in an evolving stage and our revenue is still quite small. Therefore, it is reasonable to expect that our revenue may continue to be concentrated among relatively few customers for the near future.

Our cost of revenues primarily represents the direct costs associated with customer support, training and implementation, and consulting services related to services performed under contract with our customers. There are no significant costs associated with the manufacturing of our software. The Company does not allocate any indirect costs such as facilities, sales commissions and administrative costs to cost of revenues. Cost of revenues were $240,000 (gross margin of 95%) for the year ended December 31, 2007 compared to $1,041,000 (gross margin of 38%) for 2006. This represents the direct costs associated with completing the software solutions and consulting services revenue. The Company’s lower cost of revenues in 2007 is the result of a higher level of license revenues in 2007. The higher level of cost of revenues and therefore lower gross margin in 2006 primarily represents the significant costs incurred to perform the consulting services with RSA Security. The Company is able to effectively redeploy its employees between its research and development projects, sales and marketing activities and customer service contracts on a continuous basis, thereby the cost of revenues only represents costs related to employees while they are actively involved in customer projects.

Research and development expenses includes compensation of software development teams working on the continuing enhancement of our products, quality assurance and testing activities as well as legal costs incurred for patent registration activities and direct administrative costs incurred by the department. The Company does not include an allocation of general operating expenses to its research and development expenses. Research and development expenses were $2,266,000 for the year ended December 31, 2007 compared to $832,000 for 2006. The increase in research and development costs in 2007 was largely due to the cost for outsourcing starting in January 2007 and the year over year increase of 19% in head count (from 21 to 25 people) in this department and the reduction in cost reallocations to cost of revenues. In 2007, product developments costs of $165,000 were reallocated from research and development to cost of revenues as the development department redeployed its resources to perform professional services work to modify our products as required under our customer agreements. Costs were further reduced in 2007 by the receipt of $87,000 from our scientific research and experimental development (SRED) claim for 2006 fiscal year. Starting in Q1 2006, the development department focused a portion of their work effort towards completing modifications to our products for RSA Security. In the past, this department’s time has been spent conducting research and developing our products for general availability. During 2006, product development costs of $730,000 were reallocated from research and development to cost of revenues. Costs were further reduced in 2006 by $288,000 from the receipt of funds for our scientific research and experimental development (SRED) claim for the 2003, 2004 and 2005 fiscal years.

Sales and marketing expenses include compensation of sales and marketing personnel, public relations and advertising, trade shows, marketing materials and direct operating expenses incurred by the sales and marketing department. The Company does not include an allocation of general operating expenses in its sales and marketing expenses. Sales and marketing expenses were $1,781,000 for the year ended December 31, 2007 compared to $701,000 for 2006. The increase in costs in this department was due to a 100% year over year increase in head count (from 5 to 10), as well as higher sales commissions as a result of higher revenues. Further increases in costs included an increase in travel costs of $102,000, and consulting services of $212,000. Included in the December 31, 2006 sales and marketing expenses is $33,000 relating to stock-based compensation expenses. In addition, $107,000 of salary expense was reallocated to cost of revenues in 2006 for the RSA Security work.

General and administrative expenses include compensation expenses for corporate personnel and other general and administrative expenses such as facilities, travel and professional costs. Corporate personnel include executive officers, business development, financial planning and control, legal, human resources and corporate administrative staff. General and administrative expenses were $3,739,000 for the year ended December 31, 2007 compared to $2,485,000 for 2006. Included in the December 31, 2007 general and administrative expenses is $1,543,000 ($874,000 for 2006) relating to stock-based compensation expenses. Under GAAP, the Company is required to estimate the fair value of stock-based compensation granted to employees and to expense the fair value over the estimated vesting period of the stock options and warrant grants. Also, the year over year increase is partially due to the $512,000 severance payment to our former CEO and $391,000 relating to the Instant Publisher litigation settlement. During 2007, we entered into a settlement and release whereby we agreed to pay Instant Publisher $625,000 as full and complete settlement in the matter. During 2006, the Company had accrued Cdn$250,000 in regards to the lawsuit.

Depreciation and amortization expense was $120,000 for the year ended December 31, 2007 compared to $159,000 for 2006. This is consistent with the reduction in net capital assets.

Foreign exchange losses were $71,000 for the year ended December 31, 2007 compared to $18,000 for 2006. During 2007, the U.S./Canadian dollar exchange rate changed from approximately 1.17 to 1.01. As we have the majority of our expenses in Canadian dollars, these foreign exchange swings negatively impact our operating results. We earned interest and other income of $246,000 during 2007 compared to $118,000 for 2006 through investing our excess cash.

We reported a net loss for the year ended December 31, 2007 of $3,433,000 compared to $3,451,000 for 2006. These net losses include stock-based compensation expense relating to the issuance of options and warrants of $1,543,000 and $906,000 during 2007 and 2006, respectively. Due to the significant increase in our revenues, the net loss has decreased despite increased expenses. The large increase in expenses is due primarily to (i) the increase in our number of employees from 29 to 36 as the Company focuses on activities to generate and service revenues from our new product offerings, (ii) the one time severance expense of $512,000 related to the former CEO and (iii) $391,000 relating to litigation settlement. Loss per share for 2007 was $0.09 compared to $0.12 in 2006 based on a diluted weighted average of 36,872,000 and 28,740,000 common shares, respectively.

Liquidity and Capital Resources

Year ended December 31, 2008 compared to year ended December 31, 2007

Cash and cash equivalents at December 31, 2008 were $12,075,000 compared with $8,394,000 at December 31, 2007. The net change in cash and cash equivalents for 2008 was an increase of $3,681,000 compared to $3,248,000 for 2007. The fiscal 2008 increase was largely due to the exercise of warrants in an amount of $1,773,000 and cash provided by operations of $1,938,000. Of the $5,000,000 invoiced to AllOne in September 2008, $2,400,000 has been recognized as revenue, with the remaining $2,600,000 shown in deferred revenue on the balance sheet. The fiscal 2007 increase over 2006 was largely due to the $5,000,000 BCNEPA private placement discussed below. This was offset by operating activities which used cash in an amount of $2,200,000, including the reversal of $808,000 in deferred revenues from the recognition of the Q4 2006 BCNEPA cash receipt of $900,000 into revenues in 2007. Cash used in investing activities for 2008 and 2007 is solely the result of the purchase of capital assets of $30,000 and $111,000, respectively. \

In June 2008, Mr. Wahbe exercised 2,300,000 shares purchase warrants at $0.75 per share for gross proceeds of $1,725,000. In August 2007 we completed a private placement of 6,756,757 Diversinet common shares to BCNEPA at $0.74 per share, for gross proceeds of $5,000,000.

We are not subject to material financial market risk exposures, except for risks related to interest rate fluctuations and foreign currency exchange rates. Our exposure to market rate risk for changes in interest rates relates primarily to our cash equivalents and short-term investments, created by our past financings. We have not used derivative financial instruments in our short-term investments. We invest in high quality money market instruments and bonds with terms of less than 90 days. We are averse to principal loss and ensure the safety and preservation of our invested funds by limiting default, market and reinvestment risk. We do not make use of a bank line of credit and do not have any long-term debt. The impact of inflation has not been material to our business over the past five years.

We believe that our cash and cash equivalents as at December 31, 2008 of $12,075,000 is sufficient to meet our short-term working capital requirements beyond the next twelve months. We may need to raise additional amounts to meet future 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 could leave us with insufficient resources in the future to sustain our operations beyond the next twelve months.

The following table presents unaudited selected financial data for each of the last eight quarters ending December 31, 2008:

Revenue for the period Net income (loss) for the period Net income (loss) per share

($000’s) ($000’s) ($)

December 31, 2008 1,924 272 0.01

September 30, 2008 1,784 142 0.00

June 30, 2008 565 (1,205) (0.03)

March 31, 2008 342 (1,159) (0.03)

December 31, 2007 1,352 (1,326) (0.03)

September 30, 2007 1,262 (730) (0.02)

June 30, 2007 1,017 (1,045) (0.03)

March 31, 2007 905 (331) (0.01)

Quarter ended December 31, 2008 compared to quarter ended December 31, 2007

The net change in cash and cash equivalents for the fourth quarter of 2008 was $71,000 compared to $(524,000) for the fourth quarter of 2007. The Q4 2008 increase is largely due to cash provided by operations of $76,000, including a foreign exchange gain of $616,000, offset by a reduction in working capital of $(869,000). The Q4 2007 decrease includes the $625,000 litigation settlement payment with Instant Publisher.

Year ended December 31, 2007 compared to year ended December 31, 2006

Cash and cash equivalents at December 31, 2007 were $8,394,000 compared with $5,146,000 at December 31, 2006. The net change in cash and cash equivalents for 2007 was $3,248,000 compared to $3,791,000 for 2006. The fiscal 2007 increase was largely due to the $5,000,000 BCNEPA private placement discussed below. This was offset by operating activities which used cash in an amount of $2,200,000, including the reversal of $808,000 in deferred revenues from the recognition of the Q4 2006 BCNEPA cash receipt of $900,000 into revenues in 2007. The fiscal 2006 increase was largely due to the June and July private placements in which aggregate gross proceeds of $5,008,000 were raised. This was offset by operating activities which used cash in an amount of $1,210,000 which includes the receipt from BCNEPA of $900,000 included as part of the deferred revenues. Cash used in investing activities for 2007 and 2006 is solely the result of the purchase of capital assets of $111,000 and $75,000, respectively.

In August 2007 we completed a private placement of 6,756,757 Diversinet common shares to BCNEPA at $0.74 per share, for gross proceeds of $5,000,000.

On July 26, 2006, we completed a private placement of 1,538,463 units, at $0.65 per unit, for gross proceeds of $1,000,000 and issued 96,154 units for consulting services related to the private placement. Each unit is comprised of one common share and one common share purchase warrant. The warrant will be exercisable to purchase one common share for each whole warrant at a price of $1.00 and will expire on July 26, 2008.

On June 30, 2006, we completed a private placement of 6,680,001 units, at $0.60 per unit, for gross proceeds of $4,008,000. Each unit is comprised of one common share and one common share purchase warrant. One half of the warrant will be exercisable to purchase one common share for each whole warrant at a price of $0.75, the other half warrant at $0.90, and will expire on June 30, 2008.

Disclosure Controls and Procedures

Disclosure controls and procedures are designed to provide reasonable assurance that all relevant information is gathered and reported to senior management, including the Chief Executive Officer and the Chief Financial Officer, on a timely basis so that appropriate decisions can be made regarding public disclosure. We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal year covered by this annual report. This evaluation was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that, due to the material weakness in internal controls over financial reporting set out below, the Company’s disclosure controls and procedures were not effective to provide reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act and Canadian securities laws is recorded, processed, summarized and reported as and when required and that it is accumulated and communicated to management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In light of this conclusion, we have applied compensating procedures and processes as necessary to ensure the reliability of our financial reporting including a review of all non routine and complex transactions with external advisers. Accordingly, management believes, based on its knowledge, that (i) this report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which they were, not misleading with respect to the period covered by this report and, (ii) the financial statements, and other financial information included in this report, fairly present in all material respects our financial condition, results of operations and cash flows at, and for, the periods presented in this report.

In connection with the evaluation referred to in the foregoing paragraph, we have identified no change in our disclosure controls and procedures that occurred during the year ended December 31, 2008 that has materially affected, or is reasonably likely to materially affect, our disclosure controls over financial reporting.

Internal Controls over Financial Reporting

Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with Canadian generally accepted accounting principles and the requirements of the Securities and Exchange Commission in the United States, as applicable. Management is responsible for establishing and maintaining adequate internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting can provide only reasonable assurance and may not prevent or detect misstatements. Furthermore, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management has assessed the design and operating effectiveness of internal controls over financial reporting as at December 31, 2008. In making this assessment, we used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this assessment, management concluded that internal control over financial reporting is ineffective, as of December 31, 2008, because of the following material weakness. Due to the limited number of staff, Diversinet’s finance staff does not have sufficient technical accounting knowledge to address all complex and non-routine accounting transactions that may arise. These transactions are sometimes extremely technical in nature and require an in-depth understanding of GAAP. As a result of this pervasive deficiency, these types of transactions may not be recorded correctly, potentially resulting in material misstatements of the financial statements of the Company. To address this risk, the Company has a control whereby it consults with its auditors and advisors, as needed, in conjunction with the recording and reporting of complex and non-routine accounting transactions. Management has concluded that this control was not operating effectively during the year as the Company did not consult with external advisors on certain complex and non-routine transactions and on certain of these transactions, errors were identified by our auditors. All material misstatements detected by the audit have been corrected by the Company. Any changes in the staff complement will be dependant upon the growth of our operations and the number of our staff to allow further technical accounting knowledge to address all complex and non-routine accounting transactions. Management will continue to review consultation controls and, if appropriate, implement changes to its current internal control processes whereby more effective consultation will be adopted.

Changes in Internal Controls over Financial Reporting

During the year ended December 31, 2008, there were no changes in the Company’s internal control over financial reporting that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

Off-balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have had, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.

Tabular Disclosure of Contractual Obligations

We are committed under operating leases for a total amount of approximately $650,087. The minimum payments due in each of

During the second quarter of 2007 Albert Wahbe was appointed Chief Executive Officer. In April 2008, Mr. Wahbe entered into a

three year employment agreement, renewable for a further one year period at the discretion of the Board of Directors. Mr. Wahbe’s compensation consists of salary of up to Cdn$300,000 in the first year and up to Cdn$450,000 in subsequent years and is payable through the issuance of up to 300,000 Diversinet common shares annually and bonus of up to up to Cdn$200,000 in the first year and up to Cdn$300,000 in subsequent years and is payable through the issuance of up to 200,000 Diversinet common shares annually as determined by Diversinet’s Board of Directors. Mr. Wahbe is also entitled to reimbursement of up to Cdn$6,000 per month in expenses. Furthermore in April 2008, Mr. Wahbe received options to purchase 1,500,000 common shares at $0.55 per share, vesting annually in arrears over a four year period. During the first quarter of 2008 Mr. Wahbe received 50,000 options. During 2008 Mr. Wahbe received 500,000 common shares and Cdn$72,000 in compensation as CEO. On June 30, 2008 Mr. Wahbe exercised 2,300,000 share purchase warrants at $0.75 per share for gross proceeds of $1,725,000. A further 2,300,000 share purchase warrants at $0.90 expired unexercised. As of December 31, 2008, Albert Wahbe owns 7,875,000 common shares and 1,600,000 options, representing approximately 19% of the issued and outstanding common shares of the Company, assuming the exercise of such options.

During 2008 BCNEPA received 50,000 options and 80,645 Diversinet common shares in regards to compensation for William Reed’s participation on the Diversinet Board of Directors. As part of the August 2007 private placement, BCNEPA acquired 6,756,757 common shares. As at December 31, 2008, BCNEPA owns 6,937,402 common shares and 50,000 options representing approximately 15% of the issued and outstanding common shares of the Company, assuming the exercise of such options.

During the second quarter of 2007, Mr. Wigdale began performing services for the Company in a sales capacity for a period of one year to March 31, 2008. From April to October 2008, Mr. Wigdale has provided services on a monthly retainer basis. During October 2008 Mr. Wigdale completed his services to Diversinet and the parties entered into a Termination and Release Agreement. During 2008, the Company paid Mr. Wigdale $370,000 in salary, commissions and severance. During the first quarter of 2008 Mr. Wigdale received 50,000 options. During the second quarter of 2008 Mr. Wigdale was allocated options to purchase 600,000 common shares at $0.60 per share, vesting annually in arrears over a four year period. These options were cancelled in October 2008 upon the completion of Mr. Wigdale’s services to the Company. On June 30, 2008 666,667 share purchase warrants at $0.75 and $0.90 expired unexercised. As at December 31, 2008, a company controlled by Mr. Wigdale owns 3,909,462 common shares, and Mr. Wigdale owns 1,151,872 common shares and 100,000 options, together representing approximately 11% of the issued and outstanding common shares of the Company, assuming the exercise of such options.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Significant estimates are used in determining, but not limited to, the allowance for doubtful accounts, income tax valuation allowances, stock based compensation, the useful life of depreciable assets and the recoverability of fixed assets. In making such estimates and assumptions, management consults with employees knowledgeable in the area; gathers relevant information; where appropriate, seeks advice from qualified third parties, and, makes judgments, which in their opinion at the time, represent fair, balanced and appropriate conservative estimates and assumptions. Actual results could differ from those estimates.

Allowance for doubtful accounts

The Company has an accounts receivable balance of $nil at December 31, 2008 (2007 – $123,000). The valuation of accounts receivable requires significant estimates to be made by management and the valuation of these balances could have an impact on the Company’s consolidated financial statements. These accounts receivable are comprised of amounts arising from contractual arrangements with major health care, identity management, financial and mobile network and security service providers. The Company determines an allowance for doubtful accounts based on knowledge of the financial conditions of its customers, the aging of the receivables, customer and industry concentrations, the current business environment and historical experience. At December 31, 2008, management has consistently applied this methodology and the Company has had a history of minimal bad debt loss. A change in any of the factors impacting the estimate of the allowance for doubtful accounts will directly impact the amount of bad debt expense recorded in general and administrative expenses.

Income tax estimates

Management continually reviews the estimates of the valuation of future income tax assets. This involves the use of judgment in the estimation of future income projections, actual tax exposures, assessing temporary differences that result from differing treatments in items for accounting purposes versus tax purposes, and in estimating the recoverability of the benefits arising from tax loss carry-forwards. The Company is required to assess whether it is more likely than not that future income tax assets will be realized prior to the expiration of the related tax loss carry forwards.

Changes in the forecasts of future profitability, the utilization of income tax loss carry forwards, the valuation allowance, and changes in tax rates could have a material impact on the reported amounts for future income tax assets and future income tax expense. The Company currently has a 100% valuation allowance against its future tax assets.

Stock based compensation

The Company records stock based compensation expense over the vesting period of the options based on the estimated fair value of the stock options granted. The Company’s policy is to determine the exercise price of an option based on the average trading price for five days prior to the grant. The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options on the grant date and the amount is expensed over the vesting period of the stock options. The assumptions used in the calculation of fair value include the risk free interest rate, dividend yield, volatility factor and expected life of the options.

The risk free interest rate is based on the then current risk free interest rate for the expected life of the option. The dividend yield is based on the Company’s historical practice of dividend payments. The volatility factor is based on analysis of the history of the Company’s share price and management’s estimate of the expected volatility over the respective terms of the options. The expected life of the option is based on the expected length of time options are estimated to remain outstanding.

Useful lives of depreciable assets

The Company depreciates the cost of fixed assets over their respective estimated useful lives. These estimates of useful lives involve estimation and judgment. In determining the estimates of useful lives, the Company considers industry trends and changing technologies. On an annual basis, the Company reassesses the estimated useful lives to ensure they correspond with the anticipated life of the respective assets. If a technological change happens more quickly than anticipated, the Company may have to revise the estimates of useful lives of fixed assets which could result in higher depreciation expense in future periods or an impairment charge to write-down the value of the fixed assets.

Recoverability of long-lived assets

Long lived assets, including fixed assets and intangible assets with finite useful lives, are depreciated over their estimated useful lives. The Company reviews for impairment annually, or more frequently, if events or changes in circumstances indicate that the carrying amount may not be recoverable. If the sum of undiscounted cash flows expected to result from the use and eventual disposition of a group of assets is less than its carrying amount, it is considered to be impaired. These analyses involve estimates of future cash flows and estimated periods of use. If the undiscounted net cash flows associated with a group of long-lived assets exceed the carrying amounts, impairment losses are measured as the excess of the carrying amount over the fair value

In the year ended December 31, 2008, we did not make any significant changes in, nor take any corrective actions regarding, our internal controls or other factors that could significantly affect these estimates. We periodically review our internal controls for effectiveness and we plan to conduct an evaluation of our disclosure controls and procedures each quarter. Other important accounting policies are described in note 1 to our consolidated financial statements.

Adoption of New Accounting Pronouncements

In December 2006, The Canadian Institute of Chartered Accountants (“CICA”) issued Handbook Section 1535, Capital Disclosures, which provides standards for disclosures regarding a company's capital and how it is managed. Enhanced disclosure with respect to the objectives, policies and processes for managing capital and quantitative disclosures about what a company regards as capital is required. These recommendations were effective for the Company beginning January 1, 2008. The additional disclosures required as a result of adoption of this standard, is included in note 11.

In December 2006, the CICA issued Handbook Section 3862, Financial Instruments - Disclosures, and Handbook Section 3863, Financial Instruments – Presentation. These new standards were effective for the Company beginning January 1, 2008. Section 3862 requires disclosure about the significance of financial instruments on the entity's financial position and performance, the nature and extent of risks arising from financial instruments to which the entity is exposed and how the entity manages those risks. Section 3863 establishes standards for presentation of financial instruments and non-financial derivatives. It deals with the classification of financial instruments, from the perspective of the issuer, between liabilities and equities, the classification of related interest, dividends, gains and losses, and circumstances in which financial assets and financial liabilities are offset. The additional disclosures required as a result of adoption of these standards, are included in notes 2 and 13.

Recently Issued Pronouncements

International Financial Reporting Standards (IFRS): In February 2008, the Canadian Accounting Standards Board announced the adoption of International Financial Reporting Standards for publicly accountable enterprises. IFRS will replace Canadian GAAP effective January 1, 2011. IFRS is effective for our first quarter of 2011 and will require that we restate our 2010 comparative numbers. We cannot at this time reasonably estimate the impact of adopting IFRS on our consolidated financial statements.

Consolidated financial statements: In January 2009, the CICA issued Handbook Section 1601, "Consolidated financial statements," which replaces the existing standards. This section establishes the standards for preparing consolidated financial statements. This standard is effective for 2011. Earlier adoption is permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial statements.

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 at www.sec.gov and filed on SEDAR in Canada at www.sedar.com. 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.

Impact of current economic conditions: The current unfavorable economic conditions may negatively impact the Company’s financial viability. Unfavorable economic conditions could also increase the Company’s financing costs, negatively affect profitability, limit access to capital markets and negatively impact the ability to maintain or attract customers. The Company often enters into multi-year contracts with customers that often have minimum threshold amounts due to us. These contracts, including the AllOne and Intersections agreements have a risk of cancellation if there is slow customer adoption. Due to the economic uncertainty, our customers may default on their obligations under these agreements or seek to renegotiate certain of their financial obligations.

Financial resources: The attached consolidated financial statements are prepared on a going concern basis that assumes that the Company will continue in operation in the foreseeable future and be able to realize its assets and discharge its liabilities in the normal course of business. Although we have made progress in developing our solutions and have completed initial consumer deployments, our revenue from operations may not be sufficient to cover our operating expenses at present. We have historically obtained funding for operations from private placements, but there is no assurance we will be able to do so again in the future or on terms favourable to the Company, 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.

Variability of performance: Our quarterly and annual operating results have varied substantially in the past and are likely to vary substantially from quarter to quarter and year to year in the future due to a variety of factors. In particular, our period-to-period operating results are significantly dependent upon the sale of license agreements and the continued success in providing professional services. In this regard, the purchase of our solutions often requires our customers to make a significant capital investment, which customers may view as a discretionary cost and, therefore, a purchase that can be deferred or cancelled due to budgetary or other business reasons. Furthermore, our ability to continue providing professional services is dependent upon being able to provide value added resources at reasonable rates. Estimating future revenues is also difficult because we ship our products upon receipt of a signed license agreement and, therefore, we do not have a backlog. Thus, quarterly and annual license revenues are heavily dependent upon agreements finalized and software shipped within the same quarter or year. We expect these revenue patterns to continue for the foreseeable future, until recurring revenue becomes a significant portion of total revenue. Despite the uncertainties in our revenue patterns, our operating expenses are based upon anticipated revenue levels and such expenses are incurred on an approximately rateable basis throughout the quarter. As a result, if expected revenues are delayed or otherwise not realized in a quarter for any reason, our business, operating results and financial condition would be adversely affected in a significant way.

Liquidity of our common shares: If our common shares should become ineligible for continued quotation on the Over the Counter Bulletin Board or a public trading market does not continue for any reason, holders of our common shares may have difficulty selling their shares. Our common shares may continue to be penny stock, which may adversely affect the liquidity of our common shares. The United States Securities and Exchange Commission has adopted regulations that define a penny stock to be any equity security that has a market price, as defined in those regulations, of less than $5.00 per share, subject to certain exceptions. Our common shares are currently penny stock. In July 2008, our common shares were also posted for trading on the TSX Venture Exchange on Tier 1 as a technology issuer under the symbol DIV.

Commercial deployment: The ability of the Company to continue operations is also dependent on the acceptance of its security, identity management solutions, secure application platform solutions in the health care market 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.

Dependence on key customers; concentration of credit: The loss of any key customer and our inability to replace revenues provided by a key customer may have a material adverse effect on our business and financial condition. Our customer base includes large healthcare providers, financial institutions and security providers. As a result, we maintain individually significant receivable balances due from them. If these customers fail to meet their payment obligations, our operating results and financial condition could be adversely affected. As at December 31, 2008, three customers accounted for 47%, 30% and 18% of our total 2008 consolidated revenues.

Foreign exchange: Our functional currency is the U.S. dollar. Sales generated outside Canada are generally denominated in U.S. dollars. During fiscal 2008, we incurred a portion of our expenses in U.S. dollars and Canadian dollars. Changes in the value of the Canadian currency relative to the U.S. dollar may result in currency losses that may have an adverse effect on our operating results. During fiscal 2008 and 2007 we maintained a portion of our cash resources in both U.S. and Canadian dollar term deposits. During October 2008, we exchanged $10,000,000 into Cdn$12,940,000. As the majority of our expenses are in Canadian dollars, and with the appreciation of the US/Cdn foreign exchange rate, we believe that this exchange was a prudent decision to match the longer term requirement for Canadian dollars to meet ongoing Canadian dollar expenses. The Company does not have any foreign currency derivative instruments outstanding at December 31, 2008.

Litigation: Our Company has previously 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.

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