As filed with the Securities and Exchange Commission on April 29, 2003
     ----------------------------------------------------------------------

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C.  20549

                                    FORM 20-F

  [ ]  REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES
                        EXCHANGE ACT OF 1934, AS AMENDED
                                       or
   [x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                             ACT OF 1934, AS AMENDED
                   For the fiscal year ended October 31, 2002
                                       or
    [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                        EXCHANGE ACT OF 1934, AS AMENDED
             For the transition period from __________ to __________

                        Commission file number:  0-23304

                                DIVERSINET CORP.
                                ----------------
                           Province of Ontario, Canada
                           ---------------------------
         Suite 1700, 2225 Sheppard Avenue East, Toronto, Ontario M2J 5C2
         ---------------------------------------------------------------

Securities registered or to be registered pursuant to Section 12(b) of the Act:
                                      None
                                      ----
Securities registered or to be registered pursuant to Section 12(g) of the Act:
                           Common Shares, no par value
                           ---------------------------
Securities for which there is a reporting obligation pursuant to Section 15(d)
                              of the Act:      None
                                               ----
Indicate  the  number  of  outstanding shares of each of the issuer's classes of
capital  or  common  stock  as  of the close of the period covered by the Annual
Report:     32,222,084  Common  Shares  as  of  October  31,  2002
            ------------------------------------------------------

Indicate by check mark whether the registrant (1) has filed all reports required
to  be  filed  by Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended,  during  the  preceding  12 months (or for such shorter period that the
registrant  was required to file such reports), and (2) has been subject to such
filing  requirements  for  the  past  90  days.

              Yes         [X]     No             [ ]

Indicate by check mark which financial statement item the registrant has elected
to  follow:

              Item 17     [X]     Item 18        [ ]


<PAGE>
<TABLE>
<CAPTION>
                                       DIVERSINET CORP.
                                    FORM 20-F ANNUAL REPORT
                                       TABLE OF CONTENTS


                                           PART I

                                                                                          Page
<S>                                                                                       <C>
ITEM 1.        IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS . . . . . . . . . .     4
ITEM 2.        OFFER STATISTICS AND EXPECTED TIMETABLE . . . . . . . . . . . . . . . . .     4
ITEM 3.        KEY INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     4
ITEM 3. (A)    SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . .     4
ITEM 3. (B)    CAPITALIZATION AND INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . .     5
ITEM 3. (C)    REASONS FOR THE OFFER AND USE OF PROCEEDS . . . . . . . . . . . . . . . .     5
ITEM 3. (D)    RISK FACTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .     5
ITEM 4.        INFORMATION ON DIVERSINET . . . . . . . . . . . . . . . . . . . . . . . .    12
ITEM 4. (A)    HISTORY AND DEVELOPMENT OF DIVERSINET . . . . . . . . . . . . . . . . . .    12
ITEM 4. (B)    BUSINESS OVERVIEW . . . . . . . . . . . . . . . . . . . . . . . . . . . .    13
ITEM 4. (C)    ORGANIZATIONAL STRUCTURE. . . . . . . . . . . . . . . . . . . . . . . . .    24
ITEM 4. (D)    PROPERTY, PLANT AND EQUIPMENT . . . . . . . . . . . . . . . . . . . . . .    24
ITEM 5.         OPERATING AND FINANCIAL REVIEW AND PROSPECTS . . . . . . . . . . . . . .    24
ITEM 5. (A)    OPERATING RESULTS . . . . . . . . . . . . . . . . . . . . . . . . . . . .    25
ITEM 5. (B)    LIQUIDITY AND CAPITAL RESOURCES . . . . . . . . . . . . . . . . . . . . .    28
ITEM 5. (C)    RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ET CETERA.. . . . . . . .    29
ITEM 5. (D)    TREND INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . .    29
ITEM 6.        DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES . . . . . . . . . . . . . . .    29
ITEM 6. (A)    DIRECTORS AND SENIOR MANAGEMENT OF THE REGISTRANT . . . . . . . . . . . .    30
ITEM 6. (B)    COMPENSATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    30
ITEM 6. (C)    BOARD PRACTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    32
ITEM 6. (D)    EMPLOYEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    32
ITEM 6. (E)    SHARE OWNERSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    32
ITEM 7.        MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . .    33
ITEM 7. (A)    MAJOR SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . . .    33
ITEM 7. (B)    RELATED PARTY TRANSACTIONS. . . . . . . . . . . . . . . . . . . . . . . .    35
ITEM 7. (C)    INTERESTS OF EXPERTS AND COUNSEL. . . . . . . . . . . . . . . . . . . . .    35
ITEM 8.        FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .    35
ITEM 8. (A)    FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . .    35
ITEM 8. (B)    SIGNIFICANT CHANGES . . . . . . . . . . . . . . . . . . . . . . . . . . .    35
ITEM 9.        THE OFFER AND LISTING . . . . . . . . . . . . . . . . . . . . . . . . . .    36
ITEM 9. (A)    OFFER AND LISTING DETAILS . . . . . . . . . . . . . . . . . . . . . . . .    36
ITEM 9. (B)    PLAN OF DISTRIBUTION. . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 9. (C)    MARKETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 9. (D)    SELLING SHAREHOLDERS. . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 9. (E)    DILUTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 9. (F)    EXPENSES OF THE ISSUE . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 10.       ADDITIONAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 10. (A)   SHARE CAPITAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    37
ITEM 10. (B)   MEMORANDUM AND ARTICLES OF ASSOCIATION. . . . . . . . . . . . . . . . . .    37
ITEM 10. (C)   MATERIAL CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .    38
ITEM 10. (D)   EXCHANGE CONTROLS AND OTHER LIMITATIONS AFFECTING SECURITYHOLDERS . . . .    38


<PAGE>
ITEM 10. (E)   TAXATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    38
ITEM 10. (F)   DIVIDENDS AND PAYING AGENTS . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 10. (G)   STATEMENT BY EXPERTS. . . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 10. (H)   DOCUMENTS ON DISPLAY. . . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 10. (I)   SUBSIDIARY INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 11.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .. . . . . . .    43
ITEM 12.       DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES. . . . . . . . . .    43

                                          PART II

ITEM 13.       DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES . . . . . . . . . . . . .    43
ITEM 14.       MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
               AND USE OF PROCEEDS.. . . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 15.       [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 16.       [RESERVED]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    43

                                          PART III

ITEM 17.       FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .    43
ITEM 18.       FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . .    44
ITEM 19.       EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    44
</TABLE>


<PAGE>
                                     PART I


ITEM 1.  IDENTITY  OF  DIRECTORS,  SENIOR  MANAGEMENT  AND  ADVISERS

         Not  Applicable.

ITEM 2.  OFFER  STATISTICS  AND  EXPECTED  TIMETABLE

         Not  Applicable.

ITEM 3.  KEY  INFORMATION

3-A.     SELECTED  FINANCIAL  DATA

          The selected financial data for fiscal years ended October 31, 1998,
1999, 2000, 2001 and 2002 are derived from our audited financial statements. The
following selected financial data should be read in conjunction with the
consolidated financial statements and the notes thereto and "Operating Results"
appearing in Item 5-A. of this annual report. Our financial statements are
presented in Canadian dollars. In addition, except where otherwise indicated,
all financial information is presented in Canadian dollars.

          Our  financial  statements  have  been  prepared  in  accordance  with
Canadian GAAP. These principles conform in all material respects with U.S. GAAP
except as described in Note 15 to our 2002 consolidated financial statements.
The differences between line items under Canadian GAAP and those as determined
under U.S. GAAP are not significant except that, under U.S. GAAP, our total loss
would be greater by $55,000 for the year ended October 31, 2002, greater by
$56,000 for the year ended October 31, 2001, greater by $1,449,000 for the year
ended October 31, 2000 and less by $179,000 and $4,131,000 for the years ended
October 31, 1999 and October 31, 1998, respectively. Under U.S. GAAP share
capital would be greater and deficit would be less by $41,249,000 for each of
the years due to the elimination of reduction in stated capital offset against
accumulated shareholders' deficit in March of 1999. The value of the U.S. Dollar
in relation to the Canadian Dollar is 1.57 to 1.00 at October 31, 2002.

<TABLE>
<CAPTION>
                                     SELECTED FINANCIAL DATA YEARS ENDED OCTOBER 31
                                         (IN CDN $000'S, EXCEPT PER SHARE DATA)


                                                                     2002       2001       2000       1999       1998
                                                                   ---------  ---------  ---------  ---------  --------
                                                                            (In accordance with Canadian GAAP)
<S>                                                                <C>        <C>        <C>        <C>        <C>
Revenue                                                            $  1,118   $  1,221   $  2,636   $    246   $  ----
Loss from Continuing Operations . . . . . . . . . . . . . . . . .    (6,397)   (18,900)   (14,777)   (13,826)   (7,716)
Net loss from Discontinued Operations . . . . . . . . . . . . . .         0          0       (250)      (285)     (688)
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (6,397)   (18,900)   (15,027)   (14,111)   (8,404)
Weighted Average no. of shares (000's). . . . . . . . . . . . . .    29,717     26,376     23,534     16,742    15,325
Loss Per Share - Continuing Operations. . . . . . . . . . . . . .     (0.22)     (0.72)     (0.63)     (0.82)    (0.50)
Loss Per Share - Continuing Operations (post share. . . . . . . .     (2.20)     (7.20)     (6.30)     (8.20)    (5.00)
consolidation
Net Loss Per Share. . . . . . . . . . . . . . . . . . . . . . . .     (0.22)     (0.72)     (0.64)     (0.84)    (0.55)
Net Loss Per Share (post share consolidation) . . . . . . . . . .     (2.20)     (7.20)     (6.40)     (8.40)    (5.50)
Dividends Per Share . . . . . . . . . . . . . . . . . . . . . . .      0.00       0.00       0.00       0.00      0.00
Working Capital . . . . . . . . . . . . . . . . . . . . . . . . .     2,743      3,555     21,647      4,985     2,636
Long-term Investment. . . . . . . . . . . . . . . . . . . . . . .         0          0          0          0       100
Long-term Liabilities . . . . . . . . . . . . . . . . . . . . . .         0          0          0      1,421     2,051
Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . .     4,620      6,052     24,846      7,852     3,746
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .     6,279      9,616     28,771     12,226     7,356
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . .    58,958     53,993     53,887     20,917    43,707

                                                                                   (Reconciled to U.S. GAAP)

Loss from Continuing Operations . . . . . . . . . . . . . . . . .    (6,452)   (18,956)   (16,226)   (13,647)   (3,585)
Net Loss from Discontinued Operations . . . . . . . . . . . . . .         0          0       (250)      (285)     (688)
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . .    (6,452)   (18,956)   (16,476)   (13,932)   (4,273)
Loss Per Share - Continuing Operations. . . . . . . . . . . . . .     (0.22)     (0.72)     (0.69)     (0.82)    (0.23)
Loss Per Share - Continuing Operations (post share consolidation.     (2.20)     (7.20)     (6.90)     (8.20)    (2.30)


<PAGE>
                                                                     2002       2001       2000       1999       1998
                                                                   ---------  ---------  ---------  ---------  --------
Net Loss Per Share. . . . . . . . . . . . . . . . . . . . . . . .     (0.22)     (0.72)     (0.70)     (0.83)    (0.28)
Net Loss Per Share (post share consolidation) . . . . . . . . . .     (2.20)     (7.20)     (7.00)     (8.30)    (2.80)
Long-term Liabilities . . . . . . . . . . . . . . . . . . . . . .         0          0          0      1,703     2,652
Shareholders' Equity. . . . . . . . . . . . . . . . . . . . . . .     3,059      4,547     23,397      7,571     3,101
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . .     6,279      9,616     28,771     12,226     7,310
Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . .   100,207     95,242     95,136     62,166    44,576
</TABLE>


          At our March 1999 Annual Meeting, our shareholders approved a
resolution providing for the reduction of our stated capital by $41,249,000.
This resulted in a reduction in our accumulated shareholders' deficit in the
same amount. At October 31, 2002, we had an accumulated deficit of $54,435,306.
If our shareholders had not approved the reduction in our stated capital, our
accumulated deficit at October 31, 2002 would have been $95,684,299 and October
31, 2001 would have been $89,287,375.

          The following table sets forth the rate of exchange for the Canadian
Dollar at the end of the five fiscal years ended October 31, 2002 and the end of
each of the last six months, the average rates for the period, and the range of
high and low rates for the period. For purposes of this table, the rate of
exchange means the noon buying rate in New York City for cable transfers in
foreign currencies as certified for customs purposes by the Federal Reserve Bank
of New York. The table sets forth the number of Canadian Dollars required under
that formula to buy one U.S. Dollar. The average rate means the average of the
exchange rates on the last day of each month during the period.

<TABLE>
<CAPTION>
=======================================================
                            U.S. Dollar/Canadian Dollar
-------------------------------------------------------
                            Close  Average  High  Low
                            -----  -------  ----  ----
<S>                         <C>    <C>      <C>   <C>
Month Ended 03/31/03 . . .   1.47     1.48  1.50  1.46
Month Ended 02/28/03 . . .   1.49     1.52  1.53  1.49
Month Ended 01/31/03 . . .   1.53     1.54  1.58  1.52
Month Ended 12/31/02 . . .   1.58     1.56  1.58  1.54
Month Ended 11/30/02 . . .   1.57     1.57  1.59  1.55
Month Ended 10/31/02 . . .   1.57     1.58  1.60  1.56
Fiscal Year Ended 10/31/02   1.57     1.57  1.62  1.50
Fiscal Year Ended 10/31/01   1.58     1.54  1.58  1.49
Fiscal Year Ended 10/31/00   1.53     1.47  1.53  1.43
Fiscal Year Ended 10/31/99   1.47     1.49  1.56  1.45
Fiscal Year Ended 10/31/98   1.55     1.47  1.58  1.40
=======================================================
</TABLE>

     The exchange rate was 1.46 as of April 15, 2003.

3-B.  CAPITALIZATION AND INDEBTEDNESS

      Not Applicable.

3-C.  REASONS FOR THE OFFER AND USE OF PROCEEDS

      Not Applicable.

3-D.  RISK FACTORS

          When used in this annual report, the words "may", "will", "expect",
"anticipate", "continue", "estimate", "project", "intend" "plan" and similar
expressions are intended to identify forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
regarding events, conditions and financial trends that may affect Diversinet's
future plans of operations, business strategy, operating results and financial
position. .  All statements, other than statements of historical facts, included
or incorporated by reference in this document which address activities, events
or developments which the Company expects or anticipates will or may occur in
the future, including such things as future capital expenditures (including the
amount and nature thereof), business strategy, expansion and growth of the
Company's business and operations, and other such matters are forward-looking
statements.  These statements are based on certain assumptions and analyses made
by the Company in light of its experience and its perception of historical
trends, current conditions and expected future developments as well as other
factors it believes are appropriate in the circumstances.  Such statements are
not guarantees of future performance and are subject to risks and significant
uncertainties and that actual results may differ materially from those included
within the forward-looking statements as a result of various factors.  The
occurrence of any unanticipated events may cause actual results to differ from
those expressed or implied by the forward-looking statements contained herein.
Prospective investors are cautioned that any forward-looking statements are not
guarantees of future performance and are subject to risks and uncertainties and
that actual results may differ materially from those included within the
forward-looking statements as a result of various factors, some of which are
described in the Risk Factors below.


<PAGE>
          WE HAVE LIMITED FINANCIAL RESOURCES. Our ability to continue
operations during the next fiscal year will be dependent on our ability to
obtain additional financing. Although we have made progress in developing our
products and have completed initial consumer deployments, our revenue from
operations is not sufficient to cover our operating expenses at present and is
unlikely to be sufficient within fiscal 2003. We have obtained funding for
operations from private equity placements in the past, raising approximately
$47,709,000 through selling a total of 1,521,931 (post January 28, 2003 stock
split - see Section 8-B. Significant Changes) common shares. In April 2002,
Diversinet completed a private placement with the issuance of 518,671 units at a
price of U.S. $6.00 per unit for gross proceeds of U.S. $3,112,022 to the
Company. Each unit is comprised of one (1) common share and three-quarters (3/4)
of one common share purchase warrant (each whole warrant, a "Warrant"). Each
Warrant will entitle the holder thereof to acquire one (1) common share at a
price of U.S. $7.20 per common share for a period of up to three years from
April 4, 2002. There is no assurance we will be able to obtain further
placements in the near future despite the progress of the business. As well, the
terms of new capital, if any, may materially dilute existing shareholders. Our
failure to either raise capital when needed or to generate revenues would leave
us with insufficient resources to continue our business.

          WE HAVE LOST MONEY IN THE PAST, WE HAVE REALIZED MINIMAL REVENUES FROM
CONTINUING OPERATIONS AND WE EXPECT TO CONTINUE TO SUSTAIN LOSSES IN THE FUTURE.
We have generated minimal revenue to date from the licensing of our products.
For the year ended October 31, 2002, we posted a net loss of $6,397,000 and for
October 31, 2001, we posted a net loss of $18,900,000.  For the years ended
October 31, 2000 and October 31, 1999, we had net losses of $15,027,000 and
$14,111,000, respectively.  We generated licensing revenue of $1,118,000 in the
year ended October 31, 2002, $1,221,000 in the year ended October 31, 2001,
$2,636,000 in the year ended October 31, 2000 and $246,000 in the year ended
October 31, 1999.  The revenue represents the initial licensing of our Passport
Certificate Server(R) and Passport Authorization Product(TM) together with
related professional services. During fiscal 2002, 28% of revenue was generated
from one customer although not the same customer as in fiscal 2001 and 54% from
three customers.  During fiscal 2001, 40% of revenue was generated from one
customer. To date, revenues were generated from licensing our products to
various customers and providing them with related professional services.  We
cannot provide assurance that recurring revenues will arise from these license
agreements.  The auditors' reports on our October 31, 2001 and 2002 consolidated
financial statements include an explanatory paragraph that states that
conditions and events exist that cast substantial doubt on the Company's ability
to continue as a going concern.  The consolidated financial statements have been
prepared on the going concern basis and do not include any adjustments that
might result from the outcome of that uncertainty.

          COMMERCIAL DEPLOYMENT. Our ability to continue operations is also
dependent on the acceptance of our security products and the adoption of
transaction-based applications using Public Key Infrastructure-based security
(also known in the industry as PKI) 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.

          Our products are marketed to large companies and government agencies.
The implementation of our products by these entities typically involves a
lengthy education process and a significant technical evaluation and commitment
of capital and other resources. This process is also subject to the risk of
delays associated with customers' internal budgeting and other procedures for
approving large capital expenditures, deploying new technologies within their
networks and testing and accepting new technologies that affect key operations.
As a result, the associated sales and implementation cycles can be lengthy. Our
quarterly and annual operating results could be materially harmed if anticipated
orders for a specific customer for a particular quarter are not realized.

          Many of our early licensing agreements permitted our customers to
examine and test our products with no initial up-front payments to us. These
customers are not required to make payments to us until they begin to use our
product for commercial purposes. We also enter into evaluation agreements in
certain cases, whereby potential customers may examine our software products for
a specified period of time with no payment to us. Our current licensing
agreements typically require the customer to pay a license fee attributable to
the software components and the development toolkit and upon shipment of these
items to the customer, although until early in fiscal 2000, we generally waived
the up-front fee.

          MARKET CONDITIONS. The general economic conditions may have a
significant impact on our ability to generate sales for our products. During
fiscal 2002 and 2001, we experienced decreased activity from our potential
customers and generally the adoption of wireless services has not proceeded as
rapidly as previously expected. As a result, our revenue declined from fiscal
2001 levels and may decline even further in the near future.

          FOREIGN EXCHANGE. Our functional currency is the Canadian dollar.
Sales generated outside Canada are generally denominated in U.S. dollars. During
fiscal 2002 and 2001, we incurred most of our expenses in Canadian dollars, but
we also incurred a portion of our expenses in foreign currencies including U.S.
dollars, Pound Sterling and Hong Kong dollars. Changes in the value of these
currencies relative to the Canadian dollar may result in currency losses that
may have an adverse effect on our operating results. With the completion of our
financing in April 2002, we had a portion of our cash resources in U.S. dollar
short-term investments however, we had option contracts for U.S. $990,000 to
minimize our exposure to fluctuations in the Canadian dollar. As at October 31,
2002, the net unrealized gain on these contracts was insignificant.


<PAGE>
          WE MAY NOT BE SUCCESSFUL IF WE FAIL TO RETAIN OUR KEY TECHNICAL
PERSONNEL. During September 2001, we substantially reduced our headcount and
curtailed certain sales and marketing activities, particularly in the United
States. During 2002 we continued to review our cost structure and have continued
to reduce our headcount. Workforce reductions may have a detrimental effect on
the morale of remaining employees, impeding their performance levels. In
addition, our ability to attract potential new employees in the future may
suffer if our reputation was hurt by this staff reduction.

          We currently have four senior officers and 66 employees and
contractors. We may not be able to improve our products or create new products
if we lose any of our key employees or contractors. The contract with our CEO,
Mr. Nagy Moustafa, had a term of five years, commencing September 29, 1997, and
has been renewed on a year to year basis. None of our other employment
agreements has a specified term. We do not maintain key person life insurance
policies on any of our employees. Skilled technical personnel can be difficult
to attract depending on the strength of the economy and competitive
opportunities. We may not be able to retain our current employees if they
receive better job offers from other employers. The weakened economy through
2001 and 2002 may not alleviate this risk in the future.

          WE ARE INVOLVED IN LITIGATION WHICH COULD RESULT IN JUDGMENTS AGAINST
US WHICH, IN THE AGGREGATE, COULD TOTAL MORE THAN OUR COMBINED CURRENT ASSETS,
WORKING CAPITAL AND NET ASSETS. There are currently two material claims pending
against us. If we lose either of these suits or enter into settlements requiring
us to pay cash or issue any of our common shares, our liquidity and financial
position will be adversely affected, and our shareholders' ownership may be
diluted.

          We have been sued, along with other individuals and corporations, by
Silva Run Worldwide Ltd. in connection with Silva Run's purchase of 21,250
common shares (850,000 common shares prior reverse splits in May 1997 and
January 2003) in 1995 for a purchase price of U.S. $3,700,000. Silva Run is
seeking to cancel the stock purchase and reimbursement of the U.S. $3,700,000
purchase price, plus interest, attorneys' fees and costs. Silva Run has alleged
that we, directly or as the control person of other defendants, violated the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended.

          In May 2000 we were sued, along with our wholly owned Barbados
subsidiary, in an action in which the plaintiff is seeking damages of U.S.
$1,533,950 for breach of an October 25, 1995 dealer agreement with our previous
printing business regarding the distribution of printing equipment and damages
of U.S. $25,000,000 for loss of reputation and loss of opportunity, pre-judgment
and post-judgment interest, and costs.

          WE HAVE LIMITED EXPERIENCE IN THE WIRELESS INTERNET SECURITY SOFTWARE
FIELD AND WE ARE THEREFORE SUBJECT TO RISKS INHERENT IN ESTABLISHING A NEW
BUSINESS. We have only been in the wireless Internet security software field
since fiscal 1997, and we have generated minimal revenues from this business. We
are not sufficiently established to fully evaluate or forecast our prospects,
and we are subject to the risks inherent in establishing a new business
enterprise.

          WE ARE DEPENDENT ON THE ADOPTION OF TRANSACTION-BASED APPLICATIONS
OVER WIRELESS NETWORKS AS AN ACCEPTED METHOD OF COMMERCE. In order for
Diversinet to be successful, transaction-based applications using PKI-based
security over wireless networks must be adopted as a means of trusted and secure
communications and commerce to a sufficient extent and within a reasonable time
frame, particularly considering our existing financial resources and future
capital needs. Since trusted and secure communications and commerce over these
networks is new and evolving, it is difficult to predict with any assurance the
size of this market and its growth rate, if any.

          If the market for trusted and secure communications and commerce
utilizing PKI over these networks fails to develop or develops more slowly than
expected, we may have difficulty selling products or generating sufficient
revenues to support our business.

          OUR ABILITY TO KEEP PACE WITH THE RAPID TECHNOLOGICAL CHANGES AND
FREQUENT NEW PRODUCT INTRODUCTIONS COMMON IN THE ELECTRONIC COMMERCE INDUSTRY
WILL DETERMINE OUR ABILITY TO REMAIN COMPETITIVE AND AFFECT THE VIABILITY OF OUR
PRODUCTS. To succeed in the mobile e-commerce business, we believe that we will
have to continuously improve the performance, features and reliability of our
products and be the first to the market with new products or enhancements to
existing products. We cannot provide assurance that we will be able to improve
our products in a timely manner. The emerging market for security products for
mobile e-commerce is characterized by rapid technological developments, frequent
new product introductions and evolving industry standards. We anticipate this
evolution to also occur in the mobile e-commerce market in which we focus our
technological developments. The adoption of new standards, or the informal
adoption of certain standards by a significant percentage of the computer
security and related industries, could require us to reconfigure our products.
We may not be able to counter challenges with our current products or to
introduce product offerings that keep pace with the technological changes
introduced by competitors or persons seeking to breach information security. We
are not currently aware of any significant new technologies either under
development or about to be introduced in the mobile e-commerce security field.

          THE HIGHLY COMPETITIVE NATURE OF THE ELECTRONIC COMMERCE FIELD COULD
PREVENT US FROM ACHIEVING SUCCESS.  Our products are targeted at the new and
rapidly evolving market for authentication and authorization products for
wireless electronic commerce and telecommunications.  This market is not mature.
We anticipate that it will be intensely competitive, subject to rapid change and
significantly affected by new product and service introductions and other market
activities of industry participants.  Many of our competitors and potential
competitors have a longer operating history, greater name recognition, larger
installed customer base and significantly greater financial, technical and
marketing resources than we have.  As a result, they may be able to adapt more
quickly to new or emerging technologies and changes in customer requirements and
they could therefore render our technologies and products obsolete.


<PAGE>
          Because of the broad potential application of our authentication and
authorization software, we compete with vendors offering a wide range of
computer security products.  These competitors include Entrust Technologies,
VeriSign, Certicom, Baltimore Technologies, Sonera SmartTrust and RSA Security.
There also may be other potential entrants to the market of whom we are not yet
aware.

          OUR LICENSING REVENUES ARE DEPENDENT ON OUR CUSTOMERS' ACCEPTANCE AND
USE OF OUR SOFTWARE PRODUCTS, AND WE EXPECT OUR SALES CYCLE TO BE LENGTHY. Many
of our early licensing agreements permitted our customers to examine and test
our products with no initial up-front payments to us. These customers are not
required to make payments to us until they begin to use our product for
commercial purposes. We also enter into evaluation agreements in certain cases,
whereby potential customers may examine our software products for a specified
period of time with no payment to us. Our current licensing agreements typically
require the customer to pay a license fee attributable to the software
components and the development toolkit and upon shipment of these items to the
customer, until early in fiscal 2000, we generally waived the up-front fee.

          Customers cannot simply license our products and begin using them
immediately in their businesses.  Making our products work with a particular
customer's application may be a complex, expensive and, in certain cases, an
ultimately unsuccessful process.  This process may also require the customer to
make significant commitments of time and money.  Based on discussions with our
customers, we believe that a customer's required cycle of testing, internal
approval and network modifications can reasonably take between six and nine
months or longer.  Therefore, we expect our sales cycle, or the time between
entering into a license agreement and when we begin to receive recurring
revenue, to be six to nine months or longer.  Also, the amount of revenue can be
very limited until the customer's product is made generally available and
adopted.  Our sales are also subject to significant risks over which we have
little or no control, including customers' budgetary constraints and internal
acceptance procedures regarding security-related matters.

          TWO MAJOR ENCRYPTION TECHNOLOGY VENDORS SERVICE OUR AREA OF BUSINESS,
AND IF WE FAIL TO CONTINUE TO LICENSE ENCRYPTION TECHNOLOGY FROM EITHER OF THEM,
IT WOULD CAUSE A SIGNIFICANT DISRUPTION TO OUR BUSINESS. Our current product
offerings include encryption technology that we source from third-party vendors.
We currently license encryption technology from Certicom Corp. and RSA Security,
two encryption technology vendors who service the wireless and the e-commerce
security market. The term of each of the licensing arrangements we have with
these two vendors is open-ended. Encryption technology is currently available
from other vendors; however, if either of these agreements is terminated for any
reason and we could not obtain sufficient encryption technology from the other
vendor, or if both agreements were terminated, we would have to license
encryption technology from an alternative vendor. Accordingly, if both current
agreements were terminated there might be a disruption to our business.

          Our success will depend in part on our continued ability to have
access to these and other technologies that are important to our existing
products and may become important to products we may develop in the future. We
cannot be certain that we will be able to procure or use any necessary
technology on terms similar to existing licenses.

          WE LACK EXPERIENCE IN MARKETING AND SALES, AND WE DEPEND ON OUR
RELATIONSHIPS WITH MORE ESTABLISHED CORPORATIONS TO ASSIST IN MARKETING AND
SELLING OUR PRODUCT.  We have limited sales and marketing experience and limited
money to fund marketing.  A significant part of our business strategy is to form
strategic relationships with more established companies to expose our products
to a larger customer base than we could reach through a direct-sales and
marketing force.  Our existing relationships have not resulted in any
significant revenues to date and may not result in any revenues in the future.

          As a result of our emphasis on these relationships, our success will
partially depend on both the ultimate success of the third parties with whom we
have these relationships and the ability of these third parties to market our
products and services successfully.

          In the past, we have concentrated our sales efforts marketing to
application service providers.  This strategy has lead to no commercial
deployments.  As a result and due to some success experienced by us in Hong
Kong, we are focussing our efforts on working to establish the necessary
infrastructure first. We have jointly developed Mobile e-Cert with Hongkong
Post. Hongkong Post will support the Mobile e-Certs through its Mobile
Certification Authority and mobile operators will act as the Registration
Authorities for the authentication of the identity of Mobile e-Cert subscribers.
Hongkong Post is the first recognized public certificate authority in Hong Kong.
Hutchinson, the largest and leading mobile operator in Hong Kong, has been
appointed the first certified Registration Authority for the registration of
Hongkong Post Mobile e-Cert digital certificates to mobile users. The company
believes that this appointment also marks the first time worldwide a mobile
operator is acting as a Registration Authority for the issuance of wireless
digital certificates. After this was successfully accomplished, we have been
working with application service providers who will develop applications that
will have our software embedded and will utilize Mobile e-Cert.

          We cannot provide assurance that we will be able to enter into
additional, or maintain our existing, strategic relationships on commercially
reasonable terms, if at all. Our failure to do so would require us to devote
substantially more resources to the distribution, sales and marketing of our
products and services. Also, these strategic relationships do not afford us any
exclusive marketing or distribution rights. The third parties may reduce their
commitments to us in the future or pursue alternative technologies.


<PAGE>
          THE NATURE OF OUR PRODUCTS SUBJECTS US TO PRODUCT LIABILITY RISKS,
POTENTIAL LOST REVENUES AND ADVERSE PUBLICITY IN THE EVENT OF PRODUCT FAILURE.
Our customers may rely on our products to prevent unauthorized access to
computer networks.  Malfunctions or design defects of our products could:

          -    cause interruptions, delays or cessation of services to our
               customers,
          -    result in product returns,
          -    result in liability for damages that exceeds our errors and
               omissions insurance coverage of $5,000,000 per occurrence and
               $5,000,000 in the aggregate annually,
          -    adversely affect the market's perception of the security offered
               by our product, resulting in a lack of demand for our products,
               or
          -    require us to make significant expenditures of capital or other
               resources to alleviate the problem.

          OUR LICENSE AGREEMENTS MAY NOT BE ADEQUATE TO LIMIT OUR LIABILITY. A
large number of claims by our customers could subject us to significant
liability as well as limit the demand for our products. In most cases our
license and support agreements attempt to limit our liability to the total
amount of the licensing and support fees paid during the twelve-month period
preceding an alleged error in or failure of our software. This contractual
provision may not always be enforceable. Courts have held that contractual
limitations of liability of this type, or the "shrink-wrap licenses" in which
they are sometimes embodied, are unenforceable because the licensee does not
sign them. If these contract provisions limiting our liability are not
enforceable, we could be obligated to pay significant damages resulting from
customer claims.

          IF COMPUTER HACKERS FIND WAYS TO CIRCUMVENT OUR PRODUCTS, OUR PRODUCTS
WOULD NOT PERFORM THEIR ESSENTIAL FUNCTION.  Any compromise of the security
offered by our products, in a single incident or a series of incidents, would
make our products less attractive to our customers.  Software error or failure
may result from a hacker seeking unauthorized access to a computer network.  The
methods used by hackers are evolving rapidly and generally are not recognized
until they are launched against one or more systems.  We are unable to
anticipate hackers' tactics.  The publicity surrounding any security breaches
could adversely affect the public perception of the security offered by our
authentication and authorization products and make it more difficult for us to
sell our products.

          TECHNICAL ADVANCES IN THE INFORMATION SECURITY MARKET MAY MAKE OUR
PRODUCTS OBSOLETE. Our products are based on PKI technology and depend in part
on the application of certain mathematical principles forming the basis of the
encryption technology that we license and embed in our products. Any significant
advance in techniques for decoding or cracking encrypted computer information
could render our products obsolete or unmarketable.

          Our PKI products use algorithms, or mathematical formulae, to encrypt
and secure information. The security afforded by our products is predicated on
the assumption that these mathematical formulae are very difficult to solve.
This assumption is based on the fact that years of theoretical and empirical
research by leading mathematicians have not resulted in any efficient solutions
to these problems. There can be no assurance, however, that future research will
not uncover efficient solutions to these problems.

          Also, even if no breakthrough in solving these problems is discovered,
they may eventually be solved by computer systems having sufficient speed and
power. If improved techniques for decoding encrypted information are developed
or made possible by the increased availability of powerful computing resources,
our products could be rendered obsolete.

          WE MIGHT NOT ALWAYS BE ABLE TO ENFORCE OUR INTELLECTUAL PROPERTY
RIGHTS. Our success depends significantly upon our proprietary technology and
our means of protecting our proprietary and intellectual property rights may not
be adequate. We rely on a combination of patent and trademark laws, trade
secrets, confidentiality agreements and contractual provisions to protect our
proprietary rights. We have two U.S. patents, which will be in effect until at
least August 22, 2017, and one patent granted in Israel in effect until 2021, as
well as 14 applications pending in Europe, Israel, the United States and Canada.
We cannot provide assurance that any of our applications will be approved, that
any new patents will be issued, that we will develop proprietary products or
technologies that are subject to patent, that any issued patent will provide us
with any competitive advantages or will not be challenged by third parties.
Furthermore, we cannot provide assurance that the patents of others will not
have a material adverse effect on our business and operating results. There is
also a risk that our competitors will independently develop similar technology,
duplicate our products or design around our patents or other intellectual
property rights.

          If our technology or products were determined to infringe upon the
rights of others, we would be required to obtain licenses to use that
technology. If we are not able to obtain a license in a timely manner on
acceptable terms or at all, we may have to stop producing our product until we
can develop an alternative that does not infringe the rights of others.

          Patent disputes are common in technology-related industries. We cannot
provide assurance that we will have the financial resources to enforce or defend
a patent infringement or proprietary rights action.  As the number of products
and competitors in our target markets grows, the likelihood of infringement
claims also increases.  Any claims or litigation may be time-consuming and
costly, cause product shipment delays or require us to redesign our product or
require us to enter into royalty or licensing agreements.  Any of these events
could have a material adverse effect on our business and operating results.
Despite our efforts to protect our proprietary rights, unauthorized parties may
attempt to copy aspects of our products or to use our proprietary information
and software.  In addition, the laws of some foreign countries do not protect
proprietary and intellectual property rights to as great an extent as do the
laws of Canada and the United States.


<PAGE>
          THE TERMS OF THE AGREEMENT IN WHICH WE SETTLED TWO LAWSUITS COULD
RESULT IN THE PLAINTIFFS HAVING THE ABILITY TO INFLUENCE CORPORATE DECISIONS
BECAUSE OF THEIR SIGNIFICANT EQUITY POSITION. Pursuant to a settlement agreement
with Knockagh International Ltd. and others, the following obligations still
remain:

          -    We granted to Knockagh a warrant to purchase 15,000 of our common
               shares at a price of U.S. $131.25, which (a) becomes exercisable
               as to 1,250 common shares on the last day of each three-month
               period commencing on November 26, 1999 and (b) expires on
               November 25, 2004.

          -    On May 15, 2000, we issued to Knockagh a warrant to purchase
               26,350 common shares at an exercise price of U.S. $85.94,
               exercisable as to 2,196 common shares in each three month period
               following the date of issuance. Such warrant will expire on May
               15, 2005.

          We believe that Knockagh, as of April 15, 2003, holds 131,368 of our
common shares, or 5% of our outstanding common shares. If Knockagh exercises the
warrants granted to it in connection with the settlement, it would own
approximately 170,522 shares, or 5.2% of our common shares currently
outstanding. The exercise of those warrants could result in dilution to our
existing shareholders.

          CHANGES IN THE EXPORT REGULATION OF ENCRYPTION-BASED TECHNOLOGIES MAY
RESTRICT OUR ABILITY TO SELL OR LICENSE OUR PRODUCTS.  Our products are subject
to export controls under Canadian and U.S. laws and regulations.  These laws and
regulations may be revised from time to time in ways that may materially and
adversely affect our ability to sell our products abroad or to make products
available for sale or license via international computer networks such as the
Internet, although pursuant to an international treaty, a number of countries
have relaxed, or are in the process of relaxing, their export rules as
applicable to products licensed by us.  Canadian and U.S. government controls on
the export of encryption technologies which we license from third parties and
which are embedded in our products may, if subject to revision, be amended and
subsequently restrict our ability to freely export our products.  As a result,
foreign competitors subject to less stringent export controls on their products
may be able to compete more effectively than we can in the global information
and computer security market.

          OUR ARTICLES OF INCORPORATION AUTHORIZE US TO ISSUE AN UNLIMITED
NUMBER OF COMMON SHARES, WHICH COULD RESULT IN DILUTION TO OUR SHAREHOLDERS.
Shareholders may experience dilution because our articles of incorporation
authorize us to issue an unlimited number of common shares, subject to
regulatory and/or shareholder approval. Our shareholders, with the exception of
Knockagh, have no right to purchase additional common shares when we issue new
shares. As of April 15, 2003 after effect for the reverse share split, we had
3,222,210 common shares issued and outstanding.

          In addition, our ability to issue an unlimited number of common shares
may have the effect of delaying, deferring or preventing a takeover attempt by a
third party attempting to acquire control of us.

          IF OUR COMMON SHARES SHOULD BECOME INELIGIBLE FOR CONTINUED QUOTATION
ON THE NASDAQ SMALLCAP MARKETSM 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 have been quoted on the NASDAQ SmallCap MarketSM since
June 1995. Within the eighteen months ended October 31, 2002 the closing bid
price for our common shares was as low as U.S. $0.22 during fiscal 2002. NASDAQ
requires that we maintain a minimum bid price of U.S. $1.00 for continued
listing but allows a grace period of 180 days. On March 9, 2002 we received
notice from NASDAQ that we had not met the minimum U.S. $1.00 per share
requirement and may be subject to delisting. After the 180 day grace period, our
share price continued to trade below U.S. $1.00. Subsequent to an appeal hearing
we were granted a temporary exception from this standard subject to meeting
certain conditions, including demonstrating a closing bid price of at least U.S.
$1.00 per share on or before January 31, 2003, and, immediately thereafter, a
closing bid price of at least U.S. $1.00 for a minimum of 10 consecutive trading
days. Thereafter, on or before April 30, 2003, the Company must file this Form
20-F for the fiscal year ended October 31, 2002 evidencing continued compliance
with the U.S. $2,500,000 shareholders' equity requirement. In order to comply
fully with the terms of this exception, Diversinet must be able to demonstrate
compliance with all requirements for continued listing on the NASDAQ SmallCap
MarketSM. In the event that Diversinet fails to comply with any of the terms of
this exception, its securities will be delisted from the NASDAQ Stock MarketSM.
All companies operating under exceptions are identified with a fifth letter "C"
appended to the Company's trading symbol. Accordingly effective with the open of
business December 3, 2002, the trading symbol was changed from DVNT to DVNTC.
Following the reverse split on January 28, 2003, the trading symbol was changed
to DVNTD for 20 trading days and has now been changed back to DVNTC. The "C"
will be removed when the panel has confirmed compliance with the terms of the
exception.

          On January 22, 2003 shareholders approved a resolution to authorize
Diversinet to effect a 1:10 reverse stock split.  On January 28, 2003 the
reverse stock split was completed and the trading symbol was changed from DVNTC
to DVNTD.  On February 26, 2003, after 20 post reverse stock split trading days,
the trading symbol was changed back to DVNTC.  On April 23, 2003 we filed a
request for an extension to allow the Company additional time to evidence
compliance with the shareholders' equity requirement.  To date we have not
received a response from NASDAQ in regards to our request.

          In addition to the foregoing requirement, in order for our common
shares to continue to be listed on the NASDAQ SmallCap Market(SM):


<PAGE>
     -    We must maintain:
          --   shareholders' equity of at least U.S. $2,500,000, OR
          --   a  market  capitalization  of  at  least  U.S.  $35,000,000;  OR
          --   net  income in the latest fiscal year or in two of the last three
               fiscal  years  of  at  least  U.S.  $500,000;
     -    Our  public  float  must  be  at  least  500,000  shares;
     -    The market value of our public float must be at least U.S. $1,000,000;
     -    We  must  have  at  least  two  market  makers;  and
     -    We  must  have  at  least  300  round  lot  shareholders.

          As of April 15, 2003, we met all of these tests, with the exception of
the first requirement. As of October 31, 2002, our shareholders' equity under
U.S. GAAP was approximately U.S. $ 1.89 million.

          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 U.S. $5.00 per share, subject to certain exceptions.  Our common
shares are currently penny stock.

          Generally, for any transaction involving a penny stock, a
broker-dealer is required to deliver, prior to the transaction, a disclosure
schedule relating to the penny stock market as well as disclosure concerning,
among other things, the commissions payable, current quotations for the
securities and information on the limited market in penny stocks.

          The liquidity of our common shares may be materially and adversely
affected if our common shares continue to be penny stock due to the
administration requirements imposed by these rules.

          IT MAY BE DIFFICULT FOR OUR SHAREHOLDERS TO ENFORCE CIVIL LIABILITIES
UNDER THE U.S. FEDERAL SECURITIES LAWS BECAUSE WE ARE INCORPORATED IN CANADA.
Diversinet is incorporated under Canadian law and the majority of our directors
and executive officers are Canadian citizens or residents. All, or a substantial
portion, of these persons' assets and substantially all of our assets are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon those
persons or Diversinet or to enforce against them judgments of U.S. courts
predicated upon civil liabilities under U.S. federal or state securities laws.
Also, there is uncertainty as to the enforceability in Canada, in original
actions or in actions for enforcement of judgments of the U.S. courts, of civil
liabilities predicated upon U.S. federal or state securities laws.

          WE MAY BE TREATED AS A PASSIVE FOREIGN INVESTMENT COMPANY, WHICH WOULD
HAVE ADVERSE TAX CONSEQUENCES FOR OUR U.S. SHAREHOLDERS. We may be treated as a
passive foreign investment company, or a PFIC. While we do not believe that we
should be treated as a PFIC, whether we are treated as a PFIC depends on
questions of fact concerning our assets and revenues. Accordingly, we cannot
assure you that we will not be treated as a PFIC. If we were to be treated as a
PFIC, there could be material adverse tax consequences to U.S. holders of our
common shares. For additional information on the PFIC issue, please turn to
"Item 10-E. Taxation - United States Federal Income Tax Consequences - Passive
Foreign Investment Company."

ITEM 4.   INFORMATION ON DIVERSINET

4-A.      HISTORY AND DEVELOPMENT OF DIVERSINET

          Diversinet Corp. (formerly The Instant Publisher Inc.) was formed on
December 8, 1993 through the amalgamation of The Instant Publisher Inc. with
Lombard Consolidated Resources Inc., an Ontario corporation.  We are regulated
in accordance with the Ontario Business Corporations Act.

          Our registered and principal office is located at 2225 Sheppard Avenue
East, Suite 1700, Toronto, Ontario, Canada, M2J 5C2 (telephone: 416-756-2324;
fax: 416-756-7346).

          The following table provides the amount spent on capital expenditures
for the last three fiscal years ended October 31:

                    YEAR            AMOUNT
                    ----          ----------

                    2002          $   16,000
                    2001          $1,186,000
                    2000          $1,764,000

          There have been no major capital divestitures during the three-year
period ended October 31, 2002. A large portion of the capital expenditures have
been computer hardware and software required for our continued growth. Most of
these expenditures have occurred at our head office. We currently have no
significant capital expenditures or divestiture projects in process. All capital
expenditures have been financed through working capital.

4-B.      BUSINESS OVERVIEW

          We are a security software product company that develops, markets and
distributes PKI security solutions that provide for the secure transmission of
data over wireless networks and devices.  Our solution encompasses all aspects


<PAGE>
of commercial transaction security requirements, covering the authentication and
authorization of individuals involved, the integrity of the information being
sent and the non-repudiation or legalization of the transaction.

          We are a pioneer in providing security products for mobile commerce
over wireless networks and are striving to become the leading provider of
wireless security solutions. Our strategy to achieve this objective involves:
targeting emerging m-commerce markets, expanding strategic partnerships and
sales channel relationships, maintaining a leadership position in terms of
products and research and development and building awareness of the Diversinet
brand.

          Security solutions are becoming important to a wide range of parties -
service providers, applications developers, certification authorities,
enterprises, content providers and end-users - as organizations increasingly
utilize public and private networks for confidential and high-value
transactions.  The highly publicized security breaches associated with
communications, the storage of confidential information and transactions over
communications networks have accentuated the need for security solutions that
address the critical network security needs.

          We believe that the enactment of the Electronic Signatures in Global
and National Commerce Act by the United States in June 2000, together with
similar legislation emerging throughout the world, is increasing the demand for
security in mobile commerce to parallel that of the bricks-and-mortar world.

          A wide range of products and services has been introduced recently to
address the security needs of mobile users.  However, the lack of flexibility,
scalability and comprehensiveness inherent in many of these solutions led
companies such as Diversinet to develop a combination of public-key encryption
and digital certification systems in a PKI design to address all critical
network security needs.

          Even as standards for wireless security develop, an efficient
implementation of mobile security is required to:

          -    make efficient use of the available bandwidth,
          -    effectively utilize a mobile device to provide a rich experience
while offering efficient access to information and applications,
          -    manage the constraints of devices such as battery life, memory
and processing power, and wireless network coverage,
          -    enable a seamless experience allowing the user to move across
wireless technologies from public wide-area networks to private, local area
networks, and,
          -    provide strong security for wired and wireless applications via a
single infrastructure.

     Global investment in PKI products and services will grow from $436 million
in 2000 to $3.4 billion in 2006. An especially large growth area will be the
mobile sector. In 2000, mobile devices accounted for just 1% of overall PKI
revenues. However, after 2003, when the mass market begins to take up 3G
devices, wireless PKI will become a major industry, accounting for up to 45% of
total PKI revenues in 2006. This trend will continue as the uptake of the mobile
Internet accelerates.  [SOURCE: Datamonitor, May 2, 2001 "eSecurity: PKI the way
forward."]

     There are a number of significant demand drivers for PKI security-related
solutions:

          -    laws recognizing electronic signatures and signed transactions as
being legally equivalent to paper-based transactions,
          -    a rise in electronic and mobile commerce transactions,
          -    recognition that accredited digital certificates are necessary to
confidently identify parties to an electronic transaction,
          -    increased interest from business users in wireless office
applications, healthcare, and business-to-business scenarios,
          -    the launch of 2.5G and 3G mobile networks that offer faster data
speeds, and an always-on connection,
          -    and the emergence of security and wireless industry standards.

          Industry forecasters predict that there will be many more wireless
devices (e.g. smart phones, pagers and personal digital assistants or "PDAs")
than computers accessing the Internet in the future. In addition, wireless
devices can communicate directly with one another without going over the
Internet (referred to as peer-to-peer) or wireless devices can communicate
directly with enterprises.

          Our products are designed to address the unique needs of wireless
devices, networks and applications. We have invested significant engineering
resources in developing technology we acquired in fiscal 1996. Our main products
are Passport ONE and Passport Certificate Server(R), which enable the
implementation of a PKI solution for mobile communications and e-commerce. We
believe that Passport ONE and Passport Certificate Server(R) offer advantages in
terms of privacy, efficiency, scalability and flexibility over conventional
solutions. We also develop the Passport Authorization Product(TM), which extends
the functionality of digital certificates by granting privileges, through
digital permits, to the holder of either a Diversinet certificate, or other
selected vendor certificates.

          In fiscal 2002, the Company introduced several new products to further
expand its offering. Such products include its new PKI-enhanced Wireless VPN
product. Passport Wireless VPN offers a complete wireless Virtual Private
Network (VPN) suite to meet the needs for organizations to provide their mobile
workforce with secure wireless access to corporate data. Passport Wireless VPN
offers a strong security framework, optimized performance and convenient
always-on connectivity. Passport Wireless VPN uses a strong security framework
specially designed and optimized for communication in a wireless environment.
Transport and network level security is based on a Public Key Infrastructure
(PKI) framework for maximum interoperability.


<PAGE>
          During fiscal 2002, we announced that Passport Certificate Server(R)
now supports Symbian operating system-based devices and Microsoft's new
Windows(R) Powered Smartphone. The Symbian OS is an advanced, open operating
system licensed by the world's leading mobile phone manufacturers (Ericsson,
Fujitsu, Matsushita, Motorola, Nokia, Psion, Samsung, Sanyo, Siemens and Sony
Ericsson). Symbian OS is designed for the specific requirements of advanced 2G,
2.5G and 3G mobile phones and combines the power of an integrated application
environment with mobile telephony, bringing advanced data services to the mass
market. The Microsoft Windows(R) Powered Smartphone is a revolutionary mobile
phone software platform that allows for more than just talking on the phone.
Smartphone software keeps people in touch and entertained with unparalleled
features in small, stylish mobile phones.

          In fiscal 2002, Passport Certificate Server(R) Version 4.1.1 became
the world's first wireless public key infrastructure (PKI) security product to
receive the Common Criteria for Information Technology Security Evaluation
(Common Criteria) certification. Common Criteria, a rigorous international
security standard recognized by 14 countries, is an international standard to
evaluate the trustworthiness of Information Technology products and systems. The
evaluation was conducted at the DOMUS IT Security Laboratory, a unit of IBM
Canada Limited, and was overseen by the Communications Security Establishment
(CSE), a division of the Canadian Department of National Defence. This is the
first PKI Product (wireline or wireless) to be evaluated and certified under the
Common Criteria in North America.

          We continue to have success deploying our products in the Hong Kong
market. Hongkong Post, the first recognized mobile certification authority in
Hong Kong, launched Mobile e-Cert mobile certificates jointly developed based on
our wireless security products. In North America, we continue to work with
Scotiabank who are in the process of building a Certificate Authority that is
intended initially to service Canada and the United States. Scotiabank has
licensed our software for this purpose and their certificate authority is
expected to launch in the spring of 2003. We have had preliminary success in
Europe towards establishing a similar model. We have also conducted pilots in
England.

ACQUISITION OF DSS SOFTWARE TECHNOLOGIES

          In early January, 2003, Diversinet acquired all of the capital stock
in DSS Software Technologies ("DSS"), a systems integration provider
headquartered in Fremont, California. DSS provides technical consulting services
to tier one customers including financial, enterprise and technology companies
such as Cisco Systems, Lucent, Oracle, Sun Microsystems and Wells Fargo in the
areas of systems integration, software development, and Enterprise Resource
Planning (ERP) and Customer Relationship Management (CRM) implementation.
Founded in 1996, DSS has grown to annual revenue of U.S. $8 million and has been
profitable in every year since its inception. The aggregate purchase price was
$2,009,034 consisting of cash of $473,070 (U.S.$300,000), promissory note of
$946,140 (U.S.$600,000) payable in instalments of U.S.$300,000 on January 2,
2004 and U.S.$300,000 on January 2, 2005, and 120,000 share purchase warrants
with a value of $589,824 (U.S.$374,040). The share purchase warrants vest
equally on January 2, 2003, 2004 and 2005 and are exercisable at U.S.$3.75 per
share for five years. Additional future cash consideration in the amount of
$1,892,280 (U.S.$1,200,000) is payable based on the achievement of certain
financial targets of DSS over the next three years and will be recorded with an
increase to goodwill when the targets have been met.

          The Company expects that the addition of DSS' services suite will
enhance Diversinet's ongoing strategy to provide greater depth and breadth in
its product and service offering. Combined, DSS and Diversinet's technical and
industry expertise can offer integrated solutions and full services offerings.
The Company believes its acquisition of DSS will strengthen its position in the
U.S. through the addition of a comprehensive line of services that will help it
to better address rapidly growing demands for security in telecommunication
services.

          The synergy between the two companies is expected to provide the
infrastructure and capability to expand into new markets and convey a unique
opportunity to deliver products and services that will meet the specific needs
of enterprise customers.

          With DSS' professional services focuses, high profile customers in our
target markets (enterprise, financial, et cetera), complementary skill sets
(application development, wireless), and a U.S. sales force, the combined
company can provide technical consulting services to companies in the areas of
system integration, software development, and ERP and CRM implementation, which
are all natural extensions of wireless technology, and require enhanced
security.

          DSS' operations will be integrated with Diversinet as a wholly owned
subsidiary of Diversinet, and DSS will become the principal office for
Diversinet's U.S. operations.  The purchase of DSS will be accounted for using
the purchase method the results of operations will be consolidated into
Diversinet from the date of acquisition.

INDUSTRY BACKGROUND

          In recent years, the wireless data industry has been growing on many
fronts.  The worldwide growth of the wireless data industry is being propelled
by the explosive growth of the Internet and the consequent demand for wireless
access to the Internet, high penetration rates for users of mobile telephones,
intense price competition among wireless network operators and the emergence of
worldwide standards for wireless communications.


<PAGE>
          Security has and will continue to be a major concern for the wireless
data community. The increasing number of consumers and businesses that expect
the ability to securely access confidential information and conduct transactions
wirelessly has created the interest and demand for mobile security.

          The wireless market and its existing wired solutions are not readily
adaptable to its networks, applications and devices.  Wireless networks are
fundamentally different from wired networks.  In wired networks, the Intel chip
in a PC is the common device platform, Microsoft Windows is the dominant
operating system and the browser is the common graphical user interface.  In
wired networks data and content reside largely in databases, and data is
extracted by the user on a simplified query basis using search engines - the
user must either find or know where to get the information for which he or she
is looking.

          Wireless networks currently have no such standards for client
platforms, operating systems or user interfaces. The wireless device may be a
PDA, a two-way pager or a smart phone. Multiple operating systems are being
employed.

          Wireless industry standards are emerging, and we are a member and
contributor to many of the standard-setting bodies.  One of the main standards
setting forums is the Open Mobile Alliance (formerly the WAP or Wireless
Application Protocol Forum).  The objective of this association is to develop
standards intended to bring Internet content to wireless devices by creating
global wireless protocol specifications and standards that work across all
wireless network technologies. In addition to the Open Mobile Alliance Forum, we
are members of Hong Kong PKI Forum, The Open Group, Bluetooth, Consortium for
Efficient Embedded Security, Mobile Electronic Transactions organization, Mobile
Execution Environment Forum, Standards for Efficient Cryptography Group and
Liberty Alliance Project.

NEED FOR SECURE TRANSACTIONS

          The openness and accessibility that have stimulated the adoption and
growth of the Internet, and of wireless and wired public and private networks,
also create threats to the privacy and integrity of information that is
transmitted across or stored on the networksAccording to The Yankee Group's May
2002 Corporate Wireless Survey, security continues to be the top inhibitor of
wireless enterprise deployments. Well-publicized Internet fraud experienced by
VISA International and e-Bay and attacks resulting in overloading of popular
e-business web sites by hackers have highlighted the need for improved security.
Enhanced security is critical for such wireless applications as banking,
brokerage, database access, and corporate and consumer purchases.

          The security risks associated with communications and commerce over
the Internet, and over wireless and wired public and private networks, have
accentuated the need for information security solutions that address five
critical network security needs:

AUTHORIZATION - Only authorized users should be able to view or modify certain
data.
CONFIDENTIALITY - Data in transit over the network or in storage should not be
disclosed to unauthorized persons.
INTEGRITY - Data should not be altered or compromised by unauthorized
manipulation.
AUTHENTICATION - The identity of the data sender and receiver should be
verified.
NON-REPUDIATION - The sender of a transmission should not be able to deny or
repudiate the message.

          A wide range of products and services has been introduced to address
one or more of these five critical network security needs. For example, access
control is provided by products such as firewalls and password tokens, which
limit network access only to users having recognized addresses or entering
recognized passwords. These products are generally limited in their flexibility
and do not directly address such requirements as confidentiality, integrity,
authentication and non-repudiation. Encryption devices and programs provide
confidentiality, but are device-dependent and generally do not address issues of
authorization, integrity, authentication and non-repudiation.

          The lack of flexibility and scalability inherent in these solutions
has led to the development of public-key encryption and digital certification
systems combined in a PKI, designed to address all five critical network
security needs.

          Public-key systems offer the ability to create digital signatures. A
user applies his or her private key to the date to be signed, creating a digital
signature. Subsequently, anyone can certify the correctness of the signature
using the user's public key. If the signature verifies, then the signer must
possess the correct private key. In addition, it proves that the data signed has
not been modified thus satisfying the security needs listed above.

          Because a digital signature allows a user to prove only that he or she
holds the private key that matches a particular public key, additional data is
necessary to use signature validation to create an assurance of identity. This
is accomplished with digital certificates, which are signed messages that bind a
name or other attributes of the holder of a given private key to the
corresponding public key. Each certificate is signed by a trusted third party
known as the certificate authority, or CA; the CA vouches that a given user is
the sole holder of the private key matching the corresponding public key. The
signature from the CA allows the binding of the name to the public key to be
trusted. This allows a relying party to validate the identity of a user or
server by first checking the validity of the certificate and then verifying the
signature against the certified public key. A CA may cooperate with a
registration authority. The registration authority is responsible for validating
a user's identity, on behalf of the CA, before a certificate is issued. The
collection of certificate authorities, registration authorities, policies, and
procedures associated with the management of public keys is known as public-key
infrastructure. Enterprises have adopted PKI because it offers proven, tested
information security standards leading to greater confidence in the resulting
applications and lower integration costs for developers.


<PAGE>
MARKET ACCEPTANCE OF DIGITAL CERTIFICATION

          The use of digital certificates has gained significant market
acceptance in particular sectors where information security is critical, such as
government, finance, health care and telecommunications. The acceptance of
digital certificates in the United States escalated upon the signing of the
Electronic Signatures in Global and National Commerce Act (commonly referred to
as the E-Signature Act) on June 30, 2000. Former President Clinton signed into
federal law the E-Signature Act which legalizes contracts "signed" with
electronic signatures, thus giving the same legal validity of written contracts
to electronic contracts. We believe the new law is a significant step to provide
consumers and businesses with greater confidence regarding the security of
transactions made over wireless and wired networks. The E-Signature Act also
provides a uniform legal framework across state lines so that electronic
transactions can be conducted with the assurance that contracts signed
electronically will be valid throughout the 50 states. Similar legislation is
emerging throughout the world.

          In   August 1996, the United States passed the Health Insurance
Portability and Accountability Act to reduce administrative costs and burdens in
the health care industry through the use of electronic communication. Health
Insurance Portability and Accountability Act requires the Department of Health
and Human Services to adopt national uniform standards for the electronic
transmission of certain health information. One important aspect of Health
Insurance Portability and Accountability Act is the mandate to adopt standards
for secure electronic health transactions, including the protection of
information exchanged between healthcare providers, such as claims, enrollment,
eligibility, payment, and coordination of benefits.

          Since the E-Signature Act was signed, it opened the door for other
electronic applications to utilize digital certificates as a legal way of
conducting transactions.  In the healthcare industry, medical professionals are
starting to use wireless communications to access patient records and medical
reports, as well as to input information into these files and write electronic
prescriptions for patients.

NEED FOR A PKI

          The increasing acceptance of digital certificates is beginning to give
rise to numerous products and services that issue digital certificates or that
are able to work with digital certificates. However, the mere issuance of
digital certificates does not ensure that a user's access is properly monitored,
that privileges associated with access are accurately and currently defined, or
that the certificates in question have not been withdrawn or replaced.

          Indeed, the proliferation of users and certificates greatly
complicates management of these issues, which is critical to maintaining an
effective secure environment across and between enterprises. To address these
needs, enterprises generally require a robust PKI that supplements certificate
issuance functions with full life cycle management of public and private keys,
including issuance, authentication, storage, retrieval, backup, recovery,
updating and revocation, in an easy-to-use, cost-effective manner. We believe
that demand for this class of product will increase during the next few years.

MARKET SIZE

          PKI has been predicted to boom for the past years, but is only now is
it starting to be taken up by businesses, which want to be able to conduct
eCommerce in a secure and trusted environment. According to a May 2001
Datamonitor report, PKI is now at the beginning of what will be solid growth
until 2006, with global investment in PKI products and services growing from
$436 million in 2000 to $3.4 billion in 2006. As the uptake of eBusiness
strengthens, so the business case for PKI increases. PKI will be crucial for
many organizations, across the vertical markets and size bands enabling them to
conduct secure communications for a range of eBusiness applications, be it via
the Internet, intranets or extranets.

          Datamonitor predicts that an especially large growth area for PKI will
be in the mobile sector. In 2000, mobile devices accounted for just 1% of
overall PKI revenues. However, after 2003, when the mass market begins to take
up 3G devices, wireless PKI will become a major industry, accounting for up to
45% of total PKI revenues in 2006. This trend will continue as the uptake of the
mobile Internet accelerates.

DEMAND DRIVERS

          We believe that the four significant drivers of demand for m-commerce
security related products and services are as follows:

          1.   Rise of e-commerce over the Internet

          There were 600 million people worldwide with Internet access as of Q3
2002. International Data Corporation (IDC) is forecasting an increase in the
number of Internet users and the value of annual e-business activity. According
to IDC, almost 1 billion people around the world will be using the Internet by
2005 driving e-commerce revenues to over U.S. $5 trillion by 2005, up from U.S.
$354 billion in 2000. Online spending worldwide will more than triple from
almost U.S. $22 billion in 2000 to U.S. $69 billion in 2005. Industry forecasts
expect similar growth rates to apply to m-commerce based on the forecasted
penetration of wireless devices. It should be noted that these industry
forecasts have been missed which is reflected in our internal forecasts being
missed as well.

          2.   Data over wireless networks and the emergence of the wireless
Internet

          According to Accenture research, by 2005 there will be 1.7 billion
mobile connections, allowing the number of wireless devices capable of Internet
access in the global market to increase by an astronomical 630 per cent.


<PAGE>
          Mobile voice communications has reached high penetration levels of 80%
to 90% in Asia, 50% to 60% in Europe and 30% to 40% in North America. Voice
communications represent approximately 98% of traffic on the wireless networks
that hosted the communications. Competition by network operators for the voice
customers is intense and has reduced revenue growth per customer. These wireless
network operators are expected to implement new value-added services, such as
m-commerce, to maintain revenue growth in the face of competition from other
voice network operators.

          3.   Wireless standards, technology improvements and awarding wireless
spectrum licenses

          Worldwide initiatives are evolving for wireless standards, such as
WAP, that enhance the attractiveness for wireless device and m-commerce
application developers to create products and services to operate on wireless
networks. Network operators are also preparing for the opportunities that
m-commerce holds by upgrading their networks to maximize available capacity and
providing wireless device connection to the Internet that is always on rather
than having to establish an Internet connection when needed.

          4.   Lack of security as an impediment to m-commerce and e-commerce
growth

          Security is often regarded as the primary impediment to the mainstream
adoption of the Internet as a business tool.  Given the importance attached to
the Internet and wireless networks and the related potential for cost reduction
and revenue generation, the issue of security becomes one of fundamental need
and importance.  The majority of respondents to a recent survey conducted by
Deloitte & Touche cited the following barriers to e-commerce: lack of security,
other priorities, immature technology and no proven benefits.  VISA
International has stated publicly that although only two percent of its credit
card business relates to Internet transactions, fifty percent of its disputes
and discovered fraud are in that area.  VISA also stated that the problem of
authentication has become one of the most important issues facing e-commerce in
the financial industry.  In another well-publicized demonstration of the
security issues involved in conducting commercial transactions over the
Internet, e-Bay, an Internet-based on-line auction site, recently had a third
party fraudulently execute an auction purchase under the name and password of
one of e-Bay's customers.  This security breach demonstrates the issues relating
to the authentication of customers.  Recent overloading of e-business web sites
by hackers and the hacking of hundreds of thousands of credit cards has served
to highlight the need for strong security.

STRATEGY

          We strive to be a leader in providing security products for m-commerce
over wireless networks and other networks, including corporate networks,
telecommunications systems and the Internet.

          Our revenue model consists of (i) license fees from the licensing of
our Passport ONE, Passport Certificate Server(R) and Passport Authorization
Product, which are one-time fees typically recorded upon execution of the
license agreement and the shipment of the software as long as all vendor
obligations have been satisfied and collection of the license fee is probable
(although a licensee may ultimately require additional servers and pay
additional fees), (ii) recurring royalties from the provision of certificates
and permits, (iii) annual support fees (for phone assistance and product
updates) and (iv) consulting fees (advice regarding the integration of our
software with a client's application). In certain cases, we have waived the
first year support fees for certain of our customers (usually amounting to
approximately 15% of aggregate license fees). As our business evolves, we expect
that most of our revenue will be generated through recurring royalties. This
revenue stream is dependent on the adoption of transaction-based applications
over wireless networks.

          The key elements of our strategy to achieve this objective include the
following:

          TARGET EMERGING M-COMMERCE MARKETS. Our sales and marketing activities
are primarily targeted at emerging markets of mobile enterprise, that include
such applications as mobile banking, stock trading, gaming, prescriptions and
other transfers of medical information, in addition to more traditional forms of
e-commerce over wireless networks. Within these markets, our customers and
partners include device manufacturers, network infrastructure manufacturers,
application developers, certificate authorities and network operators. Our
business plan is dependent of the cooperation of numerous parties to a
transaction. The original equipment manufacturers, or OEMs, must integrate our
software into their hardware and software products. These personal digital
assistants, or PDAs, are then sold to consumers or enterprise customers.
Application developers also integrate our technology into their solution. Once
this software is embedded into a PDA and the end user performs an action, a
digital certificate or digital permit will be issued. A certificate authority,
or CA must also be PKI enabled and issue these certificates. A CA may cooperate
with a registration authority. The registration authority is responsible for
validating a user's identity, on behalf of the CA, before a certificate is
issued. It is through all these parties working together that our vision is
realized.

          EXPAND STRATEGIC RELATIONSHIPS. We have formed relationships in the
areas of sales, marketing and technology with industry leaders, and expect to
continue to form such relationships in the future, to encourage widespread
acceptance of our authentication and authorization products. These include
relationships with such companies as:

              Ericsson              Microsoft
              Gemplus               Research In Motion
              Hewlett-Packard       SchlumbergerSema
              Hongkong Post         Scotiabank
              Hutchison             SecureNet


<PAGE>
          MAINTAIN WHAT WE BELIEVE TO BE A LEADERSHIP POSITION IN TERMS OF
RESEARCH AND DEVELOPMENT OF TECHNOLOGY. In late 1996, we acquired technology
that consists of concepts and methods that relate to automatic and safe public
information communication systems and methods for secure distribution of
information. This technology, as well as our root rollover and permit
technology, forms the primary foundation on which we base our current product
developments. We have invested, and intend to continue to invest, significantly
in the development of our technology. We will base future development of our
technology on wireless security market requirements. In January 1999, we were
issued a patent for this technology by the U.S. Patent and Trademark Office that
will be in effect until August 22, 2017. In April 2001 we received an U.S.
patent for our technology relating to the handling of permissions. In June 2001
we received an Israeli patent that will be in effect until 2021 for our
technology relating to safe communications handshake and data transfer. We also
have 14 other patent applications pending in Europe, Israel, Canada and the
United States.

          BUILD AWARENESS OF THE DIVERSINET BRAND. Our goal is to establish our
brand as a leader for security products for all transactions over wireless
networks.  We plan to achieve this goal through a variety of programs that will
generate brand awareness.  These include regular press and investor sessions, an
ongoing pro-active speaking program by senior management and regular interaction
with major market influencers.

PRODUCTS AND PRODUCT DEVELOPMENT

          PRODUCTS

          We develop, market and distribute four primary products: Passport
Certificate Server, (R) Passport ONE, Passport Authorization Product, and
Passport Wireless VPN, that together provide, what we believe to be, a
comprehensive security solution with a focus on wireless applications including
Palm, RIM, Symbian, Microsoft's WinCE and Pocket PC operating systems; WAP
devices; Smart Cards; and GSM/SIM (Subscriber Identity Module) based devices.
Our products are designed to address the unique needs of wireless devices,
networks and applications.  When integrated with an enterprise's specific
application, our products enable these enterprises to effectively manage secure
communications across a wide range of applications.

          Passport Certificate Server(R) and Passport ONE software address the
five critical network security needs of enterprises (authentication,
non-repudiation, integrity, privacy and authorization) and allow for consistent
enterprise-wide security policy management, permitting any enterprise or service
provider to establish its own flexible and highly reliable PKI. Passport ONE and
Passport Certificate Server(R) issue digital certificates, consisting of public
and private keys to authenticate users of business applications in real time.
Passport Certificate Server(R) digital certificates are based on Diversinet's
proprietary compact micro-certificate format. Micro-certificates are designed
for use in lower-bandwidth network environments, with mobile devices that have
limited battery life, and lower data processing and storage capabilities.
Passport ONE issues Internet digital certificates suitable for use with mobile
and Internet devices that comply with this industry standard. Such support for
standards allows Passport ONE to issue certificates for use with SSL, WTLS and
WAP security. Passport Certificate Server(R) enables user anonymity through the
use of globally unique identifiers, such that permissions or private information
and credentials belonging to the digital certificate owners are stored
separately. Passport Certificate Server and Passport ONE run on Microsoft
Windows(R) 2000, Windows NT or UNIX platforms. The Passport Certificate Server
includes a developer toolkit for client software development.

          Our current product offerings include encryption technology that is
sourced from third-party vendors. Diversinet currently licenses encryption
technology from Certicom Corp. and RSA Security, two encryption technology
vendors who service the wireless and the e-commerce security markets. Under the
terms of each of the open-ended licensing arrangements, we pay a royalty to the
licensor when we derived recurring revenue from the deployment of our products.
There are a limited number of suppliers of encryption technology. If either of
our encryption technology license agreements is terminated and sufficient
technology is not available from other vendors, we would not have the necessary
license to produce our products.

          We believe that the our Passport ONE and Passport Certificate
Server(R) offers the following advantages over conventional authentication
solutions that make it well suited for wireless devices and wired networks:

Privacy
     -    Our public-key certificates do not contain personal information,
thereby ensuring anonymity
Efficiency
     -    The Passport Certificate Server(R) certificate is small in size, since
only relevant, and not private, information is included
     -    It uses a compact encoding scheme and Elliptic Curve Cryptosystem or
RSA encryption keys
     -    Root Key Rollover provides a safe way, with minimal downtime, to
update all certificates issued in a PKI realm
     -    On-line validation of certificates, which is more efficient than other
methods (such as revocation lists)
Scalability
     -    It accommodates practically any number of certificates
     -    Support for wide range of wireless devices (Palm, RIM, Symbian,
Microsoft's WinCE and Pocket PC operating systems; WAP devices; Smart Cards; and
GSM/SIM (Subscriber Identity Module) based devices)

Flexibility


<PAGE>
     -    The client globally unique identifier within a public-key certificate
can be associated with one or more attribute certificates
     -    Companies can set up environments to be closed or open, such as
allowing clients to reserve their own globally unique identifier
     -    A functional attribute can be assigned to a public-key certificate for
a specific application function
     -    Aliases can be assigned to client's globally unique identifier

          We believe that our products are ideally suited to m-commerce security
using wireless devices.  Some of the important characteristics and challenges of
these wireless devices compared to personal computers are:

     -    the devices have a less powerful central processing unit
     -    they contain less memory
          they have a more restricted power supply

          We believe our technology and approach to secure m-commerce have
several distinct advantages over existing security methods. Most notably, our
solutions were developed specifically for the wireless environment. Our digital
certificate technology minimizes demands placed on scarce device resources such
as processor and memory, and as a result assists in conserving battery life. Our
technology achieves this goal by using a digital certificate format designed to
eliminate non-essential information such as user name fields, which often is
also confidential. As a result, our digital certificate consumes approximately
one-tenth the storage requirements of digital certificates designed for wired
networks, while also preserving the anonymity of the user. Our digital
certificate can be easily stored on the wireless device, allowing for end-to-end
security from device through to the application provided on the wireless
network.

          Our technology also minimizes the amount of data sent over the network
and the number of steps required to achieve a secure connection, which optimizes
consumer network resources.

          Our Passport Authorization Product(TM) grants privileges to the holder
of our digital certificate or the digital certificate of certain other vendors.
The authorization product issues digital permits that are linked to the holder's
digital certificate. The digital permit is designed to allow digital
certificates to serve additional functions such as authorizing users to perform
specific tasks once they access a given network.

          Our PKI-enhanced Wireless VPN product, Passport Wireless VPN, offers a
complete wireless Virtual Private Network (VPN) suite to meet the needs for
organizations to provide their mobile workforce with secure wireless access to
corporate data. Passport Wireless VPN offers a strong security framework,
optimized performance and convenient always-on connectivity. Passport Wireless
VPN uses a strong security framework specially designed and optimized for
communication in a wireless environment. Transport and network level security is
based on a Public Key Infrastructure (PKI) framework for maximum
interoperability.

PRODUCT APPLICATIONS

          Our Passport Certificate Server(R) and Passport ONE products are
primarily intended to support a wide variety of emerging m-commerce applications
in the financial, enterprise, government and gaming industries. Our Passport
Wireless VPN is intended to support enterprise and mobile workforce
applications. Our Passport Authorization Product(TM) is intended to support a
wide variety of emerging wireless and wired applications, such as coupons and
loyalty programs, prescriptions for doctors for online pharmacies, and rights
for subscription services (e.g., a 45-day electronic subscription for the Wall
Street Journal).

PRODUCT DEVELOPMENT

          Our engineering group is focused on developing core technologies and
enhancements to existing product lines to maintain and extend what we believe to
be our technology and product leadership position.  More specifically, the group
is currently focused on the development of additional features for Passport ONE,
Passport Certificate Server(R) and Passport Authorization Product(TM) software
the features of which will be assessed in terms of market demand and
competition.  Our engineering group reviews all relevant proposed industry
standards or conventions as they are developed and seeks to make our products
compatible with each of them.  In addition, we participate in industry standard
bodies, such as the Open Mobile Alliance (formerly the WAP Forum) and the Open
Group and we monitor the activities of others, such as the Internet Engineering
Task Force (IETF) and the American National Standards Institute (ANSI).

PROFESSIONAL SERVICES AND SUPPORT

          We believe that a high level of service and support will be critical
to our success and that a close and active customer relationship is important to
facilitate rapid implementation of our solutions, assure customer satisfaction
and provide us with important information regarding evolving customer
requirements. We are in the process of building a professional services group
that will provide product integration services, customized engineering solutions
and training to customers.

          Our support offerings to date include direct telephone consulting,
e-mail and fax support, Internet access to our knowledge repository, and
discussion group access. Payment of an annual maintenance fee also entitles
customers to receive certain software enhancements to their licensed versions of
our security solution.


<PAGE>
RESEARCH AND DEVELOPMENT

          We expect that our future success will depend in large part on our
ability to continue to maintain what we believe is a leadership position in
terms of research and development of technology. Our research and development
efforts are focused on developing core technologies and enhancements to existing
products to maintain and extend our technology and product leadership position.

          As of October 31, 2002, our research and development staff consisted
of nineteen employees and one contractor. Research and development expenditures
were $2.3 million in 2002, $6.9 million in 2001, $5.9 million in 2000 and $1.7
million in 1999. We expect to spend approximately $2.4 million in fiscal 2003.
We believe that timely development of new and enhanced security products is
necessary to remain competitive in the marketplace.

CUSTOMERS

          To date, we had executed licensing agreements with a range of
customers; AsiaPay, Scotiabank, Heracle Technologies, and SecureNet Ltd. In
addition, we received service revenue for support and maintenance from RIM (for
custom development support) and a number of other small service contracts for
professional services and training. We currently have several customers
developing the products for integration into their product offerings (as an
embedded component) and others developing pilot deployments to end-users. We
believe the following customers are in various stages of integrating our
products into consumer-oriented applications or pilot projects:

              AsiaPay                   iMerchants Ltd.
              Heracle Technologies      Scotiabank
              Hongkong Post             SecureNet
              Hutchison

          In addition, we have co-marketing and/or development agreements with
several innovative companies.  These companies are working with Diversinet to
develop integrated security solutions.  If successful solutions are developed,
Diversinet expects to earn revenue as these solutions become commercially
available.  Some of these relationships include the following companies:

              Ericsson                  Oasis
              Gemplus                   SchlumbergerSema
              Intel

          We have also entered into a number of strategic alliances during the
past two years that we believe will facilitate the adoption of our security
technology. These alliances are with the following companies:

SECURENET LTD.

          E-security provider SecureNet and Diversinet entered into an U.S.
$200,000 agreement in fiscal 2002 to deliver Trust Services to the Australian,
New Zealand, and Chinese markets. Under the terms of the agreement, Diversinet
will license its Passport security product suite to SecureNet in order to
establish wireless Trust Services for secure consumer and enterprise
applications in Asia-Pacific. The managed Trust Services will provide
enterprises secure digital identity, authentication, authorization, and
transaction access over wireless internet applications such as payments, secure
messaging, banking, and gaming.

          This agreement will help Diversinet expands into the Australian and
Chinese markets and provide us with a new channel to market our products.

HONGKONG POST

          Hongkong Post and Diversinet jointly developed Mobile e-Cert, based on
our wireless security products. Hongkong Post supports the Mobile e-Certs
through its Mobile Certification Authority and mobile operators act as the
Registration Authorities for the authentication of the identity of Mobile e-Cert
subscribers. Hongkong Post is the first recognized public certification
authority in Hong Kong, and Hongkong Exchanges and Clearing Ltd supports this
initiative. Mobile e-Cert service will facilitate secure stock trading, banking,
gaming, and digitally signed messages over wireless communications devices. This
marks the first-ever availability of Mobile e-Certs globally. Subsequent to
year-end, Hutchison Telecommunications (HK) Ltd., the largest mobile operator in
Hong Kong, and SUNDAY Communications became Registration Authorities.

          The first phase of the new Mobile e-Cert service supports Palm and
Pocket PC PDAs, and mobile phones. Future phases of the service will support WAP
devices and other PDAs.

SCOTIABANK

          We have entered into an agreement with Scotiabank's e-commerce
division for the incorporation of our advanced wireless security products into
Scotiabank's managed security infrastructure. Under this agreement, Scotiabank
received a worldwide license to utilize Diversinet's Passport Certificate
Server(R) and


<PAGE>
Passport Authorization Product(TM) for Scotiabank's customers requiring secure
wireless e-commerce certification services. Scotiabank will integrate
Diversinet's wireless security solutions into its infrastructure in order to
provide end-to-end wireless security services for mobile commerce applications
using wireless devices such as personal digital assistants (PDAs), pagers, and
smartphones.

          This will enable Scotiabank to deploy fully secure mobile financial
service applications. This new wireless security service offering will be
available globally. Enterprises and wireless high-value application developers
will have a trusted third party to provide the wireless identity authentication
services required in mobile financial applications.

COMPETITION

     Our digital certificate technology is targeted at the new and rapidly
evolving demand for secure m-commerce solutions.  Although the competitive
environment has yet to develop fully, we anticipate that it will be highly
competitive, subject to rapid change and significantly affected by new product
and service introductions and other market activities by industry participants.
We believe we are one of a few companies that currently have PKI-based solutions
on PKI standards available in the wireless security market that provides an
end-to-end solution.  Sonera SmartTrust is our primary competitor in the
technology platform on which most cellular phones in Europe operate.  There are
a number of successful wired network security vendors who have announced their
intention to compete in the wireless space.  These include Certicom, Entrust,
VeriSign and Baltimore.  While these competitors have better name recognition in
general, we are striving to become a leading brand in wireless security today.
We also anticipate competition from a number of other larger and smaller
companies that provide other certificate security solutions.  Many of our
competitors and potential competitors have significantly greater resources than
we have.

     The principal competitive factors affecting the market for wireless
security products include technical features, ease of use, reliability, level of
security, scalability, customer service and support and price.  There are also
significant technical challenges that are unique to the wireless environment,
including constraints in device processing and storage capabilities, and network
throughput limitations.  We believe our products have been optimized for this
unique and technically challenging environment.  Our future success will largely
depend on our ability to make our products available to serve the rapidly
growing network security market, rather than taking market share away from
competitors.

REGULATORY MATTERS

     Our products are subject to special export restrictions administered by the
Canadian government and are also subject to import restrictions and/or use
restrictions imposed by countries such as the United States, although pursuant
to a recent international treaty, a number of countries have relaxed, or are in
the process of relaxing, their export rules as applicable to products of the
type licensed by us.  Consequently, our ability to export our products to
destinations outside of Canada is subject to a variety of government approvals
or licensing requirements.  These export controls may also restrict our ability
to make some products available for sale via international computer networks
such as the Internet.  Re-export of the products between countries other than
the United States and Canada may be subject to the export control laws of those
countries in addition to those provisions of Canadian export control laws that
apply to re-exported goods.  In light of these restrictions, depending on the
country of destination, industry sector and/or end-user, some of our products
made available abroad may contain significantly weaker encryption capabilities
than those available to customers in Canada, and there can be no assurance that
we will continue to be able to export our products to any destinations outside
of Canada.  Such restrictions could potentially have an adverse effect on our
business, financial condition and results of operations.

INTELLECTUAL PROPERTY

     We rely on a combination of patent, trade secret and trademark laws,
non-disclosure agreements and contractual provisions to establish and protect
our proprietary rights.  We also seek to protect our trade secrets and other
proprietary information through license agreements with customers and suppliers,
as well as non-disclosure and non-competition agreements with employees and
consultants.

     On January 26, 1999, we received a patent from the U.S. Patent and
Trademark Office for our "Method for Safe Communication" which will be in effect
until August 22, 2017.  This method consists of the safe distribution of
encryption keys, including a known public and secret private key, and
establishes a secure link between computer users who reside at separate
locations and who have had no previous secure communications.

     On April 10, 2001, we received a patent from the U.S. Patent and Trademark
Office for our "System and Method for Handling Permits". The patented technology
provides for a unique permit separation model that enhances the security and
privacy of wired and wireless e-commerce systems by improving the management of
personal privileges in advanced PKI security environments.

     On June 20, 2001, we received a patent from the State of Israel Patent
Office for our "Apparatus and Method for Safe Communication Handshake and Data
Transfer". This patent will be effective until 2021. This apparatus and method
provides for the safe distribution of encryption keys, including a known public
and secret private key, and establishes a secure link between computer users who
reside at separate locations and who have had no previous secure communications.

     Applications for fourteen other patents have also been submitted in Europe,
Israel and Canada based on the same concept for which the United States patent
was granted, as well as other concepts.


<PAGE>
     We have registered the name "Passport Certificate Server" with the Canadian
Trademark Office.  We have also applied to register as trademarks with the
United States Patent and Trademark Office and/or the Canadian Trademark Office
the names "Diversinet", "Passport Certificate Server" and "Passport
Authorization Product" as well as the Diversinet logo, but there can be no
assurance that these trademarks will be successfully registered.

     We continue to seek patent and trademark protection where appropriate.

MARKETING AND SALES

MARKETING

     Our marketing efforts will support our two primary marketing objectives:

     (i)  increasing awareness through building the Diversinet brand; and
     (ii) generating sales leads in our target markets. Our efforts to increase
          awareness and build our brand will entail gaining positive coverage in
          targeted trade and business publications and establishing and
          developing relationships with analysts from market influencers, such
          as Yankee Group and Meta Group. Diversinet will pursue the generation
          of sales leads through the implementation of programs such as web
          marketing, direct mail, active participation in targeted events, and
          cooperative marketing activities in support of channel partners.

     SALES

     We offer our products in Canada, the United States, Europe, Australia, Asia
Pacific and Africa employing several sales models to target our intended
markets.

     We believe that our coverage of the Asia Pacific, North American and
European markets by our sales team is necessary to pursue our targeted customer
base, which is in the early stage of wireless application deployment and
testing.  Our customer focus is certificate authorities that we will work with
to implement the infrastructure necessary to conduct secure m-commerce
transactions.  Once established, we will turn our attention to enterprises,
application developers, equipment manufacturers and network operators.

     Certificate Authorities provide significant strategic sales avenues for
Diversinet.  Once a certificate authority has our technology in place, the
certificate authority will promote their solution to enterprises in order to
increase sales of their wireless digital certificates.

     We are also exploring other distribution channels to assist in either
reseller relationships and/or private branding of our products.
The current sales and implementation cycle for our certificate authority
products is approximately twelve months and consists of four phases:

     -    Initial contact and customer education/qualification
     -    Pilot proof of concept
     -    Early deployment testing
     -    Phased production rollout

     With the launch of Mobile e-Cert with Hongkong Post as a certificate
authority in Hong Kong, we are working on building the necessary infrastructure
in Asia for secure m-commerce.

4-C. ORGANIZATION STRUCTURE

     Diversinet Corp. has representative offices in London, England and Hong
Kong, SAR.  In January 2003, we acquired DSS, a professional services company,
in Fremont California.

     During 2001, we entered into an agreement with an Asian company to
establish a joint venture to conduct certain of our Asian activities.  Each
party holds a 50% interest in the joint venture, Atria Limited (formerly
Diversinet Hong Kong Limited).

     We have four inactive wholly-owned subsidiaries, Diversinet Corporation of
America, incorporated in Delaware, Diversinet Inc., an Ontario corporation which
was formed on November 20, 1996; Instant Publisher Ltd., a Barbados corporation
formed on December 2, 1993; and Diversinet (Israel) Ltd., an Israeli
corporation.

4-D. PROPERTY, PLANT AND EQUIPMENT

     Our head office is located in leased premises of approximately 20,000
square feet at 2225 Sheppard Avenue East, Suite 1700, Toronto, Canada M2J 5C2.
We also have leased premises in London, England, Hong Kong, SAR, California,
United States of America.

     The lease for our head office expires in June 2006.  The London and Hong
Kong office leases have terms of less than one year.  One of the California
leases expires in August of 2005 while the other expires in September of 2004.
We currently expect to be able to extend the terms of expiring leases or to find
replacement facilities on reasonable terms.


<PAGE>
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

     Our financial statements have been prepared in accordance with Canadian
GAAP.  These principles conform in all material respects with U.S. GAAP except
as described in Note 15 to our 2002 consolidated financial statements.  The
differences between line items under Canadian GAAP and those as determined under
U.S. GAAP are not significant except that, under U.S. GAAP, our total loss would
be greater by $55,000 for the year ended October 31, 2002, greater by $56,000
for the year ended October 31, 2001, greater by $1,449,000 for the year ended
October 31, 2000 and less by $179,000 and $4,131,000 for the years ended October
31, 1999 and October 31, 1998, respectively.  Under U.S. GAAP share capital
would be greater and deficit would be less by $41,249,000 for each of the years
due to the elimination of reduction in stated capital offset against accumulated
shareholders' deficit in March of 1999.

     The following discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing elsewhere in this
annual report.  Except for historical information, the following discussion
contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended.  Such forward-looking statements
involve risks and uncertainties.  Such forward-looking statements include, among
others, those statements including the words, "expects", "anticipates",
"intends", "believes", and similar language.  Our actual results may differ
significantly from those projected in the forward-looking statements.  Factors
that might cause future results to differ materially from those discussed in the
forward-looking statements include, but are not limited to, those discussed in
"Risk Factors" in Item 3-D. of this annual report.

     We have incurred operating losses in each of fiscal 2002, 2001, 2000, 1999
and 1998 due to losses from our continuing operations of developing security
products and our discontinued operations of developing and marketing the IPS 950
instant color digital printing system.  We have sustained our business during
this period through the sale of common shares in a series of private placements.
We cannot provide assurance that we will be able to raise sufficient funds in
the future to sustain our operations.

5-A. OPERATING RESULTS

YEAR ENDED OCTOBER 31, 2002 COMPARED TO YEAR ENDED OCTOBER 31, 2001

     For  the  year  ended  October  31, 2002, we reported revenue of $1,118,000
compared  to  revenue of $1,221,000 for the year ended October 31, 2001.  We are
operating  in  an evolving and unpredictable market and accordingly have and may
continue  to experience wide fluctuations in our revenues. We generated 63% (55%
for  2001)  of  our  revenues  from  the Asian region, 2% (24% in 2001) from the
United  States,  29%  (17%  in  2001) from Canada and 6% (4% in 2001) from other
areas  during  fiscal  year  2002.

     During  fiscal  2002,  28%  (40%  in  2001)  of  our  revenue came from one
customer.  These customers are not related to each other.  As the market that we
operate  in  is  still in an early stage of development and our revenue is still
quite  small,  it  is  reasonable  to expect that our revenue may continue to be
concentrated  among  relatively  few  customers  for  the  near  future.

     We  reported  an improved net loss of $6,397,000 for the year ended October
31,  2002 compared to a net loss of $18,900,000 in the prior year.  We completed
operating  cost  reductions  in  the  fourth  quarter of 2001 that resulted in a
decline  in expenses from operations during fiscal 2002 compared to fiscal 2001.
These  reductions included workforce reductions in the United States and Canada,
closure  of  offices  in  the  United  States and the discontinuance of non-core
programs  particularly  in  the  marketing area.  The restructuring was aimed at
refocusing  our efforts on the most significant market opportunities in Asia and
Europe.

     Research  and  development  expenses  decreased  to $2,328,000 in 2002 from
$6,907,000  in  2001  resulting  primarily  as  a result of continued efforts to
reduce  costs as started in the last quarter of fiscal 2001.  During the year we
received  a  net  amount  of $286,000 relating to investment tax credits for R&D
work  done  in  2000  and  1999.

     Sales and marketing expenses were $1,737,000 in 2002 compared to $7,256,000
in 2001.  The Company continues to focus a significant portion of its efforts in
the  Austral  Asian  markets  where we derived 63% of our 2002 revenues.  During
2002  we implemented a pilot project for Hong Kong's six local mobile operators,
the  Hong  Kong  m-Cert  Implementation  Forum to develop and implement a single
mobile  digital certificate (m-Cert) standard to promote mobile commerce in Hong
Kong.  We  continue  to  make progress in this region and expect to increase our
presence  in  2003.

     General  and  administrative  expenses  were $2,989,000 in 2002 compared to
$4,029,000  in  2001.  These figures include foreign exchange losses of $228,000
for  2002  and  a  gain  of  $621,000  for  2001.

     Depreciation  and amortization expense in fiscal 2002 decreased to $635,000
from  $1,888,000  in  fiscal  2001.  The  Company's  deferred  development  and
purchased  technology  costs  were  fully amortized in 2001 and the reduction in
additions  to  capital  assets has resulted in reduced amortization for the 2002
fiscal  year.

     During fiscal 2001, we entered into a joint venture to conduct certain of
our Asian activities, as detailed in note 7 to our audited financial statements.
We own 50% of this joint venture and our financial statements reflect our
proportionate interest in its assets, liabilities, revenue and expenses.

     We earned interest income of $175,000 and $690,000 in fiscal 2002 and 2001,
respectively. The decrease is primarily due to our lower average cash and cash
equivalents in 2002 and due to lower interest rates than we received during
2001.


<PAGE>
YEAR ENDED OCTOBER 31, 2001 COMPARED TO YEAR ENDED OCTOBER 31, 2000

     For  the  year  ended  October  31, 2001, we reported revenue of $1,221,000
compared  to  revenue  of  $2,636,000, for the year ended October 31, 2000.  The
information  technology  slowdown  resulted  in  a  deferral of purchases by our
potential customers throughout the year resulting in reduced revenue compared to
the  prior  year.  We  are operating in an evolving and unpredictable market and
accordingly  have  and  may  continue  to  experience  wide  fluctuations in our
revenues.  We  generated  55% of our revenue from the Asian region, 24% from the
United  States,  17%  from Canada and 4% from other areas during the fiscal year
2001.

     During  fiscal  2001,  40% of our revenue came from one customer whereas in
fiscal 2000, 24% of our revenue came from one customer.  These customers are not
related  to  each other.  As the market we operate in is still in an early stage
of  development and our revenue is still quite small, it is reasonable to expect
that  our revenue may continue to be concentrated among relatively few customers
for  the  near  future.

     We reported a net loss of $18,900,000, for the year ended October 31, 2001,
compared  to  a  net  loss of $15,027,000, in the prior year.  The increased net
loss  in fiscal 2001 is attributable partly to a decrease in revenue compared to
the prior year and partly to increased costs, especially in sales and marketing,
during  the  year.  We completed operating cost reductions in the fourth quarter
of  2001  that  should  result  in  a decline in expenses from operations during
fiscal  2002  compared  to fiscal 2001.  We incurred $730,000 in severance costs
related to these operating cost reductions of which $150,000 was paid subsequent
to  our  year-end.

     Research  and  development  expenses  increased  to $6,907,000 in 2001 from
$5,888,000  in  2000 resulting primarily from wages, occupancy, and travel costs
which were higher on average than in the prior year. These expenses are expected
to  decline  in fiscal 2002 as a result of the cost reductions completed late in
fiscal  2001.

     Sales and marketing expenses were $7,256,000 in 2001 compared to $5,435,000
in  2000.  During  the fourth quarter sales and marketing staff in North America
were  reduced  as  the  Company  refocused its efforts in the Asian and European
markets  where  the Company has been achieving some success.  With the launch of
the  Hongkong Post wireless certificate service late in fiscal 2001, interest in
our products has increased in the Asian region.  We expect that activity in this
region  will  increase  during  fiscal  2002.

     General  and  administrative  expenses  were  $4,029,000  for  fiscal 2001,
approximately  the  same level as the $4,185,000 incurred during fiscal 2000.  A
decline  in  these  expenses  during  fiscal  2002  is expected as the result of
continuing  operating  cost  controls.

     Depreciation and amortization expense in fiscal 2001 decreased to
$1,888,000 from $2,604,000 in fiscal 2000. The Company's deferred development
costs are now fully amortized and the reduction in additions to capital assets
has resulted in reduced amortization for the year.

CRITICAL ACCOUNTING POLICIES

     The nature of our business is not highly complex, as we operate in one
primary business.  We develop, market and sell wireless security software
solutions.  We also perform professional services to install, support and
integrate our solutions with other applications.  We operate globally in a
functional organization.  We do not have any off-balance sheet financing, other
than operating leases entered into in the normal course of business.  A
significant portion of our cash balance is denoted in U.S. dollars.  To limit
our exposure to exchange rate fluctuations, we use financial instruments to
reduce risks associated with the exchange rate.  As at October 31, 2002, the
exchange rate was $1.57.

     In 2002, our most complex accounting judgments were made in the areas of
software revenue recognition.  Software revenue recognition is expected to
continue to be an on-going element of our accounting processes and judgments.

SOFTWARE REVENUE RECOGNITION

     We derive our revenue primarily from two sources: sales of products,
including hardware and software licenses, and services, including maintenance,
support and professional services.  Significant management judgments and
estimates must be made and used in connection with the revenue recognized in any
reporting period.  Material differences may affect the amount and timing of our
revenue for any period if our management made different judgments

     With respect to software revenue recognition, we recognize revenues in
accordance with the provisions of the American Institute of Certified Public
Accountants' Statement of Position No. 97-2, "Software Revenue Recognition" and
SOP No. 98-9, "Modifications of SOP No. 97-2, Software Revenue Recognition, with
Respect to Certain Transactions".

     For all sales, we use a binding contract, purchase order or another form of
documented agreement as evidence of an arrangement with the customer.  Revenues
from software license agreements are recognized upon receipt of an executed
license agreement and shipment of the software, if there are no significant
remaining vendor obligations, collection of the receivable is probable and
payment is due in accordance with our normal payment terms.

     We consider delivery to occur when we ship the product, so long as title
and risk of loss have passed to the customer.

     At the time of a transaction, we assess whether the sale amount is fixed or
determinable and whether collection is probable.  If we determine the fee is not
fixed or determinable, we recognize revenue when payment becomes due.  We assess


<PAGE>
collectibility based on a number of factors, including the creditworthiness of
the customer.  If we determine that collectibility is not probable, we do not
record revenue until such time when collectibility becomes probable, which is
generally upon the receipt of cash.

     When arrangements contain multiple elements and vendor specific objective
evidence ("VSOE") of fair value exists for all undelivered elements, we
recognize revenue for the delivered elements using the residual method.  Our
determination of fair value of each of the undelivered elements in multi-element
arrangements is based on VSOE of fair value. VSOE of fair value for each element
is either the price charged when the same element is sold separately or the
price established by management, having the relevant authority to do so, for an
element not yet sold separately.  For arrangements containing multiple elements
wherein VSOE of fair value does not exist for all undelivered elements, revenue
for the delivered and undelivered elements is deferred until VSOE of fair value
exists or all elements have been delivered.

     Maintenance service revenue, whether sold separately or as part of a
multiple element arrangement, is deferred and recognized ratably over the term
of the maintenance contract, generally twelve months.  Revenue allocated to
professional service elements is recognized as the services are performed.

     Due to the complexity of some software license agreements, we routinely
apply judgment to the application of software revenue recognition accounting
principles to specific agreements and transactions.  Different judgments and/or
different contract structures could have led to different accounting
conclusions, which could have had a material effect on our reported quarterly
earnings.

CAPITAL ASSETS

     The Company records its capital assets at their cost less accumulated
depreciation.  On a periodic basis, management reviews the carrying values of
these assets and compares it to their estimated net recoverable amount.  The
determination of net recoverable amount necessitates various assumptions, many
of which are forward looking and which are based on management's best estimate
of future revenues, expenses and cash flows.  To the extent that actual
financial performance adversely differs from the results projected by these
assumptions, an impairment charge in the value of these assets would be
necessary.

RECENT ACCOUNTING DEVELOPMENTS

     In July 2001, the FASB issued SFAS No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Tangible Assets."  SFAS No. 141 provides new
guidance on the accounting for a business combination at the date a business
combination is completed.  Specifically, it requires use of the purchase method
of accounting for all business combinations initiated after June 30, 2001,
thereby eliminating use of the pooling-of-interests method.  SFAS No. 142
establishes new guidance on how to account for goodwill and intangible assets
after a business combination is completed.  Among other things, it requires that
goodwill and certain other intangible assets will no longer be amortized and
will be tested for impairment at least annually and written down only when
impaired.  This statement will apply to existing goodwill and intangible assets,
beginning with fiscal years starting after December 15, 2001.  The Company will
apply with treatment to the 2003 acquisition of DSS in the fiscal year ending
October 31, 2003.

     In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets."  SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
This statement supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and related
literature and establishes a single accounting model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by sale.
The Company is required to adopt SFAS No. 144 no later than January 1, 2002.
The Company does not believe that the adoption of SFAS No. 144 will have a
material impact on its consolidated financial statements.

     In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" which requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
SFAS No. 146 is to be applied prospectively to exit or disposal activities
initiated after December 31, 2002.  The Company does not believe that adoption
of SFAS No. 146 will have a material effect on its results of operations and
financial position.

     In December 2001, the Accounting Standards Board in Canada issued CICA
Handbook Section 3870 "Stock-Based Compensation and Other Stock-Based Payments".
This section establishes standards for the recognition, measurement, and
disclosure of stock-based compensation and other stock-based payments made in
exchange for goods and services provided by employees and non-employees.  It
applies to transactions in which shares of common stock, stock options, or other
equity instruments are granted or liabilities incurred based on the price of
common stock or other equity instruments. The Company will adopt Section 3870
for its fiscal year beginning November 1, 2002.  The Company does not believe
that the adoption of this standard will have a material impact on the Company's
financial condition or results of operations.

     In December 2002, the Accounting Standards Board in Canada issued CICA
Handbook Section 3063 "Impairment of Long-Lived Assets" ("HB 3063") and revised
Handbook Section 3475, "Disposal of Long-Lived Assets and Discontinued
Operations" ("HB 3475"). The new standards are based upon the U.S. Statement of
Financial Accounting Standards No. 144, Impairment or Disposal of Long-Lived
Assets ("SFAS 144"). HB 3063 is effective for years beginning on or after April
1, 2003 for financial statements of profit-oriented enterprises. HB 3475 is
applicable to disposal activities initiated by an enterprise's commitment to a
plan on or after May 1, 2003. The Company does not believe that the adoption of
this standard will have a material impact on the Company's financial condition
or results of operations.


<PAGE>
     In December 2002, the FASB issued FASB Interpretation No 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others." Guarantors will have to meet new
disclosure and liability-recognition requirements for guarantees of debt that
fall within the scope of newly issued FIN 45.  A liability must be recognized at
the inception of a guarantee covered by the new requirements whether or not
payment is probable, because the Interpretation creates the new concept of a
"stand-ready" obligation.  This Interpretation applies to guarantees issued or
modified after December 31, 2002, irrespective of the guarantor's fiscal year
end. The disclosure requirements in this Interpretation are effective for
financial statements of interim or annual periods ending after December 15,
2002.

5-B. LIQUIDITY AND CAPITAL RESOURCES

YEAR ENDED OCTOBER 31, 2002 COMPARED TO YEAR ENDED OCTOBER 31, 2001 AND YEAR
ENDED OCTOBER 31, 2000

     Cash used in operating activities was $7,258,000 in the year ended October
31, 2002, a decline of 55% from the amount used in the same period of the prior
year.  Cash used in operating activities during the year was comprised of the
net loss of $6,397,000, less net depreciation and amortization of $636,000.
Changes in other non-cash items include a decrease in accounts payable and
accrued liabilities of $1,876,000, an increase in receivables of $67,000, a
decrease in deferred revenue of $29,000 and a decrease in prepaid expenses of
$475,000.

     Cash used in operating activities was $15,963,000 in the year ended October
31, 2001, attributable to the net loss of $18,900,000 less net depreciation and
amortization of $1,888,000.  Changes in other non-cash items include a decrease
in accounts payable and accrued liabilities of $321,000, a decrease in
receivables of $1,438,000, a decrease in deferred revenue of $39,000 and an
increase in prepaid expenses of $29,000.

     Cash used in operating activities was $13,121,000 in the year ended October
31, 2000, attributable to the net loss of $14,777,000 less net depreciation and
amortization of $2,604,000. Changes in other non-cash items include an increase
in accounts payable and accrued liabilities of $894,000, an increase in
receivables of $1,471,000, an increase in deferred revenue of $78,000 and a
increase in prepaid expenses of $376,000.

     Cash provided by financing activities in the year ended October 31, 2002
was $4,965,000. In April 2002, we completed a private placement for net proceeds
of $4,965,000.  The Company completed the issue and sale of 5,186,708 units in
the capital of the Company at U.S.$0.60 per unit for gross proceeds of
U.S.$3,112,022. Each unit was comprised of one common share and three-quarters
of one common share purchase warrant.  Each warrant entitles the holder thereof
to acquire one common share at a price of U.S. $0.72 per common share for a
period of up to three years from April 4, 2002.  Cash provided by financing
activities in the year ended October 31, 2001, was $106,000 as a result of
proceeds received from issuing common shares under an employee stock option
exercise.

     Cash provided by financing activities in the year ended October 31, 2000
was $30,674,000.  In July 2000, we completed a private placement that generated
net proceeds of $23,544,000.  Funds were also received during the year on the
exercise of stock options amounting to $2,022,000 and upon the exercise of
common share purchase warrants issued in April 1999 which generated proceeds of
$1,651,000.  In December 1999, we received $3,429,000 as proceeds from the
exercise of a warrant, issued in December 1997, to purchase 900,000 common
shares at an exercise price of U.S.$2.50.

     Cash provided by investing activities in the year ended October 31, 2002
was $184,000 consisting of $200,000 received from proceeds of a short-term
investment offset by $16,000 spent on capital assets.  Cash used in investing
activities in the year ended October 31, 2001 was $4,274,000 consisting of
$1,186,000 spent on capital asset additions and the purchase of a $3,088,000
short-term investment.  Cash used in investing activities in the year ended
October 31, 2000 was $1,764,000 attributable to capital assets additions.

     As of October 31, 2002 we had commitments under non-cancelable operating
leases for our principal facilities and equipment through 2006 in amounts
ranging from $554,000 in fiscal 2003 declining to $398,000 in fiscal 2006.
As of October 31, 2002 we had a commitment to contribute up to $27,000 to our
50% owned joint venture for our share of the joint venture requirements.  This
amount is expected to be contributed within six months of our 2002 year-end.

     We believe that our cash and cash equivalents and short-term investments as
at October 31, 2002 of $3,841,000 will not be sufficient to meet our short-term
working capital requirements for the next fiscal year.  We plan to raise
additional amounts to meet our working capital requirements through private or
public financings, strategic relationships or other arrangements.  However,
additional funding may not be available on terms attractive to us, or at all.
If we enter into strategic relationships to raise additional funds, we may be
required to relinquish rights to certain of our technologies.  Our failure to
either raise capital when needed or to generate revenues would leave us with
insufficient resources to continue our business.

5-C. RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ET CETERA

     We plan to continue to invest in research and development for our security
products based on the technology we purchased in 1996, and we anticipate
spending approximately $2,408,000 in the year ending October 31, 2003 in
connection with these efforts.  We expect to allocate funds almost entirely to


<PAGE>
salary payments to staff for the continued research and development of our
security product suite.  We cannot reasonably estimate when the benefits, if
any, of the continued development costs will be realized.  We also cannot
reasonably estimate whether any of the continuing development costs will result
in revenue for us, or whether additional sources of funding will be available if
continued development of the technology is unsuccessful.

5-D. TREND INFORMATION

     At this time, it is difficult to provide any trends due to a number of
factors.  We currently have several customers that are using our products for
pilot projects.  The sales cycle can take a significant amount of time.  In
addition to customer constraints, such as budgetary restrictions, the
integration process required to make our products function properly within a
customer's specific application may be complex.  M-commerce applications are
also in their infancy, and the need for security applications is dependent on
the adoption of these applications by consumers.

     Our revenue model consists of (i) license fees from the licensing of our
Passport Certificate Server(R) and Passport Authorization Product, which are
one-time fees typically recorded upon execution of the license agreement
(although a licensee may ultimately require additional servers and pay
additional fees), (ii) recurring royalties from the provision of certificates
and permits, (iii) annual support fees (for phone assistance and product
updates) and (iv) consulting fees (advice regarding the integration of our
software with a client's application).  In certain cases, we have waived the
first year support fees for certain of our customers (usually amounting to
approximately 15% of aggregate license fees).  As our business evolves, we
expect that most of our revenue will be generated through recurring royalties.
This revenue stream is dependent on the adoption of transaction-based
applications over wireless networks and therefore cannot be accurately projected
at this time.

ITEM 6.   DIRECTORS, SENIOR MANAGEMENT, AND EMPLOYEES

6-A. DIRECTORS AND SENIOR MANAGEMENT

     The following sets forth certain information about each of our directors
and executive officers:

     STANLEY M. D. BECK, 68, has served as a Director since July 2002.  Mr. Beck
was formerly Chairman of the Ontario Securities Commission and Dean of Osgoode
Hall Law School.  Mr. Beck is currently Chairman of 407 International Inc. and
President of Granville Arbitrations Limited, and holds seats on a number of
Boards

     NAGY MOUSTAFA, 39, has served as Diversinet's President and Chief Executive
Officer since November 1997. Mr. Moustafa has more than 16 years of professional
experience working in technology and engineering.

     KEITH POWELL, 57, has served as a Director since July 2002. Mr. Powell is
currently the principal of Keith Powell Consulting Inc., an information
technology consulting firm and a Partner in XPV Capital Corp., a venture capital
company investing in early stage communications companies. Mr. Powell also sits
on several other boards . From 1980 to 2000, Mr. Powell held a number of
positions with Nortel Networks, including Senior Vice-President, Information
Services & Chief Information Officer from 1996 to 2000. In 1999 Mr. Powell was
inducted into the Canadian Information Productivity Awards Hall of Fame.

     MARK C. STEINMAN, 54, has served as a Director since June 1998 and Chairman
since July 2002.  Mr. Steinman has thirty years of corporate finance experience,
currently as Executive Vice President and Chief Financial Officer of Stelco Inc.
and prior to 1999 as Chief Financial Officer of Spar Aerospace and Chief
Financial Officer of Rogers Cablesystems.

     CHARLES M.H. SHIU, 69, has served as a Director since September 2002. Mr.
Shiu is a former senior executive with Nortel Networks and has more than 25
years experience with strategic alliances, joint ventures and investments in the
European, North American and Asia Pacific markets. Mr. Shiu is currently
Chairman of Allied Asia Investments Limited and holds seats on a number of
boards.

     DAVID HACKETT, 38, Mr. David Hackett was appointed as Chief Financial
Officer effective March 26, 2002.  Previously, Mr. Hackett was CFO of a
technology and service provider to electronic marketplaces, where he oversaw
start-up operations, public financing and acquisitions.  Mr. Hackett has also
held senior financial management positions at EveryWare Development, Alliance
Atlantis Communications and Entertainment Information Services Ltd.

     HUSSAM MAHGOUB, 52, has served as our Vice President of Products since
April 1999. Prior to joining Diversinet, he held senior positions at Canada Post
Corporation, Bell Canada and Bank of Montreal.  At Canada Post Corporation, he
was responsible for introducing many electronic services.

     NICK DARWISH, 41, has served as our Vice President of Business Development
since December 1999. Mr. Darwish joined Diversinet from Nortel Networks, a
global supplier of data and telephone network solutions and services. Most
recently, he was responsible for Nortel's new E-Commerce applications business.

     6-B.     COMPENSATION

     The following table and notes show the executive compensation paid or
accrued by us during the year ended October 31, 2002 to our officers earning in
excess of $100,000 per year:


<PAGE>
<TABLE>
<CAPTION>
NAME AND
PRINCIPAL                COMPENSATION SALARY   BONUS (5)           OTHER ANNUAL
POSITION                             (CDN $)     (CDN $)   COMPENSATION (CDN $)  OPTIONS/ SARS
---------------------  ---------------------  ----------  ---------------------  -------------
<S>                    <C>                    <C>         <C>                    <C>
Nagy Moustafa,         $          220,000(1)  $   50,000  $               6,000         80,000
CEO
Hussam  Mahgoub,       $          132,000(2)  $   11,667  $               4,800         17,000
VP Product
Nick Darwish VP,       $          154,000(3)  $   11,667  $               4,800         20,375
Business Development
David Hackett, VP and  $           60,640(4)  $   10,000  $               3,000         15,000
CFO

<FN>
(1)  Mr.  Moustafa  is  currently  being compensated at the rate of $220,000 per
     annum.  See  "Employment  Agreements".
(2)  Mr.  Mahgoub  is  currently  being  compensated at the rate of $132,000 per
     annum.  See  "Employment  Agreements".
(3)  Mr.  Darwish  is  currently  being  compensated at the rate of $154,000 per
     annum.  See  "Employment  Agreements".
(4)  Mr.  Hackett  is  currently  being  compensated at the rate of $165,000 per
     annum.  See  "Employment  Agreements".
(5)  Bonus allocations, if any, are determined annually at the discretion of the
     board  of  directors  on  the recommendation of the Compensation Committee,
     bonuses  are paid and recorded as compensation in the fiscal year following
     the year in which they are earned as the determination is made by the Board
     in  the  following  year.
</TABLE>

     There were no long-term incentive awards other than stock options made to
the executive officers listed above during the fiscal year ended October 31,
2002.  There are no pension plan benefits in place for our executive officers
and none of our senior officers or directors is indebted to us.

EMPLOYMENT AGREEMENTS

     We entered into an employment agreement with Nagy Moustafa, effective
September 29, 1997, as amended, which provides for an annual salary of $220,000
for fiscal 2002, a maximum performance bonus of $250,000, payable upon the
achievement of corporate objectives, and for severance compensation upon the
occurrence of certain events.  The employment agreement also contains certain
non-competition and non-disclosure provisions and is renewable annually, subject
to certain termination provisions.

     We entered into an employment agreement with Hussam Mahgoub, effective
April 1, 1999, as amended, which provides for an annual salary of $132,000 for
fiscal 2002 and a $100,000 performance bonus, payable upon the achievement of
corporate objectives, and for severance compensation upon the occurrence of
certain events.  The employment agreement also contains certain non-disclosure
provisions and is renewable annually, subject to certain termination provisions.
We entered into an employment agreement with Nick Darwish, effective December
20, 1999, as amended, which provides for an annual salary of $154,000 for fiscal
2002 and a performance bonus of $100,000, payable upon the achievement of
corporate objectives, and for severance compensation upon the occurrence of
certain events.  The employment agreement also contains certain non-disclosure
provisions and is renewable annually, subject to certain termination provisions.

     We entered into an employment agreement and consulting agreement with David
Hackett, effective March 26, 2002, as amended, which provides for an annual
compensation of $165,000 for fiscal 2002 and a performance bonus of $75,000,
payable upon the achievement of corporate objectives, and for severance
compensation upon the occurrence of certain events.  The employment agreement
also contains certain non-disclosure provisions and is renewable annually,
subject to certain termination provisions.

COMPENSATION  OF  DIRECTORS

     Our directors received no compensation during fiscal 2002 for attending
meetings of the board of directors or a committee of the board of directors.
     We compensated none of our directors in his capacity as a director during
the fiscal year ended October 31, 2002.  It has been our practice to grant to a
director 100,000 options (pre share split) to acquire our common shares upon his
or her election as a director.  During fiscal 2002, Mark Steinman was granted an
additional 100,000 stock options.  Such options are exercisable to acquire
common shares at the market price on the day preceding the grant pursuant to the
terms of our share option plan.

OPTION  TO  PURCHASE  OUR  SECURITIES

     Our share option plan was established on October 15, 1993 and was amended
on February 4, 1997, April 16, 1999, May 15, 2000 and January 22, 2003.  Under
our share option plan, options for up to a specified maximum limit of 824,792
common shares may be granted from time to time by the board of directors to our
directors, officers, employees and consultants of Diversinet and any of our
subsidiaries.  Options granted under our share option plan have an exercise
price equal to the closing price of the common shares on the day immediately
proceeding the day of the grant and will be exercisable over a three-year period
and will expire after five years.

     The share option plan provides that:

(i)   The maximum number of common shares which may be reserved for issuance to
      any participant pursuant to share options may not exceed 5% of the common
      shares outstanding at the time of grant (on a non-diluted basis) less the
      aggregate number of common shares reserved for issuance to such person
      under any other option to purchase common shares from treasury granted as
      a compensation or incentive mechanism;


<PAGE>
(ii)  The maximum number of common shares that may be issued to any one insider
      and his associates within a one year period may not exceed 5% of the
      outstanding issue;

(iii) The maximum number of common shares that may be reserved for issuance to
      Diversinet insiders is limited to 10% of the common shares of the
      outstanding issue at the time of the grant (on a non-diluted basis) less
      the aggregate number of common shares reserved for issuance to insiders
      under any other share compensation arrangement; and

(iv)  The maximum number of common shares that may be issued to Diversinet
      insiders within a one-year period may not exceed 10% of the outstanding
      issue.

     As at April 15, 2003, there were a total of 300,891 options to purchase
common shares outstanding under our share option plan at exercise prices ranging
from U.S. $2.30 to U.S. $416.88 with expiration dates ranging from May 11, 2003
to January 17, 2008.  The directors and officers as a group hold options to
purchase 192,875 of our common shares. The following table provides details on
the share options granted to our directors, officers, employees and consultants
under the terms of our share option plan as at April 15, 2003.

<TABLE>
<CAPTION>
====================================================================================================
                                     Share Options Outstanding
----------------------------------------------------------------------------------------------------
Optionee                 Total number of common     Share exercise price        Expiration date
                        shares subject to option
----------------------------------------------------------------------------------------------------
<S>                     <C>                       <C>                       <C>

Directors and Officers                   192,875  U.S.$2.30 to U.S.$162.50  06/27/2003 - 09/04/2007
Employees and                            108,016  U.S.$2.40 to U.S.$416.88  05/11/2003 - 01/17/2008
Consultants
====================================================================================================
</TABLE>

6-C. BOARD PRACTICES

     Our board of directors presently consists of five (5) directors who are
elected annually.  Each director elected will hold office until the close of
business of our first annual meeting of shareholders following his election
unless his office is earlier vacated in accordance with our by-laws.  During
fiscal 2002, Frank Clegg, David Masotti, John McMahon, William Linton and
Richard Palmer resigned as directors.

AUDIT  COMMITTEE

     The Audit Committee is comprised of three directors.  The Audit Committee's
responsibilities include reviewing the Corporation's financial report
procedures, the adequacy of its internal controls and information systems, the
external audit plan and the independence and terms of engagement and fees of the
external auditors and the performance of the Corporation's external auditors.
The committee also has the responsibility to review, and to recommend for
approval, the Corporation's interim unaudited consolidated financial statements
and annual consolidated financial statements, management's discussion and
analysis of financial condition and results of operations and related press
releases, prior to their approval by the full Board.  The members of the Audit
Committee are Mark Steinman (Chair), Keith Powell and Nagy Moustafa.

COMPENSATION  COMMITTEE

     The Compensation Committee is comprised of two directors.  It is the
responsibility of the Compensation Committee to determine the level of
compensation in respect of the Corporation's senior executives (including Named
Executive Officers) with a view to providing such executives with a competitive
compensation package having regard to performance.  The Board of Directors
defines performance to include achievement of the Corporation's strategic
objective of growth, development of the business, enhancement of shareholder
value and attainment of annual goals as set.  The members of the Compensation
Committee are Keith Powell (Chair) and Stanley Beck.

GOVERNANCE  COMMITTEE

     The Governance Committee is comprised of two directors.  The Governance
Committee assists the Board of Directors in fulfilling its oversight
responsibilities related to seeking candidates for membership on the Board of
Directors, assessing the corporate governance policies and processes of the
Board of Directors and reviewing from time to time the policies of the Board of
Directors related to director qualifications, compensation, tenure and
retirement.  The members of the Governance Committee are Stanley Beck (Chair)
and Keith Powell.

6-D. EMPLOYEES

     As of April 15, 2003, we had 39 full-time employees and 27 contractors.  Of
our employees and contractors, 19 were involved in research and development, 15
in sales, marketing and business development and 9 in administration and
finance.  None of our employees is covered by a collective bargaining agreement,
and we believe that our relationship with our employees is good.  Our future
success, however, will depend upon our ability to attract and retain qualified
personnel.  Competition for such personnel is often intense, and we cannot
provide assurance that we will be able to attract and retain adequate numbers of
qualified personnel in the future.


<PAGE>
6-E. SHARE OWNERSHIP

     See item 7-A.

ITEM 7    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7-A. MAJOR SHAREHOLDERS

     Diversinet is a publicly owned Canadian corporation.  Another corporation
or any government does not control us directly or indirectly.

     As of April 15, 2003 (after effect of the reverse share split), we had
3,222,210 common shares outstanding.

     The following table shows the ownership of our common shares as of April
15, 2003 of:

     -    each person known to us to be the beneficial owner of more than 5% of
          our outstanding common shares;
     -    each of our directors and officers; and
     -    all of our directors and officers as a group.

     The second column indicates the number of common shares actually owned, and
the third column indicates the number of common shares that each person has the
right to acquire within sixty days from the date hereof upon the exercise of
outstanding options, warrants or convertible securities.  The fourth column
reflects a description of the shares underlying those options, warrants and
convertible securities and the vesting and exercise prices thereof.  The fifth
column reflects the sum of the second and third columns, expressed as a
percentage of the issued and outstanding common shares of Diversinet.

     Unless otherwise indicated, the business address for each of these
individuals is c/o Diversinet Corp., 2225 Sheppard Avenue East, Suite 1700,
Toronto, ON Canada M2J 5C2.

<TABLE>
<CAPTION>
                        NUMBER OF  NUMBER OF                                                 PERCENTAGE OF
                         SHARES     OPTIONS                                                   OUTSTANDING
NAME                      OWNED      OWNED                  OPTIONS REPRESENT                    SHARES
----------------------  ---------  ---------  ---------------------------------------------  --------------
<S>                     <C>        <C>        <C>                                            <C>
Nagy Moustafa              62,725     70,000  The vested and immediately exercisable                  4.03
                                              portion of options to purchase 80,000
                                              common shares at purchase prices ranging
                                              from U.S. $10.60 to U.S. $162.50 per
                                              share.  The balance of these options vest
                                              at the rate of 8.3% per quarter beginning
                                              January 11, 2001 as to the remaining
                                              10,000 options.

Hussam Mahgoub              1,000     13,583  The vested and the immediately                             *
                                              exercisable portion of options to purchase
                                              17,000 common shares at purchase prices
                                              ranging between U.S. $5.80 and U.S.
                                              64.70 per share.  The balance of these
                                              options vest at the rate of 8.3% per
                                              quarter, beginning May 9, 2002 as to
                                              2,667 options and beginning January 11,
                                              2001 as to the remaining 750 options.

Nick Darwish                4,178     14,969  The vested and immediately exercisable                     *
                                              portion of options to purchase an
                                              aggregate of 20,375 common shares at
                                              purchase prices ranging between U.S.
                                              5.30 and U.S.$119.40 per share.  The
                                              balance of these options vest at the rate of
                                              8.3% per quarter beginning January 11,
                                              2001 as to the 656 options, beginning July
                                              24, 2001 as to 2,083 options and
                                              beginning May 9, 2002 as to the
                                              remaining 2,667 options.

David Hackett                 -0-      3,750  The vested and immediately exercisable                     *
                                              portion of an option to purchase 15,000
                                              common shares at a purchase prices of
                                              U.S. $5.50. These options vest at the rate
                                              of 8.3% per quarter beginning March 26,
                                              2002.


<PAGE>
                        NUMBER OF  NUMBER OF                                                 PERCENTAGE OF
                         SHARES     OPTIONS                                                   OUTSTANDING
NAME                      OWNED      OWNED                  OPTIONS REPRESENT                    SHARES
----------------------  ---------  ---------  ---------------------------------------------  --------------

Stanley Beck                  -0-      2,500  The vested and immediately exercisable                     *
                                              portion of options to purchase 10,000
                                              common shares at purchase prices of U.S.
                                              2.30 per share.  The remaining options
                                              vest at the rate of 8.3% per quarter
                                              beginning July 8, 2002.

Mark  Steinman                -0-     12,333  The vested and immediately exercisable                     *
                                              portion of an option to purchase 21,500
                                              common shares at a purchase prices
                                              ranging between of U.S.$2.30 and
                                              U.S.$20.60 per share. The balance of
                                              these options vest at the rate of 8.3% per
                                              quarter, beginning July 24, 2001 as to
                                              1,667 options and beginning July 8, 2002
                                              as to the remaining 7,500 options.

Keith Powell                  -0-      9,167  The vested and immediately exercisable                     *
                                              portion of options to purchase 15,000
                                              common shares at a purchase price
                                              ranging between of U.S.$2.30 and
                                              U.S.$13.10 per share.  The balance of
                                              these options vest at the rate of 8.3% per
                                              quarter beginning July 8, 2002 as to 7,500
                                              and beginning April 6, 2001 as to 1,667
                                              options.

Charles Shiu                  -0-      2,500  The vested and immediately exercisable                     *
                                              portion of options to purchase 10,000
                                              common shares at purchase prices of U.S.
                                              4.60 per share.  These remaining options
                                              vest at the rate of 8.3% per quarter
                                              beginning September 4, 2002.

Knockagh                  131,368     39,154  The vested and immediately exercisable                  5.23%
International Ltd. (1)              warrants  portion of warrants to purchase an
                                              aggregate of 41,350 common shares at a
                                              purchase price ranging between U.S.
                                              131.25 and U.S. $85.94.  The balance of
                                              the warrants vest at the rate of 8.3% per
                                              quarter beginning May 15, 2000.

All Officers and           67,903    128,802                                                          5.87%
Directors as a group
(10 persons)

<FN>
----------------------
*  Less than 1%

(1)  We believe that Moti Barkan is an affiliate of Knockagh International Ltd.
     Does not include options to purchase common shares held by Mr. Barkan.

7-B. RELATED PARTY TRANSACTIONS

     Not Applicable.

7-C. INTERESTS OF EXPERTS AND COUNSEL

     Not Applicable.

ITEM 8    FINANCIAL INFORMATION

8-A.      CONSOLIDATED STATEMENTS AND OTHER FINANCIAL INFORMATION
</TABLE>


<PAGE>
The financial statements are included in this Registration Statement, Form 20-F
as Item 17.

LEGAL PROCEEDINGS

          There are currently two material claims pending against us. If we lose
any of these suits or enter into settlements requiring us to pay cash or to
issue any of our common shares, our liquidity and financial position will be
adversely affected and our shareholders' ownership may be diluted.

(a)     Silva Run Litigation Matter

          In May 1996, Silva Run Worldwide Ltd. sued a number of individuals and
corporations, including us, in the United States District Court for the Southern
District of New York in connection with, among other things, Silva Run's
purchase of 21,250 common shares (850,000 common shares prior common share
consolidations) in August 1995.  At the time of such purchase, we were operating
a different business under our prior name, The Instant Publisher Inc., and a
prior management group was running us.  In this lawsuit, the plaintiff is
seeking to cancel this stock purchase, alleging, inter alia:

          -    that the plaintiff was fraudulently induced into the transaction
               by certain defendants other than us;
          -    that the sale of our common shares was not in compliance with the
               Securities and Exchange Commission regulation governing the sale
               of those shares outside the United States; and
          -    that we were the control person of other defendants who violated
               the Securities Act of 1933, as amended, in connection with the
               sale of our common shares, and thereby are required to cancel the
               transaction or are liable for damages under the control person
               provisions of the Securities Act of 1933, as amended, and the
               Securities Exchange Act of 1934, as amended.

          The plaintiff also sought punitive damages of U.S. $25,000,000 plus
interest, attorneys' fees and costs.

          In April 1998, the court dismissed all claims against us except for
the claims against us directly and as an alleged control person seeking either a
reversal of the transaction, which would require us to buy back the 21,250
common shares (850,000 common shares prior all share consolidations) purchased
by Silva Run, or damages.  The plaintiffs then filed a second amended complaint
in July 1998 which seeks approximately U.S. $3,700,000, as a refund or damages,
plus interest, attorneys' fees, and costs, but no longer seeks punitive damages
against us.

          On March 28, 2000, the court granted our motion to dismiss (and the
other defendants' motions to dismiss) the second amended complaint, without
prejudice to Silva Run's filing of a third amended complaint within 30 days.  A
third amended complaint was filed.  We have filed a motion to dismiss the
current complaint on the merits and on the ground that the third amended
complaint was filed beyond the time limit set by the Court.  While we intend to
continue to vigorously defend this case, we may have to refund the U.S.
$3,700,000 purchase price of the shares, or be assessed damages, either of which
would have a material adverse effect on our liquidity and our ability to fund
our business.  It is possible that the dismissed claims may be reinstated and
that either a judge or jury could impose punitive damages on us.

(b)  INSTANT PUBLISHER (ISRAEL) LITIGATION MATTER

          In May 2000, we were sued in the Ontario Superior Court of Justice,
along with our wholly-owned Barbados subsidiary, The Instant Publisher Ltd., by
Instant Publisher (Israel) Limited, a company not related to Diversinet. Instant
Publisher (Israel) Limited is seeking damages of U.S. $1,533,950 for breach of
an October 25, 1995 dealer agreement with our previous printing business
regarding the distribution of printing equipment, and damages of U.S.
$25,000,000 for loss of reputation and loss of opportunity, pre-judgment and
post-judgment interest, and costs.  Based on our preliminary evaluation of the
merits of this claim, we filed a notice of intention to defend against the
claim.  If we are required to pay damages, this could have a material adverse
effect on our liquidity and our ability to fund our business.

8-B.  SIGNIFICANT CHANGES

          On January 23, 2003 the Board of Directors approved a 1-for-10 reverse
stock split of our outstanding common shares. This move followed a vote January
22, 2003, at the Annual and Special Shareholders' Meeting in which a majority of
our shareholders authorized the board to effect the reverse stock split.

          As a result of the reverse stock split, effective on January 28, 2003,
every ten shares of Diversinet common stock were exchanged for one share of
Diversinet common stock. The reverse stock split affected all shares of common
stock, stock options and warrants outstanding immediately prior to the effective
time of the reverse stock split.

          There have been no other significant changes or events between October
31, 2002 and April 15, 2003.

ITEM 9    THE OFFER AND LISTING

9-A.  OFFER AND LISTING DETAILS

          Diversinet Corp.'s common shares traded on the Canadian Dealing
Network until it ceased to operate in August of 2000.  The following table lists
the high, low, closing prices and the aggregate yearly trading volumes on the
Canadian Dealing Network for shares of our common shares for the last five
fiscal years ended October 31:


<PAGE>
                CANADIAN DEALING NETWORK SHARES TRADING ACTIVITY


                                                  TRADING VOLUME
YEAR ENDED OCTOBER 31,  HIGH     LOW    CLOSING        (000)
----------------------  ------  ------  --------  ---------------
2002 . . . . . . . . .     N/A     N/A       N/A             N/A
2001  . . . . . . . . .    N/A     N/A       N/A             N/A
2000  . . . . . . . . .  66.75  $10.00  $      -          43,126
1999  . . . . . . . . .  18.00    1.40     17.25          17,040
1998  . . . . . . . . .  7.25     1.20      1.50           7,618

     The following table lists the high, low and closing prices on NASDAQ of our
common shares for the last five fiscal years ended October 31:

<TABLE>
<CAPTION>
            NASDAQ TRADING ACTIVITY (IN U.S. DOLLARS)
        ADJUSTED FOR REVERSE SPLIT ON JANUARY 28, 2003


                                                     TRADING
YEAR ENDED OCTOBER 31,   HIGH     LOW    CLOSING   VOLUME(000)
----------------------  -------  ------  --------  -----------
<S>                     <C>      <C>     <C>       <C>
2002 . . . . . . . . .  $ 11.80  $ 2.30  $   3.00        2,443
2001 . . . . . . . . .    63.40    9.40     12.70          235
2000 . . . . . . . . .   498.80   43.80     61.30       27,280
1999 . . . . . . . . .   130.00    9.40    119.40        8,625
1998 . . . . . . . . .    53.80    6.30     13.10        4,401
</TABLE>

     Diversinet Corp. has not been traded on The Canadian Dealing Network since
it ceased to operate in August of 2000 so there has been no activity of our
common shares for the last eight fiscal quarters. The following table lists the
high, low and closing prices on NASDAQ of our common shares for the last eight
fiscal quarters:

<TABLE>
<CAPTION>
          NASDAQ TRADING ACTIVITY (IN U.S. DOLLARS)
      ADJUSTED FOR REVERSE SPLIT ON JANUARY 28, 2003


                                                     TRADING
QUARTER ENDED             HIGH    LOW    CLOSING   VOLUME(000)
-----------------------  ------  ------  --------  -----------
<S>                      <C>     <C>     <C>       <C>
January  31, 2003 . . .  $ 6.10  $ 1.66  $   2.24          592
October 31, 2002. . . .    6.10    2.20      3.00           15
July 31, 2002 . . . . .    7.60    1.90      4.40           20
April 30, 2002. . . . .   10.80    3.80      6.30           46
January 31, 2002. . . .   18.50    9.50     10.70           41
October 31, 2001. . . .   26.40    9.40     12.70           28
July 31, 2001 . . . . .   38.00   13.70     23.90           30
April 30, 2001. . . . .   33.20   10.00     27.00           40
January 31, 2001. . . .   63.40   16.90     27.20        2,801
</TABLE>

     The following table lists the high, low and closing prices on NASDAQ of our
common shares for the last six months:

<TABLE>
<CAPTION>
                    NASDAQ TRADING ACTIVITY (IN U.S. DOLLARS)
                 ADJUSTED FOR REVERSE SPLIT ON JANUARY 28, 2003


                                                   TRADING VOLUME
MONTH ENDED                HIGH    LOW   CLOSING        (000)
------------------------  -----  -----  --------  ---------------
<S>                       <C>    <C>    <C>       <C>
March 2003 . . . . . . .  $1.83  $1.06  $   1.40         185,100
February 2003. . . . . .   2.25   1.05      1.55         119,700
January 2003 . . . . . .   4.40   1.66      2.24         240,340
December 2002. . . . . .   5.10   2.50      3.00             169
November 2002. . . . . .   6.10   2.80      4.60             182
October 2002 . . . . . .   3.50   2.20      3.00             101
</TABLE>

     Our common shares are issued in registered form and the following
information is taken from the records of ComputerShare Trust Company of Canada
located in Toronto, Ontario, Canada, the registrar and transfer agent for our
common shares.


<PAGE>
     On January 3, 2003, the shareholders' list for our common shares showed 466
registered shareholders and 3,222,210 shares outstanding.  Of the 466 registered
shareholders, 364 list U.S. addresses, showing ownership of an aggregate of
2,121,879 shares, representing 66% of our outstanding common shares.

     We have not declared any dividends for the last seven years and do not
anticipate that we will do so in the foreseeable future.  Our present policy is
to retain future earnings, if any, for use in our operations and the expansion
of our business.

9-B. PLAN OF DISTRIBUTION

     Not Applicable.

9-C. MARKETS

     Our common shares began trading on the NASDAQ SmallCap MarketSM on June 20,
1995.  Prior to December 3, 2002, our common shares traded on the NASDAQ
SmallCap MarketSM under the symbol "DVNT".  Effective December 3, 2002 our
common shares trade under the symbol "DVNTC" with the exception of a 20 period
from January 28, 2003 to February 25, 2003 when our common shares traded under
the symbol "DVNTD".

     Prior to August 2000 our shares were also traded on the now defunct
Canadian Dealers Network.

9-D. SELLING SHAREHOLDERS

          Not Applicable.

9-E. DILUTION

          Not Applicable.

9-F. EXPENSES  OF  THE  ISSUE

          Not Applicable.

ITEM 10.  ADDITIONAL  INFORMATION

10-A.     SHARE  CAPITAL

          Not Applicable.

10-B.     MEMORANDUM  AND  ARTICLES  OF  ASSOCIATION

1.   Our Certificate of Incorporation No. is 1054873 (Ontario). Our objectives
     are not indicated on the registration form. However, our objective is to
     enable mobile e-commerce (m-commerce) services with our wireless security
     infrastructure solutions.

2.   (a)  A Director shall disclose in writing to us or request to have
     entered into the minutes of the meeting the nature and extent of his
     interest regarding any material contracts.
     (b)  Not Applicable.
     (c)  Not Applicable.
     (d)  Not Applicable. Directors are appointed at the annual shareholders'
          meeting or appointed by special resolution.
     (e)  Not Applicable.
     (f)  Not Applicable.
     (g)  Not Applicable.
     (h)  Not Applicable.

10-C.     MATERIAL CONTRACTS

          We have not entered into any material contracts, other than contracts
entered into in the ordinary course of business and those listed herein to which
we are a party, for the two years immediately preceding publication of this Form
20-F.

10-D.     EXCHANGE CONTROLS

          The federal Investment Canada Act (the "ICA"), which became effective
on June 30, 1985, regulates the acquisition by non-Canadians of control of a
Canadian Business (as defined in the Investment Canada Act). Such an acquisition
is either notifiable or reviewable depending on its structure and the value of
the assets of the Canadian business being acquired. In effect, the ICA requires
review by Investment Canada, the agency which administers the ICA, and approval
by the Canadian government in the case of an acquisition of control of a
Canadian business by a non-Canadian that is a WTO Investor (as defined in the
ICA) where: (i) in the case of a direct acquisition of control of a Canadian
entity (i.e., through a share purchase), the assets of the entity carrying on
the Canadian Business and of all other entities in Canada, the control of which
is acquired exceeds $184 million (this threshold is adjusted annually for
inflation and growth in Canada's domestic product); or (ii) in the case of a
direct acquisition of assets of a Canadian Business (i.e., through an asset
acquisition) the value of the assets used in carrying on the Canadian business
exceeds $184 million. Indirect acquisitions (for example, the acquisition of the
foreign parent of the Canadian business) of assets or indirect acquisitions of
control by a WTO investor are not reviewable, but are still notifiable. Where an
investor is not a WTO Investor, review is required where: (i) in the case of a
direct acquisition of control of a Canadian Business, the value of the assets of
the business and all other entities being acquired is $5 million or more; or
(ii) in the case of an indirect acquisition of control of a Canadian Business,
where the Canadian Business has assets of $50 million or more in value; or (iii)


<PAGE>
in the case of an acquisition of assets of a Canadian Business, the assets
represents more than 50% of the assets of the original group and the value of
the acquired assets exceeds $5 million. These lower thresholds also apply, even
where the investor is a WTO investor, where the Canadian Business is engaged in
certain activities relating to "Canada's cultural heritage or national identity"
such as book publishing, film production and distribution, television and radio,
production and distribution of music, uranium production, certain financial
services or transportation services.

     In the context of Diversinet, in essence, three methods of acquiring
control of a Canadian business are regulated by the ICA: (i) the acquisition of
all or substantially all of the assets used in carrying on the Canadian
business; (ii) the acquisition, directly or indirectly, of voting shares of a
Canadian corporation carrying on the Canadian business; (iii) the acquisition of
voting shares of an entity which controls, directly or indirectly, another
entity carrying on a Canadian business. An acquisition of a majority of the
voting interests of an entity, including a corporation, is deemed to be an
acquisition of control in accordance with the ICA. An acquisition of less than
one-third of the voting shares of a corporation is deemed not to be an
acquisition of control. An acquisition of less than a majority, but one-third or
more, of the voting shares of a corporation is presumed to be an acquisition of
control unless it can be established that on the acquisition the corporation is
not, in fact, controlled by the acquirer through the ownership of voting shares.
For partnerships, trusts joint ventures or other unincorporated entities, an
acquisition of less than a majority of the voting interests is deemed not to be
an acquisition of control.

     If an acquisition of control of a Canadian business by a non-Canadian is
not reviewable, the ICA requires a formal notification to the Canadian
government.  These provisions require a foreign investor to give notice in the
required form, which notices are for information, as opposed to review,
purposes.

10-E.  TAXATION

CERTAIN CANADIAN FEDERAL INCOME TAX CONSEQUENCES

     The following summary of the material Canadian federal income tax
considerations generally applicable in respect of the holding and disposition of
common shares reflects our opinion as of the date hereof. The tax consequences
to any particular holder of common shares will vary according to the status of
that holder as an individual, trust, corporation or member of a partnership, the
jurisdiction in which that holder is subject to taxation, the place where that
holder is resident and, generally, according to that holder's particular
circumstances.

          This summary is applicable only to holders who are resident solely in
the United States, have never been resident in Canada, deal at arm's length with
us, hold their common shares as capital property and who will not use or hold
the common shares in carrying on business in Canada.

          This summary is based upon the provisions of the Income Tax Act
(Canada) and the regulations thereunder (collectively, the "Tax Act" or "ITA")
and the Canada-United States Tax Convention (the "Tax Convention") as at the
date hereof and the current administrative practices of the Canada Customs and
Revenue Agency.  This summary does not take into account provincial income tax
consequences.

          This summary is not exhaustive of all possible income tax
consequences.  It is not intended as legal or tax advice to any particular
holder of common shares and should not be so construed.  Each holder should
consult his own tax advisor with respect to the income tax consequences
applicable to him in his own particular circumstances.

DIVIDENDS

          In the case of any dividends paid to non-resident shareholders, we
withhold the Canadian tax, which remits only the net amount to the shareholder.
The rate of withholding tax is generally 25% but by virtue of Article X of the
Tax Convention, the rate of tax on dividends paid to persons who are residents
only of the United States for purposes of the Tax Convention is generally
limited to 15% of the gross amount of the dividend (or 5% in the case of certain
corporate shareholders owning at least 10% of our voting shares).

DISPOSITIONS

          A non-resident of Canada is not subject to tax under the ITA in
respect of a capital gain realized upon the disposition of a common share unless
the share is "taxable Canadian property" to the holder thereof and the
non-resident is not entitled to relief under a tax treaty.  In the case of a
non-resident holder to whom our common shares are taxable Canadian property and
who is resident only in the United States for purposes of the Tax Convention, no
tax under the ITA will be payable on a capital gain realized on such shares by
reason of the Tax Convention unless the value of such shares is derived
principally from real property situated in Canada.  We believe that the value of
our common shares is not derived from real property situated in Canada.

          Our common shares will be taxable Canadian property to a non-resident
holder if, at any time during the period of sixty months immediately preceding
the disposition, the non-resident holder, persons with whom the non-resident
holder did not deal at arm's length, or the non-resident holder together with
persons with whom the holder did not deal at arm's length owned 25% or more of
our issued shares of any class or series.  Holders to whom our common shares are
taxable Canadian property and who are not entitled to relief under the Tax
Convention should consult their own tax advisors in advance of any disposition
of common shares.


<PAGE>
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

          The following is a discussion of material United States Federal income
tax consequences generally applicable to a U.S. Holder (as defined below) of our
common shares.  This discussion does not address all potentially relevant
Federal income tax matters, and it does not address consequences peculiar to
persons subject to special provisions of Federal income tax law, such as, for
example, tax-exempt organizations, qualified retirement plans, persons subject
to alternative minimum tax, financial institutions, insurance companies, real
estate investment trusts, regulated investment companies, broker-dealers,
non-resident alien individuals or foreign corporations whose ownership of our
common shares is not effectively connected with the conduct of a trade or
business in the United States and shareholders who acquired their shares through
the exercise of employee share options or otherwise as compensation.  In
addition, this discussion only applies to common shares held by U.S. Holders as
capital assets within the meaning of Section 1221 of the Internal Revenue Code
of 1986, as amended, and does not cover any state, local or foreign tax
consequences.

          The following discussion is based upon the sections of the Internal
Revenue Code, Treasury Regulations, published Internal Revenue Service rulings,
published administrative positions of the Internal Revenue Service and court
decisions that are currently applicable, any or all of which could be materially
and adversely changed, possibly on a retroactive basis, at any time.  The
following discussion is for general information only and is not intended to be,
nor should it be construed to be, legal or tax advice to any holder or
prospective holder of our common shares and no opinion or representation with
respect to the United States Federal income tax consequences to any such holder
or prospective holder is made. Accordingly, holders and prospective holders of
our common shares should consult their own tax advisors about the federal,
state, local, and foreign tax consequences of purchasing, owning and disposing
of our common shares.

U.S. HOLDERS

          As used herein, a "U.S. Holder" includes any person, with the
exception of those subject to special provisions of Federal income tax law, who
holds our common shares who is a citizen or resident of the United States, a
partnership or corporation organized under the laws of the United States, an
estate, the income of which is subject to United States federal income tax
without regard to its source and a trust if a United States court is able to
exercise primary supervision over administration of the trust and one or more
United States persons have authority to control all substantial decisions of the
trust or if the trust was in existence on August 20, 1996 and has elected to
continue to be treated as a United States person, and any other person or entity
whose ownership of our common shares is effectively connected with the conduct
of a trade or business in the United States.

DISTRIBUTIONS ON OUR COMMON SHARES

          U.S. Holders receiving dividend distributions (including constructive
dividends) with respect to our common shares are required to include in gross
income for United States Federal income tax purposes the gross amount of such
distributions to the extent that we have current or accumulated earnings and
profits, without reduction for any Canadian income tax withheld from such
distributions.  Such Canadian tax withheld may be credited, subject to certain
limitations, against the U.S. Holder's United States Federal Income tax
liability or, alternatively, may be deducted in computing the U.S. Holder's
United States Federal taxable income by those who itemize deductions (see more
detailed discussion at "Foreign Tax Credit" below).  To the extent that
distributions exceed our current or accumulated earnings and profits, they will
be treated first as a return of capital up to the U.S. Holder's adjusted basis
in the common shares and thereafter as gain from the sale or exchange of the
common shares.  Preferential tax rates for long-term capital gains are
applicable to an U.S. Holder, which is an individual, estate or trust.  There
are currently no preferential tax rates for long-term capital gains for an U.S.
Holder, which is a corporation.  Dividends paid in Canadian dollars will be
included in income in an U.S. dollar amount based on the exchange rate at the
time of their receipt.  U.S. Holders should consult their own tax advisors
regarding the treatment of any foreign currency gain or loss on any Canadian
dollars received as a dividend which are converted into U.S. dollars on a date
subsequent to receipt.

          Dividends paid on our common shares will not generally be eligible for
the dividends received deduction provided to corporations receiving dividends
from certain United States corporations. A U.S. Holder which is a corporation
may, under certain circumstances, be entitled to a 70% deduction of the United
States source portion of dividends received from us (unless we qualify as a
"foreign personal holding company" or a "passive foreign investment company", as
defined below) if such U.S. Holder owns shares representing at least 10% of the
voting power and value of Diversinet. The availability of this deduction is
subject to several complex limitations, which are beyond the scope of this
discussion.

FOREIGN TAX CREDIT

          A U.S. Holder who pays (or has withheld from distributions) Canadian
income tax with respect to the ownership of our common shares may be entitled,
at the option of the U.S. Holder, to either a deduction or a tax credit for such
foreign tax paid or withheld.  Generally, it will be more advantageous to claim
a credit because a credit reduces United States Federal income taxes on a
dollar-for-dollar basis, while a deduction merely reduces the taxpayer's income
subject to tax.  This election is made on an annual basis and applies to all
foreign income taxes (or taxes in lieu of income tax) paid by (or withheld from)
the U.S. Holder during the year.  There are significant and complex limitations
which apply to the credit, among which is the general limitation that the credit
cannot exceed the proportionate share of the U.S. Holder United States income
tax liability that the U.S. Holder's foreign source income bears to his/her or
its worldwide taxable income.


<PAGE>
          In the determination of the application of this limitation, the
various items of income and deduction must be classified into foreign and
domestic sources. Complex rules govern this classification process. There are
further limitations on the foreign tax credit for certain types of income such
as "passive income", "high withholding tax interest", "financial services
income", "shipping income", and certain other classifications of income.  In
certain circumstances, recently enacted legislation and other guidance issued by
the United States Treasury may deny a United States holder foreign tax credits
(and instead may allow deductions) for foreign taxes imposed on a dividend if
the United States holder (i) has not held the common shares for at least 16 days
in the 30-day period beginning 15 days before the ex-dividend date, during which
it is not protected from risk of loss; (ii) is obligated to make payments
related to the dividends; or (iii) holds the common shares in arrangements in
which the United States holder's expected economic profit, after non-U.S. taxes,
is insubstantial.

          The availability of the foreign tax credit and the application of the
limitations on the credit are fact specific and holders and prospective holders
of our common shares should consult their own tax advisors regarding their
individual circumstances.

DISPOSITION OF OUR COMMON SHARES

          A U.S. Holder will recognize gain or loss upon the sale of our common
shares equal to the difference, if any, between (i) the amount of cash plus the
fair market value of any property received, and (ii) the shareholder's tax basis
in the our common shares.  Any gain recognized on the sale or other disposition
of common shares will generally be U.S. source income.  Any loss recognized on
the sale or other disposition of common shares will generally be U.S. source.
However, such loss will be foreign source to the extent certain dividends were
received by the U.S. Holder within the 24-month period proceeding the date on
which the loss was recognized.  This gain or loss will be capital gain or loss
if the common shares are capital asset in the hands of the U.S. Holder, which
will be a short-term or long-term capital gain or loss depending upon the
holding period of the U.S. Holder.  Gains and losses are netted and combined
according to special rules in arriving at the overall capital gain or loss for a
particular tax year.  Deductions for net capital losses are subject to
significant limitations.  For U.S. Holders who are individuals, a capital loss
is deductible only to the extent of capital gains, plus ordinary income of up to
U.S. $3,000; any unused portion of such net capital loss may be carried over to
be used in later tax years until such net capital loss is thereby exhausted.
For U.S. Holders which are corporations (other than corporations subject to
Subchapter S of the Internal Revenue Code), any unused net capital loss may be
carried back three years from the loss year and carried forward five years from
the loss year to be offset against capital gains until such net capital loss is
thereby exhausted.  If the amount realized on a sale or exchange is not
denominated in U.S. dollars, the amount realized will be equal to the U.S.
dollar value thereof, determined at the spot rate on the date of the sale or
exchange.

OTHER CONSIDERATIONS

          In the following three circumstances, the above sections of the
discussion may not describe the United States Federal income tax consequences
resulting from the holding and disposition of our common shares.  Based on (a)
the number of shareholders of our common shares, and (b) the majority ownership
of our shares by Canadian residents, we do not believe that we are either a
"Foreign Personal Holding Company" or a "Controlled Foreign Corporation."
However, we do believe that we are likely to be treated as a "Passive Foreign
Investment Company" for the taxable years 2000, 2001 and 2002.

FOREIGN PERSONAL HOLDING COMPANY

          If, at any time during a taxable year, more than 50% of the total
combined voting power or the total value of our outstanding shares are owned,
actually or constructively, by five or fewer individuals who are citizens or
residents of the United States and 60% or more of our gross income for such year
was derived from certain passive sources (e.g. from dividends received from
unrelated persons), we would be treated as a "foreign personal holding company."
In that event, U.S. Holders that hold our common shares would be required to
include in gross income for such year their allowable portions of such foreign
personal holding company income to the extent that we do not actually distribute
such income.

CONTROLLED FOREIGN CORPORATION

          If more than 50% of the voting power of all classes of shares or the
total value of our shares is owned, directly or indirectly, by U.S.
shareholders, each of whom own 10% or more of our voting shares ("U.S.
Shareholders"), we could be treated as a "controlled foreign corporation" (a
"CFC") under SubPart F of the Internal Revenue Code.  If we were classified as a
CFC and as a PFIC, CFC treatment would prevail with respect to U.S.
Shareholders.  CFC classification would effect many complex results including
the required inclusion by such U. S. shareholders in income of their pro rata
share: of "SubPart F Income" (as specially defined by the Internal Revenue Code)
of Diversinet; and of our earnings invested in U.S. property.  In addition,
under Section 1248 of the Internal Revenue Code, gain from the sale or exchange
of our common shares by a U.S. person who is or was a U.S. shareholder (as
defined in the Internal Revenue Code) at any time during the five years period
ending with the sale or exchange is generally treated as ordinary dividend
income to the extent of our earnings and profits attributable to the shares sold
or exchanged.  Because of the complexity of SubPart F, and because it is not
clear that we are a controlled foreign corporation, a more detailed review of
these rules is outside of the scope of this discussion.

PASSIVE FOREIGN INVESTMENT COMPANY

          As stated above, we believe that we will not be treated as a passive
foreign investment company ("PFIC"), as defined in Section 1297 of the Internal
Revenue Code, for our fiscal years 2000, 2001, and 2002.


<PAGE>
          United States income tax legislation contains rules governing PFIC's,
that can have significant tax effects on U.S. Holders of foreign corporations.
These rules do not apply to non-U.S. Holders.  Section 1297 of the Internal
Revenue Code defines a PFIC as a corporation that is not formed in the United
States and, for any taxable year, either (i) 75% or more of its gross income is
"passive income", which includes interest, dividends and some types of rents and
royalties or (ii) the average percentage, by fair market value (or, if the
company is a controlled foreign corporation or makes an election, by adjusted
tax basis), of its assets that produce or are held for the production of
"passive income" is 50% or more.  Based on these tests we do not meet the
definition of a PFIC in 2000, 2001 or 2002.

          An U.S. Holder who holds shares in a foreign corporation during any
year in which such corporation qualifies as a PFIC is subject to U.S. Federal
income taxation under alternative tax regimes, depending upon whether such U.S.
Holder makes elections.  The following is a discussion of these alternative tax
regimes as applicable to our U.S. Holders.

          A U.S. Holder of a PFIC who does not make either of the elections
described below (a "Non-electing U.S. Holder") is subject to special taxation
rules under Section 1291 of the Internal Revenue Code with respect to (i) gains
realized on the disposition (or deemed to be realized by reason of a pledge) of
his/her common shares and (ii) excess distributions by us, defined as any
distribution received by a U.S. Holder from a PFIC in a taxable year that is
greater than 125% of the average distributions received by the U.S. Holder in
the three preceding taxable years, or, if shorter, the U.S. Holder's holding
period for the shares.

          A Non-electing U.S. Holder generally would be required to include in
income pro rata all gains realized on the disposition of his/her common shares
and all excess distributions over the entire holding period for the PFIC common
shares.  All gains or excess distributions allocated to prior years of the U.S.
Holder (other than years prior to the first taxable year of the company during
such U.S. Holder's holding period and beginning after January 1, 1987 for which
it was a PFIC) would be taxed at the highest tax rate for each such prior year
applicable to ordinary income.  The Non-electing U.S. Holder also would be
liable for interest on the foregoing tax liability for each such prior year
calculated as if such liability had been due with respect to each such prior
year.  A Non-electing U.S. Holder that is not a corporation must treat this
interest charge as "personal interest" which, as discussed above, is partially
or wholly non-deductible.  The balance of the gain or the excess distribution
will be treated as ordinary income in the year of the disposition or
distribution, and no interest charge will be incurred with respect to such
balance.

          If we are a PFIC for any taxable year during which a Non-electing U.S.
Holder holds common shares, then we will continue to be treated as a PFIC with
respect to such common shares, even if we are no longer a PFIC as defined above.
A Non-electing U.S. Holder may terminate this deemed PFIC status by electing to
recognize a gain (which will be taxed under the rules discussed above for
Non-electing U.S. Holders) as if such common shares had been sold on the last
day of the last taxable year for which it was a PFIC.

          Under Section 1291(f) of the Internal Revenue Code, the Department of
the Treasury has issued proposed regulations that would treat as taxable
transfers of PFIC shares by Non-electing U.S. Holders that are generally not
otherwise taxed, such as gifts, exchanges pursuant to corporate reorganizations,
and transfers at death.  Special, generally adverse, rules will apply with
respect to the common shares while the company is a PFIC. For example under
Section 1298(b)(6) of the Internal Revenue Code, a U.S. Holder who uses PFIC
shares as security for a loan (including a margin loan) will, except as may be
provided in regulations, be treated as having made a taxable disposition of such
shares.

          Alternatively, if we are a PFIC, an U.S. Holder (an "Electing U.S.
Holder") who owns common shares is permitted generally to elect out of the tax
treatment discussed above, if an U.S. Holder makes a mark-to-market election
with respect to common shares.  Under such election, an Electing U.S. Holder
would generally recognize as ordinary income for each taxable year an amount
equal to the excess, if any, of the fair market value of common shares as of the
close of the taxable year over the Electing U.S. Holder's adjusted tax basis in
such shares.  An Electing U.S. Holder would generally be allowed an ordinary
deduction (to the extent of any net mark-to-market gains recognized for prior
taxable years) for the excess, if any, of the adjusted tax basis of the common
shares over their fair market value as of the close of the taxable year.  An
Electing U.S. Holder's adjusted tax basis of the common shares would generally
be adjusted to reflect the amounts included or deducted under the mark-to-market
election.  Additionally, any gain on the actual sale or other disposition of the
common shares generally will be treated as ordinary income.  Ordinary loss
treatment also would generally apply to any loss realized on the actual sale or
other disposition of the common shares to the extent that the amount of such
loss did not exceed the net mark-to-market gains previously included with
respect to such shares.  An election to mark to market would generally apply to
the taxable year made and all subsequent taxable years.  A mark-to-market
election is subject to complex and specific rules and requirements, and U.S.
Holders are strongly urged to consult their tax advisors concerning such
election if the company is classified as a PFIC.

          Finally, an U.S. Holder who elects in a timely manner to treat us as a
"qualified electing fund" (a "QEF") as defined in the Internal Revenue Code
would be subject to another set of special rules different from those described
above.  Although a QEF election may be beneficial to some U.S. Holders depending
upon their particular tax situations, it requires us to make information
available to such holders, and we do not intend to make such information
available even if it is classified as a PFIC.  Accordingly, the QEF election
will not be available to U.S. Holders.

          The foregoing discussion is based on existing provisions of the
Internal Revenue Code, existing and proposed regulations thereunder, and current
administrative ruling and court decisions, all of which are subject to change.
Any such change could affect the validity of this discussion. In addition, the


<PAGE>
implementation of aspects of the PFIC rules requires the issuance of regulations
which in many instances have not been promulgated and which may have retroactive
effect. There can be no certainty that any of these proposed regulations will be
enacted or promulgated and if so, the form they will take or the effect that
they may have on this discussion. Accordingly, and due to the complexity of the
PFIC rules, U.S. Holders who are shareholders of Diversinet are strongly urged
to consult their own tax advisors concerning the impact of these rules on their
investment in us.

10-F.     DIVIDENDS AND PAYING AGENTS

          Not Applicable.

10-G.     STATEMENTS BY EXPERTS

          Not Applicable.

10-H.     DOCUMENTS ON DISPLAY

          Documents are available either on SEDAR or EDGAR.

10-I.     SUBSIDIARY INFORMATION

          Our consolidated financial statements include the accounts of Atria
Limited, a 50% owned joint venture operating in Hong Kong and its wholly-owned
inactive subsidiaries, Diversinet Corporation of America, a Delaware
corporation, Diversinet Inc., an Ontario corporation, Diversinet (Israel) Ltd.,
an Israeli corporation and The Instant Publisher Ltd., a Barbados corporation.
For the fiscal year ended October 31, 2003 our consolidated financial statements
will also include the accounts of DSS, the wholly owned subsidiary we acquired
in January 2003.

ITEM 11.  Quantitative and Qualitative Disclosure about Market Risk

          We believe that inflation has not had a material impact on our results
of operations for each of our fiscal years in the three-year period ended
October 31, 2002.  However, there can be no assurance that future inflation
would not have an adverse impact on our operating results and financial
condition.  We have limited market risk exposure since we do not have any
outstanding variable rate debt or derivative financial and commodity instruments
as of October 31, 2002.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not Applicable.

                                    PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

          Not Applicable.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS TO SECURITY HOLDERS AND
          USE OF PROCEEDS

          Not Applicable.

ITEM 15.  [RESERVED]

ITEM 16.  [RESERVED]

                                    PART III

ITEM 17.  FINANCIAL STATEMENTS

          Our financial statements have been prepared in accordance with
Canadian GAAP.  These principles conform in all material respects with U.S. GAAP
except as described in Note 15 to our 2002 consolidated financial statements.
The differences between line items under Canadian GAAP and those as determined
under U.S. GAAP are not significant except that, under U.S. GAAP, our total loss
would be greater by  $55,000 for the year ended October 31, 2002, greater by
$56,000 for the year ended October 31, 2001, greater by $1,449,000 for the year
ended October 31, 2000 and less by $179,000 and $4,131,000 for the years ended
October 31, 1999 and October 31, 1998, respectively.  Under U.S. GAAP share
capital would be greater and deficit would be less by $41,249,000 for each of
the years due to the elimination of reduction in stated capital offset against
accumulated shareholders' deficit in March of 1999.

           Reference is made to our consolidated financial statements and
related footnotes attached as an exhibit to this Report.

ITEM 18.  FINANCIAL STATEMENTS

          We have elected to provide financial statements pursuant to Item 17.

ITEM 19.  EXHIBITS

Financial Statements:
---------------------
     -    KPMG Auditors' Report dated November 22, 2002.

     -    Consolidated Balance Sheets as at October 31, 2001 and 2002.


<PAGE>
     -    Consolidated Statements of Loss and Deficit for the years ended
          October 31, 2000, 2001 and 2002.

     -    Consolidated Statements of Cash Flows for the years ended October 31,
          2000, 2001 and 2002.

     -    Notes to Consolidated Financial Statements.

Exhibits:
---------

1.1        Underwriting Agreement, dated as of June 12, 2000, between Diversinet
           and Tucker Anthony Incorporated.(1)

1.2        Private Agency Agreement between Allen & Company and Diversinet Corp.
           dated March 27, 2002.
           Form of Stock Purchase Agreement dated March 27, 2002.

5.1        Opinion of Lang Michener.(1)

10.1       Form of Diversinet General Product License & Support Agreement.(1)

23.2       Consent of Lang Michener (filed as part of Exhibit 5).

23.3       Consent of KPMG LLP.


(1)  Previously filed with prior year's Form 20-F


<PAGE>
                                 SIGNATURE PAGE

          Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, as amended, the Registrant certifies that it meets all of the
requirements for filing on Form 20-F and has duly caused this registration
statement to be signed on its behalf by the undersigned, there unto duly
authorized.

                                     DIVERSINET CORP.



                                     By:   /s/ NAGY MOUSTAFA
                                        ----------------------------------------
                                           Nagy Moustafa
                                           President and Chief Executive Officer

Dated:  April 28, 2003


<PAGE>
Dated: April 28, 2003


                                 CERTIFICATIONS



I, Nagy Moustafa certify that:


1.   I have reviewed this annual report on Form 20-F of Diversinet Corp.;

2.   Based on my knowledge, this amendment to the annual report does not contain
     any untrue statement of material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by this annual report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in this amendment to the annual report, fairly present
     in all material respects the financial condition, results of operations and
     cash flows of Diversinet Corp. as of, and for, the periods presented.

Dated: April 28, 2003 ---------------------




/s/ Nagy Moustafa
-------------------------------------------
Name:  Nagy Moustafa
Title: Chief Executive Officer



I David Hackett certify that:

1.   I have reviewed this annual report on Form 20-F of Diversinet Corp.;

2.   Based on my knowledge, this amendment to the annual report does not contain
     any untrue statement of material fact or omit to state a material fact
     necessary to make the statements made, in light of the circumstances under
     which such statements were made, not misleading with respect to the period
     covered by this annual report; and

3.   Based on my knowledge, the financial statements, and other financial
     information included in this amendment to the annual report, fairly present
     in all material respects the financial condition, results of operations and
     cash flows of Diversinet Corp. as of, and for, the periods presented.

Dated: April 28, 2003 ---------------------



/s/ David Hackett
-------------------------------------------
Name:  David Hackett
Title: Chief Financial Officer


<PAGE>
MANAGEMENT'S REPORT

     THE  ACCOMPANYING  CONSOLIDATED FINANCIAL STATEMENTS AND ALL INFORMATION IN
THE  ANNUAL REPORT HAVE BEEN PREPARED BY MANAGEMENT AND APPROVED BY THE BOARD OF
DIRECTORS  OF  THE COMPANY.  THE CONSOLIDATED FINANCIAL STATEMENTS WERE PREPARED
IN  ACCORDANCE  WITH  GENERALLY  ACCEPTED  ACCOUNTING  PRINCIPLES  AND,  WHERE
APPROPRIATE,  REFLECT MANAGEMENT'S BEST ESTIMATES AND JUDGEMENTS.  MANAGEMENT IS
RESPONSIBLE  FOR  THE  ACCURACY,  INTEGRITY  AND OBJECTIVITY OF THE CONSOLIDATED
FINANCIAL  STATEMENTS  WITHIN  REASONABLE  LIMITS  OF  MATERIALITY  AND  FOR THE
CONSISTENCY  OF  FINANCIAL  DATA  INCLUDED IN THE TEXT OF THE ANNUAL REPORT WITH
THAT  CONTAINED  IN THE CONSOLIDATED FINANCIAL STATEMENTS.  TO ASSIST MANAGEMENT
IN  THE  DISCHARGE  OF THESE RESPONSIBILITIES, THE COMPANY MAINTAINS A SYSTEM OF
INTERNAL  CONTROLS  DESIGNED TO PROVIDE REASONABLE ASSURANCE THAT ITS ASSETS ARE
SAFEGUARDED,  THAT  ONLY VALID AND AUTHORIZED TRANSACTIONS ARE EXECUTED AND THAT
ACCURATE,  TIMELY  AND  COMPREHENSIVE  FINANCIAL  INFORMATION  IS  PREPARED  AND
DISCLOSED.  CONSISTENT  WITH  THE  CONCEPT  OF REASONABLE ASSURANCE, THE COMPANY
RECOGNIZES  THAT  THE  RELATIVE  COST  OF  MAINTAINING THESE CONTROLS SHOULD NOT
EXCEED  THEIR  EXPECTED  BENEFITS.

     THE  COMPANY'S  AUDIT  COMMITTEE  IS  APPOINTED  BY  THE BOARD OF DIRECTORS
ANNUALLY  AND  IS  COMPRISED  OF  NON-MANAGEMENT DIRECTORS.  THE AUDIT COMMITTEE
MEETS WITH MANAGEMENT AS WELL AS WITH THE INDEPENDENT AUDITORS TO SATISFY ITSELF
THAT MANAGEMENT IS PROPERLY DISCHARGING ITS FINANCIAL REPORTING RESPONSIBILITIES
AND  TO  REVIEW  THE  CONSOLIDATED  FINANCIAL  STATEMENTS  AND  THE  INDEPENDENT
AUDITORS'  REPORT.  THE  AUDIT  COMMITTEE  REPORTS  ITS FINDINGS TO THE BOARD OF
DIRECTORS  FOR  CONSIDERATION IN APPROVING THE CONSOLIDATED FINANCIAL STATEMENTS
FOR  PRESENTATION  TO  THE  SHAREHOLDERS.  THE  INDEPENDENT AUDITORS HAVE DIRECT
ACCESS  TO  THE  AUDIT  COMMITTEE.

     THE  CONSOLIDATED  FINANCIAL  STATEMENTS  HAVE  BEEN  AUDITED  BY KPMG LLP,
CHARTERED  ACCOUNTANTS,  ON  BEHALF  OF  THE  SHAREHOLDERS,  IN  ACCORDANCE WITH
GENERALLY ACCEPTED AUDITING STANDARDS.  THEIR REPORT OUTLINES THE SCOPE OF THEIR
AUDIT  AND  EXPRESSES  THEIR OPINION ON THE CONSOLIDATED FINANCIAL STATEMENTS OF
THE  COMPANY.


/s/  Nagy Moustafa                      /s/  David Hackett

Nagy Moustafa                           David Hackett
President & Chief Executive Officer     Chief Financial Officer

KPMG

         KPMG LLP
         CHARTERED ACCOUNTANTS                      Telephone     (416) 228-7000
         Yonge Corporate Centre                     Telefax     (416) 228-7123
         4100 Yonge Street Suite 200                www.kpmg.ca
         North York ON M2P 2H3
         Canada

AUDITORS'  REPORT  TO  THE  SHAREHOLDERS
We  have  audited  the  consolidated  balance  sheets  of Diversinet Corp. as at
October  31,  2002  and  2001  and  the  consolidated statements of earnings and
deficit  and  cash  flows  for  each of the years in the three-year period ended
October  31,  2002.  These  financial  statements  are the responsibility of the
Company's  management.  Our  responsibility  is  to  express an opinion on these
financial  statements  based  on  our  audits.

We  conducted our audits in accordance with Canadian generally accepted auditing
standards  and  United  States  generally  accepted  auditing  standards.  Those
standards  require  that  we  plan  and  perform  an  audit to obtain reasonable
assurance  whether  the  financial statements are free of material misstatement.
An  audit  includes  examining, on a test basis, evidence supporting the amounts
and  disclosures  in the financial statements.  An audit also includes assessing
the  accounting principles used and significant estimates made by management, as
well  as  evaluating  the  overall  financial  statement  presentation.

In  our  opinion, these consolidated financial statements present fairly, in all
material  respects, the financial position of the Company as at October 31, 2002
and  2001  and  the results of its operations and its cash flows for each of the
years  in  the  three-year  period  ended  October  31,  2002 in accordance with
Canadian  generally  accepted  accounting  principles.


/s/ KPMG LLP

Chartered  Accountants
Toronto,  Canada
November 22, 2002

COMMENTS  BY  AUDITORS  FOR  U.S.  READERS ON CANADA - U.S. REPORTING DIFFERENCE
In  the  United States, reporting standards for auditors require the addition of
an  explanatory  paragraph  (following the opinion paragraph) when the financial
statements  are affected by conditions and events that cast substantial doubt on
the Company's ability to continue as a going concern, such as those described in
note  1  to  the  financial  statements.  Our  report  to the shareholders dated
November  22, 2002, is expressed in accordance with Canadian reporting standards
which  do  not permit a reference to such events and conditions in the auditors'
report  when  these  are  adequately  disclosed  in  the  financial  statements.


/s/ KPMG LLP

Chartered  Accountants, Toronto,  Canada


<PAGE>
<TABLE>
<CAPTION>
DIVERSINET CORP.
Consolidated Balance Sheets
(In Canadian dollars)

October 31, 2002 and 2001

===========================================================================================================
                                                                                  2002           2001
-----------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>
ASSETS

Current assets:
   Cash and cash equivalents                                                  $    953,272   $  3,061,844
   Short-term investments                                                        2,887,352      3,087,680
   Accounts receivable (including $172,503, $nil from joint venture, note 7)       416,070        274,521
   Other receivables                                                                24,952         99,469
   Prepaid expenses                                                                120,608        596,105
   -------------------------------------------------------------------------------------------------------
   Total current assets                                                          4,402,254      7,119,619

Capital assets, net (note 3)                                                     1,877,012      2,496,738

----------------------------------------------------------------------------------------------------------
Total assets                                                                  $  6,279,266   $  9,616,357
==========================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
   Accounts payable                                                           $    551,306   $  1,191,117
   Accrued liabilities (note 4)                                                  1,093,352      2,329,269
   Deferred revenue                                                                 14,452         43,843
   -------------------------------------------------------------------------------------------------------
   Total current liabilities                                                     1,659,110      3,564,229

Shareholders' equity:
   Share capital (note 5):
      Authorized:
       Unlimited common shares
     Issued and outstanding:
       32,222,084 common shares (2001 - 26,413,876)                             58,957,962     53,992,992
   Contributed surplus                                                              97,500         97,500
   Deficit                                                                     (54,435,306)   (48,038,364)
   -------------------------------------------------------------------------------------------------------
Total shareholders' equity                                                       4,620,156      6,052,128

Future operations (note 1)
Commitments and contingencies (note 11)

----------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' equity                                    $  6,279,266   $  9,616,357
==========================================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.

On behalf of the Board:

/s/ Mark Steinman                        /s/ Nagy Moustafa
           Mark Steinman, Director                      Nagy Moustafa, Director


                                        1
<PAGE>
<TABLE>
<CAPTION>
DIVERSINET CORP.
Consolidated Statements of Earnings and Deficit
(In Canadian dollars)

Years ended October 31, 2002, 2001 and 2000

============================================================================================
                                                     2002           2001           2000
--------------------------------------------------------------------------------------------
<S>                                              <C>            <C>            <C>
Revenue (including $133,989, $199,925, $nil
         from joint venture, note 7)             $  1,117,785   $  1,220,981   $  2,636,180

Expenses:
   Research and development                         2,327,604      6,906,566      5,888,028
   Sales and marketing                              1,737,027      7,256,432      5,435,378
   General and administrative                       2,989,102      4,029,236      4,185,431
   Depreciation and amortization                      635,835      1,888,147      2,603,589
   Severance costs                                          -        730,000              -
   -----------------------------------------------------------------------------------------
                                                    7,689,568     20,810,381     18,112,426
--------------------------------------------------------------------------------------------
Loss before the following                          (6,571,783)   (19,589,400)   (15,476,246)

Interest income and other income                     (174,841)      (689,541)      (705,815)

Interest expense                                            -              -          6,777
--------------------------------------------------------------------------------------------

Loss from continuing operations                    (6,396,942)   (18,899,859)   (14,777,208)

Net loss from discontinued operations (note 14)             -              -       (250,000)
--------------------------------------------------------------------------------------------

Loss for the year                                  (6,396,942)   (18,899,859)   (15,027,208)

Deficit, beginning of year                        (48,038,364)   (29,138,505)   (14,111,297)

--------------------------------------------------------------------------------------------
Deficit, end of year                             $(54,435,306)  $(48,038,364)  $(29,138,505)
============================================================================================
Basic and diluted loss per share -
   continuing operations (note 6)                $      (0.22)  $      (0.72)  $      (0.63)
Basic and diluted loss per share (note 6)               (0.22)         (0.72)         (0.64)

============================================================================================

Weighted average number of
   common shares                                   29,716,924     26,376,480     23,534,438

============================================================================================
</TABLE>

See  accompanying  notes  to  consolidated  financial  statements.


                                        2
<PAGE>
<TABLE>
<CAPTION>
DIVERSINET CORP.
Consolidated Statements of Cash Flows
(In Canadian dollars)

Years ended October 31, 2002, 2001 and 2000


=============================================================================================
                                                       2002          2001           2000
---------------------------------------------------------------------------------------------
<S>                                                <C>           <C>            <C>
Cash provided by (used in):

Operating activities:
  Loss from continuing operations                  $(6,396,942)  $(18,899,859)  $(14,777,208)
  Items not involving cash:
    Depreciation and amortization                      635,835      1,888,147      2,603,589
    Foreign exchange gain on
     debenture                                               -              -        (78,864)
Interest on debenture                                        -              -          4,833
  Change in non-cash operating working capital:
    Accounts receivable                               (141,549)     1,383,227     (1,387,844)
    Other receivables                                   74,517         55,175        (82,699)
    Prepaid expenses                                   475,497        (28,635)      (375,700)
    Accounts payable                                  (639,811)       770,977        202,146
    Accrued liabilities                             (1,235,917)    (1,092,111)       692,233
    Deferred revenue                                   (29,391)       (39,493)        78,100
  -------------------------------------------------------------------------------------------
  Cash used in continuing operations                (7,257,761)   (15,962,572)   (13,121,414)

Financing activities:
  Issue of common shares, common share
    purchase options and warrants for cash           4,964,970        105,728     30,674,246
  -------------------------------------------------------------------------------------------
  Cash provided by financing activities              4,964,970        105,728     30,674,246

Investing activities:
  Short-term investments                               200,328     (3,087,680)             -
  Additions to capital assets                          (16,109)    (1,186,218)    (1,763,658)
  -------------------------------------------------------------------------------------------
  Cash provided by (used in) investing activities      184,219     (4,273,898)    (1,763,658)
  -------------------------------------------------------------------------------------------

Increase (decrease) in cash and cash
  equivalents                                       (2,108,572)   (20,130,742)    15,789,174

Cash and cash equivalents, beginning of year         3,061,844     23,192,586      7,403,412

  -------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year             $   953,272   $  3,061,844   $ 23,192,586
=============================================================================================
Supplementary non-cash financing and
  investing activities:
    Conversion of convertible debenture            $         -   $          -   $  1,707,468
=============================================================================================
</TABLE>

See accompanying notes to consolidated financial statements.


                                        3
<PAGE>
DIVERSINET CORP.
Notes to Consolidated Financial Statements
(In Canadian dollars)

Years ended October 31, 2002, 2001 and 2000

Diversinet  Corp.  (the "Company"), an Ontario corporation, develops and markets
security  software  products  utilizing  public-key  infrastructure  technology
primarily  for  use  within  wireless  mobile  e-commerce  applications, such as
banking,  stock  trading,  gaming  and  healthcare.

1.   FUTURE  OPERATIONS:

     These  consolidated  financial  statements  have  been  prepared on a going
     concern  basis, which assumes the Company will continue in operation in the
     foreseeable future and be able to realize assets and satisfy liabilities in
     its  normal  course  of  business. Certain conditions and events exist that
     cast  doubt  on  the  Company's  ability  to  continue  as a going concern.

     The Company has incurred significant losses and used significant amounts of
     cash  in  operating  activities  in  recent  years.

     Continued  operations  depend upon the Company's ability to generate future
     profitable  operations  and/or  obtain  additional financing to fund future
     operations  and, ultimately, to generate positive cash flows from operating
     activities.  There  can be no assurance that the Company will be successful
     in  obtaining  additional  financing.

     Should  the  Company  be  unable  to  generate  positive  cash  flows  from
     operations  or  secure  additional financing in the foreseeable future, the
     application  of  the  going  concern  principle  for  financial  statement
     reporting purposes may no longer be appropriate. These financial statements
     do  not  include any adjustments related to the valuation or classification
     of  recorded  asset amounts or the amounts or classification of liabilities
     that  may  be necessary should the Company be unable to continue as a going
     concern.

2.   SIGNIFICANT  ACCOUNTING  POLICIES:

     These  consolidated  financial  statements have been prepared in accordance
     with  accounting  principles generally accepted in Canada, which, except as
     described  in  note  15,  conform  in all material respects with accounting
     principles  generally accepted in the United States. Significant accounting
     policies  adopted  by  the  Company  are  as  follows:

     (a)  Basis  of  consolidation:

          The  consolidated  financial  statements  include  the accounts of the
          Company and its subsidiaries. The Company accounts for its interest in
          a  joint  venture  by  the  proportionate  consolidation  method.  All
          significant  intercompany  transactions  and  balances  have  been
          eliminated.

     (b)  Revenue  recognition:

          Revenue  from software license agreements is recognized upon execution
          of  a  license  agreement and the shipment of the software, as long as
          all  vendor  obligations have been satisfied, the license fee is fixed
          and  determinable  and  collection  of  the  license fees is probable.
          Revenue from the sale of additional software products is recognized as
          software  is  delivered.

          Revenue  earned  on  software arrangements involving multiple elements
          (i.e.,  software  products,  upgrades/enhancements,  post  contract
          customer  support,  installation, training, etc.) is allocated to each
          element  based  on vendor specific objective evidence of relative fair
          value of the elements. When arrangements contain multiple elements and
          vendor  specific  objective  evidence  only exists for all undelivered
          elements,  the  Company  recognizes revenue for the delivered elements
          using  the  residual  method,  whereby  the  total  arrangement fee is
          assigned  to  the undelivered elements based on their fair value, with
          the  residual  assigned  to the delivered elements and recognized. For
          arrangements  containing  multiple  elements  where  vendor  specific
          objective  evidence  does  not  exist  for  all  undelivered elements,
          revenue  for  the delivered and undelivered elements is deferred until
          either  vendor  specific  objective  evidence exists for the remaining
          undelivered  elements or all elements have been delivered. The revenue
          allocated to post contract customer support is recognized ratably over
          the  term  of  the  support  and revenue allocated to service elements
          (such  as training and installation) is recognized as the services are
          performed.


                                        1
<PAGE>
          The  Company's  sales  arrangements generally include standard payment
          terms  ranging up to 90 days dependant upon geographic location of the
          customer.  The  Company provides a limited product warranty, the costs
          of  which  are  insignificant.

          Amounts  received  in  advance  of revenue recognition are recorded as
          deferred  revenue.

     (c)  Cash  and  cash  equivalents:

          Cash  and  cash  equivalents  include  cash  on account and short-term
          investments in money market instruments with original maturities of 90
          days  or  less  when  acquired.

     (d)  Short-term  investments:

          Short-term  investments  consist  of  bonds which are recorded at cost
          plus  accrued  interest.

     (e)  Investment  tax  credits:

          Investment  tax  credits  are accrued when qualifying expenditures are
          made  and  there  is  reasonable  assurance  that  the credits will be
          realized.  Investment  tax  credits  earned  with  respect  to current
          expenditures  for  qualified  research  and development activities are
          included  in  the consolidated statements of earnings and deficit as a
          reduction of related expenses in the year incurred. Assistance related
          to the acquisition of capital assets used for research and development
          is  credited  against  the  related  capital  assets.  The Company has
          recorded  no  investment  tax  credits.

     (f)  Research  and  development  costs:

          Research  costs  are  expensed as incurred. Software development costs
          are  deferred  once  costs  meet the criteria under Canadian generally
          accepted  accounting  principles  for  deferral and amortization. Such
          deferred  costs  are  amortized,  commencing  when  the  product  is
          commercially  released,  on  a straight-line basis over two years. The
          recoverability  of  any  unamortized  deferred  development  costs  is
          reviewed  on  an  ongoing  basis.

     (g)  Purchased  technology:

          The  Company capitalizes purchased technology and amortizes such costs
          over  two years. The carrying value is assessed on a periodic basis to
          determine  if  a  write-down  is  required.

     (h)  Foreign  currency  translation:

          Monetary  assets and liabilities denominated in foreign currencies are
          translated  into  Canadian dollars at the exchange rates prevailing at
          the  consolidated  balance  sheet  dates.  Non-monetary  assets  and
          liabilities  are  translated  at  historical  rates.  Transactions  in
          foreign  currencies  are  translated  into  Canadian  dollars  at  the
          approximate rates prevailing at the dates of the transactions. Foreign
          exchange  gains  and  losses  are  included  in  loss  for  the  year.

     (i)  Capital  assets:

          Capital  assets  are  stated at cost less accumulated depreciation and
          amortization.  Depreciation  and  amortization  is  provided  over the
          estimated useful lives of the assets at the following annual rates and
          bases:

          ======================================================================
          Asset                             Basis                   Rate
          ----------------------------------------------------------------------
          Computer hardware           Declining balance                      30%
          Computer software           Declining balance                      30%
          Furniture and fixtures      Declining balance                      20%
          Leasehold improvements      Straight-line           Over term of lease
          ======================================================================

          The  Company  regularly  reviews  the  carrying  values of its capital
          assets  by  comparing the carrying amount of the asset to the expected
          future  undiscounted  cash  flows to be generated by the asset. If the
          carrying  value  exceeds  the  amount recoverable, a write-down of the
          asset  to  its  estimated  net  recoverable  amount  is charged to the
          statements  of  earnings  and  deficit.

     (j)  Income  taxes:

          The  Company  accounts  for income taxes using the asset and liability
          method.  Under  this method, future income taxes are recognized at the
          enacted or substantively enacted tax rate expected to be applicable at
          the date of reversal for all significant temporary differences between
          the tax and accounting bases of assets and liabilities and for certain
          tax  carryforward  items. Future income tax assets are recognized only
          to  the  extent  that, in the opinion of management, it is more likely
          than  not  that  the future income tax assets will be realized. Future
          income  tax  assets  and  liabilities  are adjusted for the effects of
          changes in tax laws and rates on the date of the substantive enactment
          of  the  change.


                                        2
<PAGE>
     (k)  Earnings  per  share:

          Basic earnings per share is computed using the weighted average number
          of  common  shares  that  are  outstanding  during  the  year. Diluted
          earnings  per  share  is computed using the weighted average number of
          common  and  potential  common  shares  outstanding  during  the year.
          Potential  common  shares  consist of the incremental number of common
          shares  issuable upon the exercise of stock options and are calculated
          using  the  treasury  stock  method.

     (l)  Stock-based  compensation:

          The  Company has a stock-based compensation plan, as described in note
          12.  No compensation expense is recognized when stock or stock options
          are  issued  to  employees  and consultants. Any consideration paid by
          employees  on  exercise  of  stock  options  or  purchase  of stock is
          credited  to  share capital. If stock or stock options are repurchased
          from employees, the excess of the consideration paid over the carrying
          amount  of  the  stock  option  cancelled  is  charged  to  deficit.

     (m)  Use  of  estimates:

          The  preparation  of  these  consolidated  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 and disclosure of contingent assets
          and liabilities at the date of these consolidated financial statements
          and  the  reported  amounts  of  revenue and expenses during the year.
          Actual  results  could  differ  from  those  estimates.

     (n)  Derivatives:

          From  time  to time the Company enters into forward exchange contracts
          to  limit  the  Company's  exposure  to exchange rate fluctuations. As
          these  contracts  are  accounted  for  as hedges, unrealized gains and
          losses  are  recognized  in  income  on  their  settlement  dates.

3.   CAPITAL ASSETS:
     ===========================================================================
                                                       Accumulated     Net book
     2002                               Cost          depreciation        value
                                                  and amortization
     ---------------------------------------------------------------------------
     Computer hardware              $  1,541,580  $         799,889  $  741,691
     Computer software                   695,587            354,755     340,832
     Furniture and fixtures              532,450            215,797     316,653
     Leasehold improvements              731,268            253,432     477,836
     ---------------------------------------------------------------------------
                                    $  3,500,885  $       1,623,873  $1,877,012
     ===========================================================================

     In 2002, depreciation and amortization expense amounted to $635,835.

     ===========================================================================
                                                    Accumulated        Net book
     2001                               Cost        depreciation          value
                                                  and amortization
     ---------------------------------------------------------------------------
     Computer hardware              $  1,550,159  $         516,417  $1,033,742
     Computer software                   689,927            215,268     474,659
     Furniture and fixtures              520,257            138,196     382,061
     Leasehold improvements              732,549            126,273     606,276
     ---------------------------------------------------------------------------
                                    $  3,492,892  $         996,154  $2,496,738
     ===========================================================================

In  2001,  depreciation  expense  and  amortization  amounted  to  $545,446.

4.   ACCRUED  LIABILITIES:
     ===========================================================================
                                                            2002        2001
     ---------------------------------------------------------------------------
     Remuneration                                        $  369,670  $1,328,200
     Professional fees                                      471,350     460,084
     Miscellaneous                                          252,332     540,985
     ---------------------------------------------------------------------------
                                                         $1,093,352  $2,329,269
     ===========================================================================


                                        3
<PAGE>
5.   SHARE  CAPITAL,  WARRANTS  AND  COMMON  SHARE  PURCHASE  OPTIONS:

     There  are  an  unlimited  number  of  authorized common shares with no par
     value.

     The  following  details  the  changes  in  issued  and  outstanding shares,
     compensation  options  and  warrants  for the three years ended October 31,
     2002:

<TABLE>
<CAPTION>
==============================================================================================================
                                               Compensation options and warrants           Common shares
--------------------------------------------------------------------------------------------------------------
                                                   Number              Amount            Number      Amount
--------------------------------------------------------------------------------------------------------------
<S>                                            <C>              <C>                    <C>         <C>
Balance, October 31, 1999                           2,185,625   $            589,000   20,280,528  $20,916,550
Conversion of warrants (b)                           (300,000)              (468,000)     205,017      468,000
Conversion of warrants (c)                           (400,000)                     -      273,356            -
Conversion of debenture (b)                                 -                      -    1,050,102    1,707,468
Common share purchase warrants
      exercised (c)                                  (298,875)                     -      298,875    1,156,646
Compensation options exercised (c)                   (136,750)                     -      136,750      494,194
Stock options exercised and shares issued (e)               -                      -      656,131    2,022,253
Warrants (a)                                         (900,000)              (121,000)     900,000    3,428,500
Private placement (d)                                       -                      -    2,450,001   23,543,653
Settlement of litigation (note 10)                    263,500                      -      100,000      150,000
--------------------------------------------------------------------------------------------------------------
Balance, October 31, 2000 (f)                         413,500                      -   26,350,760   53,887,264
Stock options exercised and shares issued (e)               -                      -       63,116      105,728
--------------------------------------------------------------------------------------------------------------
Balance, October 31, 2001                             413,500                      -   26,413,876   53,992,992
Private placement (g)                               4,715,541                      -    5,808,208    4,964,970
--------------------------------------------------------------------------------------------------------------
Balance, October 31, 2002                           5,129,041   $                  -   32,222,084  $58,957,962
==============================================================================================================
</TABLE>

     (a)  On  December  5, 1997, the Company received $1,295,000 (U.S. $900,000)
          from  the  issue  and  sale  of 900,000 common shares and a warrant to
          purchase  900,000  common  shares  at  a price of U.S. $2.50 per share
          until  December  5,  1999.  These  warrants  were exercised during the
          fiscal  year  ended  October  31,  2000 and common shares were issued.
          Proceeds  to the Company as a result of this exercise were $3,428,500.

     (b)  During  the  year  ended  October  31,  1998,  the Company completed a
          private  placement  of  an  unsecured  convertible  debenture  (the
          "Convertible  Debenture")  in  the principal amount of U.S. $2,000,000
          and  a  non-redeemable  warrant  (the  "Warrant")  to purchase 300,000
          common  shares  for total proceeds of U.S. $2,000,000. The Convertible
          Debenture  was convertible until October 14, 2001 and bore interest at
          3% per annum which was payable in cash or common shares, at the option
          of  the  Company.  The  Convertible  Debenture  was convertible at the
          holder's  option into common shares of the Company at the lower of (a)
          U.S.  $1.18  per share or (b) approximately 80% of the market price of
          the  common shares at the time of conversion. The Warrant entitled the
          holder  to  purchase  an  aggregate of 300,000 of the Company's common
          shares  at an exercise price of U.S. $1.18 per share until October 15,
          2003.

          During  fiscal  2000,  the Convertible Debenture plus accrued interest
          were fully converted into common shares leaving a principal balance of
          nil.  During  fiscal  2000, the Warrant was converted to common shares
          for  no  additional consideration based on the prevailing market price
          at  the  time  of  conversion  less  U.S.  $1.18.

     (c)  On  April 23, 1999, the Company completed a private placement offering
          of  2,134,000  special  warrants.  Each special warrant was offered at
          $3.45  and  was exercisable at any time until October 23, 2000, for no
          additional  consideration, to acquire one unit. Each unit consisted of
          one  common  share and one quarter of a common share purchase warrant.
          Each  whole  common  share  purchase  warrant  entitled  the holder to
          purchase  one  share  for  $3.87  until  October  23,  2000. The gross
          proceeds  of  the  offering  were  $7,362,300.

          The  underwriter received commissions of 8% of gross proceeds for cash
          commission  of  $588,984  plus  out-of-pocket  expenses (approximately
          $285,170).  The  underwriter  also  received  compensation  options
          entitling them to purchase up to 213,400 units at a price of $3.45 per
          unit  at  any  time  prior  to  April  23,  2001, provided that if any
          compensation  options  are  exercised  after  October  23,  2000, such
          options  entitled the underwriter to receive only one common share per
          unit  exercised.


                                        4
<PAGE>
          On  July  23,  1999, the Company received a receipt for its prospectus
          qualifying  the common shares to be issued in exchange for the special
          warrants.  At  that  time, all special warrants were converted and the
          Company  received  the  funds that were held in escrow. As part of the
          conversion,  the  Company  issued  533,500  share  purchase  warrants
          exercisable  upon  payments of $3.87 per share until October 23, 2000.
          During  fiscal  1999,  234,625 share purchase warrants were exercised,
          resulting  in proceeds of $907,999 to the Company. During fiscal 2000,
          the remaining 298,875 warrants were exercised resulting in proceeds of
          $1,156,646  to  the  Company.

          The  consent  of  the debentureholder was required to proceed with the
          private  placement  offering.  In  consideration for this consent, the
          Company  issued  to  the  debentureholder  warrants  to purchase up to
          400,000  common  shares at an exercise price of U.S. $4.50 expiring on
          April  23,  2001. During fiscal 2000, these warrants were converted to
          common  shares for no additional consideration based on the prevailing
          market  price  of  the common shares at the time of exercise less U.S.
          $4.50.

     (d)  During  July  and  August  of  2000,  the  Company completed a private
          placement  of 2,450,001 common shares for net proceeds of $23,543,653.

     (e)  During  2000,  2001  and  2002, the Company granted options to certain
          employees, officers and directors under a share option plan (note 12),
          enabling  them  to  purchase  common  shares  of  the  Company.

     (f)  Warrants  outstanding  as  of  October  31,  2001  and 2000 consist of
          150,000  warrants  issued in October 1999 as an exercise price of U.S.
          $13.13 per share, expiring October 2004 and 263,500 warrants issued in
          May  2000  at  an exercise price of U.S. $8.59 per share, expiring May
          2005.

     (g)  On  April  4,  2002,  the  Company  completed  a  private placement of
          5,186,708  units  at a price of U.S. $0.60 per unit for gross proceeds
          before  expenses  of  $4,979,235  (U.S.  $3,112,022).  Each  unit  was
          comprised  of  one common share and three-quarters of one common share
          purchase  warrant. Each warrant entitles the holder thereof to acquire
          one  common  share  at  a  price  of U.S. $0.72 per common share for a
          period  of  up  to  three  years  from  April  4,  2002.

          The  following  consideration  was  issued  to  placement  agents  in
          connection  with  the  private  placement:  (i)  cash consideration of
          $224,640  (U.S.$140,400)  plus out-of-pocket expenses of approximately
          U.S.$7,500;  (ii) compensation options to purchase up to 234,000 units
          on  the  same  terms  as  described  above; (iii) 500,000 common share
          purchase warrants to purchase common shares at prices of U.S.$0.60 and
          U.S.$0.72  and  expiring  on  April 2 and 3, 2005; (iv) 187,500 common
          share  purchase  warrants  to  purchase  common  shares  at a price of
          U.S.$0.01  per  common  share.

          On  April  8, 2002, the compensation options noted in (ii) above, were
          exercised  and  the  Company  issued 234,000 common shares and 175,500
          common  share  purchase  warrants  to  the  placement  agents.

          On  May  8,  2002, upon issuance of the common share purchase warrants
          noted  in  (iv) above, the warrants were immediately exercised and the
          Company issued 187,500 common shares. The fair value of these warrants
          in  the  amount  of  $173,681  was  recorded  as  share  issue  costs.

          On  May  8,  2002, the Company issued an additional 200,000 units at a
          price  of  U.S.$0.60  per  unit  for  gross  proceeds  of  $188,400
          (U.S.$120,000).  Each unit was comprised of one common share and three
          quarters  of  one  common  share  purchase  warrant. Each common share
          purchase warrant entitles the holder to purchase one common share at a
          price  of  U.S.$0.72  for  a  period  of three years from May 8, 2002.

6.   BASIC  AND  DILUTED  LOSS  PER  SHARE:

     Common shares issuable upon the exercise of options and warrants that could
     dilute  basic  loss  per  share  in  the  future  were  not included in the
     computation  of  diluted  loss  per  share because to do so would have been
     anti-dilutive  for  the years ended October 31, 2002, 2001 and 2000. During
     these  periods,  options  and  warrants  amounted  to  2,569,793  (2001  -
     2,985,175;  2000  -  2,529,031)  and  5,129,041  (2001  -  413,500;  2000 -
     259,792),  respectively.

7.   INTEREST  IN  JOINT  VENTURE:

     On  June  4,  2001,  the  Company  entered  into an agreement with an Asian
     company  to  establish  a joint venture to conduct certain of the Company's
     Asian  activities.  Each  party  holds a 50% interest in the joint venture.
     These  financial statements reflect the Company's proportionate interest in
     the  joint  venture's  assets,  liabilities,  revenue  and  expenses.


                                        5
<PAGE>
     The  following  amounts  included  in the consolidated financial statements
     represent  the  Company's  proportionate  interest  in the joint venture at
     October  31,  2002:

     ===========================================================================
                                                               2002         2001
     ---------------------------------------------------------------------------
     Cash                                                 $      78   $        -
     Accounts receivable                                      1,979            -
     Prepaid expenses                                           162        9,622
     Capital assets                                         405,207      523,138
     ---------------------------------------------------------------------------
     Total assets                                         $ 407,426   $  532,760
     ===========================================================================
     Accounts payable                                     $ 157,343   $  600,649
     Accrued liabilities                                      6,250       14,378
     ---------------------------------------------------------------------------
     Total liabilities                                    $ 163,593   $  615,027
     ===========================================================================
     Revenue                                              $   5,482   $        -
     Expenses                                              (297,171)   (483,472)
     ---------------------------------------------------------------------------
     Loss                                                 $(291,689)  $(483,472)
     ===========================================================================

     During  fiscal  2002,  the  Company  recognized revenue of $133,989 (2001 -
     $199,925)  from  sales  to  the  joint venture. As at October 31, 2002, the
     Company  had  contributed approximately $990,700 (2001 - $401,000) into the
     joint  venture.  The  Company  has  to  date  committed  to  contribute  an
     additional  $27,000  to  the  joint venture for the Company's proportionate
     share  of  the  joint  venture  requirements. This amount is expected to be
     contributed  within  the  next  six  months.

8.   INCOME  TAXES:

     The  tax  effects  of significant temporary differences representing future
     tax  assets  is  as  follows:

<TABLE>
<CAPTION>
     ==================================================================================
                                                               2002           2001
     ----------------------------------------------------------------------------------
<S>                                                        <C>            <C>
     Future tax assets:
     Operating loss carryforwards                          $ 17,496,136   $ 24,762,785
     Capital loss carryforwards                               1,018,332      1,119,902
     Share issue costs                                          546,030        982,616
     Capital assets, accounting basis less than tax basis     5,095,400      5,327,984
     ----------------------------------------------------------------------------------
                                                             24,155,898     32,193,287
     Valuation allowance                                    (24,155,898)   (32,193,287)
     ----------------------------------------------------------------------------------
     Net future tax assets                                 $          -   $          -
     ==================================================================================
</TABLE>

     In  assessing  the realizability of future tax assets, management considers
     whether  it  is more likely than not that some portion or all of the future
     tax  assets  will  not  be realized. The ultimate realization of future tax
     assets is dependent upon the generation of future taxable income during the
     periods  in which those temporary differences become deductible. Management
     considers  projected  future  taxable  income, uncertainties related to the
     industry  in  which  the  Company  operates  and tax planning strategies in
     making  this  assessment.

     At  October  31,  2002,  the  Company  has non-capital losses available for
     carryforward  for  Canadian  income  tax purposes amounting to $42,668,000.
     These  losses  expire  in  the  following  fiscal  years:

     ===========================================================================
     2003                                                            $ 6,052,000
     2004                                                              1,211,000
     2005                                                              3,700,000
     2006                                                              5,510,000
     2007                                                              7,589,000
     2008                                                             14,283,000
     2009                                                              4,323,000
     ---------------------------------------------------------------------------
                                                                     $42,668,000
     ===========================================================================

     The  Company  also  has  non-capital  losses available for carryforward for
     United States income tax purposes amounting to $2,659,000, expiring between
     2018  and  2020.


                                        6
<PAGE>
9.   SEGMENTED  INFORMATION:

     The Company operates in a single reportable operating segment. This segment
     derives its revenue from the sale of security software and related products
     and  services. As at October 31, 2000, substantially all the assets related
     to  the Company's operations were located in Canada. As at October 31, 2001
     and  2002, substantially all the assets related to the Company's operations
     were  located  in  Canada  with the exception of the assets held within the
     joint  venture,  as  disclosed  in  note  7,  which  were  located in Asia.

     A  summary  of  sales  to  major customers that exceeded 10% of total sales
     during  each  of the years in the three-year period ended October 31, 2002,
     and  the  approximate  amount  due  from these customers, as of October 31,
     2002,  are  as  follows:

     ===========================================================================
                                                      Sales             Accounts
                                             2002     2001     2000   receivable
     ---------------------------------------------------------------------------
     Customer 1                                -          -     24%  $         -
     Customer 2                                -         40%     -             -
     Customer 3                               12%        19%     -       134,553
     Customer 4                               25%        17%     -             -
     Customer 5                               28%         -      -       156,000
     Customer 6                               17%         -      -        81,900
     ===========================================================================

     The  Company  does  not consider itself to be economically dependent on any
     single  customer  or  supplier.

     Revenue is attributable to geographic location based on the location of the
     customer,  as  follows:

     ===========================================================================
                                                2002        2001        2000
     ---------------------------------------------------------------------------
     Sales:
       United States                         $   27,162  $  294,650  $1,464,630
       Canada                                   321,304     213,295     308,000
       Other                                     70,950      44,156     863,550
       Asia                                     698,369     668,880           -
     ---------------------------------------------------------------------------
                                             $1,117,785  $1,220,981  $2,636,180
     ===========================================================================

10.  SETTLEMENT  OF  LITIGATION:

     During  fiscal  2000,  the Company settled a lawsuit involving the Company,
     among  others,  relating  to  2,558,679  common  shares  issued  as partial
     consideration  for  technology  acquired  in  1996. The suit dealt with the
     movement  of  the  common  shares  after  the  Company  had  fulfilled  its
     obligation  under  the  acquisition  agreement by issuing the shares in the
     name  of  two  parties  in  accordance  with  the  acquisition  agreement.

     As  part  of the settlement, the Company issued 300,000 common shares and a
     warrant to acquire 150,000 common shares at an exercise price of U.S.$13.13
     per  share  over  a  three-year  period.  The  common shares were valued at
     U.S.$14.50  representing the market price at the time that the terms of the
     settlement  were  agreed  upon  by the parties. The estimated costs of this
     settlement  of  $6,394,090  were  accrued  in  fiscal year 1999. During the
     fiscal  year  ended  October 31, 2000, under the terms of the settlement, a
     second  warrant  was issued to acquire 263,500 common shares at an exercise
     price  of  U.S.$8.59  per  share,  exercisable  over  a  three-year period.

     During  the year ended October 31, 2000, the Company also settled a lawsuit
     brought  against  it by a former employee of the Company alleging breach of
     contract  for  failing  to  honour  a certain share option agreement. Under
     terms  of  the  settlement,  the Company confirmed and continued options to
     acquire  100,000  of  the  Company's  common  shares.  These  options  were
     exercised  during  fiscal  2000.

11.  COMMITMENTS  AND  CONTINGENCIES:

     (a)  Litigation:

          Management  is of the opinion that the claims listed below are without
          merit  and  will  not  materially  impact the Company. As a result, no
          provision  for  loss  has  been  made  in these consolidated financial
          statements.

          (i)  The  Company  has been served with a statement of complaint, as a
               co-defendant,  wherein  the plaintiff is seeking rescission of an
               international  offering  private placement transaction it entered
               into  with  the  Company  in  August 1995, in which the plaintiff


                                        7
<PAGE>
               purchased 212,500 common shares (850,000 common shares prior to a
               one-for-four  reverse split) from the Company for U.S.$3,700,000.
               The  plaintiff  is  also  seeking  damages  in  the  amount  of
               U.S.$3,700,000 plus interest and costs. This claim has previously
               been  dismissed  twice  and  the  Company  has  filed a motion to
               dismiss  this  claim  again.

          (ii) During  fiscal  2000,  the  Company and its wholly owned Barbados
               subsidiary,  The  Instant  Publisher Ltd., were sued by a company
               that alleged that the Company breached a dealer agreement entered
               into  in  1995  by  the Company's former printing business and is
               seeking  damages of U.S.$1,533,950 and damages of U.S.$25,000,000
               for  loss of reputation and loss of opportunity, pre-judgment and
               post-judgment  interest,  and  costs.

        (iii)  In  addition  to the above, in the ordinary course of business,
               the  Company  and its subsidiaries have legal proceedings brought
               against  them.

     (b)  Lease  commitments:

          Total  future  minimum lease payments including operating costs are as
          follows:

          ======================================================================
          2003                                                        $  553,788
          2004                                                           482,185
          2005                                                           482,185
          2006                                                           398,091
          ----------------------------------------------------------------------
                                                                      $1,916,249
          ======================================================================

12.  STOCK  INCENTIVE  PLAN:

     The  Company  grants  options to certain employees, officers, directors and
     consultants  under  a  share  option  plan  (the  "Plan"), enabling them to
     purchase  common  shares  of  the  Company. The exercise price of an option
     under  the  Plan  may  not  be less than the current market price of common
     shares  on  the  day  immediately  proceeding  the day the share option was
     granted.  The  Plan  provides that the number of common shares reserved for
     issuance  under  the  Plan  shall not exceed 6,100,000 common shares. These
     options  generally  vest  on  a quarterly basis over three years and expire
     five  years  after the date of grant. As at October 31, 2002, the number of
     common  shares  reserved  for  future  issues  of  stock options amounts to
     1,082,291.

     The  following table summarizes information about stock options outstanding
     at  October  31,  2002:

<TABLE>
<CAPTION>
========================================================================================================================
                                             Options outstanding                                 Options vested
-------------------------------------------------------------------------------------  ---------------------------------
                                               Weighted average    Weighted average                   Weighted average
Range of exercise price U.S.        Number        remaining      exercise price U.S.     Number     exercise price U.S.
[Cdn.]                            outstanding  contractual life         [Cdn.]         exercisable         [Cdn.]
-------------------------------------------------------------------------------------  ---------------------------------
<S>                               <C>          <C>               <C>                   <C>          <C>

0.23 - $0.61 [$0.36 - $0.96]         850,350              4.64  $       0.40 [$0.63]       64,750  $       0.43 [$0.68]
1.06 - $1.94 [$1.66 - $3.05]         986,258              1.99  $       1.35 [$2.12]      763,190          1.31 [$2.06]
2.05 - $3.15 [$3.22 - 4.95]          640,267              2.70  $       2.30 [$3.61]      429,871  $       2.32 [$3.64]
4.00 - $9.66 [$6.28 - $15.17]        281,014              2.23  $      6.43 [$10.10]      239,761  $       6.33 [$9.94]
11.38 - 41.69 [$17.87 - $65.45]      111,904              2.13  $     12.91 [$20.27]      102,323  $     12.86 [$20.19]
-------------------------------------------------------------------------------------  ---------------------------------
                                    2,869,793              2.96  $       2.23 [$3.50]    1,599,895  $       3.04 [$4.77]
========================================================================================================================
</TABLE>

Changes  for  the  employee stock option plan during the years ended October 31,
2002  and  2001  were  as  follows:

<TABLE>
<CAPTION>
=====================================================================================================================
                                                            2002                               2001
---------------------------------------------------------------------------------  ---------------------------------
                                                               Weighted average                   Weighted average
                                                 Number of   exercise price U.S.    Number of   exercise price U.S.
                                                  shares            [Cdn.]           shares            [Cdn.]
---------------------------------------------------------------------------------  ---------------------------------
<S>                                             <C>          <C>                   <C>          <C>

Options outstanding, beginning of year           3,686,256   $        5.15 [8.13]   3,275,045   $       7.75 [10.87]
Options granted                                    891,350            0.44 [0.69]   1,863,280            2.15 [3.40]
Options exercised                                        -                      -     (63,116)           1.10 [1.73]
Options cancelled                               (1,707,813)          7.59 [11.92]  (1,388,953)           6.26 [9.91]
---------------------------------------------------------------------------------  ---------------------------------
Options outstanding, end of year                 2,869,793            2.23 [3.50]   3,686,256            5.15 [8.13]
=================================================================================  =================================
Options exercisable, end of year                 1,599,895   $        3.04 [4.77]   1,874,909   $        5.46 [8.63]
=================================================================================  =================================
Weighted average fair value of options granted
during the year                                              $        0.24 [0.38]               $        1.57 [2.48]
=================================================================================  =================================
</TABLE>


                                        8
<PAGE>
13.  FINANCIAL  INSTRUMENTS  AND  RISK  MANAGEMENT:

     The  Company  is exposed to the following risks related to financial assets
     and  liabilities:

     (a)  Currency  risk:

          The  Company  is  subject  to  currency risk through its activities in
          United  States,  United Kingdom, Europe and Asia. Unfavourable changes
          in  the exchange rate may affect the operating results of the Company.

          The Company does not actively use derivative instruments to reduce its
          exposure  to  foreign currency risk. However, dependent on the nature,
          amount  and  timing  of  foreign  currency  receipts and payments, the
          Company  may  enter  into  forward  exchange contracts to mitigate the
          associated  risks.

          A significant portion of the Company's cash balance is denoted in U.S.
          dollars.  To  limit  the  Company's  exposure  to  exchange  rate
          fluctuations,  the  Company uses financial instruments to reduce risks
          associated  with  the  exchange  rate  and  is committed under various
          forward  exchange  contracts to sell U.S.$330,000 for each of the next
          three  months  ending  January 31, 2003 at exchange rates ranging from
          $1.540 to $1.541. As at October 31, 2002, the exchange rate was $1.57.
          These  financial  instruments  are subject to normal credit standards,
          financial  controls,  risk management and monitoring procedures. As at
          October  31,  2002,  the  net  unrealized  gain on these contracts was
          insignificant.

     (b)  Fair  values:

          The  fair  values  of  the  Company's  current  financial  instruments
          approximate  their  carrying  amounts  due to their short-term nature.

     (c)  Credit  risk:

          Financial  instruments,  which  potentially  subject  the  Company  to
          concentrations  of  credit  risk,  consist  principally  of  cash
          equivalents,  short-term  investments  and  accounts  receivable. Cash
          equivalents  and short-term investments are maintained at high-quality
          financial  institutions.

          The Company generally does not require collateral for sales on credit.
          The Company closely monitors extensions of credit. Management assesses
          the need for allowances for potential credit losses by considering the
          credit  risk  of  specific  customers,  historical  trends  and  other
          information.

14.  DISCONTINUED  OPERATIONS:

     During  1997, the Company decided to divest its IPS 950 division, which was
     involved  in  the  marketing  and  sale  of high technology instant digital
     printing  systems  to  the  on-demand  print  and  graphics  industry.

     On  January  30,  1998,  the  Company  sold  its IPS 950 division for total
     proceeds  of  $3.2  million  consisting of: (a) $1.1 million in cash, (b) a
     $0.4 million eight-month promissory note, and (c) a $1.7 million promissory
     note  payable  as  the  purchaser  sells  and  is  paid for such division's
     inventory.  The  purchaser  subsequently entered bankruptcy proceedings and
     did  not fulfil its obligation to repay the $0.4 million promissory note or
     the  $1.7 million promissory note. The Company does not expect repayment of
     these  notes  and,  accordingly,  they  were  written  off  in  1999.

     The  carrying  value  of income taxes recoverable related to investment tax
     credits  for  the  IPS  950 division in 2000 was nil (1999 - $250,000). The
     investment  tax  credits  related  to  the 1993 and 1994 fiscal years. As a
     result of a reassessment issued by Canada Customs and Revenue Agency during
     the  year ended October 31, 2000, the income tax recoverable was determined
     to  have  no  value  and  was  written  off.

15.  RECONCILIATION  OF CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
     PRINCIPLES  ("GAAP"):

     The  consolidated  financial  statements  are  prepared  in accordance with
     Canadian  generally  accepted  accounting  principles. Material differences
     between Canadian and United States generally accepted accounting principles
     are  described  below.

<TABLE>
<CAPTION>
==============================================================================================
                                                       2002           2001           2000
----------------------------------------------------------------------------------------------
<S>                                                <C>            <C>            <C>
Share capital:
  Canadian GAAP                                    $ 58,957,962   $ 53,992,992   $ 53,887,264
  Elimination of reduction of share capital (a)      41,248,993     41,248,993     41,248,993
----------------------------------------------------------------------------------------------
U.S. GAAP                                          $100,206,955   $ 95,241,985   $ 95,136,257
==============================================================================================


                                        9
<PAGE>
Deficit and comprehensive loss:
  Canadian GAAP                                    $(54,435,306)  $(48,038,364)  $(29,138,505)
  Elimination of reduction of share capital (a)     (41,248,993)   (41,248,993)   (41,248,993)
  Compensation expense (b)                           (1,560,721)    (1,505,557)    (1,449,078)
----------------------------------------------------------------------------------------------
U.S. GAAP                                          $(97,245,020)  $(90,792,914)  $(71,836,576)
==============================================================================================
Consolidated statements of loss:
  Loss from continuing operations
    under Canadian GAAP                            $ (6,396,942)  $(18,899,859)  $(14,777,208)
  Compensation expense (b)                              (55,164)       (56,479)    (1,449,078)
  --------------------------------------------------------------------------------------------
Loss from continuing operations
  under U.S. GAAP                                    (6,452,106)   (18,956,338)   (16,226,286)
Loss from discontinued operations (note 14)                   -              -       (250,000)
----------------------------------------------------------------------------------------------
Loss under U.S. GAAP                               $ (6,452,106)  $(18,956,338)  $(16,476,286)
==============================================================================================
Basic and diluted Loss per share under U.S. GAAP   $      (0.22)  $      (0.72)  $      (0.70)
==============================================================================================
</TABLE>

     (a)  Share  capital  and  deficit:

          On March 1, 1999, the shareholders approved a resolution to reduce the
          stated  capital of the Company by $41,248,993 to eliminate the deficit
          as  at October 31, 1999. Under Canadian GAAP, a reduction of the share
          capital  of  outstanding common shares is allowed with a corresponding
          offset  to  deficit.  This reclassification, which the Company made in
          2000  to  eliminate  the deficit that existed at October 31, 1999, did
          not  meet  the  criteria  specified  by  U.S.  GAAP  and results in an
          increase  to share capital with a corresponding increase in deficit of
          $41,248,993.

     (b)  Options  to  consultants:

          Under  Canadian  GAAP,  the  Company  does  not recognize compensation
          expense  when  stock  or  stock options are issued to consultants. Any
          consideration  paid  on exercise of stock options or purchase of stock
          is  credited  to  share  capital. Under U.S. GAAP, the Company records
          compensation  expense  for  stock or stock options granted in exchange
          for services from consultants. During the year ended October 31, 2000,
          the  Company  issued  177,500  stock  options  to  consultants and has
          recorded  $286,578  as compensation expense for the services rendered.
          In  addition,  the Company recorded compensation expense in the amount
          of  $1,162,500, which is the difference between the exercise price and
          the share price at the settlement date of the lawsuit, as described in
          note  10.

          During  the  year  ended  October  31, 2001, the Company issued 50,000
          stock  options  to  consultants. The Company has recorded compensation
          expense  of $56,479, of which $13,912 relates to the options issued in
          fiscal  2001  to  consultants.

          During  the  fiscal  year  2002, the Company has recorded compensation
          expense  of  $55,164  relating  to  options  granted  to  consultants.

     (c)  Interest  in  joint  venture:

          Canadian GAAP requires the proportionate consolidation of interests in
          joint  ventures.  Proportionate  consolidation  is not permitted under
          U.S.  GAAP  and  interests  in joint ventures are accounted for on the
          equity  basis.  However,  as  allowed  by  the Securities and Exchange
          Commission  ("SEC"),  reclassification is not required in a SEC filing
          when  specified  criteria  are  met  and  information disclosed. These
          criteria  have  been  met  and the information is disclosed in note 7.

          Although  the adoption of proportionate consolidation has no impact on
          net  earnings  or  shareholders'  equity,  it  does  increase  assets,
          liabilities,  revenue,  expenses  and  cash flows from operations from
          those  amounts  otherwise  reported  under  U.S.  GAAP.

     (d)  Short-term  investments:

          Short-term  investments consist of corporate debt securities. For U.S.
          GAAP  purposes,  the  Company  classifies  its  debt  securities  as
          available-for-sale,  which  are  recorded  at  fair  value.

          Unrealized holding gains and losses, net of the related tax effect, on
          available-for-sale  securities  are  excluded  from  earnings  and are
          reported  as  a separate component of other comprehensive income until
          realized.  Realized  gains  and  losses  from  the  sale  of
          available-for-sale  securities  are  determined  on  a  specific
          identification basis. During the periods presented, there have been no
          unrealized  holding  gains  or  losses  on  short-term  investments.


                                       10
<PAGE>
          A decline in the market value of any available-for-sale security below
          cost  that is deemed to be other than temporary results in a reduction
          in  carrying  amount  to  fair  value.  The  impairment  is charged to
          earnings  and  a  new  cost  basis  for  the  security is established.

     (e)  Notes  to  consolidated  financial  statements:

          In  order  to  comply  with  U.S.  GAAP,  the  following  notes to the
          consolidated  financial  statements  would  need  to  be  added:

          (i)  Stock-based  compensation  plan:

               Under  U.S.  GAAP,  for  any stock options with an exercise price
               that  is  less  than  the  market price on the date of grant, the
               difference between the exercise price and the market price on the
               date  of  grant  is  recorded as compensation expense ("intrinsic
               value-based  method"). As the Company grants stock options at the
               fair  market value of the shares on the day immediately preceding
               the  date of the grant of the options, no compensation expense is
               recognized  under  the  intrinsic  value-based  method.

               SFAS  No.  123, Accounting for Stock-Based Compensation, requires
               pro forma disclosures of net income and earnings per share, as if
               the  fair  value-based  method  as  opposed  to  the  intrinsic
               value-based  method  of accounting for employee stock options had
               been  applied.  The  disclosures  in the following table show the
               Company's  loss  for  the  year and loss per share on a pro forma
               basis  using  the  fair  value  method as determined by using the
               Black-Scholes option-pricing model. Assumptions used when valuing
               the  options  at  their  date of grant using in the Black-Scholes
               option  pricing model include: risk-free interest rate of 3.092%,
               estimated  life  of three years, expected divided yield of 0% and
               volatility  of  150%.

<TABLE>
<CAPTION>
=====================================================================================
                                              2002           2001           2000
-------------------------------------------------------------------------------------
<S>                                       <C>            <C>            <C>
Loss under U.S. GAAP                      $ (6,452,106)  $(18,956,338)  $(16,476,286)
Pro forma loss under U.S. GAAP             (13,153,667)   (25,275,143)   (22,638,303)
Pro forma loss per common share:
   Basic and diluted                             (0.44)         (0.96)         (0.96)
=====================================================================================
Weighted average number of common shares    29,716,924     26,376,480     23,534,438
</TABLE>

          (ii) Recent  accounting  pronouncements:

               In  July  2001,  the  FASB  issued  SFAS  No.  141,  "Business
               Combinations,"  and  SFAS  No.  142, "Goodwill and Other Tangible
               Assets." SFAS No. 141 provides new guidance on the accounting for
               a  business  combination  at  the  date a business combination is
               completed.  Specifically,  it requires use of the purchase method
               of  accounting for all business combinations initiated after June
               30,  2001,  thereby  eliminating  use of the pooling-of-interests
               method.  SFAS  No. 142 establishes new guidance on how to account
               for  goodwill  and intangible assets after a business combination
               is  completed.  Among other things, it requires that goodwill and
               certain  other  intangible assets will no longer be amortized and
               will  be tested for impairment at least annually and written down
               only  when  impaired.  This  statement  will  apply  to  existing
               goodwill  and  intangible  assets,  beginning  with  fiscal years
               starting  after  December  15, 2001. The Company does not believe
               that the adoption of SFAS 141 and 142 will have a material impact
               on  its  consolidated  financial  statements.

               In  October  2001,  the FASB issued SFAS No. 144, "Accounting for
               the  Impairment  or  Disposal of Long-Lived Assets." SFAS No. 144
               addresses  financial  accounting and reporting for the impairment
               or  disposal of long-lived assets. This statement supersedes SFAS
               No.  121, "Accounting for the Impairment of Long-Lived Assets and
               for  Long-Lived  Assets to be Disposed Of" and related literature
               and establishes a single accounting model, based on the framework
               established in SFAS No. 121, for long-lived assets to be disposed
               of  by  sale.  The  Company  is required to adopt SFAS No. 144 no
               later than January 1, 2002. The Company does not believe that the
               adoption  of  SFAS  No.  144  will  have a material impact on its
               consolidated  financial  statements.

               In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
               Associated  with  Exit  or  Disposal  Activities"  which requires
               companies  to  recognized  costs associated with exit or disposal
               activities  when  they  are incurred rather than at the date of a
               commitment  to  an  exit  or disposal plan. SFAS No. 146 is to be
               applied  prospectively  to  exit or disposal activities initiated
               after  December  31,  2002.  The  Company  does  not believe that


                                       11
<PAGE>
               adoption  of  SFAS  No.  146  will  have a material effect on its
               results  of  operations  and  financial  position.

               In December 2001, the Accounting Standards Board in Canada issued
               CICA  Handbook  Section  3870 "Stock-Based Compensation and Other
               Stock-Based Payments". This section establishes standards for the
               recognition,  measurement,  and  disclosure  of  stock-based
               compensation  and other stock-based payments made in exchange for
               goods  and  services  provided by employees and non-employees. It
               applies  to  transactions  in which shares of common stock, stock
               options,  or  other equity instruments are granted or liabilities
               incurred  based  on  the  price  of  common stock or other equity
               instruments.  The  Company will adopt Section 3870 for its fiscal
               year  beginning  November  1,  2002. The Company does not believe
               that the adoption of this standard will have a material impact on
               the  Company's  financial  position  or  results  of  operations.


                                       12
<PAGE>