Route1 Inc. Reports Second Quarter 2012 Financial Results

Route1 Inc. (TSX VENTURE:ROI) (Route1 or the Company), a digital security and
identity management company, today announced its financial results for the three
and six month periods ended June 30, 2012. 


Operating results for the second quarter were positively affected by the
proceeds of an arbitration award which were received in January 2012. For the
quarter ended June 30, 2012, $0.6 million of service revenue was included in the
Company's financial statements. 


Revenue and Earnings Improvement

Q2 2012

Total revenue for the second quarter ended June 30, 2012 increased to more than
$1.9 million from $1.2 million in the second quarter of 2011. Cost of revenues
decreased during the quarter due to decreasing royalties on licenses and reduced
expenses as a result of lower sales of MobiKEY devices. Gross profit increased
to $1.7 million in the second quarter of 2012 from $1.0 million in same quarter
of 2011. 


Operating profit for the second quarter was $0.6 million, compared with $29,529
a year earlier. During the second quarter of 2012 Route1's expenses increased to
$1.1 million from $0.9 million a year earlier primarily due to a lower
Scientific Research and Experimental Development (SR&ED) credit of $0.1 million,
and an increase in the number of software developers employed. 


The Company increased its total comprehensive income for the three months ended
June 30, 2012 to $0.5 million from $(0.3) million in the second quarter of 2011.
Basic and diluted earnings per share were unchanged in the second quarter of
2012 and 2011 at nil. 


EBITDA for the most recent quarter was $0.6 million compared with approximately
$0.1 million in the second quarter of 2011.




in 000s of CAD dollars         June 30   Mar 31   Dec 31   Sept 30   June 30
                                  2012     2012     2011      2011      2011
----------------------------------------------------------------------------
Revenue                          1,888    2,952    1,401     1,399     1,238
EBITDA                             634    1,125   (1,464)      (36)       70
Amortization                        44       36       40        34        40
Operating profit (loss)            590    1,089   (1,504)      (70)       30
============================================================================



Year-to-Date 2012

For the six month period ended June 30, 2012, total revenue increased to $4.8
million from $2.7 million in the same period of 2011. Gross profit increased to
$4.0 million from $2.2 million in same period of 2011, as did operating profit
and comprehensive income, respectively to $1.7 million from $0.2 million and to
$1.5 million from $(0.2) million. 


Cash Position and Balance Sheet Continue to Strengthen

For the quarter and six month period ended June 30, 2012, the net cash generated
from operating activities was $1.1 million and $2.8 million respectively. For
the 2011 year, there was an outflow of $0.2 million for the quarter and six
month period ended June 30. 


As at June 30, 2012, Route1 had no bank debt and a cash balance of $2.3 million. 



in 000s of CAD dollars           Jun 30   Mar 31   Dec 31  Sept 30  June 30 
                                   2012     2012     2011     2011     2011 
----------------------------------------------------------------------------
                                                                            
Cash Flow                                                                   
  Operating activities          $ 1,086  $ 1,706  $   175  $  (229) $  (178)
  Investing activities             (122)     (18)     (27)    (106)      (4)
  Financing activities             (188)    (290)     (85)     104       51 
----------------------------------------------------------------------------
  Net cash inflow (outflow)         776    1,398       63     (231)    (131)
  Cash, beginning of period       1,485       87       24      255      386 
----------------------------------------------------------------------------
  Cash, end of period           $ 2,261  $ 1,485  $    87  $    24  $   255 
============================================================================
                                                                            
Balance Sheet Abstracts                                                     
Working capital (deficiency)    $  (493) $  (901) $(1,707) $  (853) $  (503)
  Total assets                  $ 4,067  $ 2,765  $ 5,999  $ 2,616  $ 2,011 
  Shareholders' equity                                                      
   (deficiency)                 $  (302) $  (778) $(1,539) $  (586) $  (340)



Paid, Active Subscribers

As at June 30, 2012, Route1 had 14,876 paying, active subscribers. The decrease
from the March 31, 2012 value of 15,794 is a result of a reduction in government
subscription renewals stemming from budgetary cut backs. Offsetting the
subscriber decrease is an improvement in the quality of revenue during the same
period of time. Specifically, revenue per subscriber increased from $248 to
$253.




in 000s of CAD dollars for Revenue   June 30  Mar 31  Dec 31 Sept 30 June 30
 from subscribers                       2012    2012    2011    2011    2011
----------------------------------------------------------------------------
Closing number of subscribers         14,876  15,794  15,903  15,796  15,722
Revenue per subscriber               $   253 $   248 $   243 $   246 $   245
Revenue from subscribers             $   942 $   983 $   963 $   969 $   960
============================================================================



Significant Developments during the Quarter

In April 2012 Route1 entered into a licensing agreement with its current MobiKEY
Fusion device manufacturer, Giesecke & Devrient GmbH (G&D), to use and develop
G&D's middleware while Route1 continues to develop its own middleware. The
strategically important agreement allows Route1 to directly support and evolve
MobiKEY Fusion devices already deployed and to procure similar devices from
other parties that would use Route1's middleware. In conjunction with the
agreement, Route1 has ordered an additional 4,605 MobiKEY Fusion devices from
G&D. 


On May 23, 2012, the Company announced that an Interim Authorization to Operate
(IATO) had been recently granted by the U.S. Navy (USN) for the DEFIMNET and
MobiKEY solution. The IATO is still in effect and Route1 now expects to receive
an Authority to Operate (ATO), the final step in the certification and
accreditation process, in September 2012.


Business Development Update

Route1's primary business development focus is with the U.S., Canadian and Dutch
federal governments. More recently, the Company has started to work with select
channel partners to target new clients in the financial services, legal and
healthcare verticals. The expanding business development focus is directly tied
to the commercial market's evolving interest to act, and not just talk about,
cyber security measures, and the timing of Route1's new offerings. By way of an
example, the soon to be released MobiKEY Classic 2 (MC2) supports both Windows
and Mac operating systems on the remote computer, which is more in line with the
requirements of small to medium sized businesses.


The table below provides an overview of Route1's Top 20 new account and organic
growth business development pipeline as of today's date.




----------------------------------------------------------------------------
                                 Demo  Pilot       Roll Out                 
                               ---------------------------------------------
                               ---------------------------------------------
                                              Phase  Phase Phase      
                                                  1      2     3
                                 less   less   less   less  less            
                                 than   than   than   than  than     Approx.
Client                   Client    10     50    500   2.5k   10k        Max.
 Description     No.       Type users  users  users  users users   Personnel
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Government U.S.    1    Defense                          X               (a)
                   2    Defense     X                                    (a)
                   3    Defense     X                                    (a)
                   4    Defense     X                                     8k
                   5    Defense                   X                      26K
                   6   Civilian                   X                      (b)
                   7   Civilian                   X                      (b)
                   8   Civilian                   X                      (b)
                   9   Civilian            X                             20k
                  10   Civilian                   X                       2k
                  11   Civilian                                X         50k
                  12    Defense     X                                   300k
----------------------------------------------------------------------------
Government Other  13    Defense     X                                    15k
                  14   Civilian            X                              5k
                  15   Civilian            X                              3k
                  16   Civilian     X                                    10k
----------------------------------------------------------------------------
Enterprise        17 Healthcare                   X                      10K
                  18    Defense                   X                       2k
                  19 Healthcare     X                                    14K
                  20 Investment     X                                    26k
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total                               8      3      7      1     1     greater
                                                                   than 1 mm
----------------------------------------------------------------------------
                                    
(a)Combined opportunity of 700,000. 
(b)Combined opportunity of 70,000.



The table above does not include business development opportunities that have
not started a demonstration or have completed a demonstration but as of today's
date not yet initiated a pilot. 


As at June 30, 2012, the USN had ordered more than 2,100 subscriptions and
provisioned approximately 890 users. The provisioned number is the value
included in the paid, active subscriber count above. Route1 believes an
influencing factor in the slow growth in orders and provisioned users is the
accreditation status of the DEFIMNET.


The relationship with the USN has also led to additional U.S. Department of
Defense opportunities that the Company believes will translate into additional
users in the coming months.


It should be noted that the U.S. government is a large and profoundly complex
organization with more than five million employees, contractors and military
personnel across its legislative, judicial and executive branches, encompassing
more than 300 agencies, sub agencies and branches.


Advances in Product Development

Support additional operating systems - Expect the release of support for Mac OS
X on the remote computer by September 30, 2012. Route1 will also support Windows
8 on both the host and remote computers on or around the time Microsoft
commercially releases it to the market place.


Tablet support - Expect release of Route1's MobiKEY solution by the end of
December 2012 to support Android OS tablets and during the first quarter in 2013
to support iOS tablets.


Simply authentication - The Company expects to have a commercially available
product by the end of December 2012.


Remote access features - Audio support and policy management by the end of
December 2012. Policy management will allow organizations to establish and
implement MobiKEY policy management with real-time implementation of changes.
Management features will include security settings (encryption settings),
default connection settings, password policy, operating systems and versions on
remote computer and mobile devices permissible. 


It is important to note that these target dates can be affected by a number of
factors, including priority product development requirements from new and
existing clients.


Normal Course Issuer Bid

Route1 announced on February 27, 2012, its intention to make a Normal Course
Issuer Bid ("NCIB") to buy back its common shares through the facilities of the
TSX Venture Exchange ("Exchange"), which was approved by the Exchange. The
maximum number of common shares that may be purchased for cancellation pursuant
to the NCIB is 35,480,904, which represents 10% of the common shares in the
public float on the date that the Exchange approved the NCIB. Route1 stated that
it believed its common shares had been trading in a price range which did not
adequately reflect the value of the shares in relation to the business of Route1
and its future business prospects. As a result, depending upon future price
movements and other factors, Route1 believes that its outstanding common shares
may represent an attractive investment to Route1. In addition, the NCIB is
expected to benefit all Route1 shareholders who continue to hold the Company's
common shares by increasing their equity interest in Route1. 


To date, the Company has purchased and cancelled approximately 6.9 million
common shares. 


Annual and Special Meeting of Shareholders

The Company will hold its annual meeting of its shareholders on October 22,
2012. The meeting time and location will be announced shortly.


ABOUT ROUTE1, INC.

Route1 delivers industry-leading security and identity management solutions to
enterprises worldwide, such as businesses, government and military, which need
universal, secure access to all digital resources and sensitive data. These
customers depend on The Power of MobiNET - Route1's communications and service
delivery platform. MobiNET provides identity assurance and individualized access
to networks and data. Route1's patented solutions are based on FIPS 140-2
cryptographic modules, and simplify the process of meeting increasingly
stringent regulatory requirements for privacy and security. Headquartered in
Toronto, Canada, Route1 is listed on the TSX Venture Exchange. 


For more information, visit our website at: www.route1.com. 

This news release, required by applicable Canadian laws, does not constitute an
offer to sell or a solicitation of an offer to buy any of the securities in the
United States. The securities have not been and will not be registered under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") or
any state securities laws and may not be offered or sold within the United
States or to U.S. Persons unless registered under the U.S. Securities Act and
applicable state securities laws or an exemption from such registration is
available.


(C) Route1 Inc., 2012. All rights reserved. Route1, the Route1 and shield design
Logo, SECURING THE DIGITAL WORLD, Mobi, MobiSecure, Route1 MobiKEY, Route1
MobiVDI, MobiKEY, MobiKEY IBAD, DEFIMNET, MobiNET, Route1 MobiNET, TruOFFICE,
TruFLASH, TruOFFICE VDI, MobiKEY Fusion, EnterpriseLIVE, EnterpriseLIVE VO,
MobiNET Agent and MobiKEY Classic, are either registered trademarks or
trademarks of Route1 Inc. in the United States and or Canada. All other
trademarks and trade names are the property of their respective owners. The
DEFIMNET and MobiNET platforms and the MobiKEY, MobiKEY Classic and MobiKEY
Fusion devices are protected by U.S. Patents 7,814,216 and 7,739,726, and other
patents pending.