Route1 Inc. Reports First Quarter 2012 Financial Results

TORONTO, ONTARIO--(Marketwire - May 28, 2012) - Route1 Inc. (TSX VENTURE:ROI) (Route1 or the Company), a digital security and identity management company, today announced its financial results for the first quarter of fiscal 2012, which ended March 31.

"Route1's operations continue to perform well, we are making great strides in evolving our technology, continuing to build a diversified sales pipeline, and ensuring the Company is strongly positioned to manage accelerated demand. Calendar year 2012 should be an exciting year for Route1," said Tony Busseri, Chief Executive Officer of Route1.

Results for the first quarter were positively affected by the proceeds of an arbitration award of approximately $3.4 million which was received on January 24, 2012. For the quarter ended March 31, 2012, $1.1 million of devices and appliances revenue, $0.6 million of service revenue and $0.6 million of cost of revenue were included in the Company's financial statements. As previously disclosed, the cost of pursuing the arbitration was highlighted in the 2011 financial statements.

Improved Revenues and Earnings

Total revenues for the period ended March 31, 2012 increased to more than $2.9 million from $1.4 million in the first quarter of 2011. Cost of revenues rose during the quarter largely due to expenses related to the arbitration award, however gross profit increased to $2.3 million from $1.2 million in same quarter of 2011.

Operating profit for the first quarter was $1.1 million, compared with $154,150 a year earlier. During the quarter, Route1's expenses increased as a result of higher legal fees associated with the pursuit of patents, its investment in research and development, and selling and marketing as it builds its operations for future growth.

The Company increased its total comprehensive income for the three months ended March 31, 2012 to $982,879 from $60,822 in the first quarter of 2011. Basic and diluted earnings per share were unchanged at nil.

EBITDA for the most recent quarter was $1.1 million compared with approximately $205,000 in the first quarter of 2011.

in thousands of Canadian dollars		Mar 31 2012		Mar 31 2012 before award			Dec 31 2011			Dec 31 2011 before award			Sept 30 2011			June 30 2011		Mar 31 2011
EBITDA		1,125		22			(1,464	)		18			(36	)		70		205
Amortization		36		36			40			40			34			40		51
Operating profit (loss)		1,089		(14	)		(1,504	)		(22	)		(70	)		30		154

Stronger Cash Position and Balance Sheet

Net cash from operating activities was $1.7 million compared with an outflow of $20,483 a year earlier. As at March31, 2012, Route1 had no bank debt and a cash balance of $1.5 million.

in thousands of Canadian dollars		Mar 31 2012				Dec 31 2011				Sept 30 2011				June 30 2011				Mar 31 2011
Cash Flow
Operating activities		$	1,706			$	175			$	(229	)		$	(178	)		$	(21	)
Investing activities			(18	)			(27	)			(106	)			(4	)			(78	)
Financing activities			(290	)			(85	)			104				51				-
Net cash inflow (outflow)			1,398				63				(231	)			(131	)			(99	)
Cash, beginning of period			87				24				255				386				485
Cash, end of period		$	1,485			$	87			$	24			$	255			$	386
Balance Sheet Abstracts
Working capital (deficiency)		$	(901	)		$	(1,707	)		$	(853	)		$	(503	)		$	(532	)
Total assets		$	2,765			$	5,999			$	2,616			$	2,011			$	2,134
Shareholders' equity (deficiency)		$	(778	)		$	(1,539	)		$	(586	)		$	(340	)		$	(426	)

Significant First Quarter Developments

As at March 31, 2012, Route1 had 15,794 paying, active subscribers.

During the three months ended March 31, 2012 and subsequently, Route1 announced several important developments, including:

In January 2012, the Company announced that the Canadian Patent Office had allowed Route1's patent application for its MobiNET platform. Route1 expects the patent to be issued later this year. In the same month, Route1 announced the appointment of recently retired United States Navy Rear Admiral Mark S. Boensel to the Board of Directors. Admiral Boensel's 32 years of experience adds further depth to the Board.

On February 16, 2012, the Company announced that a second component of the U.S. Department of Homeland Security (DHS) was now using its remote access solution in a pilot driven in part by the MobiKEY Fusion device, which will allow the DHS component to be in compliance with Homeland Security Presidential Directive 12 (HSPD-12) when accessing U.S. Government digital resources remotely. Upon successful pilot completion, Route1 anticipates that it would build a DEFIMNET for the new users group that would be located at a DHS operations center. The new component has approximately 20,000 employees.

Later in February 2012, Route1 announced 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 believed 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. As at May 28, 2012, the Company had purchased 6,272,900 common shares for cancellation under the NCIB.

On March 1, 2012, Route1 announced that it has been awarded a Supply Arrangement by the Government of Canada to facilitate the government's procurement of required software products including but not limited to security, identity management and remote access solutions. The Software Licensing Supply Arrangement (SLSA) is a two-phased procurement process. The first phase consists of suppliers qualifying through SLSA, and the second phase consists of the approved Public Works and Government Services Canada service providers completing their requirements via request for quotations, simplified bid solicitation or through sole sourcing.

Significant Developments after the Quarter End

Route1 announced in April it had 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, which it expects to have commercially available by the end of summer 2012. 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 the Commander, U.S. Fleet Cyber Command had notified the Program Manager for the Navy Marine Corps Intranet (NMCI) that an Interim Authorization to Operate (IATO) was recently granted for the "Unclassified DEFIMNET MobiKEY Secure Remote Access Solution" on the Unclassified NMCI Enterprise. Prior to the IATO, the Route1 MobiKEY solution had been operating under an Interim Authority to Test (IATT). The IATO has been issued to allow for additional time to complete certification and accreditation testing and validation and is valid until August 16, 2012. Route1 expects to receive an Authority to Operate (ATO), the final step in the certification and accreditation process, in August 2012.

Business Development Update

Route1 provided an update on its business development pipeline on March 1, 2012 and committed to provide a similar update in each quarter of 2012.

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

Client Description

No.

Client Type

<10 users

<50 users

Phase 1 <500 users

Phase 2 <2.5k users

Phase 3 <10k users

Approx. Max. Personnel

Government

U.S.

1 2 3 4 5 6 7 8 9 10 11 12

Defense Defense Defense Defense Defense Civilian Civilian Civilian Civilian Civilian Civilian Defense

X X X X

X

X X X X X

X

X

(a) (a) (a) 8k 26K (b) (b) (b) 20k 2k 50k 300k

Government

Other

13 14 15 16

Defense Civilian Civilian Civilian

X X X X

15k 5k 1k 10k

Enterprise

17

Healthcare

X

10K

18 19 20

Defense Investment Investment

X X

X

2k 2K 1k

Total

10

1

7

1

1

> 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.

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.

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.

© 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.