Route1 Inc.
TSX VENTURE : ROI

Route1 Inc.

July 13, 2015 09:00 ET

Route1 Provides Operations Update

TORONTO, ONTARIO--(Marketwired - July 13, 2015) - Route1 Inc. (TSX VENTURE:ROI), a leading provider of secure access technologies for the mobile workspace that protects businesses and government agencies and whose customers include the U.S. Department of Defense, the Department of Homeland Security, the Department of Energy and the Government of Canada, today provided an update on recent market drivers, its operations and business development activity.

OPM Data Breach

"We believe that working with the U.S government has changed significantly as a result of the recently announced breaches at the U.S. Office of Personnel Management (OPM)", said Brian Brunetti, President of Route1. As reported by the Washington Post on July 10, 2015, two major breaches last year of U.S. government databases holding personnel records and security-clearance files exposed sensitive information of at least 22.1 million people, including not only federal employees and contractors but also their families and friends.

Mr. Brunetti continued, "The OPM breaches have created unprecedented action among U.S. civilian department technology and security leadership to, among other items: fully comply with two-factor authentication policy (HSPD-12) by mid August 2015, review prior decisions to have enterprise network's inbound ports open, turn off all systems that are without appropriate accreditation or authorities to operate, and take action to properly protect data-at-rest. Route1 is working with civilian components of the U.S. government to help them improve and fully comply with policy and data security expectations as they pertain to mobility use cases."

Paid, Active Subscribers

As at June 30, 2015, Route1 had 15,410 paying, active subscribers.

Paid, Active Subscribers
In CAD Dollars
Closing Subscriber Count Quarterly Subscriber Growth Count Average Revenue per Subscriber Quarterly Subscriber Revenue Quarterly Subscriber Revenue Growth
June 30, 2015 15,410 398 $352 $1,346,000 $94,000
March 31, 2015 15,012 220 $334 $1,252,000 $31,000
December 31, 2014 14,792 147 $334 $1,221,000 $10,000
September 30, 2014 14,645 184 $332 $1,211,000 $26,000
June 30, 2014 14,461 221 $329 $1,185,000 $77,000

Business Development Update

Route1 has more than 100 unique paying clients. Expected drivers of MobiKEY user growth will most likely center on the U.S. federal government - intelligence, civilian and defense, the Canadian federal government, and the financial services sector in the U.S.

U.S. Department of Defense (DOD) - As announced by Route1 in mid-2014, and as evidenced by the five consecutive quarters of subscriber user growth, Route1 continues to successfully leverage U.S. government reciprocity rules and the installed accredited infrastructure to grow the number of proof of concepts and pilots within the DOD. Route1 continues to believe that as it works towards closing larger enterprise account opportunities, there will be smaller account purchases from DOD components that will drive increased subscribers.

Further, the Next Generation Enterprise Network (NGEN) contracting issue that delayed the purchase of the software component of our MobiKEY technology by certain prospective users within the U.S. Department of the Navy was fully addressed in late June 2015 and Route1 now expects to see additional user-growth from this account shortly.

U.S. Fish and Wildlife Service (FWS) - Route1 has installed a DEFIMNET platform at DOI and expects that the platform will be accredited for use by FWS and the broader U.S. Department of Interior during the second half of 2015. The accreditation timing is a byproduct of the recent OPM breach and related priorities for the broader department.

Product Development Update

As an update to information provided on Route1's latest webcast held on April 1, 2015, and adjusted for client requirements and market changes, Route1 expects to deliver the following technologies to market based on the schedule as set out in the table below.

Technology Release Attributes Timing
MobiKEY for Android 4.5 Android OS support On or before August 15, 2015
MobiKEY 5.0 Linux OS support
IPv6 support
Mac OS X audio support
On or before September 30, 2015
MobiKEY Fusion3 SES (New Offering) Secure encrypted storage using ID-1 cards
Local, smart-card reader
On or before September 30, 2015
MobiKEY for iOS 5.0 Improved UX Fall 2015

Route1 also has a number of additional ongoing development initiatives that for competitive reasons it cannot disclose to the market place at this time. The new technologies center around a current Route1 core competency - public key infrastructure (PKI) based mutual authentication (a fundamental component to achieving a high level of assurance in communication), lifecycle management of credentials, and access to data.

Patent Update

The United States Patent and Trademark Office (USPTO) recently issued Route1 two additional patents. Route1 now has been issued four patents by the USPTO.

Secure Access to Applications Behind a Firewall (U.S. Patent 9,059,962 B2): "A user having remote device wants to access an application executing on an application server computer that is behind a firewall. During set-up, another firewall and a gateway computer are configured in front of the original firewall. During registration, users' remote devices are configured with security data. The security data includes user authentication cryptographic credentials, for establishing secure channels, and may include user application cryptographic credentials as needed by individual applications executing on the application server. During operation, the user provides a password to an application program executing on his/her remote device to use the security information on the remote device to establish a secure channel to the application, and then conducts a data session with the application. If the application needs to verify the identity of the user, the user's remote device performs a cryptographic operation using the user application cryptographic credentials, and sends the result to the application."

Distribution of Secure or Cryptographic Material (U.S. Patent 9,059,997 B2): "A user having remote device wants to access an application that requires that the user possess a user application crypto graphic credential. If the application needs to verify the identity of the user, the user's remote device performs a crypto graphic operation using the user application cryptographic credentials, and sends the result to the application. A configuration for securely distributing the user application cryptographic credentials includes at least one gateway located at an enterprise that is under the control of an enterprise administrator, and a controller that is not located in the enterprise but can be configured by the enterprise administrator to cooperate with at least one gateway."

Route1 filed each of the patents on March 13, 2013.

Share Repurchase Program

On September 5, 2014, the Company announced with approval from the TSX Venture Exchange its intention to make a Normal Course Issuer Bid ("NCIB"). The NCIB permits the Company to purchase for cancellation up to 10% of the common shares in the public float. The maximum number of shares allowed for repurchase is 38,200,991. Purchases under the NCIB commenced September 11, 2014 and will end September 10, 2015, or the date upon which the maximum number of common shares have been purchased by the Company.

As of June 30, 2015 the Company has purchased a total of 15,644,500 common shares under the NCIB.

Stock Option Grant

Recently a total of 3,000,000 stock options at an exercise price of $0.05 per share were granted to a member of the Company's executive team. Under the Company's stock option plan, 10% of the issued capital is reserved for issuance or a total of 36,561,441 options.

As of today's date, including the above grant, a total of 34,014,000 options (as at April 7, 2015 - 34,314,000) are currently outstanding under the stock option plan.

Reporting of Q2 and YTD 2015 Financial Results

Route1 will report its second quarter and year-to-date financial results for the period ended June 30, 2015 on Tuesday, August 18, 2015.

ABOUT ROUTE1, INC.

Route1 enables the mobile workspace without compromising on security. Its flagship technology MobiKEY uniquely combines secure mobile access, with high assurance identity validation and plug-and-play usability. Remote and mobile workers are able to securely and cost-effectively access their workspace from any device without exposing the organization to the risk of data spillage or malware propagation. MobiKEY customers include Fortune 500 enterprises as well as the U.S. Department of Defense, the Department of Homeland Security, the Department of Energy and the Government of Canada. 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.

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

© Route1 Inc., 2015. All rights reserved. Route1, the Route1 and shield design Logo, SECURING THE DIGITAL WORLD, Mobi, MobiSecure, MobiLINK, Route1 MobiKEY, Route1 MobiVDI, MobiKEY, MobiKEY IBAD, DEFIMNET, MobiNET, Route1 MobiNET, TruOFFICE, TruFLASH, TruOFFICE VDI, MobiKEY Fusion, MobiNET Aggregation Gateway, MobiNET Switching Array, MobiNET Secure Gateway, EnterpriseLIVE, EnterpriseLIVE Virtualization Orchestrator, MobiNET Agent, MobiKEY Classic and MobiKEY Classic 2, 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, MobiKEY Classic 2 and MobiKEY Fusion devices are protected by copyright, international treaties, and various patents, including Route1's U.S. Patents 7,814,216 and 7,739,726, Canadian Patent 2,578,053, and other patents pending. The MobiKEY Classic 2 is also protected by U.S. Patents 6,748,541 and 6,763,399, and European Patent 1001329 of Aladdin Knowledge Systems Ltd. and used under license. Other patents are registered or pending in various countries around the world.

Other product and company names mentioned herein may be trademarks of their respective companies.

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