Route1 Inc.
TSX VENTURE : ROI

Route1 Inc.

October 15, 2015 09:00 ET

Route1 Provides Q3 Operations Update

TORONTO, ONTARIO--(Marketwired - Oct. 15, 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 market drivers, its operations and business development activity.

MobiKEY Paid, Active Subscribers

As at September 30, 2015, Route1 had 15,989 paying, active subscribers.

Paid, Active Subscribers
In CAD Dollars
Closing
Subscriber
Count
Quarterly
Subscriber
Growth
Count
Quarterly
Average
Revenue per
Subscriber
Quarterly
Subscriber
Revenue
Quarterly
Subscriber
Revenue
Growth
September 30, 2015 15,989 579 $362 $1,424,000 $78,000
June 30, 2015 15,410 398 $353 $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
Note: The fourth quarter of each calendar year is seasonally a weaker quarter for user growth due to timing of U.S. government budget approvals and procurement slowdowns to accommodate the holiday season.

Tony Busseri, Route1's CEO, said, "Q3 was a very successful quarter for Route1. We achieved a record number of subscribers, subscriber based revenue and average revenue per subscriber. We are continuing to increase our customer and user count among government agencies. Our success with some of the most security conscious organizations in the world is the ultimate seal of approval for our MobiKEY technology and is serving to attract customers in the broader corporate marketplace who are recognizing the business necessity of secure mobile access on demand."

Business Development Update

Route1 has continued to see strong interest in its MobiKEY technology from civilian, intelligence and defense components within the U.S. government.

The reported June 2015 data breaches at the Office of Personnel Management (OPM) brought needed attention to the lack of full compliance with two-factor authentication policy (HSPD-12), the use of unaccredited technology within government networks and failure to properly protect data-at-rest within certain components of the U.S. government. It also has created a driver for many additional civilian components to reconsider their approach to secure mobility and authentication. By way of example, Route1 has had renewed interest in the MobiKEY technology from the Office of the CIO with the Department of Commerce, and a number of components with the Department of Agriculture (USDA) have engaged Route1 in the potential use of MobiKEY.

Route1 is also benefiting from continued, growing awareness of MobiKEY within the Department of Defense (DOD). During the current calendar year, Route1 has worked with a number of groups within the U.S. Air Force and the U.S. Marine Corps that are directly tied to the positive user results realized with other components of the DOD, including the Department of the Navy and the Joint Information Technology Service Provider Pentagon (JITSPP).

Route1 expects that these and other civilian and DOD proof of concepts and pilots may lead to further paid user adoption of the MobiKEY technology in 2016 and beyond. If and when procurement occurs, it will most likely follow past Route1 experiences of initial orders in the tens or hundreds of users followed by user growth over time.

To accelerate and expand the adoption of the MobiKEY technology within the Department of the Navy and the Marine Corps, Route1 has appointed Michael Seiler as Program Manager, Navy/USMC, effective October 19, 2015. Previously he was the Solution Development Leader, Navy Marine Corp Intranet (NMCI) for HP. Michael is well versed in the MobiKEY technology and brings a deep knowledge of each of the two DOD components. Michael will report directly to Brian Brunetti, President of Route1.

Lastly, the previously reported accreditation process for the U.S. Fish and Wildlife Service (FWS) DEFIMNET platform that was installed at a Department of Interior (DOI) secure hosting facility earlier this calendar year is now expected to be concluded during the fourth quarter of 2015 or the first quarter of 2016. Once accredited, Route1 expects that the MobiKEY technology will be made available for use by FWS and the broader DOI. The accreditation process is being led by a contractor to the DOI and the timing of the DEFIMNET's authority to operate (ATO) is not directly controlled by Route1. Route1 also continues to believe that the DOI will be a productive MobiKEY account for Route1 once the ATO is received.

Route1 also continues to pursue business development opportunities in the financial services vertical in the U.S. and the professional services vertical in Canada, as most recently evidenced by its October 1, 2015 announcement of Fasken Martineau as a new client. Route1 expects to invest more heavily in increasing its presence in the enterprise marketplace in 2016.

Brian Brunetti, Route1 President, said, "We are seeing greater recognition of the importance of fully securing authentication for all enterprise users, especially as it pertains to mobile devices. According to a recent study from Intel Security, internal corporate employees account for 43% of data loss, and the majority of these breach incidents are accidental, stemming from improper access protocols. Additionally, Trend Micro recently found that 41% of all breaches are the result of lost or stolen mobile devices. Failing to secure sensitive data in a mobile environment can lead to serious legal consequences for enterprises, as evidenced by a U.S. District Court's recent green light on a class action lawsuit brought against Coca-Cola as a result of lost company laptops resulting in a breach of sensitive employee information. These and countless other incidents are forcing business leaders to realize that data security is not only a technology issue, but also a boardroom issue of the highest importance."

Mr. Brunetti continued, "An increasingly mobile workforce presents massive risks to confidential or sensitive client and enterprise information. Mobile devices - tablets or laptops, whether enterprise-issued or employee-owned that do not utilize correct security technology, are one of the biggest reasons for the countless data breaches we see today. If data is stored on a mobile device, it will most likely be compromised when that device is lost or stolen. Additionally, introduction of malware to an enterprise's network is also a strong possibility when mobile devices connect remotely as nodes, such as through a VPN or a browser."

Product Development Update

Release(s) during the third quarter:

Technology Release Attributes Date
MobiKEY 4.5 for Android • Android OS support August 3, 2015

Expected releases during the fourth quarter:

Technology Release Attributes Timing
MobiKEY 5.0 • Linux OS support; specifically Mint, Ubuntu, Fedora and CentOS
• Bootable MobiKEY - requires a Fusion3 or MC3 enabling device, feature not a standalone offering
• Secure encrypted storage using ID-1 cards - requires a Fusion3 or MC3 enabling device, feature not a standalone offering
• iPv6 support
• Mac OS X audio support using 10.10 and higher
• Support of Win 10.0 and OS X 10.11 operating systems
• Bugs fixes and other enhancements
Before October 31, 2015
MobiKEY 5.1 • Support for a second ID-1 card for elevated privileges Before November 30, 2015
MAP 3.0 • Improved UX
• Bugs fixes and other enhancements
Before November 30, 2015
MobiKEY 5.0 for iOS • Support iOS 9
• Improved UX
• Bugs fixes and other enhancements
Before December 31, 2015

Future development:

Technology Release Attributes Date
MobiKEY 5.0 for Android • Improved UX
• Bugs fixes and other enhancements
Q1 2015
MobiKEY 5.2 • New keyboard driver
• Multi-monitor support
• New protocol - performance optimization
Q2 2015

Route1 also has a number of additional ongoing development initiatives that for competitive reasons it cannot disclose to the marketplace at this time.

Share Repurchase Program

On September 22, 2015, 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 5% of the common shares in the public float. The maximum number of shares allowed for repurchase is 18,262,570. Purchases under the NCIB commenced September 27, 2015 and will end September 26, 2016, or the date upon which the maximum number of common shares have been purchased by the Company. As of September 30, 2015 the Company has purchased a total of 169,000 common shares under the NCIB.

Since the first NCIB was announced on February 28, 2012, Route1 has repurchased a total of 23,838,200 of its common shares, representing 6.1% of Route1's common shares outstanding as at February 28, 2012.

Investor Relations

Route1 has engaged Proconsul Capital Inc. (Proconsul) to provide investor relations services. Route1 will pay Proconsul a monthly retainer of $7,000 and reimburse any preapproved expenses. The consulting contract renews automatically on a month to month basis and may be terminated by either party at any point upon thirty days written notice. Neither Proconsul, nor any Proconsul principals, have any interest, directly or indirectly, in Route1 or its securities. Proconsul and Proconsul principals have the right and intend to, from time to time, purchase Route1 securities for investment purposes.

Reporting of Q3 and YTD 2015 Financial Results

Route1 will report its third quarter and year-to-date financial results for the period ended September 30, 2015 on Wednesday, November 25, 2015.

Annual and Special Meeting of Shareholders

Route1's annual and special meeting of the holders of its common shares will be held at 9:00 am EST on Wednesday, November 25, 2015 at The Omni King Edward Hotel, 37 King Street East, Toronto, Ontario, M5C 1E9.

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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