Route1 Inc.
TSX VENTURE : ROI

Route1 Inc.

April 16, 2009 07:30 ET

Route1 Reports Fourth Quarter and Fiscal 2008 Financial Results

- Gross margin increases to 50 percent in the fourth quarter

- Qwest Government Services rollout expected to strengthen balance sheet

- Current book of business surpasses Route1's breakeven point

TORONTO, ONTARIO--(Marketwire - April 16, 2009) - Route1Inc. (“Route1” or “the Company”)(TSX VENTURE:ROI), the trusted provider of security and identity management network solutions, today announced its 2008 Fiscal Year and Fourth Quarter financial results as at and for the three months and year ended December 31, 2008.

For the year ended December 31, 2008, Route1 reported revenues of $1.2 million versus $1.1 million during the corresponding period in 2007. Deferred revenue increased by 339 percent to $1.7 million in 2008, compared to $388,337 as at December 31, 2007. Gross profit for the year amounted to $357,995 or 31 percent as a percentage of revenues, versus a deficit of $285,387 in 2007. As the Company ramps up the sales of its products and subscription-fee revenue stream, gross margin on a normalized basis is expected to substantially increase. Throughout fiscal 2008, management diligently monitored and reduced operating expenses to $5.9 million from $7.2 million, while growing revenues and deferred revenues. Net loss for the year ended December 31, 2008 amounted to $5.5 million or $0.02 per share, compared to a net loss of $7.5 million or $0.03 per share.

For the three-month period ended December 31, 2008, revenues increased by 131 percent to $332,153 compared to $143,768 for the same period in 2007. Gross profit for the three-month period was $167,017 or 50 percent as a percentage of revenues, versus a deficit of $113,516 during the fourth quarter of 2007. Operating expenses during the period were lower by 41 percent at $1.0 million versus $1.7 million during the corresponding quarter in 2007. Net loss for the three months ended December 31, 2008 was $829,535 or $nil per share, compared to a net loss of $1,856,444 or $0.01 per share for the same period in 2007. In the prior period's net loss was a one-time write-down of an investment for $74,999.

“I am pleased with our progress in building and securing a number of high value and growth relationships in the U.S. and Europe in 2008, which we expect will contribute to a rapid ramp up in sales, profits and cash flows in 2009 and beyond,” said Andrew White, President and CEO, Route1 Inc. “Based on our current book of business and commitments, we will have surpassed our breakeven point and are extremely excited to move forward with our plan to accelerate revenue growth and demonstrate Route 1's earning power.”

As at December 31, 2008 the Company had cash and cash equivalents amounting to $2.1 million compared to $6.3 million at December 31, 2007. On January 7, 2009 the Company announced the signing of an agreement, whereby Qwest Government Services Inc. (“Qwest”) committed to purchase a minimum of 30,000 Route1 MobiKEY(TM) devices along with TruOFFICE(TM) subscription-based services, which is valued at approximately US$8.0 million. Under the terms of this agreement, Route 1 will book revenues and receive payments throughout 2009, with full payment of the contract value to be expected no later than January 30, 2010. As a result, the Company expects the balance sheet to gain strength by year-end; however management continues to closely manage cash flow to maintain the balance sheet and service the Company's capital requirements.

As at December 31, 2008 the share capital consisted of 350,388,115, and 392,581,348 on a basic and fully diluted basis, respectively.

                                                 
  (in thousands of Canadian dollars, except per share amounts)   As at and for the
three months ended
As at and for the
year ended
 
                                                 
        Dec. 31,     Dec. 31,     Change       Dec. 31,     Dec. 31,     Change    
        2008     2007     $ %       2008     2007     $ %    
  STATEMENT OF OPERATIONS                                            
  Devices $ 25   $ 46   $ (21) (45) %   $ 444   $ 633     (189) (30) %  
  Services   307     98     209 214       725     374     351 94    
    Total revenues   332     144     188 131       1,169     1,007     162 16    
    Cost of revenues   165     257     (92) (36)       811     1,292     (481) (37)    
    Gross margin (loss)   167     (113)     280 249       358     (285)     643 226    
  Operating expenses                                            
    General administration   277     667     (390) (59)       2,387     2334     53 2    
    Research and development   409     523     (114) (22)       1,947     2245     (298) (13)    
    Selling and marketing   281     424     (143) (34)       1,338     2308     (970) (42)    
    Amortization   36     72     (36) (50)       214     285     (71) (25)    
    Total operating expenses   1,003     1,686     (683) (41)       5,886     7,172     (1,286) (18)    
  Loss before undernoted   (836)     (1799)     963 53       (5,528)     (7,457)     1,929 26    
  Interest income   6     18     (12) (67)       81     68     13 19    
  Write-off of investment   -     (75)     75 -       -     (75)     75 -    
  Net loss for the period $ (830)   $ (1,856)   $ 1,026 55     $ (5447)   $ (7,464)     2,017 27    
  Loss per share $ (0.00)   $ (0.00)   $ (0.00)         -     $ (0.02)   $ (0.03)   $ 0.01 33 %  
                                                 
  CASH FLOW INFORMATION                                            
  Operating activities $ 548   $ (1,381)   $ 1,929       $ (4,089)   $ (6,720)   $ 2,631      
  Investing activities   (4)     (75)     71         (100)     (334)     234      
  Financing activities   (9)     6,984     (6,993)         6     11,871     (11,865)      
  Net cash inflow (outflow)   535     5,528     (4,993)         (4,183)     4,817     (9,000)      
  Cash, beginning of period   1,585     775     810         6,303     1,486     4,817      
  Cash, end of period $ 2,120   $ 6,303   $ (4,183)       $ 2,120   $ 6,303   $ (4,183)      
                                                 
  BALANCE SHEET INFORMATION AS AT DECEMBER 31                          
  Working capital $ 1,433   $ 6,196   $ (4,763)       $ 1,433   $ 6,196   $ (4,763)      
  Total assets $ 4,221   $ 8,325   $ (4,104)       $ 4,221   $ 8,325   $ (4,104)      
  Obligation under capital lease $ 3   $ 91   $ (88)       $ 3   $ 91   $ (88)      
  Shareholders’ equity $ 1,591   $ 6,652   $ (5,061)       $ 1,591   $ 6,652   $ (5,061)      
                                                 

ABOUT ROUTE1 INC.

Route1 deliversaward-winning security and identity management solutions tocustomers world-wide. These solutions provideuniversal, secure access to alldigital resources and sensitive data. At the heart of Route1's solutions is MobiNET, a communicationsand service delivery platform focused on identity management and entitlement-based access toresources. Route1's patent-pending solutions are based on FIPS-140-2cryptographic modules, and simplify the process ofmeeting increasingly stringent regulatory requirements around privacy andsecurity. Headquartered in Toronto, Route1 is listed on the TSX VentureExchange (symbol: ROI). For more information, visit www.route1.com.

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

Certain statementsin this press release may contain words such as "could","expects", "may", "anticipates","believes", "intends", "estimates","targets", "envisions", "seeks" and other similarlanguage and are considered forward-looking statements or information underapplicable securities legislation. These statements are based on Route1'scurrent expectations, estimates, forecasts and projections about the operatingenvironment, legal environment, economies and markets in which Route1operates. These statements are subject to important assumptions, risks anduncertainties, which are difficult to predict and the actual outcome may bematerially different from those contemplated in forward-lookingstatements. Unless otherwise required by applicable securitieslaws, Route1 disclaims any intention or obligation to update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise.

(C)2009 All rightsreserved. Route1, the Route1 Logo, Mobi, Route1 MobiKEY, Route1 TruOFFICE,Route1 PurLINK, Route1 EnterpriseLIVE, and Route1 MobiNET are either registeredTrademarks or Trademarks of Route1 Inc. in the United States and or Canada. Allother trademarks and trade names are the property of their respective owners.

The TSX Venture Exchange has not reviewed or approved the contents of this press release and does not accept responsibility for its adequacy or accuracy.

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