Route1 Inc.

Route1 Inc.

August 25, 2011 13:05 ET

Route1 Reports Second Quarter Financial Results

TORONTO, ONTARIO--(Marketwire - Aug. 25, 2011) - Route1 Inc. (TSX VENTURE:ROI) ("Route1" or the "Company"), a security and identity management company, today announced its financial results for the three month period ended June 30, 2011.

For the three-month period ended June 30, 2011, revenues remained unchanged at $1.2 million versus the corresponding period in 2010. During the same period, subscription revenue increased by 7 percent to $1,067,084 from $995,065. Gross profit for the second quarter of 2011 amounted to $952,709 or 77 percent of revenues, versus $1,069,352 or 88 percent of revenues during the same period in 2010. The decrease in gross profit margin is attributable to a one-time sale of 1,000 MobiKEY Classic replacement devices to a component of the U.S. Department of Homeland Security.

Net loss for the period amounted to $264,037 or nil per share, compared to a net loss of $617,728 or nil per share during the second quarter of 2010. Excluding the impact of stock based compensation amounting to $299,782, Route1's net income would have been $35,745. EBITDA for the second quarter remained positive at $0.1 million versus a negative $0.2 million during the second quarter of 2010.

As at June 30, 2011, Route1 had cash and cash equivalents amounting to $254,815, and the Company had no bank indebtedness.

Quarter Ended
In 000s of CAD dollars
Jun 30
Mar 31
Dec 31
Sept 30
June 30 2010
Revenue 1,238 1,417 1,777 1,381 1,207
Gross Margin 953 1,207 1,699 1,031 1,069
EBITDA 70 205 440 (284 ) (208 )
Operating Income (Loss) 30 154 405 (307 ) (228 )
Net Income (Loss) (264 ) 61 10 (1,159 ) (618 )

"While we continue to wait on a number of customers to advance their large scale roll-outs, I am pleased with our company's ability to continue to build our sales pipeline to complement what we are about to achieve in the near term," noted Tony Busseri, CEO of Route1 Inc. "We continue to make progress with our customers and remain confident in Route1's ability to demonstrate significant revenue and cash flow growth in the very near future."

As at August 25, 2011 Route1 had 15,384 paid, active TruOFFICE application software subscribers. Further, the U.S. Navy has commenced its roll-out and as a result has ordered 1,206 subscriptions which are expected to be provisioned shortly. The Company has also commenced shipment of MobiKEY Fusion device to support the roll-out.

TruOFFICE Subscribers
(in 000s of CAD dollars for Revenue)
Jun 30
Mar 31
Dec 31
Sept 30
June 30
Closing Number 15,722 15,642 15,654 15,648 13,451
Average Number (1) 15,694 15,672 15,635 14,585(2 ) 15,651(3 )
Revenue per Subscriber $245 $251 $253 $248 $233
Revenue $960 $982 $958 $904 $912
  1. Calculated by taking the average of the closing TruOFFICE subscriber number at the end of the month for each of the three months during the quarter.
  2. For the three months ended September 30, 2010, the ending subscriber number includes the 1,533 subscriptions sold to US DHS, CBP on September 16, 2010. Revenue recognition for the new subscriber service, as per Company policy, commenced in the month of October 2010.
  3. During the second quarter of fiscal year 2010, current management evaluated the various pricing models which were used by the previous management team to arrive at a subscriber total. Current management, after reviewing the sustainable and upward trend seen on a revenue per subscriber basis, elected to terminate any heavily discounted and/or free subscriptions as of June 30, 2010. All of these discounted and/or free service arrangements were with channel partners and had been put in place by past management.

Shareholder Rights Plan

Today, the Board of Directors of Route1 adopted a shareholder rights plan (the "Rights Plan"). The Rights Plan has been adopted by the Board of Directors to ensure the fair treatment of shareholders in connection with any take-over offer for Route1, and to provide the Board of Directors and shareholders with additional time to fully consider any unsolicited take-over bid. The Rights Plan will also provide the Board of Directors more time to pursue, if appropriate, other alternatives to maximize shareholder value.

The Rights Plan received conditional approval from the TSX Venture Exchange on August 24, 2011 and is awaiting approval by shareholders at the Company's upcoming annual and special meeting to be held on September 26, 2011. If ratified by the shareholders, the Rights Plan will have a term of three years. The Rights Plan will only remain effective upon shareholder approval. If the resolution approving the Rights Plan is not passed by the shareholders, the Rights Plan will terminate immediately.

Route1 has not adopted the Rights Plan in response to any specific proposal to acquire control of the Company. The Rights Plan is similar to plans adopted by other Canadian companies and approved by their shareholders.

The Rights Plan is not intended to prevent take-over bids. Under the Rights Plan, those bids that meet certain requirements intended to protect the interests of all shareholders are deemed to be "Permitted Bids". Permitted Bids must be made by way of a take-over bid circular prepared in compliance with applicable securities laws and remain open for sixty days.

Under the Rights Plan, Rights have been issued and attached to all common shares of Route1 issued and outstanding as of the close of business on August 25, 2011. Rights will be issued upon any future issuance of any common shares of Route1 that occurs prior to the Separation Time (as defined in the Rights Plan).

In the event a take-over bid does not meet the Permitted Bid requirements of the Rights Plan and the conversion of the Rights is triggered pursuant to the provisions of the Rights Plan, the Rights will entitle shareholders, other than any shareholder or shareholders making the take-over bid, to purchase additional common shares in Route1 at a substantial discount to the market value at the time.

Organization Update

Upon the recommendation of Tony Busseri, Brian Brunetti has been promoted to President and COO.

"The change in Brian's title to include President reflects his significant contribution and leadership role with Route1," noted Tony Busseri, CEO of Route1 Inc. "Brian and I have a strong partnership and we will continue to use the trust inherent in our partnership to create value for our shareholders."

Second Quarter 2011 Conference Call Details

Route1 will hold a conference call Thursday, August 25 at 4:00 p.m. Eastern Standard Time (EST) to discuss the financial results for the second quarter 2011.

Participants should dial 1-719-325-2322 or 1-888-523-1244 at least 10 minutes prior to the conference time of 4:00 p.m. EST. For those unable to attend the call, a replay will be available after 7:00 p.m. EST at 1-858-384-5517 or 1-877-870-5176 pass code 6628074 until midnight, September 8, 2011.


Route1 delivers industry-leading security and identity management solutions to enterprises worldwide – 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:

This news release, required by applicable Canadian laws, and 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., 2011. 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.

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.

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