Route1's Sept. 30 MobiKEY subscriber count at 15,989

2015-10-15 10:05 ET - News Release

Mr. Tony Busseri reports

ROUTE1 PROVIDES Q3 OPERATIONS UPDATE

Route1 Inc. has provided an update on market drivers, its operations and business development activity.

MobiKEY paid, active subscribers

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

Paid, active         Closing   Quarterly    Quarterly    Quarterly    Quarterly
subscribers       subscriber  subscriber      average   subscriber   subscriber
                       count      growth  revenue per      revenue      revenue
                                   count   subscriber                    growth

Sept. 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
Dec. 31, 2014         14,792         147         $334   $1,221,000      $10,000
Sept. 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 chief executive officer, said: "[The third quarter] 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 defence 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 Chief Information Officer with the Department of Commerce, and a number of components with the U.S. 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 U.S. Marine Corps, Route1 has appointed Michael Seiler as program manager, Navy/USMC, effective Oct. 19, 2015. Previously, he was the solution development leader, Navy Marine Corps Intranet (NMCI), for HP. Mr. Seiler is well versed in the MobiKEY technology and brings a deep knowledge of each of the two DOD components. Mr. Seiler 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 United States and the professional services vertical in Canada, as most recently evidenced by its Oct. 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's 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 per cent of data loss, and the majority of these breach incidents are accidental, stemming from improper access protocols. Additionally, Trend Micro recently found that 41 per cent 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 work force 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 [virtual private network] or a browser."

Product development update

              RELEASE(S) DURING THE THIRD QUARTER

Technology release          Attributes                        Date                     

MobiKEY 4.5 for Android     - Android OS support      Aug. 3, 2015           

          EXPECTED RELEASES DURING THE FOURTH QUARTER

Technology      Attributes                                      Timing              
release                                                                     

MobiKEY 5.0     - Linux OS support; specifically        Before Oct. 31,  
                Mint, Ubuntu, Fedora and CentOS                   2015                
                - Bootable MobiKEY, which requires 
                a Fusion3 or MC3 enabling device; 
                feature not a stand-alone offering                                         
                - Secure encrypted storage using ID-1                       
                cards; requires a Fusion3 or MC3                           
                enabling device; feature not a                              
                stand-alone 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                         
MobiKEY 5.1     - Support for a second ID-1 card for    Before Nov. 30, 
                elevated privileges                               2015                
MAP 3.0         - Improved UX                           Before Nov. 30, 
                - Bugs fixes and other enhancements               2015                
MobiKEY 5.0     - Support iOS 9                         Before Dec. 31, 
for iOS         - Improved UX                                     2015                
                - Bug fixes and other enhancements                         

                        FUTURE DEVELOPMENT

Technology      Attributes                                Date              
release         

MobiKEY 5.0     - Improved UX                          Q1 2015      
for Android     - Bug fixes and other enhancements                 
MobiKEY 5.2     - New keyboard driver                  Q2 2015      
                - Multimonitor support                             
                - New protocol -- performance                        
                optimization                                        

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

Share repurchase program

On Sept. 22, 2015, the company announced with approval from the TSX Venture Exchange its intention to make a normal course issuer bid. The normal course issuer bid permits the company to purchase for cancellation up to 5 per cent of the common shares in the public float. The maximum number of shares allowed for repurchase is 18,262,570. Purchases under the normal course issuer bid commenced Sept. 27, 2015, and will end Sept. 26, 2016, or the date upon which the maximum number of common shares have been purchased by the company. As of Sept. 30, 2015, the company has purchased a total of 169,000 common shares under the normal course issuer bid.

Since the first normal course issuer bid was announced on Feb. 28, 2012, Route1 has repurchased a total of 23,838,200 of its common shares, representing 6.1 per cent of Route1's common shares outstanding as at Feb. 28, 2012.

Investor relations

Route1 has engaged Proconsul Capital Inc. 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 30 days of 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 2015 third quarter and year-to-date financial results

Route1 will report its third quarter and year-to-date financial results for the period ended Sept. 30, 2015, on Wednesday, Nov. 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 a.m. EST on Wednesday, Nov. 25, 2015, at the Omni King Edward Hotel, 37 King St. E, Toronto, Ont., M5C 1E9.

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