Route1 Reports 2007 Second Quarter Results



    TORONTO, Aug. 16 /CNW/ - Route1 Inc.(TM) (TSX-V:ROI), the trusted
provider of security and identity management network solutions, today
announced its 2007 Second Quarter financial results as at and for the three
and six months ended June 30, 2007.
    Revenue for three months ended June 30, 2007 was $488,000, an increase of
$334,000 or 217%, from $154,000 for the comparable period in the preceding
year and an increase of $80,000 or 20% for the previous quarter ended
March 31, 2007. Included in revenues this quarter is higher percentage of
hardware revenues that reflects the Company's recent unbundling in its pricing
strategy of hardware and services. Under this new strategy, resellers are now
placing stock orders for the hardware and carrying inventory whereas in the
past they would wait until they had an order in hand before purchasing the
combined hardware and services. The subscription-based services revenue
associated with these hardware revenues will be recognized into revenue over
the next few months when these subscriptions become activated.
    Gross loss for three months ended June 30, 2007 was $9,000, an
improvement of $255,000, from a $264,000 loss for the comparable period in the
preceding year. The negative gross margin for the quarter is due primarily to
the higher percentage of hardware revenues to subscription-based services
revenues as discussed above and combined with volume discounts offered to
resellers for placing stock orders in the quarter. The cost of revenue number
includes the variable/direct cost of hardware and software licenses, and also
the fixed/indirect costs of providing the MobiNET subscription services which
includes but is not limited to support personnel, system hardware amortization
and facilities which are not directly variable and are not expected to
increase significantly in the short term as the number of subscribers
increases. The Company anticipates that the gross margin as a percentage of
revenue will increase as the Company builds its subscriber base.
    The Company's losses for the quarter were $2.0 million ($0.01 per share),
which is an improvement of $400,000, from a $2.4 million ($0.01 per share) for
comparable period in the preceding year. Operating expenses totalled
$2.0 million for the quarter, which is an improvement of $200,000 or 6%, of
$2.2 million for the comparable period in the preceding year, that consisted
primarily of G&A (31%), Selling and Marketing (32%), R&D (33%) and
amortization (4%).
    Total Assets increased 49% to $4.8 million from $3.2 million a year
earlier. This includes cash and cash equivalents of $2.4 million. As at
August 15, 2007, the share capital consisted of 282,492,449 common shares
outstanding.
    "The progress that we have made this quarter in developing our product
and services offerings, and strengthening our distribution channels is in line
with our strategic plan for the Company," said Andrew White, President and CEO
of Route1. "And with the addition of Jeff Denberg as our new Senior Vice
President of Sales, and his experience in dealing with the information
technology needs of enterprise customers, will prove invaluable as we continue
to position Route1 as the premiere solution to today's mobile workforce. We
expect Jeff's expertise and leadership in executing sales strategies to
accelerate Route1's penetration of our targeted market segments."


    
                                        -------------------------------------
    (in thousands of Canadian            As at and for the  As at and for the
    dollars, except per share amounts)  three months ended   six months ended
                                        -------------------------------------
                                          June 30  June 30  June 30  June 30
                                             2007     2006     2007     2006
                                        -------------------------------------
    STATEMENT OF OPERATIONS
    Revenues                                  488      154      896      281
    Cost of revenues                          497      418      864      807
                                        -------------------------------------
    Gross margin (loss)                        (9)    (264)      32     (526)
                                        -------------------------------------
    OPERATING EXPENSES
    General and administrative                635      745    1,110    1,351
    Research and development                  679      675    1,158    1,205
    Selling and marketing                     640      660    1,384    1,088
    Amortization                               74       82      136      168
                                        -------------------------------------
    LOSS BEFORE UNDERNOTED                 (2,037)  (2,426)  (3,756)  (4,338)
    Interest income                            25       16       34       26
    Income (loss) from
     discontinued operations                    -        -        -      457
                                        -------------------------------------
    Net loss for the period                (2,012)  (2,410)  (3,722)  (3,855)
                                        -------------------------------------
                                        -------------------------------------
    Loss per share                          (0.01)   (0.01)   (0.01)   (0.02)

    CASH FLOW INFORMATION
    Operations (including non-cash
     working capital changes)              (2,040)  (2,015)  (3,068)  (3,637)
    Financing                                 700      (53)   4,802    4,439
    Investing                                 (75)    (138)    (260)    (120)
                                        -------------------------------------
    Cash flow                              (1,415)  (2,207)     934      682
    Cash and cash equivalents,
     beginning of period                    3,835    3,727    1,486      838
                                        -------------------------------------
    Cash and cash equivalents,
     end of period                          2,420    1,520    2,420    1,520
                                        -------------------------------------
                                        -------------------------------------
    BALANCE SHEET INFORMATION
    Working capital                         2,312    1,222    2,312    1,222
    Total assets                            4,765    3,201    4,765    3,201
    Shareholders' equity                    3,077    2,017    3,077    2,017
    


    Given the closeness of the Company's Annual General Meeting on August 29,
2007, it has decided not to hold a conference call in connection with the
release of these quarterly financial results.

    About Route1 Inc.

    Route1 is the trusted provider of security and identity management
network solutions that are redefining today's workplace. At the heart of
Route1's solutions is MobiNET, a communications and service delivery platform
focused on identity management and entitlement-based access to resources.
Leveraging the power of MobiNET is the award-winning MobiKEY, an
ultra-portable computing device that securely connects users to the myriad of
MobiNET services from any Internet-enabled Windows-based PC. This
patent-pending computing solution is embedded on a smart-card enabled,
cryptographic USB device, making it one of the most powerful and easy-to-use
secure computing solutions available today. Combined with TruOFFICE, Route1's
secure, remote access service, MobiKEY enables users to connect to their
desktop data, applications and network resources. Route1's patent-pending
solutions, based on FIPS-140-2 cryptographic modules, meet the stringent
security needs and high standards mandated by all levels of government. They
have been evaluated by ICSA Labs and certified by the CSE. As a Company with
high regard for intellectual property, Route1 continues to encourage and
nurture innovation across its talented team. Headquartered in Toronto, Route1
is listed on the TSX Venture Exchange (symbol: ROI) and has offices and agents
in New York, Florida, the UK, Germany, and Latin America. For more
information, visit www.route1.com.

    This news release 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.

    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.

    (C)Route1 Inc. All rights reserved. Route1, the Route1 Logo,
    Mobi, Route1 MobiKEY, TruOFFICE, and Route1 MobiNET 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.





For further information:

For further information: Investor Relations, Anthony Rzepka, Executive
Vice President and Chief Financial Officer, Tel: (416) 848-8391, Email:
ir@route1.com; Amir Nayeri, Genoa Management (for Route1), Tel: (416)
962-3300, Email: anayeri@genoa.ca

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