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Route1, Inc. (ROIUF) Acquires Spyrus Solutions

September 15, 2021 4:17 PM EDT

Route1 Inc. (OTCQB: ROIUF) today reported it has acquired Spyrus Solutions, Inc.

Based in San Jose, California, Spyrus develops and manufactures cryptographic products, including the SPYCOS smart card operating system, enabling strong protection for data-in-motion, data-at-rest and data-in-process. For more than 20 years, Spyrus has delivered encryption, authentication, and digital content security products to U.S. defense and civilian agencies, international government, financial, and healthcare enterprises.

With the acquisition of Spyrus, Route1 is proactively responding to the marketplace to better achieve the mission of leveraging technology to build smarter, safer communities with:

  • Products providing safe application execution environment - mitigating the risk of malware introduction;
  • Modules to create secure Internet of Things interactions across all sectors - from military applications to consumer electronics;
  • Cryptographically enabled MicroSD cards to secure mobile communications for governments and citizens; and
  • Next generation of high-performance encrypted data storage devices - from portable flash drives to embedded solid state drives - complemented with high assurance management and control platform.

Spyrus Products

  • USB Solid State Drives - high assurance data encryption devices with Rosetta-based cryptographic elements for most sensitive military, government and commercial applications.
  • MicroSD Format Cryptographic Tokens and Storage Devices - cryptographic authentication and encryption capabilities combined with secure storage in a form factor that can be deployed, amongst other applications, within mobile phones and devices.
  • DevicePatrol - comprehensive endpoint management platform, providing the highest levels of data at rest protection ("DAR") and mitigating the risk of security breaches to an organization's infrastructure.
  • NcryptNshare - software solution that allows geographically dispersed teams to securely collaborate over unsecured communication paths, ensuring the protection of critical data and critical workflows.

The Spyrus Team

Route1 has entered into new employment or independent contractor agreements with the core group of Spyrus hardware and software engineers, as well as sales and support talent. In aggregate Route1 will be adding seven additional team members.

"The acquisition of Spyrus is a milestone event for Route1. It is the first acquisition made by Route1 to acquire additional products and technology in the data security arena. This acquisition is about so much more than technology; it is about talent. With today's acquisition, Route1 is positioning itself to grow its data security capability, which is currently driven by its flagship MobiKEY technology, to meet the growing demand to secure data, devices and networks", said Tony Busseri, Route1's President and CEO. "As a company, Spyrus is an unfinished business. Leveraging Route1's management, engineering, and sales and marketing capabilities - in which we have invested aggressively over the last couple of years - should allow us to release the potential of Spyrus."

Transaction Summary

Route1 acquired Spyrus for cash or assumption of debt obligations of approximately US $0.58 million with $0.22 million paid at closing and the balance paid out over the next 12 months. In addition, Route1 has agreed to pay the prior owners of Spyrus additional compensation based on certain gross profit metrics being met (the "Earnout").

The Earnout payment for calendar years 2021-2024 will work as follows:

  • For the remainder of CY 2021 - From date of closing to Dec 31-21, the prior owners will receive 20% of Spyrus' gross profit above US $1.0 mm
  • For each of CY 2022, 2023 and 2024 - the prior owners will receive 20% of Spyrus' gross profit once a minimum gross profit threshold of US $1.5 mm is met
  • If the gross profit in any one year exceeds US $2.5 mm, the Earnout percentage increases from 20% to 25%.

Route1 has acquired cash, accounts receivable net of reserves, and other current assets not including inventory worth US $0.3 mm. Route1 also has assumed trade accounts payable, customer deposits and deferred revenue of US $0.3 mm. Deferred revenue makes up US $0.1 mm of the liability assumption.

Also, Route1 acquired inventory with a book value of US $1.3 mm that when adjusted for its market value will provide full asset coverage for the purchase price paid.



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