Zaio Releases Third Quarter 2007 Financial Results

    Revenues Almost Triple from Prior Quarter

    CALGARY, Nov. 19 /CNW/ - Zaio Corporation (TSX-V: ZAO) is pleased to
announce their financial results for the three months and nine months ended
September 30, 2007. Revenue in the third quarter increased to $4.9 million
compared to $51,000 in the third quarter of 2006 bringing the total revenue
for the first nine months of the year to $6.7 million compared to $113,000
last year. On a quarter over quarter basis, revenue increased 188% from
$1.7 million last quarter to $4.9 million this quarter. Net loss for the
quarter was $3.2 million and $6.9 million for the nine months compared to
$289,000 and $666,000 respectively in 2006. It is important to note that the
loss reported for the quarter includes $2 million in non cash items and
approximately $800,000 of expenses that are either non-recurring or relate
directly to Zone sale efforts and training of photographers and Zone
Appraisers. The effective monthly burn rate for the quarter was $300,000 which
is funded by the sale of 35 Appraisal Zones per month. During the quarter,
monthly Zone sales averaged 68, almost double the break even level.
    During the third quarter, the Company acquired the net assets of
Kirchmeyer & Associates, Inc., Real Info Inc. and Virtual Imaging Corporation
with offices in Buffalo, New York and Chicago, Illinois. The acquisitions are
now divisions of Zaio's Tempe, Arizona based subsidiary, Zaio Inc. The
business units provide services to the real estate, appraisal and mortgage
banking industries and in the last quarter contributed 83% of the Company's
revenue. The combined cost of the acquisitions was $7.2 million.

    Third Quarter 2007 Financial Review

    This was the first quarter in which the Company recognized revenue, other
than initial deposits, from the sale of licenses to Zone Appraisers. A total
of $713,000 in revenue was recorded related to 127 zones which were handed
over to appraisers for completion of the valuation process. A further $115,000
was included in revenue from deposits made on the sale of 204 zones during the
quarter. Revenue from the various units in Zaio Inc. amounted to $4.1 million
with half of that amount coming from the Kirchmeyer division. Total revenue
for the quarter was $4.9 million. The Company has experienced an increase in
orders of traditional appraisal products since the end of the third quarter.
    The software license fee per zone remains at US$9,800. The license fee
includes a US$500 administration fee payable upon signing with a discount is
available for multiple zone purchases. Only this administration portion is
recognized as revenue at the time of the sale. The balance of the fee is
included in revenue once the licensees have been supplied with photographs and
property data for their zones, thereby allowing them to proceed with the
appraisal valuation process. Until this time the amount is recorded as
deferred revenue on the balance sheet. The Company does not record the
deferred portion of the revenue until the funds are actually received. It is
expected that 75% of the deferred revenue of $6.5 million currently on the
balance sheet will be recorded as revenue over the next two quarters.

    Selling, General and Administration Expenses

    Selling, General and Administrative expense was $3.4 million for the
three months ended September 30, 2007 compared to $246,000 for the same period
in 2006. The Company has grown from 15 employees to over 180 employees since
this time last year resulting in higher salary and compensation costs and new
office bases in Tempe, AZ, Buffalo, New York and Chicago, Illinois. Expenses
related to the sale of Appraisal Zones and the training of photographers and
appraisers alone amounted to $400,000 during the quarter. The significant
increase in the Company's stock price in the last six months triggered an
equally large increase in the amount of stock compensation expense recorded
for the quarter as options were issued to all new employees. This non-cash
item amounted to $1.2 million for the quarter and is not included in the total
of selling, general and administrative expense.

    Net Earnings

    The net loss for the three months ended September 30, 2007 was
$3.2 million or $0.078 per share compared to a net loss of $289,000 or $0.01
per share for the same period in 2006.

    Financial Condition and Liquidity

    At September 30, 2007, Zaio had total assets of $27 million. Included in
this total is $3.6 million in Asset Backed Commercial Paper (ABCP) which is
temporarily not liquid. Accordingly, the Company has followed the guidance of
the CICA and recorded the asset under the category of Investments and recorded
a write down of 10% of the face value of the paper. The advisors through whom
the paper was acquired have advised that it continues to be rated R1 (AAA) by
DBRS and that it does not contain any Canadian or US residential mortgage
backed securities. There is general consensus that this is an issue of
liquidity and not a deterioration of underlying asset quality. A secondary
market for the paper has recently been created which has shown a bid of
90 cents on the dollar for this paper. The Company intended these funds to be
applied to database expansion or a potential acquisition, both of which are
discretionary. If the need arises for funds to support operations, the company
will draw on a bank line or consider selling the paper in the secondary
market. Working capital was $1.2 million. If amounts owing from the sale of
Zones was included, working capital would be $3.7 million.


    The last mortgage crisis in the early 1990's resulted in a massive effort
by lenders to revalue their portfolios and created significant revenue streams
for appraisers across the country. A similar effort will be undertaken soon
and this time will include a much larger asset base considering the growth of
publicly traded mortgage backed securities in the past ten years. Zaio has the
capability of valuing property nationwide through its premiere group of
certified appraisers making it much more efficient and economical for lenders.
A recent surge in interest among lenders and appraisers in Zaio's products
suggests they are preparing for an increase in volume and that they recognize
the value of the Company's patent-pending technology and business process.
    One of the Company's primary messages has always been that because our
values are prepared in advance of a request from a lender, there can be no
pressure on the appraiser to meet a certain value. The recent claim against an
appraisal firm in the United States suggests that the pressure is real and
significant. Recent bills introduced in Congress also call attention to a
growing national problem and the important need to protect appraiser
independence. Here again, Zaio is in a position to offer unbiased values which
could be used as a yardstick in situations where an appraised value is being
    The strategic acquisitions made during the first nine months of this year
have provided significantly more resources necessary to support an
acceleration of our growth. In fact, as a result, Zaio now has the current
ability to deliver a full range of valuation services in all 50 states to the
mortgage backed securities and lending markets. In addition, these
acquisitions have allowed and will continue to allow Zaio to substantially
increase its rate of photography and the subsequent population of its
proprietary database. In addition, they have immediately provided
relationships with over 400 institutional clients ordering a wide range of
valuation services on behalf of thousands of customers and are now generating
significant revenue to the Company. Also, Zaio and its affiliated appraisers
and photographers are now simultaneously deployed and implementing these new
automated solutions in more than 200 USA cities across America. Zaio is
quickly adding photos, site verified property data, and valuations to its
National Appraisal Repository so these markets can objectively and "instantly"
value real estate. Zaio's database currently consists of 140 million property
records, and 12.6 million photos growing at the rate of over 100,000 homes per
    During the first nine months of 2007, a total of 766 Zone licenses were
sold to property appraisers across the country bringing the total at the end
of the quarter to 1,300 and the rate of photography rose on a weekly basis,
occasionally exceeding highs of over 100,000 per day. In the third quarter,
the Company began handing fully completed zones back to Zone Appraisers
allowing them to conclude the valuation process and start the earnings and
revenue share process. This important transition will continue to accelerate
into the last quarter and into next year until all zones sold have been
integrated and returned to the appraisers.
    At the same time, management is continually exploring opportunities to
align with other strategic partners in the valuation industry and will
consider further acquisitions that allow us to penetrate our various markets
    Zaio recently sponsored the nation's largest appraisal conference known
as Valuation 2007 which was attended by 400 appraisers and lenders. The
Company also hosted a National Summit in Las Vegas which was attended by 230
Zone Appraisers. Interest in Zones among appraisers and in valuation products
by lenders was very strong. Our marketing efforts along with widespread media
relating to the industry conditions has resulted in a surge in interest among
appraisers and lenders and has in turn led to a significant increase in
inquiries to our call centre.
    Parties interested in learning more details about Zaio's third quarter
results are invited to listen to the Q3 conference call by dialing in to
800-732-6179 at 3:00pm ET Tuesday November 20, 2007.

    About Zaio

    Zaio develops and maintains a secure database of site-verified photos,
property information and appraisals of virtually every property in entire
cities. Zaio's network of premiere, local appraiser experts photograph,
inspect, and appraise entire cities, one building at a time from the street
using a proprietary "GeoScore(TM)" rating system.
    Zaio is a public corporation that trades under the symbol "ZAO" on the
TSX-V Exchange in Canada. Additional information is available for U.S.
investors under the symbol "ZAOFF".
    For investors who would like to be added to Zaio's investor distribution
list or receive a 2006 annual report, please contact Collum Hunter at

    The TSX Venture Exchange has not reviewed and does not accept
responsibility for the adequacy or accuracy of this press release. This press
release contains forward-looking statements which may include financial and
business prospects, as well as statements regarding the Company's future
plans, objectives or economic performance and financial outlooks. Such
statements are subject to risk factors associated with the real estate
industry, and the overall economy in both Canada and the United States. The
Company believes that the expectations reflected in this press release are
reasonable, but actual results may be affected by a variety of variables and
may be materially different from the results or events predicted in the
forward-looking statements. Readers are therefore cautioned not to place undue
reliance on these forward-looking statements.
    In evaluating forward-looking statements readers should consider the risk
factors which could cause actual results or events to differ materially from
those indicated by such forward-looking statements. These forward-looking
statements are made as of the date hereof, and unless otherwise required by
applicable securities laws, the Company does not intend nor does it undertake
any obligation to update or revise any forward-looking statements to reflect
subsequent information, events, results or circumstances or otherwise.

    %SEDAR: 00020572E

For further information:

For further information: visit or please contact: Thomas J.
Inserra, President and CEO, (480) 575-5111; Rodney D. Mitton, CFO, (403)

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