2006 Financial Review
Revenue was CDN$289,000 for the year ended December 31, 2006 of which CDN$175,000 was from the fourth quarter. This represents a 198% increase over Zaio's 2005 revenue of CDN$97,000. Zaio's revenue is currently derived primarily from the licensing of the Company's valuation software to property appraisers in cities across the United States where Zaio is currently active and growing.
During 2006, licenses in the United States sold for US$7,750 per appraiser zone up to the end of October at which time the price was increased to US$8,250, which includes a US$500 administration fee payable upon signing. In January 2007 this fee increased to US$9,000 and in April increased to US$9,200 with further increases planned during the year. Only the administration fee portion of the total fee is initially 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 appraisal zones, thereby allowing the appraiser to proceed with the appraisal valuation process. Until that time the amount is recorded as deferred revenue on the balance sheet.
"It is important to note that the Company does not record the deferred portion of the revenue until the funds are actually received. A total of CDN$2.2 million in appraisal zone sales was deferred in 2006. If proceeds received during the year from the sale of appraisal zones were included in revenue, the Company would have recorded revenue of CDN$2.5 for the year and net earnings of CDN$724,000 or CDN$0.026 per share," said Rodney Mitton, chief financial officer of Zaio Corporation.
Salaries and benefits amounted to CDN$588,000 compared to CDN$228,000 in 2005. The increase in the Company's stock price in the last four months of the year triggered an equally large increase in the amount of stock compensation expense recorded for the year. This non-cash item amounted to CDN$375,000 and is not included in the total of Selling, General and Administrative expense.
Zaio is also continually exploring opportunities to align with various strategic partners within the real estate valuation and lending industries," said Thomas Inserra. "As previously announced, we expect to start benefiting from the Realink acquisition throughout the year and we anticipate revenues of about $12 million for the next 12 months."
