Zaio Corporation Announces Completion of Debenture Financing for Gross Proceeds of $1.58 million, Executive Employment Matters and Reports the Early Conversion of Debentures and Concurrent Exercise of Warrants

/THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT INTENDED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

CALGARY, Jan. 26, 2016 /CNW/ - Zaio Corporation (TSXV: ZAO) ("Zaio" or the "Company") is pleased to announce that it has closed approximately $1.585 million in gross proceeds pursuant to its previously announced private placement (the "Financing").

Zaio issued an aggregate amount of approximately $1.635 million in principal amount of debentures ("Debentures") to subscribers ("Subscribers") at a price of $1,000 per $1,000 principal amount of Debenture.  The Debentures will bear interest at a rate of 15% per annum payable quarterly and in cash or on Common Shares, at the option of the holder, subject to a reduction to 12% per annum if the Company's Existing Debentures (as defined below) are fully repaid.  The Debentures will mature on January 25, 2019.  The Company may, at any time prior to maturity and upon giving notice, prepay the Debentures in full or in part, by paying the holders thereof the outstanding principal amount plus a 5% premium on the outstanding principal amount as a bonus for early redemption, together with all accrued and unpaid interest.  At any time on or after July 25, 2017, StableView Asset Management Inc. (the "Lender Representative"), on behalf of all holders of Debentures, may also upon notice, require repayment of the outstanding Debentures together with any accrued and/or unpaid interest.  The Debentures have been guaranteed by the Company's wholly-owned subsidiary, Valuation Vision, Inc. (the "Guarantor"), and have been secured against all of the Company's and the Guarantor's property, assets and patents and will be registered in all of the jurisdictions in which the Company and the Guarantor carry on business.

As part of the Financing, Zaio also issued approximately 4,905,000 common share purchase warrants ("Warrants"), representing a total of three Warrants issued to each Subscriber for each $1.00 of principal amount of Debentures.   Each Warrant entitles the holder thereof to purchase one common share ("Common Share") in the capital of the Company at $0.11 per Common Share exercisable for a period of 36 months from the date of issuance.

Under the terms of the Financing, Zaio has agreed to pay the following fees to the Lender Representative: (i) a $150,000 facility administration fee, payable as to $100,000 by way of the issuance of 1,666,667 Common Shares and as to $50,000 through the issuance of $50,000 Debentures; and (ii) a fixed annual fee of $70,000, payable quarterly. 

Finders' fees were paid to arm's length third parties of Zaio consisting of cash in the aggregate amount of $23,100 being 6% of the gross proceeds raised by the Finders and 23,100 Finders' compensation warrants (the "Finders' Warrants") were issued to the Finders being 6% of the number of Debentures subscribed for through the Finders.  The Finders' Warrants were issued on the same terms and conditions as the Warrants.

All securities issued pursuant to the Financing (including any underlying securities and the Finders' Warrants) will be subject to a four-month hold period.

The proceeds from the Funding will be used for general corporate purposes. This transaction is subject to the submission of final documentation and final approval of the TSX Venture Exchange.

David King, a director of the Company, directly subscribed for an aggregate of $200,000 Debentures.  As such, these transactions are considered to be related party transactions subject to TSX Venture Exchange Policy 5.9 and Multilateral Instrument 61-101. The Company is relying on exemptions from the formal valuation and minority shareholder approval requirements provided under sections 5.5(a) and 5.7(a) of Multilateral Instrument 61-101 on the basis that the subscriptions by Insiders did not exceed 25% of the fair market value of the Company's market capitalization.

The terms of the Financing also grant the Lender Representative the right to nominate up to four replacement directors to the board of Zaio.  Effective on January 25, 2016, Messrs. Gregory Ford, Joel Strickland and Ed Madro have each resigned from the board of directors of the Company and Messrs. Robert Louis Gloer, Willem Francois Emile Galle and Walter Andri have each been appointed to the board of directors of the Company as replacement directors.  Mr. Jim Boyle has also been appointed to the board of directors of the Company to replace Mr. David Gregory who resigned effective October 19, 2015.

Executive Employment Matters

The Company announces that Mr. Phil Wazonek has entered into a consulting agreement to serve as the ongoing President and Chief Operating Officer of the Company.  Pursuant to the terms of Mr. Wazonek's consulting agreement, the Company will issue 2,000,000 options exercisable into common shares in the capital of the Company at $0.068 per share and will have a term of five years.  The issuance of the options remains subject to the approval of the TSX Venture Exchange.

The Company announces that it will issue 2,000,000 common shares in the capital of the Company to Mr. Ron Love, the Chief Financial Officer of the Company, as part of a restructuring of Mr. Love's employment relationship with the Company.  The common shares will be issued at a deemed issue price of $0.06 per common share.

The Company further announces that it will issue 1,200,000 common share purchase warrants to Mr. David King under his employment contract. Each warrant shall entitle Mr. King to purchase, at an exercise price of $0.25, one common share of the Company at any time prior to the earlier of: (i) 36 months from the date of issuance of the warrants; and (ii) the date that is 45 days from the date that the Company provides notice to warrantholders that the 20 day volume weighted average trading price of the Company's common shares has exceeded $0.40 per share where such price threshold occurs more than 12 months from the issuance date.

The issuance of all such common shares and common share purchase warrants remain subject to the approval of the TSX Venture Exchange.

Early Conversion of Existing Debentures and Concurrent Exercise of Warrants

The Company further announces that that on July 31, 2015, in response to the one-time offering to holders (the "Existing Debentureholders") of its 10% secured, redeemable, convertible debentures due May 9, 2017 (the " Existing Debentures") to convert their Existing Debentures into units in the capital of the Company ("Units"), Existing Debentureholders holding approximately $607 thousand of principal amount of Existing Debentures elected to convert their Existing Debentures into 5,058,335 Units (the "Early Conversion"). Each Unit consisted of one Common Share and one common share purchase warrant exercisable into one Common Share at a price of $0.15 per share ("2015 Warrants"). Concurrent with the Early Conversion, Existing Debentureholders exercised 5,058,335 2015 Warrants, providing proceeds of approximately $758,750 to the Company. In consideration for the Early Conversion and pursuant to the trust indenture governing the Existing Debentures (the "Existing Trust Indenture"), Existing Debentureholders were issued an aggregate of 307,116 Common Shares of the Company at a deemed price of $0.28 per share for the "make whole amount payment" to compensate participating Existing Debentureholders for their forgone interest payments between the conversion date (May 9, 2015) and the maturity date of the Existing Debentures (May 9, 2017) in the amount of $121,400.

On June 10, 2015, Existing Debentureholders voted in favour of amending the Existing Trust Indenture to provide for the Early Conversion. The Company has issued 10,423,786 Common Shares in consideration for the Early Conversion, as determined in accordance with the formula set forth in the Existing Trust Indenture, as amended, subject to approval by the TSX Venture Exchange.

Zaio Corporation would like to thank Mr. Colin Fisher and his team at StableView Asset Management Inc. for their extensive support and efforts particular to this debenture financing and additional future financing options.  Boyle & Co. LLP, Toronto, acted as legal counsel to StableView.

About Zaio Corporation

Zaio provides customers in the property valuation, underwriting and lending industries with real-time access to certified appraisal reports from the company's patented database of proactively maintained residential property evaluations prepared by licensed appraisers across the United States.  Visit the company online at zaio.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

This news release does not constitute an offer to sell or a solicitation of an offer to buy and of the securities in the United States.  The securities of the Company will not be registered under the United States Securities Act of 1933, as amended the U.S. Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.

Forward-Looking Information

This news 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, the overall economy in both Canada and the United States. Forward-looking information in this press release, includes, among other things, information relating to any applicable approvals required in order to complete the Financing, which may include, but is not limited to, the approval of the TSX Venture Exchange and approval by the shareholders of Zaio. The Company believes that the expectations reflected in this news 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.

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 of the Company will not be registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act, and may not be offered or sold within the United States or to, or for the account or benefit of U.S. persons except in certain transactions exempt from the registration requirements of the U.S. Securities Act.

SOURCE Zaio Corporation

visit www.zaio.com or contact: Phil Wazonek, President & COO, Zaio Corporation, 403-819-5449, [email protected]; Babak Pedram, Investor Relations, Virtus Advisory Group Inc., 416-644-5081, [email protected]