News release

 Zi Corporation


Zi Corporation well positioned for profitable 2002


Calgary, AB (November 15, 2001) - Zi Corporation's (NASDAQ: ZICA) (TSE: ZIC) revenue increased 32 per cent over the same nine-month period last year. In addition Zi Corporation delivered improved results during the third quarter with the company reporting a 59 per cent decrease in net loss compared to the second quarter 2001. Zi's funds applied to operating activities were within $1.8 million of break-even for the three-month period ended September 30, 2001.

"By establishing a diversified customer base, Zi has built a strong position moving into 2002. Despite industry turbulence we have held our revenue steady and narrowed our loss," says Michael Lobsinger, chairman and chief executive officer, Zi Corporation. "When the wireless and telecom sectors recover, we are well positioned to realize accelerated growth as we have only scratched the surface on revenue potential from our 48 licensees. eZiText™ enabled products in the market now number 52, with several times this amount expected a year from now."

Third quarter highlights

License, implementation and royalty revenue grew 28 per cent in this quarter over third quarter last year, despite two of the company's largest clients generating lower revenue. The nine additional revenue-generating clients, delivered more than enough revenue to offset the decline from these two clients. Of Zi's 48 licensees and six marketing agreements, 11 have begun to generate revenue to date. As product implementations increase over the coming months, revenue from these clients, together with revenue from existing clients is expected to increase.

"Considering the economic and industry environment, we have made considerable progress towards positive operating cash flow," says Dale Kearns, chief financial officer, Zi Corporation. "With potential revenue streams from 37 more licensees, six marketing agreements, VoIP contracts and significant improvements in operating cost levels, 2002 holds the expectation for further growth."

On a year to date basis, total revenue was $4.5 million, up $1.1 million or 32 per cent over the year earlier period. This reflects the diversification and overall increase of Zi's customer base. Total revenue for the three-month period ended September 30, 2001 was $1.6 million, approximately even with revenues for the same period a year earlier.

Zi reported a net loss of $0.08 per share for the three months ended September 30, 2001, approximately equal to the per share loss in the same period in 2000. Increases in litigation costs together with expenses associated with the global expansion of Zi's operations and the development of Zi services resulted in a net loss of $0.36 per share for the first nine months of 2001, compared to $0.18 per share for the first nine months of 2000.

Zi holds $32.6 million in cash and short-term investments and has net working capital of $34.0 million. Zi has no debt other than equipment leases and is capitalized entirely by common stock.

All figures presented are quoted in Canadian dollars. Detailed financial statements for the third quarter ended September 30, 2001 are attached.

(CDN $000) 3 months
September 30		 9 months
September 30
  2001 2000 2001 2000
Revenue 1,567 1,515 4,450 3,364
Gross margin 1,446 1,173 3,817 2,788
Foreign exchange gain 1,373 940 1,874 2,107
Net loss (2,959) (3,034) (13,194) (6,727)
Net loss per share (.08) (.08) (.36) (.18)

Zi Corporation will host a teleconference and Webcast to discuss the third quarter results on Thursday November 15, 2001, 9am eastern standard time. To participate, please make your connection 10 minutes prior to the start of the call.

Conference call

Toll free in North America: 1-888-571-5411
International: 1-416-646-3096

Webcast

The call can be accessed on the Internet at: http://webevents.broadcast.com/financecalls/event/index.asp?EarningsID=2134 or

The call can also be accessed on the Internet at: http://www.vcall.com/NASApp/VCall/EventPage?ID=79209

Recording

A recording is available after 12 pm eastern standard time (10 am mountain) on Thursday, November 15. The recording will be available until 11:55 pm eastern standard time (9:55 pm mountain) on Thursday, November 22.
Toll free in North America 1-877-289-8525 and enter code 145641# (pound key)
International 1-416-640-1917 and enter code 145641# (pound key) Zi Corporation is a market-driven technology company delivering intelligent interface solutions to enhance the user experience of wireless and consumer technologies. The company's core technology product, eZiText™ connects people to short messaging, e-mail, e-commerce, Web browsing and similar applications in almost any written language. Zi Services provides market-leading engineering design in Bluetooth™, VoIP and man-machine interface. Zi supports its strategic partners from offices in Calgary, Beijing, Hong Kong, San Francisco, Shenzhen, Stockholm and Tokyo. A publicly traded company, Zi Corporation is listed on the NASDAQ National Market (ZICA) and the Toronto Stock Exchange (ZIC).

Certain statements in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The information in this press release is based on Zi Corporation's current expectation and assumptions, and is subject to a number of risks and uncertainties that could cause actual results to differ materially from those anticipated. Such risks include, among others, general business and economic conditions, competitive actions and continued acceptance of Zi Corporation's products and services as well as the risks and uncertainties referred to in Zi Corporation's 20-F for the most recent calendar year that is filed with the Securities and Exchange Commission.

-30-

For more information:

Dale Kearns
Zi Corporation
Chief Financial Officer
Phone: (403) 233-8875
E-mail: investor@zicorp.com
Website: www.zicorp.com
  

ZI CORPORATION
CONSOLIDATED BALANCE SHEETS

  (unaudited) (audited) (unaudited)
  30-Sep-01
 31-Dec-00
 30-Sep-00
Assets
Current assets
  Cash and cash equivalents $ 27,907,035 $ 46,891,866 $ 51,459,806
  Short-term investments 4,702,029 - -
  Accounts receivable 2,164,834 3,265,301 3,099,599
  Prepayments and deposits 2,488,501 1,244,111 1,391,545
 
  37,262,399 51,401,278 55,950,950
Capital assets - net 3,491,722 2,984,978 2,561,231
Intangible assets - net 11,627,952 8,467,096 7,868,714
 
  $ 52,382,073 $ 62,853,352 $ 66,380,895
 

 
Liabilities and shareholders' equity
Current liabilities
  Accounts payable and accrued liabilities $ 2,976,889 $ 2,658,223 $ 2,716,673
  Deferred revenue 162,690 140,975 -
  Current portion of capital lease obligations 165,089 152,948 -
 
  3,304,668 2,952,146 2,716,673
 
Capital lease obligations 171,546 238,066 -
 
  3,476,214 3,190,212 2,716,673
 

 
Shareholders' equity
Share capital 94,412,723 91,975,823 90,745,960
Deficit (45,506,864) (32,312,683) (27,081,738)
 
  48,905,859 59,663,140 63,664,222
 
  $ 52,382,073 $ 62,853,352 $ 66,380,895
 

 


ZI CORPORATION
CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT

  3 months ended 9 months ended
(unaudited) 30-Sep-01 30-Sep-00 30-Sep-01 30-Sep-00
Revenue
  License & implementation fees $ 1,477,406 $ 1,156,492 $ 3,922,880 $ 2,722,161
  Engineering services 22,339 257,402 330,908 534,899
  Other product revenue 67,606 101,443 196,681 107,058
 
   1,567,351 1,515,337 4,450,469 3,364,118

Cost of sales
 License & implementation fees 103,701 291,262 503,762 440,233
 Engineering services 17,828 50,723 129,186 135,511
 
  121,529 341,985 632,948 575,744
 
 
Gross margin 1,445,822 1,173,352 3,817,521 2,788,374
 

Selling, general and administrative (4,075,105) (4,149,501) (13,809,676) (9,431,942)
Product research and development (776,390) (799,234) (3,606,904) (2,307,283)
Depreciation and amortization (1,175,718) (1,051,437) (2,888,677) (2,355,834)
Foreign exchange gain 1,373,043 939,972 1,873,612 2,107,258
Interest income and other income 249,621 852,945 1,419,943 2,472,306

 
Net loss (2,958,727) (3,033,903) (13,194,181) (6,727,121)
 
 Deficit, beginning of period (42,548,137) (24,047,835) (32,312,683) (20,354,617)
 
Deficit, end of period $(45,506,864) $(27,081,738) $(45,506,864) $(27,081,738)
 
 
Loss per share $(0.08) $(0.08) $(0.36) $(0.18)
Weighted average common shares 37,256,584 36,574,926 37,122,792 36,574,926
Common shares outstanding 37,503,350 36,794,967 37,503,350 36,794,967



ZI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW




  3 months ended 9 months ended
(unaudited) 30-Sep-01 30-Sep-00 30-Sep-01 30-Sep-00
Operating activities:
  Net loss $(2,958,727) $(3,033,903) $(13,194,181) $(6,727,121)
  Add items not affecting cash:
   Loss (gain) on dispositions of capital assets - 47 (20,983) 6,362
   Depreciation and amortization 1,175,718 1,051,437 2,888,677 2,355,834
 
 Funds applied to operations (1,783,009) (1,982,419) (10,326,487) (4,364,925)
 Decrease (increase) in non-cash working capital (921,461) (374,562) 196,458 376,882
 
 Cash flow applied to operations (2,704,470) (2,356,981) (10,130,029) (3,988,043)
 
Financing activities:
  Proceeds from issuance of common shares 2,018,275 237,250 2,436,900 36,259,280
  Payment of capital lease obligations (87,235) - (116,556) -
 
  1,931,040 237,250 2,320,344 36,259,280
 
 
Investing activities:
  Short-term investments (4,702,029) 2,780,997 (4,702,029) 6,111,987
  Purchase of capital assets (385,407) (749,077) (1,124,415) (1,628,220)
  Acquisition of subsidiaries net of cash acquired - (4,744,771) - (5,076,991)
  Cash acquired through purchase of subsidiaries - 1,931,435 - 1,932,441
  Proceeds from capital dispositions - 60 - 9,388
  Deferred development costs (1,858,398) (1,275,225) (5,108,155) (3,631,257)
  Other deferred costs - (2,761) (240,547) (48,516)
 
   (6,945,834) (2,059,342) (11,175,146) (2,331,168)
 
  
 
Net cash (outflow) inflow (7,719,264) (4,179,073) (18,984,831) 29,940,069
Cash and cash equivalents, at the beginning of period 35,626,299 55,638,879 46,891,866 21,519,737
 
Cash and cash equivalents, at the end of period $ 27,907,035 $ 51,459,806 $ 27,907,035 $ 51,459,806
 
 
Non cash financing activity
  Equipment acquired under capital lease $ 45,826 $    - $ 62,177 $    -
 
Components of cash and cash equivalents
  Cash     $ 5,172,054 $ 6,526,659
  Short-term investments     22,734,981 44,933,147

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