SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K-A1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
April 28, 2004
--------------
Date of Report
(Date of Earliest Event Reported)
WIZZARD SOFTWARE CORPORATION
----------------------------
(Exact Name of Registrant as Specified in its Charter)
Colorado 000-33381 87-0575577
-------- --------- ----------
(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
424 Gold Way
Pittsburgh, Pennsylvania 15213
------------------------------
(Address of Principal Executive Offices)
(412) 621-0902
--------------
Registrant's Telephone Number
N/A
---
(Former Name or Former Address if changed Since Last Report)
Item 7. Financial Statements and Exhibits.
a. Financial Statements of Business Acquired.
MedivoxRx Technologies, Inc.
i. Independent Auditor's Report
Balance Sheets, December 31, 2003 and 2002
Statements of Operations for the year ended December 31, 2003 and
the periods from inception on January 7, 2002 through December
31, 2003 and 2002
Statement of Stockholders' Equity (Deficit) for the period from
inception on January 7, 2002 through December 31, 2003
Statements of Cash Flows for the year ended December 31, 2003 and
the periods from inception on January 7, 2002 through December
31, 2002 and 2002
Notes to Financial Statements
ii. Independent Auditor's Report
Balance Sheets, April 23, 2004
Statements of Operations for the period ended April 23, 2004 and
the period from inception on January 7, 2002 through April 23,
2004
Statement of Stockholders' Equity (Deficit) for the period from
inception on January 7, 2002 through April 23, 2004
Statements of Cash Flows for the period ended April 23, 2004 and
the period from inception on January 7, 2002 through April 23,
2004
Notes to Financial Statements
b. Pro Forma Financial Information.
Wizzard Software Corporation and MedivoxRx Technologies, Inc.
Pro Forma Condensed Combined Financial Statements
Pro Forma Unaudited Condensed Combined Balance Sheet, March 31, 2004
Pro Forma Unaudited Condensed Combined Statement of Operation
[Unaudited]
Notes to Pro Forma Condensed Combined Financial Statements
c. Exhibits.
Exhibit No. Exhibit Description
----------- -------------------
99* Press Release
* This document has previously been filed with the Securities and
Exchange Commission as an exhibit to the Registrant's Current Report on Form
8-K, dated April 28, 2004, and filed with the Securities and Exchange
Commission on April 28, 2004.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
December 31, 2003 and 2002
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets, December 31, 2003 and 2002 2 - 3
Statements of Operations, for the year ended
December 31, 2003 and the periods from inception
on January 7, 2002 through December 31, 2003 and 2002 4
Statement of Stockholders' Equity (Deficit) for the period
from inception on January 7, 2002 through
December 31, 2003 5
Statements of Cash Flows for the year ended
December 31, 2003 and the periods from inception
on January 7, 2002 through December 31, 2003 and 2002 6 - 7
Notes to Financial Statements 8 - 11
INDEPENDENT AUDITOR'S REPORT
Board of Directors
MEDIVOXRX TECHNOLOGIES, INC.
Pittsford, NY 14534
We have audited the accompanying balance sheets of MediVoxRx Technologies,
Inc. [A Development Stage Company] as of December 31, 2003 and 2002 and the
related statements of operations, stockholders' equity and cash flows for the
year ended December 31, 2003 and the periods from inception on January 7, 2002
through December 31, 2003 and 2002 . These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MediVoxRx Technologies, Inc.
[A Development Stage Company] as of December 31, 2003 and 2002 and the results
of its operations and its cash flows for the year ended December 31, 2003 and
the periods from inception on January 7, 2002 through December 31, 2003 and
2002 in conformity with generally accepted accounting principles in the United
States of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has not yet established profitable
operations, has incurred significant losses since its inception and has
current liabilities in excess of current assets. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 2.
The consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
/s/ Gregory & Eldridge, LLC
July 2, 2004
Salt Lake City, Utah
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
BALANCE SHEETS
ASSETS
December 31,
___________________________
2003 2002
___________ ___________
CURRENT ASSETS:
Cash in bank $ 2,638 $ 15,028
Accounts receivable, net 58 -
Advance to related party - 16,700
Product inventories 10,361 -
Deposits on inventory purchases 41,576 35,576
___________ ___________
Total Current Assets 54,633 67,304
PRODUCTION MOLDS, net 52,604 67,284
DEFINATE LIFE INTANGIBLE ASSETS, net 4,999 3,289
___________ ___________
$ 112,236 $ 137,877
___________ ___________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable $ 95,000 $ 97,500
Accounts payable 26,370 19,128
Accrued liabilities 3,875 -
___________ ___________
Total Current Liabilities 125,245 116,628
___________ ___________
Total Liabilities 125,245 116,628
___________ ___________
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, $0.000275 par value,
1,000,000 shares authorized, 489,380
and 485,820 shares issued and
outstanding, respectively. 4,894 4,858
Additional paid in capital 427,406 331,842
Accumulated deficit (445,309) (315,451)
___________ ___________
Total Stockholders' Equity (13,009) 21,249
___________ ___________
$ 112,236 $ 137,877
___________ ___________
The accompanying notes are an integral part of these financial statements.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From Inception on
For the January 7, 2002
Year Ended through December 31,
December 31, _______________________
2003 2002 2003
___________ ___________ ___________
SALES, net of returns $ 6,961 $ - $ 6,961
COST OF GOODS SOLD 3,226 - 3,226
___________ ___________ ___________
Gross profit 3,735 - 3,735
___________ ___________ ___________
OPERATING EXPENSES:
General and administrative 110,944 129,099 240,043
Selling expense 16,318 13,571 29,889
Research & development 172,781 172,781
___________ ___________ ___________
Total Operating Expenses 127,262 315,451 442,713
___________ ___________ ___________
LOSS FROM OPERATIONS (123,527) (315,451) (438,978)
___________ ___________ ___________
INTEREST EXPENSE (6,331) - (6,331)
___________ ___________ ___________
LOSS BEFORE INCOME TAXES (129,858) (315,451) (445,309)
CURRENT TAX EXPENSE - - -
DEFERRED TAX (BENEFIT) - - -
___________ ___________ ___________
NET LOSS $ (129,858) $ (315,451) $ (445,309)
___________ ___________ ___________
The accompanying notes are an integral part of these financial statements.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE PERIOD FROM INCEPTION ON JANUARY 7, 2002
THROUGH DECEMBER 31, 2003
Common Stock Additional
________________________ Paid-in Accumulated
Shares Amount Capital Deficit
____________ ___________ ___________ __________
BALANCE, January 7, 2002 - $ - $ - $ -
Stock issued to the founders
for services 345,000 3,450 - -
Stock issued for expenses
paid by a founder 105,000 1,050 73,950 -
Stock issued for payables 6,000 60 17,940 -
Stock issued for cash upon a
Private placement at $3.00
Per share 16,850 168 50,382 -
Stock issued for cash upon a
Private placement at $10.00
Per share 12,970 130 129,570 -
Contributed services - officer - - 60,000 -
Net loss for the period ended
December 31, 2002 - - - (315,451)
____________ ___________ ___________ __________
BALANCE, December 31, 2002 485,820 $ 4,858 $ 331,842 $ (315,451)
Stock issued for cash upon a
Private placement at $10.00
Per share 3,560 36 35,564 -
Contributed services - officer - - 60,000 -
Net loss for the year ended
December 31, 2003 - - - (129,858)
____________ ___________ ___________ __________
BALANCE, December 31, 2003 489,380 $ 4,894 $ 427,406 $ (445,309)
____________ ___________ ___________ __________
The accompanying notes are an integral part of this financial statement.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
From Inception on
For the January 7, 2002
Year Ended through December 31,
December 31, _______________________
2003 2002 2003
___________ ___________ ___________
Cash Flows from Operating Activities
Net loss $ (129,858) $ (315,451) $ (445,309)
___________ ___________ ___________
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation and amortization 15,970 6,277 22,247
Non-cash expense 60,000 81,450 141,450
Increase/ decrease in assets /
liabilities:
Accounts receivable (58) - (58)
Product inventories (10,361) - (10,361)
Deposits for inventory (6,000) (35,576) (41,576)
Accounts payable 7,242 19,128 26,370
Accrued expenses 3,875 - 3,875
___________ ___________ ___________
Net Cash (Used) by
Operating Activities (59,190) (244,172) (303,362)
___________ ___________ ___________
Cash Flows from Investing Activities:
Purchase of molds - (73,400) (73,400)
Payments for definite life
intangible assets (3,000) (3,450) (6,450)
Advances to a shareholder (23,000) (57,500) (80,500)
Payments from a shareholder 39,700 40,800 80,500
___________ ___________ ____________
Net Cash (Used) by
Investing Activities 13,700 (93,550) (79,850)
___________ ___________ ____________
Cash Flows from Financing Activities:
Proceeds from issuance of common
stock 35,600 255,250 290,850
Proceeds from notes payable - 100,000 100,000
Payments on notes payable (2,500) (2,500) (5,000)
___________ ___________ ____________
Net Cash Provided by
Financing Activities 33,100 352,750 385,850
___________ ___________ ____________
Net Increase (Decrease) in Cash (12,390) 15,028 2,638
Cash at Beginning of Year / Period 15,028 - -
___________ ___________ ____________
Cash at End of Year / Period $ 2,638 $ 15,028 $ 2,638
___________ ___________ ____________
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
Interest $ - $ - $
Income taxes $ - $ - $
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
For the year ended December 31, 2003:
The President of the Company contributed her services with an estimated
valued at $60,000.
For the period ended December 31, 2002:
The Company issued 345,000 share of common stock to the founders for
services valued at $3,450.
The President of the Company contributed her services with an estimated
valued at $60,000.
The Company issued 6,000 shares of common stock in payment of $18,000 in
accounts payable.
The accompanying notes are an integral part of these financial statements.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization MediVoxRx Technologies, Inc. ("the Company") was organized
under the laws of the State of New York on January 7, 2002. The Company is
considered a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7. The Company is engaged in the
business of developing and marketing a talking prescription pill bottle.
Accounting Estimates The preparation of financial statements in
conformity with generally accepted accounting principles in the United
States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosures of
contingent assets and liabilities at the date of the financial statements
and the reported amount of revenues and expenses during the reporting
period. Actual results could differ from those estimated.
Cash and Cash Equivalents For the purpose of the financial statements,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.
Allowance for doubtful accounts - The allowance for doubtful accounts is
based on our assessment of the collectibility of specific customer accounts
and the aging of the accounts receivable. If there were a deterioration of
a major customer's credit worthiness, or actual defaults were higher that
our historical experience, our estimates of the recoverability of amounts
due to us could be overstated, which could have an adverse impact on our
net income.
Product Inventories Inventory is carried at the lower of cost or market,
as determined on the first-in, first-out (FIFO) method. [See Note 3]
Production Molds Molds are stated at cost. Expenditures for major
renewals and betterments that extend the useful lives of the molds are
capitalized, upon being placed in service. Expenditures for maintenance and
repairs are charged to expense as incurred. Depreciation of molds is
computed for financial statement purposes on a straight-line basis over the
estimated useful lives of the assets which is five years.
Fair value of financial instruments -The fair value of the Company's
accounts receivable, inventory, related party advances, accounts payable
and accrued liabilities, and demand note payable approximate their carrying
values based on their effective interest rates compared to current market
prices.
Research and Development The Company expenses the costs of developing new
products and improving its current products as research and product
development costs. The Company recorded $0 and $172,781 for the year and
period ended December 31, 2003 and 2002, respectively.
Income Taxes The Company has accounted for income taxes in accordance
with FASB Statement No. 109, "Accounting for Income Taxes [See Note 9]
Revenue Recognition Revenue is recognized when the product is shipped an
no further obligation exist with the customer. The Company evaluates
whether an allowance for estimated returns is required based on historical
returns. The Company has not established an estimated allowance for
returns at December 31, 2003.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising Costs Costs incurred in connection with advertising and
promotion of the Company's products are expensed as incurred. Advertising
costs amounted to $8,372 and $ 515 for the years ended December 31, 2003
and 2002.
Definite life intangible assets - Definite life intangible assets consist of
cost expended towards acquiring a patent on the Company's proprietary
products. The Company accounts for definite life intangible assets in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
142 requires that definite intangible assets with estimable useful lives be
amortized over their respective estimated useful lives (five years), and
reviewed for impairment in accordance with SFAS No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets.
Impairment of Long-Lived Assets - In accordance with SFAS No. 144, long-lived
assets, such as molds, and purchased intangibles subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Circumstances
which could trigger a review include, but are not limited to: significant
decreases in the market price of the asset; significant adverse changes in the
business climate or legal factors; current period cash flow or operating
losses combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and current expectation that the asset
will more likely than not be sold or disposed of significantly before the end
of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge
is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the asset. Assets to be disposed of would be
separately presented in the balance sheet and reported at the lower of the
carrying amount or fair value less costs to sell, and would no longer be
depreciated.
NOTE 2 GOING CONCERN
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles of the United
States of America, which contemplate continuation of the Company as a going
concern. However, the Company has incurred significant losses from
inception, has current liabilities in excess of current assets and has not
yet been successful in establishing profitable operations. These factors
raise substantial doubt about the ability of the Company to continue as a
going concern. In this regard, management plans to mitigate this doubt by
raising additional funds through debt and/or equity offerings, being
acquired by another entity [See Note 11] and by substantially increasing
sales. There is no assurance that the Company will be successful in
achieving profitable operations. The consolidated financial statements do
not include any adjustments that might result from the outcome of these
uncertainties.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 PRODUCT INVENTORIES AND DEPOSITS ON INVENTORY PURCHASE
Inventories consists of the following at December 31, 2003 and 2002:
2003 2002
___________ ___________
Raw materials and supplies $ - $ -
Finished goods 10,361 -
___________ ___________
$ 10,361 $ -
___________ ___________
Subsequent to the year ended December 31, 2003, the Company distributed
approximately $4,000 of the finished goods inventory as samples for direct
response advertising.
At December 31, 2003 and 2002 the Company paid a 50% deposit of $41,576 and
$35,576 towards the future purchase of certain inventory components.
NOTE 4 PRODUCTION MOLDS
The Company has purchased proprietary molds used in the production of its
product. These molds are recorded at cost.
The following is a summary of Molds less accumulated depreciation as of
December 31, 2003 and 2002:
Life 2003 2002
____________ _________ _________
Molds 5 Years $ 73,400 73,400
Less: accumulated depreciation (20,796) (6,116)
_________ _________
$ 52,604 $ 67,284
_________ _________
Depreciation expense for the year and period ended December 31, 2003 and
2002 amounted to $14,680 and $6,116, respectively.
NOTE 5 OTHER ASSETS
The Company has classified its intangible assets as a definite-life
intangible asset and is amortizing them on a straight-line basis over five
years. During 2003, the Company completed its initial test of intangible
assets for impairment in accordance with SFAS No. 142. The Company used the
estimated future cash flows to test the remaining intangible assets for
impairment and determined that the Company's intangible assets were not
impaired. Amortization expense of $1,290 and $161 was recorded for the year
and period ended December 31, 2003 and 2002 and has been included in cost
of goods sold. The following is a summary of intangibles at December 31:
Life 2003 2002
____________ _________ _________
Patent Pending 5 Years $ 6,450 3,450
Less: accumulated amortization (1,451) (161)
_________ _________
$ 4,999 $ 3,289
_________ _________
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 5 OTHER ASSETS (Continued)
The remaining estimated aggregate amortization expense for next five years is
as follows at December 31, 2003:
2004 $ 1,290
2005 1,290
2006 1,290
2007 1,229
Thereafter -
__________
$ 4,999
__________
The unamortized portion of the patent pending cost will be impaired in full
if the Company is not successful in obtaining a patent.
NOTE 6 NOTES PAYABLE
The Company issued a $100,000 note to a private organization. The note was
non - interest as long as the company paid the quarterly payments of
$2,500. The Company defaulted on the quarterly payments in May of 2003 and
the remaining $95,000 became due on demand. The note was settled in
connection with the Company being acquired by Wizzard Software Acquisition
Corporation through the issuance of 36,363 shares of Wizzard Software
Corporations common stock valued at $98,875. During 2003, the Company
record interest of $3,875 based upon the $98,875 settlement.
NOTE 7 - RELATED PARTY TRANSACTIONS
Management Compensation - During 2003 and 2002, the president of the
Company contributed her services with an estimated value of $60,000 per
year to the Company. The company has expensed these services during their
respective year and recorded a contribution to capital of $60,000 per year.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use her home
as a mailing address, as needed, at no significant expense to the Company.
Advances to from a related party - During the period ended December 31,
2002, the Company advanced the President / shareholder of the Company
$57,500 and received payments of $40,800. During the year ended December
31, 2003 the Company advanced the President / shareholder of the Company
$23,000 and received payments of $39,700. The advances were non-interest
bearing and payable on demand.
NOTE 8 COMMITMENT AND CONTINGENCIES
Commitment The has issued a purchase order to purchase $81,102 in
inventory and paid a deposit of $40,576 towards the purchase. The Company
has not been able to raise the necessary capital to pay the remaining 50%.
The supplier is holding the inventory until full payment is made.
Product warranty - The Company provides no product warranties to customers
including repair or replacement of defects in materials and workmanship of
certain products. As of December 31, 2003 and 2002, no provision for
warranty claims has been established.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 9 INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes [FASB
109]. FASB 109 requires the Company to provide a net deferred tax asset or
liability equal to the expected future tax benefit or expense of temporary
reporting differences between book and tax accounting and any available
operating loss or tax credit carryforwards. At December 31, 2003 and 2002,
the total of all deferred tax assets was approximately $48,500 and $38,000
and the total of the deferred tax liabilities was $0 and $0. The amount of
and ultimate realization of the benefits from the deferred tax assets for
income tax purposes is dependent, in part, upon the tax laws then in
effect, the Company's future earnings, and other future events, the effects
of which cannot presently be determined accordingly the Company has
established a valuation allowance of $48,500 and $38,000 at December 31,
2003 and 2002, respectively. The net change in the valuation allowance for
the year ended December 31, 2003, was $10,500.
The components of income tax expense from continuing operations for the
years ended December 31, 2003 and 2002 consist of the following:
2003 2002
__________ __________
Current income tax expense:
Federal $ - $ -
State - -
__________ __________
Net current tax expense $ - $ -
__________ __________
Deferred tax expense (benefit) arising from:
Net operating loss carryforwards 10,500 38,000
Valuation allowance (10,500) (38,000)
__________ __________
Net deferred tax expense $ - $ -
__________ __________
Deferred income tax expense results primarily from the reversal of temporary
timing differences between tax and financial statement income.
At December 31, 2003, the Company has unused net operating loss carryforwards
of approximately $48,500 which expire beginning 2022.
The temporary differences and carryforwards gave rise to the following
deferred tax asset (liability) at December 31, 2003 and 2002:
2003 2002
________________________
Long term asset (liability):
Net operating loss carryforward 48,500 38,000
Valuation allowance (48,500) (38,000)
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 10 COMMON STOCK
Common stock The Company has authorized 1,000,000 shares of common stock
with a par value of $0.01. At December 31, 2003 and 2002, the Company had
489,380 and 485,820 shares of common stock issued and outstanding.
During 2002, the Company issued 345,000 common shares to the founders for
services rendered valued at $3,450. The Company further issued 105,000
shares for $75,000 in expense of Company paid by the president. The Company
issued 6,000 common shares in payment of $18,000 in accounts payable.
During 2002, the Company issued 16,850 common shares in connection with a
private placement of the Company's common stock at $3.00 per share for
$50,550 in cash.
During 2003 and 2002, the Company issued 3,560 and 12,970 common shares in
connection with a private placement of the Company's common stock at $10.00
per share for $35,600 and $129,700 in cash, respectively.
During 2003 and 2002, the president of the Company contributed her services
with an estimated value of $60,000 per year to the Company. The company has
expensed these services during their respective year and recorded a
contribution of capital of $60,000 per year.
NOTE 11 SUBSEQUENT EVENTS
Acquisition of the Company - On April 23, 2004, the Company was acquired by
Wizzard Software Corporation through Wizzards issuance of 150,035 shares of
common stock for all of the issued and outstanding common shares of MedivoxRx
Technologies, Inc. and reduction of approximately $155,000 in MedivoxRx
Technologies, Inc. outstanding liabilities. Wizzard Software Corporation
further agreed to issue up to 1,550,000 additional common shares to the
Medivox Rx, Technologies, Inc. shareholders if certain sales and product
acceptance milestones are reached.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
FINANCIAL STATEMENTS
April 23, 2004
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
CONTENTS
PAGE
Independent Auditor's Report 1
Balance Sheets, April 23, 2004 2 - 3
Statements of Operations, for the period ended
April 23, 2004 and the period from inception
on January 7, 2002 through April 23, 2004 4
Statement of Stockholders' Equity (Deficit) for the
period from inception on January 7, 2002
through April 23, 2004 5
Statements of Cash Flows for the period ended
April 23, 2004 and the period from inception
on January 7, 2002 through April 23, 2004 6 - 7
Notes to Financial Statements 8 11
INDEPENDENT AUDITOR'S REPORT
Board of Directors
MEDIVOXRX TECHNOLOGIES, INC.
Pittsford, NY 14534
We have audited the accompanying balance sheets of MediVoxRx Technologies,
Inc. [A Development Stage Company] as of April 23, 2004 and the related
statements of operations, stockholders' equity (deficit) and cash flows for
the period then ended and the period from inception on January 7, 2002 through
April 23, 2004. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of MediVoxRx Technologies, Inc.
[A Development Stage Company] as of April 23, 2004 and the results of its
operations and its cash flows for the period ended April 23, 2004 and the
period from inception on January 7, 2002 through April 23, 2004 in conformity
with generally accepted accounting principles in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has not yet established profitable
operations, has incurred significant losses since its inception and has
current liabilities in excess of current assets. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regards to these matters are also described in Note 2.
The consolidated financial statements do not include any adjustments that
might result from the outcome of these uncertainties.
/s/ Gregory & Eldridge, LLC
July 2, 2004
Salt Lake City, Utah
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
BALANCE SHEET
ASSETS
April 23,
2004
CURRENT ASSETS:
Cash $ -
Accounts receivable, net -
Product Inventories 10,361
Deposits on purchase of inventory 41,576
Total Current Assets 51,937
PRODUCTION MOLDS, net 47,710
DEFINATE LIFE INTANGIBLE ASSETS, net 6,558
$ 106,205
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Notes payable $ 95,000
Accounts payable 61,277
Accrued liabilities 3,875
Total Current Liabilities 160,152
Total Liabilities 160,152
STOCKHOLDERS' EQUITY:
Common stock, $0.000275 par value,
1,000,000 shares authorized, 489,380
shares issued and outstanding. 4,894
Additional paid in capital 447,406
Accumulated deficit (506,247)
Total Stockholders' Equity (Deficit) (53,947)
$ 106,205
The accompanying notes are an integral part of this financial statement.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENTS OF OPERATIONS
From Inception
For the on January 7,
Period Ended 2002 Through
April 23, April 23,
2004 2004
SALES, net of returns $ - $ 6,961
COST OF GOODS SOLD - 3,226
Gross profit - 3,735
OPERATING EXPENSES:
General and administrative 60,938 300,981
Selling expense - 29,889
Research & development - 172,781
Total Operating Expenses 60,938 503,651
LOSS FROM OPERATIONS (60,938) 499,916
INTEREST EXPENSE - (6,331)
LOSS BEFORE INCOME TAXES (60,938) (506,247)
CURRENT TAX EXPENSE - -
DEFERRED TAX (BENEFIT) - -
NET LOSS $ (60,938) $ (506,247)
The accompanying notes are an integral part of these financial statements.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR PERIOD FROM INCEPTION ON JANUARY 7, 2002
THROUGH APRIL 23, 2004
Common Stock Additional
________________________ Paid-in Accumulated
Shares Amount Capital Deficit
BALANCE, January 7, 2002 - $ - $ - $ -
Stock issued to the founders
for services 345,000 3,450 - -
Stock issued for expenses paid
by a founder 105,000 1,050 73,950 -
Stock issued for payables 6,000 60 17,940 -
Stock issued for cash upon a
Private placement at $3.00
Per share 16,850 168 50,382 -
Stock issued for cash upon a
Private placement at $10.00
Per share 12,970 130 129,570 -
Contributed services -officer - - 60,000 -
Net loss for the period ended
December 31, 2002 - - - (315,451)
BALANCE, December 31, 2002 485,820 $ 4,858 $ 331,842 $(315,451)
Stock issued for cash upon a
Private placement at $10.00
Per share 3,560 36 35,564 -
Contributed services - officer - - 60,000 -
Net loss for the year ended
December 31, 2003 - - - (129,858)
BALANCE, December 31, 2003 489,380 $ 4,894 $ 427,406 $(445,309)
Contributed services - officer - - 20,000 -
Net loss for the period ended
April 23, 2004 - - - (60,938)
BALANCE, December 31, 2003 489,380 $ 4,894 $ 447,406 $(506,247)
The accompanying notes are an integral part of this financial statement.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
STATEMENTS OF CASH FLOWS
Net Increase (Decrease) in Cash
For the From Inception on
Period Ended January 7, 2002
April 23, through April 23,
2004 2004
Cash Flows from Operating Activities
Net loss $ (60,938) $ (506,247)
Adjustments to reconcile net loss
to net cash used by operations:
Depreciation and amortization 5,335 27,582
Non-cash services 20,000 161,450
Increase/ decrease in
assets / liabilities:
Accounts receivable 58 -
Product Inventories - (10,361)
Deposits for inventory - (41,576)
Accounts payable 34,907 61,277
Accrued expenses - 3,875
Net Cash (Used) by Operating Activities (638) (304,000)
Cash Flows from Investing Activities:
Purchase of molds - (73,400)
Payments for definite life
intangible assets (2,000) (8,450)
Advances to a shareholder - (80,500)
Payments form a shareholder - 80,500
Net Cash (Used) by Investing Activities (2,000) (81,850)
Cash Flows from Financing Activities:
Proceeds from issuance of common stock - 290,850
Proceeds from notes payable - 100,000
Payments on notes payable - (5,000)
____________ ____________
Net Cash Provided by Financing Activities - 385,850
Net Increase (Decrease) in Cash (2,638) -
Cash at Beginning of Period 2,638 -
Cash at End of Period $ - $ -
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the period for:
Interest $ - $ -
Income taxes $ - $ -
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
For the period ended April 23, 2003:
The President of the Company contributed her services with an estimated valued
at $20,000.
For the year ended December 31, 2003:
The President of the Company contributed her services with an estimated valued
at $60,000.
For the period ended December 31, 2002:
The Company issued 345,000 share of common stock to the founders for services
valued at $3,450.
The President of the Company contributed her services with an estimated valued
at $60,000.
The Company issued 6,000 shares of common stock in payment of $18,000 in
accounts payable.
The accompanying notes are an integral part of these financial statements.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization MediVoxRx Technologies, Inc. ("the Company") was organized
under the laws of the State of New York on January 7, 2002. The Company is
considered a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7. The Company is engaged in the business
of developing and marketing a talking prescription pill bottle.
Accounting Estimates The preparation of financial statements in conformity
with generally accepted accounting principles in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amount of
revenues and expenses during the reporting period. Actual results could
differ from those estimated.
Cash and Cash Equivalents For the purpose of the financial statements, the
Company considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
Allowance for doubtful accounts - The allowance for doubtful accounts is based
on our assessment of the collectibility of specific customer accounts and the
aging of the accounts receivable. If there were a deterioration of a major
customer's credit worthiness, or actual defaults were higher that our
historical experience, our estimates of the recoverability of amounts due to
us could be overstated, which could have an adverse impact on our net income.
Product Inventories Inventory is carried at the lower of cost or market, as
determined on the first-in, first-out (FIFO) method. [See Note 3]
Production Molds Molds are stated at cost. Expenditures for major renewals
and betterments that extend the useful lives of the molds are capitalized,
upon being placed in service. Expenditures for maintenance and repairs are
charged to expense as incurred. Depreciation of molds is computed for
financial statement purposes on a straight-line basis over the estimated
useful lives of the assets which is five years.
Fair value of financial instruments -The fair value of the Company's accounts
receivable, inventory, related party advances, accounts payable and accrued
liabilities, and demand note payable approximate their carrying values based
on their effective interest rates compared to current market prices.
Research and Development The Company expenses the costs of developing new
products and improving its current products as research and product
development costs. The Company recorded $0 for the period ended April 23,
2004.
Income Taxes The Company has accounted for income taxes in accordance with
FASB Statement No. 109, "Accounting for Income Taxes" [See Note 9].
Revenue Recognition Revenue is recognized when the product is shipped and no
further obligation exist with the customer. The Company evaluates whether an
allowance for estimated returns is required based on historical returns. The
Company has not established an estimated allowance for returns at April 23,
2004.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Advertising Costs Costs incurred in connection with advertising and
promotion of the Company's products are expensed as incurred. Advertising
costs amounted to $0 for the period ended April 23, 2004.
Definite life intangible assets - Definite life intangible assets consist of
cost expended towards acquiring a patent on the Company's proprietary
products. The Company accounts for definite life intangible assets in
accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No.
142 requires that definite intangible assets with estimable useful lives be
amortized over their respective estimated useful lives (five years), and
reviewed for impairment in accordance with SFAS No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets.
Impairment of Long-Lived Assets - In accordance with SFAS No. 144, long-lived
assets, such as molds, and purchased intangibles subject to amortization, are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Circumstances
which could trigger a review include, but are not limited to: significant
decreases in the market price of the asset; significant adverse changes in the
business climate or legal factors; current period cash flow or operating
losses combined with a history of losses or a forecast of continuing losses
associated with the use of the asset; and current expectation that the asset
will more likely than not be sold or disposed of significantly before the end
of its estimated useful life.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to estimated undiscounted future cash flows
expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated undiscounted future cash flows, an impairment charge is
recognized by the amount by which the carrying amount of the asset exceeds the
fair value of the asset. Assets to be disposed of would be separately
presented in the balance sheet and reported at the lower of the carrying
amount or fair value less costs to sell, and would no longer be depreciated.
NOTE 2 GOING CONCERN
The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles of the United States
of America, which contemplate continuation of the Company as a going concern.
However, the Company has incurred significant losses from inception, has
current liabilities in excess of current assets and has not yet been
successful in establishing profitable operations. These factors raise
substantial doubt about the ability of the Company to continue as a going
concern. In this regard, management plans to mitigate this doubt by raising
additional funds through debt and/or equity offerings, being acquired by
another entity [See Note 11] and by substantially increasing sales. There is
no assurance that the Company will be successful in achieving profitable
operations. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 3 PRODUCT INVENTORIES AND DEPOSITS on PURCHASE OF INVENTORY
Inventory consists of the following at April 23, 3004:
2004
___________
Raw materials and supplies $ -
Finished goods 10,361
$10,361
Subsequent to the period ended April 23, 2004, the Company used approximately
$4,000 of the finished goods inventory as samples for direct response
advertising.
At April 23, 2004, the Company had paid a 50% deposit of $41,576 towards the
future purchase of certain inventory components.
NOTE 4 PRODUCTION MOLDS
The following is a summary of Molds less accumulated depreciation as of April
23, 2004:
Life 2004
Molds 5 Years $ 73,400
Less: accumulated depreciation (25,690)
$ 47,710
Depreciation expense for the period ended April 23, 2004 amounted to $4,894.
NOTE 5 OTHER ASSETS
The Company has classified its intangible assets as a definite-life intangible
asset and is amortizing them on a straight-line basis over 2 to 5 years.
During 2003, the Company completed its initial test of intangible assets for
impairment in accordance with SFAS No. 142. The Company used the estimated
future cash flows to test the remaining intangible assets for impairment and
determined that the Company's intangible assets were not impaired.
Amortization expense of $441 period ended April 23, 2004. The following is a
summary of intangibles at April 23:
Life 2004
Patent Pending 5 Years $ 6,450
Website 2 Years 2,000
$ 8,450
Less: accumulated amortization (1,892)
$ 6,558
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 5 OTHER ASSETS (Continued)
The remaining estimated aggregate amortization expense for next five years is
as follows at April 23, 2004:
2004 $ 1,849
2005 2,290
2006 1,290
2007 1,229
Thereafter -
$ 6,658
The unamortized portion of the patent pending cost will be impaired in full if
the Company is not successful in obtaining a patent.
NOTE 6 NOTES PAYABLE
The Company issued a $100,000 note to a private organization. The note was non
- - interest as long as the company was current on the quarterly payments of
$2,500. The Company defaulted on the quarterly payments in May of 2003 and
the remaining $95,000 became due on demand. The note was settled in
connection with the Company being acquired by Wizzard Software Acquisition
Corporation through the issuance of 36,363 shares of Wizzard Software
Corporations common stock valued at $98,875. During 2003, the Company record
interest of $3,875 based upon the $98,875 settlement.
NOTE 7 - RELATED PARTY TRANSACTIONS
Management Compensation - During the period ended April 23, 2004, the
president of the Company contributed her services with an estimated value of
$20,000 to the Company. The company has expensed these services during their
respective period and recorded a contribution to capital of $20,000.
Office Space - The Company has not had a need to rent office space. An
officer/shareholder of the Company is allowing the Company to use her home as
a mailing address, as needed, at no significant expense to the Company.
Advances to from a related party - During the period ended December 31, 2002,
the Company advanced the President / shareholder of the Company $57,500 and
received payments of $40,800. During the year ended December 31, 2003 the
Company advanced the President / shareholder of the Company $23,000 and
received payments of $39,700. The advances were non-interest bearing and
payable on demand.
NOTE 8 COMMITMENT AND CONTINGENCIES
Commitment The Company has issued a purchase order to purchase $81,102 in
inventory and paid a deposit of $40,576 towards the purchase. The Company has
not been able to raise the necessary capital to pay the remaining 50%. The
supplier is holding the inventory until full payment is made.
Product warranty - The Company provides no product warranties to customers
including repair or replacement of defects in materials and workmanship of
certain products. As April 23, 2004, no provision for warranty claims has been
established.
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 9 INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109 Accounting for Income Taxes [FASB 109].
FASB 109 requires the Company to provide a net deferred tax asset or liability
equal to the expected future tax benefit or expense of temporary reporting
differences between book and tax accounting and any available operating loss
or tax credit carryforwards. At April 23, 2004, the total of all deferred tax
assets was approximately $54,500 and the total of the deferred tax liabilities
was $0. The amount of and ultimate realization of the benefits from the
deferred tax assets for income tax purposes is dependent, in part, upon the
tax laws then in effect, the Company's future earnings, and other future
events, the effects of which cannot presently be determined accordingly the
Company has established a valuation allowance of $54,500 at April 23, 2004.
The net change in the valuation allowance for the period ended April 23, 2004,
was $6,000.
The components of income tax expense from continuing operations for the period
ended April 23, 2004 consist of the following:
2004
Current income tax expense:
Federal $ -
State -
Net current tax expense $ -
Deferred tax expense (benefit) arising from:
Net operating loss carryforwards 6,000
Valuation allowance (6,000)
Net deferred tax expense $ -
Deferred income tax expense results primarily from the reversal of temporary
timing differences between tax and financial statement income.
At April 23, 2004, the Company has unused net operating loss carryforwards of
approximately $54,500 which expire beginning 2022.
The temporary differences and carryforwards gave rise to the following
deferred tax asset (liability) at April 23, 2004:
2004
Long term asset (liability):
Net operating loss carryforward 54,500
Valuation allowance (54,500)
MEDIVOXRX TECHNOLOGIES, INC.
[A Development Stage Company]
NOTES TO FINANCIAL STATEMENTS
NOTE 10 COMMON STOCK
Common stock The Company has authorized 1,000,000 shares of common stock
with a par value of $0.01. At December 31, 2003 and 2002, the Company had
489,380 and 485,820 shares of common stock issued and outstanding.
During 2002, the Company issued 345,000 common shares to the founders for
services rendered valued at $3,450. The Company further issued 105,000 shares
for $75,000 in expense of Company paid by the president. The Company issued
6,000 common shares in payment of $18,000 in accounts payable.
During 2002, the Company issued 16,850 common shares in connection with a
private placement of the Company's common stock at $3.00 per share for $50,550
in cash.
During 2003 and 2002, the Company issued 3,560 and 12,970 common shares in
connection with a private placement of the Company's common stock at $10.00
per share for $35,600 and $129,700 in cash, respectively.
During 2004, the president of the Company contributed her services with an
estimated value of $20,000 to the Company. The company has expensed these
services during the period and recorded a contribution of capital of $20,000.
NOTE 11 SUBSEQUENT EVENTS
Acquisition of Company - On April 23, 2004, the Company was acquired by
Wizzard Software Corporation through Wizzards issuance of 150,035 shares of
common stock for all of the issued and outstanding common shares of MedivoxRx
Technologies, Inc. and reduction of approximately $155,000 in MedivoxRx
Technologies, Inc. outstanding liabilities. The Wizzard Software Corporation
further agreed to issue up to 1,550,000 additional common shares to the
Medivox Rx, Technologies, Inc. shareholders if certain sales and product
acceptance milestones are reached.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
The following unaudited proforma condensed combined balance sheet aggregates
the balance sheet of Wizzard Software Corporation ("PARENT") as of March 31,
2004 and the balance sheet of MediVoxRx Technologies, Inc. ("SUBSIDIARY") as
of April 23, 2004, accounting for the transaction as a purchase of SUBSIDIARY
with the issuance 150,035 common shares of the PARENT for all of the issued
and outstanding shares of SUBSIDIARY and the settlement of $155,478 of
liabilities of the SUBSIDIARY and using the assumptions described in the
following notes, giving effect to the transaction, as if the transaction had
occurred as of the end of the period. The transaction was not completed as of
March 31, 2004.
The following unaudited proforma condensed combined statement of operations
combine the results of operations of PARENT for the three months ended March
31, 2004, and the years ended December 31, 2003 and 2002 and the results of
operations of SUBSIDIARY for the period ended April 23, 2004, year ended
December 31, 2003 and period from inception on January 7, 2002 through
December 31, 2002 as if the transaction had occurred as of the beginning of
the respective years and periods.
The proforma condensed combined financial statements should be read in
conjunction with the separate financial statements and related notes thereto
of PARENT and SUBSIDIARY. These proforma financial statements are not
necessarily indicative of the combined financial position, had the acquisition
occurred on the date indicated above, or the combined results of operations
which might have existed for the periods indicated or the results of
operations as they may be in the future.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
PROFORMA UNAUDITED CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2004
[Unaudited]
ASSETS
Wizzard Software MediVoxRx
Corporation Technologies, Inc. Proforma Proforma
March 31, 2004 April 23, 2004 Increase Proforma Contingent
[Parent] [Subsidiary] (Decrease)Combined Shares
________________________________________________________________
ASSETS:
Cash $ 970,868 $ - - $ 970,868 $ 970,868
Cash-restricted 104,591 - - 104,591 104,591
Accounts
receivable, net 30,688 - - 30,688 30,688
Product Inventories 22,602 10,361 - 32,963 32,963
Deposit for inventory - 41,576 - 41,576 41,576
Prepaid expenses 24,628 - - 24,628 24,628
Property, molds and
equipment, net 88,715 47,710 - 136,425 136,425
Goodwill - - [A] 435,594 435,594 5,984,594
Other assets, net 257,746 6,558 - 264,304 264,304
__________ __________ _________ __________ __________
$1,499,838 $ 106,205 $ 435,594 $2,041,637 $7,590,637
__________ __________ _________ __________ __________
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES:
Notes payable -
related party $ 270,092 $ - $ - $ 270,092 $ 270,092
Notes payable - 95,000 [A] (95,000) - -
Accounts payable 238,147 61,277 [A] (56,603) 242,821 242,821
Accrued liabilities 115,432 3,875 [A] (3,875) 115,432 115,432
Customer Deposits 7,000 - - 7,000 7,000
__________ __________ _________ __________ __________
Total Liabilities 630,671 160,152 (155,478) 635,345 635,345
__________ __________ _________ __________ __________
STOCKHOLDERS'
EQUITY (DEFICIT):
[A] 150
Common Stock 23,929 4,894 [A] (4,894) 24,079 25,629
Additional paid in [A] 536,975
capital 10,107,207 447,406 [A](447,406)10,644,182 16,191,632
Accumulated deficit (9,261,969) (506,247)[A] 506,247 (9,261,969)(9,261,969)
__________ __________ _________ __________ __________
Total Stockholders'
Equity (Deficit) 869,167 (53,947) 591,072 1,406,292 6,955,292
__________ __________ _________ __________ __________
$1,499,838 $ 106,205 $ 435,594 $2,041,637 $7,590,637
__________ __________ _________ __________ __________
See Notes To Unaudited Proforma Condensed Financial Statements.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
PROFORMA UNAUDITED CONDENSED COMBINED STATEMENT OF OPERATION
[Unaudited]
Wizzard Software MediVoxRx
Corporation Technologies, Inc.
For the Three For the Period
Months Ended Ended Proforma Proforma
March 31, 2004 April 23, 2004 Increase Proforma Contingent
[Parent] [Subsidiary] (Decrease)Combined Shares
________________________________________________________________
REVENUE, net $ 97,064 $ - $ - $ 97,064 $ 97,064
COST OF GOODS SOLD 78,612 - 78,612 78,612
__________ ________ _______ __________ _________
GROSS PROFIT 18,452 - 18,452 18,452
EXPENSES:
Selling expense 69,481 - - 69,481 69,481
General and
administrative 1,055,333 60,938 - 1,116,271 116,271
Compensation for
repricing Warrants 160,420 - - 160,420 160,420
__________ ________ _______ __________ _________
Total operating
expenses 1,285,234 60,938 - 1,346,172 1,346,172
__________ ________ _______ __________ _________
LOSS FROM
OPERATIONS (1,266,782) (60,938) - (1,327,720)(1,327,720)
__________ ________ _______ ____________________
OTHER (EXPENSE) (10,158) - - (10,158) (10,158)
__________ ________ _______ ____________________
LOSS BEFORE INCOME
TAXES (1,276,940) (60,938) - (1,337,878)(1,337,878)
INCOME TAX EXPENSE - - - - -
__________ ________ _______ _________ __________
NET LOSS $(1,276,940) $(60,938) $ - $(1,337,878)(1,337,878)
___________ ________ _______ _________ __________
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE OUTSTANDING $(.06)$ (.05)
_________ __________
See Notes To Unaudited Proforma Condensed Financial Statements.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
[Unaudited]
Wizzard Software MediVoxRx
Corporation Technologies, Inc.
For the Year For the Year
Ended December Ended December Proforma Proforma
31, 2003 31, 2003 Increase Proforma Contingent
[Parent] [Subsidiary] (Decrease)Combined Shares
________________________________________________________________
REVENUE, NET $ 470,487 $ 6,961 $ - $ 477,448 $ 477,448
COST OF GOOD SOLD 388,330 3,226 - 291,556 291,556
__________ _________ ________ __________ __________
GROSS PROFIT 82,157 3,735 - 85,892 85,892
EXPENSES:
Selling Expense 153,865 16,318 - 170,183 170,183
General and
administrative 590,085 110,944 - 701,029 701,029
Non-cash legal and
consulting fees 1,334,815 - - 1,334,815 1,334,815
__________ _________ ________ __________ __________
Total operating
expenses 2,088,765 127,262 - 2,206,027 2,206,027
__________ _________ ________ __________ __________
LOSS FROM
OPERATIONS (1,996,608) (123,527) - (2,120,135)(2,120,135)
__________ _________ ________ __________ __________
OTHER (EXPENSE) (47,434) (6,331) - 53,765 53,765
__________ _________ ________ __________ __________
LOSS BEFORE INCOME
TAXES (2,044,042) (129,858) - (2,173,900)(2,173,900)
INCOME TAX EXPENSE - - - - -
__________ _________ ________ __________ __________
NET LOSS $(2,044,042) $(129,858) $ - $(2,173,900)(2,173,900)
__________ _________ ________ ___________ __________
BASIC AND DILUTED NET (LOSS) PER COMMON SHARE OUTSTANDING $(.11) $ (.10)
_____ ________
See Notes To Unaudited Proforma Condensed Financial Statements.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
PROFORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
[Unaudited]
Wizzard Software MediVoxRx
Corporation Technologies, Inc.
For the Year For the Year
Ended December Ended December Proforma Proforma
31, 2002 31, 2002 Increase Proforma Contingent
[Parent] [Subsidiary] (Decrease)Combined Shares
________________________________________________________________
REVENUE, NET $ 346,116 $ - $ - $ 346,116 $ 346,116
COST OF GOOD SOLD 225,254 - - 225,254 225,254
__________ _________ ________ __________ __________
GROSS PROFIT 120,862 - - 120,862 120,862
EXPENSES:
Selling Expense 35,169 13,571 - 48,740 48,740
General and
administrative 687,265 129,099 - 816,364 816,364
Research & Development - 172,781 - 172,781 172,781
Non-cash legal and
consulting fees 723,899 - - 723,899 723,899
__________ _________ ________ __________ __________
Total operating
expenses 1,446,333 315,451 - 1,761,784 1,761,784
__________ _________ ________ __________ __________
LOSS FROM
OPERATIONS (1,325,471) (315,451) - (1,640,922)(1,640,922)
__________ _________ ________ __________ __________
OTHER (EXPENSE) (33,222) - - (33,222) (33,222)
__________ _________ ________ __________ __________
LOSS BEFORE INCOME
TAXES (1,358,693) (315,451) - (1,674,144)(1,674,144)
INCOME TAX EXPENSE - - - - -
__________ _________ ________ __________ __________
NET LOSS $(1,358,693) $(315,451) $ - $(1,674,144)(1,674,144)
__________ _________ ________ ___________ __________
BASIC NET (LOSS) PER COMMON SHARE OUTSTANDING $(.10) $ (.09)
_____ ________
See Notes To Unaudited Proforma Condensed Financial Statements.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
NOTE 1 WIZZARD SOFTWARE CORPORATION
Wizzard Software Corporation (Formerly Balance Living, Inc.) [PARENT] a
Colorado corporation, was organized on July 1, 1998. Parent has two
subsidiaries Wizzard Software Corp. incorporated on February 29, 1996
under the laws of the State of Delaware and 96% owned by the PARENT and
Speech Systems, Inc a wholly owned subsidiary. The Company is an OEM
licensee of certain speech to text and text to speech software engines.
The Company also develops, sells, and service of custom and packaged
speech recognition computer software products.
NOTE 2 MEDIVOXRX TECHNOLOGIES, INC.
MediVoxRx Technologies, Inc. [SUBSIDIARY] was organized under the laws
of the State of New York on January 7, 2002. The Company is considered
a development stage company as defined in Statement of Financial
Accounting Standards ("SFAS") No. 7. The Company is engaged in the
business of developing a talking prescription pill bottle.
NOTE 3 PROFORMA ADJUSTMENTS
On April 23, 2004 the PARENT organized Merger Corp. a wholly owned
subsidiary of the PARENT for the purpose merging with and into
SUBSIDIARY and acquiring the SUBSIDIARY as a wholly owned subsidiary of
the PARENT. Following the merger the Subsidiary shall continue as the
surviving corporation and the separate corporate of Merger Corp. shall
cease.
The acquisition will be accounted for as a purchase, wherein the PARENT
will issued 70,678 common shares to the shareholder of the SUBSIDIARY
for the 489,380 common shares of the SUBSIDIARY. The PARENT will
further issued 79,357 common shares in settlement of $155,478 in
liabilities of the SUBSIDIARY.
The PARENT has further agreed to issue 1,550,000 common shares to the
Shareholders of the SUBSIDIARY upon the SUBSIDIARY meeting certain sales
and product acceptance milestones [See Note 4]. For the purpose of the
column labeled "Proforma Contingent Shares" in the attached proforma
financial statements the 1,550,000 are assumed to be issued at $3.58 per
share. The ultimate goodwill recorded for the contingent shares if
issued will be determined based on the number of contingent shares
issued and the price per share on the date issued.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
NOTE 3 PROFORMA ADJUSTMENTS [Continued]
Proforma adjustments on the attached financial statements include the
following:
[A] To record the issuance of 70,678 restricted common shares of the
PARENT valued at $3.58 per share for all of the issued and
outstanding shares of Subsidiary.
To record the issuance of 79,357 restricted common shares of PARENT
valued at $3.58 per share in settlement of $155,478 in liabilities
of the SUBSIDIARY.
These transactions resulting in PARENT recording goodwill of
$435,594 as the total purchase price of $537,125 exceed the fair
value of the $101,531 in net assets.
NOTE 4 CONTINGENT SHARES WHICH COULD BE ISSUED IN THE ACQUISITION
The PARENT will issue 100,000 restricted common shares to the SUBSIDIARY
stockholders upon the successful development, testing and installation
of the planned automated system whereby the audio to be loaded on the
Talking pill bottle is generated and automatically loaded using TTS plus
technology, SUBSIDIARY must have repeat sales from at lease 8 Veterans
Administration (VA) sites and total VA sales in excess of 5,000 units
with a specific gross margin within a six month period of the closing
date.
The PARENT will issue 100,000 restricted common shares to the SUBSIDIARY
stockholders if the SUBSIDIARY must have repeat sales of 250 units per
month from at lease 15 VA sites for three consecutive months with a
specific gross margin.
The PARENT will issue 50,000 restricted common shares to the SUBSIDIARY
stockholders if the SUBSIDIARY receives Federal Supply Schedule
approval.
The PARENT will issue 50,000 restricted common shares to the SUBSIDIARY
stockholders if the SUBSIDIARY upon approval and acceptance by any
Veterans Administration Hospital that pill bottle simultaneously loads
the prescription while the label is being printed.
The PARENT will issue 625,000 restricted common shares to the SUBSIDIARY
stockholders if the SUBSIDIARY meets revenue and profit projections for
the first year of operations forward from the April 23, 2004.
The PARENT will issue 625,000 restricted common shares to the SUBSIDIARY
stockholders if the SUBSIDIARY meets revenue and profit projections for
the second year of operations forward from the April 23, 2004.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
NOTE 5 PROFORMA (LOSS) PER SHARE
The proforma (loss) per share is computed based on the weighted average
number of common shares outstanding during the period plus the estimated
shares issued in the acquisition and contingent shares which could be
issued in the acquisition had the acquisition occurred at the beginning
of the periods presented.
For the For the For the
Three Months Year Ended Year Ended
Ended December 31, December 31,
March 31, 2004 2003 2002
_______________ ____________ ___________
Weighted average number of common
shares outstanding during the period
used in loss per share (denominator) 23,158,789 20,631,309 17,190,134
Shares issued in acquisition 150,035 150,035 150,035
__________ __________ __________
Proforma weighted average number of
common shares outstanding during the
period used in loss per share after
purchase (denominator) 23,308,824 20,781,344 17,340,169
__________ __________ __________
Potential contingent shares which
could be issued in the acquisition 1,550,000 1,550,000 1,550,000
__________ __________ __________
Proforma weighted average number of
common shares outstanding during the
period after purchase and used in loss
per issuance of contingent shares 24,858,824 22,331,344 18,890,169
__________ __________ __________
At March 31, 2004, the Company had 432,086 warrants outstanding to purchase
common stock of the Company at $.25 to $1.55 per share and a convertible
note payable wherein the holder could convert the note into a minimum of
470,000 shares of common stock, which were not included in the loss per
share computation because their effect would be anti-dilutive.
At December 31, 2003, PARENT had 608,076 warrants outstanding to purchase
common stock of the Company at $.25 to $2.00 per share and a convertible
note payable wherein the holder could convert the note into a minimum of
470,000 shares of common stock; which were not included in the loss per
share computation because their effect would be anti-dilutive.
Subsequent to the year ended December 31, 2003, the PARENT had issued
528,076 common shares upon the exercise of warrants outstanding to purchase
common stock of the Company at $.25 to $2.00 per share; the company issued
824,174 of 1,648,352 common shares and warrants to purchase 412,087 of
824,174 common shares at $1.55 per share expiring three years from the date
issued for $600,000 of $1,200,000 subscription agreement and the Company
issued 90,210 shares upon exercise of 90,210 options issued for services
valued at $152,020 during 2004. These equity transactions were not
included in the loss per share computation as they occurred subsequent to
December 31, 2003.
WIZZARD SOFTWARE CORPORATION
AND MEDIVOXRX TECHNOLOGIES, INC.
NOTES TO PROFORMA CONDENSED COMBINED FINANCIAL STATEMENTS
[Unaudited]
NOTE 5 PROFORMA (LOSS) PER SHARE [Continued]
At December 31, 2002, the PARENT had 1,788,076 warrants outstanding to
purchase common stock of the Company at $.25 to $2.00 per share and a
convertible note payable wherein the holder could convert the note into
a minimum of 470,000 shares of common stock, which were not included in
the loss per share computation because their effect would be anti-
dilutive.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf by
the undersigned hereunto duly authorized.
WIZZARD SOFTWARE CORPORATION
Date: 7-7-04 /s/ Christopher J. Spencer
------ ---------------------------
Christopher J. Spencer,
President, CEO and Director