SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act
October 23, 2006
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Date of Report
(Date of Earliest Event Reported)
WIZZARD SOFTWARE CORPORATION
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(Exact Name of Registrant as Specified in its Charter)
Colorado 000-33381 87-0609860
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(State or other (Commission File No.) (IRS Employer I.D. No.)
Jurisdiction)
5001 Baum Boulevard, Suite 770
Pittsburgh, Pennsylvania 15213
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(Address of Principal Executive Offices)
(412) 621-0902
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Registrant's Telephone Number
N/A
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(Former Name or Former Address if changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the Registrant under any of
the following provisions (see general instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14-a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
Effective as of October 23, 2006, the Registrant, ("Wizzard," the
"Company," "we," "our," "us" and words of similar import); and Webmayhem Inc.
dba Liberated Syndication, a Pennsylvania corporation ("Webmayhem"), executed
a Letter of Intent (the "LOI"), whereby Wizzard agreed to purchase all of the
outstanding securities of Webmayhem and for Webmayhem to become a wholly-owned
subsidiary of Wizzard.
The following are the principal terms of the LOI:
1. Webmayhem will be merged into a newly-formed subsidiary of Wizzard
in exchange for: (i) $250,000 in cash to be paid at the time of Closing (as
defined in the LOI); (ii) 3,157,895 "unregistered" and "restricted" shares of
Wizzard common stock; and (iii) an additional $100,000 to be paid to
Webmayhem's stockholders on the six month anniversary of the Closing.
2. Wizzard agreed to provide a minimum of $200,000 working capital for
the operations of the subsidiary in each of the four consecutive calendar
quarters following the Closing.
3. Wizzard agreed to enter into employment agreements with Webmayem's
principals for a minimum of one year, with these salaries to be paid out of
the working capital provided by Wizzard. Fifteen percent of operating capital
must be used for sales and marketing purposes to grow the Webmayhem business.
Wizzard further agreed that if Webmayhem achieves Milestone No. 1 (as defined
below), Wizzard will guarantee employment of at least Webmayhem's original
employees for an additional year. Both Wizzard and Webmayhem must approve an
operating budget for the second year of operations.
4. Milestone No. 1 will occur if Webmayhem's monthly podcast media
file downloads and unique IP addresses grow by 20% in the first full year
post-acquisition over the previous year. If Milestone No. 1 is reached, an
additional 2,631,579 "unregistered" and "restricted" shares of Wizzard's
common stock will be issued to the Webmayhem stockholders.
5. Milestone No. 2 will occur if Webmayhem's gross revenues after two
years equal or exceed $5 million and profits (EBITDA) equal or exceed $1.5
million. If Milestone No. 2 is reached, Wizzard will issue an additional
2,631,578 "unregistered" and "restricted" shares of its common stock to the
Webmayhem stockholders.
6. Milestone No. 3 will occur if Webmayhem's gross revenues after
three years equal or exceed $15 million and profits (EBITDA) equal or exceed
$5 million. If this milestone is reached Wizzard will issue an additional
2,631,578 "unregistered" and "restricted" shares of its common stock to the
Webmayhem stockholders.
7. Webmayhem will have the right to appoint one person to Wizzard's
Board of Directors, which shall not have more than four directors following
such appointment. Furthermore, if Milestone No. 2 is achieved and the newly-
formed subsidiary makes up at least 35% of Wizzard's revenues for four
consecutive quarters, Webmayhem will have the right to appoint a second person
to Wizzard's Board of Directors.
8. Wizzard agreed to provide "soft support," including but not
limited to professional, marketing and programming personnel. If such
expenses exceed $250,000 in a given year, they will be taken into account when
determining whether the milestones have been met.
9. The LOI is binding on both Wizzard and Webmayhem for 60 days while
Wizzard performs a due diligence evaluation on Webmayhem, prepares closing
documents and performs the required audit. Notification in writing to
Webmayhem that the due diligence was completed satisfactorily will cause both
parties to immediately begin finalizing the definitive purchase agreement. If
Wizzard notifies Webmayhem that the due diligence examination was
unsatisfactory, Webmayhem will have five working days to cure all such
deficiencies. If Webmayhem is unable to cure its deficiencies to the extent
that a satisfactory examination will result, upon written notice by Wizzard to
Webmayhem, the LOI will be deemed void and both parties will be released from
further obligation thereunder.
10. Upon successful completion of the due diligence exam, both parties
will have 60 working days, from the date of the LOI, to reach a definitive
Purchase Agreement.
11. Both Wizzard and the Webmayhem stockholders will execute
customary lock-up/leak-out agreements with respect to the Wizzard common stock
to be acquired under the definitive purchase agreement. The lock-up/leak-out
agreement will restrict sales of such common stock for 18 months, with a
leak-out provision allowing the Webmayhem stockholders collectively to sell no
more than 20% of their shares in any given calendar quarter.
Prior to the execution of the LOI, Webmayhem had no material relationship
with our Company.
Webmayhem is the world's largest podcasting network. It broadcasts over
42 million podcast downloads a month to 15 million people worldwide.
Item 2.01 Completion of Acquisition or Disposition of Assets.
See Item 1.01 above.
Item 7.01 Regulation FD Disclosure.
Press Release dated October 26, 2006, a copy of which is attached hereto
and incorporated herein by reference. See Item 9.01.
Item 9.01 Financial Statements and Exhibits.
(c) Exhibits.
Exhibit Description
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99 Press Release
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
Dated: 10/27/06 /s/ Christopher J. Spencer
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Christopher J. Spencer
President