Highlights of Third Quarter, 2008

Our business, for the last twelve years, has been focused on the speech recognition technology industry. As a result of our commitment to speech technologies, we have been able to position ourselves as a leader in the fast growing digital media aggregation, syndication and advertising industry currently taking shape on the internet. Using sophisticated speech recognition technologies, we are able to offer advertisers highly targeted advertising packages from the 15,000+ digital media 'shows' hosted and published using Wizzard Media's products and services. Below is an update of our entire business, from our most recent entry into digital media where we expect most of our future growth to occur, to our legacy businesses of offering core speech engine tools for developers and speech technology solutions for the healthcare industry. Currently, our healthcare operations make up 64% of our revenue, but we expect our digital media publishing business to become our largest revenue generator at some point in 2009 and provide the largest revenue growth in the future. We believe this is due to the size of our digital media operations and the potential advertising inventory available for sale by Wizzard's ad sales team. The growth of our media operations has occurred faster than initially expected and it is Management's opinion that we are still in the early stages of growth for this industry as we are seeing the flow of quality content coming to the internet increase at a rapid pace and advertisers showing growing interest in the medium. As paid search advertising is the largest and most profitable segment of the internet advertising industry (Google, Yahoo, etc), we believe the Internet media advertising industry has the potential over the next five years to grow into the largest segment of Internet advertising and believe that Wizzard is positioned to be one of the leading companies in the Internet media advertising business.

1. WIZZARD MEDIA

Wizzard Media is the one year old division for our digital media business.
Wizzard Media is focused on the digital media industry and how speech technology, when used effectively, can have a significant impact on the industry by providing a safe means for advertisers to promote their brands in professional and semi-professional content. By incorporating speech recognition into the digital media mix, Wizzard can search through a transcript of every participating show utilizing our publishing platform and offer targeted keyword advertising to national brands while providing monetization of digital content for our publishers and for Wizzard. Wizzard Media is currently the industry's largest network of independent and professional digital media publishers utilizing RSS as a distribution method. The network received over 450 million download requests for shows in 2006 and surpassed 1 billion download requests in 2007. In the third quarter of 2008, the Wizzard Network received 287,400,000 download requests for shows vs. 241,700,000 download requests in the third quarter of 2007. Wizzard's publishing platform grew by over 3,300 new shows in the third quarter of 2008 vs. 700 new shows in the third quarter of 2007. Over 88,000 new individual episodes were added across the network in the third quarter of 2008 vs. 42,000 new episodes added in the third quarter of 2007.
With the continuing success of Apple's iPod, iPhone and Apple TV 2.0 along with new RSS aggregators from Adobe and others, we expect the number of content publishers using our service and the number of consumers watching the shows to continue to grow rapidly on an annual basis. The total number of episodic shows published through Wizzard Media grew to over 15,000 in the third quarter of 2008 with over 500,000 individual episodes in syndication. Wizzard's LibsynPRO Enterprise service grew to 32 network publishers in the third quarter of 2008.
We continue to receive positive feedback from major media publishers for our new LibsynPRO Enterprise publishing and advertising platform. As Wizzard Media derives a portion of its revenues through data transfer from PRO customers, launching a new, feature rich version of the PRO publishing platform provides Management with the tools to grow the number of PRO publishers and thereby revenues associated with our data transfer business. During the third quarter 2008, revenue from data transfer totaled $46,790.

In the third quarter of 2008, traditionally a slower quarter than the first or fourth quarter for media consumption, the Wizzard Network received approximately 287,400,000 download requests for shows vs. 241,700,000 download requests in the third quarter of 2007, from a wide variety of distribution outlets to which Wizzard syndicates content. The Wizzard Media network received over 3,100,000 million requests for shows per day in the third quarter. These shows are consumed by over thirteen million people around the world creating what Management believes is a very compelling platform for advertisers. Download requests are calculated by counting the number of shows requested

Currently, Wizzard Media distributes digital shows for our producers to a variety of web portals and content aggregators including: Wizzard.tv, Veoh.com, Apple TV (Featured Provider), iTunes (Featured Provider), Second Life, iPhone, YouTube (Partner Channel), Google (Affiliate Network), Adobe Media Player, Daily Motion (Featured Channel), Zune Marketplace, and Facebook. Some of these partner channels were created solely to expand audience reach and some to expand both audience reach and generate revenues for Wizzard and our publishers. In the third quarter of 2008, Wizzard expanded the number of distribution points available to our publishers by 22 through a partnership with TubeMogul, including Yahoo Video, AOL Video, Google Video and MySpace. While no material revenue has been generated from these distribution channels to date, we expect to realize revenue in the fourth quarter of 2008 with anticipated growth throughout 2009.

In the first quarter of 2008, Wizzard announced a content licensing and advertising agreement with YouTube. As a YouTube content partner, Wizzard has its own branded channel that enables users to access streaming video from the Wizzard Media Network. Wizzard worked with YouTube and several of its other distribution partners/content licensees in the third quarter to monetize the shows Wizzard distributes through their third party service. Management expects to have numerous working advertising campaigns through third party audience consumption platforms (distribution partners) in the fourth quarter of 2008.
Wizzard is in the process of entering into advertising agreements with several of its distribution partners but expects third party ad sales to be minimal in 2008 as Wizzard posts content to the partner channels and builds audiences for the various shows.

In the third quarter of 2008, Wizzard launched seven advertising campaigns including Puma, Panasonic, US Navy Medical, Coca-Cola, SpikeTV, Powerade and Saturn. These campaigns run across multiple shows bringing the total number of advertising campaigns launched to date to 35, with 18 different advertisers, resulting in $283,942 of year to date advertising revenue.

In the third quarter of 2008, Wizzard's new technical advertising insertion system, able to handle the insertion of advertisements into audio and video shows with geographical targeting capabilities, continued to be successfully tested for multiple advertising campaigns. Using the new system, the Wizzard Media Network had the capability to deliver over four hundred and thirty nine million (439,928,687) advertisements in the third quarter. This was calculated using the formula"*" described below. In order to increase the percentage of filled advertising inventory we must continue to execute on our advertising sales strategy, grow our ad sales force, integrate third party ad networks and create relationships with more advertising agencies and their clients. This demonstrates to advertisers the reach of the Wizzard Media network as most advertisers want to see the opportunity for large advertising campaigns.
Management believes that most advertisers prefer to deal with a few companies with large reach rather than many companies with smaller reach as it makes their advertising 'buys' and tracking easier to monitor. Wizzard continues to ramp up its advertising sales efforts with a goal to fill 35% of all available inventory for any given quarter at some point in 2009.

Client results of our largest advertising execution to date were excellent in management's opinion and we expect more buys from the client in the future. We have now had multiple advertisers renew campaigns with Wizzard including one advertiser that is on its ninth campaign demonstrating what Management believes is excellent back-end ad operational service on Wizzard's part and a satisfactory ROI for our clients.

Wizzard's Data Research department has completed audience surveys in excess of 65,000, which is a critical sales component in the data driven advertising industry and the information gathered will be used by our ad sales team extensively. Poll questions were added to survey regarding campaign execution in third quarter which offers added data on effectiveness on various components of our operations. Wizzard's ad sales team currently consists of five individuals in San Francisco, Los Angeles, Chicago and New York who have been aggressively courting media buyers through extensive education sessions raising awareness of digital media advertising opportunities delivered via subscribable, episodic RSS as well as streaming via the Internet. Neither the Research Department, nor the

In the third quarter 2008, our publisher recruiting efforts resulted in the addition of 81 new shows specifically joining the Wizzard Media Advertising Network (vs. 74 in the 2nd quarter and 50 in the 1st quarter of 2008). As of September 30, 2008, 783 publishers have signed up for Wizzard's advertising network. Wizzard Media currently has 22 distinct ad categories we take to market with more than 450 shows available in those categories. Our efforts to date have been focused on the top 501 shows using our publishing platform which represent 85.6% of our global download requests. Of these 501 shows, 253 have signed up for the Wizzard advertising network representing 67.3% of the most coveted traffic for advertising sales. Wizzard will continue to aggressively market our advertising network to the remaining 23% of the desired publishers not yet signed up through our Publisher Relations team. As the number of publishers joining Wizzard's Advertising Network grows, so does the available advertising inventory for Wizzard's advertising sales team to sell.

    Month        Potential Ad Impressions
October 2007                  118,789,270
November 2007                 129,220,048
December 2007  *              137,212,313
January 2008   *              155,842,635
February 2008                 145,449,788
March 2008                    148,176,155
April 2008                    142,014,592
May 2008                      146,629,010
June 2008      *              134,409,515
July 2008                     143,855,017
August 2008                   146,070,265
September 2008                150,003,405

*

December and January are historically strong months for downloads. June, July and August are historically slower months for downloads. Management believes that the above numbers demonstrate to advertisers the reach of the Wizzard Media network as most advertisers want to see the opportunity for large advertising campaigns. Management believes that most advertisers prefer to deal with a few companies with large reach rather than many companies with smaller reach as it makes their advertising 'buys' and tracking easier to monitor. Formula: Nielsen certified downloads x 2.5 (to take into account pre-roll and post-roll position, and 50% of all downloads capable of handling 1 mid-roll ad). While there can be no future pricing guarantees, the industry is currently charging, and plans to continue to charge, between $.02 and $.05 per downloaded ad. The advertisements tend to be no longer than 15 to 30 seconds and several ads can be inserted in one twenty-minute episode.

Nielsen Certified Downloads for Ad Network

         Month                   Downloads
January 2008            **          62,337,054
February 2008                       58,179,915
March 2008                          59,270,462
April 2008                          56,805,837
May 2008                            58,651,604
June 2008               **          53,763,806
July 2008                           57,542,007
August 2008                         58,428,106
September 2008                      60,001,362

**

December and January are historically strong months for downloads. June, July and August are historically slower months for downloads. While there can be no future pricing guarantees, the industry average is $.02 and $.05 per downloaded ad. In order to win new business, at times, our ad sales force will give first time discounts in the per download price. The advertisements tend to be no longer than 15 to 30 seconds and several ads can be inserted in one twenty-minute episode.

Wizzard Media is currently the industry's largest network of independent and professional digital media publishers utilizing RSS as a distribution method.
Wizzard's publishing platform grew by over 3,300 new shows in the third quarter of 2008 with 88,000 new episodes added across the network. The total number of shows published through Wizzard Media grew to over 15,000 in the third quarter of 2008 with over 500,000 individual episodes in syndication. An increase in shows helps Wizzard gain additional distribution for our publishers and correlates to more downloads, greater audiences and increases our chances of securing advertisers for said shows in addition increasing hosting/publishing revenues. With the continuing success of Apple's iPod, iPhone and Apple TV 2.0 along with new RSS aggregators from Adobe and other companies, we expect the number of publishers using our service and the number of consumers watching the shows we distribute to continue to grow rapidly. Wizzard's LibsynPRO enterprise service grew to 32 network publishers in the third quarter of 2008. We continue to see extremely positive reception by major media publishers for our new LibsynPRO publishing and advertising platform.

Some of the more notable shows joining the Wizzard Media Network in the third quarter of 2008 were:

·

WatchMojo - One of the largest producers, publishers and syndicators of video content for broadband platforms, including the Web, wireless and out-of-home digital video markets. WatchMojo produces original video programming across the Automotive, Education, Fashion, Film, Food, Gambling, Health, Music, Politics & Economy, Space, Sports, Technology and Travel categories.

·

Alan Watts Podcast - Audio clips from the late Alan Watts, who is generally credited with bringing eastern philosophy to the West.

·

Classic Tales - One of the largest Classic Audiobook podcasts with a focus on children's stories, this one came over as part of the Podshow Creator closure. This show is already part of the Audible Kids Campaign.

·

Davey & Goliath - The classic claymation TV show from the 1960's and 70's. The first show brought over from Lightworks.

·

ScrapCast - The Largest and first Scrapbook Podcast. This show is one of many we are working on bringing over from Mevio / Podshow.

·

SomaGirls TV Network - After a year of courting SomaGirls TV, we were able to bring them on board to be part of the Saturn Campaign.

·

The Moth Podcast - One of the most popular podcasts on iTunes, the Moth is part of both the Saturn and the Audible Adult campaigns.

·

YogaToday - Considered the largest and most well known of the YogaPodcasts, this one was brought in with the help of Todd Sweeny. This show is part of the Saturn Campaign.

Wizzard Media continued to extend content distribution in third quarter of 2008 through:

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Partners with Joost for online video distribution

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Partners with TubeMogul for online video distribution to YouTube, YahooVideo, AOL Video and 19 other major video portals on the internet.

·

Partners with Canoe for content distribution across Canada's pre-eminent news and entertainment online portal

Some of above mentioned new publishers are utilizing our media services and in turn we have the ability to bring advertising to their shows. Others are obtaining ads themselves, and utilizing our Ad Insertion and Ad Management technology, Alcheny, in addition to Wizzard having the opportunity to bring advertising to their shows. Then there are publishers for which we are distributing their content and in turn, we have the ability to license the content to a third party and/or bring advertising to their show. Any revenue generated from obtaining ads or the licensing of the content will be shared with the publisher of the show. While the addition of these shows will have little impact on revenue during 2008, Management believes that by publicizing our high profile shows it lends credibility to our service and helps to attract new publishers, distribution outlets and advertisers.

Wizzard Media's technical development team continues to make significant accomplishments in terms of maintaining and expanding on our publishing platform. In the third quarter of 2008, Wizzard's development team focused its efforts on development of Wizzard suite of Tools to support launch of Media (Flash) Player, extended distribution and enhancements to the back-end publishing and advertising support systems.

Additional technical developments in the third quarter of 2008 include:

•

Two updates to LibsynPRO version 2 released to beta users (v2.4)

•

Migration of users from v1.0 to v2.0 of LibsynPRO (100%)

•

Wizzard Media Platform statistics data warehouse project started (90% complete)

•

Wizzard Media Player project (flash media player) launched Wizzard Media Player enhancements for interactive Share and Ad functionality

•

Wizzard Media Tools project launched Wizzard Media integration with video distribution partner, TubeMogul launched

•

Wizzard Media Ad-ops project redesign started (95% complete)

•

Wizzard Media Receiver iPhone Service (65% complete)

Wizzard's speech recognition system continues to process hours upon hours of digital media allowing for better discovery of content, advertising targeting and brand safety and confidence. Below are various statistics from the speech system and its efforts of converting shows on the Wizzard Media Network to searchable text.

 Wizzard Speech System for Digital Media Statistics

Number of Total Words Captured           208,185,350
Number of Shows Transcribed                    2,608
Number of Episodes Transcribed                58,709
Minutes of Processed Content               1,433,801
Number of Unique Words Captured               33,418

2. SPEECH TECHNOLOGY & SERVICES GROUP

Wizzard Software's legacy Speech Technology & Services Group sells and licenses speech programming tools, related speech products and services, and distributable speech engines in over 13 languages worldwide. Wizzard receives the majority of its sales leads through arrangements with IBM and AT&T, as well as through our own internet marketing efforts through Google, Yahoo and other major internet search engines.

The T&S Group continues to focus its efforts on core assistive application and medical dictation markets and continues to add new customers in the language learning and website audio file distribution categories. The website audio file distribution category currently shows the most promise for expanded business going forward.

Management believes a shift in customer demand is fully underway from the purchase of stand alone speech engine applications to a more hosted services type offering. We believe we are well positioned to capture the growing demand for hosted speech solutions with our server based text to speech offerings as well as our server based speaker independent speech recognition products. With the recent acquisition of three hosting systems we now have the internal expertise and network platform to begin offering hosted speech services and Wizzard's speech team secured their first client for hosted speech services.

The Speech Technology and Services Group's immediate focus is to increase revenue and be a preferred supplier for speech technologies to large businesses worldwide, emphasize great technologies, competitive prices, and high quality support to the speech development community and offer non-technical hosted speech conversion services to companies that have subscriber bases in fast growing market segments. There can be no guarantee that customers will be willing to pay Wizzard for these services.

Based in Casper, Wyoming and Billings, Montana, Interim Health Care of Wyoming has been serving its community for fifteen years and is part of the fast growing home health segment of the healthcare industry, providing a wide range of visiting nurse services to the elderly, wounded and sick. It is one of the 300 home health agencies that comprise Interim Health Care, the largest home healthcare franchise in the United States. Wizzard currently derives the bulk of its revenues, 64% for the first nine months of 2008, from its home healthcare operations. As is the case within the medical industry, we continue to be faced with the challenge of identifying and retaining personnel with the required skill set for our home healthcare operations. As a result, we have shifted functional responsibility to better utilize available and qualified personnel.
As an example, functions that were once completed by a Registered Nurse are now being performed by a Licensed Practicing Nurse while maintaining all federal and state compliance requirements.

Both home care offices, Billings and Casper, have invested a great deal of time and effort into their respective conversions to the Interlink Software System. The process has been extremely labor intensive but has progressed to the point that it is operational in both offices. This system integrates scheduling, physician orders, employee data, billing, and payroll functions: eliminating duplicate efforts in day to day operations. Both offices have worked with Wizzard in tracking process for compliance with Sarbanes-Oxley requirements.

In Billings, we hired a new director of healthcare services who comes with extensive local healthcare management experience. As a result, Interim has realized the addition of one new service: providing skilled assessment and supervision of patients at local testing facilities, and we are evaluating additional healthcare services.

In Casper, we hired a new Administrator, who comes with a diverse background in the healthcare industry. Interim Casper continues to provide home care and staffing services. Staffing services has experienced a decline in the past year but we anticipate the hiring of a Staffing Manager to focus on growing the business. Casper staffing is exploring the potential of new facilities for use of supplemental services.

Overall, internal operations have been given greater structure. Employee hiring processes and record keeping have been fine tuned. Drug screening of employees upon hire and random quarterly screening have been implemented. Home care client files have been restructured improving timely communication in the office and maintaining the access to information in the home. Promotional activities are escalating as the offices experience stability in day to day operations.

Our home healthcare business continues to be a strong revenue generator for our Company as our country's population ages and new methods of patient data capture become critical components for delivering high quality, affordable healthcare services in a patient's home. Although this has been a gradual process, we believe that we are building a solid business that will offer a complimentary package of new technology and traditional services. Recruiting and retaining nurses continues to be one of the biggest challenges for our home healthcare businesses and we plan to continue our aggressive marketing efforts to satisfy our customers' demands.

Results of Operations

Three Months Ended September 30, 2008 and 2007.

During the third quarter ended September 30, 2008, Wizzard recorded revenues of $ 1,533,339, a 4% increase from revenues of $ 1,468,476 in the third quarter of 2007. The increase for the third quarter of 2008 was due to the new business in our digital media publishing and incremental sales of our speech recognition software. Home healthcare sales were flat compared to prior year.

Cost of goods sold totaled $1,118,200 in the third quarter of 2008, versus $ 1,005,135 in the third quarter of 2007. This increase of 11% is attributed primarily to an increase in wages within our healthcare operations, offset by a decrease in bandwidth costs within our media services operation. Wizzard posted a gross profit of $415,139 during the third quarter of 2008, versus a gross profit of $ 463,341 in the third quarter of 2007, a decrease of 10%.

In the third quarter ended September 30, 2008, operating expenses totaled $1,747,586 which was a 4% increase from operating expenses of $1,684,973 in the third quarter of 2007. Broken down by line item our operating expenses were:

Selling expenses in the third quarter of 2008 were $316,736 versus $256,331 in 2007. This 24% increase was due to the addition of personnel with the development of our digital media publishing and media business operations.

General and administrative expenses were $1,026,557 in 2008 versus $894,025 in 2007, an increase of 15%, due the additional personnel to run the operations of the digital media publishing operations. This increase was also due to the recording of amortization expense associated with the intangible assets from the purchase of iClipx; incremental internet bandwidth fees associated with our development of the media services operating platform; and incremental rent expense with the addition of offices in Florida, New York and Los Angeles.

Salaries, wages and related expenses decreased to $637,218 in 2008 from $681,940 . . .