Modavox Announces Opening Quarter '06 Results

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80% Growth in Revenues from Comparable Period of 2005 and Progress Being Made in the Interactive Division

We appreciate the patience of our shareholders. We intend to address the information and other needs of our shareholders as we continue to reduce the legacy issues that we have faced and get some

Modavox, Inc. (OTCBB: MDVX), a Phoenix based company that produces the online talk radio VoiceAmerica™ Network and creates software solutions for online audio/visual advertising and business to business and business to consumer communications, today reported on the progress that the Company has made since its February 28, 2006 year end including its first quarter results as filed in its 10QSB on July 17, 2006.

For the three months ended May 31, 2006, the Company reported revenues of $432,903 and a net loss of $669,233.

Revenues of $432,903 increased $192,656 or 80% over the $240,247 reported in the comparable period of the previous year. Of the increase, $143,000 arose from revenues of the Interactive Media division that was acquired in the Kino acquisition on February 28, 2006 with the remainder of the increase arising from the Broadcast media division. David Ide, CEO, stated “Although we are pleased that revenues increased in our Broadcast Media division, we are disappointed that the transition issues related to the Kino merger and other distractions outside of the normal operations of the company in March, 2006, resulted in fewer revenues from our Interactive Media division than we had anticipated. However, as we will discuss further on in this release, we are confident that the addition of our VP of Business Development and Strategic Marketing, will provide the catalyst that will allow us to achieve our Interactive Media division revenue and growth goals.”

Operating expenses were $121,802 for the 2006 quarter compared to 156,552 in the comparable quarter of the previous year. The reduction of $34,750 resulted from cost cutting efforts. Selling, general and administrative expenses were $907,357 for the 2006 quarter compared to $462,616 in the comparable quarter of the previous year. The $444,741 increase in expenses in the 2006 quarter included a $125,000 separation payment to the former Chairman of the Board, $44,000 in legal expenses related to this separation and the Kino merger, and $356,000 of non-cash expenses related to the issuance of stock and warrants to resolve legacy issues and to “position” the current management and strategy of the Company. Without these charges, which aggregated $525,000, the Company would have had a decrease in selling and administrative expenses of $80,259. “We had a large number of difficult issues to deal with in the quarter” stated David Ide. “However, we believe that we have dealt with most issues and do not foresee the need to use warrants and stock in this magnitude in the future.” The large charge for the use of warrants resulted from the valuation of the warrants using the Black-Scholes model as required by SFAS 123, which was adopted by the Company on March 1, 2006.

Depreciation and amortization expense increased $78,811 to $90,990, reflecting amortization of the software assets acquired in the Kino merger. Interest expense was $535 in the 2006 quarter compared to $118,775 in the comparable period of the previous year. The decrease resulted from the conversion to common stock of outstanding debt.

The net loss for the 2006 period was $669,233 compared to $509,875 in the prior year. The loss in 2006 included the $525,000 of expenses discussed above and the $78,811 increase in depreciation expense.

“We are attempting to restructure the Company so that we have at least breakeven cash flow in the near term” stated David Ide. “In that regard, I believe that we made progress in the May quarter, as our $194,000 use of cash in operations during the quarter included the $125,000 separation payment, $31,500 in legal fees related to the issues of the quarter, $27,000 paid to the IRS for back payroll taxes, and approximately $20,000 paid on overdue payables. While we continue to have an IRS liability and overdue payables, we are optimistic about meeting our operating cash needs from operations.”

While “closing” Interactive Media division contracts with customers has required long lead times, Modavox is now beginning to realize the benefits of its previous efforts. David Ide, said “We have concentrated or efforts on internet advertising, e-commerce, and e-learning customers”. VP of Business Development and Strategic Marketing, Nathaniel Bradley stated “Our model contracts with these customers provide initial website and software development fees, ongoing monthly hosting and maintenance fees, and in certain contracts, fees for each e-commerce transaction or advertising sale arising from the website or software sold.”

Recent successes include the addition of advertising contracts with the Detroit Free Press a Gannett owned newspaper that joined as a Modavox ad streaming customer, a contract for the development of a video advertising platform for Village Voice Media LLC, a publisher of seventeen weekly newspapers, and a contract for the development of a on-demand video streaming application for Spin Magazine. Modavox has also recently signed a contract with Indolink, Inc., the largest ethnic internet media company serving Asian-Indians worldwide since 1995, to provide movie trailer, pay-per-view and streaming advertising for and other Indolink website properties. Under the agreement Modavox will realize revenues from each pay-per-view and advertising transaction. The State of Arizona has also contracted with Modavox for the delivery of live proceedings from the State’s legislature as well as its weekly review program previously distributed over cable television, now available on the State’s official website In addition, Modavox also launched the initial phase of its e-learning development and hosting contract for, which will feature the largest web repository for dermatological information on the Internet. Future development under the Onderm contract will feature audio and video podcasts. Onderm has been contracted with Modavox through Intramed West, Inc a company owned and operated by Sudler & Hennessey, a Young & Rubicam/WPP company, one of the world's largest and most prestigious health care communication companies. “We have concentrated efforts on selling highly scalable business solutions that can be easily replicated” said Nathaniel Bradley. “We believe that our technologies allow our customers to automate service deliveries and efficiently create economies of scale.”

David Ide, CEO, said “I believe these recent contract successes demonstrate the creditability and market acceptance of our belief that our technology and products assist our potential customers in achieving their business goals.” David Ide also commented “We appreciate the patience of our shareholders. We intend to address the information and other needs of our shareholders as we continue to reduce the legacy issues that we have faced and get some “breathing room”. Modavox and its predecessors have never had a shareholders meeting. It is my intention to have a shareholders’ meeting within the next few months in which we will elect a board of directors and deal with other governance issues.”

Media Contact:

Denise Dion

Phone: 480.643.5626


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