- Quarterly Report (10-Q)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________

FORM 10-Q

______________

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission File No. 000-51882

______________

VOICESERVE, INC .

(Exact name of small business issuer as specified in its charter)

______________

Delaware
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Cavendish House, 369 Burnt Oak Broadway, Edgware, Middlesex	HA8, 5AW
(Address of principal executive offices)	(Zip Code)

44 208 136 6000

(Issuer’s telephone number)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act. Yes o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of August 18, 2009: 32,402,935 shares of common stock.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements	F-
Item 2. Management’s Discussion and Analysis or Plan of Operation	1
Item 3. Quantitative and Qualitative Disclosures About Market Risk	6
Item 4T. Controls and Procedures	6

PART II -OTHER INFORMATION

Item 1. Legal Proceedings.	7
Item 1A. Risk Factors.	7
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	7
Item 3. Defaults Upon Senior Securities.	7
Item 4. Submission of Matters to a Vote of Security Holders.	7
Item 5. Other Information.	7
Item 6. Exhibits and Reports of Form 8-K.	7

SIGNATURES	8

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

VOICESERVE, INC.

Index to Financial Statements

	Page
Financial Statements:

Consolidated Balance Sheets as of June 30, 2009 (Unaudited)
and March 31, 2009	F-2

Consolidated Statements of Operations for the three months ended
June 30, 2009 and 2008 (Unaudited)	F-3

Consolidated Statement of Changes in Stockholders’ Equity
(Deficiency) for the three months ended June 30, 2009 (Unaudited)	F-4

Consolidated Statements of Cash Flows for the three months ended	F-5
June 30, 2009 and 2008 (Unaudited)

Notes to Consolidated Financial Statements (Unaudited)	F-6

F-1

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

	June 30,			March 31,
	2009			2009
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	93,546		$	175,072
Accounts receivable, net of allowance
for doubtful accounts of $0 and $0, respectively		88,171			31,243
Prepaid expenses		9,532			19,837

Total current assets		191,249			226,152

Property and equipment, net of accumulated depreciation
of $62,681 and $53,986, respectively		13,799			13,084
Intangible assets, net of accumulated amortization of
$335,417 and $277,917, respectively		2,396,374			2,365,874

Total assets	$	2,601,422		$	2,605,110

Liabilities and Stockholders' Equity (Deficiency)

Current liabilities:
Accounts payable	$	273,328		$	176,045
Accrued expenses payable		46,645			48,347
Deferred software license fees		157,749			121,993
Loans payable to related parties		37,082			60,514
Due sellers of VoipSwitch Inc.		150,000			150,000

Total current liabilities		664,804			556,899

Stockholders' equity (deficiency):
Preferred stock, $.001 par value; authorized
10,000,000 shares, none issued and outstanding		-			-
Common stock, $.001 par value; authorized
100,000,000 shares, issued and outstanding
32,402,935 and 29,402,935 shares, respectively		32,403			29,403
Additional paid-in capital		4,707,030			4,330,765
Deficit		(2,773,153	)		(2,328,713	)
Accumulated other comprehensive income (loss)		(29,662	)		16,756

Total stockholders' equity (deficiency)		1,936,618			2,048,211

Total liabilities and stockholders' equity (deficiency)	$	2,601,422		$	2,605,110

See notes to consolidated financial statements.

F-2

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

	Three Months Ended June 30,
	2009			2008
Operating revenues:
Software license fees	$	637,991		$	198,205
Revenues from communications air time		22,787			271,113
Net sales of communications devices		1,126			-

Total operating revenues		661,904			469,318

Cost of operating revenues:
Software license fees		206,082			161,228
Communications air time		41,872			264,300
Communications devices		-			-

Total cost of operating revenues		247,954			425,528

Gross profit (loss)		413,950			43,790

Operating expenses:
Selling, general and administrative expenses
(including stock-based compensation of $379,265)		858,368			246,604

Total operating expenses		858,368			246,604

Income (loss) from operations		(444,418	)		(202,814	)

Interest income		1			136
Interest expense		(23	)		(269	)

Income (loss) before income taxes		(444,440	)		(202,947	)

Income taxes (benefit)		-			-

Net income (loss)	$	(444,440	)	$	(202,947	)

Net income (loss) per share - basic and diluted	$	(0.01	)	$	(0.01	)

Weighted average number of shares
outstanding - basic and diluted		30,754,584			28,890,435

See notes to consolidated financial statements.

F-3

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity (Deficiency)
Three Months Ended June 30, 2009
(Unaudited)

										Accumulated			Total
	Common Stock				Additional					Other			Stockholders'
	$.001 par value				Paid-In					Comprehensive			Equity
	Shares		Amount		Capital		Deficit			Income (Loss)			(Deficiency)

Balances,
March 31, 2009		29,402,935	$	29,403	$	4,330,765	$	(2,328,713	)	$	16,756		$	2,048,211

Shares issued for
services		3,000,000		3,000		372,000		-			-			375,000

Stock options expense		-		-		4,265		-			-			4,265

Foreign currency
translation adjustment		-		-		-		-			(46,418	)		(46,418	)

Net income (loss)		-		-		-		(444,440	)		-			(444,440	)

Balances, June 30, 2009		32,402,935	$	32,403	$	4,707,030	$	(2,773,153	)	$	(29,662	)	$	1,936,618

See notes to consolidated financial statements.

F-4

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)

	Three Months Ended June 30,
	2009			2008
Cash flows from operating activities:
Net income (loss)	$	(444,440	)	$	(202,947	)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Stock-based compensation		379,265			-
Depreciation		1,177			1,514
Amortization		57,500			57,500
Changes in operating assets and liabilities:
Accounts receivable, net		(56,928	)		43,726
Prepaid expenses		10,305			133,703
Accounts payable		97,283			3,784
Accrued expenses payable		(1,702	)		277
Deferred software license fees		35,756			10,960

Net cash provided by (used in) operating activities		78,216			48,517

Cash flows from investing activities:
Acquisition of VoipSwitch Inc.		(88,000	)		-
Purchases of property and equipment		-			-

Net cash provided by (used in) investing activities		(88,000	)		-

Cash flows from financing activities:
Proceeds from sales of common stock		-			9,845
Increase (decrease) in loans payable to related parties		(28,286	)		102

Net cash provided by (used in) financing activities		(28,286	)		9,947

Effect of exchange rate changes on cash and cash equivalents		(43,456	)		(24,943	)

Increase (decrease) in cash and cash equivalents		(81,526	)		33,521

Cash and cash equivalents, beginning of period		175,072			50,046

Cash and cash equivalents, end of period	$	93,546		$	83,567

Supplemental disclosures of cash flow information:

Interest paid	$	23		$	269

Income taxes paid	$	-		$	-

See notes to consolidated financial statements.

F-5

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS

VoiceServe, Inc. (“VoiceServe”) was incorporated in the State of Delaware on December 9, 2005 under the name 4306, Inc. On February 20, 2007, VoiceServe acquired 100% of the issued and outstanding stock of VoiceServe Limited (“Limited”), a corporation incorporated in the United Kingdom on March 21, 2002, in exchange for 20,000,000 shares of VoiceServe common stock (representing 100% of the issued and outstanding shares of VoiceServe after the exchange). From October 1, 2006 to February 20, 2007, Limited owned 100% of the issued and outstanding shares of VoiceServe. Accordingly, this acquisition was treated as a combination of entities under common control and was accounted for in a manner similar to pooling of interests accounting. The consolidated financial statements include the operations of VoiceServe from October 1, 2006 and the operations of Limited from its inception on March 21, 2002.

On January 15, 2008, VoiceServe acquired 100% of the issued and outstanding stock of VoipSwitch Inc. (“VoipSwitch”), a corporation incorporated in the Republic of Seychelles on May 9, 2005 (see Note 3). VoipSwitch licenses software systems (online telephony management applications) to customers online. Generally, the license of a system includes remote installation and initial configuration of the main system, training relating to the use of the system and modules, and 1 year technical support.

VoiceServe has had no operations; VoiceServe is a holding company for its wholly owned subsidiaries Limited (since February 20, 2007) and VoipSwitch (since January 15, 2008).

Limited is engaged in the telephone communications business from its London, United Kingdom office. Limited offers customers through its software voice calls over the internet. The software allows computer users to access the Company’s exchange via the internet and through the exchange connect with numerous sources of telephone communications at discounted rates. Since January 15, 2008, Limited has also licensed VoipSwitch software systems.

The consolidated financial statements include the accounts of VoiceServe and its wholly owned subsidiaries Limited and VoipSwitch (collectively, the “Company”). All intercompany balances and transactions have been eliminated in consolidation.

NOTE 2 – INTERIM FINANCIAL STATEMENTS

The unaudited financial statements as of June 30, 2009 and for the three months ended June 30, 2009 and 2008 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with Instructions to Form 10-Q. In the opinion of management, the unaudited financial statements have been prepared on the same basis as the annual financial statements and reflect all adjustments, which include only normal

F-6

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

recurring adjustments, necessary to present fairly the financial position as of June 30, 2009 and

the results of operations and cash flows for the three months ended June 30, 2009 and 2008. The financial data and other information disclosed in these notes to the interim financial statements related to these periods are unaudited. The results for the three month period ended June 30, 2009 are not necessarily indicative of the results to be expected for any subsequent quarter of the entire year ending March 31, 2010. The balance sheet at March 31, 2009 has been derived from the audited financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission’s rules and regulations. These unaudited financial statements should be read in conjunction with our audited financial statements and notes thereto for the year ended March 31, 2009 as included in our report on Form 10-K.

NOTE 3 – ACQUISITION OF VOIPSWITCH INC.

On January 15, 2008, VoiceServe closed an Acquisition Agreement with VoipSwitch Inc. (“VoipSwitch”) whereby VoiceServe acquired all VoipSwitch issued and outstanding ordinary

shares as well as all of VoipSwitch’s assets, including customer orders and intangible assets, for

total consideration of $3,000,000 ($450,000 cash, $150,000 notes payable due on demand, $600,000 notes payable in total monthly installments of $50,000 per month for 12 months, and 3,750,000 shares of VoiceServe common stock valued at $0.48 per share or $1,800,000).

Payment of the monthly installments of the $600,000 notes payable is contingent upon and limited each month to the future monthly net income of VoipSwitch. Accordingly, pursuant to SFAS No. 141, this $600,000 “contingent consideration” portion of the $3,000,000 total purchase price was not included in the initial recorded cost of the acquisition or the recorded notes payable. If and when the contingency is resolved and payments of the $600,000 notes payable are made, such paid amounts will be added to goodwill.

F-7

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

The estimated fair values of the identifiable net assets of VoipSwitch at January 15, 2008 (date of acquisition) consisted of:

Cash and cash equivalents	$	6,682
Developed software (for licensing to customers)		2,000,000
In-place contracts and customer list		100,000
Trade name		100,000
Accounts payable and accrued expenses		(2,999	)
Deferred software license fees		(48,474	)

Identifiable net assets	$	2,155,209

Goodwill of $244,791 (excess of the $2,400,000 consideration, excluding the $600,000 contingent consideration, over the $2,155,209 identifiable net assets) was recorded at the acquisition date January 15, 2008. In February and March 2008, $100,000 of the $600,000 “contingent consideration” notes payable was paid and added to goodwill. In the year ended March 31, 2009, an additional $99,000 of the “contingent consideration” notes payable was paid and added to goodwill. In the three months ended June 30, 2009, an additional $88,000 of the “contingent consideration” notes payable was paid and added to goodwill.

NOTE 4 – INTANGIBLE ASSETS, NET

Intangible assets, net consisted of:

		June 30,	March 31,
		2009	2009
Acquisition of VoipSwitch:
Developed software (for licensing to customers)	$	2,000,000	2,000,000
In-place contracts and customer list		100,000	100,000
Trade name		100,000	100,000
Goodwill		531,791	443,791

Total		2,731,791	2,643,791

Accumulated amortization		(335,417)	(277,917	)

Intangible assets, net	$	2,396,374	2,365,874

F-8

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

The developed software, in-place contracts and customer list, and trade name are amortized using the straight-line method over their estimated economic lives (ten years for the developed software and trade name; five years for the in-place contracts and customer list). Goodwill is not amortized.

For the three months ended June 30, 2009 and 2008, amortization of intangible assets expense was $57,500. $50,000 was included in cost of software license fees and $7,500 was included in selling, general and administrative expenses.

Expected future amortization expense for acquired intangible assets as of June 30, 2008 follows:

Year ended March 31 ,	Amount
2010	$	172,500
2011		230,000
2012		230,000
2013		225,833
2014		210,000
Thereafter		796,250

Total	$	1,864,583

NOTE 5 – LOANS PAYABLE TO RELATED PARTIES

Loans payable to related parties consisted of:

	June 30, 2009		March 31, 2009
Due chief financial officer	$	82	$	71
Due chairman of the board of directors		21,043		18,289
Due chief operational officer		15,957		42,154

Total	$	37,082	$	60,514

The loans payable to related parties are all non-interest bearing, unsecured, and due on demand.

F-9

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

NOTE 6 – STOCKHOLDERS’ EQUITY

Common stock issuances

On May 21, 2009, VoiceServe issued a total of 3,000,000 shares of its common stock to the three sellers of VoipSwitch for services rendered. The $375,000 estimated fair value of the shares is included in selling, general and administrative expenses in the three months ended June 30, 2009.

Stock options

Effective May 12, 2009, VoiceServe granted non-qualified stock options to 4 service providers exercisable into a total of up to 703,000 shares of common stock at an exercise price of $0.13 per share to December 23, 2013. The options vest 2/3 on December 23, 2010 and 1/3 on December 23, 2011. The $81,618 estimated fair value of the options (calculated using the Black-Scholes option pricing model and the following assumptions: (i) $0.15 share price, (ii) 5 year term, (iii) 100% expected volatility, and (iv) 3% risk free interest rate) is being expensed ratably over the requisite service period from May 12, 2009 to December 23, 2011.

NOTE 7 – INCOME TAXES

No provisions for income taxes were recorded in the three months ended June 30, 2009 and 2008 since the Company incurred losses in those periods.

Based on management‘s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset attributable to the future utilization of net operating loss carryforwards as of June 30, 2009 will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements at June 30, 2009. The Company will continue to review this valuation allowance and make adjustments as appropriate.

NOTE 8 – RELATED PARTY TRANSACTIONS

For the three months ended June 30, 2009 and 2008, consulting fees paid to officers, directors, and their affiliates totaled $182,589 and $96,649, respectively. These fees are included in selling, general, and administrative expenses in the accompanying statements of operations. .

F-10

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

NOTE 9 – COMMITMENTS AND CONTINGENCIES

Investment agreement

On August 20, 2007, VoiceServe entered into an Investment Agreement with Dutchess Private Equities Fund, Ltd. (the “Investor”). Pursuant to this Agreement, the Investor shall commit to purchase up to $10,000,000 of our common stock over the course of thirty-six (36) months. The amount that we shall be entitled to request from each purchase (“Puts”) shall be equal to, at our election, either (i) up to $250,000 or (ii) 200% of the average daily volume (U.S. market only) of the common stock for the ten (10) trading days prior to the applicable Put Notice Date, multiplied by the average of the three (3) daily closing bid prices immediately preceding the Put Date. The Put Date shall be the date that the Investor receives a put notice of a draw down by us. The purchase price shall be set at ninety-three percent (93%) of the lowest closing Best Bid price of the Common Stock during the pricing period. The pricing period shall be the five (5) consecutive trading days immediately after the put notice date. There are put restrictions applied on days between the put date and the closing date with respect to that particular put. During this time, we shall not be entitled to deliver another put notice.

In connection with the Agreement, we entered into a Registration Rights Agreement with the Investor (”Registration Agreement”). Pursuant to the Registration Agreement, we were obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 2,335,550 shares of the common stock underlying the Investment Agreement within 15 days after the execution date. In addition, we were obligated to use all commercially reasonable efforts to have the registration statement declared effective by the SEC within 90 days after the execution date, which occurred November 6, 2007.

Service agreements

In connection with the acquisition of VoipSwitch, VoiceServe entered into service agreements with the three sellers. The agreements have a three year term (to January 15, 2011) and provide for monthly compensation of $6,000 for each of the three individuals, or $18,000 per month total.

Rental agreements

Limited rents office space at monthly rentals of £560 (or $921 translated at the June 30, 2009 exchange rate). For the three months ended June 30, 2009 and 2008, rent expense was $3,008 and $3,692, respectively.

F-11

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

June 30, 2009

(Unaudited)

NOTE 10 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the filing date of this Form 10-Q and has determined that there were no subsequent events to recognize or disclose in these financial statements.

F-12

Item 2. Management’s Discussion and Analysis or Plan of Operation

The following discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to future events or our future performance. Actual results may materially differ from those projected in the forward-looking statements as a result of certain risks and uncertainties set forth in this prospectus. Although management believes that the assumptions made and expectations reflected in the forward-looking statements are reasonable, there is no assurance that the underlying assumptions will, in fact, prove to be correct or that actual results will not be different from expectations expressed in this report.

OVERVIEW

We were founded December 9, 2005 by Michael Raleigh. On February 20, 2007, pursuant to a share exchange agreement, Voiceserve Limited, a United Kingdom Corporation founded in 2002, became our wholly owned subsidiary. Voiceserve Limited is a global internet communications company that makes it possible for anyone with an internet connection to make free high quality voice calls over the internet. Following the merger, we adopted Voiceserve Limited’s business plan, and will be conducting business as a global internet communications company. We have changed our name to Voiceserve, Inc., to better reflect our new business plan.

Voiceserve Limited was founded in March 2002 by Michael Bibelman, Alexander Ellinson and Mike Ottie. The founders have over 15 years of experience in the telecommunications industry.

We generate revenue by developing, manufacturing, licensing, and supporting a wide range of Voip software products and services for many different types of devices. VoipSwitch is a complete IP telephony offering a variety of services including wholesale voip termination, device to phone technology, pc to phone/web to phone features, calling cards, SMS/ANI/PIN/DID/WEB callback, DIDs' mapping, call shops and more. Unlike competitive systems composed of many different parts, the Voipswitch platform is fully integrated in one application which makes it exceptionally easy to manage. All elements that are necessary for successful voip implementation are already built in. All the features are integrated in one multiple server based application.

Our revenue historically has fluctuated quarterly. Following the decision that we should exhibit globally at key Telecom exhibitions our “Voipswitch Brand” has gained recognition and popularity. Our mobile dialer released towards the end of last year has proved to be a real success, it is module that sits on top of the main Voipswitch license.

We intend to sustain the long-term growth of our businesses through technological innovation, engineering excellence, and a commitment to delivering high-quality products and services to customers and partners. Recognizing that one of our primary challenges is to help accelerate worldwide VOIP adoption, we continue to advance the functionality, security, and value of VOIP telephony within emerging markets. We also are increasing our focus on selling our products in emerging markets. In addition, we continue to develop innovative applications and solutions that we believe will enhance and improve communication within the business community and beyond. To sustain the growth of our business amid competition from other vendors of proprietary and open source software, our goal is to deliver products that provide the best platform with the lowest total cost of ownership.

We continue to invest in research and development in existing and new lines of business, including IPTV, Apple mobile and the blackberry handsets. We also invest in research and development of advanced technologies for future products. We believe that delivering innovative and high-value solutions through our integrated platform is the key to meeting customer needs and to our future growth.

We believe that over the last few years we have laid a foundation for long-term growth by delivering innovative products, creating opportunities for partners, improving customer satisfaction with key audiences, and improving our internal business processes. Our focus in fiscal year 2010 is to continue to build on this foundation and to continue to execute well in key areas, including continuing to innovate on our integrated software platform, responding effectively to customer and partner needs, and continuing to focus internally on product excellence.

Key market opportunities include:

Voipswitch Softswitch Technology. We are focused on delivering consumers softswitch products that we believe are compelling in terms of design, features, and functionality. We also are working to define the next era of VOIP telephony through the development of innovative software that runs on a wide range of devices and connects people quickly and easily to the information, experiences, and communities they care about.

Mobile phone VOIP connectivity. The ability to combine the power of VOIP and mobile technology via the Internet represents an opportunity across every one of our businesses. We believe our approach will enable us to deliver new experiences to end users and new value to businesses.

Expanding our presence. Through our ability to deliver additional value in voip telephony, we believe we are well-positioned to build on our strength.

Revenue growth was driven primarily by increased sales of the Mobile dialers. Operating income increased primarily reflecting increased revenue.

Operating Expenses

Cost of Revenue

Cost of revenue includes the manufacturing and distribution costs for products sold and programs licensed. It also includes operating costs related to product support and product distribution. Costs were also generated associated with the delivery of consulting services. Cost of revenue increased in fiscal year 2009, reflecting increased data center and equipment costs, and increased costs associated with the growth in our consulting services. Cost of revenue increased in fiscal year 2009, primarily driven by the amount of exhibitions we exhibited, and costs associated with the growth in consulting services.

Sales and Marketing

Sales and marketing expenses include expenses associated with sales and marketing personnel and advertising, promotions, trade shows, seminars, and other programs. Sales and marketing expenses increased during fiscal year 2009, primarily reflecting increased consultancy expenses and increased marketing campaigns.

RESULTS OF OPERATIONS

Results of Operation for the Three Months Ended June 30, 2009 Compared to the Three Months Ended June 30, 2008

The following table presents the statement of operations for the three months ended June 30, 2009 as compared to the comparable period of the three months ended June 30, 2008. The discussion following the table is based on these results.

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)

	For The Three Months
	Ended June 30,
	2009			2008
Operating revenues:
Revenues from communications air time	$	22,787		$	271,113
Software license fees		637,991		$	198,205
Net sales of communications devices		1,126			-

Total operating revenues		661,904		$	469,318

Cost of operating revenues:
Communications air time		41,872		$	264,300
Software license fees		206,082		$	161,228
Communications devices		-			-

Total cost of operating revenues		247,954		$	425,528

Gross profit (loss)		413,950		$	43,790

Operating expenses:
Selling, general and administrative		858,368		$	246,604
expenses

Total operating expenses		858,368		$	246,604

Income (loss) from operations		(444,418	)	$	(202,814	)

Interest income		1		$	136
Interest expense		(23	)	$	(269	)

Income (loss) before income taxes		(444,440	)	$	(202,947	)

Income taxes (benefit)		-			-

Net income (loss)		(444,440	)	$	(202,947	)

Net income (loss) per share
- basic and diluted		(0.01	)	$	(0.01	)

Weighted average number of shares
outstanding - basic and diluted	$	30,754,584		$	28,890,435

Total Revenues

We had revenues of $661,904 for the three months ended June 30, 2009 and $469,318 for the three months ended June 30, 2008.

The Company's revenue growth was the result of its purchase of Voipswitch Inc. and the sale of air time through wholesale minute distributors. The total revenues of airtime for the quarter ended June 30, 2009 were $22,787 and that of Software licenses was $637,991. This compares to revenues of $271,113 for the same period ending June 30, 2008 from air time, and $198,205 for license sales for that period.

Cost of Revenues

Cost of revenues for the three months ended June 30, 2009 was $247,954 compared to $425,528 for the same quarter ended June 30, 2008. The increase in cost of revenues in 2009 relates to a dramatic increase in sales. The increase in cost of revenues was also the result of Voiceserve hiring additional technology service professionals to complete its development of products, and service the current clientele.

Gross Margin

The gross profit for the three months ended June 30, 2009 is $413,950 compared to a gross profit of $43,970 for the same quarter ended June 30, 2008. The sale of Voipswitch licenses with very significant gross margins caused the dramatic increase in the gross margin. The gross margin for the quarter ended June 30, 2009 is 63% compared to 9% for the same quarater ended June 30, 2008.

Operating Expenses

Operating expenses for three months ended June 30, 2009 were $858,368 as compared to $246,604 for the same period ended June 30, 2008. The increase in operating expenses was primarily due to higher stock-based compensation and professional and consulting fees in 2009.

Income (loss) from operations

Profits from operations for the three months ended June 30, 2009 totaled $(444,418) compared to a loss of $(202,947) for the same period ended June 30, 2008. The dramatic swing from losses to profitability from operations was primarily due to sales from Voipswitch Solutions following the purchase of Voipswitch Inc. on January 15, 2008.

Net income (loss)

Net profit was $(444,440) for the three months ended June 30, 2009, compared to $(202,947) for the same period ended June 30, 2008. The swing from losses to profitability is mainly due to the sales of the Voipswitch solutions.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2009 we had $93,546 in cash. A substantial amount of cash will be required in order to grow operations over the next twelve months. Based upon our current cash we may not be able to meet our current expenses and may need additional capital. We intend to seek advice from investment professionals on how to obtain additional capital and believe that by being a public entity we will be more attractive to sources of capital. In addition, we will need to raise additional capital to continue our operations past 12 months, and there is no assurance we will be successful in raising the needed capital. Currently we have no material commitments for capital expenditures. Management believes that actions presently being taken to obtain additional funding and implement its strategic plans provide the opportunity for the Company to continue as a going concern.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Investment agreement

In connection with the Agreement, we entered into a Registration Rights Agreement with the Investor (”Registration Agreement”). Pursuant to the Registration Agreement, we were obligated to file a registration statement with the Securities and Exchange Commission (“SEC”) covering 2,335,550 shares of the common stock underlying the Investment Agreement within 15 days after the execution date. We filed a registrations statement with the SEC covering the Investor shares on October 4, 2007, which was then declared effective on November 6, 2007.

As of August 14th, 2009, we have not exercised our Puts rights pursuant to our investment agreement with the Investor since there was not enough liquidity in our stock to exercise the Dutchess Put Option. We are currently looking for private placement financing to increase our capital.

Consulting agreement

On September 15, 2007, VoiceServe entered into an agreement with an investor relations firm (the “IR Firm”). The agreement provided for the IR firm to perform certain investor relations, consulting, and advisory services for VoiceServe. The term of the agreement was one year commencing September 15, 2007 and ending September 14, 2008. As consideration for their services, VoiceServe issued the IR Firm 200,000 shares of VoiceServe common stock and the $110,000 estimated fair value of these shares was expensed ratably over the one year initial term of the agreement.

CRITICAL ACCOUNTING POLICIES

Our significant accounting policies are summarized in Note 2 of our financial statements included in our annual report on Form 10-K for the year ended December 31, 2008. Our financial statements and related public financial information are based on the application of accounting principles generally accepted in the United States (“GAAP”). GAAP requires the use of estimates; assumptions, judgments and subjective interpretations of accounting principles that have an impact on the assets, liabilities, revenues and expense amounts reported. These estimates can also affect supplemental information contained in our external disclosures including information regarding contingencies, risk and financial condition. We believe our use of estimates and underlying accounting assumptions adhere to GAAP and are consistently and conservatively applied. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from these estimates under different assumptions or conditions. We continue to monitor significant estimates made during the preparation of our financial statements.

Recent Accounting Pronouncements

The impact on the Company’s financial position and results of operations from accounting pronouncements which went effective and were adopted by the Company in the periods presented was not material. The future impact of accounting pronouncements issued by the FASB and other standard setting organizations which are not yet effective and have not yet been adopted by the Company are not expected to be material.

OFF-BALANCE SHEET ARRANGEMENTS

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities” (SPEs).

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable because we are a smaller reporting company.

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls and procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in internal controls

There were no changes in our internal controls over financial reporting that occurred during the quarter ended June 30, 2009 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

Not applicable because we are a smaller reporting company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Descriptions

31.1	Certification of Michael Bibelman pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2	Certification of Aron Sandler pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1	Certification of Michael Bibelman pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2	Certification of Aron Sandler pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.