- 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 December 31, 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 February11, 2010: 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	3
Item 4T. Controls and Procedures	3

PART II -OTHER INFORMATION

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

SIGNATURES	5

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

	Page

Financial Statements:

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

Consolidated Statements of Operations for the three and nine months
ended December 31, 2009 and 2008 (Unaudited)	F-3

Consolidated Statement of Changes in Stockholders’ Equity
for the nine months ended December 31, 2009 (Unaudited)	F-4

Consolidated Statements of Cash Flows for the nine months ended
December 31, 2009 and 2008 (Unaudited)	F-5

Notes to Consolidated Financial Statements (Unaudited)	F-6

F-1

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

	December 31,			March 31,
	2009			2009
	(Unaudited)
Assets

Current assets:
Cash and cash equivalents	$	179,312		$	175,072
Accounts receivable, net of allowance
for doubtful accounts of $64,679 and $0, respectively		78,418			31,243
Inventory		4,506
Prepaid expenses and other current assets		76,201			19,837

Total current assets		338,437			226,152

Property and equipment, net of accumulated depreciation
of $63,157 and $53,986 respectively		12,023			13,084
Intangible assets, net of accumulated amortization of
$450,417 and $277,917, respectively		2,281,374			2,365,874

Total assets	$	2,631,834		$	2,605,110

Liabilities and Stockholders' Equity

Current liabilities:
Accounts payable	$	305,142		$	176,045
Accrued expenses payable		45,485			48,347
Deferred software license fees		247,783			121,993
Loans payable to related parties		36,452			60,514
Due sellers of VoipSwitch Inc.		150,000			150,000

Total current liabilities		784,862			556,899

Stockholders' equity:
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		4,722,722			4,330,765
Deficit		(2,878,616	)		(2,328,713	)
Accumulated other comprehensive income (loss)		(29,537	)		16,756

Total stockholders' equity		1,846,972			2,048,211

Total liabilities and stockholders' equity	$	2,631,834		$	2,605,110

See notes to consolidated financial statements.

F-2

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

	Three Months					Nine Months
	Ended December 31,					Ended December 31,
	2009			2008		2009			2008
Operating revenues:
Software license fees	$	917,793		$	354,632	$	2,281,493		$	883,204
Revenues from communications air time		66,548			84,553		112,997			512,922
Net sales of communications devices		897			-		2,557			-

Total operating revenues		985,238			439,185		2,397,047			1,396,126

Cost of operating revenues:
Software license fees		283,149			166,379		708,132			513,650
Communications air time		60,498			76,866		102,724			466,293
Communications devices		1			-		123			-

Total cost of operating revenues		343,648			243,245		810,979			979,943

Gross profit (loss)		641,590			195,940		1,586,068			416,183

Operating expenses:
Selling, general and administrative
expenses		689,575			165,533		2,135,952			759,221

Total operating expenses		689,575			165,533		2,135,952			759,221

Income (loss) from operations		(47,985	)		30,407		(549,884	)		(343,038	)

Interest income		-			60		1			201
Interest expense		-			62		(20	)		(1,064	)

Income (loss) before income taxes		(47,985	)		30,529		(549,903	)		(343,901	)

Income taxes (benefit)		-			-		-			-

Net income (loss)	$	(47,985	)	$	30,529	$	(549,903	)	$	(343,901	)

Net income (loss) per share
- basic and diluted	$	(0.00	)	$	0.00	$	(0.02	)	$	(0.01	)

Weighted average number of shares
outstanding - basic and diluted		32,402,935			29,402,935		31,853,485			29,079,928

See notes to consolidated financial statements.

F-3

VOICESERVE, INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
Nine Months Ended December 31, 2009
(Unaudited)

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

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		-		-		19,957		-			-			19,957

Foreign currency
translation adjustment		-		-		-		-			(46,293	)		(46,293	)

Net income (loss)		-		-		-		(549,903	)		-			(549,903	)

Balances,
December 31, 2009		32,402,935	$	32,403	$	4,722,722	$	(2,878,616	)	$	(29,537	)	$	1,846,972

See notes to consolidated financial statements.

F-4

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

	Nine Months Ended December 31,
	2009			2008
Cash flows from operating activities:
Net income (loss)	$	(549,903	)	$	(343,901	)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation		9,171			4,175
Amortization		172,500			172,500
Stock-based compensation		394,957			-
Changes in operating assets and liabilities:
Accounts receivable, net		(47,175	)		62,851
Inventory		(4,506	)		-
Prepaid expenses and other current assets		(56,364	)		130,655
Accounts payable		129,097			17,740
Accrued expenses payable		(2,862	)		(31,804	)
Deferred software license fees		125,790			10,332

Net cash provided by (used in) operating activities		170,705			22,548

Cash flows from investing activities:
Acquisition of VoipSwitch Inc.		(88,000	)		(137,000	)
Purchases of property and equipment		(8,110	)		-

Net cash provided by (used in) investing activities		(96,110	)		(137,000	)

Cash flows from financing activities:
Proceeds from sales of common stock		-			99,845
Increase (decrease) in loans payable to related parties		(24,062	)		(11,821	)

Net cash provided by (used in) financing activities		(24,062	)		88,024

Effect of exchange rate changes on cash and cash equivalents		(46,293	)		46,742

Increase (decrease) in cash and cash equivalents		4,240			20,314

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

Cash and cash equivalents, end of period	$	179,312		$	70,360

Supplemental disclosures of cash flow information:

Interest paid	$	-		$	1,064

Income taxes paid	$	-		$	-

See notes to consolidated financial statements.

F-5

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 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”), an applications development company focused on high quality, scalable and cost efficient Voice Over Internet Protocol (“VoIP”) transmission technology solutions for global telecommunications service providers. Its softswitch platform provides complete Internet Telephony services to wholesalers, resellers, businesses and residences. VoipSwitch was incorporated in the Republic of Seychelles on May 9, 2005 (see Note 3). Generally, the license of a VoipSwitch 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 is a holding company for its wholly owned subsidiaries Limited (since February 20, 2007) and VoipSwitch (since January 15, 2008) and, as such, has no operations.

Limited is engaged in the telephone communications business, offering advanced VoIP services under the brand name Call-to-PBX to customers through the VoipSwitch software platform. Call-to-PBX services enable customers to access the Company’s exchange via the Internet and through exchange connections with numerous sources of telephone communications at discounted rates through telephone handsets, computers and cell phones. Its advanced VoIP telephony services are designed for both residential and business use. Services include a personalized, highly sophisticated private branch exchange (“PBX”) system that provides constant availability regardless of global location. All telephony services are delivered over Internet connections, eliminating the need for costly, on-premise phone systems. The software platform offers virtual office extensions, automated attendants, conference bridges, and extension to extension dialing, in addition to a rich variety of other features normally offered on physical PBX equipped systems.

F-6

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

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 December 31, 2009 and for the three and nine months ended December 31, 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 recurring adjustments, necessary to present fairly the

financial position as of December 31, 2009 and the results of operations and cash flows for the three and nine months ended December 31, 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 and nine month period ended December 31, 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-KSB.

Certain prior period amounts have been reclassified (decreasing cost of revenues and increasing selling, general and administrative expenses) to conform with current period presentation. The reclassifications have no effect on income (loss) from operations or net income (loss).

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).

F-7

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

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 Accounting Standards Codification (“ASC”) 805, “Business Combinations” (then 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.

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 $600,000 “contingent consideration” notes payable was paid and added to goodwill. In the nine months ended December 31, 2009, an additional $88,000 of the $600,000 “contingent consideration” notes payable was paid and added to goodwill. The balance remaining on the notes payable as of December 31, 2009 is $313,000.

F-8

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

NOTE 4 – INTANGIBLE ASSETS, NET

Intangible assets, net consisted of:

	December 31,			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		(450,417	)		(277,917	)

Intangible assets, net	$	2,281,374		$	2,365,874

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 nine months ended December 31, 2009 and 2008, amortization of intangible assets expense was $172,500. $150,000 was included in cost of software license fees and $22,500 was included in selling, general and administrative expenses.

Expected future amortization expense for acquired intangible assets as of December 31, 2009 follows:

F-9

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

Year ending March 31 ,	Amount
2010	$	57,500
2011		230,000
2012		230,000
2013		225,833
2014		210,000
Thereafter		796,250

Total	$	1,749,583

NOTE 5 – DEFERRED SOFTWARE LICENSE FEES

The licenses of the VoipSwitch systems generally include certain postcontract customer support (“PCS”). In accordance with ASC 985, “Software Revenue Recognition”, the Company allocates a portion of the license fees to PCS based on the vendor-specific objective evidence of fair value (generally $800 for 1 year technical support) of the PCS and recognizes the PCS revenues ratably over the period of the agreed PCS.

Deferred software license fees (attributable to PCS) for the nine months ended December 31, 2009 and the year ended March 31, 2009 were accounted for as follows:

	Nine Months Ended			Year Ended
	December 31,			March 31,
	2009			2009
Balance, beginning of period	$	121,993		$	64,334
Additions		311,873			168,800
Recognized as revenue		(186,083	)		(111,141	)

Balance, end of period	$	247,783		$	121,993

F-10

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

NOTE 6 – LOANS PAYABLE TO RELATED PARTIES

Loans payable to related parties consisted of:

	December 31, 2009		March 31, 2009
Due chief financial officer	$	80	$	71
Due chairman of the board of directors		15,686		18,289
Due chief operational officer		20,686		42,154

Total	$	36,452	$	60,514

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

NOTE 7 – 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.

F-11

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

NOTE 8 – INCOME TAXES

No provisions for income taxes were recorded in the nine months ended December 31, 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 December 31, 2009 will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements at December 31, 2009. The Company will continue to review this valuation allowance and make adjustments as appropriate.

NOTE 9 – RELATED PARTY TRANSACTIONS

For the nine months ended December 31, 2009 and 2008, consulting fees paid to officers, directors, and their affiliates totaled $484,424 and $270,402, respectively. These fees are included in selling, general, and administrative expenses in the accompanying statements of operations.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

Investment agreement

Date. The Put Date shall be the date that the Investor receives a put notice of a drawn 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.

F-12

VOICESERVE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

December 31, 2009

(Unaudited)

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. To date, the Company has not exercised its Puts under this agreement. The Investment Agreement with the Investor expires on August 20, 2010.

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 £710 (or $1,148 translated at the December 31, 2009 exchange rate). For the nine months ended December 31, 2009 and 2008, rent expense was $9,950 and $9,527, respectively.

NOTE 11 – 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-13

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 on 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. Following the merger, we adopted VoiceServe Limited’s business plan, and conduct 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 each have over 15 years of experience in the telecommunications industry. Their career began in 1991 when the founders of Econophone Inc. (“Econophone”) came to Europe looking for agents to market international “call-back” and calling cards. Econophone had developed a “call-back” and alternative direct service. They worked as independent resellers of calling cards creating markets in Europe and third world countries transmitting the calls via universal 0800 numbers. By being independent agents our founders discovered a huge potential in the market for pre-paid calling cards that did not need to be physically put into the slot of a pay phone. The pre-paid card had an access number accompanied with a pin number. Our founders helped Econophone develop and enhance this feature. Moreover, our founders were one of the first groups in the industry to market such a product in Europe. Our founders introduced, amongst the many famous European distributors to market such a product, the Audax Group (“Audax”), based in Holland with an annual turnover in excess of 850 million Euros. Through the Audax distribution channels, cards were marketed throughout the Benelux. Our founders were also instrumental in aiding Econophone LLC in its transformation from a privately held company to one listed on the New York Stock Exchange, known thereafter as Viatel. Once Viatel was listed on the New York Stock Exchange, our founders independently set up their own ISDN and VoIP platforms with the intention of developing and bringing the world of telecoms into its next stage-a complete solution in one.

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, consisting of $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. To date, the Company has made a total of $287,000 in such payments.

VoipSwitch develops and implements various types of software that facilitate the deployment of VoIP services globally, and to-date has successfully implemented over 800 VoipSwitch systems around the world.

VoipSwitch is a complete IP telephony offering a variety of services including 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 that 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.

VoiceServe has established a minute trading platform “Voip Proxy” whereby wholesale minutes are offered to VoipSwitch clients. Non VoipSwitch clients can also be connected to the Wholesale Minute platform.

Plan of Operation

During the next twelve months, we expect to take the following steps in connection with the development of our business and the implementation of our plan of operations:

a) Maintain sales of approximately 20 VoipSwitch solutions monthly with an average of 10% monthly increase,

b) Launch IPTV by the latter quarter of 2010,

c) Launch Mobile GSM-WIFI Phone the latter quarter of 2010,

d) Launch VoipSwitch “Office” during the cause of the third quarter,

e) Increase Voip Proxy volumes at a monthly rate of 15%,

f) Establish Haloswiat in Poland.

VoiceServe plans on establishing distribution networks in Brazil and the USA in the very near future. VoiceServe’s mission is to be the leader in introducing complete “Softswitch” solutions at very competitive prices to the growing global markets. Through close customer contact and excellent relationships, we will meet the needs of our customers wherever we can. While the Company believes it can generate sufficient free cash flow to sustain its operations, conditions and/or markets may change,and the Company may not be able to meet its current expenses and may need additional capital., Furthermore, additional capital may be needed to maximize existing worldwide opportunities. Consequently, we intend to seek advice from investment professionals on how to obtain additional capital over the next three months; however, there is no assurance we will be successful in raising additional capital.

Results of Operations for the Three Months Ended December 31, 2009 Compared to the Three Months Ended December 31, 2008

We had revenues of $985,238 for the three months ended December 31, 2009 and $439,185 for the three months ended December 31, 2008. Operating expenses for the three months ended December 31, 2009 increased to $689,575 from $165,533 for the three months ended December 31, 2008 representing an increase of $524,042.

Results of Operations for the Nine Months Ended December 31, 2009 Compared to the Nine Months Ended December 31, 2008

We had revenues of $2,397,047 for the nine months ended December 31, 2009 and $1,396,126 for the nine months ended December 31, 2008. Operating expenses for the nine months ended December 31, 2009 increased to $2,135,952 from $759,221 for the nine months ended December 31, 2008 representing an increase of $1,376,731.

The increase in sales is attributed to various factors. The company has begun exhibiting globally at prominent and significant IT and Voip exhibitions. Presence at shows increases awareness to the company’s broad spectrum of its software products and modules. Prior to the exhibitions, in addition to advertising the company sends e-mails to its entire data base inviting its clientele. The current VoipSwitch clients that attend are given a demo of the company’s new features and modules and are given the opportunity to upgrade their features.

In the last few months VoiceServe’s VoipSwitch softswitch has expanded its modules. It has added three different types of mobile dialers. Windows, android and the apple dialers. This allows connectivity to the VoipSwitch softphone not only from a PC but even from a mobile phone whilst in Wifi, 3G or edge environment. These new added modules contributed to an increase in sales. The modules are easily added to current VoipSwitch softwares, and can also be downloaded onto competitor’s platforms. The mobile dialer purchaser once having added the feature onto the softswitch can thereby expand his operations dramatically.

The company advertises on Google via pay per click. A perspective Voip switch client, who enters in Google the word VoipSwitch will see the companies details. Thereafter an enquiry will be sent to be followed up by the sales team. Due to increase demand the company has increased its budget paying google for this feature and has seen an increase in sales from this sales front as well.

The increased costs in sales are due to an increase in sales. The company has increased its advertising budget on Google, a major component promoting the VoipSwitch features globally. Consultancy fees have risen due to the fact that the company has increased its customer support services. Technicians have also been commissioned to enhance the current modules, and venture into new VoIP arenas. Exhibiting nearly every second month has added additionally to the companies expenses. A rise in the SG and A is due to the rise in travel costs and hotels. An average of four to five personnel attends the exhibitions in order to accommodate the visitors. Preparation of the stands at exhibitions, which are custom made to attract the potential clientele are additional costs that contribute to the rise in the SG and A. Costs have also risen due to the sale of the dialers. For every Symbian dialer sold for example a fee is payable to Symbian.

Liquidity and Capital Resources

As of December 31, 2009 we had $179,312 in cash and cash equivalents. While the Company believes it can generate sufficient free cash flow to sustain its operations, conditions and/or markets may change,and the Company may not be able to meet its current expenses and may need additional capital., Furthermore, additional capital may be needed to maximize existing worldwide opportunities. Consequently, we intend to seek advice from investment professionals on how to obtain additional capital over the next three months; however, there is no assurance we will be successful in raising additional 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

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 drawn 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. 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. To date, the Company has not exercised its Puts under this agreement. The Investment Agreement with the Investor expires on August 20, 2010.

Critical Accounting Pronouncements

Our significant accounting policies are summarized in Note 2 of our financial statements included in our report on Form 10-KSB.

We have adopted the following accounting standards. While all of these significant accounting policies impact our financial condition, our views of these policies are critical. Policies determined to be critical are those policies that have the most significant impact on our financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates. Our management believes that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would have materially effected our results of operations, financial position or liquidity for the periods presented in this report.

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

The Company is subject to certain market risks, including changes in interest rates and currency exchange rates. The Company does not undertake any specific actions to limit those exposures.

Item 4. 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 Accounting Officer (“CAO”) (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 CAO 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 CAO, as appropriate, to allow timely decisions regarding required disclosure.

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 Chief Executive Officer 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 Chief Financial Officer 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 Chief Executive Officer 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 Chief Financial Officer 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.