VSRV Voiceserve Inc (CE)

VoiceServe, Inc. (OTCBB: VSRV), a low-cost, next-generation Internet Telephony software and service provider, today reported financial results for its third quarter and nine month period ended December 31, 2010. The Company reported revenues in its fiscal third quarter of $1.3 million. This compares to revenue of $985,000 for the same period in its previous fiscal year and $1.0 million in the second quarter of its current fiscal year, representing increases of 28 percent and 22 percents of the prior periods, respectively. The Company reported a net loss for its third quarter of the current fiscal year of $(42,000), compared to losses of $(48,000) and $(592,000) for the third quarter of the prior fiscal year and the second quarter of the current fiscal year, respectively.

Revenue for the nine month period in the current fiscal year was $3.4 million which compares to $2.4 million for the same period of the prior fiscal year. The Company reported a net loss of $(510,000) or $0.02 per basic share for the first nine months of fiscal year 2011. This compares to a net loss of $(550,000) or $0.02 per basic share for the same period in fiscal year 2010.

The Company’s gross margin for the current fiscal quarter was 46 percent compared to 65 percent for the third quarter of the previous fiscal year. For the first nine months the Company’s gross margin was 50 percent in the current fiscal year and 66 percent in the previous fiscal year. The lower gross margins experienced during the current fiscal year reflect management’s decision to deemphasize its VoIP services offering to focus on its core higher margin software business, which resulted in negative gross margin for the service line of business as the Company expensed communication air time costs, coupled with costs associated with breaking into new geographic markets, specifically North and Latin America. The Company expects its gross margin to return to levels more reflective of a software company as its sales efforts gain momentum in these markets during the current calendar year.

Sales, general and administrative (SG&A) costs during the first nine months of fiscal 2011 were $1,724,116, inclusive of stock based compensation, compared $1,409,897 for the nine month period of the previous fiscal year, also inclusive of stock based compensation. Increased SG&A for the current fiscal year reflects increased marketing and Internet advertising investment, increased sales and sales-engineers professionals, the added expense of Directors and Officers insurance, which the company purchased in the later part of the second quarter. Higher marketing costs are directly associated with management’s decision to increase its participation in telecommunications industry conferences, which has historically generated considerable sales leads and provided crucial exposure to senior telecommunications professionals and associations. Voiceserve also hired several sales and engineer professionals to support its geographic expansion into North and Latin America and to further develop its video on demand offering, which it plans to introduce in the third or fourth quarter of the current fiscal years.

Cash and cash equivalents as of December 31, 2010 were $337,000 and the Company has no long term debt.

“Our participation in telecom conferences around the world is greatly enhancing Voiceserve’s visibility in targeted markets. Sales leads generated from these annual conventions are qualified, saving our sales force valuable time and shortening our sales cycles,” said Michael Bibelman, Voiceserve’s CEO. The benefit from our increased sales force hired during the second quarter is beginning to develop traction, which can be seen in our quarter-over-quarter revenue increase of 22%. As we achieve a critical mass in our sales effort to effectively sell into the Americas market, and further penetrate existing customer bases in the Middle East and Europe, we expect to maintain this sales momentum for the foreseeable future. Further supporting healthy revenue growth will be our video-on-demand offering. We have developed a robust software package that delivers on-demand movies to VoIP users and are well on our way to building access to an extensive library of movies that will serve the viewing needs of customers in any country and language. We expect to begin offering Voiceserve’s video-on-demand during the current fiscal quarter.”

Alex Ellinson, Voiceserve’s Chairman, added, “With the increasing deployment of WIFI technology globally, smart phones such as Blackberries and iPhones are becoming a very popular form of communication thus avoiding GSM or other mobile networks. Voiceserve’s Voipswitch software for most mobile phones is the most advanced on the market. Our software caters to nearly all the smart phones currently on the market. Voiceserve is one of the only companies globally that VoIp-enables nearly all the mobile units circulating through retailers. Through the trade shows our company is getting recognition from the large carriers for its suite of products and advanced software. We are rapidly developing a reputation for offering the most consistent and effective suite of next generation VoIP software solutions for smart phones. December 2010, marked a turn in our business. Our capabilities are being discovered daily by telecom industry leaders and large corporations demonstrating serious interest in partnership and licensing a portion, if not all, of our VoIP capabilities. The next several months should prove interesting for not only is our traditional sales effort growing, but it is becoming clear that there are several opportunities to establish our first corporate licensing agreements in the near future.”

About VoiceServe, Inc.

VoiceServe is a software platform provider focusing primarily on delivering affordable, complete, next generation services to Internet Telephony Providers (ITSPs). Products include VoipSwitch, a custom modular all-in-one Voice over Internet Protocol (VoIP) management platform licensing solution for resellers; VoIP airtime minutes bundled with optional convenient features, including virtual numbers, direct dial, web callback, and call forwarding; IP-PBX; and mobile softphone, and video technologies. For further information please visit www.voiceserve.com. More information about Voipswitch can be found at www.voipswitch.com

Certain statements in this news release may constitute “forward-looking” statements within the meaning of section 21E of the Securities and Exchange Act of 1934. The Company believes that its expectations, as expressed in these statements are based on reasonable assumptions regarding the risks and uncertainties inherent in achieving those expectations. These statements are not, however, guarantees of future performance and actual results may differ materially. Risk factors are listed in the most recent Annual Report on Form 10-KB and Quarterly Report on Form 10-QB filed with the Securities and Exchange Commission.

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VOICESERVE, INC. AND SUBSIDIARIESConsolidated Statements of Operations(Unaudited)

Three Months Nine Months Ended December 31, Ended December 31, 2010   2009 2010   2009 Operating revenues: Software license fees $ 1,166,175 $ 917,793 $ 3,123,386 $ 2,281,493 Revenues from communications air time 97,420 67,445 248,894 115,554 Total operating revenues 1,263,595 985,238 3,372,280 2,397,047   Cost of operating revenues: Software license fees 573,494 283,149 1,026,371 708,132 Communications air time 109,616 60,499 244,049 102,847 Total cost of operating revenues 683,110 343,648 1,270,420 810,979   Gross profit (loss) 580,485 641,590 2,101,860 1,586,068   Operating expenses: Selling, general and administrative expenses 739,065 689,575 2,882,722 2,135,952 Total operating expenses 739,065 689,575 2,882,722 2,135,952   Income (loss) from operations (158,580) (47,985) (780,862) (549,884)   Income from revaluation of liability for common stock purchase warrants 116,196 - 271,170 - Interest income 19 - 23 1 Interest expense (42) - (652) (20) Income (loss) before income taxes (42,407) (47,985) (510,321) (549,903) Income taxes (benefit) - - - - Net income (loss) $ (42,407) $ (47,985) $ (510,321) $ (549,903)   Net income (loss) per share - basic and diluted $ (0.00) $ (0.00) $ (0.01) $ (0.02)   Weighted average number of shares outstanding - basic and diluted 37,914,212 32,402,935 35,551,646 31,853,485

VOICESERVE, INC. AND SUBSIDIARIESConsolidated Balance Sheets

  December 31, 2010   March 31, 2010 (Unaudited) Assets   Current assets: Cash and cash equivalents $ 337,233 $ 218,438 Accounts receivable, net of allowance for doubtful accounts of $56,011 and $0, respectively 140,780 32,839 Prepaid expenses and other current assets 93,350 16,901 Total current assets 571,363 268,178   Property and equipment, net of accumulated depreciation of $67,739 and $60,227 respectively 48,735 11,662 Intangible assets, net of accumulated amortization of $680,417 and $507,917, respectively 2,185,624 2,223,874 Total assets $ 2,802,722 $ 2,503,714   Liabilities and Stockholders' Equity   Current liabilities: Accounts payable $ 286,968 $ 256,458 Accrued expenses payable 58,800 57,705 Deferred software license fees 270,991 245,666 Loans payable to related parties 35,188 34,212 Due sellers of VoipSwitch Inc. - 150,000 Total current liabilities 651,947 744,041 Liability for common stock purchase warrants 186,438 - Total liabilities 838,385 744,041   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 38,354,429 and 32,402,935 shares, respectively 38,354 32,403 Additional paid-in capital 5,471,357 4,733,537 Deficit (3,504,476) (2,994,155) Accumulated other comprehensive income (loss) (40,898) (12,112) Total stockholders' equity 1,964,337 1,759,673 Total liabilities and stockholders' equity $ 2,802,722 $ 2,503,714