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VOICESERVE INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations.
(Edgar Glimpses Via Acquire Media NewsEdge) The following discussion provides information which management believes is
relevant to an assessment and understanding of our results of operations and
financial condition. The discussion should be read along with our financial
statements and notes thereto contained elsewhere in this Report. The following
discussion and analysis contains forward-looking statements, which involve risks
and uncertainties. Our actual results may differ significantly from the results,
expectations and plans discussed in these forward-looking statements. See
"Cautionary Statement on Forward-Looking Information."
Overview
We were founded December 9, 2005 as 4306, Inc. On February 20, 2007, pursuant to
a share exchange agreement (the "Share Exchange"), Voiceserve Limited became our
wholly owned subsidiary. Following the Share Exchange, we adopted Voiceserve
Limited's business plan and began conducting business as a global Internet
communications company. We are now a global Internet communications company that
makes it possible for anyone with an Internet connection to make low cost, high
quality voice calls over the Internet. Immediately following the Share Exchange,
we 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.
We generate revenue by developing, manufacturing, licensing, and supporting a
wide range of VoIP software products and services for many different types of
devices, including a wide range of cellular telephones. Our founders began their
careers in 1991 with Econophone Inc. ("Econophone") a marketer of international
"call-back" and "calling cards". The founders worked as independent resellers of
calling cards creating markets in Europe and third world countries transmitting
the calls via universal 0800 numbers. While working at Econophone, the founders
discovered a huge potential in the market for pre-paid calling cards and were
one of the first groups in the industry to market such a product in Europe. Our
founders introduced, among 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. 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 marketing a
comprehensive VoIP solution.
Our marketing efforts are focused on VoIP wholesalers termination carriers,
retail VoIP providers, Internet providers, including WiFi and WiMax operators,
Cable TV networks, GSM providers, telecom resellers, prepaid serve companies,
and small-to-medium size companies (businesses, hotels, hospitals, etc.).
On January 15, 2008, we acquired all of the issued and outstanding ordinary
shares of VoIPSwitch 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 our common stock valued at $0.48 per share or $1,800,000. Payment of
the monthly installments of the $600,000 notes payable was 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. As payments of the
$600,000 notes payable were made, such paid amounts were added to goodwill.
On December 7, 2010, pursuant to a verbal agreement on October 19, 2010,
Voiceserve issued a total of 2,250,000 shares of its common stock to the three
sellers of VoipSwitch in full and final satisfaction of debt totaling $463,000,
consisting of the $150,000 demand note payable and the remaining $313,000
"contingent consideration" potential amount due the three sellers. The $131,250
excess of the $281,250 estimated fair value of the shares, which was calculated
based on the October 19, 2010 nearest day closing trading price of $0.25 per
share and a 50% restricted stock discount (2,250,000 shares x $0.125 [50%
discount applied to 0.25 per share price] per share = $281,250), over the
$150,000 demand note payable was added to goodwill.
VoipSwitch
VoipSwitch is a complete IP telephony system 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 VoIP systems composed of many different parts, the VoipSwitch
platform is fully integrated into one application, which makes it easy to
manage. All elements that are necessary for VoIP implementation are already
built in. All the features are integrated in one multiple server based
application. To date, we have installed over 16,000 VoipSwitch systems around
the world.
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The "VoipSwitch Brand" has gained recognition and popularity especially in
countries where land-line telecommunication infrastructure are less
developed. Since increasing our participation in telecom conferences and
exhibitions over the last year, awareness of our comprehensive VoIP software
offering has significantly increased.
To further the breadth of VoipSwitch's system, we added VoIP dialers for
cellular phones. Over the last twelve months, we have enhanced its dialers for
Blackberry and Apple's iPhone, in addition to its existing dialers for Symbian
(Nokia, Motorola, Samsung, Sony, etc.), Android and Windows® cellular phones. We
have also introduced video conferencing for Apple, iPads and iPods, enabling the
end-users to conduct economical VoIP video conference calls, worldwide via the
internet.
The Company cultivates long-term growth of its businesses through technological
innovation, engineering excellence, advanced functionality and security, and a
commitment to delivering high-quality products and services. Our goal is to
deliver products that provide the best platform with the lowest total cost of
ownership.
We will continue to invest in research and development in existing and new lines
of business, including Video On Demand. We will 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 we have laid a foundation for long-term growth by delivering
innovative products, creating opportunities for wholesale and retail partners,
and offering a comprehensive VoIP software platform with a low cost of ownership
for service providers as well as end users. Our focus in fiscal year 2013 is to
build on this foundation, and expand our marketing efforts into North, Central
and South America and Asia.
Key market opportunities:
VoipSwitchSoftswitch 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 all our
businesses lines. 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. In
addition to wholesalers and retailers, we intend to market our VoIP software to
small-to-medium size business, hotels, cruise lines, hospitals and
schools/universities.
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:
Maintain a strong presence at key telecommunications exhibitions across the
world.
Further develop our Video On Demand capabilities with additional full-time
programmers hired during the quarter. We expect to introduce a Video On
Demand solution for Hoteliers during our second or third quarter of the
current fiscal year. We believe providing VOD to our customers will have a
material impact on our ability to penetrate market opportunities.
Market our VoIP software capabilities to the transportation industry
(commercial and leisure), hotel industry, small-to-medium size business and
larger commercial enterprises, as well as wholesalers and resellers.
Amass a large subscription base for our Vippie retail service via Internet
advertising and direct marketing.
Expand our distribution partnership network throughout Asia.
Private Placements
On May 6, 2011, we entered into definitive agreements with investors to sell in
a private placement an aggregate of 2,623,077 shares of our common stock and
warrants to purchase 1,311,539 shares of our common stock at a purchase price of
$0.13 per unit, resulting in gross proceeds to us of $341,000, before deducting
placement agent fees and other offering expenses. The warrants are exercisable
at an exercise price of $0.30 per share and expire three years from the closing
date.
On June 6, 2011, we entered into definitive agreements with investors to sell in
a private placement an aggregate of 1,207,692 shares of our common stock and
warrants to purchase 603,846 shares of our common stock at a purchase price of
$0.13 per unit, resulting in gross proceeds to us of $157,000, before deducting
placement agent fees and other offering expenses. The warrants are exercisable
at an exercise price of $0.30 per share and expire three years from the initial
closing date.
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Results of Operations
For the three and six months ended September 30, 2012 compared to September 30,
2011
The following tables present the statements of operations for the three and six
months ended September 30, 2012 and September 30, 2011. The discussion following
the tables is based on these results.
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