UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





FORM 10-Q/A


Amendment No. 1





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





For the quarterly period ended September 30, 2010





OR





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 number:               000-29341





iVOICE, INC


(Exact name of registrant as specified in its charter)




New Jersey

51-0471976(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)750 Highway 34, Matawan, NJ07747(Address of Principal Executive Offices)(Zip Code)




Registrant’s Telephone Number, Including Area Code:                             (732) 441-7700





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  YES xNO 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES o  NO x





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated files, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the exchange act.




Large Accelerated filero
Accelerated fileroNon-accelerated filer    o(Do not check if a smaller reporting company)
Smaller reporting company      x





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YESo  NOx





Number of shares of Class A, common stock,


No par value, outstanding as of November 12, 2010:                      6,265,563,493









EXPLANATORY NOTE
  This amendment is being filed in order to modify Item. 4T, Controls and Procedures, to include our conclusion regarding the effectiveness of our disclosure controls and procedures and to modify Exhibit 31.1 to change “small business issuer” to “registrant”. No other changes have been made, and the information contained in this Report has not been updated.  For more current information regarding the Company, readers should refer to the more recent reports filed by the Company with the Securities and Exchange Commission.




Table of Contents




iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


SEPTEMBER 30, 2010 AND 2009





TABLE OFCONTENTS




PART I.
FINANCIAL INFORMATION
Page No.Item 1.
Condensed Consolidated Financial Statements (Unaudited)
2Condensed Consolidated Balance Sheets – September 30, 2010 and December 31, 2009
2Condensed Consolidated Statements of Operations - For the nine months and   three months ended September 30, 2010 and 2009
4Condensed Consolidated Statement of Accumulated Other Comprehensive Income – For the nine months ended September 30, 2010
5Condensed Consolidated Statements of Cash Flows - For the nine monthsended September 30, 2010 and 2009
6Notes to Condensed Consolidated Financial Statements
7Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
17Item 4T.
Controls and Procedures
20PART II.
OTHER INFORMATIONItem 5.
Other Information
21Item 6.
Exhibits
21
  Table of Contents





ITEM 1 - CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATEDBALANCE SHEETS


(UNAUDITED)




September 30,


December 31,2010


2009ASSETSCURRENT ASSETSCash and cash equivalents

$
1,633,300


$
1,842,801Securities available for sale


3,265



9,681Accounts receivable, net of allowance for doubtful accounts $0


11,308



6,188Inventory


879Prepaid expenses and other current assets


36,336



45,075Total current assets


1,685,088



1,903,745PROPERTY AND EQUIPMENT, net of accumulated depreciationof $245,939 and $235,296, respectively


40,708



35,925OTHER ASSETSIntangible assets, net of accumulated amortization of $2,897 andand $2,345, respectively


171,417



171,969Deposits and other assets


6,666



6,666Total other assets


178,083



178,635TOTAL ASSETS

$
1,903,879


$
2,118,305LIABILITIES AND STOCKHOLDERS’ DEFICITCURRENT LIABILITIESAccounts payable and accrued expenses

$
968,980


$
927,105Due to related parties


922.725



580,703Class A common stock liability


12,157



29,508Deferred revenues


1,000



2,210Total current liabilities


1,904,862



1,539,526NON CURRENT LIABILITIESConvertible debentures payable, net of discounts of $114,006 and$159,128, respectively


404,094



512,472Derivative liability on convertible debentures


569,798



742,139Total non-current liabilities


973,892



1,254,611TOTAL LIABILITIES

$
2,878,754


$
2,794,137
 COMMITMENTS AND CONTINGENCIES




See accompanying notes to condensed consolidated financial statements.




2
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iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)


(UNAUDITED)




September 30,


December 31,2010


2009STOCKHOLDERS’ EQUITY (DEFICIT)Stockholders’ equity:Preferred stock, $1 par value; authorized 1,000,000 shares;no shares issued and outstanding


--



--Common stock, Class A, no par value; authorized 10,000,000,000 shares;2010 – 6,265,563,493 shares issued; 6,265,563,493 shares outstanding2009 - 3,401,870,145 shares issued; 3,401,867,145 shares outstanding


25,225,513



24,818,162Common stock, Class B, $0.01 par value; authorized 50,000,000 shares;no shares issued and outstanding


--



--Additional paid-in capital


719,702



719,702Accumulated other comprehensive income


2,439



4,658Accumulated deficit


(24,933,709
)


(24,146,624
)Treasury stock, 3,000 Class A shares, at cost


(28,800
)


(28,800
)Total iVoice, Inc. stockholders' equity


985,145



1,367,098Noncontrolling interest


(1,960,020
)


(2,042,930
)TOTAL STOCKHOLDERS’ EQUITY (DEFICIT)


(974,875
)


(675,832
)TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

$
1,903,879


$
2,118,305


See accompanying notes to condensed consolidated financial statements.




3
 Table of Contents





iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATEDSTATEMENTS OF OPERATIONS


(UNAUDITED)




For the nine months


For the three monthsEnded September 30,


Ended September 30,2010


2009


2010


2009SALES

$
142,996


$
73,969


$
43,357


$
28,721COST OF SALES


68,958



34,473



22,288



13,934GROSS PROFIT


74,038



39,496



21,069



14,787OPERATING EXPENSESSelling, general and administrative expenses


966,547



948,756



308,292



299,191Depreciation and amortization


9,906



11,595



3,455



4,057Total operating expenses


976,453



960,351



311,747



303,248LOSS FROM OPERATIONS


(902,415
)


(920,855
)


(290,678
)


(288,461
)OTHER INCOME (EXPENSE)Other income


272,561



103,051



6,600



19,892Gain on revaluation of derivatives


172,341



24,442



31,534



24,009Amortization of discount on debt


(45,122
)


(104,201
)


(15,041
)


(34,734
)Interest expense


(217,110
)


(265,381
)


(60,952
)


(179,127
)Total other income (expense)


182,670



(242,089
)


(37,859
)


(169,960
)LOSS FROM OPERATIONS BEFOREPROVISION FOR INCOME TAXES


(719,745
)


(1,162,944
)


(328,537
)


(458,421
)PROVISION FOR INCOME TAXES


--



--



--



--NET LOSS


(719,745
)


(1,162,944
)


(328,537
)


(458,421
)Net loss attributable to noncontrolling interest


(135,396
)


(319,930
)


(120,169
)


(146,590
)NET LOSS APPLICABLE TO COMMONSHARES

$
(584,349
)

$
(843,014
)

$
(208,368
)

$
(311,831
)NET LOSS PER COMMON SHAREBasic and diluted

$
(0.00
)

$
( 0.00
)

$
(0.00
)

$
( 0.00
)WEIGHTED AVERAGE SHARES OUTSTANDINGBasic and diluted


4,678,876,888



2,669,670,752



5,985,506,360



2,804,671,201


See accompanying notes to condensed consolidated financial statements.




4
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iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATEDSTATEMENTS OF


ACCUMULATED OTHER COMPREHENSIVE INCOME (UNAUDITED)


FOR THE NINE MONTHS ENDED SEPTEMBER 30,


2010


2009Balance at beginning of the period

$
4,658


$
1,785Unrealized gain on securities available for sale:Unrealized gain (loss) arising during the period


27,595



(195
)Less: reclassification adjustment and lossesincluded in net loss


(29,814
)


(522
)Net change for the period


(2,219
)


(717
)Balance at end of the period

$
2,439


$
1,068


See accompanying notes to condensed consolidated financial statements.




5
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  iVOICE, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS (UNAUDITED)


FOR THE NINE MONTHS ENDED SEPTEMBER 30,




2010


2009CASH FLOWS FROM OPERATING ACTIVITIES:Net loss

$
(719,745
)

$
(1,162,944
)Adjustments to reconcile net loss to net cash:Depreciation of fixed assets and amortization of intangibles


9,906



11,595Amortization of discount on debt conversion


45,122



104,201Beneficial interest on issuance of stock


207,900



82,253Gain on sales of securities available for sale


(29,814
)


(14,895
)Gain on revaluation of derivatives


(172,341
)


(24,442
)Stock issue to noncontrolling shareholders for services


15,570



14,218(Gain) from settlement of note receivable previously written-off


(3,570
)


(50,000
)Changes in certain assets and liabilities:(Increase) in accounts receivable


(5,120
)


(11,412
)(Increase) decrease in inventory


(879
)


6,149(Increase) decrease in prepaid expenses and other assets


8,739



(89,752
)Increase (decrease) in accounts payable and accrued liabilities


205,640



38,993Increase (decrease) in deferred revenues


(1,210
)


(5,138
)Increase (decrease) in related party liabilities


206,857



7,298Net cash used in operating activities


(232,945
)


(1,093,876
)CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment


(14,137
)


--Costs of trademarks and other intangibles


--



(5,393
)Net proceeds from sales of securities available for sale


37,581



21,083Net cash provided by investing activities


23,444



15,690NET DECREASE IN CASH AND CASH EQUIVALENTS


(209,501
)


(1,078,186
)CASH AND CASH EQUIVALENTS – BEGINNING OF PERIOD


1,842,801



3,442,590CASH AND CASH EQUIVALENTS – END OF PERIOD

$
1,633,300


$
2,364,404CASH PAID DURING THE PERIOD FOR:Interest expense

$
-


$
-Income taxes

$
-


$
-


See accompanying notes to condensed consolidated financial statements.




6
 Table of Contents


iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSEDCONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis of Presentation


These unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and disclosures required by generally accepted accounting principles for complete financial statements.  In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included.  It is suggested that these condensed consolidated financial statements be read in conjunction with the December 31, 2009 audited financial statements and the accompanying notes thereto.





Principles of Consolidation


The accompanying condensed consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, iVoice Innovations, Inc. and its Variable Interest Entity, B Green Innovations. All significant intra/inter-company transactions and balances have been eliminated in consolidation.





B Green Innovations is considered a Variable Interest Entity by the Company because iVoice, Inc. is the primary beneficiary of B Green Innovations, as such, according to provisions of FASB Accounting Standards Codification (“ASC”) Topic 810 “Consolidation”, iVoice, Inc. continued to consolidate the results of operations of B Green Innovations with those of iVoice and its other subsidiary. The Company reclassified certain accounts in the stockholders’ deficit section to conform to the current year presentation. The reclassifications had no effect on operations or cash flows.





Revenue and Cost Recognition


The parent Company obtains its income primarily from the sales or licensing of its patents and patent applications. Revenues for the sales of our patents are recorded upon transfer of title. The patent revenues are reported net of any broker fees or commissions.





The Company also is reporting revenues for B Green Innovations which primarily derives revenues from the shipments of “green products” which are recognized at the time of shipment to, or acceptance by customer, provided title and risk of loss is transferred to the customer. Provisions, when appropriate, are made where the right of return exists. B Green Innovation also derives revenues from the customer support (maintenance) service contracts for its IVR software product for one-year periods. Deferred revenues are recorded when the company receives payment and then revenues are recorded over the maintenance period.





Concentration of Credit Risk


The Company maintains cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to federally insured limits. The balances exceed FDIC insured limits. The Company has not experienced any losses in such accounts.




Fair Value of Financial Instruments


The Company estimates that the fair value of all financial instruments at September 30, 2010 and December 31, 2009, as defined in ASC 320-10-35, “Subsequent Measurement of Investment Securities”, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying condensed consolidated balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.




7
 Table of Contents




iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





Income (Loss) Per Share


ASC 260, “Earnings Per Share” requires presentation of basic earnings per share (“basic EPS”) and diluted earnings per share (“diluted EPS”).The computation of basic EPS is computed by dividing income available to common stockholders by the weighted average number of outstanding Common shares during the period.  Diluted earnings per share gives effect to all dilutive potential Common shares outstanding during the period. The computation of diluted EPS for the nine months ended September 30, 2010 and 2009 does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect on earnings.





The shares used in the computations are as follows:




Nine months ended

September 30,2010


2009Net (loss) applicable to common shares

$
(584,349
)

$
(843,014
)Weighted average shares outstanding - basic


4,678,876,888



2,669,670,752Weighted average shares outstanding - diluted


4,678,876,888



2,669,670,752Net (loss) per common share - basic

$
(0.00
)

$
(0.00
)Net (loss) per common share - diluted

$
(0.00
)

$
(0.00
)


As of September 30, 2010, the Company has common stock equivalents of 4,428,205,128 issuable upon conversion of the YA Global Convertible Debentures and an obligation to issue 553,559,410 shares of common stock outstanding. As of September 30, 2009, the Company had common stock equivalents of 16,507,142,857 issuable upon conversion of the YA Global Convertible Debentures and YA Global Warrants. The computation of diluted EPS in the periods ended September 30, 2010 and 2009 do not include the common stock equivalents because these would have an anti-dilutive effect on loss per share.





Accumulated Other Comprehensive Income


Comprehensive income (loss) includes net income (loss) and other revenues, expenses, gains and losses that are excluded from net income (loss) but are included as a component of total stockholders’ equity (deficit). Comprehensive income (loss) for the nine months ended September 30, 2010 and 2009 was $(2,219) and $(717), respectively. The difference between comprehensive income (loss) and net income (loss) results primarily from the effect of unrealized gains and losses determined in accordance with FASB ASC 320, “Investments – Debts and Equity Securities”.  As of September 30, 2010 and December 31, 2009, the accumulated balance of unrealized gains and losses excluded from net income (loss) was $2,439 and $4,658, respectively. These amounts are presented as “Accumulated other comprehensive income” in the balance sheet.





Reclassification of accounts


On January 1, 2009, the Company adopted provisions of ASC 810-10-55, disclosure for “Noncontrolling Interest in Consolidated Financial Statements.” Certain prior year amounts have been reclassified to conform to the adoption of these provisions. The reclassifications have had no effect on operations or cash flows for the nine months ended September 30, 2009.




8
 Table of Contents




iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


Recent Accounting Pronouncements


In April, 2010, the FASB issued ASU 2010-17, “Revenue Recognition – Milestone Method.” ASU 2010-17 amends ASC 605 “Revenue Recognition” to provide guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. A vendor can recognize consideration that is contingent upon achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone meets all criteria to be considered substantive. The amendments in this Update are effective on a prospective basis for milestones achieved in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. Early adoption is permitted.  The Company does not expect the adoption of ASU 2010-17 to have an effect on the Company’s financial statements.




NOTE 2 – CONSOLIDATED FINANCIAL STATEMENTS AND NON-CONTROLLING INTEREST





On March 12, 2008, the Company acquired 1,444.44 shares of B Green Innovations, Inc. (f/k/a iVoice Technology, Inc.) Series A 3% Secured Convertible Preferred Stock for $1,444,444.  At the time that the Company acquired these shares, the holder of each share of Series A Preferred Stock had the right to one vote for each share of Common Stock into which such Series A Preferred Stock could then be converted, and the holders of the Series A Preferred Stock shall not have in the aggregate more than seventy percent (70%) of the total votes of all classes of voting stock of the Corporation that would vote at a meeting of shareholders. These securities are also secured by the assets of B Green Innovations. On March 6, 2009, B Green Innovations amended its Certificate of Incorporation to remove the voting and conversion rights of the Series A Convertible Preferred Stock. Based on this change, the Company no longer has any voting rights in the stock of B Green Innovations. On February 23, 2010, the Company acquired 1,219 shares of B Green Innovations, Inc.’s Series A 3% Convertible Preferred Stock for $1,218,766 of cash and convertible debt. In addition, on February 23, 2010, B Green Innovations reinstated the conversion rights on their Series A Convertible Preferred Stock. iVoice may, with the consent of B Green Innovation, convert an amount of the Series A Preferred Stock into Class A common stock calculated by dividing the Series A Initial Value by the closing bid price of the Class A common stock on the last trading day immediately prior to the date of the Notice of Conversion and which limits the conversion to Class A common stock to 9.99% of the outstanding shares of B Green Innovations. iVoice will receive no discount to the closing bid price on the conversion. The Company is the primary beneficiary of B Green Innovations, and as such, according to ASC 810, “Consolidation”, iVoice, Inc. continued to consolidate the results of operations of B Green Innovations with those of iVoice, Inc. and its other subsidiary.





For the period ended September 30, 2010, the stockholders’ equity for non-controlling interest and net income attributable to non-controlling interest reflects 90% of the non-controlling interest’s portion of B Green Innovations operations, after giving effect of elimination of intra-company transactions. For the period ended September 30, 2009, the non-controlling interest reflects 100% of the non-controlling interest’s portion of B Green Innovations operations, after giving effect of elimination of intra-company transactions.





Since 2004, iVoice has provided administrative services to B Green Innovations and its subsidiary through various agreements. In 2008, the accumulated unpaid receivables were exchanged for Convertible Promissory Notes payable to iVoice by B Green Innovations and its subsidiary. In November 2009, iVoice and B Green Innovations mutually agreed to terminate and extinguish the following agreements:




a.
The Administrative Services Agreement dated March 1, 2007 by and between B Green Innovations, Inc.(subsidiary) and iVoice, Inc.


b.
The Convertible Promissory Note dated May 5, 2008 issued by B Green Innovations, Inc. (subsidiary) payable to iVoice, Inc.


c.
The Security Agreement dated May 5, 2008 by and between B Green Innovations, Inc. (subsidiary) and iVoice, Inc.





On February 10, 2010, the remaining Administrative Services Agreement with B Green Innovations was terminated, and the Company entered into an Exchange Agreement to exchange the B Green Innovations Convertible Promissory Note, having a principal and accrued interest of approximately $119,000, for 119 shares of the B Green Innovations 3% Convertible Preferred Stock.




9
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iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





On February 10, 2010, and as subsequently amended (see below), the Company entered into an administrative services agreement with B Green Innovations to provide iVoice with administrative and financial services and office space. This agreement will continue on a month-to-month basis unless terminated by either party by providing 30 days written notice. In consideration of the services, iVoice will pay B Green $5,000 per month. For the nine months ended September 30, 2010 the companies recorded administrative fees of $45,000.





On April 29, 2010, the Administrative Services Agreement between the Company and B Green Innovations was amended as follows:




a.
The agreement will commence effective January 1, 2010.


b.
The monthly fee will increase to $5,000 per month and will be evidenced by a Convertible Promissory Note, the terms of which are as follows:


i.
Interest will accrue in the unpaid balance at the rate of prime plus 1 percent per annum.


ii.
Additional advances to include Fees accrued pursuant to the Administrative Services Agreement will be added to the principal of this note and will accrue interest at the above specified rate.


iii.
The interest shall accrue monthly and be paid annually.


iv.
The principal is payable on demand.


v.
The holder may elect payment of the principal and/or interest at the Holder’s sole discretion, owed pursuant to this Note by requiring the Maker to issue to the Holder, or his assigns either: (i) one Class B common stock share of the Maker, no par value per share, for each dollar owed, (ii) the number of Class A common stock shares of the Maker calculated by dividing (x) the sum of the principal and interest that the Holder has decided to have paid by (y) fifty percent (50%) of the lowest issue price of Class A common stock, or (iii) exchange the iVoice Market Value of the number of Class A Common Stock shares calculated, but not issued, in subsection (ii) above, equal to the number of B Green Series A 3% Preferred Stock shares calculated by dividing the iVoice Market value by the Series A Initial Value, as defined in the Company’s Certificate of Incorporation. The Holder may elect payment of the principal of this Note, before any repayment of interest.


vi.
This note may be prepaid in full or in part at any time without penalty.


vii.
In the event of (a) default in payment of any installment of principal or interest hereof as the same becomes due and such default is not cured within ten (10) days from the due date, or (b) default under the terms of any instrument securing this Note, and such default is not cured within fifteen (15) days after written notice to maker, then in either such event the Holder may, without further notice, declare the remainder of the principal sum, together with all interest accrued thereon, and the prepayment premium, if any, at once due and payable. Failure to exercise this option shall not constitute a waiver of the right to exercise the same at any other time. The unpaid principal of this Note and any part thereof, accrued interest and all other sums due under this Note shall bear interest at the rate of prime plus 2 percent per annum after default until paid.





NOTE 3 – GOING CONCERN





The Company has negative cash flows from operations, negative working capital and recurring losses from operations. These issues raise substantial doubt about the Company’s ability to continue as a going concern. Therefore, recoverability of a major portion of the recorded asset amounts shown in the accompanying balance sheets is dependent upon continued operations of the Company, which in turn, is dependent upon the Company’s ability to raise capital and/or generate positive cash flow from operations.





Since the spin-off of the three operating subsidiaries in 2005, the Company has transitioned itself into a company focused on the development and licensing of proprietary technologies. Following the sales of patents to Lamson Holdings LLC, the Company has 9 remaining patent applications, which have been awarded or are pending.  These applications include various versions of the “Wirelessly Loaded Speaking Medicine Container”, which is also filed internationally, the “Voice Activated Voice Operated Copier”, the “Voice Activated Voice Operational Universal Remote Control”, “Wireless Methodology for Talking Consumer Products” which is also filed internationally, “Product Identifier and Receive Spoken Instructions” and “Traffic Signal System with Countdown Signaling with Advertising and/or News Message”.





The Company also continues to search for potential merger candidates with or without compatible technology and products, which management feels may make financing more appealing to potential investors.





The financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence.




10
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iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





NOTE 4 – FAIR VALUE MEASUREMENTS





ASC 820, “Fair Value Measurements and Disclosures”, defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. As defined in ASC 820, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The Company utilizes market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The Company classifies fair value balances based on the observability of those inputs. ASC 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurement).





ASC 820 classifies these inputs into the following hierarchy:





Level 1 Inputs– Quoted prices are available in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide  pricing information on an ongoing basis. Level 1 primarily consists of financial instruments such as exchange-traded derivatives, marketable securities and listed equities.





Level 2 Inputs– Pricing inputs are other than quoted prices in active markets included in level 1, which are either directly or indirectly observable as of the reported date. Level 2 includes those financial instruments that are valued using models or other valuation methodologies. These models are primarily industry-standard models that consider various assumptions, including quoted forward prices for commodities, time value, volatility factors, and current market and contractual prices for the underlying instruments, as well as other relevant economic measures. Substantially all of these assumptions are observable in the marketplace throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace. Instruments in this category generally include non-exchange-traded derivatives such as commodity swaps, interest rate swaps, options and collars.





Level 3 Inputs– Pricing inputs include significant inputs that are generally less observable from objective sources. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.





The following table sets forth by level within the fair value hierarchy the Company’s financial assets and liabilities that were accounted for at fair value as of September 30, 2010 and December 31, 2009. As required by ASC 820, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.





September 30, 2010





Assets

Level I


Level II


Level III


TotalSecurities available for sale

$
3,265


$
-


$
-


$
3,265Total Assets

$
3,265


$
-


$
-


$
3,265Derivative liabilities

$
-


$
569,798


$
-


$
569,798Total Liabilities

$
-


$
569,798


$
-


$
569,798
  11
 Table of Contents





iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





December 31, 2009




Assets

Level I


Level II


Level III


TotalSecurities available for sale

$
9,681


$
-


$
-


$
9,681Total Assets

$
9,681


$
-


$
-


$
9,681Derivative liabilities

$
-


$
742,139


$
-


$
742,139Total Liabilities

$
-


$
742,139


$
-


$
742,139


Valuation methods:


The Company’s securities available for sale are valued using quoted stock prices based on the OTC BB quotation system for the periods ended in the tables above.





The Company’s derivatives are classified within Level 2 of the valuation hierarchy. The Company’s derivatives are valued using internal models that use as their basis readily observable market inputs, such as time value, forward interest rates, and volatility factors. Refer to Note 6 for more discussion on derivatives.




NOTE 5 - CONVERTIBLE DEBENTURES PAYABLE





On November 12, 2009, the Company issued an Amended and Restated convertible debenture for the principal amount of $671,600 due on May 25, 2014. This debenture is secured with a $370,000 secured convertible debenture dated January 6, 2006 held by the Company, which has been fully reserved, and issued by Thomas Pharmaceuticals, Ltd.  Additionally, under the terms of the Settlement Agreement, YA Global released its security interest on the other assets of the Company, terminated the outstanding warrants previously issued by the Company in favor of YA Global and both parties executed releases fully releasing each other from any and all claims through the date of the Settlement Agreement. This debenture has no interest rate and the Company imputed an effective interest rate of 5.25% and recorded imputed interest of $141,043 which is being amortized over the term of the debenture. The Company amortized $23,507 of this interest during the nine months ended September 30, 2010. The Company can redeem a portion or all amounts outstanding under the YA Global Debentures at any time upon three business days advanced written notice.  The Company shall pay 20% redemption premium on the principal amount being redeemed. YA Global may, at its discretion, convert the outstanding principal and accrued interest, in whole or in part, into a number of shares of our Class A Common Stock equal to the quotient obtained by dividing (x) the outstanding amount of the YA Global Debentures to be converted by (y) 90% of the lowest closing bid price of our shares of Class A Common Stock during the three (3) trading days immediately preceding the conversion date.





During the nine months ended September 30, 2010, the Company issued 1,598,119,657 shares if its Class A common stock as a conversion of $153,500 of YA Global’s convertible debt. The aggregate principal value of the remaining debentures at September 30, 2010 and December 31, 2009 is $518,100 and $671,600, respectively. These amounts are shown on the balance sheet net of the unamortized portion of the discount on conversion of $1,694 and $23,309, respectively, and imputed interest of $112,312 and $135,819, respectively. This discount is being amortized over the life of the debenture and is being amortized as debt discount on the statement of operations.




12
 Table of Contents




iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





NOTE 6 - DERIVATIVE LIABILITY





In accordance with ASC 815, "Derivatives and Hedging", the conversion feature associated with the YA Global Secured Convertible Debentures represents embedded derivatives. In May 2006, the Company had initially recognized embedded derivatives in the amount of $6,908,078 as a derivative liability in the accompanying condensed consolidated balance sheet, and at September 30, 2010 is measured at its estimated fair value of $601,332.





The estimated fair value of the embedded derivative has been calculated based on a Black-Scholes pricing model using the following assumptions:




At 9/30/10


At 12/31/09Fair market value of stock

$
0.00013


$
0.00020Exercise price

$
0.00012


$
0.00018Dividend yield


0.00
%


0.00
%Risk free interest rate


3.2
%


3.2
%Expected volatility


264.28
%


260.52
%Expected life

3.67 years


4.42 years


Changes in the fair value of the embedded derivatives are calculated at each reporting period and recorded in gain (loss) on revaluation of derivatives in the condensed consolidated statements of operations. During the nine months ended September 30, 2010, there was a change in the fair value of the embedded derivatives, which resulted in a gain of $172,341.





In accordance with ASC 820, the fair market value of the derivatives and warrants are bifurcated from the convertible debentures as a debt discount.  The debt discount is being amortized over the life of the convertible debentures. The consolidated amortization expense on the debt discount on the convertible debentures for the nine months ended September 30, 2010 and 2009 was $45,122 and $104,201, respectively.





NOTE 7 – DUE TO RELATED PARTIES





From time to time, iVoice, Inc. has entered into various loan agreements and employment agreements with Jerome R. Mahoney, President and Chief Executive Officer of the Company. As of September 30, 2010, the balances due to Mr. Mahoney were: a) accrued interest of $5,285 and b) deferred compensation of $459,172. During the year ended December 31, 2009, the loan balance from 2008 of $2,295 was paid off. During the nine months ended September 30, 2010, the Company issued 880,000,000 shares of the Company’s Class A common stock upon conversion of $28,600 of debt. Other amounts due to Mr. Mahoney are convertible into either (i) one Class B common stock share of iVoice, Inc., $.01 par value, for each dollar owed, or (ii) the number of Class A common stock shares of iVoice, Inc. calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to prepay by (y) fifty percent (50%) of the lowest issue price of Series A common stock since the first advance of funds under this Note, whichever the Note holder chooses, or (iii) payment of the principal of the Note, before any repayment of interest.  The Board of Directors of the Company maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the Company.




In August 2005, B Green Innovations had assumed an outstanding promissory demand note in the amount of $190,000 payable to Jerome Mahoney, then, the Non-Executive Chairman of the Board of B Green Innovations.  The note bears interest at the rate of prime plus 2.0% per annum (5.25% at September 30, 2010 and December 31, 2009) on the unpaid balance until paid.  Under the terms of the Promissory Note, at the option of the Note holder, principal and interest can be converted into either (i) one share of Class B Common Stock of B Green Innovations, Inc., par value $.01, for each dollar owed, (ii) the number of shares of Class A Common Stock of B Green Innovations, Inc. calculated by dividing (x) the sum of the principal and interest that the Note holder has requested to have prepaid by (y) eighty percent (80%) of the lowest issue price of Class A Common Stock since the first advance of funds under this Note, or (iii) payment of the principal of this Note, before any repayment of interest. The Board of Directors of B Green Innovations maintains control over the issuance of shares and may decline the request for conversion of the repayment into shares of the B Green Innovations. During the years ended December 31, 2009 and 2008, Mr. Mahoney received shares of Class A common stock and Class B common stock as partial repayment of this loan. As of September 30, 2010 and December 31, 2009, the outstanding balances were $3,003, plus accrued interest $109,906 and $100,692, respectively.




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iVOICE, INC. AND SUBSIDIARIES
 NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)





On August 1, 2004, B Green Innovations entered into a five-year employment agreement with Jerome Mahoney to serve as Non-Executive Chairman of the Board of Directors of B Green Innovations with a base salary of $85,000 for the first year with annual increases based on the Consumer Price Index.  On August 30, 2006 Mr. Mahoney was elected to the position of President and Chief Executive Officer of B Green Innovations and no longer serves as Non-Executive Chairman of the Board of B Green Innovations. On March 9, 2009, the term of the employment agreement between B Green Innovations and Mr. Mahoney, the Company’s CEO, was extended to July 31, 2016.  On March 1, 2010, the consulting agreement between Mr. Mahoney and B Green Innovations wholly owned subsidiary was terminated and his compensation on that agreement was added to his current employment agreement. On June 15, 2010, Mr. Mahoney’s employment agreement was amended to increase the base salary to $195,000 effective July 1, 2010. All other terms of the Employment Agreement shall remain in full force and effect.  A portion of Mr. Mahoney’s compensation shall be deferred until such time that the Board of Directors of B Green Innovations determines that it has sufficient financial resources to pay his compensation in cash. As of September 30, 2010 and December 31, 2009, total deferred compensation due to Mr. Mahoney was $291,500 and $260,248, respectively. The Board of Directors of B Green Innovations has the option to pay Mr. Mahoney’s compensation in the form of Class B Common Stock. Pursuant to the terms of the Class B Common Stock, a holder of Class B Common Stock has the right to convert each share of Class B Common Stock into the number of shares of Class A Common Stock determined by dividing the number of Class B Common Stock being converted by a 20% discount of the lowest price for which the Company had ever issued its Class A Common Stock.





NOTE 8 - COMMON STOCK





Class A Common Stock


Class A common stock consists of 10,000,000,000 shares of authorized common stock with no par value. As of September 30, 2010, 6,265,563,493 shares were issued and outstanding.





Each holder of Class A common stock is entitled to one vote for each share held of record.  Holders of our Class A common stock have no preemptive, subscription, conversion, or redemption rights.  Upon liquidation, dissolution or winding-up, the holders of Class A common stock are entitled to receive our net assets pro rata.  Each holder of Class A common stock is entitled to receive ratably any dividends declared by our board of directors out of funds legally available for the payment of dividends.  The Company has not paid any dividends on its common stock and management does not contemplate doing so in the foreseeable future.  The Company anticipates that any earnings generated from operations will be used to finance growth.





For the nine months ended September 30, 2010:





·
The Company issued 800,000,000 shares of Class A common stock to an Officer of the Company for payment of $28,600 of deferred compensation. The stock was valued at $236,500 and $207,900 was charged to beneficial interest expense.





·
The Company issued 385,576,691 shares of Class A common stock to Meritz and Muenz, LLP for payment of $17,351 accrued legal services.




·
The Company issued 1,598,119,657 shares of Class A common stock to YA Global Investments, LP as repayment of $153,500 of principal on outstanding convertible debentures.




NOTE 9 – INCOME TAXES





The tax effect of temporary differences, primarily net operating loss carryforwards, asset reserves and accrued liabilities give rise to a deferred tax asset. Deferred income taxes are recognized for the tax consequence of such temporary differences at the enacted tax rate expected to be in effect when the differences reverse. Because of the current uncertainty of realizing the benefit of the tax carry forward, a valuation allowance equal to the tax benefit for deferred taxes has been established. The full realization of the tax benefit associated with the carry forward depends predominantly upon the Company's ability to generate taxable income during the carry forward period.




NOTE 10 – SEGMENT DATA
  FASB ASC 280, “Disclosures about Segments of an Enterprise and related information”, establishes standards for reporting information regarding operating segments in annual financial statements and requires selected information of those segments to be presented in interim financial statements. Operating segments are identified as components of an enterprise for which separate discrete financial information is available for evaluation by the chief operating decision maker (the Company’s President and Chief Executive Officer) in making decisions on how to allocate resources and assess performance
  14
 Table of Contents
 
 The tables below present information about reportable segments for the three and nine months ended September 30, 2010 and 2009 for this entity.
 Nine Months Ended September 30, 2010
  “Green” Products


IVR


Corporate/

Reconciling

Items


TotalNet sales

$
122,761


$
20,235


$
-


$
142,996Cost of sales


68,774



184



-



68,958Gross profit


53,989



20,051



-



74,038General and administrative


-



-



976,453



976,453Interest, net


-



-



217,110



217,110Gain on valuation of derivative


-



-



(172,341
)


(172,341
)Amortization of discount on debt


-



-



45,122



45,122Other income


-



-



(272,561
)


(277,561
)Total expenses


-



-



793,783



793,783Income (loss) before taxes

$
53,989


$
20,051


$
(793,783
)

$
(719,745
)
  Nine Months Ended September 30, 2009
  “Green” Products


IVR


Corporate/

Reconciling

Items


TotalNet sales

$
52,636


$
21,333


$
-


$
73,969Cost of sales


34,473



-



-



34,473Gross profit


18,163



21,333



-



39,496General and administrative


-



-



960,351



960,351Interest, net


-



-



265,381



265,381Amortization of debt discount


-



-



104,201



104,201Gain on valuation of derivative


-



-



(24,442
)


(24,442
)Other income


-



-



(103,051
)


(103,051
)-



-



1,202,440



1,202,440Income (loss) before taxes

$
18,163


$
21,333


$
(1,202,440
)

$
(1,162,944
)
 
 15
 Table of Contents
  Three Months Ended September 30, 2010
  “Green” Products


IVR


Corporate/

Reconciling

Items


TotalNet sales

$
35,516


$
7,841


$
-


$
43,351Cost of sales


22,288



-



-



22,288Gross profit


13,228



7,841



-



21,069General and administrative


-



-



311,747



311,747Interest, net


-



-



60,952



60,952Amortization of debt discount










15,041



15,041Gain on valuation of derivative










31,534



31,534Other income


-



-



(6,600
)


(6,600
)-



-



349,606



349,606Income (loss) before taxes

$
13,228


$
7,841


$
(349,606
)

$
(328,537
)
  Three Months Ended September 30, 2009
  “Green” Products


IVR


Corporate/

Reconciling

Items


TotalNet sales

$
26,699


$
2,022


$
-


$
28,721Cost of sales


13,934



-



-



13,934Gross profit


12,765



2,022



-



14,787General and administrative


-



-



303,248



303,248Interest, net


-



-



179,127



179,127Amortization of debt discount


-



-



34,734



34,734Other income










(19,892
)


(19,892
)Gain on valuation of derivative


-



-



(24,009
)


(24,009
)-



-



473,208



473,208Income (loss) before taxes

$
12,765


$
2,022


$
(473,208
)

$
(458,421
)




16
 Table of Contents




ITEM 2 - MANAGEMENT’S DISCUSSIONAND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS





Some information included in this Quarterly Report on Form 10-Q and other materials filed by us with the Securities and Exchange Commission, or the SEC, 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. Such forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future and, accordingly, such results may differ materially from those expressed in any forward-looking statements made by or on behalf of us. For a discussion of material risks and uncertainties that the Company faces see the discussion in the Form 10−K for the fiscal year ended December 31, 2009 entitled “Risk Factors”.  This discussion and analysis of financial condition and plan of operations should be read in conjunction with our Condensed Consolidated Financial Statements included herein.





Overview





Since 2005, the Company has transitioned itself into a company focused on the development and licensing of proprietary technologies. As an example, in March 2006 we sold four of our voice activated product and item locator patents to Lamson Holdings LLC for net proceeds of $136,000 and on December 6, 2007 we were issued Patent 7,305,344 for a patent for Methodology for Talking Consumer Products with Voice Instructions via Wireless Technology. On January 8, 2008, the Company entered into a Technology Transfer Agreement with GlynnTech to market its recently issued patent. The Company also continues to search for potential merger candidates with or without compatible technology and products, which management feels may make financing more appealing to potential investors.




In 2008 and 2010, the iVoice has acquired an aggregate of 2,663 shares of B Green Innovations Series A 3% Convertible Preferred Stock for a total investment of $2,663,210.  These shares are convertible by iVoice into B Green Innovations Class A common stock only with the consent of B Green Innovations. iVoice is limited to holding up to 9.99% of the outstanding shares of B Green Innovations. iVoice is the primary beneficiary of B Green Innovations, and as such, according to ASC 810 “Consolidation”, iVoice continued to consolidate the results of operations of B Green Innovations with those of iVoice and its other subsidiary.




Results of Operations





Nine months ended September 30, 2010 compared to nine months ended September 30, 2009





Total sales for the nine months ended September 30, 2010 and 2009 were $142,996 and $73,969, respectively. The increase in sales of $69,027 is primarily due to the increase in product sales of green products offset by a small decrease in IVR maintenance revenues. Declines in the IVR maintenance revenues are due to the general decline in the economies of our customers. Sales of the new “green” products are through distributors and by direct sales to the B Green customers.




Total cost of sales for the nine months ended September 30, 2010 and 2009 were $68,958 and $34,473, respectively. The cost of sales represents the direct material and labor costs for the anti-vibration products produced by B Green Innovations’ out-sourced manufacturer. The increase in cost of sales of $34,485 is attributed to the increase in sales of “green” products.




Total operating expenses for the nine months ended September 30, 2010 and 2009, were $976,453 and $960,351, respectively, for an increase of $16,102.  The increase is primarily attributable to the expenses of B Green for the staffing and roll-out of the new “green” products offset by small decreases in insurance and other overhead and office expenses.




Total other income (expense) for the nine months ended September 30, 2010 was an income of $182,670 as compared to an expense of $242,089 for the nine months ended September 30, 2010. This change was primarily the result of an increase in other income, which was comprised mostly of a $232,491 gain on sale of tax losses in the NJEDA program, an increase in the gain on revaluation of derivatives and lower amortization of debt discount.




The net losses for the nine months ending September 30, 2010 and 2009 were $719,745 and $1,162,944, respectively. The changes were the result of the factors discussed above.




The net loss attributable to non-controlling interest for the nine months ended September 30, 2010 and 2009 were $135,396 and $319,930, respectively reflect the non-controlling interest’s portion of the operating losses recorded by B Green Innovations, after effect of elimination of intra-company transactions, which is included in our consolidation for the nine months ended September 30, 2010 and 2009, respectively.




17
 Table of Contents





Three months ended September 30, 2010 compared to three months ended September 30, 2009





Total sales for the three months ended September 30, 2010 and 2009 were $43,357 and $28,721, respectively. The increase in sales of $14,636 is primarily due to the increase in product sales of green products and a small increase in IVR maintenance revenues for the period. Normally the IVR maintenance revenues have been declining due to the general decline in the economies of our customers. But, increases this period are only temporary due to receipts that were previously thought to be uncollectible. Sales of the new “green” products are through distributors and by direct sales to the B Green customers.




Total cost of sales for the three months ended September 30, 2010 and 2009 were $22,288 and $13,934, respectively. The cost or sales represent the direct material and labor costs for the anti-vibration products produced by B Green Innovations’ out-sourced manufacturer. The increase in cost of sales of $8.354 is attributed to the increase in sales of “green” products.




Total operating expenses for the three months ended September 30, 2010 and 2009, were $311,747 and $303,248, respectively, for an increase of $8,499.  The increase is primarily attributable to the expenses of B Green for the staffing and roll-out of the new “green” products offset by small decreases in insurance and other overhead and office expenses.




Total other income (expense) for the three months ended September 30, 2010 was an expense of $37,859 as compared to an expense of $169,960 for the three months ended September 30, 2009. This decrease is primarily attributed to lower interest expense.




The net losses for the three months ending September 30, 2010 and 2009 were $328,537 and $458,421, respectively. The changes were the result of the factors discussed above.





The net loss attributable to non-controlling interest for the three months ended September 30, 2010 and 2009 were $120,169 and $146,590, respectively reflect the non-controlling interest’s portion of the operating losses recorded by B Green Innovations, after effect of elimination of intra-company transactions, which is included in our consolidation for the three months ended September 30, 2010 and 2009, respectively.




Liquidity and Capital Resources





We are currently seeking additional operating income opportunities through potential acquisitions or investments. Such acquisitions or investments may consume cash reserves or require additional cash or equity. Our working capital and additional funding requirements will depend upon numerous factors, including: (i) strategic acquisitions or investments; (ii) an increase to current Company personnel; (iii) the level of resources that we devote to sales and marketing capabilities; (iv) technological advances; and (v) the activities of competitors.





During the nine months ended September 30, 2010 and the year ended December 31, 2009, we had incurred consolidated losses from operations of $902,415 and $1,310,096, respectively, and had cash flow deficiencies from operations of $232,945 and $1,141,998, respectively.  These matters raise substantial doubt about our ability to generate cash flows internally through our current operating activities sufficient enough that its existence can be sustained without the need for external financing. Our primary need for cash is to fund our ongoing operations until such time that we can identify sales opportunities for new products or identify strategic acquisitions that generate enough revenue to fund operations.  There can be no assurance as to the receipt or timing of revenues from operations.  We anticipate that our operations of the iVoice parent will require at least $500,000 for the next 12 months.  These expenses are anticipated to consist of the following: payroll and benefits of $200,000, occupancy costs of $60,000, professional fees of $100,000, business insurance of $70,000 and miscellaneous administrative expenses of $70,000.  We expect to fund these obligations from cash on hand or otherwise from the sale of equity or debt securities.  We believe that we have sufficient funds on-hand to fund our operations for at least 12 months.





During the nine months ended September 30, 2010, the Company had a net decrease in cash of $209,501. The Company’s principal sources and uses of funds in the nine months ended September 30, 2010 were as follows:




Cash flows from operating activities.  The Company used $232,945 in cash from operations in the nine months ended September 30, 2010, a decrease of $860,931 compared to $1,093,876 in cash used in operations in the nine months ended September 30, 2009.  This decrease was primarily attributed to the lower cash loss from operations, the increase of current liabilities and related party accounts and a decrease in prepaid and other assets.




18
 Table of Contents





Cash flows from investing activities.  The Company had a net increase in funds from investing activities of $23,444 for the nine months ended September 30, 2009. This was primarily due to net proceeds from the sales of securities of $37,581 offset by spending for property and equipment. The Company had a net increase in funds from investing activities of $15,690 for the nine months ended September 30, 2009. This was primarily due to net proceeds from the sales of securities of $21,083 offset by spending for trademarks and other intangibles.




Below is a description of iVoice’s principal sources of funding:





On May 11, 2006 we issued to YA Global a $5,544,110 secured convertible debenture due on May 11, 2008 with an interest of 7.5%. This debenture replaced a promissory note with a principal balance of $5,000,000 and $544,110 of accrued interest due to YA Global from June 15, 2005. On May 12, 2008, the remaining principal balance of $4,796,510 was repaid in cash from the proceeds of the Smith Barney short term loans.




On May 25, 2006, we issued to YA Global a $1,250,000 secured convertible debenture due on May 25, 2008 with an interest of 7.5% per annum pursuant to a Securities Purchase Agreement entered into between us and YA Global. On February 21, 2008, this debenture was amended to extend the maturity date until May 25, 2011 and to raise the interest rate to 15% per annum. On November 12, 2009, the Company and YA Global reached a settlement agreement whereby the Company made a cash payment of $500,000 and issued an Amended and Restated convertible debenture for the sum of $671,600.




On March 7, 2008 and May 8, 2008, the Company received proceeds from an Express Creditline Loan from Smith Barney that were collateralized by the proceeds available from the sales of the auction rate preferred shares. The interest rate charged on the loan is tied to the dividend rates earned on the auction rate preferred shares. When an auction rate preferred shares were sold in October 2008, a portion of the proceeds is applied to pay down the short term loan and the balance was deposited into interest bearing savings account at our primary banking center.




We can redeem a portion or all amounts outstanding under the YA Global Debentures at any time upon three business days advanced written notice.  A 20% redemption premium on the principal amount being redeemed is required. YA Global may, at its discretion, convert the outstanding principal and accrued interest, in whole or in part, into a number of shares of our Class A Common Stock equal to the quotient obtained by dividing (x) the outstanding amount of the YA Global Debentures to be converted by (y) 90% of the lowest closing bid price of our shares of Class A Common Stock during the three (3) trading days immediately preceding the conversion date.




We cannot predict the actual number of shares of Class A Common Stock that will be issued pursuant to the YA Global Debentures, in part, because the conversion price of the YA Global Debentures will fluctuate based on prevailing market prices.  If we are unable to issue enough shares to meet our obligations, then YA Global could request cash payments, which could have a material impact on our long-term growth strategy.




There is no assurance that the future funding, if any, offered by YA Global or from other sources will enable us to raise the requisite capital needed to implement our long-term growth strategy.  Current economic and market conditions have made it very difficult to raise required capital for us to implement our business plan.




Off Balance Sheet Arrangements





During the nine months ended September 30, 2010, we did not engage in any material off-balance sheet activities nor have any relationships or arrangements with unconsolidated entities established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities nor do we have any commitment or intent to provide additional funding to any such entities.




19
 Table of Contents





Forward Looking Statements - Cautionary Factors





Certain information included in this Form 10-Q and other materials filed or to be filed by us with the Securities and Exchange Commission (as well as information included in oral or written statements made by us or on our behalf), may contain forward-looking statements about our current and expected performance trends, growth plans, business goals and other matters.  These statements may be contained in our filings with the Securities and Exchange Commission, in our press releases, in other written communications, and in oral statements made by or with the approval of one of our authorized officers.  Information set forth in this discussion and analysis contains various “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.  The Private Securities Litigation Reform Act of 1995 (the “Act”) provides certain “safe harbor” provisions for forward-looking statements.  The reader is cautioned that such forward-looking statements are based on information available at the time and/or management’s good faith belief with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in the statements.  Forward-looking statements speak only as of the date the statement was made.  We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information.  Forward-looking statements are typically identified by the use of terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “predict,” “project,” “should,” “will,” and similar words, although some forward-looking statements are expressed differently.  Although we believe that the expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such expectations will prove to be correct.





ITEM 4T -CONTROLS AND PROCEDURES





Evaluation of Disclosure Controls and Procedures
 Management of the Company has evaluated, with the participation of the Chief Executive Officer and Chief Financial Officer of the Company, the effectiveness of the Company's disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company had concluded that the Company's disclosure controls and procedures as of the period covered by this Quarterly Report on Form 10-Q were not effective for the following reasons:
 
 a)           The Company has limited segregation of duties amongst its employees with respect to the Company's control activities. This deficiency is the result of the Company's limited number of employees. This deficiency may affect management's ability to determine if errors or inappropriate actions have taken place. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible changes in our disclosure controls and procedures.
 
 b)           The Company's has a limited number of external board members. This deficiency may give the impression to the investors that the board is not independent from management. Management and the Board of Directors are required to apply their judgment in evaluating the cost-benefit relationship of possible changes in the organization of the Board of Directors.
 
 Changes in internal control over financial reporting.
 
 Management of the Company has also evaluated, with the participation of the Chief Executive Officer of the Company, any change in the Company’s internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q and determined that there was no change in the Company’s internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.


20
 Table of Contents




PART II – OTHER INFORMATION





ITEM 5                    OTHER INFORMATION




(b)
There were no material changes to the procedures by which security holders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of paragraph (c)(2)(iv) or paragraph (c)(3) of §229.407 of the regulations promulgated by the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934, as amended.





ITEM 6                          EXHIBITS





31.1
Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





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





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SIGNATURES





Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.




iVoice, Inc.Date: April 4, 2011
By:
/s/Jerome R. MahoneyJerome R. MahoneyPresident, Chief Executive Officerand Principal Financial Officer




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Index of Exhibits




31.1
Certification of the Chief Executive Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.





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