UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549









FORM 10-Q






X
QUARTERLY REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended March 31, 2009__
TRANSITION REPORT PURSUANT TO SECTION 13 OR15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File No. 333-120507





SPEECHSWITCH, INC.


(Exact name of the Registrant as specified in Charter)




New Jersey
20-1862816(State of Incorporation)
(I.R.S. Employer ID Number)6 Minneakoning Road, Flemington, New Jersey
08822(Address of Principal Executive Offices)
(Zip Code)




Registrant’s Telephone No. including Area Code: 908-788-0077





Securities registered under 12(b) of the Exchange Act: None





Securities registered under Section 12(g) of the Exchange Act: None





Indicateby checkmark 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.YesNo _X_





Indicate by check mark whether the registrant has submitted electronically and posted on its 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).YesNo_X_





Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Act).  Yes  No _X_






Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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. (Check one):




Large accelerated filer o       Accelerated filer o     Non-accelerated filer o    Smaller reporting company [x]




(Do not check if a smaller reporting company)





Indicate the number of shares outstanding of the issuer's common stock, as of the latest practical date:


1,400,096,193 shares of Class A Common stock, no par value as of March 31, 2009.











SPEECHSWITCH, INC.


TABLEOF CONTENTS




PAGEPart I – Financial InformationItem 1.
Condensed Financial Statements:Condensed Balance Sheets –March 31, 2009 (Unaudited) and December 31, 2008 (Audited)
1Condensed Statements of Operations -Three months ended March 31, 2009 and 2008 (Unaudited)
2Condensed Statements of Cash Flows -Three months ended March 31, 2009 and 2008 (Unaudited)
3-4Notes to Condensed Financial Statements (Unaudited)
5-18Item 2.
Management’s Discussion and Analysis or of the Results of Operations andFinancial Position
19-23Item 4T.
Controls and Procedures
23Part II – Other InformationItem 5.
Other Information
24Item 6.
Exhibits
24









Table of Contents








Item 1 - Financial Statements


SPEECHSWITCH, INC.CONDENSED BALANCE SHEETSMarch 31,


December 31,ASSETS

2009


2008(Unaudited)


(Audited)Current assets:Cash and cash equivalents

$
968


$
8,371Accounts receivable, net of allowance for doubtful accounts of $2,862

at  March 31, 2009 and December 31, 2007


617



617Prepaid expenses


0



904Total current assets


1,585



9,892Intangible assets, net


1,464



2,315Total assets

$
3,049


$
12,207LIABILITIES & STOCKHOLDERS’ DEFICITCurrent liabilities:Accounts payable and accrued expenses

$
695,360


$
682,366Due to related parties


319,910



319,910Deferred maintenance contracts


5,030



3,786Note payable to related parties


71,756



71,756Convertible promissory note, net of unamortized debt discount of $62,819

and $66,759, respectively


17,117



13,177Convertible debenture, net of unamortized debt discount of $305,993

and $381,650, respectively


615,348



539,690Derivative liabilities


647,341



935,451Total current liabilities


2,371,862



2,566,136Stockholders' deficit:Preferred stock, $1.00 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;

1,400,096,193shares issued and outstanding


806,814



806,814Class B - $.01 par value; authorized 50,000,000

Shares; no shares issued and outstanding


-



-Class C - $.01 par value; authorized 20,000,000

Shares; no shares issued and outstanding


-



-Additional paid-in capital


2,119,085



2,119,085Accumulated deficit


(5,294,712
)


(5,479,828
)Total stockholders' deficit


(2,368,813
)


(2,553,929
)Total liabilities and stockholders' deficit

$
3,049


$
12,207








See accompanying notes to condensed financial statements






1
 Table of Contents




SPEECHSWITCH, INC.


CONDENSED STATEMENTS OF OPERATIONS(Unaudited)Three Months EndedMarch 31, 2009


March 31, 2008Net sales

$
11,944


$
6,036Cost of sales


3,385



993Gross margin


8,559



5,043Operating expenses:Selling and marketing expenses


--



21,615General and administrative expenses


8,188



72,186Depreciation and amortization


851



851Engineering, research, & development


5,875



22,245Total operating expenses


14,914



116,897Loss from operations


(6,355
)


(111,854
)Other income (expense):Interest income


--



910Other income


225



--Interest expense


(17,267
)


(64,165
)Amortization of debt discount


(79,597
)


(108,414
)Gain on valuation of derivative


288,110



1,465,377Total other income (expense)


191,471



1,293,708Income from operations before

Income taxes


185,116



1,181,854





Provision for income taxes


-



-Net income attributable to common

Shares

$
185,116


$
1,181,854Basic income per common share

$
0.00


$
0.00Diluted income per common share

$
0.00


$
0.00Weighted average shares outstanding -basic


1,400,096,193



639,241,481diluted


10,000,000,000



10,000,000,000





See accompanying notes to condensed financial statements






2
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SPEECHSWITCH, INC.


CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)





Three months EndedMarch 31, 2009


March 31, 2008Cash flows from operating activities:Net income

$
185,116


$
1,181,854Adjustments to reconcile net income to net

cash used in operating activities:Amortization of intangibles


851



851Gain on valuation of derivative


(288,110
)


(1,465,377
)Amortization of debt discount


79,597



108,414Beneficial interest on conversion of debt


-



45,000Changes in assets and liabilities:Decrease in accounts receivable


-



5,400Decrease in prepaid expenses


904



6,708Increase in accounts payable and accrued liabilities


12,995



20,277Increase in amounts due to related parties


-



23,107Increase (decrease) in deferred maintenance contracts


1,244



(1,016
)Net cash (used in) operating activities


(7,403
)


(74,782
)Cash flows from financing activities:Issuance costs associated with equity financing


-



(6,290
)Issuance of common stock through equity financing


-



36,355Net cash provided by financing activities


-



30,065Net (decrease) in cash and cash equivalents


(7,403
)


(44,717
)Cash and cash equivalents at beginning of period


8,371



185,581Cash and cash equivalents at end of period

$
968


$
140,864SUPPLEMENTAL CASH FLOW INFORMATION:Taxes paid

$
-


$
-Interest paid

$
-


$
-Non-Cash TransactionsAccounts Payable converted to Convertible Promissory Note

$
-


$
50,562See accompanying notes to condensed financial statements








3
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SPEECHSWITCH, INC.CONDENSED STATEMENTS OF CASH FLOWS (Continued)(Unaudited)





Supplemental Schedule of Non-Cash Financing Activities:





For the three months ended March 31, 2008:





a)
The Company issued 190,466,666 shares of Class A common stock for repayment of convertible debenture in lieu of cash, valued at $48,861. The difference in the market value and the reduction in debt of $32,100 was charged to beneficial interest in the amount of $16,761.





b)
The Company issued 81,000,000 shares of Class A common stock with a fair market value of $37,356 to an officer to reduce the promissory note by $12,312. The difference in the market value and the reduction in debt was charged to beneficial interest in the amount of $25,044.





c)
The Company issued 71,000,000 shares of Class A common stock with a fair market value of $8,875 to iVoice, Inc. to reduce the convertible promissory note by $5,680. The difference in the market value and the reduction in debt was charged to beneficial interest in the amount of $3,195.





d)
The Company converted $50,562 of accounts payable into a convertible promissory note.



























































See accompanying notes to condensed financial statements








4
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 SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





Note 1                      Background





SpeechSwitch, Inc. (“SpeechSwitch” or “Company”) was incorporated under the laws of New Jersey on November 10, 2004 as a wholly owned subsidiary of iVoice, Inc. ("iVoice").  The Company received by assignment all of the interests in and rights and title to, and assumed all of the obligations of, all of the agreements, contracts, understandings and other instruments of iVoice Technology 3, Inc., a Nevada corporation and affiliate of the Company.  When we refer to or describe any agreement, contract or other written instrument of the Company in these notes, we may also be referring to an agreement, contract or other written instrument that had been entered into by iVoice Technology 3 and thereafter assigned to the Company.





In September 2004, the Board of Directors of iVoice, Inc., the former parent of the Company, resolved to pursue the separation of iVoice software business into three publicly owned companies.  SpeechSwitch intends to continue to develop, market and license the automated speech attendant software, which runs on industry-standard hardware and performs speech recognition.





The Spin-off transaction was accomplished, on August 5, 2005, by the assignment, contribution and conveyance of certain intellectual property, representing the software codes of speech recognition, and certain accrued liabilities and related party debt into SpeechSwitch (the "Spin-off").  The Class A Common Stock shares of the Company were distributed to iVoice shareholders in the form of a taxable special dividend distribution.





Note 2                      Business Operations





The Company develops, markets and licenses the lines of business relating to iVoice's Speech- Enabled Auto Attendant, Name Dialer and Speech Software Developers Kit (Speech SDK) products, which were developed by iVoice. Speech recognition is used to recognize what a person says, and through the use of natural language understanding, derives the meaning of what is said. The Company also offers a range of support services that enable its customers and channel partners to develop voice-driven applications that use the Company’s software. Our products are designed to be “people oriented”, with features that can be readily used with out special training and manuals.  Our product line of Speech SDK, incorporate this philosophy.  SpeechSwitch markets, promotes and sells its speech-enabled products primarily through telephony reseller channels.  The Company also sells direct to end users in geographic locations where an authorized reseller does not exist.  On direct sales orders, the Company is able to achieve greater profit margins through higher direct selling prices.





The Company employs one full-time employee and one part-time employee.  SpeechSwitch may seek to expand its operations through additional sales and marketing activity and the acquisition of additional businesses.  Any potential acquired additional businesses may be outside the current field of operations of SpeechSwitch.  SpeechSwitch may not be able to identify, successfully integrate or profitably manage any such businesses or operations.  Currently, SpeechSwitch has no plans, proposals or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.








5
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





Note 3                      Going Concern





The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates continuation of the Company as a going concern. The Company relies on iVoice, Inc. for administrative and other services.





As of March 31, 2009, the Company had a negative cash flow from operations and negative working capital. Although the Company reported a net profit for the three months ending March 31, 2009, the profit was attributable to the fluctuation in the market price of its stock, which was reflected in the substantial gain in the valuation of the derivative. These matters 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.





Management plans on developing new products and increasing their sales to existing customers, to achieve profitability and to generate a positive cash flow. However, these plans are dependent upon obtaining additional capital. 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.





Note 4                      Summary of Significant Accounting Policies





a)    Basis of Presentation





The accompanying condensed unaudited interim financial statements included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). The condensed financial statements and notes are presented as permitted on Form 10-Q and do not contain information included in the Company's annual statements and notes. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed financial statements be read in conjunction with the December 31, 2008 audited financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year. These results are not necessarily indicative of the results to be expected for the full year.





These condensed unaudited financial statements reflect all adjustments, including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the operations and cash flows for the periods presented.











6
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





b)    Use of Estimates





The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.





c)    Revenue Recognition





The Company derives its revenues from the licensing of its software product and optional customer support (maintenance) service. The Company's standard license agreement provides for a one-time fee for use of the Company's product in perpetuity for each computer or CPU in which the software will reside. The Company's software application is fully functional upon delivery and implementation and does not require any significant modification or alteration. The Company also offers customers an optional annual software maintenance and support agreement for the subsequent one-year periods. Such maintenance and support services are free for the first year the product is licensed and is considered the warranty period. The software maintenance and support agreement provides free software updates, if any, and technical support the customer may need in deploying or changing the configuration of the software. Generally, the Company does not license its software in multiple element arrangements whereby the customer purchases a combination of software and maintenance. In a typical arrangement, software maintenance services are sold separately from the software product; are not considered essential to the functionality of the software and are purchased at the customer's option upon the completion of the first year licensed.





The Company does not offer any special payment terms or significant discount pricing.  Normal and customary payment terms require payment for the software license fees when the product is shipped.  Payment for software maintenance is due prior to the commencement of the maintenance period.  It is also the Company's policy to not provide customers the right to refund any portion of its license fees.  With respect to the sale of software license fees, the Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended, and generally recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists generally evidenced by a signed, written purchase order from the customer, (2) delivery of the software product on Compact Disk (CD) or other means to the customer has occurred, (3) the perpetual license fee is fixed or determinable and (4) collectibility, which is assessed on a customer-by-customer basis, is probable.




With respect to customer support services, upon the completion of one year from the date of sale, considered to be the warranty period, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods.  Sales of purchased maintenance and support agreements are recorded as deferred revenue and recognized over the respective terms of the agreements.




Due to the nature of the business and one-time contracts, it is unlikely that any one customer will impact revenues in future periods.







7
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008




d)    Product Warranties




The Company estimates its warranty costs based on historical warranty claims experience in estimating potential warranty claims. Due to the limited sales of the Company's products, management has determined that warranty costs are immaterial and has not included an accrual for potential warranty claims. Presently, costs related to warranty coverage are expensed as incurred. Warranty claims are reviewed quarterly to verify that warranty liabilities properly reflect any remaining obligation based on the anticipated expenditures over the balance of the obligation period.





e)    Research and Development Costs





Research and development costs are charged to expense as incurred.





f)    Cash and Cash Equivalents





The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. There were no cash equivalents at March 31, 2009 and December 31, 2008.





g)    Reclassifications





Certain prior year amounts have been reclassified to conform to the current year presentation. The reclassifications have had no effect on the results of operations or cash flows for the period ended March 31, 2008.




h)     Intangible Assets





In May and December 2003, the Company was issued two patents by the U.S. Patent and Trademark Office for its Speech-Enabled Automatic Telephone Dialer.  The patents expire 20 years from the date of the original patent filings.  All accumulated costs incurred with respect to the Company's patent filings have been capitalized.  Costs related specifically to the awarded patents are now being amortized on a straight basis over the life of the patents. In accordance with FAS 142, goodwill and indefinite-lived intangible assets are reviewed for impairment at least annually, or whenever events or changes in circumstances indicate the carrying amounts of the assets may be impaired.  The Company has elected to perform the impairment review during the fourth quarter of each year, in conjunction with the annual planning cycle.





i)    Income Taxes





The Company accounts for income taxes under the Financial Accounting Standards Board ("FASB") of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes" ("Statement 109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.







8
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008




j)    Derivative Liabilities




The Company accounts for its embedded conversion features in its convertible debentures in accordance with SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities", which requires a periodic valuation of their fair value and a corresponding recognition of liabilities associated with such derivatives, and EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock. The recognition of derivative liabilities related to the issuance of convertible debt is applied first to the proceeds of such issuance as a debt discount, at the date of issuance, and the excess of derivative liabilities over the proceeds is recognized as “Loss on Valuation of Derivative” in other expense in the accompanying financial statements. Any subsequent increase or decrease in the fair value of the derivative liabilities is recognized as “Other expense” or “Other income”, respectively.




k)    Fair Value of Instruments




The carrying amount reported in the condensed balance sheet for cash and cash equivalents, deposits, prepaid expenses, accounts payable, and accrued expenses approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount reported for notes payable approximates fair value because, in general, the interest on the underlying instruments fluctuates with market rates.





l)     Concentrations of Credit Risk





Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash. As of March 31, 2009, the Company believes it has no significant risk related to its concentration within its accounts receivable.





The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $250,000. The uninsured cash balances at March 31, 2009 and December 31, 2008 were $0.




Note 5                      Income (Loss) Per Share





SFAS No. 128, "Earnings Per Share" requires presentation of basic earnings per share ("basic EPS") and diluted earnings per share ("diluted EPS").





The Company’s basic and diluted income per common share is based on net income for the relevant period, divided by the weighted average number of common shares outstanding during the period.  Diluted income per common share is based on net income, divided by the weighted average number of common shares outstanding during the period, including common share equivalents, such as outstanding stock options. A computation of diluted loss per share would not assume conversion, exercise or contingent exercise of securities due to the beneficial conversion of related party accounts as this would be anti-dilutive.




Three Months

Ended


Three Months

EndedMarch 31, 2009


March 31, 2008Basic net income per share computation:Net income attributable to common stockholders

$
185,116


$
1,181,854Weighted-average common shares outstanding


1,400,096,193



639,241,481Basic net income per share attributable to

common stockholders

$
0.00


$
0.00




9
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008






Three Months

Ended


Three Months

EndedMarch 31, 2009


March 31, 2008Diluted net income per share computationNet income attributable to common stockholders

$
185,116


$
1,181,854Weighted-average common shares outstanding


1,400,096,193



639,241,481Incremental shares attributable to the assumed conversion of

Convertible debenture and convertible promissory note


8,599,903,807



9,360,758,519Total adjusted weighted-average shares


10,000,000,000



10,000,000,000Diluted net income per share attributable to

common stockholders

$
0.00


$
0.00





The Company had common stock equivalents in excess of its authorized capital at March 31, 2009 and 2008, so the maximum authorized shares of 10,000,000,000 are shown for diluted earnings per common share calculations. The Company had common stock equivalents of 11,258,334,655 at March 31, 2009.





Note 6                      Intangible Assets





Intangible assets consist of accumulated costs incurred with respect to the Company’s patent filings originally paid for by iVoice for $24,000 in May and December 2003. These assets were valued at $16,800 at the date of the spin-off from iVoice, Inc.  Additional filing costs of $225 were capitalized on August 26, 2005. These assets are reflected at cost, net of accumulated amortization of $15,561, at March 31, 2009.





Note 7                      Income Taxes





Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company's assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company's tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.





At March 31, 2009 and December 31, 2008 deferred tax assets consist of the following:









March 31, 2009



December 31, 2008Deferred tax assets

$
606,000


$
598,000Less: Valuation Allowance


(606,000
)


(598,000
)Net deferred tax assets

$
-0-


$
-0-







At March 31, 2009 and December 31, 2008, the Company had federal net operating loss carry forwards in the approximate amounts of $1,780,000 and $1,760,000, respectively, available to offset future taxable income. The Company established valuation allowances equal to the full amount of the deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.





Note 8                      Related Party Transactions





SpeechSwitch had entered into a temporary administrative services agreement with iVoice in 2004.  The administrative services agreement continued on a month-to-month basis until December 31, 2008 at which point the agreements were suspended by mutual consent of the parties. See note 9.






10
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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





The Company also assumed an outstanding promissory note in the amount of $190,000 payable to Jerry Mahoney, President and Chief Executive Officer of iVoice and was previously the non-executive Chairman of the Board of Directors of SpeechSwitch.  This amount is related to funds loaned to iVoice and is unrelated to the operations of SpeechSwitch.  The note will bear interest at the rate of Prime plus 2.0% per annum (7.0% at March 31, 2009) on the unpaid balance until paid.  Under the terms of the Promissory Note, at the option of the Promissory Note holder, principal and interest can be converted into either (i) one share of SpeechSwitch Class B Common Stock, par value $.01 per share, for each dollar owed, (ii) the number of shares of SpeechSwitch Class A Common Stock 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 Promissory 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. At various times Mr. Mahoney has drawn down the outstanding principal by either receiving stock or cash repayments. As of March 31, 2009, the outstanding balance due to Mr. Mahoney is $71,756 plus accrued interest of $93,985.  On February 7, 2008, the Company announced that it had accepted the resignation of Mr. Jerry Mahoney as Non-Executive Chairman of the Company.





SpeechSwitch entered into a five-year employment agreement with Mr. Mahoney as of August 1, 2004.  Mr. Mahoney will serve as SpeechSwitch’s Non-Executive Chairman of the Board for a term of five years.  As consideration, SpeechSwitch agreed to pay Mr. Mahoney the sum of $85,000 the first year with an annual increase based on the Consumer Price Index every year thereafter.  SpeechSwitch also agreed to pay Mr. Mahoney a bonus for each merger or acquisition completed by the Company equal to six percent (6%) of the gross consideration paid or received by SpeechSwitch in a merger or acquisition completed by the Company during the term of the agreement.  This bonus would be payable in the form of cash, debt, or shares of our Class B Common Stock at the option of Mr. Mahoney. On February 7, 2008, the Company announced that it had accepted the resignation of Mr. Jerry Mahoney as Non-Executive Chairman of the Company. For the one month ended January 31, 2008, Mr. Mahoney deferred $7,702 of his compensation. Effective February 1, 2008, Mr. Mahoney entered into a consulting arrangement with the Company and Mr. Mahoney will be paid $92,428 annually with an annual increase based upon the Consumer Price Index. Mr. Mahoney agrees to accept compensation in the form of Class B common stock in lieu of cash for as long as the Board of Directors decides in their sole discretion that the Company does not have the financial resources to pay Mr. Mahoney in cash. As of March 31, 2009 total deferred compensation and consulting fees due Mr. Mahoney was $319,910.





SpeechSwitch entered into an employment agreement with Bruce Knef as of November 8, 2004.  Pursuant to the terms of the employment agreement, as amended on November 22, 2006, Mr. Knef will serve as SpeechSwitch’s President and Chief Executive Officer until November 7, 2007. Mr. Knef’s employment agreement expired in November 2007, but he continues to work for the Company. As consideration, SpeechSwitch agreed to pay Mr. Knef a base salary of $85,000 during the term.  In addition, SpeechSwitch agreed to pay Mr. Knef incentive compensation based on the amount of total revenues collected by SpeechSwitch.  If SpeechSwitch records and collects total revenues in an amount greater than $300,000 but less than $2,000,000, Mr. Knef will receive a bonus equal to 7.5% of the total revenues of the Company.  If SpeechSwitch records and collects total revenues in an amount greater than $2,000,000, in addition to the 7.5% bonus, Mr. Knef will also receive a bonus equal to 3.5% of the total revenues of the Company in excess of $2,000,000.  However, if the Company’s pre-tax profit margin for the year is less than 35%, Mr. Knef’s aggregate bonus will be reduced by 35%.






11
 Table of Contents


SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008




Note 9                    Convertible Promissory Note and Derivative Liability





SpeechSwitch had entered into a temporary administrative services agreement with iVoice in 2004.  The administrative services agreement continued on a month-to-month basis until December 31, 2008 at which point the agreements were suspended by mutual consent of the parties.





In March 2008, the administrative services agreement was amended to provide that accrued and unpaid administrative services shall be segregated and converted into a Convertible Promissory Note. The principal and interest shall be due and payable as follows: (a) interest shall accrue monthly on the unpaid balance and shall be paid annually, and (b) principal shall be payable on demand.





OnMarch 5, 2008, the Company converted its outstanding accounts payable to iVoice, Inc. for unpaid administrative services in the amount of $50,652 into a convertible promissory note at the rate of prime plus 1 percent per annum. Additional amounts of $42,209 were added to this note based on any unpaid administrative services, and will accrue interest at the above specified rate from date of advance until paid.





iVoice, Inc. may elect payment of the principal and/or interest, at the its sole discretion, owed pursuant to this Note by requiring the Company to issue to iVoice, or his assigns either: (i) one Class B common stock share of the Company par value $.01 per share, for each dollar owed, (ii) the number of Class A common stock shares of the Company calculated by dividing (x) the sum of the principal and interest that the Note holder has decided to have paid 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.





At various times during 2008, the Company had issued shares of Class A common stock to reduce the promissory not in the amount of $12,925. As of March 31, 2009, the outstanding balance on the Convertible Promissory Note was $79,936 plus accrued interest of $3,618.





Unless otherwise provided, this Note may be prepaid in full or in part at any time without penalty or premium. Partial prepayments shall be applied to installments due in reverse order of their maturity.





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.





The promissory note has a security interest in substantially all of the assets of the Company. However, the Company's interests are second to that of YA Global Investments (f/k/a/ Cornell Capital Partners) (see Notes 10 and 11).





In accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”, (“FASB 133”), the Company determined that the conversion feature of the Promissory Note met the criteria of an embedded derivative, and therefore the conversion feature of this Promissory Note needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 5 years; and volatility: 263.04%. The accounting guidance instructs that the conversion options are a derivative liability. As such, at March 5, 2008 the Company recorded the conversion options as a liability, recorded a debt discount of $50,652, and charged Other Expense - Loss on Valuation of Derivative for $67,530, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2008, the Company recorded a Gain on Valuation of Derivative in the amount of $55,967. For the three months ended March 31, 2009, the Company recorded a Gain on Valuation of Derivative in the amount of $20,491.






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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008


Note 10      Convertible Debenture and Derivative Liability





On March 30, 2007, SpeechSwitch, Inc. issued a Secured Convertible Debenture (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners) for the sum of $1,000,000 in exchange for previously issued notes payable for the same amount. The Debenture has a term of three years, and pays interest at the rate of 5% per annum. YA Global has the right to convert a portion or the entire outstanding principal into the Company's Class A Common Stock at a Conversion Price equal to eighty percent (80%) of the lowest closing Bid Price of the Common Stock during the five (5) trading days immediately preceding the Conversion Date. YA global may not convert the Debenture into shares of Class A Common Stock if such conversion would result in YA Global beneficially owning in excess of 4.99% of the then issued and outstanding shares of Class A Common Stock. The Conversion Price and number of shares of Class A Common Stock issuable upon conversion of the Debenture are subject to certain exceptions and adjustment for stock splits and combinations and other dilutive events. Subject to the terms and conditions of the Debenture, the Company has the right to redeem ("Optional Redemption") a portion or all amounts outstanding under this Debenture prior to the Maturity Date at any time provided that as of the date of the Holder's receipt of a Redemption Notice (i) the Closing Bid Price of the of the Common Stock, as reported by Bloomberg, LP, is less than the Conversion Price and (ii) no Event of Default has occurred. The Company shall pay an amount equal to the principal amount being redeemed plus a redemption premium ("Redemption Premium") equal to twenty percent (20%) of the principal amount being redeemed, and accrued interest, (collectively referred to as the "Redemption Amount"). During the time that any portion of this Debenture is outstanding, if any Event of Default has occurred, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become at the Holder's election, immediately due and payable in cash, provided however, the Holder may request (but shall have no obligation to request) payment of such amounts in Common stock of the Company. Furthermore, on addition to any other remedies, the Holder shall have the right (but not the obligation) to convert this Debenture at any time after (x) an Event of Default or (y) the Maturity Date at the Conversion Price then in-effect. The debenture is secured by substantially all of the assets of the Company.





During the three months ended March 31, 2008, the Company issued 190,466,666 shares of Class A common stock with a fair value of $48,861 to reduce the convertible promissory note in the amount of $32,100. The difference in the market value and the convertible promissory note reduction was charged to beneficial interest in the amount of $16,761.





As of March 31, 2009, the outstanding balance on the Convertible Debenture was $921,340.








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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008


In accordance with Statement of Financial Accounting Standards No. 133, “Accounting for Derivative Instruments and Hedging Activities”, (“FASB 133”), the Company determined that the conversion feature of the Debenture met the criteria of an embedded derivative, and therefore the conversion feature of this Debenture needed to be bifurcated and accounted for as a derivative. The fair value of the embedded conversion was estimated at the date of issuance using the Black-Scholes model with the following assumptions: risk free interest rate: 5.6%; expected dividend yield: 0%: expected life: 3 years; and volatility: 165.62%. The accounting guidance instructs that the conversion options are a derivative liability. As such, in March 2007 the Company recorded the conversion options as a liability, recorded a debt discount of $1,000,000, and charged Other Expense - Loss on Valuation of Derivative for $124,479, resulting primarily from calculation of the conversion price. For the three months ended March 31, 2008, the Company recorded a Gain on Valuation of Derivative in the amount of $1,476,940. For the three months ended March 31, 2009, the Company recorded a Gain on Valuation of Derivative in the amount of $267,619.





Note 11      Subscription Agreement





On August 31, 2005, SpeechSwitch, Inc. entered into a Standby Equity Distribution Agreement (the SEDA”) with YA Global Investments (f/k/a/ Cornell Capital Partners) (was amended and restated on December 12, 2005) whereby YA Global agrees to purchase up to $10 million of the Company’s Class A Common Stock (the “Common Stock”) over a two-year period.





The purchase price of the Common Stock shall be at ninety-five percent (95%) of the lowest trading price of the Company’s Common Stock during the five consecutive trading day period following the notification by the Company of its request for an advance from YA Global under the SEDA.  In connection with the SEDA, the Company entered into an Escrow Agreement, Registration Rights Agreement and Placement Agent Agreement.





On March 30, 2007, the Company and YA Global entered into an Amendment to the Amended and Restated Standby Equity Distribution Agreement dated as of the 12th day of December 2005, which revised the restrictions upon the Company's ability to sell equity.





For the three months ended March 31, 2008, the Company has sold in the aggregate 134,770,603 shares of Class A Common Stock to YA Global for net proceeds of $30,065, which are net of fees and discounts of $6,290.





The Standby Equity Distribution Agreement expired on February 5, 2008.





Note 12       Capital Stock





Pursuant to SpeechSwitch's certificate of incorporation, as amended, the Company is authorized to issue 1,000,000 shares of Preferred Stock, par value of $1.00 per share, 10,000,000,000 shares of Class A Common Stock, no par value per share, 50,000,000 shares of Class B Common Stock, par value $0.01 per share, and 20,000,000 shares of Class C Common Stock, par value $0.01 per share. Below is a description of SpeechSwitch's outstanding securities, including Preferred Stock, Class A Common Stock, Class B Common Stock, and Class C Common Stock.








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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008




a) Preferred Stock





SpeechSwitch is authorized to issue 1,000,000 shares of Preferred Stock, par value $1.00 per share.  As of March 31, 2009, SpeechSwitch has not issued any shares of Preferred Stock.





b) Class A Common Stock





As of March 31, 2009, there are 10,000,000,000 shares of Class A Common Stock authorized, no par value, and 1,400,096,193 shares were issued and outstanding.




Each holder of Class A Common Stock is entitled to receive ratably dividends, if any, as may be declared by the Board of Directors out of funds legally available for payment of dividends.  The Company has never paid any dividends on its common stock and does not contemplate doing so in the foreseeable future.  The Company anticipates that any earnings generated from operations will be used to finance its growth objectives.





c) Class B Common Stock





As of March 31, 2009, there are 50,000,000 shares of Class B Common Stock authorized, par value $.01 per share.  Each holder of Class B Common Stock has voting rights equal to 100 shares of Class A 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 that SpeechSwitch, Inc. had ever issued its Class A Common Stock.





Upon liquidation, dissolution, or winding-up, holders of Class B Common Stock will be entitled to receive distributions.  As of March 31, 2009, no shares were issued or outstanding.





d) Class C Common Stock





As of March 31, 2009, there are 20,000,000 shares of Class C Common Stock authorized, par value $.01 per share.  Each holder of Class C Common Stock is entitled to 1,000 votes for each share held of record.  Shares of Class C Common Stock are not convertible into Class A Common Stock.  Upon liquidation, dissolution or wind-up, the holders of Class C Common Stock are not entitled to receive the Company’s net assets pro rata.  As of March 31, 2009, no shares were issued or outstanding.





Note 13      Stock Options





During 2005, the Company adopted the 2005 Stock Incentive Plan and the 2005 Directors’ and Officers’ Stock Incentive Plan (“Plan”) in order to attract and retain qualified personnel.  Under the Plan, the Board of Directors, in its discretion may grant stock options (either incentive or non-qualified stock options) to officers, directors and employees.  The Company has not issued any stock options as of March 31, 2009.







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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008







Note 14         New Accounting Pronouncements





In November 2008, the FASB issued EITF Issue No. 08-7, Accounting for Defensive Intangible Assets (“EITF 08-7”). EITF 08-7 addresses the accounting for assets acquired in a business combination or asset acquisition that an entity does not intend to actively use, otherwise referred to as a ‘defensive asset.’ EITF 08-7 requires defensive intangible assets to be initially accounted for as a separate unit of accounting and not included as part of the cost of the acquirer’s existing intangible asset(s) because it is separately identifiable. EITF 08-7 also requires that defensive intangible assets be assigned a useful life in accordance with paragraph 11 of SFAS 142 and is effective for financial statements issued for fiscal years beginning after December 15, 2008. The Company’s adoption of this EITF is not expected to have a material impact on the Company’s condensed financial statements.





In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments in the financial statements. The most significant change the FSP brings is a revision to the amount of other-than-temporary loss of a debt security recorded in earnings. FSP FAS 115-2 and FAS 124-2 is effective for interim and annual reporting periods ending after June 15, 2009. The Company does not believe that the implementation of this standard will have a material impact on its condensed financial statements.





In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly. This FSP provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, Fair Value Measurements, when the volume and level of activity for the asset or liability have significantly decreased. This FSP also includes guidance on identifying circumstances that indicate a transaction is not orderly. This FSP emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FSP FAS 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, and is applied prospectively. The Company does not believe that the implementation of this standard will have a material impact on its condensed financial statements.





In April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. FSP FAS 107-1 and APB 28-1 is effective for interim and annual reporting periods ending after June 15, 2009. The Company does not believe that the implementation of this standard will have a material impact on its condensed financial statements.







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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





Note 15         Fair Value Measurements





On January 1, 2008, the Company adopted SFAS No. 157 "Fair Value Measurements"("SFAS 157"). SFAS 157 defines fair value, provides a consistent framework for measuring fair value under Generally Accepted Accounting Principles and expands fair value financial statement disclosure requirements. SFAS 157's valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the following hierarchy:





Level 1 Inputs- Quoted prices for identical instruments in active markets.


Level 2 Inputs- Quoted prices for similar instruments in active markets;


quoted prices for identical or similar instruments in markets that are


not active; and model-derived valuations whose inputs are observable or


whose significant value drivers are observable.


Level 3 Inputs- Instruments with primarily unobservable value drivers.





The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2009.





Assets

Level I


Level II


Level III


TotalTotal Assets

$
-


$
-


$
-


$
-Convertible promissory notes

$
-


$
17,117


$
-


$
17,117Note payable - other


-



71,756



-



71,756Convertible debentures


-



618,348



-



618,348Derivative liabilities


-



647,341



-



647,341Total Liabilities

$
-


$
1,354,562


$
-


$
1,354,562





December 31, 2008





Assets

Level I


Level II


Level III


TotalTotal Assets

$
-


$
-


$
-


$
-Convertible promissory notes

$
-


$
13,177


$
-


$
13,177Note payable to related parties


-



71,756



-



71,756Convertible debentures


-



539,690



-



539,690Derivative liabilities


-



935,451



-



935,451Total Liabilities

$
-


$
1,560,074


$
-


$
1,560,074








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SPEECHSWITCH, INC.
 NOTES TO CONDENSED FINANCIAL STATEMENTS
 March 31, 2009 and 2008





Note 16                      Subsequent Events





Departure of Directors or Certain Officers and Election of Directors





On April 15, 2009, Bruce Knef resigned as President of the Company.





On June 17, 2009, Kenneth P. Glynn was elected as Board of Directors member and Chairman of the Board of Directors.





On June 17, 2009, Kenneth P. Glynn was appointed President and Secretary of the company.





On June 17, 2009, Bruce Knef resigned from the Board of Directors of the company.





Other Events.





Due to the economy and/or product differentiation, SpeechSwitch, Inc. experienced its last sales in the field of speech recognition and autodialing systems and support in the first quarter of 2009.





On June 16, 2009 and June 17, 2009, Kenneth P. Glynn acquired debt owed by SpeechSwitch, Inc. to third party creditors as follows:





(1)
Promissory Note to Jerome Mahoney dated August 5, 2005 having a balance on December 31, 2008 of $80,956.27, and accruing interest, and thus having a balance of $82,035.42 as of April 30, 2010;





(2)
Deferred Compensation to Jerome Mahoney as of December 31, 2008 equal to $273,696.20 and accrued interest of $95,901.88 through May 31, 2009 and additional interest from that date through April 30, 2010 of $10,035.51 totaling $379,633.58;





(3)
Convertible promissory note to iVoice, Inc. dated March 5, 2008 in the amount of $50,651.52, and having a balance on May 31, 2009, including additional dispersements and interest, of $84,113.39, and from that date through April 30,2010 of $1,857.21, totaling $85,968.59; and





(4)
Loan from iVoice Technology, Inc. to SpeechSwitch, Inc. in the amount of $3,600.00.





In September, 2009, Kenneth P. Glynn established the Kenergy Scientific Group to seek new products to be sold under the Kenergy Scientific brand.  The Group acquired a small inventory of solar rechargeable lanterns for testing and eventual sales. The Group will be merged into SpeechSwitch, Inc. in 2010





In March, 2010, the company moved its headquarters from Matawan, NJ to its current location in Flemington, NJ.








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Item 2.                    MANAGEMENT’S DISCUSSION AND ANALYSIS OF THE


RESULTS OF OPERATIONS AND FINANCIAL CONDITION





Forward Looking Statements





A number of the statements made by the Company in this report may be regarded as “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.





Forward-looking statements include, among others, statements concerning the Company’s outlook, pricing trends and forces within the industry, the completion dates of capital projects, expected sales growth, cost reduction strategies and their results, long-term goals of the Company and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts.





All predictions as to future results contain a measure of uncertainty and accordingly, actual results could differ materially.  Among the factors that could cause a difference are:  changes in the general economy; changes in demand for the Company’s products or in the cost and availability of its raw materials; the actions of its competitors; the success of our customers; technological change; changes in employee relations; government regulations; litigation, including its inherent uncertainty; difficulties in plant operations and materials; transportation, environmental matters; and other unforeseen circumstances.  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, 2008 entitled “Risk Factors”.





Overview and Plan of Operation




The Company develops, markets and licenses the lines of business relating to iVoice's Speech- Enabled Auto Attendant, Name Dialer and Speech Software Developers Kit (Speech SDK) products, which were developed by iVoice. Speech recognition is used to recognize what a person says, and through the use of natural language understanding, derives the meaning of what is said. The Company also offers a range of support services that enable its customers and channel partners to develop voice-driven applications that use the Company’s software. Our products are designed to be “people oriented”, with features that can be readily used with out special training and manuals.  Our product line of Speech SDK, incorporate this philosophy.





SpeechSwitch markets, promotes and sells its speech-enabled products primarily through telephony reseller channels.  The Company also sells direct to end users in geographic locations where an authorized reseller does not exist.  On direct sales orders, the Company is able to achieve greater profit margins through higher direct selling prices.





The Company employs one full-time employee and one part-time employee.  SpeechSwitch may seek to expand its operations through additional sales and marketing activity and the acquisition of additional businesses.  Any potential acquired additional businesses may be outside the current field of operations of SpeechSwitch.  SpeechSwitch may not be able to identify, successfully integrate or profitably manage any such businesses or operations.  Currently, SpeechSwitch has no plans, proposals or arrangements, either orally or in writing, regarding any proposed acquisitions and is not considering any potential acquisitions.






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Results of Operations





All revenues reported by SpeechSwitch are derived from our speech recognition software products installations and maintenance. For the three months ended March 31, 2009, total revenues increased $5,908 (97.9%) to $11,944 as compared to the same period in the prior year of $6,036.  The increase is associated with a increase in the number of installations with a small decrease in maintenance revenues. The low overall sales volume of the speech recognition software business is attributable to the minimal resources made available for the sales and marketing of the speech recognition software products.  Management feels that the sales of the speech recognition software products may increase if greater financial and operational resources are made available for the sales and marketing of the products.  See "Liquidity and Capital Resources”.





Gross margin for the three months ended March 31, 2009 increased $3,516 (69.7%) as compared to the same periods in the prior year. Gross margin % to sales for the three months decreased from 83.5% to 71.7% primarily as a result of the unfavorable change in sales mix between maintenance and installation costs for the new installations.





Total operating expenses decreased $101,983 (87.2%) to $14,914 for the three months ended March 31, 2009 as compared to the same period in the prior year, primarily as a result of the curtailment of all non-essential spending due to limited cash availability.




Total other income (expense) for the three months ended March 31, 2009 was total income of $191,471 as compared to total income of $1,293,708 for the three months ended March 31, 2008, for a decrease of $1,102,237.  This change is primarily attributed to the lower gain on revaluation of derivatives.




Net income for the quarter ended March 31, 2009 was $185,116 as compared to a net income of $1,181,854 for the quarter ended March 31, 2008. The changes for these periods were the result of the factors discussed above.




Liquidity and Capital Resources




To date, SpeechSwitch has incurred substantial cash losses, and will require financing for working capital to meet its operating obligations. We anticipate that we will require financing on an ongoing basis for the foreseeable future.




On March 30, 2007, SpeechSwitch, Inc. issued a Secured Convertible Debenture (the "Debenture") to YA Global Investments (f/k/a/ Cornell Capital Partners, LP) for the sum of $1,000,000 in exchange for a previously issued promissory note for the same amount (see Notes 10 and 11 to the Condensed Financial Statements).




On December 12, 2005, the Company entered into an Amended and Restated Standby Equity Distribution Agreement, whereby we may, at our discretion, periodically sell to YA Global Investments (f/k/a/ Cornell Capital Partners) shares of Class A Common Stock for a total purchase price of up to $10 million. For each share of Class A Common Stock purchased under the equity line of credit, YA Global Investments (f/k/a/ Cornell Capital Partners) will pay 95% of the lowest closing bid price on the Over-the-Counter Bulletin Board or other principal market on which our Class A Common Stock is traded during the five consecutive trading days following the date that SpeechSwitch delivers to Cornell Capital Partners a notice requiring it to advance funds to us. Further, YA Global Investments (f/k/a/ Cornell Capital Partners) will retain 6% of each advance under the equity line of credit as a commitment fee and we will pay Yorkville Advisors Management a structuring fee of five hundred dollars ($500) directly out of the gross proceeds of each advance under the equity line of credit.






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Pursuant to the Standby Equity Distribution Agreement, the Company may periodically sell shares of Class A Common Stock to YA Global Investments (f/k/a/ Cornell Capital Partners) to raise capital to fund our working capital needs. The periodic sale of shares is known as an advance. We may request an advance every five trading days. A closing will be held four trading days after such written notice at which time we will deliver shares of Class A Common Stock to YA Global Investments (f/k/a/ Cornell Capital Partners) and YA Global Investments will pay the advance amount.  We may continue to request advances until YA Global Investments (f/k/a/ Cornell Capital Partners)has advanced $10 million or two years after the effective date of the accompanying registration statement, whichever occurs first.





The Standby Equity Distribution Agreement expired on February 5, 2008. If the Company cannot find sources of additional financing to fund its working capital needs, the Company will be unable to obtain sufficient capital resources to operate our business. We cannot assure you that we will be able to access any financing in sufficient amounts or at all when needed. Our inability to obtain sufficient working capital funding will have an immediate material adverse effect upon our financial condition and our business.





The Company currently has no other significant sources of working capital or cash commitments. However, no assurance can be given that SpeechSwitch will raise sufficient funds from such financing arrangements, or that SpeechSwitch will ever produce sufficient revenues to sustain its operations, or that a market will develop for its common stock for which a significant amount of SpeechSwitch’s financing is dependent upon.





For the three months ended months March 31, 2009, the Company had a net decrease in cash of $7,403.  The Company’s principal sources and uses of funds were as follows:





Cash used by operating activities       The Company used $7,403 and $74,782 in cash for operating activities for the three months ended March 31, 2009 and 2008, respectively. This decrease was primarily the result of the lower cash used to fund the smaller cash loss from current operating activities.




Cash provided by financing activities.  For the three months ended March 31, 2009, the Company did not provide or use any cash from financing activities. For the three months ended March 31, 2008 the Company received net proceeds of $30,065 from the issuance of common stock through the equity financing with YA Global Investments (f/k/a/ Cornell Capital Partners).





There was no significant impact on the Company’s operations as a result of inflation for the three months ended March 31, 2009.




Critical Accounting Policies




The discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate these estimates, including those related to bad debts, inventory obsolescence, intangible assets, payroll tax obligations, and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of certain assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions.




We have identified below the accounting policies, revenue recognition and software costs, related to what we believe are most critical to our business operations and are discussed throughout Management’s Discussion and Analysis of Financial Condition or Plan of Operation where such policies affect our reported and expected financial results.






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Revenue Recognition




With respect to the sale of software license fees, the Company recognizes revenue in accordance with Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), as amended, and generally recognizes revenue when all of the following criteria are met: (1) persuasive evidence of an arrangement exists generally evidenced by a signed, written purchase order from the customer, (2) delivery of the software product on Compact Disc (CD) or other means to the customer has occurred, (3) the perpetual license fee is fixed or determinable and (4) collectibility, which is assessed on a customer-by-customer basis, is probable.




With respect to customer support services, upon the completion of one year from the date of sale, the Company offers customers an optional annual software maintenance and support agreement for subsequent one-year periods. Sales of purchased maintenance and support agreements are recorded as deferred revenues and recognized over the respective terms of the agreements.




The Company derives its revenues from the licensing of its software product and optional customer support (maintenance) services. Presently, 100% of the revenues reported by the Company are derived from the licensing of the Company’s IVR software. No revenues have been derived from the sale of optional customer support services. The Company’s standard license agreement provides for a one-time fee for use of the Company’s product in perpetuity for each computer or CPU in which the software will reside. The Company’s software application is fully functional upon delivery and implementation and does not require any significant modification or alteration. The Company also offers customers an optional annual software maintenance and support agreement for the subsequent one-year periods. Such maintenance and support services are free for the first year the product is licensed. The software maintenance and support agreement provides free software updates, if any, and technical support the customer may need in deploying or changing the configuration of the software. Generally, the Company does not license its software in multiple element arrangements whereby the customer purchases a combination of software and maintenance. In a typical arrangement, software maintenance services are sold separately from the software product; are not considered essential to the functionality of the software and are purchased at the customer’s option upon the completion of the first year licensed.




The Company does not offer any special payment terms or significant discount pricing. Normal and customary payment terms require payment for the software license fees when the product is shipped. Payment for software maintenance is due prior to the commencement of the maintenance period. It is also the Company’s policy not to provide direct customers (as opposed to resellers and dealers) the right to refund any portion of its license fees. The Company accepts Visa and MasterCard as well as company checks.




Customers may license the Company’s products through our telesales organization and through promotions or reseller agreements with independent third parties.  SpeechSwitch only permits returns from authorized dealers and resellers of unused inventory, subject to the consent of the Company and a twenty-five percent restocking fee. End users who purchaser products directly from SpeechSwitch may not return such products to SpeechSwitch under any circumstances.  Accordingly, the Company records a provision for product returns and allowances against product revenue in the same period the revenue is recorded. The estimates are based on historical sales returns and other known data as well as market and economic conditions.




Our current products are not sold through retail distribution channels. Current reseller agreements provide for a limited contractual right of return and do not provide for future price concessions, minimum inventory commitments nor is payment contingent upon the reseller’s future sales or our products. Revenues generated from products licensed through marketing channels where the right of return exists, explicitly or implicitly, is reduced by reserves for estimated product returns. Such reserves are estimates based on returns history and current economic and market trends.




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OFF BALANCE SHEET ARRANGEMENTS





During the three months ended March 31, 2009, 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.





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) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end of the quarter covered by this Quarterly Report on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer of the Company have concluded, as of the end of the quarter covered by this Quarterly Report on Form 10-Q, that our disclosure controls and procedures have not been effective for the following reason:





A deficiency was identified as the Company's limited segregation of duties amongst the Company's 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.





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.






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Part II.  Other Information





Item 5.                    Other Information.








(b)
The Company does not have a standing nominating committee or a committee performing similar functions as the Company’s Board of Directors consists of only two members and therefore there would be no benefit in having a separate nominating committee that would consist of the same number of members as the full board of directors.  Both members of the Board of Directors participate in the consideration of director nominees.








Item 6.                    Exhibits





31.1
Rule 13a-14(a)/15d-14(a) Certifications.





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 Section 13 or 15 (d) 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.










SPEECHSWITCH, INC.Date:  October 1, 2010
By: /s/ Kenneth GlynnKenneth GlynnPresidentChief Executive Officer andChief Financial Officer



















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INDEX OF EXHIBITS




31.1Certification required under Section 302 of the Sarbanes-Oxley Act of 2002.




32.1      Certification required under Section 906 of the Sarbanes-Oxley Act of 2002.