United States
                       Securities and Exchange Commission
                             Washington, D. C. 20549

                                   Form 10-QSB

|X|   Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
      Exchange Act of 1934 for the Period Ended December 31, 2005.

                                       or

|_|   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 33-92894
                       --------

                              PREFERRED VOICE, INC.

            Delaware                                     75-2440201
-------------------------------             -----------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

6500 Greenville Avenue
Suite 570
Dallas,  TX                                                             75206
----------------------------------------                              ----------
(Address of Principal Executive Offices)                              (Zip Code)

                                 (214) 265-9580
             -----------------------------------------------------
             (Registrant's Telephone Number, including area code.)

                                 Not Applicable
                 ----------------------------------------------
                 (Former name, Former Address and Former Fiscal
                      year, if changed since last report.)

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 periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

                      Applicable Only to Corporate Issuers

Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practical date.

Common Stock, $ 0.001 Par Value - 29,815,826 shares as of February 10, 2006.

Transitional Small Business Format Yes |_| No |X|

<PAGE>

                                      INDEX

                              Preferred Voice, Inc.

Part I.  Financial Information                                                 1

Item 1.  Financial Statements                                                  1

         Balance Sheets-December 31, 2005 and March 31, 2005.

         Statements of Operations- Three Months Ended December 31, 2005
         and 2004 and Nine Months Ended December 31, 2005 and 2004.

         Statements of Cash Flows- Three Months Ended December 31, 2005
         and 2004 and Nine Months Ended December 31, 2005 and 2004.

         Notes to Financial Statements - December 31, 2005.

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations                                            13

Item 3.  Controls and Procedures                                              16

Part II. Other Information                                                    16

Item 1.  Legal Proceedings                                                    16

Item 2.  Unregistered Sales of Securities and Use of Proceeds                 16

Item 3.  Defaults upon Senior Securities                                      16

Item 4.  Submission of Matters to a Vote of Security Holders                  16

Item 5.  Other Information                                                    16

Item 6.  Exhibits and Reports on Form 8-K                                     17

Signatures                                                                    17

<PAGE>

                              PREFERRED VOICE, INC.

                            CONDENSED BALANCE SHEETS
                      DECEMBER 31, 2005 AND MARCH 31, 2005

                                                      December 31,    March 31,
                                                         2005           2005
                                                      (unaudited)     (audited)
                                                     ------------   ------------
Assets

Current assets:
  Cash and cash equivalents                          $    151,608   $  1,135,164
  Accounts receivable, net of allowance for
    doubtful accounts of $5,325 and $5,325,
    respectively                                          103,643        100,920
  Prepaid expense                                              --          2,759
                                                     ------------   ------------

      Total current assets                           $    255,251   $  1,238,843
                                                     ------------   ------------

Property and equipment:
  Computer equipment                                 $  1,786,536   $  1,629,844
  Furniture and fixtures                                   32,046         32,046
  Office equipment                                         61,044         61,044
                                                     ------------   ------------

                                                     $  1,879,626   $  1,722,934
  Less accumulated depreciation                         1,310,096      1,143,905
                                                     ------------   ------------

Net property and equipment                           $    569,530   $    579,029
                                                     ------------   ------------

Other assets:
  Capitalized software development costs, net of
    accumulated amortization of $1,024,334
    and $955,436, respectively                       $    194,068   $    224,881
  Deposits                                                  4,485          4,485
  Trademarks and patents, net of accumulated
    amortization of $15,113 and $9,709,
    respectively                                          106,293        104,307
                                                     ------------   ------------

      Total other assets                             $    304,846   $    333,673
                                                     ------------   ------------

      Total assets                                   $  1,129,627   $  2,151,545
                                                     ============   ============

See independent accountants' review report.
The accompanying notes are an integral part of these financial statements.

                                       1
<PAGE>

                                                    December 31,     March 31,
                                                       2005            2005
                                                    (unaudited)      (audited)
                                                   ------------    ------------
Liabilities and stockholders' equity

Current liabilities:
  Accounts payable                                 $    178,599    $    203,209
  Accrued operating expenses                                173              60
  Accrued vacation                                        6,015           5,667
  Accrued payroll and payroll taxes                       9,212          39,830
  Accrued interest                                       43,875              --
  Current portion- notes payable                         13,929          13,315
                                                   ------------    ------------

      Total current liabilities                    $    251,803    $    262,081
                                                   ------------    ------------

Long-term liabilities:
  Notes payable                                    $      3,622    $     14,144
  Debentures payable - net of discounts                 654,438         547,583
                                                   ------------    ------------

      Total long-term liabilities                  $    658,060    $    561,727
                                                   ------------    ------------

Commitments and contingencies (Note G)

Stockholders' equity:
  Common stock, $.001 par value;
    50,000,000 shares authorized; 29,815,826
    and 29,607,493 shares issued, respectively     $     29,816    $     29,607
  Additional paid-in capital                         19,384,586      19,384,794
  Accumulated deficit                               (19,193,132)    (18,085,158)
  Treasury stock- 22,500 shares at cost                  (1,506)         (1,506)
                                                   ------------    ------------

      Total stockholders' equity                   $    219,764    $  1,327,737
                                                   ------------    ------------

      Total liabilities and stockholders' equity   $  1,129,627    $  2,151,545
                                                   ============    ============

See independent accountants' review report.
The accompanying notes are an integral part of these financial statements.

                                       2
<PAGE>

                              PREFERRED VOICE, INC.

                       CONDENSED STATEMENTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004

<TABLE>
<CAPTION>
                                             Three months      Nine months       Three months      Nine months
                                                ended             ended             ended             ended
                                             December 31,      December 31,      December 31,      December 31,
                                                 2005              2005              2004              2004
                                             (unaudited)       (unaudited)       (unaudited)       (unaudited)
                                           --------------    --------------    --------------    --------------
<S>                                        <C>               <C>               <C>               <C>
Net sales                                  $      175,649    $      423,734    $      204,249    $      747,297

Cost of sales                                      99,338           337,070           122,926           367,311
                                           --------------    --------------    --------------    --------------

  Gross profit                             $       76,311    $       86,664    $       81,323    $      379,986
                                           --------------    --------------    --------------    --------------

General and administrative expenses        $      336,075    $    1,060,617    $      398,089    $    1,078,336
                                           --------------    --------------    --------------    --------------

Loss from operations                       $     (259,764)   $     (973,953)   $     (316,766)   $     (698,350)
                                           --------------    --------------    --------------    --------------

Other income (expense):
  Interest expense                         $      (51,296)   $     (152,778)   $         (914)   $       (5,608)
  Negotiated settlement                                --                --                --            64,573
  Gain on sale of assets                               --            18,758                --                --
                                           --------------    --------------    --------------    --------------

Total other income (expense)               $      (51,296)   $     (134,020)   $         (914)   $       58,965
                                           --------------    --------------    --------------    --------------

Loss from operations before income taxes   $     (311,060)   $   (1,107,973)   $     (317,680)   $     (639,385)

Provision for income taxes                             --                --                --                --
                                           --------------    --------------    --------------    --------------

Net loss                                   $     (311,060)   $   (1,107,973)   $     (317,680)   $     (639,385)
                                           ==============    ==============    ==============    ==============

Per share amounts:
  Loss from operations                     $        (0.01)   $        (0.04)   $        (0.01)   $        (0.02)
                                           ==============    ==============    ==============    ==============

Net loss                                   $        (0.01)   $        (0.04)   $        (0.01)   $        (0.02)
                                           ==============    ==============    ==============    ==============
</TABLE>

See independent accountants' review report.
The accompanying notes are an integral part of these financial statements.

                                       3
<PAGE>

                              PREFERRED VOICE, INC.

                       CONDENSED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED DECEMBER 31, 2005 AND 2004

                                                       2005            2004
                                                    (unaudited)     (unaudited)
                                                   ------------    ------------
Cash flows from operating activities:
  Cash received from customers                     $    421,011    $    817,428
  Cash paid to suppliers and employees               (1,180,159)     (1,429,169)
  Interest paid                                          (2,049)         (5,608)
                                                   ------------    ------------

    Net cash used by operating activities          $   (761,197)   $   (617,349)
                                                   ------------    ------------

Cash flows from investing activities:
  Capital expenditures                             $   (236,452)   $   (246,343)
  Proceeds from sale of assets                           24,000              --
                                                   ------------    ------------

    Net cash used by investing activities          $   (212,452)   $   (246,343)
                                                   ------------    ------------

Cash flows from financing activities:
  Proceeds from stock issuance                     $         --    $  1,100,000
  Repayment of note payable                              (9,907)        (45,829)
                                                   ------------    ------------

    Net cash provided (used) by financing
      activities                                   $     (9,907)   $  1,054,171
                                                   ------------    ------------

Net increase (decrease) in cash and cash
  equivalents                                      $   (983,556)   $    190,479

Cash and cash equivalents:
  Beginning of period                                 1,135,164          64,674
                                                   ------------    ------------

  End of period                                    $    151,608    $    255,153
                                                   ============    ============

See independent accountants' review report.
The accompanying notes are an integral part of these financial statements.

                                       4
<PAGE>

                                                       2005            2004
                                                    (unaudited)     (unaudited)
                                                   ------------    ------------

Reconciliation of net loss to net cash used by
 operating activities:
  Net loss                                         $ (1,107,973)   $   (639,385)
                                                   ------------    ------------

Adjustments to reconcile net loss to net cash
 used by operating activities:
  Depreciation and amortization                    $    269,536    $    287,100
  Gain on sale of assets                                (18,758)             --
  Fair value of stock warrants issued in
   exchange for services                                     --           3,362

Changes in operating assets and liabilities:
  (Increase) decrease in accounts receivable             (2,723)          5,558
  (Increase) decrease in prepaid expenses                 2,759          (1,287)
  Decrease in accounts payable                          (24,610)       (125,103)
  Increase (decrease) in accrued expenses               120,572        (147,594)
                                                   ------------    ------------

Total adjustments                                  $    346,776    $     22,036
                                                   ------------    ------------

Net cash used by operating activities              $   (761,197)   $   (617,349)
                                                   ============    ============

See independent accountants' review report.
The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note A - General organization:

      Preferred Voice, Inc. (the "Company") is a Delaware corporation
incorporated in 1992. On February 25, 1997, the Company's stockholders approved
changing the name of the Company to better reflect the nature of the Company's
business. The Company commenced business on May 13, 1994, and was in the
development stage until August 1, 1995. The Company provides voice recognition
services to the telecommunications industry throughout the United States and
maintains its principal offices in Dallas, Texas.

Note B - Summary of significant accounting policies:

Basis of presentation

      The accounting policies followed by Preferred Voice, Inc. are set forth in
the Company's financial statements that are a part of its March 31, 2005, Form
10KSB and should be read in conjunction with the financial statements for the
three and nine months ended December 31, 2005, contained herein.

      The financial information included herein as of December 31, 2005, and for
the three and nine-month periods ended December 31, 2005 and 2004, has been
presented without an audit, pursuant to accounting principles for the interim
financial information generally accepted in the United States of America and the
rules of the Securities and Exchange Commission. The Company believes that the
disclosures are adequate to make the information presented not misleading. The
information presented reflects all adjustments (consisting solely of normal
recurring adjustments), which are, in the opinion of management, necessary for a
fair statement of results for the period.

Cash and cash equivalents

      For purposes of reporting cash flows, cash and cash equivalents include
all amounts due from banks with original maturities of three months or less.

Concentration of business, market and credit risks

      In the normal course of business, the Company extends unsecured credit to
its customers with payment terms generally 30 days. Because of the credit risk
involved, management provides an allowance for doubtful accounts which reflects
its opinion of amounts which will eventually become uncollectible. In the event
of complete nonperformance by the Company's customers, the maximum exposure to
the Company is the outstanding accounts receivable balance at the date of
nonperformance.

Receivables and credit policies

      Accounts receivable are uncollateralized customer obligations due under
normal trade terms requiring payment within 30 days from the invoice date.
Unpaid accounts receivable with invoice dates over 30 days old bear no interest.

      Accounts receivable are stated at the amount billed to the customer.
Customer account balances with invoices dated over 90 days are considered
delinquent.

      Payments of accounts receivable are allocated to the specific invoices
identified on the customer's remittance advice or, if unspecified, are applied
to the earliest unpaid invoice.

See independent accountants' review report.

                                       6
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note B - Summary of significant accounting policies (continued):

      The carrying amount of accounts receivable is reduced by a valuation
allowance that reflects management's best estimate of amounts that will not be
collected. Management individually reviews all accounts receivable balances that
exceed 90 days from invoice date and, based on an assessment of current
creditworthiness, estimates that portion, if any, of the balance that will not
be collected. Accounts receivable past 90 days due are $13,218 and $25,109 as of
December 31, 2005 and March 31, 2005, respectively.

Capitalized software development

      The Company has adopted the provisions of FASB No. 86, Accounting for the
Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed, to account
for its internally developed software costs since the Company is dependent on
the software to provide the voice recognition services. Under the provisions of
FASB No. 86, costs incurred prior to the product's technological feasibility are
expensed as incurred. The capitalization of software development costs begins
when a product's technological feasibility has been established and ends when
the product is available for use and released to customers. Capitalized software
development costs include direct costs incurred subsequent to establishment of
technological feasibility for significant product enhancements. Amortization is
computed on an individual product basis using the straight-line method over the
estimated economic life of the product, generally three years.

Property and equipment

      The cost of property and equipment is depreciated over the estimated
useful lives of the related assets. Depreciation is computed on the
straight-line method for financial reporting purposes and the double declining
method for income tax purposes.

      Maintenance and repairs are charged to operations when incurred.
Betterments and renewals are capitalized.

      The useful lives of property and equipment for purposes of computing
depreciation are as follows:

               Computer equipment            5 years
               Furniture and fixtures        5 years
               Office equipment              5 years

Fair value of financial instruments

      The Company defines the fair value of a financial instrument as the amount
at which the instrument could be exchanged in a current transaction between
willing parties. Financial instruments included in the Company's financial
statements include cash and cash equivalents, trade accounts receivable, other
receivables, other assets, notes payable and long-term debt. Unless otherwise
disclosed in the notes to the financial statements, the carrying value of
financial instruments is considered to approximate fair value due to the short
maturity and characteristics of those instruments. The carrying value of
long-term debt approximates fair value as terms approximate those currently
available for similar debt instruments.

Revenue recognition

      For recognizing revenue, the Company applies the provisions of SEC Staff
Accounting Bulletin (SAB) No. 104, Revenue Recognition which was issued in
December 2003. In most cases, the services being performed do not require
significant production, modification or customization of the Company's software
or services; therefore, revenues are recognized when evidence of a completed
transaction exists, generally when services have been rendered. In situations
where the Company receives an initial payment for future services, the Company
defers recognition of revenue, and recognizes the revenue over the life of the
respective contract. SAB No. 104 codified, revised and rescinded certain
sections of Staff Accounting Bulleting (SAB) No. 101, Revenue Recognition in
Financial Statements, in order to make this interpretive guidance consistent
with current authoritative accounting guidance and SEC rules and regulations.

See independent accountants' review report.

                                       7
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note B - Summary of significant accounting policies (continued):

Loss per share

      The Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 128, Earnings per Share. SFAS No. 128 reporting
requirements replace primary and fully-diluted earnings per share (EPS) with
basic and diluted EPS. Basic EPS is calculated by dividing net income or loss
(available to common stockholders) by the weighted average number of common
shares outstanding for the period. Diluted EPS reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Since the Company incurred a loss from
operations for the periods ended December 31, 2005 and 2004, no computation of
diluted EPS has been performed.

      Loss per share is based on the weighted average number of shares
outstanding of 29,803,480 and 29,815,826 and 27,855,641 and 29,607,493 for the
nine and three months ended December 31, 2005 and 2004, respectively.

Income taxes

      Income taxes are accounted for using the liability method under the
provisions of SFAS 109, Accounting for Income Taxes. 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 that will apply in the years in
which those temporary differences are expected to be recovered or settled. 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.

Trademarks and patents

      Trademarks and patents are recorded at cost. Amortization is computed on
the straight-line method over the identifiable lives of the trademarks and
patents. The Company has adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets,
effective for periods beginning January 1, 2002, and thereafter. SFAS 142
addresses financial accounting and reporting for acquired goodwill and other
intangible assets and supersedes APB Opinion No. 17, Intangible Assets.
Specifically, the statement addresses how intangible assets that are acquired
should be accounted for in financial statements upon their acquisition, as well
as how goodwill and other intangible assets should be accounted for after they
have been initially recognized in the financial statements. The statement
requires intangible assets to be reviewed for impairment whenever events or
changes in circumstances indicate that their carrying amounts may not be
recoverable and that a loss shall be recognized if the carrying amount of an
intangible exceeds its fair value.

Impairment of long-lived assets and long-lived assets to be disposed of

      The Company adopted the provisions of SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, effective for periods beginning
January 1, 2002 and thereafter. SFAS 144 replaces SFAS 121, Accounting for the
Impairment of Long-Lived Assets for Long-Lived Assets to Be Disposed Of, and,
among other matters, addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. SFAS 144 retains the basic
provisions of SFAS 121, but broadens its scope and establishes a single model
for long-lived assets to be disposed of by sale.

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 amounts reported in
the financial statements and accompanying notes. Actual results could differ
from these estimates.

See independent accountants' review report.

                                       8
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note B - Summary of significant accounting policies (continued):

Reporting comprehensive income and operating segments

      The Company has adopted the provisions of SFAS No. 130, Reporting
Comprehensive Income and SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information. SFAS No. 130 requires that an enterprise
report, by major components and as a single total, the change in its net assets
during the period from non-owner sources. SFAS No. 131 establishes annual and
interim reporting standards for an enterprise's operating segments and related
disclosures about its products, services, geographic areas and major customers.
Adoption of these statements has had no impact on the Company's financial
position, results of operations, cash flow or related disclosures.

Stock-based compensation

      Prior to January 1, 1996, the Company accounted for its stock option plans
in accordance with the provisions of Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees, and related interpretations.
As such, compensation expense would be recorded on the date of grant only if the
current market price of the underlying stock exceeds the exercise price. On
January 1, 1996, the Company adopted SFAS No. 123, Accounting for Stock-Based
Compensation, which permits entities to recognize, as expense over the vesting
period, the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS No. 123 allows entities to continue to apply the provisions
of APB Opinion No. 25 and provide proforma net income and proforma earnings per
share disclosures for employee stock option grants made in 1996 and future years
as if the fair-valued-based method defined in SFAS No. 123 had been applied. The
Company has elected to continue to apply the provisions of APB Opinion No. 25
and provide the proforma disclosure provisions of SFAS No. 123.

      In addition, the Company has adopted the provisions of Financial
Accounting Standards Board Interpretation (FIN) 44, Accounting for Certain
Transactions Involving Stock Compensation, which became effective July 1, 2000.
FIN 44 clarifies the application of APB Opinion No. 25 for certain issues. Among
other issues, this interpretation clarifies the definition of an employee for
purposes of applying APB Opinion No. 25, the criteria for qualification of a
plan as compensatory, the consequences of modifications to the terms of the
plan, and the treatment of stock compensation issued to service providers who
are not employees. The issuance of this interpretation does not change the
current accounting policies of the Company, and has had no effect on the
accompanying financial statements.

      In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, Accounting for Stock-Based Compensation - Transition and Disclosure, which
amends SFAS No. 123. SFAS No. 148 provides alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
compensation. In addition, SFAS No. 148 amends the disclosure requirements of
SFAS No. 123 to require more prominent and more frequent disclosures in
financial statements about the effects of stock-based compensation. The
transition guidance and annual disclosure provisions are effective for years
ending after December 15, 2002. The interim disclosure provisions are effective
financial reports containing financial statement for interim periods beginning
after December 15, 2002. The transition rules of this standard are not
applicable since the Company continues to account for stock-based compensation
under the guidance of APB Opinion 25. The other requirements of this standard
have been adopted by the Company for periods beginning January 1, 2003.

Gain from extinguishment of debt

      In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical Corrections
effective for period beginning May 15, 2002 and thereafter. The Company adopted
the provision of SFAS No. 145 for the fiscal year ending March 31, 2003. SFAS
No. 145, among other matters, addresses financial accounting and reporting for
the extinguishment of debt, concluding that debt extinguishments are often
routine, recurring transactions and concluded that classifying the associated
gains and losses as extraordinary items in all cases would be inconsistent with
the criteria of ABP Opinion 30.

See independent accountants' review report.

                                       9
<PAGE>

                             PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note C - Notes payable:

      Notes payable consist of the following:

                                                     December 31,     March 31,
                                                         2005           2005
                                                     ------------   ------------

        Note payable, 6% interest rate.  Principal
        and interest due in monthly installments
        through March 1, 2007. Note is unsecured     $     17,551   $     27,459

        Less current portion                               13,929         13,315
                                                     ------------   ------------

                                                     $      3,622   $     14,144
                                                     ============   ============

      Interest expense charged to operations related to notes payable was $1,044
and $5,211, for the nine months ended December 31, 2005 and 2004, respectively
and $296 and $601 for the three months ended December 31, 2005 and 2004,
respectively.

Note D - Convertible debt and warrants:

      On March 31, 2005, the Company closed a Securities Purchase Agreement and
issued $975,000 in principal amount of 6% Convertible Debentures due March 31,
2008 (the "Debentures"), to a group of institutional and high net worth
investors. The Debentures pay an interest rate of 6% on an annual basis and are
convertible into 9,750,000 shares of the Company's common stock at a price of
$0.10 per share when the company receives shareholder approval for an increase
in its authorized shares equal to or above 65,000,000 shares at which time the
Company will record the intrinsic value of the beneficial conversion of $257,500
as interest expense. The investors also received warrants to purchase an
additional 4,875,000 shares of common stock with an exercise price of $0.12 per
share.

      The Company has allocated the proceeds from the issuance of the Debentures
to the warrants and the Debentures based on their relative fair market values at
the date of issuance. The value assigned to the warrants of $427,416 has been
recorded as an increase in additional paid in capital. The assignment of a value
to the warrants results in a loan discount being recorded for the same amount.
The discount is being amortized over the original three-year term of the
Debentures as additional interest expense. Amortization was $106,854 and $35,618
for the nine and three months ended December 31, 2005, respectively.

Note E - Common stock:

Stock purchase warrants

      At December 31, 2005, the Company had outstanding warrants to purchase
16,042,285 shares of the Company's common stock at prices which ranged from
$0.12 per share to $3.53 per share. The warrants are exercisable at any time and
expire through March 31, 2010. At December 31, 2005, 16,042,285 shares of common
stock were reserved for that purpose.

See independent accountants' review report.

                                       10
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note E - Common stock (continued):

Common stock reserved

      At December 31, 2005, shares of common stock were reserved for the
following purposes:

        Exercise of stock warrants                          16,042,285

        Exercise of future grants of stock options
        and stock appreciation rights under the 2000
        stock option plan                                    1,791,667
                                                          ------------

                                                            17,833,952
                                                          ============

Note F - Proforma information related to employee stock options and warrants:

      The per share weighted-average fair value of stock options granted was
determined using the Black Scholes Option-Pricing Model. There were no options
granted during the nine-month period ended December 31, 2005. The following
weighted-average assumptions were used in the pricing model:

                                                               March 31,
                                                                 2005
                                                           -------------------

        Expected dividend yield                                  0.00%
        Risk-free interest rate                              3.15% - 4.02%
        Expected life                                           5 years
        Expected volatility                                   185% - 209%

      The Company applies APB Opinion No. 25 in accounting for its option plan
and warrants and, accordingly, has recognized no compensation expense for stock
options and warrants granted at exercise prices at least equal to the market
value of the Company's common stock. Had the Company determined compensation
cost based on the fair value at the grant date for its stock options and
warrants under SFAS No. 123, the Company's net loss and loss per share would
have been increased to the proforma amounts indicated below:

<TABLE>
<CAPTION>
                                                  Three months ended               Nine months ended
                                                     December 31,                     December 31,
                                                 2005            2004            2005            2004
                                             ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>
Net loss, as reported                        $   (311,060)   $   (317,680)   $ (1,107,973)   $   (639,385)

Less total compensation expense determined
  under fair value based method for all
  awards, net of tax effects                      (39,432)        (44,086)       (153,162)       (178,296)
                                             ------------    ------------    ------------    ------------

Proforma net loss                            $   (350,492)   $   (361,766)   $ (1,261,135)   $   (817,681)
                                             ============    ============    ============    ============

Loss per common share:
As reported                                  $      (0.01)   $      (0.01)   $      (0.04)   $      (0.02)
                                             ============    ============    ============    ============

Proforma                                     $      (0.01)   $      (0.01)   $      (0.04)   $      (0.03)
                                             ============    ============    ============    ============
</TABLE>

See independent accountants' review report.

                                       11
<PAGE>

                              PREFERRED VOICE, INC.

                     NOTES TO CONDENSED FINANCIAL STATEMENTS

Note G - Commitments:

      The Company leases its office facilities and various office equipment
under operating leases expiring through December 2008. Following is a schedule
of future minimum lease payments required under the above operating leases as of
March 31, 2005:

     Year ending
      March 31,              Amount
---------------------   ----------------

        2006            $         60,900
        2007                      55,705
        2008                      53,820
        2009                      40,365
        2010                          --
                        ----------------

                        $        210,790
                        ================

      Total rent expense charged to operations was $45,720 and $44,195 for the
nine months ended December 31, 2005 and 2004, respectively and $15,401 and
$17,124 for the three months ended December 31, 2005 and 2004.

Note H - Going concern:

      The Company has suffered significant operating losses in the current and
prior years. As there has been a significant decrease in current assets and the
Company does not currently have external financing in place to fund working
capital requirements, there is substantial doubt about the Company's ability to
continue as a going concern. Management's plans in regard to this matter are
described below.

      Management projects working capital needs to be approximately $1,080,000
over the next twelve months for corporate overhead and equipment purchases to
continue to deploy services to carrier customers. Management believes that
current cash and cash equivalents and cash that may be generated from operations
will be sufficient to meet these anticipated capital requirements and to finance
marketing initiatives for the next twelve months. Such projections have been
based on revenue trends from current customers, customers who have signed new
ringback contracts, and customers that are currently in trial utilizing the
revenue rates that we have experienced over the past six months with currently
installed customers and projections from trial carrier models and projected cash
requirements to support installation, sales and marketing, and general overhead.
The Company may be forced to raise additional capital through the issuance of
new shares, the exercise of outstanding warrants, or reducing current overhead.
However, any projections of future cash needs and cash flows are subject to
substantial uncertainty. If further funding is required, and the Company is
unable to secure such funding, the Company would be forced to rely on existing
cash and cash from operations which would greatly impact their ability to
complete product development and product rollout until such time as necessary
funds were secured.

See independent accountants' review report.

                                       12
<PAGE>

            Item 2. Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

      This report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). These forward-looking statements are subject to certain risks
and uncertainties that could cause actual results to differ materially from
historical results or anticipated results, including those set forth herein
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and those set forth in the "Management's Discussion and Analysis
of Financial Condition and Results of Operations" section of the Form 10-KSB for
the fiscal year ended March 31, 2005. Notwithstanding the foregoing, the Company
is not entitled to rely on the safe harbor for forward looking statements under
27A of the Securities Act or 21E of the Exchange Act as long as the Company's
stock is classified as a penny stock within the meaning of Rule 3a51-1 of the
Exchange Act. A penny stock is generally defined to be any equity security that
has a market price (as defined in Rule 3a51-1) of less than $5.00 per share,
subject to certain exceptions.

Overview

      Overview

      We began operations in May 1994 as a traditional 1+ long-distance
reseller. Recognizing the declines in telecommunications service prices and the
decreasing margins being experienced in long distance sales, we decided to sell
our long distance customer base and assets in early 1997. From June of 1997,
until the end of 2004 we focused on the development, testing, and deployment of
voice activated telecommunications services that would allow any consumer the
ability to "dial" their calls using their voice. Even though we believe that
voice activated services still have viability in the marketplace, we do not
believe that consumers see enough value in the services to pay for them.
Therefore, in the last eighteen months we developed and deployed two service
applications that do not utilize voice recognition but instead focus on the
growing mobile entertainment enhanced service area, ringbacks and downloadable
content such as ringtones, games and graphics.

      Our services are distributed through two distribution channels master
distributors and telecommunications carriers. Our telecommunications
distribution channel is directly with Incumbent Local Exchange Carriers, or
local telephone companies, Wireless Communication Carriers, or cell phone
companies, and Competitive Local Exchange Carriers, or competitive local
telephone companies. This avenue of distribution is extremely attractive because
these companies already have the subscriber bases and the infrastructure to
service large numbers of subscribers. We have service deployment in Miami,
Florida, with a master distributor but to date revenues generated from that
channel have been minimal.

      Our contracts for voice dial are revenue sharing contracts whereby we
provide hardware, software applications and support in exchange for a portion of
revenue generated from the service provided by our customer to their
subscribers. Currently we are providing voice dial service to fourteen (14)
wireless carriers nationwide. As of December 31, 2005, these fourteen contracts
were generating revenues of approximately $30,000 per month.

      On September 15, 2004 we announced the release of "My Phone Services
Suite", which incorporates our network address book, network voice dialing,
Push2Connect, and Rockin Ringback services into one user-centric service that
allows the subscriber to personalize the look and feel of their communications
service especially for their personality. On October 22, 2004 we announced the
first commercial launch of a ringback service in the United States with the
launch of our Rockin' Ringback service. Our personalized ringback service
provides a network-based personalized service that enables users to choose an
audio file that callers will listen to while the phone is ringing. We believe
that since we already have a relationship with the carrier and are integrated
with these carriers customer service departments and billing departments that we
have an opportunity to introduce new products with minimal integration effort.
We will continue to research and either develop or acquire additional services
that can be deployed through our platform. Our contracts for our "My Phone
Services Suite" are revenue sharing contracts which also require that the
carrier acquire network equipment to facilitate the service. Revenue from these
new products is expected to be slow with no guarantees of market and/or customer
acceptance. We also believe that we will continue to see increased competition
that along with many other factors may have an impact on the company and its
products. As of February 10, 2006 we had one carrier customer providing My Phone
Services Suite service in their marketplace, one additional carrier who has
signed our contract to provide our Rockin' Ringback service to its customer
base, and one carriers in test phase on the ringback service.

                                       13
<PAGE>

         The implementation of our business plan is subject to risks inherent in
the establishment and deployment of technology. We believe our services are
services that any consumer who uses a phone can utilize. Our services are
generic to cell phone users as well as land line users, children as well as
adults. In order for us to succeed, we must:

o     secure adequate financial and human resources to meet our requirements,
      including adequate numbers of technical support staff to provide service
      for our phone company customers;
o     establish and maintain relationships with phone companies;
o     make sure the GAP system works with the telephone switches of all of the
      major manufacturers;
o     achieve user acceptance for our services;
o     generate reasonable margins on our services;
o     continue to deploy and install GAP systems on a timely and acceptable
      schedule;
o     respond to competitive market developments;
o     mitigate risk associated with our technology by obtaining patents and
      copyrights and other protections of our intellectual property; and
o     continually update and add to our product offerings to meet the needs of
      consumers.

Failure to achieve these objectives could adversely affect our business,
operating results and financial condition. Increased competition from other
providers of similar services and the impact of features available in cell
phones can and have impacted our business.

Results of Operations

      We recorded a net loss of $1,107,973 or $0.04 per share, for the
nine-month period ended December 31, 2005, compared to a net loss of $639,385 or
$0.02 per share, for the nine-month period ended December 31, 2004. For the
three-month period ended December 31, 2005, we recorded a net loss of $311,060,
or $.01 per share compared to a net loss of $317,680 or $.01 per share for the
three-month period ended December 31, 2004.

      Total Sales

      Total revenue for the nine-month period ended December 31, 2005, was
$423,734 compared to $747,297 for the nine-month period ended December 31, 2004.
Total revenue for the three-month period ended December 31, 2005, was $175,649
compared to $204,249 for the three-month period ended December 31, 2004.
Revenues in both periods consisted of revenue sharing receipts from our customer
phone companies, test agreements and billing our direct end-users for individual
services.

      We anticipate that revenues from our revenue sharing agreements on our
voice dial product will continue to deteriorate in the fiscal year ending March
31, 2006. We do anticipate that revenues from the My Phone Services Suite to
begin gradually and build as new customers to the service integrate and market
the product to their subscriber base.

      Cost of Sales

      Cost of sales for the nine-month period ended December 31, 2005 was
$337,070 compared to $367,311 for the nine-month period ended December 31, 2004.
Cost of sales for the three-month period ended December 31, 2005 was $99,338
compared to $122,926 for the three-month period ended December 31, 2004. Cost of
sales consisted entirely of costs for network infrastructure such as
collocations, connectivity, system access and long distance to end-users during
both periods and marketing enhancements to our opt-out customers.

      Selling, General and Administrative

      Selling, general and administrative expenses for the nine-month period
ended December 31, 2005 were $1,060,617 compared to $1,078,336 for the
nine-month period ended December 31, 2004. Selling, general and administrative
expenses for the three-month period ended December 31, 2005 were $336,075
compared to $398,089 for the three-month period ended December 31, 2004. The
decrease from 2004 to 2005, are due to our efforts to maximize current resources
and reduce inefficiencies. We expect that selling, general and administrative
expenses will remain steady through fiscal year 2006, such expenses to include
costs related to the number of employees, office space requirements and general
overhead.

                                       14
<PAGE>

      Core Technology Enhancements Software Applications and Hardware

      The capitalization of software development costs begins when a product's
technological feasibility has been established and ends when the product is
available for general release to customers. Capitalized software development
costs include direct costs incurred subsequent to establishment of technological
feasibility for significant product enhancements. During the periods ended
December 31, 2005 and 2004, software development costs capitalized were $38,086
and $195,517 respectively. The amortization of capitalized software development
costs for the periods ended December 31, 2005 and 2004 was $68,899 and $62,958
respectively.

      Other Income and Expense

      During the nine-month period ended December 31, 2005, the Company made a
sale of excess equipment that generated one-time net revenue of $18,758. The
company was also able to negotiate settlement of outstanding accounts payable
for the nine-months periods ended December 31, 2004 of $64,573.

      Income Taxes

      As of December 31, 2005, we had cumulative federal net operating losses of
approximately $17.9 million, which can be used to offset future income subject
to federal income tax through the fiscal year 2025. Net operating loss
limitations may be imposed if changes in stock ownership of the company create a
change of control as provided in Section 382 of the Internal Revenue Code of
1986.

      Liquidity and Capital Resources

      Our cash and cash equivalents at December 31, 2005 were approximately
$151,608, a decrease of $983,556 from $1,135,164 at March 31, 2005. We have
relied primarily on the issuance of stock and warrants to fund our operations
since January of 1997 when we sold our long-distance resale operation.

      On March 31, 2005, pursuant to Section 4(2) of the Securities Act and
Regulation D thereunder, we completed the sale of 97.5 units ("Units") with each
Unit consisting of a 3-year, 6% Convertible Debenture in the principal amount of
$10,000.00, and 50,000 5-year warrants to purchase a share of Common Stock,
$.001 par value per share, of the Company at an exercise price of $.12 for an
aggregate of $975,000.

      Our recurring revenues are approximately $30,000 per month primarily from
our voice dial contracts. We will continue to experience declines in revenue
from this product as more of our multi year contracts expire and carriers do not
extend their contracts. We are optimistic that our new services through My Phone
Services Suite, primarily the Rockin Ringback product, will begin to generate
revenues in the fourth quarter of this fiscal year.

      We have also issued stock or convertible securities to fulfill certain
obligations or motivate various people. We have issued warrants to purchase
shares of our common stock in connection with services provided by various
individuals and entities in their capacity as members of our Board of Directors,
Council of Advisors, various forms of consulting services, capital raising (such
as a private offering), and marketing distributors. These warrants are always
priced at the fair market value of our common stock on the date of issuance. We
have utilized our common stock as actual compensation in only one instance where
5,000 shares were issued as compensation for consulting services. These services
were valued at total fair market value for the 5,000 shares on the date of
completion of services.

      Off-Balance Sheet Arrangements

      We do not have any off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors.

                                       15
<PAGE>

      Future Obligations

      We project our working capital needs to be approximately $1,080,000 over
the next twelve months for corporate overhead and equipment purchases to
continue to deploy our services to carrier customers. Management believes that
current cash and cash equivalents and cash that may be generated from operations
will be sufficient to meet these anticipated capital requirements and to finance
marketing initiatives for the next twelve months. Such projections have been
based on revenue trends from current customers, customers which have signed new
ringback contracts, and customers that are currently in trial utilizing the
revenue rates that we have experienced over the past six months with our
currently installed customers and projections from trial carrier models and
projected cash requirements to support installation, sales and marketing, and
general overhead. We may be forced to raise additional capital through the
issuance of new shares, the exercise of outstanding warrants, or reduce our
current overhead. However, any projections of future cash needs and cash flows
are subject to substantial uncertainty. If further funding is required, and we
are unable to secure such funding, we would be forced to rely on existing cash
and cash from operations which would greatly impact our ability to complete our
product development and product rollout until such time as necessary funds are
secured.

                         Item 3. Controls and Procedures

Evaluation of disclosure controls and procedures. The Chief Executive Officer,
who also acts as our Chief Financial Officer, of the Company has evaluated 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-QSB. Based on that evaluation, the Chief Executive
Officer of the Company has concluded that the Company's disclosure controls and
procedures as of the end of the quarter covered by this Quarterly Report on Form
10-QSB are effective to provide assurance that information required to be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the rules and forms of the Securities and Exchange
Commission. However, due to the limited number of Company employees engaged in
the authorization, recording, processing and reporting of transactions, there is
inherently a lack of segregation of duties. The Company periodically assesses
the cost versus benefit of adding the resources that would remedy or mitigate
this situation and currently, does not consider the benefits to

Changes in internal controls. There were no changes in our internal controls
over financial reporting identified in connection with our evaluation that
occurred during our last fiscal quarter ended December 31, 2005 that materially
affected, or was reasonably likely to materially affect our internal control
over financial reporting.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

         We are not a party to any material legal proceedings.

Item 2.  Unregistered Sales of Securities and Use of Proceeds

None

Item 3.  Defaults upon Senior Securities.

None.

Item 4.  Submission of Matters to a Vote of Security Holders.

None

Item 5.  Other Information.

None

                                       16
<PAGE>

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

Exhibit
Number   Exhibit Description
------   -------------------
31.1     Certification of Chief Executive Officer and Chief Financial Offier
32.1     Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant
           to Section 906 of the Sarbanes-Oxley Act of 2002

(b)      Reports on Form 8-K

The Company filed the following reports on Form 8-K during the quarter ended
December 31, 2005:

      1.    On October 31, 2005 the Company furnished a Current Report on Form
            8-K reporting the retirement of G. Ray Miller as a member of the
            Board of Directors.

                                   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.

                                            PREFERRED VOICE, INC.

February 14, 2006                           /s/ Mary G. Merritt
-----------------                           -------------------
Date                                        Mary G. Merritt
                                            Chairman and Chief Executive Officer
                                            (Principal Executive Officer)