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 June 30, 2000.

                                       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                   (Zip Code)
              Offices)

                                 (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 - 13,626,492 shares as of July 8, 2000.

Transitional Small Business Format    Yes                  No    X
                                          ------------        -----------






<PAGE>




                                      INDEX

                              Preferred Voice, Inc.
<TABLE>
<CAPTION>
<S>                                                                                    <C>

Part I.  Financial Information                                                         1

Item 1.   Financial Statements                                                         1

         Balance Sheets-June 30, 2000, June 30, 1999 and March 31, 2000.               1

         Statements of Cash Flows-Three Months Ended June 30, 2000 and 1999
         and for the Year Ended March 31, 2000.                                        3

         Statements of Operations-Three Months Ended June 30, 2000 and 1999
         and for the Year Ended March 31, 2000.                                        5

         Notes to Financial Statements - June 30, 2000.                                6

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                14

Part II. Other Information                                                             18

Item 1.  Legal Proceedings                                                             18

Item 2.  Changes in Securities                                                         18

Item 3.  Defaults upon Senior Securities                                               18

Item 4.  Submission of Matters to a Vote of Security Holders                           18

Item 5.  Other Information                                                             19

Item 6.  Exhibits and Reports on Form 8-K                                              19

Signatures                                                                             20

</TABLE>






<PAGE>


      Part I.  Financial Information
      Item 1.  Financial Statements

<TABLE>
<CAPTION>

                              Preferred Voice, Inc.

                                 Balance Sheets
                    June 30, 2000 and 1999 and March 31, 2000



                                                                    June 30,            June 30,             March 31,
                                                                      2000                1999                 2000
Assets                                                            (Unaudited)         (Unaudited)            (Audited)
<S>                                                           <C>                 <C>                   <C>

      Current Assets:
          Cash and Cash                                       $    644,739        $    390,731          $  1,373,291
      Equivalents
      Accounts Receivable, net of allowance
           for doubtful accounts of $ -0-, $-0-
           and $-0- respectively                                     7,020               1,000                 3,924
      Inventory                                                     86,314                   0                84,724
                                                               ------------------- -------------------  --------------------
      Total Current Assets                                    $    738,073        $    391,731          $  1,461,939
                                                               ------------------- -------------------  --------------------

      Property and Equipment:
         Computer Equipment                                   $    472,927        $    270,062          $    321,248
         Furniture and Fixtures                                     40,791              20,119                38,880
         Office Equipment                                           18,198              12,493                18,198
         Computer Software                                         500,955             222,405               384,686
         LESS:  Accumulated Depreciation                          (305,466)           (189,215)             (253,143)
                                                              -------------------------------------------------------------
      Net Property and Equipment                              $    727,405        $    335,864          $    509,869
                                                              ------------------- -------------------  --------------------

      Other Assets:
         Deposits                                             $     85,114        $     81,535          $     85,114
         Prepaid Expenses                                          761,018             761,018               761,018
         Trademarks                                                 11,452                   0                 7,472
         Deferred Stock Issuance Costs                              32,470                   0                19,803
                                                               ------------------- -------------------  --------------------
      Total Other Assets                                      $    890,054        $    842,553          $    873,407
                                                               ------------------- -------------------  --------------------

Total Assets                                                  $  2,355,532        $  1,570,148          $  2,845,215
                                                               =================== ===================  ====================



</TABLE>







<PAGE>
<TABLE>

<CAPTION>



                                                                  June 30,            June 30,             March 31,
                                                                    2000                1999                 2000
                                                                (Unaudited)          (Unaudited)          (Audited)
Liabilities and Stockholders' Equity
<S>                                                            <C>                 <C>                   <C>

      Current Liabilities:

       Accounts Payable                                        $    228,285        $    319,478          $     272,818
       Accrued Operating & Vacation                                  32,202              19,611                 24,981
       Expenses
       Accrued Payroll and Related Tax                                5,631             187,057                  2,265
       Accrued Interest Payable                                      41,001             262,937                 39,851
       Customer deposits                                            390,992                   0                390,992
       Notes Payable                                                 80,868             195,866                 80,866
       Notes Payable-Related Parties                                      0             100,000                      0
                                                             -------------------  ------------------   --------------------
           Total Current Liabilities                           $    778,979        $  1,084,949          $     811,773
                                                             -------------------  ------------------   --------------------



      Commitments and Contingencies (Note I)

      Stockholders' Equity:
       Common Stock, $0.001 par value
         20,000,000 shares authorized;
         shares issued 13,626,492, 9,700,681
         and 13,276,796 respectively                           $     13,626        $     11,096          $      13,277
      Additional  Paid In Capital                                 9,310,570           6,100,961              8,952,788
      Accumulated Deficit                                        (7,745,775)         (5,624,990)            (6,930,755)
      Treasury Stock - 385,224
      shares at cost                                                 (1,868)             (1,868)                (1,868)
                                                             -------------------  ------------------   --------------------

           Total Stockholder Equity                            $  1,576,553        $    485,199          $   2,033,442
                                                             -------------------  ------------------   --------------------

Total Liabilities and Stockholder Equity                       $  2,355,532        $  1,570,148          $   2,845,215
                                                             ===================  ==================   ====================

</TABLE>




<PAGE>


<TABLE>
<CAPTION>

                              Preferred Voice, Inc.

                             Statement of Cash Flows
                For the Three Months Ended June 30, 2000 and 1999

                      And For the Year Ended March 31, 2000

                                                                    June 30,             June 30,             March 31,
                                                                      2000                 1999                  2000
                                                                   (Unaudited)         (Unaudited)            (Audited)
                                                                ------------------  -------------------  ---------------------
      <S>                                                         <C>                 <C>                   <C>

      Cash Flows from Operating Activities:
        Cash Received from customers                              $     3,512         $    595,035          $  1,273,062
        Cash Paid to suppliers and employees                         (792,473)            (318,048)           (2,093,749)
        Interest Paid                                                       0               (2,467)             (224,235)
                                                                ------------------  -------------------  ---------------------

               Net Cash used by Operating Activities              $   (788,961)       $    274,523          $ (1,044,922)
                                                               ------------------  -------------------  ---------------------

      Cash Flows from Investing Activities:
        Capital Expenditures                                      $   (269,859)       $    (82,542)         $   (389,436)
        Proceeds from Sale of Fixed Assets                                   0                   0                 1,750
                                                                ------------------  -------------------  ---------------------

               Net Cash used by Investing Activities              $   (269,859)       $    (82,542)         $   (387,686)
                                                                ------------------  -------------------  ---------------------

      Cash Flows from Financing Activities:
        Proceeds from Issuance  of Stock                          $    342,935        $          0          $  2,811,952
        Proceeds from Notes Payable                                          0             200,000               200,000
        Note Principal Payments                                              0             (43,000)             (228,000)
        Deferred Stock Issuance Costs                                  (12,667)                  0               (19,803)
                                                                ------------------  -------------------  ---------------------

              Net Cash provided by Financing Activities           $    330,268        $    157,000          $  2,764,149
                                                                ------------------  -------------------  ---------------------

      Net Increase (Decrease) in
        Cash and Cash Equivalents                                 $   (728,552)       $    348,981          $  1,331,541


      Cash and Cash Equivalents:
         Beginning of Period                                         1,373,291              41,750                41,750
                                                                ------------------  -------------------  ---------------------

         End of Period                                            $    644,739        $    390,731          $  1,373,291
                                                                ==================  ===================  =====================

      Supplemental Schedule of non-cash investing
        and financing activities:

           Issuance of Common Stock in
            Exchange for Debt                                     $     15,197        $  910,329            $    952,383

</TABLE>


<PAGE>

<TABLE>
<CAPTION>


                                                                    June 30,            June 30,              March 31,
                                                                      2000                1999                  2000
                                                                  (Unaudited)          (Unaudited)            (Audited)
                                                                -------------------  --------------------  --------------------
      <S>                                                           <C>               <C>                  <C>

      Reconciliation of Net Gain/(Loss) to Net
         Cash used by Operating Activities:

      Net Gain/(Loss)                                               $   (815,020)     $    312,700         $   (993,066)
                                                                 ------------------- --------------------  --------------------

      Adjustments to Reconcile Net Loss to
        Net Cash used by Operating Activities:

         Depreciation                                               $     52,323      $     28,166         $    140,948
         (Gain) Loss on Sale of Fixed Assets                                   0                 0               18,356

         Changes in Assets and Liabilities:
            (Increase) Decrease in Accounts Receivable                    (3,096)             (140)              (3,064)
            (Increase) Decrease in Inventory                              (1,590)                0              (84,724)
            (Increase) Decrease in Employee Receivables                        0             2,500                2,500
            (Increase) Decrease in Deposits                                    0                 0               (3,579)
            (Increase) Decrease in Patents and Trademarks                 (3,980)                0               (7,472)
            Increase in Customer Deposits                                      0                 0              390,992
            Increase (Decrease) in Accounts Payable                      (29,336)          (44,356)             (91,016)
            Increase (Decrease) in Accrued Expenses                       11,738           (24,347)            (414,797)
                                                                 ------------------- --------------------  --------------------


                   Total Adjustments                                $     26,059      $    (38,177)        $    (51,856)
                                                                 ------------------- -------------------- --------------------

      Net Cash used by Operating Activities                         $   (788,961)     $    274,523         $ (1,044,922)


</TABLE>



<PAGE>

<TABLE>
<CAPTION>


                              Preferred Voice, Inc.

                            Statements of Operations
                For the Three Months Ended June 30, 2000 and 1999

                      And For the Year Ended March 31, 2000

                                                                   June 30,             June 30,             March 31,
                                                                     2000                 1999                  2000
                                                                 (Unaudited)           (Unaudited)           (Audited)
                                                              -------------------  --------------------  -------------------
      <S>                                                        <C>                 <C>                  <C>


      Sales                                                      $     6,608         $    595,175         $    885,134

      Cost of Sales                                                    8,949               44,916              215,293
                                                              -------------------  --------------------  -------------------

        Gross Profit (loss)                                      $    (2,341)        $    550,259         $    669,841
                                                              -------------------  --------------------  -------------------

      Costs and Expenses:
        General & Administrative                                 $    811,529        $     233,15         $  1,675,971
         Interest Expense                                               1,150              16,440               28,556
                                                              -------------------  --------------------  -------------------
        Total Costs and Expenses                                 $    812,679        $    249,615         $  1,704,527
                                                              -------------------  --------------------  -------------------

      Income (Loss)  from Operations                             $   (815,020)       $    300,644         $ (1,034,686)

      Other Income (Expense):
        Loss from Sale of Assets                                            0                   0              (18,356)

      Provision for Income Tax                                              0                   0                    0
                                                              -------------------  --------------------  -------------------

      Loss From Operations Before
      Extraordinary Item                                         $   (815,020)       $    300,644         $ (1,053,042)
                                                              ===================  ====================  ===================

      Extraordinary Item:
      Gain/(Loss) from Extinguishment
        of  Debt (less applicable income
        taxes  of  -0-) (Note K)                                            0              12,056               59,976

      Net Gain/(Loss)                                            $   (815,020)       $    312,700         $   (993,066)
                                                              ===================  ====================  ===================


      Per Share Amounts:

      Gain/(Loss) from Operations                                $      (0.06)               0.03         $      (0.10)

      Gain from Extinguishment of Debt
       (less applicable income taxes of -0-)                                0                   0                  .01

      Net Loss Per Share                                         $      (0.06)       $       0.03         $      (0.09)
                                                              ===================  ====================  ===================



</TABLE>

<PAGE>


                              PREFERRED VOICE, INC.

                          NOTES TO 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  products  and
services to the  telecommunications  industry  throughout  the United States and
maintains its principal  offices in Dallas,  Texas. The preparation of financial
statements in conformity with generally accepted accounting  principles 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.

Note B - Summary of significant accounting policies:

   Cash and cash equivalents
   -------------------------

     For purposes of reporting  cash flows,  cash and cash  equivalents  include
amounts due from banks.

   Accounts receivable
   -------------------

      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  has provided 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.

   Inventory
   ---------

      Inventories  consist of finished goods and are stated at the lower of cost
   (specific identification) or market.

   Depreciation
   ------------

      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
                         Software development                         3 years

   Income taxes
   ------------

      Income  taxes  are  accounted  for using the  liability  method  under the
   provisions of SFAS 109 "Accounting for Income Taxes."


<PAGE>


                              PREFERRED VOICE, INC.

                          NOTES TO FINANCIAL STATEMENTS

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

   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
   -------------------

      The Company is engaged as a provider  of  telecommunication  products  and
   services.  Generally, the Company recognizes revenue under the accrual method
   when its services and  products are  provided.  During the three months ended
   June 30, 2000,  the majority of the  Company's  revenue  consisted of billing
   end-users for long distance charges.

   Advertising expense
   -------------------

      The Company  expenses  advertising  costs when the  advertisement  occurs.
   Total advertising  expense amounted to $2,950 for the three months ended June
   30, 2000.

   Loss per share
   --------------

      The Company  adopted the  provisions of Statement of Financial  Accounting
   Standards (SFAS) No. 128, Earnings per Share, during the year ended March 31,
   1998. 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.

      Loss  per  share  is  based  on the  weighted  average  number  of  shares
   outstanding of 13,091,105 at June 30, 2000.

   Amortization
   ------------

      The cost of trademarks  are being  amortized on the  straight-line  method
   over a period of 15 years.

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

      The Company has adopted the provisions of SFAS No. 121, Accounting for the
   Impairment of Long-Lived  Assets and for Long-Lived Assets to Be Disposed Of.
   This  statement  requires  that  long-lived  assets  and  certain  identified
   intangibles  be  reviewed  for  impairment  whenever  events  or  changes  in
   circumstances  indicate  that the  carrying  amount  of an  asset  may not be
   recoverable.  Recoverability  of assets to be held and used is  measured by a
   comparison  on the  carrying  amount  of an asset to  future  net cash  flows
   expected to be generated by the asset.  If such assets are  considered  to be
   impaired,  the impairment to be recognized is measured by the amount by which
   the carrying amount of the assets exceed the fair value of the assets. Assets
   to be disposed of are  reported at the lower of the  carrying  amount or fair
   value less costs to sell.


<PAGE>


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

   New accounting pronouncements
   -----------------------------

      The  Company  adopted  the  provisions  of SFAS No.  133,  Accounting  for
   Derivative  Instruments and Hedging Activities on April 1, 2000. SFAS No. 133
   requires  that an  entity  recognize  all  derivatives  as  either  assets or
   liabilities  in  the  statement  of  financial  position  and  measure  those
   instruments at fair value. Adoption of this statement did not have a material
   impact on the  Company's  financial  position,  results of operations or cash
   flows as the Company has not entered into any derivative transactions.

Note C - Note payable:
<TABLE>
<CAPTION>

   Note payable consists of the following at June 30, 2000:
   <S>                                                                           <C>
   Note payable,  Brite Voice Systems, Inc., dated January 31, 1997.
     Note is  unsecured  and payable in monthly  installments  of
     $8,112, including interest at the rate of prime + 2 (8.5% at
     March 31,  1999)  through  maturity  on January  1, 1998.                   $ 50,866
                                                                                 =========

</TABLE>

      The note to Brite Voice Systems,  Inc. (Brite) is currently in dispute and
   effective  April  1997,  the  Company  discontinued  the  accrual of interest
   expense. Interest expense charged to operations related to the Brite note was
   $-0- for the three months ended June 30, 2000.

Note D - Long-term debt:
<TABLE>
<CAPTION>

   Long-term debt consisted of the following at June 30, 2000:
   <S>                                                                           <C>

   Notes  payable  dated  various  dates  from  May  20,  1996  through
     September 9,  1996,  secured by common stock with  principal and
     accrued  interest  due at  maturity  on  various  dates  through
     September 9,  1998.  216,250  warrants  to  purchase  shares  of
     common  stock at $3.00  per  share  expiring  on  various  dates
     through  September 9,  1998  were  issued  to the note  holders.
     These  notes  were  converted  into  1,602,712  shares of common
     stock on various dates through March 31, 2000.                              $  20,000

   Note  payable  to  Equity  Communication.  This  note is  unsecured,
     non-interest bearing, and due upon demand.
                                                                                    10,000
                                                                                 -----------

                                                                                 $  30,000
                                                                                    30,000
                                                                                 -----------

                                                                                 $       0
                                                                                 ===========

</TABLE>

   Interest  expense  charged to operations  related to the  long-term  debt was
$1,150 for the three months ended June 30, 2000.


<PAGE>


Note E - Common stock:

 Stock purchase warrants
 -----------------------

   At June 30, 2000, the Company had outstanding  warrants to purchase 2,003,203
 shares of the  Company's  common  stock at prices  which  ranged from $0.50 per
 share to $4.00 per share.  The warrants are  exercisable at any time and expire
 on dates  ranging  from July 1, 2000 to  December  1, 2004.  At June 30,  2000,
 2,003,203 shares of common stock were reserved for that purpose.

 Common stock reserved
 ---------------------

   At June 30,  2000,  shares of common stock were  reserved  for the  following
purposes:

   Exercise of stock warrants                                       2,003,203
   Exercise and future grants of stock
      options and stock appreciation rights                           412,250
                                                                 --------------

                                                                    2,415,453
                                                                 ==============



Note F - Income taxes:

    The Company uses the liability  method of accounting  for income taxes under
the provisions of Statement of Financial Accounting Standards No. 109. Under the
liability  method,  a  provision  for income  taxes is  recorded  based on taxes
currently payable on income as reported for federal income tax purposes, plus an
amount which represents the change in deferred income taxes for the year.

    Deferred income taxes are provided for the temporary differences between the
financial  reporting basis and the tax reporting  basis of the Company's  assets
and  liabilities.  The major areas in which temporary  differences  give rise to
deferred  taxes  are  accounts   receivable,   accrued   liabilities,   start-up
expenditures,  accumulated  depreciation,  and net operating loss carryforwards.
Deferred  income taxes are classified as current or noncurrent  depending on the
classification  of the assets and  liabilities  to which they  relate.  Deferred
income taxes arising from temporary differences that are not related to an asset
or liability are  classified as current or noncurrent  depending on the years in
which the temporary differences are expected to reverse.

    The provision for income taxes consists of:

         Current income taxes                                  $      0

         Change in deferred income taxes due
            to temporary differences                                  0
                                                            ---------------

                                                               $      0
                                                            ===============




<PAGE>


Note F - Income taxes (continued):

 Deferred tax (liabilities) assets consist of the following:

    Accumulated depreciation                           $   (39,000)
                                                       ---------------

    Gross deferred tax liabilities                     $   (39,000)
                                                       ---------------

    Accrued liabilities                                $     7,000
    Start-up expenditures                                    1,000
    Net operating loss carryforward                      2,598,000
                                                       ---------------

   Gross deferred tax assets                           $ 2,606,000
   Valuation allowance                                  (2,567,000)
                                                       ---------------

   Net deferred tax assets                             $    39,000
                                                       ---------------

                                                       $         0
                                                       ===============


   The increase in the deferred tax valuation
      allowance is as follows:                         $   275,000
                                                       ===============

    The  Company  has  recorded a valuation  allowance  amounting  to the entire
deferred tax asset balance  because of the Company's  uncertainty  as to whether
the deferred tax asset is realizable. However, if the Company is able to utilize
the deferred tax asset in the future,  the valuation  allowance  will be reduced
through a credit to income.

    The  Company  has  available  at  June  30,  2000,  a  net  operating   loss
carryforward  of  approximately  $7,643,000  which can be used to offset  future
taxable income through the year 2021.

Note G- Stock option plan:

   On November 1, 1994,  the Company  adopted a stock award and  incentive  plan
which permits the issuance of options and stock appreciation  rights to selected
employees and independent  contractors of the Company. The plan reserves 450,000
shares of common  stock for grant and  provides  that the term of each  award be
determined by the committee of the Board of Directors  (Committee)  charged with
administering the plan.

   Under the terms of the plan,  options  granted may be either  nonqualified or
incentive stock options,  and the exercise  price,  determined by the Committee,
may not be less  than the  fair  market  value of a share on the date of  grant.
Stock appreciation  rights granted in tandem with an option shall be exercisable
only to the extent the  underlying  option is  exercisable  and the grant  price
shall be equal to the exercise price of the underlying option. At June 30, 2000,
options to  purchase  412,000  shares at  exercise  prices of $0.69 to $2.50 per
share were outstanding.  No stock  appreciation  rights had been granted at June
30, 2000.


<PAGE>


Note H - Stock options:

   The per  share  weighted-average  fair  value of stock  options  granted  was
determined  using  the  Black  Scholes   Option-Pricing   Model.  The  following
weighted-average assumptions were used in the pricing model:

                        Expected dividend yield              0.00%

                        Risk-free interest rate          5.69% - 6.02%

                        Expected life                     2.5 years to
                                                           3.5 years

                        Expected volatility                   139%

   The  Company  applies  APB  Opinion  No. 25 in  accounting  for its plan and,
accordingly, has recognized no compensation expense for stock options 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 under SFAS No. 123, the Company's net loss
and loss per share would have been increased to the proforma  amounts  indicated
below:

                        Net loss:
                          As reported                     $ (815,020)
                                                       ==============

                          Proforma                        $ (824,849)
                                                       ==============

                        Loss per common share:
                          As reported                     $    (0.06)
                                                       ==============

                          Proforma                        $    (0.07)
                                                       ==============


   Following is a summary of the stock award and incentive plan during the three
months ended June 30, 2000:


                                                  Number          Weighted
                                                    of            average
                                                  shares       exercise price
                                                ----------   -----------------

  Outstanding at March 31, 2000                  406,500          $     0.96

  Granted                                         15,000                2.50
  Exercised                                       (9,500)               1.00
                                                ----------   -----------------

  Outstanding at June 30, 2000                   412,000          $     1.02
                                                ==========   =================


  Options exercisable at June 30, 2000           295,083          $     0.94
                                                ==========   =================

  Weighted average fair value of
     options granted at June 30, 2000             15,000          $     2.13
                                               ===========  ==================


Note I- Commitments:

   The Company leases its office  facilities and various office  equipment under
operating  leases  expiring  through  December 2003.  Following is a schedule of
future minimum lease payments  required under the above  operating  leases as of
June 30, 2000:

<PAGE>

                 Year ending
                   June 30,                          Amount
              ----------------                   -------------

                  2001                            $ 114,353
                  2002                              116,250
                  2003                              112,679
                  2004                               53,576
                                                 -------------

                                                  $ 396,858
                                                 =============

      Total rent expense  charged to operations was $28,977 for the three months
ended June 30, 2000.

Note J- Barter transaction:

   On June 3, 1996, the Company entered into a media purchase  agreement for the
promotion of its products and services with Proxhill Marketing, Ltd. (Proxhill).
Under the terms of the agreement,  the Company committed to purchase  $1,200,000
of media  advertising  time in exchange for 200,000  shares of common stock at a
value of $4.00 per share, and $400,000 in cash. The agreement is for a period of
five  years.  For each  purchase of media  advertising  time,  the Company  will
receive  a barter  credit  equal to  66.67% of the  transaction  value  with the
remaining  balance  payable in cash.  A prepaid  barter  credit in the amount of
$761,018 is included in other  assets in the  accompanying  balance  sheets.  In
connection with this  agreement,  the Company issued to Proxhill 50,000 warrants
to  purchase  the  Company's  common  stock at a price of $4.00 per  share.  The
options expire June 3, 2001.

Note K- Going concern:

   The Company has incurred  substantial  operating  losses to date. The Company
has  raised,  and  intends to  continue  to raise,  additional  capital  through
subsequent offerings of its common stock in over-the-counter securities markets.

   On June 3, 1999, the Company entered into a software  license  agreement with
KMC Telecom Holdings, Inc. (KMC). Under the terms of the agreement, KMC paid the
Company an initial license fee of $570,000.  The agreement is for a period of 10
years and provides for a total of 39 installations and grants KMC the ability to
add up to 81 additional  installations.  The agreement also calls for KMC to pay
the Company a monthly  license  fee ranging  from $1,000 to $3,500 per month for
each software and hardware  installation  beginning in the 25th month after each
installation.  The  Company  anticipates  having the  initial  39  installations
completed by December 2000 which would  obligate KMC to pay the Company  monthly
license fees of $131,500, subject to certain adjustments, beginning January 2003
and continuing through January 2010.

   As of June 30, 2000,  the Company has entered into  fifteen  revenue  sharing
agreements  with various  telecommunication  service  providers  throughout  the
United States.  Generally, the agreements provide for the Company to receive 30%
to 70% of the revenue from the sale of the Company's services depending upon the
level of revenue generated.  The Company  anticipates to begin receiving revenue
from the agreements in September 2000.


<PAGE>







Note K - Going concern (continued):

   In view of these matters, realization of a major portion of the assets in the
accompanying  balance  sheet  is  dependent  upon  continued  operations  of the
Company,  which in turn is  dependent  upon the  Company's  ability  to meet its
financing  requirements,  and the success of its future  operations.  Management
believes  that actions  presently  being taken to meet the  Company's  financial
requirements  will  provide the Company the  opportunity  to continue as a going
concern.

Note L - Concentrations:

   Concentrations of credit risk
   -----------------------------

      At June 30,  2000,  the  Company had cash  balances  of $765,045  with one
   banking  institution,  which is in excess of the federally  insured amount of
   $100,000 per institution.  These balances are before considering  outstanding
   items.


<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, 2000. 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 Exchcange 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

         The  Company  began  operations  in  April  1995  as a  traditional  1+
long-distance  reseller. The need to distinguish itself from other resellers led
it  to  concentrate  on  enhanced  services  utilizing  voice  recognition  call
completion  technology.  The Company  contracted  with  Intervoice-Brite,  Inc.,
formerly known as Brite Voice Systems,  Inc.  ("Brite"),  to develop a switching
platform  that  incorporated  its service  applications  with voice  recognition
technology  acquired  through a licensing  agreement with Voice Control Systems,
Inc.

         Recognizing the declines in  telecommunications  service prices and the
decreasing margins being experienced in long distance sales, the Company decided
to sell its long distance  customer  base and assets in early 1997.  The Company
also  concluded that the  underlying  architecture  used by Brite to develop its
services  would not be  flexible  enough  to  continue  to  create a variety  of
services in the future.  Therefore,  the Company  reduced its staff and overhead
and began its focus on developing its own proprietary software.

         From June of 1997 until April of 1998,  all corporate  activities  were
focused on the  development and testing of services to be deployed to the public
through a platform the Company calls the VIP System.  In late April of 1998, the
first operational VIP System was collocated in a switch environment. The initial
sales activity  focused its efforts on introducing  the concept of voice dialing
to  prospective  customers to gauge  consumer  response with respect to pricing,
features and viability of the services provided.

         In December of 1998, the Company realized that the resources  necessary
to sell and market its services  directly to subscribers would require extensive
amounts of working  capital  and began  researching  venues  which  already  had
inherent  customer  bases.  The  first  distribution  channel  that the  Company
explored was the use of master  distributors in various cities and states around
the country.  The Company  believes  this will be a source of customer  addition
once the  Company is in the  position  to locate  its VIP  Systems in the master
distributor marketing areas. The second is through revenue sharing directly with
Incumbent Local Exchange Carriers  ("ILECs"),  Wireless  Communication  Carriers
("WCCs"),  and Competitive  Local Exchange  Carriers  ("CLECs").  This avenue is
extremely attractive to the Company because these entities already have customer
bases and the infrastructure to service large numbers of customers. To date, the
Company has signed twenty seven ILEC and WCC multi-year contracts.  One contract
has been  fully  implemented  and five are in the  system  acceptance  and early
marketing stages.

         The Company is still at an early  stage of  implementing  its  business
plan. It is subject to risks  inherent in the  establishment  and  deployment of
technology  with  which  the  consumer  has  very  little  experience.  As voice
recognition  becomes  more  prevalent  in  everyday  life,  such as in  computer
programs,  reservation systems and  telecommunications  information systems, the
public will be more apt to accept and utilize  its many  features.  In order for
the Company to succeed, it must secure adequate financial and human resources to
meet its requirements,  including adequate numbers of technical support staff to
provide  service for its customers;  establish and maintain  relationships  with
telecommunications   providers;   facilitate  integration  with  various  switch
environments;  establish a lead time for  delivery  of  hardware;  achieve  user
acceptance for its services; generate reasonable margins on its services; deploy
and  install  VIP  Systems  on a timely  and  acceptable  schedule;  respond  to
competitive  developments;  mitigate risk associated with obtaining  patents and
copyrights  and other  protections of  intellectual  property;  and  continually
update its  software  to meet the needs of end users.  Failure to achieve  these
objectives could adversely affect the Company's business,  operating results and
financial condition.

Results of Operations

         The Company  recorded a net loss of $815,020,  or $0.06 per share,  for
the period ended June 30, 2000,  compared to a net gain of $312,700 or $0.03 per
share, for the period ended June 30, 1999.

         Total Sales

         Total revenue for the period ended June 30, 2000, was  $6,608 compared
to $595,175 for the period  ended June 30,  1999.  During the three months ended
June 30, 2000, the Company's revenue consisted entirely of billing end-users for
services.  For the three  months  ended  June 30,  1999,  revenue  consisted  of
$570,000 from one-time license fees to KMC Telecom Holdings, $25,000 from master
distributor  fees,  and the remainder  from sales of services.  The reduction of
revenues  reflects the Company' move from a licensing  arrangement  to a revenue
sharing agreement with its customers.

         The Company  anticipates  that  revenues  from the sale of its services
will grow  gradually  in the second half of its fiscal year 2001 as it continues
to install VIP Systems in the ILECs and WCCs which have already  signed  revenue
sharing  agreements  and as VIP Systems are  purchased  and  installed  at KMC's
switch  locations.  The Company does not anticipate  substantial  revenues going
forward from the sale of master distributorships.

         Cost of Sales

         Cost of sales for the period ended June 30, 2000 was $8,949 compared to
$44,916 for the period ended June 30,  1999.  Cost of sales  consisted  100% for
network  infrastructure  such as collocations,  connectivity,  system access and
long distance to end-users  during the period ended June 30, 2000,  whereas cost
of sales  consisted  primarily  for direct costs  associated  with the licensing
agreement with KMC in the period ended June 30, 1999.

         Selling, General and Administrative

         Selling,  general and administrative expenses for the period ended June
30, 2000 were $811,529  compared to $233,175 for the period ended June 30, 1999.
The  increases  from 1999 to 2000 are due to increased  staffing and  additional
marketing efforts of the Company's Emma services to potential parties interested
in the Company's revenue sharing  agreements.  The Company expects that selling,
general and  administrative  expenses will continue to increase  through  fiscal
year 2001,  such  expenses to include  costs related to the number of employees,
office space  requirements and general overhead.  However,  the Company believes
that such expenses will not increase proportionately with revenue from sales.

         Research and Development

         The Company has not expensed any research and development costs for the
periods  stated  on its  financial  statements,  but has  capitalized  costs  of
$973,882 for  development of its software and hardware for the period ended June
30, 2000, in comparison to $492,467 for the period ended June 30, 1999.

         Extraordinary Items

         The Company has recognized  income from the  extinguishment  of debt of
$-0- and $12,056 for the period ended June 30, 2000 and 1999 respectively.

<PAGE>

         Income Taxes

         As of June 30, 2000, the Company had  cumulative  federal net operating
losses of approximately $7.6 million,  which can be used to offset future income
subject to federal income tax through the fiscal year 2021.

Liquidity and Capital Resources

         Throughout  fiscal 2000 and 2001,  the Company has continued to sustain
operating  losses  that  have  resulted  in the use of its  cash  reserves.  The
Company's cash and cash  equivalents at June 30, 2000 were $644,739  compared to
$390,731 at June 30, 1999.

         In June of 1997, the Company conducted a Regulation S offering and sold
$480,000 of 12% convertible debentures due December 25, 1997. From this offering
$320,000  was  received  in cash and a note  issued on  November  12,  1996 with
accrued  interest  valued at $160,000 which was exchanged for debentures in this
offering.  On February 19, 1998,  $160,000 of the  debentures was converted into
183,908  shares of the  Company's  common  stock.  On September  30,  1998,  the
remaining  $320,000 was converted  into 367,816  shares of the Company's  common
stock.

         In March of 1998 and again in May of 1998,  the Company  entered into a
sale leaseback  arrangement under which the Company sold two of its VIP Systems,
each for a  $100,000  and  leased  them  back for a period  of three  years.  In
November 1998, the Company agreed to issue 579,971 shares of common stock to the
lessor in  exchange  for the  release  of the then past due lease  payments  and
release of the future liabilities.

         In September of 1998, the Company borrowed $100,000 from a more than 5%
beneficial owner. The note was unsecured and bore interest at 10% per annum with
principal and interest due on various dates through  October 6, 1999.  This note
has been paid in full.

         From June of 1998 until January of 1999,  three  separate  shareholders
lent the Company varying amounts totaling  $193,000.  On June 18, 1999, the full
$193,000 was converted into 386,000 shares of the Company's common stock.

         From  December  of 1998  through  May of  1999,  the  Company  received
$195,000 from the sale of Master Distributorships to eight different entities.

         On March 31,  1999,  the Company  borrowed  $43,000 from a more than 5%
beneficial owner. The note was unsecured and bore interest at 12% per annum with
the principal and interest due on March 30, 2000. The note was convertible  into
shares of common  stock at a  conversion  price of $1.00 per share.  On June 16,
1999 the note was repaid in full.

         In April of 1999,  the Company  borrowed  $200,000 from three  separate
individuals.  The loans  accrue  interest at 12% per annum due at various  dates
between  April 7, 2000 and April 23, 2000.  On June 28, 1999,  $100,000 of these
notes were used to purchase  200,000  shares of the  Company's  common  stock by
paying  the  exercise  price  under  a  warrant  held  by one  of the  entities.
Twenty-five  thousand  dollars of a remaining  note plus  interest of $1,381 was
converted  into 26,381 shares of the Company's  common stock,  and the remaining
$75,000 plus interest of $3,353.76 was repaid to the note holders.

         On June 3, 1999, the Company entered into a software license  agreement
with KMC Telecom  Holdings,  Inc. (KMC).  Under the terms of the agreement,  KMC
paid the Company an initial  license fee of  $570,000.  The  agreement  is for a
period of 10 years and provides for a total of 39  installations  and grants KMC
the ability to add up to 81 additional  installations.  The agreement also calls
for KMC to pay the Company a monthly  license fee ranging  from $1,000 to $3,500
per month for each  software  and  hardware  installation  beginning in the 25th
month after each  installation.  The Company  anticipates  having the initial 39
installations  completed by December,  2000 which would  obligate KMC to pay the
Company monthly license fees of $131,500,  subject to certain adjustments and to

<PAGE>

KMC's right to terminate  the entire  contract on standard  events of default by
the Company, beginning January, 2003 and continuing through July, 2010.

         On July 1, 1999,  pursuant to Section 4(2) of the  Securities  Act, the
Company conducted an offering of 320,000 shares of the Company's common stock at
$1.25 per share providing the Company with $400,000 working capital.

         On December 22, 1999,  pursuant to Section 4(2) of the Securities  Act,
the Company  conducted an offering of 1,500,000  shares of the Company's  common
stock at $1.50 per share providing the Company with $2,250,000 working capital.

         On February 23, 2000,  pursuant to Section 4(2) of the Securities  Act,
the Company  conducted  an offering of 100,000  shares of the  Company's  common
stock at $2.00 per share providing the Company with $200,000 working capital.

         In contemplation  of additional  capital needs required to continue the
Company's  current  growth rate,  on February 15, 2000,  the Company  engaged an
investment  banking firm to act as a financial  advisor to assist the Company in
obtaining additional financing to expand its business.

Future Obligations

         During the next twelve months, the Company intends,  subject to raising
adequate capital, to substantially increase the marketing of its VIP Systems, to
introduce  new  services,  and to continue  refining  the  services it currently
provides.  Subject to the Company's ability to fund the cost, management expects
the Company to hire or contract with  approximately 15 additional persons during
the next twelve  (12)  months,  primarily  to support  its  expanding  marketing
activities and system  installations.  At August 10, 2000, the Company  employed
thirty-five (35) full time employees.

         The  ability of the  Company  to raise  capital  is, in the  opinion of
management,  the primary  constraint on the implementation of its business plan.
Management  estimates that during the next twelve (12) months,  the Company will
require approximately  $6,000,000 of equity and/or long term debt to finance its
costs of marketing, system deployment, and continued refinement of its services.
In addition,  the Company will be required to obtain  extensions  of its current
debt or raise  additional  funds of  approximately  $780,000 to retire its debt.
There is no assurance that the Company will be able to secure any such financing
or extensions of its current debt.

Year 2000 Compliance

         Many currently  installed  computer  systems and software  products are
coded to accept only two digit  entries in the date code field.  These date code
fields will need to accept four digit entries to distinguish  21st century dates
from 20th century dates. As a result,  many companies'  computer  systems and/or
software  may need to be  upgraded  or  replaced to comply with such "Year 2000"
requirements. Significant uncertainty exists in the software industry concerning
the potential effects associated with such compliance.

         The Company has reviewed its own  software  products and believes  that
there  will be no  adverse  impact  with the Year 2000 date  change.  All of the
Company's  products are designed to record,  store,  and process  calendar dates
occurring  before  and after  January  1, 2000 with the same full year  accuracy
(i.e. four numeric characters instead of two).

         An impact  analysis has been  conducted to identify the risk of failure
within the Company's in-house computer systems.  The Company believes that there
will be no adverse impact with the Year 2000 date change.  However, this risk to
the Company's business relates not only to the Company's  computer systems,  but
also to some degree to those of the Company's  suppliers and customers and there
is a risk that existing and  potential  customers may not purchase the Company's
products in the future if the  computer  systems of such  existing or  potential
customers are adversely impacted by the Year 2000 date changes.  The Company has
<PAGE>

developed a policy to ensure that all key  customers,  suppliers  and  strategic
partners  operate and provide  Year 2000  compliant  systems and  software.  The
Company has collected certifications from third parties on compliance.

          Based on the  information  to date, the Company has completed its Year
2000 compliance review and made necessary  modifications.  However, the issue is
complex and no business can guarantee  that there will be no Year 2000 problems.
Some commentators have stated that a significant amount of litigation will arise
out of Year 2000 compliance issues, and the Company is aware of a growing number
of lawsuits against other software vendors.  Because of the unprecedented nature
of such  litigation,  it is uncertain to what extent the Company may be affected
by it.

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company is not involved in any material legal proceedings.

Item 2.  Changes in Securities.

(a)      There have been no material changes in securities during the period

(b)  There  have been no  material  changes  in the class of  securities  or the
     rights of the holders of the registered securities.

(c)  Recent Sales of Unregistered Securities

     On April 6, 2000,  the Company  issued  9,500 shares of common stock of the
Company to Anthony Clure at an exercise price of $1.03 per share pursuant to the
exercise of an employee stock option.

     On April 14,  2000,  the  Company  issued  Scott V.  Ogilvie  a warrant  to
purchase  40,000  shares of common stock of the Company at an exercise  price of
$2.50  per share on or  before  April 14,  2003  related  to his  position  as a
director of the Company.

     On April 14,  2000,  the  Company  issued  Robert R.  Williams a warrant to
purchase  25,000  shares of common stock of the Company at an exercise  price of
$2.50 per share on or  before  April 14,  2003  related  to his  position  as an
officer and employee of the Company.

     On April 14, 2000,  the Company  issued an  aggregate of 15,000  options to
purchase  common  stock of the  Company at an  exercise  price of $2.50 to three
employees of the Company pursuant to the Company's option plan.

     All of the  transactions  referred  to in  this  section  are  exempt  from
registration under the Securities Act pursuant to Section 4(2) of the Securities
Act.  These  transactions  did not involve an  underwriter  and no  underwriting
discounts or commissions were paid.


Item 3.   Defaults upon Senior Securities.

None.

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

None.

Item 5.   Other Information.

None.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits


Exhibit
Number               Description of Exhibits


10.1*   Warrant Certificate No. 106 issued to Scott Ogilvie (10.1)
10.2*   Warrant Certificate No. 107 issued to Robert R. Williams (10.1)
27.1    Financial Data Schedule



*    Filed as an exhibit to the Company's  Form 10-KSB for the fiscal year ended
     March 31, 2000 (File No. 33-92894) and incorporated herein by reference.


(b)      Reports on Form 8-K

         None
<PAGE>


                                   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.


         August 14, 2000                        /s/ G. Ray Miller
------------------------------------            ------------------------------
        Date                                    G. Ray Miller
                                                President, Chief Executive
                                                Officer and Chairman of
                                                the Board of Directors
                                                (Principal Executive Officer)

         August 14, 2000                        /s/ Mary G. Merritt
------------------------------------            ------------------------------
         Date                                   Mary G. Merritt
                                                Secretary, Treasurer and
                                                Vice President of Finance
                                                (Principal Financial Officer)