##### Table of Contents

---



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, 2002.
| |  |  | ---------------------------------------



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 incorporation or organization) |  | (I.R.S. Employer Identification No.)



|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18,407,493 shares as of February 7, 2003.



Transitional Small Business Format  Yes ̈No  x



---



---

##### Table of Contents



INDEX



Preferred Voice, Inc.



|          
|----------
|Part I.   
|          
|Item 1.   
|          
|          
|          
|          
|          
|          
|          
|          
|          
|Item 2.   
|          
|Item 3.   
|          
|Part II.  
|          
|Item 1.   
|          
|Item 2.   
|          
|Item 3.   
|          
|Item 4.   
|          
|Item 5.   
|          
|Item 6.   
|          
|Signatures





---

##### Table of Contents



PREFERRED
VOICE, INC.

CONDENSED BALANCE SHEETS

DECEMBER 31, 2002 AND MARCH 31, 2002



|                                                                                                               |  | December 31, 2002 (unaudited) |           | March 31, 2002 (audited)
|-------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | ------------------------
|Assets                                                                                                         |  |                               |           |                         
|Current assets:                                                                                                |  |                               |           |                         
|Cash and cash equivalents                                                                                      |  | $                             | 154,874   |                         
|Accounts receivable                                                                                            |  |                               | 204,711   |                         
|Employee advances                                                                                              |  |                               | 1,561     |                         
|Prepaid expenses                                                                                               |  |                               | 27,240    |                         
|                                                                                                               |  |                               |           |                         
|Total current assets                                                                                           |  | $                             | 388,386   |                         
|                                                                                                               |  |                               |           |                         
|Property and equipment:                                                                                        |  |                               |           |                         
|Computer equipment                                                                                             |  | $                             | 1,709,185 |                         
|Furniture and fixtures                                                                                         |  |                               | 42,691    |                         
|Office equipment                                                                                               |  |                               | 62,997    |                         
|                                                                                                               |  |                               |           |                         
|                                                                                                               |  | $                             | 1,814,873 |                         
|Less accumulated depreciation                                                                                  |  |                               | 616,587   |                         
|                                                                                                               |  |                               |           |                         
|Net property and equipment                                                                                     |  | $                             | 1,198,286 |                         
|                                                                                                               |  |                               |           |                         
|Other assets:                                                                                                  |  |                               |           |                         
|Notes receivable                                                                                               |  | $                             | 4,500     |                         
|Capitalized software development costs, net of accumulated amortization of $707,561 and
$588,815, respectively |  |                               | 266,669   |                         
|Deposits                                                                                                       |  |                               | 23,019    |                         
|Trademarks and patents, net of accumulated amortization of $1,365 and $-0-,
respectively                       |  |                               | 74,843    |                         
|                                                                                                               |  |                               |           |                         
|Total other assets                                                                                             |  | $                             | 369,031   |                         
|                                                                                                               |  |                               |           |                         
|Total assets                                                                                                   |  | $                             | 1,955,703 |                         
|                                                                                                               |  |                               |           |                         



See
independent accountants review report.

The accompanying notes are an integral part of these statements.



1



---

##### Table of Contents



|                                                                                       |  | December 31, 2002 (unaudited) |             |   | March 31, 2002 (audited) |  
|-------------------------------------------------------------------------------------- |  | ----------------------------- | ----------- | - | ------------------------ | -
|Liabilities and stockholders
equity                                                   |  |                               |             |   |                          |  
|Current liabilities:                                                                   |  |                               |             |   |                          |  
|Accounts payable                                                                       |  | $                             | 287,808     |   |                          | $
|Accrued operating expenses                                                             |  |                               | 69,983      |   |                          |  
|Accrued vacation                                                                       |  |                               | 3,885       |   |                          |  
|Accrued payroll and payroll taxes                                                      |  |                               | 0           |   |                          |  
|Accrued interest payable                                                               |  |                               | 32,069      |   |                          |  
|Deferred revenue                                                                       |  |                               | 0           |   |                          |  
|Notes payable                                                                          |  |                               | 100,866     |   |                          |  
|Accrued lawsuit settlement                                                             |  |                               | 150,000     |   |                          |  
|                                                                                       |  |                               |             |   |                          |  
|Total current liabilities                                                              |  | $                             | 644,611     |   |                          | $
|                                                                                       |  |                               |             |   |                          |  
|Long-term debt                                                                         |  | $                             | 0           |   |                          | $
|                                                                                       |  |                               |             |   |                          |  
|Commitments and contingencies (Notes G and H)                                          |  |                               |             |   |                          |  
|                                                                                      
|Stockholders equity:                                                                  |  |                               |             |   |                          |  
|Common stock, $0.001 par value; 50,000,000 shares authorized; 18,407,493 shares
issued |  | $                             | 18,407      |   |                          | $
|Additional paid-in capital                                                             |  |                               | 17,817,465  |   |                          |  
|Accumulated deficit                                                                    |  |                               | (16,523,274 | ) |                          |  
|Treasury stock  22,500 shares at cost                                                 |  |                               | (1,506      | ) |                          |  
|                                                                                       |  |                               |             |   |                          |  
|Total stockholders equity                                                             |  | $                             | 1,311,092   |   |                          | $
|                                                                                       |  |                               |             |   |                          |  
|Total liabilities and stockholders equity                                             |  | $                             | 1,955,703   |   |                          | $
|                                                                                       |  |                               |             |   |                          |  



See
independent accountants review report.

The accompanying notes are an integral part of these statements.



2



---

##### Table of Contents



PREFERRED
VOICE, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED

DECEMBER 31, 2002 AND 2001



|                                         |  | Three months ended December 31, 2002 (unaudited) |          |   | Nine months ended December 31, 2002 (unaudited) |   |            | Three months ended December 31, 2001 (unaudited) |  |   | Nine months Ended December 31, 2001
(unaudited) |  
|---------------------------------------- |  | ------------------------------------------------ | -------- | - | ----------------------------------------------- | - | ---------- | ------------------------------------------------ |  | - | ----------------------------------------------- | -
|Sales                                    |  | $                                                | 577,724  |   |                                                 | $ | 1,606,516  |                                                  |  | $ | 565,402                                         |  
|Cost of sales                            |  |                                                  | 228,441  |   |                                                 |   | 585,314    |                                                  |  |   | 194,002                                         |  
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Gross profit                             |  | $                                                | 349,283  |   |                                                 | $ | 1,021,202  |                                                  |  | $ | 371,400                                         |  
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|General and administrative expenses      |  | $                                                | 617,695  |   |                                                 | $ | 2,228,476  |                                                  |  | $ | 1,150,502                                       |  
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Loss from operations                     |  | $                                                | (268,412 | ) |                                                 | $ | (1,207,274 | )                                                |  | $ | (779,102                                        | )
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Other income (expense):                  |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Interest income                          |  | $                                                | 560      |   |                                                 | $ | 5,116      |                                                  |  | $ | 0                                               |  
|Interest expense                         |  |                                                  | (1,266   | ) |                                                 |   | (3,766     | )                                                |  |   | (1,950                                          | )
|Other expense                            |  |                                                  | 0        |   |                                                 |   | (2,015     | )                                                |  |   | 0                                               |  
|Negotiated settlement                    |  |                                                  | 342,579  |   |                                                 |   | 342,579    |                                                  |  |   | 0                                               |  
|Lawsuit settlement                       |  |                                                  | (150,000 | ) |                                                 |   | (150,000   | )                                                |  |   | 0                                               |  
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Total other income (expense)             |  | $                                                | 191,873  |   |                                                 | $ | 191,914    |                                                  |  | $ | (1,950                                          | )
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Loss from operations before income taxes |  | $                                                | (76,539  | ) |                                                 | $ | (1,015,360 | )                                                |  | $ | (781,052                                        | )
|Provision for income taxes               |  |                                                  | 0        |   |                                                 |   | 0          |                                                  |  |   | 0                                               |  
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Net loss                                 |  | $                                                | (76,539  | ) |                                                 | $ | (1,015,360 | )                                                |  | $ | (781,052                                        | )
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Per share amounts:                       |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Loss from operations                     |  | $                                                | (0.01    | ) |                                                 | $ | (0.05      | )                                                |  | $ | (0.05                                           | )
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  
|Net loss per share                       |  | $                                                | (0.01    | ) |                                                 | $ | (0.05      | )                                                |  | $ | (0.05                                           | )
|                                         |  |                                                  |          |   |                                                 |   |            |                                                  |  |   |                                                 |  



See
independent accountants review report.

The accompanying notes are an integral part of these statements.



3



---

##### Table of Contents



PREFERRED
VOICE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED

DECEMBER 31, 2002 AND 2001



|                                          |  | 2002 (unaudited) |            |   | 2001 (unaudited) |  
|----------------------------------------- |  | ---------------- | ---------- | - | ---------------- | -
|Cash flows from operating activities:     |  |                  |            |   |                  |  
|Cash received from customers              |  | $                | 1,562,706  |   |                  | $
|Cash paid to suppliers and employees      |  |                  | (2,606,573 | ) |                  |  
|Interest received                         |  |                  | 5,116      |   |                  |  
|Interest paid                             |  |                  | (5,016     | ) |                  |  
|                                          |  |                  |            |   |                  |  
|Net cash used by operating activities     |  | $                | (1,043,767 | ) |                  | $
|                                          |  |                  |            |   |                  |  
|Cash flows from investing activities:     |  |                  |            |   |                  |  
|Capital expenditures                      |  | $                | (100,690   | ) |                  | $
|Increase in notes receivable              |  |                  | (4,500     | ) |                  |  
|Employee advances                         |  |                  | 1,077      |   |                  |  
|                                          |  |                  |            |   |                  |  
|Net cash used by investing activities     |  | $                | (104,113   | ) |                  | $
|                                          |  |                  |            |   |                  |  
|Cash flows from financing activities:     |  |                  |            |   |                  |  
|Proceeds from issuance of stock           |  | $                | 0          |   |                  | $
|Proceeds from note payable                |  |                  | 0          |   |                  |  
|Stock issuance costs                      |  |                  | 0          |   |                  |  
|                                          |  |                  |            |   |                  |  
|Net cash provided by financing activities |  | $                | 0          |   |                  | $
|                                          |  |                  |            |   |                  |  
|Net decrease in cash and cash equivalents |  | $                | (1,147,880 | ) |                  | $
|Cash and cash equivalents:                |  |                  |            |   |                  |  
|Beginning of period                       |  |                  | 1,302,754  |   |                  |  
|                                          |  |                  |            |   |                  |  
|End of period                             |  | $                | 154,874    |   |                  | $
|                                          |  |                  |            |   |                  |  



See
independent accountants review report.

The accompanying notes are an integral part of these statements.



4



---

##### Table of Contents



|                                                                            |  | 2002 (unaudited) |            |   | 2001 (unaudited) |  
|--------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | -
|Reconciliation of net loss to net cash used by operating activities:        |  |                  |            |   |                  |  
|Net loss                                                                    |  | $                | (1,015,360 | ) |                  | $
|                                                                            |  |                  |            |   |                  |  
|Adjustments to reconcile net loss to net cash used by operating
activities: |  |                  |            |   |                  |  
|Depreciation and amortization                                               |  | $                | 329,330    |   |                  | $
|Gain on sale of fixed assets                                                |  |                  | 0          |   |                  |  
|Changes in assets and liabilities:                                          |  |                  |            |   |                  |  
|Increase in accounts receivable                                             |  |                  | (41,771    | ) |                  |  
|Decrease in inventory                                                       |  |                  | 0          |   |                  |  
|Increase in deposits                                                        |  |                  | 0          |   |                  |  
|Decrease in prepaid expenses                                                |  |                  | 1,171      |   |                  |  
|Increase in patents and trademarks                                          |  |                  | (22,673    | ) |                  |  
|Decrease in accounts payable                                                |  |                  | (45,828    | ) |                  |  
|Increase in accrued expenses                                                |  |                  | 95,982     |   |                  |  
|Increase (decrease) in customer deposits                                    |  |                  | (344,618   | ) |                  |  
|                                                                            |  |                  |            |   |                  |  
|Total adjustments                                                           |  | $                | (28,407    | ) |                  | $
|                                                                            |  |                  |            |   |                  |  
|Net cash used by operating activities                                       |  | $                | (1,043,767 | ) |                  | $
|                                                                            |  |                  |            |   |                  |  
|Supplemental schedule of non-cash investing and financing activities:       |  |                  |            |   |                  |  
|Issuance of common stock in exchange for debt                               |  | $                | 0          |   |                  | $
|                                                                            |  |                  |            |   |                  |  



See
independent accountants review report.

The accompanying notes are an integral part of these statements.



5



---

##### Table of Contents

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 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, 2002, Form 10KSB and should be read in conjunction with the financial statements for the three and nine months ended December 31, 2002,
contained herein.



The financial information
included herein as of December 31, 2002, and for the three and nine-month periods ended December 31, 2002 and 2001, have 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.



On December 26, 2001, the American Institute of Certified
Public Accountants (AICPA) issued Statement of Position (SOP) No. 01-06, Accounting by Certain Entities (Including Entities with Trade Receivables) That Lend to or Finance the Activities of Others. This SOP provides certain presentation and
disclosure changes for entities with trade receivables and is effective for periods beginning January 1, 2002, and thereafter. The Company has not fully analyzed the provisions of the SOP, but does not believe adoption will have a material effect on
the financial statements.



At December 31, 2002,
the Company had cash balances of approximately $235,000 in banking institutions in excess of federally insured amounts. These balances are before considering outstanding items.



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



6



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





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



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.



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



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. 101, Revenue Recognition in Financial Statements. 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.



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, 2002 and 2001, no
computation of diluted EPS has been performed.



Loss per share is based on the weighted average number of shares outstanding of 18,407,493 and 16,736,507 for the three months ended December 31, 2002 and 2001, respectively, and 18,407,493 and 16,015,566 for the nine months ended
December 31, 2002 and 2001, respectively.



7



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





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



Income taxes



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



Trademarks and patents



Certain costs incurred for the registration of trademarks and patents are capitalized and amortized. The amortization is calculated using
the straight-line method, beginning when it is approved and continuing over its estimated useful or legal life, generally between 5 and 20 years.



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 Assetseffective 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 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.



Reclassification



Certain amounts were reclassified in the prior years. The purpose of the reclassification is to give a more accurate representation of the Companys operations. The reclassification did not affect the representation of the
Companys overall performance or net income or losses.



Reporting comprehensive income and operating segments



The Company has adopted the provisions of SFAS No. 130, Reporting Comprehensive Incomeand 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.



8



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





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



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.



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 plans to adopt 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. Management has not fully
assessed the effect of FASB No. 145; however, it believes that the adoption will result in a reclassification of extraordinary gains into ordinary income, with no effect on net income.



Note C  Notes payable:



Notes payable consist of the following:



|                                                                                                                                                                                                                              |  | December 31, 2002 |         | March 31, 2002
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | --------------
|Note payable, Brite Voice Systems, Inc., dated January 31, 1997. Note is
unsecured.                                                                                                                                           |  | $                 | 50,866  |               
|Note payable, 10% interest rate. Principal and accrued interest payable on September
30, 2003. Convertible into shares of the Companys common stock at a conversion rate of $2.00 of indebtedness per share of common stock. |  |                   | 50,000  |               
|                                                                                                                                                                                                                              |  |                   |         |               
|                                                                                                                                                                                                                              |  | $                 | 100,866 |               
|                                                                                                                                                                                                                              |  |                   |         |               



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 notes payable was $1,250, $2,500, $-0- and $-0-
for the three and nine months ended December 31, 2002 and 2001, respectively.



9



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





Note D  Long-term
debt:



Long-term debt consists of the
following:



|                                                                                                                                                                                                                              |  | December 31, 2002 |   | March 31, 2002
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | - | --------------
|Note payable, 10% interest rate. Principal and accrued interest payable on September
30, 2003. Convertible into shares of the Companys common stock at a conversion rate of $2.00 of indebtedness per share of common stock. |  | $                 | 0 |               
|                                                                                                                                                                                                                              |  |                   |   |               



Interest
expense charged to operations related to the long-term debt was $-0-, $1,250, $1,950 and $3,800 for the three and nine months ended December 31, 2002 and 2001, respectively.



Note E  Common stock:



Common stock authorized



On September 29, 2000, the Companys Board of Directors adopted a resolution to increase the number of authorized shares of common
stock from 20,000,000 to 50,000,000. The increase in authorized shares was approved by the Companys stockholders on September 21, 2001.



Stock purchase warrants



At December 31, 2002, the Company had outstanding warrants to purchase 4,403,703 shares of the Companys common stock at prices which
ranged from $0.50 per share to $3.53 per share. The warrants are exercisable at any time and expire through November 20, 2006. At December 31, 2002, 4,403,703 shares of common stock were reserved for that purpose.



Common stock reserved



At December 31, 2002, shares of common stock were reserved for
the following purposes:



|Exercise of stock warrants                                                                                |  | 4,403,703
|--------------------------------------------------------------------------------------------------------- |  | ---------
|Exercise of future grants of stock options and stock appreciation rights under the 1994
stock option plan |  | 337,132  
|Exercise of future grants of stock options and stock appreciation rights under the 2000
stock option plan |  | 2,000,000
|Conversion of note payable                                                                                |  | 25,000   
|                                                                                                          |  |          
|                                                                                                          |  | 6,765,835
|                                                                                                          |  |          



10



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





Note F 
Negotiated settlement and lawsuit settlement:



The Company had been the plaintiff and counter-defendant in a lawsuit with a former customer. The former customer placed a cash deposit for an order of certain items with the Company. After the customer received the first stage of
its order, the customer wanted to cancel the order. The Company claimed that under the terms of the order, the customer was not entitled to a refund of its deposits as deferred revenue.



The lawsuit proceeded to trial and the jury returned its verdict; but prior to any judgment being signed by
the court, the parties announced that all matters in dispute between them had been resolved by an agreement. The court accepted the agreement. The agreement called for the Company to pay $150,000 to the customer no later than October 31, 2003. The
Company has recognized $342,579 of previously deferred revenue related to the customers deposits.



Note G  Commitments:



The Company leases its office facilities and various office equipment under operating leases expiring through December 2005. Following is a schedule of future minimum lease payments required under the
above operating leases as of March 31, 2002:



|Year ending March 31, |  | Amount
|--------------------- |  | ------
|2003                  |  | $     
|2004                  |  |       
|2005                  |  |       
|2006                  |  |       
|                      |  |       
|                      |  | $     
|                      |  |       



Total
rent expense charged to operations was $51,975, $155,967, $52,510 and $150,633 for the three and nine months ended December 31, 2002 and 2001, respectively.



Note H  Operations and managements intent:



Operating losses



The Company has incurred substantial operating losses to date. These losses have significantly depleted the Companys cash balances.
The Company does not have enough cash to continue to fund large operating losses. The ability of the Company to continue as a going concern is dependent on its ability to eliminate these operating losses.



Overview



The Company 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, the Company decided to sell their long distance customer base and assets in early 1997. Since
June 1997, they have focused solely on the development, testing, and deployment of voice activated telecommunications services that would allow any consumers the ability to dial calls using their voice.



In December 1998, the Company realized that it would need
extensive amounts of working capital to sell and market its services directly to individual consumers. Therefore, the Company began researching venues which already had inherent customer or subscriber 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 the distributors will be a source of direct subscriber addition once it includes the master distributor marketing area in the
network of a VIP system, the first



11



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS





Note H 
Operations and managements intent (continued):



deployment of which began in Miami, Florida in March 2002 with Boston, Massachusetts opening January 1, 2003. The second distribution channel is directly with (1) Incumbent Local Exchange Carriers or local telephone companies, (2)
Wireless Communication Carriers or cell phone companies and (3) 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. The third distribution channel is through the network services division which provides third party service application providers access to wireline and wireless carriers through
voice over internet protocol (VOIP) network hosted by a web-hosting provider.



The Company first attempted to sell its hardware and license application software but after only one such agreement with KMC Telecom Holdings, Inc. (KMC) decided to pursue revenue sharing
whereby the Company provides all hardware, software applications and support in exchange for a portion of revenue generated from the service provided by the customer to their subscribers. The entire sales force focuses on marketing revenue sharing
agreements and, to date, has signed forty-nine (49) local telephone company and cell phone company multi-year contracts. Seventeen contracts have been fully implemented so that the systems installed pursuant to such contracts are already generating
revenues. As of December 31, 2002, these seventeen contracts were generating revenues of approximately $180,000 per month. The revenue sharing agreement, and not the sale of hardware, is the primary method in which the Company intends to contract
with customers to generate revenue going forward. Since deployments began in October 2000, the Company has experienced increased revenues each month, but with a new technology it is difficult to project continued satisfaction with the product;
therefore, revenues will fluctuate with subscriber additions and deletions. Two contracting phone companies are in the system acceptance and early marketing stages, and the Company should generate revenues from these contracts in the fourth quarter
of the fiscal year ending March 31, 2003.



The
Company is still at an early stage of implementing their business plan. It is subject to risks inherent in the establishment and deployment of technology with which consumers have limited experience. The Company believes their services are services
that any consumer who uses a phone can utilize. For example, any cell phone user who wants to speak a name or use the dial number feature without punching buttons on his cell phone would be a user, or a company who wants their employees accessed by
the caller saying an employee name instead of asking the caller to punch in an extension or spell a name on the key pad. These services are generic to cell phone users as well as landline users, children as well as the elderly. As voice recognition
becomes more prevalent in everyday life, such as in computer programs, reservation systems and telecommunications information systems, the Company believes the public will be more apt to accept and utilize voice-related features. In order to
succeed, the Company must:



| |  | secure adequate financial and human resources to meet requirements, including adequate numbers of technical support staff to provide service for their phone company
customers;
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | establish and maintain relationships with phone companies;
|- |  | ----------------------------------------------------------

| |  | make sure the VIP system works with the telephone switches of all of the major manufacturers;
|- |  | ---------------------------------------------------------------------------------------------

| |  | establish a lead time for delivery of hardware;
|- |  | -----------------------------------------------

| |  | achieve user acceptance for services;
|- |  | -------------------------------------

| |  | generate reasonable margins on services;
|- |  | ----------------------------------------

| |  | deploy and install VIP systems on a timely and acceptable schedule;
|- |  | -------------------------------------------------------------------

| |  | respond to competitive developments;
|- |  | ------------------------------------

| |  | mitigate risk associated with technology by obtaining patents and copyrights and other protections of the Companys intellectual property; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | continually update software to meet the needs of consumers.
|- |  | -----------------------------------------------------------



Failure to achieve these objectives could adversely affect business, operating results and financial condition.



12



---

##### Table of Contents

PREFERRED VOICE, INC.

NOTES TO FINANCIAL STATEMENTS



Note H  Operations and managements intent (continued):



Future Obligations



The Company projects its working capital needs to be
$1,200,000 over the next six months for corporate overhead and equipment purchases to continue deployment of its systems in carrier locations. 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 continued growth for the next six months. Such projections are based on continued growth from current customers and customers which are already under contract utilizing
the revenue rates that the Company has experienced over the past six months with currently installed customers 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 reduction of current overhead. However, any projections of future cash needs and cash flows are subject to substantial uncertainty.



On May 31, 2002, the Company implemented a thirty-three
percent (33%) reduction in force.



13



---

##### Table of Contents



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,
2002. 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



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. Since June of 1997, we have focused solely 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.



In December of 1998, we realized that we would need extensive amounts of working capital to sell and market
our services directly to individual consumers. Therefore, we began researching venues which already had inherent customer or subscriber bases. The first distribution channel that we explored was the use of master distributors in various cities and
states around the country. We believe the distributors will be a source of direct subscriber addition once we include the master distributor marketing area in the network of a VIP system, the first deployment of which began in Miami, Florida in
March of 2002 with Boston, Massachusetts opening January 1st, 2003. The second 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. Our third distribution channel is through our network services division which provides third party service
application providers access to wireline and wireless carriers through our voice over internet protocol (VOIP) network hosted by a web hosting provider.



We first attempted to sell our hardware and license our application software but after only one such agreement with KMC Telecom Holdings,
Inc. (KMC) we decided to pursue revenue sharing whereby we provide all hardware, software applications and support in exchange for a portion of revenue generated from the service provided by our customer to their subscribers. Our entire
sales force focuses on marketing our revenue sharing agreements and, to date, we have signed forty nine (49) local telephone company and cell phone company multi-year contracts. Seventeen contracts have been fully implemented so that the systems
installed pursuant to such contracts are already generating revenues for us. As of December 31, 2002, these seventeen contracts were generating revenues of approximately $180,000 per month. The revenue sharing agreement, and not the sale of our
hardware, is the primary method in which we intend to contract with customers to generate revenue going forward. Since our deployments began in October of 2000, we have experienced increased revenues each month but with a new technology it is
difficult to project continued satisfaction with the product; therefore, revenues will fluctuate with subscriber additions and deletions. Two contracting phone companies are in the system acceptance and early marketing stages, and we should generate
revenues from these contracts in the fourth quarter of the fiscal year ending March 31, 2003.



We are still at an early stage of implementing our business plan. It is subject to risks inherent in the establishment and deployment of technology with which consumers have limited experience. We
believe our services are services that any consumer who uses a phone can utilize. For example, any cell phone user who wants to speak a name or use our dial number feature without punching buttons on his cell phone would be a user, or a



14



---

##### Table of Contents

company who wants their employees accessed by the caller saying an employee name instead of asking the
caller to punch in an extension or spell a name on the key pad. Our services are generic to cell phone users as well as land line users, children as well as the elderly. As voice recognition becomes more prevalent in everyday life, such as in
computer programs, reservation systems and telecommunications information systems, we believe the public will be more apt to accept and utilize voice-related features. In order for us to succeed, we must:



| |  |  | 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;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | establish and maintain relationships with phone companies;
| | - |  | ----------------------------------------------------------



| |  |  | make sure the VIP system works with the telephone switches of all of the major manufacturers;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | establish a lead time for delivery of hardware;
| | - |  | -----------------------------------------------



| |  |  | achieve user acceptance for our services;
| | - |  | -----------------------------------------



| |  |  | generate reasonable margins on our services;
| | - |  | --------------------------------------------



| |  |  | deploy and install VIP systems on a timely and acceptable schedule;
| | - |  | -------------------------------------------------------------------



| |  |  | respond to competitive developments;
| | - |  | ------------------------------------



| |  |  | mitigate risk associated with our technology by obtaining patents and copyrights and other protections of our intellectual property; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | continually update our software to meet the needs of consumers.
| | - |  | ---------------------------------------------------------------



Failure to achieve these objectives could adversely affect our business, operating results and financial condition.



Results of Operations



We recorded a net loss of $1,015,360 or $0.05 per share, for
the nine-month period ended December 31, 2002, compared to a net loss of $2,951,709 or $0.18 per share, for the nine-month period ended December 31, 2001. For the three-month period ended December 31, 2002, we recorded a net loss of $76,539, or $.01
per share compared to a net loss of $781,052 or $.05 per share for the three-month period ended December 31, 2001.



Total Sales



Total revenue for the nine-month period ended December 31, 2002, was $1,606,516 compared to $860,582 for the nine-month period ended
December 31, 2001. Total revenue for the three-month period ended December 31, 2002, was $577,724 compared to $565,402 for the three-month period ended December 31, 2001. Revenues in both the nine-month and three-month periods for the period ended
December 31, 2002 consisted entirely of revenue sharing receipts from our customer phone companies and billing our direct end-users for individual services. Revenues in both the nine-month and three month periods for the period ended December 31,
2001 included $206,000 of one-time network service fees. The increase of revenues reflects our commercial deployment of our services through our revenue sharing agreement with our customers.



We anticipate that revenues from the sale of our services will
continue to grow gradually throughout fiscal year 2003 as we continue to install VIP systems in the service areas for the local telephone companies and cell phone companies which have already signed revenue sharing agreements.



15



---

##### Table of Contents



Cost of
Sales



Cost of sales for the nine-month
period ended December 31, 2002 was $585,314 compared to $267,547 for the nine-month period ended December 31, 2001. Cost of sales for the three-month period ended December 31, 2002 was $228,441 compared to $194,002 for the three-month period ended
December 31, 2001. 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, 2002 were $2,228,476 compared to $3,540,944 for the nine-month period ended December 31, 2001. Selling, general and administrative expenses for the three-month period ended December 31, 2002 were $617,695
compared to $1,150,502 for the three-month period ended December 31, 2001. The decrease from 2001 to 2002, are due to decreases in staffing. We expect that selling, general and administrative expenses will remain steady through fiscal year 2003,
such expenses to include costs related to the number of employees, office space requirements and general overhead. However, we believe that such expenses will begin to increase again in fiscal year 2004 as the company expects to market new services.



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, 2002 and 2001, software development costs capitalized were $63,941 and $178,845, respectively. The amortization of
capitalized software development costs for the periods ended December 31, 2002 and 2001 was $122,331 and $196,051 respectively.



Other Income and Expense



The Company settled a lawsuit on November 18, 2002 that will require the company to pay $150,000 to a former customer no later than
October 1, 2003. The company has recognized $342,579 of previously deferred revenue related to the customers deposit.



Income Taxes



As of December 31, 2002, we had cumulative federal net operating losses of approximately $16 million, which can be used to offset future
income subject to federal income tax through the fiscal year 2022. Net operating loss limitations may be imposed if changes in our stock ownership 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, 2002 were
$154,874, a decrease of $1,147,880 from $1,302,754 at March 31, 2002. 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.



We have relied on the issuance of stock to fund our operations
since January of 1997 when we sold our long-distance resale operation. We began collecting revenues from our revenue sharing agreements in January of 2001. These revenues are approximately $180,000 per month and we expect these to continue to rise
as we continue to deploy new customers and our current customers continue to provide services to their customers.



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



16



---

##### Table of Contents

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.



Future Obligations



We project our working capital needs to be $1,200,000 over the next six months for corporate overhead and equipment purchases to continue
to deploy our systems in carrier locations. 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 steady growth for
the next six months. Such projections have been based on revenue trends from current customers and customers which are already under contract utilizing the revenue rates that we have experienced over the past six months with our currently installed
customers 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.



We do not make any assurance that we will be able to raise any additional capital or to raise capital on terms satisfactory to us. On May
31, 2002, we implemented a thirty-three (33) percent reduction in force and at January 31, 2003 we employed fifteen (15) employees, fourteen (14) that were full time employees.



Item 3.
Controls and Procedures



| | 1. |  | Evaluation of disclosure controls and procedures. Our principal executive officer and our principal financial officer, after evaluating the effectiveness of our
disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d- 14(c) as of a date (the Evaluation Date) within 90 days before the filing date of this quarterly report, have concluded that
as of the Evaluation Date our disclosure controls and procedures were adequate and designed to ensure that material information relating to us and our consolidated subsidiaries would be made known to them by others within those entities.
| | -- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 2. |  | Changes in internal controls. There were no significant changes in our internal controls or, to our knowledge, in other factors that could significantly affect our
disclosure controls and procedures subsequent to the Evaluation Date.
| | -- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



PART II.
OTHER INFORMATION



Item 1.
Legal Proceedings.



With
respect to the KMC Telecom Holdings litigation which was reported in the Form 10-KSB, on September 16, 2002 the lawsuit against KMC went to trial in the 101stDallas District Court, Texas. The jury concluded that there was no breach by KMC in canceling the contract with Preferred but that Preferred had breached the contract with KMC by not completing system
testing within the 90-day testing period specified in the contract and that Preferred was justified in its breach and therefore excused from paying damages to KMC. In regards to attorneys fees, KMC and Preferred have agreed to a settlement
agreement whereby Preferred will pay KMC $150,000 no later than October 1, 2003, which was memorialized in the judgment of the 101stDallas District Court and a related settlement agreement on November 18, 2002.



With respect to the Proxhill Marketing Ltd. litigation which was reported in the Form 10-KSB, Preferred Voice and Proxhill reached an agreement to dismiss both the Texas litigation and the Colorado
litigation after Proxhill provided verified financials that it was unable to respond in damages once Preferred Voice prevailed in



17



---

##### Table of Contents

either lawsuit. The Texas litigation was dismissed on September 30, 2002 and the Colorado claim and
counterclaim were dismissed on October 11, 2002.



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
|--- |  | ---------------------------------------



None



Item 3.
Defaults upon Senior Securities.



None.



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



None



Item 5.
Other Information.



On
January 15, 2003, William J. Schereck resigned his position as President and Chief Operating Officer. The Company is the process of naming his replacement.



Item 6.
Exhibits and Reports on Form 8-K



|(a) |  | Exhibits
|--- |  | --------



|Exhibit Number |  | Exhibit Description                                                                                                  
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------
|              
|99.1           |  | CertificationPursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
of the Sarbanes-Oxley Act of 2002
|              
|99.2           |  | CertificationPursuant 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
|--- |  | -------------------



None



18



---

##### Table of Contents



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 13,
2003 |  |  |  | /s/ Mary G. Merritt                                                                                  
|Date              |  |  |  | Date Mary G. Merritt Secretary, Treasurer and Vice President of Finance (Principal Executive Officer)







19



---

##### Table of Contents



CERTIFICATIONS



I, Mary G. Merritt, certify that:



1. I have
reviewed this quarterly report on Form 10-QSB of Preferred Voice, Inc.;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.



4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:



a. designed such disclosure controls and
procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b. evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;



5. The registrants other certifying
officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):



a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



/s/ Mary G. Merritt



Mary G. Merritt

Vice President Finance

(Principal Executive Officer)

February 13, 2003



20



---

##### Table of Contents



I, Ernest Gillespie, certify that:



1. I have
reviewed this quarterly report on Form 10-QSB of Preferred Voice, Inc.;



2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this quarterly report;



3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of
operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.



4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
registrant and we have:



a. designed such disclosure controls and
procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b. evaluated the effectiveness of the registrants
disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the Evaluation Date); and



c. presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;



5. The registrants other certifying
officers and I have disclosed, based on our most recent evaluation, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent function):



a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls; and



b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrants internal controls; and



6. The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



/s/ Ernest Gillespie



Ernest Gillespie

Controller

(Principal Financial Officer)

February 13, 2003



21