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

                                  Form 10-QSB/A
                                (Amendment No.1)

{ X }  Quarterly  Report  Pursuant  to Section 13 or 15 (d) of the  Securities
     Exchange Act of 1934 for the Period Ended September 30, 1996. 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/telecom, Inc.

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

12655 N. Central Expwy, Suite 800
Dallas,  TX                                                      75243
(Address of Principal Executive                               (Zip Code)
            Offices)

                                    (214)  458-9950
                  (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 Issuers Involved in Bankruptcy
                   Proceedings During the Preceding Five Years

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be filed by  Sections  12, 13, or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by the Court.     Yes           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 -  10,851,142  Shares as of October 31, 1996.

Transitional Small Business Format    Yes   X                 No




<PAGE>
     Item 2.Item 2 contained in the Registrant's Form 10-QSB, dated November 19,
1996, for  the quarter ended September 30, 1996 is replaced  by Item 2 set forth
below:
                 Item 2. Management's Discussion and Analysis of
                  Financial Condition and Results of Operations

The following  discussion and analysis  should be read in  conjunction  with the
Financial  Statements  of  the  Company  and  related  notes  thereto  appearing
elsewhere in this filing.

Results of Operations

Preferred/telecom,  Inc. (the Company)  commenced  business on May 13, 1994, and
was in the development  stage through August 1, 1995. During the period from its
inception  until  March 31,  1995,  the end of the fiscal  year,  the  Company's
activities  consisted entirely of developing and implementing its business plan,
including  developing its product service  offerings,  formulating its marketing
strategies and operations,  negotiation of agreements  necessary to its proposed
operations and hiring personnel. The Company began its sales activities in April
1995 and had no  revenues  during the period of May 13, 1994  through  March 31,
1995. The initial sales activity  involved  introducing  the Company's  proposed
services to  prospective  customers to gauge  consumer  response with respect to
pricing , features and  viability of the services.  The Company began  enrolling
SecureCard  customers  in  August  1995 and has  been  providing  long  distance
services,  including  SecureCard and  traditional 1+ and 800 services since that
time.

In the six months period ended September 30, 1995 the Company booked revenues of
$ 14,450 for services, and the direct costs associated with generating sales was
$ 93,851.  During the six months ended  September 30, 1996,  the Company  booked
revenues of $ 478,910.  Of this amount,  19% was  attributed  to the  SecureCard
product.  The  remainder  of the  Company's  revenue was derived from 1+ and 800
service. Direct cost of sales for the six month period ending September 30, 1996
was  $583,896  or  121.9%  of  sales.  Of that  amount,  $  127,500  related  to
contractual  minimums,  very  little of which  represented  payment  for  actual
services. In part, this is due to the costs of the basic infrastructure that the
Company has put in place and is required regardless of the level of sales.

During the fiscal year ended  March 31,  1996,  the Company  booked $ 159,004 in
revenue and $ 344,310 in direct expenses  associated with the sale of SecureCard
and  other  telecommunication  services.  Of these  direct  expenses,  $ 140,000
related to paying contractual  minimums.  For the six months ended September 30,
1996,  sales  and  marketing  expenses  were  113% of  sales,  and  general  and
administrative   expenses  were  147%  of  sales.   Each  of  these  ratios  are
considerably less than the equivalent ratios for the fiscal year ended March 31,
1996, down from 722.1% and 697.2% respectively.

The Company has  reevaluated  its  marketing  efforts and product  strategies as
expenses  continue  to exceed  revenues.  The Company  now  recognizes  that the
services it pioneered are applicable  not only in the long distance  markets but
also in the  newly-competitive  local  calling  arena and the realm of  wireless
communications.  The  Company  plans on  divesting  itself of its long  distance
business.  The strategic  focus will be on providing its  technology to domestic
and international  interexchange carriers and other  telecommunications  service
providers  who  wish  to  offer  speech   recognition-enhanced   services  as  a
value-added product to their customers, and to corporations who wish to make the
convenience of speech recognition available to its employees.

Liquidity and Capital Resources

The  Company's  cash and cash  equivalents  at September 30, 1996 were $ 18,250.
During the period from  inception , May 1994 through  September  30,  1995,  the
Company's operations were funded primarily through loans of $ 1,255,000 of which
an aggregate of $ 822,500 was borrowed  from the Company's  officers,  directors
and a greater than 5% beneficial  owner. In March,  1995 the Company conducted a
private offering of convertible  debentures in which debentures due in September
1996 with an aggregate principal amount of $ 122,500 were sold. In October, 1995
$ 12,500 of those debentures were converted to stock. In July, 1996, $ 15,000 of
those  debentures  were converted to stock. By terms of the debenture , when the
debenture came due on September 27, 1996 the holder was due principal,  interest
and penalties for a sum due of $ 125,000.  Of this amount  $60,000 was converted
to 40,000 shares of the Company's common stock (the "Common  Stock"), $0.001 par
value per share, and $65,000 of the debenture was replaced by a convertible note
due March 27, 1997 bearing  interest at a rate of 8.5% per annum and convertible
into shares of Common Stock at a rate of $1.50 per share.  In October,  1995 the
Company  conducted a Regulation S offering and sold  1,000,000  shares of Common
Stock at $ 1.50 per share,  generating $ 1,500,000 in capital.  In addition,  in
October and
                                       -1-
<PAGE>
November, 1995, in accordance with Regulation D under the Securities Act of 1933
(the "Securities  Act"), the Company conducted an offering of eight percent (8%)
convertible  debentures  due March  31,  1997 with  interest  payable  quarterly
commencing  December 31, 1995.  Under the terms of the debenture  offering the $
375,000  generated  was  converted  to  Common Stock in  November,  1995.   From
this $  1,875,000  generated,  notes  due to  non-affiliates  in the  amount  of
$300,000.  were repaid with associated interest. The remainder was available for
working capital and payment of vendor payables.

In April 1996 the  Company  commenced a private  offering of notes and  warrants
("Units")  with  maximum  proceeds  to the  Company of  $800,000  with each Unit
consisting of (i) a note in principal face amount of $10,000 bearing interest at
a rate of 7% per annum,  with principal and interest  payable two years from the
date of issue and (ii)  warrants to purchase  5,000 shares of Common  Stock,  at
$1.50 per share at any time within two (2) years after issuance of the warrants.

On June 3, 1996,  the terms of the offering were amended to increase the size of
the offering  from 80 Units to a maximum of 150 Units or proceeds to the Company
of $1,500,000. Also in this amendment the Company altered the repayment terms to
the promissory note by means of an addendum to the note stating that the Company
contemplated  raising  capital  in an  underwritten  public  offering  and after
payment of expenses of the underwriting would apply proceeds of such offering to
repayment of the notes issued in the private offering. The funds being sought in
the offering were only intended to permit the Company to continue operations and
meet its  material  operating  obligations  while it sought  additional  funding
sufficient for long term  implementation  of its business plan. The offering was
closed on  September  30,  1996,  after the  Company had raised $ 875,000 in the
private placement.

The Company  entered into a letter of intent with an investment  banking firm to
underwrite  on a firm  commitment  basis,  a  proposed  Four  Million  Dollar ($
4,000,000)  public offering of the Company's  securities.  The  underwriting was
subject  to  numerous  conditions  upon which  ultimately  the  Company  and the
investment  banking  firm were  unable  to agree.  Therefore,  the  Company  has
terminated  its plans to conduct a public  offering at this time.  Although  the
provisions  of the  letter  of  intent  relating  to the  public  offering  have
terminated,  the letter of intent grants to the investment  banking firm a right
of first refusal to act as the Company's investment banker with regard to future
offerings, and certain acquisition/disposition transactions and provides for the
payment of a  substantial  fee to the  investment  banking  firm for a breach of
these provisions. The Company requested a general termination and mutual release
in order to move forward with other means of financing.  To date, the investment
banking  firm has  agreed  to waive  compensation  on the  near  term  financing
requirements of the Company but has not provided a release with respect to other
transactions.

     The Company has acquired short term funding which will allow it to continue
operations  through  December  31,  1996.  In October,  1996,  a greater than 5%
shareholder  lent the Company $ 60,000 at 10% per annum and is secured by office
furniture and  equipment.  Principal and interest is due on this note on January
10, 1997.  Additional  funding of  $150,000.  has been  negotiated  with another
shareholder  which bears interest at 12% and is due February 10, 1997. This note
is secured by a media barter credit under its media purchase agreement. See Note
H to the Financial Statements. In addition, the shareholder received warrants to
purchase 600,000 shares of Common Stock, at a purchase price of $0.50 per share.
The Company has been forced to significantly curtail its operations and has made
drastic cuts in its overhead.  The Company's  operations consist  principally of
servicing existing customers.  It has suspended its marketing  operations and is
not acquiring  additional  platforms until additional financing is in place. The
Company  intends  to offer a  combination  of  Common  Stock and  warrants  in a
Regulation D offering for maximum proceeds of $ 1,800,000.  If all such proceeds
are raised, the Company will have sufficient funds to operate while it continues
to develop a long term financial structure.  The timing of the proposed offering
is subject  to a number of  factors,  certain of which are beyond the  Company's
control;  however,  the  Company  intends to  commence  this  offering  in early
December 1996.

Future Obligations. During the next twelve months, the Company plans, subject to
raising  adequate  capital,  to sell  platforms  which  provide  the  technology
necessary to utilize its  Preferred  SecureCard,  VIP800 and  Preferred  Collect
Service  technology,  to introduce new products,  and to continue  refining this
technology.  Subject  to the  Company's  ability  to fund the  cost,  Management
expects the Company to hire or contract with approximately 20 additional persons
during  the  next  12  months,  primarily  to  support  its  expanded  marketing
activities.

                                       -2-
<PAGE>


The  ability of the Company to raise  capital is, in the opinion of  Management,
the primary constraint on such business plan.  Management estimates that, during
the next twelve (12) months, the Company will require  approximately $ 3,500,000
of equity  and/or  long  term debt to  finance  its costs of  marketing  and the
continued  refinement of its services at anticipated  levels, with most of these
funds being needed to support marketing efforts.  In addition,  the Company will
be required to  renegotiate  or obtain  extensions  of its current debt or raise
additional  funds of  approximately $ 1,300,000 to retire its debt.  There is no
assurance   however,   that  the  Company  will  be  able  to  secure  any  such
renegotiations,  financing or extensions  of its current debt. In addition,  the
Company will continue to seek a general  termination  and mutual  release of the
provisions of the letter of intent with its investment  banking firm relating to
future offerings.

The  Company  was  obligated  under its  agreement  with MCI  Telecommunications
Corporation  (MCI)  to pay at  least $  1,000,000  per  month  for  transmission
services beginning January,  1996. Throughout 1996,  negotiations for a mutually
beneficial  revised  agreement  took place,  but no final  revised  contract was
executed.  With the Company's new focus on sales of  technology,  the need for a
carrier agreement is no longer necessary.  The Company is currently  negotiating
with MCI to eliminate its agreement  completely and provide its services through
traditional  long  distance  service  agreements  which would be based upon much
lower  traffic  volume  requirements.  The  Company may be  obligated  to make a
substantial payment of previously  submitted invoices to terminate its agreement
with MCI.

The Company's  agreement  with Brite Voice  Systems,  Inc.  ("Brite")  calls for
minimum  monthly  usage fees of at least $ 20,000 per month  through  August 15,
1996, $ 25,000 per month through August 15, 1997, and $ 30,000 per month through
August 15, 1998 in  SecureCard  charges.  The  Company's  obligation to Brite is
based upon the Company's  billable minutes through the Brite system and paid out
of  revenues  as they  are  received.  To the  extent  that  the  monthly  usage
obligation  is  less  than  the  minimum  amounts  specified  in  the  governing
agreements,  the Company would be required to pay Brite the  difference  between
the actual  usage  charges and these  minimums at those times  specified  in the
agreements.  At present,  the  Company's  monthly usage is less than the minimum
amount.  The Company and Brite have  executed an  agreement  to convert  monthly
minimums of $216,500  which  represent  minimum  payments  from January  through
October into a promissory note bearing interest at prime +2% per annum which was
due November 1, 1996 and warrants to purchase 60,000 shares of common stock at a
price of $2.44 per share  exercisable  three years from the date of the note. At
this time, the Company is in default of this note.

Certain  of the  information  contained  in Parts I and II of this  form  10-QSB
constitutes  forward looking statements within the meaning of Section 27A of the
Securities Act and Section 21E of the Securities  Exchange Act of 1934. Although
the Company  believes that the  expectations  reflected in such forward  looking
statements are based upon reasonable assumptions,  it can give no assurance that
its expectations will be achieved. Important factors that could cause the actual
results to differ from the Company's expectations are set forth and herein under
the caption "Risk Factors" in the Company's prospectus dated August 15, 1995. In
addition,  an  important  factor is the  Company's  ability to raise  sufficient
capital to execute its business plan and meet its  obligations.  Therefore,  the
actual  results that are achieved  may differ  materially  from any such forward
looking information.




                                       -3-

<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/TELECOM, INC.


     December 6, 1996                    /s/Dennis L. Gundy
     -----------------                   ------------------
          Date                              Dennis L. Gundy,  President
                                            (Principal Executive Officer)


     December 6, 1996                    /s/Mary G. Merritt
     -----------------                   ------------------
          Date                              Mary G. Merritt, Secretary/Treasurer
                                            (Principal Financial Officer)




                                       -4-