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, 2006.


or


o Transition
      Report
      Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for
      the
      Transition Period From _____________to _____________





Commission
      File Number 33-92894





**PREFERRED
      VOICE, INC.**


Delaware
              75-2440201(State
                  or other jurisdiction of
              (I.R.S.
                  Employer Identification No.)incorporation
                  or organization)6500
                  Greenville AvenueSuite
                  570Dallas,
                  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
o





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act


Yes
o No x





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 practicable date.





Common
      Stock, $ 0.001 Par Value - 6,130,184 shares as of February 13,
      2007.





Transitional
      Small Business Format Yes o  No x










INDEX





**Preferred
      Voice, Inc.**


Part
                  I.
              Financial
                  Information
              1Item
                  1.
              Financial
                  Statements
              1Balance
                  Sheets-December 31, 2006 and March 31, 2006.
              F-1Statements
                  of Operations- Three Months Ended December 31, 2006 and 2005
                  andNine
                  Months Ended December 31, 2006 and 2005.
              F-3Statements
                  of Cash Flows- Nine Months Ended December 31, 2006 and
                  2005.
              F-4Notes
                  to Financial Statements - December 31, 2006.
              F-5Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Conditionand
                  Results of Operations
              11Item
                  3.
              Controls
                  and Procedures
              14Part
                  II.
              Other
                  Information
              14Item
                  1.
              Legal
                  Proceedings
              14Item
                  2.
              Unregistered
                  Sales of Securities and Use of Proceeds
              14Item
                  3.
              Defaults
                  upon Senior Securities
              14Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              14Item
                  5.
              Other
                  Information
              14Item
                  6.
              Exhibits
              14Signatures
              15


**PREFERRED
      VOICE, INC.**





**CONDENSED
      BALANCE SHEETS**


**DECEMBER
      31, 2006 AND MARCH 31, 2006**


**December
                  31,**
              
              **March
                  31,****2006**
              
              **2006****(unaudited)**
              
              **(audited)****Assets**Current
                  assets:Cash
                  and cash equivalents
              
              $
              767,049
              
              $
              209,466Accounts
                  receivable, net of allowance for doubtfulaccounts
                  of $5,325 and $5,325, respectively
              
              
              209,228
              
              
              210,392Inventory
              
              
              75,730
              
              
              -Current
                  portion deferred loan cost
              
              
              8,428
              
              
              -Total
                  current assets
              
              $
              1,060,435
              
              $
              419,858Property
                  and equipment:Computer
                  equipment
              
              $
              1,180,041
              
              $
              1,414,809Furniture
                  and fixtures
              
              
              22,317
              
              
              22,317Office
                  equipment
              
              
              28,393
              
              
              29,443$
              1,230,751
              
              $
              1,466,569Less
                  accumulated depreciation
              
              
              950,685
              
              
              1,091,236Net
                  property and equipment
              
              $
              280,066
              
              $
              375,333Other
                  assets:Capitalized
                  software development costs, net of accumulatedamortization
                  of $1,130,369 and $1,050,760, respectively
              
              $
              118,376
              
              $
              180,845Deposits
              
              
              4,485
              
              
              4,485Noncurrent
                  portion deferred loan cost, net of accumulatedamortization
                  of $2,107 and $0, respectively
              
              
              14,749
              
              
              -Trademarks
                  and patents, net of accumulatedamortization
                  of $52,878 and $16,945, respectively
              
              
              70,245
              
              
              104,461Total
                  other assets
              
              $
              207,855
              
              $
              289,791Total
                  assets
              
              $
              1,548,356
              
              $
              1,084,982






F-1






**December
                  31,**
              
              **March
                  31,****2006**
              
              **2006****(unaudited)**
              
              **(audited)****Liabilities
                  and stockholders' equity (deficit)**Current
                  liabilities:Accounts
                  payable
              
              $
              175,626
              
              $
              191,147Accrued
                  operating expenses
              
              
              111
              
              
              34Accrued
                  vacation
              
              
              4,302
              
              
              7,802Accrued
                  payroll and payroll taxes
              
              
              25,140
              
              
              19,255Accrued
                  interest
              
              
              61,424
              
              
              58,500Current
                  portion - notes payable
              
              
              3,622
              
              
              14,144Total
                  current liabilities
              
              $
              270,225
              
              $
              290,882Long-term
                  liabilities:Debentures
                  payable - net of discounts
              
              $
              1,708,431
              
              $
              690,056Commitments
                  and contingencies (Note F)Stockholders'
                  equity (deficit):Common
                  stock, $.001 par value;100,000,000
                  shares authorized; 6,130,184and
                  5,963,165 shares issued, respectively
              
              $
              6,130
              
              $
              5,963Additional
                  paid-in capital
              
              
              20,047,571
              
              
              19,424,477Accumulated
                  deficit
              
              
              (20,482,495
              )
              
              (19,324,890
              )Treasury
                  stock - 4,500 shares at cost
              
              
              (1,506
              )
              
              (1,506
              )Total
                  stockholders' equity (deficit)
              
              $
              (430,300
              )
              $
              104,044Total
                  liabilities and stockholders' equity (deficit)
              
              $
              1,548,356
              
              $
              1,084,982


F-2




**PREFERRED
      VOICE, INC.**





**CONDENSED
      STATEMENTS OF OPERATIONS**


**FOR
      THE THREE AND NINE MONTHS ENDED** **DECEMBER
      31, 2006 AND 2005**




**Three
                  months**
              
              **Nine
                  months**
              
              **Three
                  months**
              
              **Nine
                  months****ended**
              
              **ended**
              
              **ended**
              
              **ended****December
                  31,**
              
              **December
                  31,**
              
              **December
                  31,**
              
              **December
                  31,****2006**
              
              **2006**
              
              **2005**
              
              **2005****(unaudited)**
              
              **(unaudited)**
              
              **(unaudited)**
              
              **(unaudited)**Net
                  sales
              
              $
              334,363
              
              $
              699,032
              
              $
              175,649
              
              $
              423,734Cost
                  of sales
              
              
              181,565
              
              
              433,400
              
              
              99,338
              
              
              337,070Gross
                  profit
              
              $
              152,798
              
              $
              265,632
              
              $
              76,311
              
              $
              86,664General
                  and administrative expenses
              
              $
              319,025
              
              $
              974,661
              
              $
              336,075
              
              $
              1,060,617Loss
                  from operations
              
              $
              (166,227
              )
              $
              (709,029
              )
              $
              (259,764
              )
              $
              (973,953
              )Other
                  income (expense):Interest
                  expense
              
              $
              (91,803
              )
              $
              (452,681
              )
              $
              (51,296
              )
              $
              (152,778
              )Gain
                  on sale of assets
              
              
              183
              
              
              4,108
              
              
              -
              
              
              18,758Total
                  other income (expense)
              
              $
              (91,620
              )
              $
              (448,573
              )
              $
              (51,296
              )
              $
              (134,020
              )Loss
                  from operations before income taxes
              
              $
              (257,847
              )
              $
              (1,157,602
              )
              $
              (311,060
              )
              $
              (1,107,973
              )Provision
                  for income taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  loss
              
              $
              (257,847
              )
              $
              (1,157,602
              )
              $
              (311,060
              )
              $
              (1,107,973
              )Per
                  share amounts:Loss
                  from operations
              
              $
              (0.04
              )
              $
              (0.19
              )
              $
              (0.05
              )
              $
              (0.19
              )Net
                  loss
              
              $
              (0.04
              )
              $
              (0.19
              )
              $
              (0.05
              )
              $
              (0.19
              )


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


F-3




**PREFERRED
      VOICE, INC.**





**CONDENSED
      STATEMENTS OF CASH FLOWS**


**FOR
      THE NINE MONTHS ENDED** **DECEMBER
      31, 2006 AND 2005**


**2006**
              
              **2005****(unaudited)**
              
              **(unaudited)**Cash
                  flows from operating activities:Cash
                  received from customers
              
              $
              700,196
              
              $
              421,011Cash
                  paid to suppliers and employees
              
              
              (1,245,260
              )
              
              (1,180,159
              )Interest
                  paid
              
              
              (3,406
              )
              
              (2,049
              )Net
                  cash used by operating activities
              
              $
              (548,470
              )
              $
              (761,197
              )Cash
                  flows from investing activities:Capital
                  expenditures
              
              $
              (69,467
              )
              $
              (236,452
              )Proceeds
                  from sale of assets
              
              
              16,042
              
              
              24,000Net
                  cash used by investing activities
              
              $
              (53,425
              )
              $
              (212,452
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of convertible debt and warrants
              
              $
              1,170,000
              
              $
              -Repayment
                  of note payable
              
              
              (10,522
              )
              
              (9,907
              )Net
                  cash provided (used) by financing activities
              
              $
              1,159,478
              
              $
              (9,907
              )Net
                  increase (decrease) in cash and cash equivalents
              
              $
              557,583
              
              $
              (983,556
              )Cash
                  and cash equivalents:Beginning
                  of period
              
              
              209,466
              
              
              1,135,164End
                  of period
              
              $
              767,049
              
              $
              151,608


*See
        independent accountants’ review report.*
 *The
        accompanying notes are an integral part of these financial statements.*
  F-4




**2006**
              
              **2005****(unaudited)**
              
              **(unaudited)**Reconciliation
                  of net loss to net cashused
                  by operating activities:Net
                  loss
              
              $
              (1,157,602
              )
              $
              (1,107,973
              )Adjustments
                  to reconcile net loss to net cashused
                  by operating activities:Depreciation
                  and amortization
              
              $
              235,533
              
              $
              269,536Gain
                  on sale of assets
              
              
              (4,110
              )
              
              (18,758
              )Intrinsic
                  value of beneficial interest
              
              
              257,500
              
              
              -Changes
                  in operating assets and liabilities:(Increase)
                  decrease in accounts receivable
              
              
              1,164
              
              
              (2,723
              )Increase
                  in inventory
              
              
              (59,671
              )
              
              -Decrease
                  in prepaid expenses
              
              
              -
              
              
              2,759Decrease
                  in accounts payable
              
              
              (15,521
              )
              
              (24,610
              )Increase
                  (decrease) in accrued expenses
              
              
              194,237
              
              
              120,572Total
                  adjustments
              
              $
              609,132
              
              $
              346,776Net
                  cash used by operating activities
              
              $
              (548,470
              )
              $
              (761,197
              )Schedule
                  of noncash financing activities:Issuance
                  of stock for accrued interest payable onconvertible
                  debentures
              
              $
              58,500
              
              $
              -Intrinsic
                  value of beneficial interest
              
              $
              257,500
              
              $
              -Proceeds
                  allocated to warrants related to issuance ofconvertible
                  debt and warrants
              
              $
              281,977
              
              $
              -Fair
                  value of stock warrants issued in exchange for services
              
              $
              25,284
              
              $
              -


F-5




**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**





**Note
      A - General organization** :





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





**Note
      B - Summary of significant accounting policies:**





**Basis
      of presentation**





The
      accounting policies followed by Preferred Voice, Inc. are set forth in the
      Company’s financial statements that are a part of its March 31, 2006, Form 10KSB
      and should be read in conjunction with the financial statements for the three
      and nine months  ended
      December 31, 2006 and 2005, contained herein.





The
      financial information included herein as of December 31, 2006, and for the
      three
      and nine-month periods ended December 31, 2006 and 2005, has been presented
      without an audit, pursuant to accounting principles for the interim financial
      information generally accepted in the United States of America and the rules
      of
      the Securities and Exchange Commission. The Company believes that the
      disclosures are adequate to make the information presented not misleading.
      The
      information presented reflects all adjustments (consisting solely of normal
      recurring adjustments) which are, in the opinion of management, necessary for
      a
      fair statement of results for the period.





**Cash
      and cash equivalents**





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





**Inventory**





Inventory,
      consisting primarily of ringback platforms and their related components, is
      stated at the lower of cost or market.





**Concentration
      of business, market and credit risks**





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





**Receivables
      and credit policies**





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





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





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


5


**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**








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





The
      carrying amount of accounts receivable is reduced by a valuation allowance
      that
      reflects management’s best estimate of amounts that will not be collected.
      Management individually reviews all accounts receivable balances that exceed
      90
      days from invoice date and, based on an assessment of current creditworthiness,
      estimates that portion, if any, of the balance that will not be collected.
      Accounts receivable past 90 days due are $6,907 and $7,525 as of December 31,
      2006 and March 31, 2006, respectively.





**Capitalized
      software development**





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





**Property
      and equipment**





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





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





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


Computer
                  equipment
              
              
              5
                  yearsFurniture
                  and fixtures
              
              
              5
                  yearsOffice
                  equipment
              
              
              5
                  years


**Fair
      value of financial instruments**





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





**Revenue
      recognition**





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


6


**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**








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





**Loss
      per share**





The
      Company adopted the provisions of Statement of Financial Accounting Standards
      (SFAS) No. 128, *Earnings
      per Share* .
      SFAS
      No. 128 reporting requirements replace primary and fully-diluted earnings per
      share (EPS) with basic and diluted EPS. Basic EPS is calculated by dividing
      net
      income or loss (available to common stockholders) by the weighted average number
      of common shares outstanding for the period. Diluted EPS reflects the potential
      dilution that could occur if securities or other contracts to issue common
      stock
      were exercised or converted into common stock. Since the Company incurred a
      loss
      from operations for the periods ended December 31, 2006 and 2005, no computation
      of diluted EPS has been performed.





Loss
      per
      share is based on the weighted average number of shares outstanding of 6,129,672
      and 5,960,696 for the nine months ended December 31, 2006 and 2005,
      respectively, and 6,130,257 and 5,963,165 for the three months ended December
      31, 2006 and 2005, respectively.





**Income
      taxes**





Income
      taxes are accounted for using the liability method under the provisions of
      SFAS
      109, *Accounting
      for Income Taxes* .
      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing assets and liabilities and their respective tax
      basis. Deferred tax assets and liabilities are measured using enacted tax rates
      that will apply in the years in which those temporary differences are expected
      to be recovered or settled. The effect on deferred tax assets and liabilities
      of
      a change in tax rates is recognized in income in the period that includes the
      enactment date.





**Trademarks
      and patents**





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





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





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





**Use
      of estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the amounts reported in the financial
      statements and accompanying notes. Actual results could differ from these
      estimates.


7


**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**





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





**Reporting
      comprehensive income and operating segments**





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





**Stock-based
      compensation**





Effective
      April 1, 2006, the Company adopted the provisions of SFAS No. 123R, *Share-Based
      Payment,* which is
      a revision of SFAS No. 123, *Accounting
      for Stock-Based Compensation* .
      This
      statement now requires the Company to recognize compensation costs related
      to
      stock-based payment transactions (i.e. granting of stock options and warrants
      to
      employees) in the financial statements. With limited exceptions, the amount
      of
      compensation cost will be measured based on the grant-date fair value of the
      equity or liability instruments issued. In addition, liability awards will
      be
      remeasured each reporting period. Compensation cost will be recognized over
      the
      period that an employee provides services in exchange for the award.





The
      Company has adopted the Modified Prospective Application method of accounting
      and disclosing transition to this new accounting policy. Under this method,
      this
      statement applies to new awards and to awards modified, repurchased, or
      cancelled after April 1, 2006. Additionally, compensation cost for the portion
      of awards for which the requisite service has not been rendered that are
      outstanding as of April 1, 2006, would be recognized as the requisite service
      is
      rendered after March 31, 2006. The compensation cost for those earlier awards
      would be attributed to periods beginning after March 31, 2006. The Company
      did
      have options outstanding as of April 1, 2006, for which the requisite service
      had not been performed, but the service was not performed during the nine months
      ended December 31, 2006.





There
      was
      no compensation expense recognized during the nine months ended December 31,
      2006 as there were no options issued or requisite service fulfilled during
      the
      nine-months period.





**Note
      C - Notes payable:**





Notes
      payable consist  of the
      following:


**December
                  31,**
              
              **March
                    31,****2006**
              
              **2006**Note
                  payable, 6% interest rate. Principaland
                  interest due in monthly installmentsthrough
                  March 1, 2007. Note is unsecured.
              
              $
              3,622
              
              $
              14,144Less
                  current portion
              
              
              3,622
              
              
              14,144$
              -
              
              $
              -


Interest
      expense charged to operations related to notes payable was $430 and $1,044,
      for
      the nine months ended December 31, 2006 and 2005, respectively, and $90 and
      $296
      for the three months ended December 31, 2006 and 2005,
      respectively.




8




**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**








**Note
      D - Convertible debt and warrants:**





On
      March
      31, 2005, the Company closed a Securities Purchase Agreement and issued $975,000
      in principal amount of 6% Convertible Debentures due March 31, 2008 (the
      "Debentures"), to a group of institutional and high net worth investors. The
      Debentures pay an interest rate of 6% on an annual basis and are convertible
      into 1,950,000 shares of the Company’s common stock at a price of $0.50 per
      share at which time the authorized shares increases to 65,000,000 shares. The
      Company recorded the intrinsic value of the beneficial conversion of $257,500
      as
      interest expense as the shareholders approved an increase in its authorized
      shares to 100,000,000 shares on April 27, 2006. The investors also received
      warrants to purchase an additional 975,000 shares of common stock with an
      exercise price of $0.60 per share.





The
      Company has allocated the proceeds from the issuance of the Debentures to the
      warrants and the Debentures based on their relative fair market values at the
      date of issuance. The value assigned to the warrants of $427,416 has been
      recorded as an increase in additional paid in-capital. The assignment of a
      value
      to the warrants results in a loan discount being recorded for the same amount.
      The discount is being amortized over the original three-year term of the
      Debentures as additional interest expense. Amortization was $71,236 for the
      nine
      months ended December 31, 2006 and 2005 and $35,618 for three months ended
      December 31, 2006 and 2005.





On
      September 29, 2006, the Company closed a Securities Purchase Agreement and
      issued $1,170,000 in principal amount of 6% Convertible Debentures due September
      29, 2009 (the "Debentures"), to a group of institutional and high net worth
      investors. The Debentures pay an interest rate of 6% on an annual basis and
      are
      convertible into 3,342,857 shares of the Company’s common stock at a price of
      $0.35 per share. The investors also received warrants to purchase an additional
      1,671,429 shares of common stock with an exercise price of $0.50 per share.





The
      Company has allocated the proceeds from the issuance of the Debentures to the
      warrants and the Debentures based on their relative fair market values at the
      date of issuance. The value assigned to the warrants of $281,977 has been
      recorded as an increase in additional paid-in capital. The assignment of a
      value
      to the warrants results in a loan discount being recorded for the same amount.
      The discount is being amortized over the original three-year term of the
      Debentures as additional interest expense. Amortization was $23,498 and $-0-
      for
      the nine months ended December 31, 2006 and 2005 and $23,498 and $-0- for three
      months ended December 31, 2006 and 2005.





167,143
      warrants were issued in exchange for consulting services provided for in the
      issuance of the Securities Purchase Agreement. These warrants are exercisable
      at
      price of $0.50 per share and were valued using the relative fair market value
      at
      the date of issuance. The value assigned to the warrants of $25,285 has been
      recorded as deferred loan cost and is being amortized over the original
      three-year term of the debentures as financing cost. Amortization was $2,107
      and
      $-0- for the nine months ended December 31, 2006 and 2005 and $2,107 and $-0-
      for three months ended December 31, 2006 and 2005.





**Note
      E - Common stock:**





On
      November 13, 2006, the Board of Directors approved a 1 for 5 reverse stock
      split
      of its common stock.  All references in the accompanying financial
      statements to the number of shares of common stock and loss per share have
      been
      retroactively restated to reflect the reverse stock split.





**Stock
      purchase warrants**





At
      December 31, 2006, the Company had outstanding warrants to purchase 4,611,072
      shares of the Company's common stock at prices which ranged from $0.50 per
      share
      to $0.85 per share. The warrants are exercisable at any time and expire through
      September 29, 2011. At December 31, 2006, 4,611,072 shares of common stock
      were
      reserved for that purpose.




9




**PREFERRED
      VOICE, INC.**





**NOTES
      TO CONDENSED FINANCIAL STATEMENTS**





**Note
      E - Common stock (continued):**





**Common
      stock reserved**





At
      December 31, 2006, shares of common stock were reserved for the following
      purposes:


Exercise
                  of stock warrants
              
              
              4,611,072Exercise
                  of future grants of stock options and stockappreciation
                  rights under the 2000 stock option plan
              
              
              4,791,6679,402,739


**Note
      F - Commitments:**





The
      Company leases its office facilities and various office equipment under
      operating leases expiring through December 2008. Following is a schedule of
      future minimum lease payments required under the above operating leases as
      of
      March 31, 2006:


**Year
                  ending****March
                  31,**
              
              **Amount**2007
              
              $
              55,7052008
              
              
              53,8202009
              
              
              40,3652010
              
              
              -2011
              
              
              -$
              149,890




Total
      rent expense charged to operations was $42,510 and $45,720 for the nine months
      ended December 31, 2006 and 2005, respectively, and $14,327 and $15,401 for
      the
      three months ended December 31, 2006 and 2005.




10




**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, 2006. 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. Originally we focused on the
      development, testing, and deployment of voice activated telecommunications
      services that would allow any consumer the ability to “dial” their calls using
      their voice. Even though we believe voice activated products have viability
      in
      the telecommunications arena, we have concentrated our last two years of
      development efforts on the growing trend in mobile entertainment.





We
      first
      contracted with a leading content provider to distribute their library of
      downloadable wireless games, picture messages, graphics and ring-tones. Our
      first content project was launched on June 18, 2004 with a full turnkey solution
      for the carrier that includes secure customer login from the carrier website,
      viewing of content, download of content, and creation of a billing record for
      the carriers billing system. This initial introduction to mobile entertainment
      led us to research the viability of additional personalized entertainment
      services that could be delivered through our network. On October 22, 2004 we
      announced the first commercial launch of a ringback service in the United States
      with the launch of our Rockin’ Ringback service. Our personalized ringback
      service provides a network-based personalized service that enables users to
      choose an audio file that callers will listen to while the phone is ringing.
      We
      believe that since we already have a relationship with the carrier and are
      integrated with these carriers customer service departments and billing
      departments that we have an opportunity to introduce new products with minimal
      integration effort. We will continue to research and either develop or acquire
      additional services that can be deployed through our platform. As of February
      8,
      2007 we had seven carriers providing our voice dialing service. We have two
      carrier customers providing ringback service through our My Phone Services
      Suite
      platform with a possible 2.5 million addressable customer base. We have three
      additional carriers in implementation phase that we believe will launch ringback
      in the second quarter of 2007. Additionally, we have one carrier providing
      downloadable content through our download system.





Our
      system structure is a robust data base system which will allow for scalability
      and the addition of new services to the platform in shorter development cycles
      than were possible under our previous structure. On September 15, 2004 we
      announced the release of “My Phone Services Suite”, which incorporates our
      network address book, network voice dialing, Push2Connect, and Rockin Ringback
      services into one user-centric service that allows the subscriber to personalize
      the look and feel of their communications service especially for their
      personality. Revenue from these new products is expected to be slow with no
      guarantees of market and/or customer acceptance. We also believe that we will
      continue to see increased competition that along with many other factors may
      have an impact on the company and its products.





The
      implementation of our business plan is subject to risks inherent in the
      establishment and deployment of technology. 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 GAP system works with the telephone switches of all of the
                major
                manufacturers;




11




·
            achieve
                user acceptance for our services;




·
            generate
                reasonable margins on our services;




·
            continue
                to deploy and install GAP systems on a timely and acceptable schedule;




·
            respond
                to competitive market developments;




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




·
            continually
                update and add to our product offerings to meet the needs of consumers.





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





*Results
      of Operations*





We
      recorded a net loss of $1,157,602 or $0.19 per share, for the nine-month period
      ended December 31, 2006, compared to a net loss of $1,107,973 or $0.19 per
      share, for the nine-month period ended December 31, 2005. For the three-month
      period ended December 31, 2006, we recorded a net loss of $257,847, or $.04
      per
      share compared to a net loss of $311,060 or $.05 per share for the three-month
      period ended December 31, 2005.





*Total
      Sales*




Total
      revenue for the nine-month period ended December 31, 2006, was $669,032 compared
      to $423,734 for the nine-month period ended December 31, 2005. Total revenue
      for
      the three-month period ended December 31, 2006, was $334,363 compared to
      $175,649 for the three-month period ended December 31, 2005. Revenues in both
      periods consisted of revenue sharing receipts from our customer phone companies,
      test agreements and billing our direct end-users for individual
      services.





We
      anticipate that revenues from our revenue sharing agreements on our voice dial
      product will continue to deteriorate in the fiscal year ending March 31, 2007.
      We do anticipate that revenues from the My Phone Services Suite to begin
      gradually and build as new customers to the service integrate and market the
      product to their subscriber base.




*Cost
      of Sales*





Cost
      of
      sales for the nine-month period ended December 31, 2006 was $433,400 compared
      to
      $337,070 for the nine-month period ended December 31, 2005. Cost of sales for
      the three-month period ended December 31, 2006 was $181,565 compared to $99,338
      for the three-month period ended December 31, 2005. Cost of sales consisted
      of
      costs for network infrastructure such as collocations, connectivity, system
      access, long distance to end-users and third party content costs during both
      periods.





*Selling,
      General and Administrative*




Selling,
      general and administrative expenses for the nine-month period ended December
      31,
      2006 were $974,661 compared to $1,060,617 for the nine-month period ended
      December 31, 2005. Selling, general and administrative expenses for the
      three-month period ended December 31, 2006 were $319,025 compared to $336,075
      for the three-month period ended December 31, 2005. We expect that selling,
      general and administrative expenses will remain steady through fiscal year
      2007,
      such expenses to include costs related to the number of employees, office space
      requirements and general overhead.





*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, 2006 and 2005, software development costs capitalized were $18,856
      and $38,086 respectively. The amortization of capitalized software development
      costs for the periods ended December 31, 2006 and 2005 was $115,540 and $68,899
      respectively.




12




*Other
      Income and Expense*





During
      the periods ended December 31, 2006 and 2005, the Company made a sale of excess
      equipment that generated one-time net revenue of $4,108 and $18,758
      respectively.





*Income
      Taxes*





As
      of
      December 31, 2006, we had cumulative federal net operating losses of
      approximately $19.1 million, which can be used to offset future income subject
      to federal income tax through the fiscal year 2026. Net operating loss
      limitations may be imposed if changes in stock ownership of the company create
      a
      change of control as provided in Section 382 of the Internal Revenue Code of
      1986.





*Liquidity
      and Capital Resources*





Our
      cash
      and cash equivalents at December 31, 2006 were approximately $767,049, an
      increase of $557,583 from $209,466 at March 31, 2006. We have relied primarily
      on the issuance of stock and warrants to fund our operations since January
      of
      1997 when we sold our long-distance resale operation.





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





On
      September 29, 2006, pursuant to Section 4(2) of the Securities Act and
      Regulation D thereunder, we completed the sale of 117 units (“Units”) with each
      Unit consisting of a 3-year, 6% Convertible Debenture in the principal amount
      of
      $10,000.00, and 71,428 5-year warrants to purchase a share of Common Stock,
      $.001 par value per share, of the Company at an exercise price of $.10 for
      an
      aggregate of $1,170,000.





Due
      to
      uncertainties regarding a number of new customer contracts that are in the
      Company's sales pipeline, it is difficult for management to project the
      Company's revenue performance, operating profits or loss, or cash requirements
      beyond the next twelve months. Even though the Company has been able to secure
      additional financing to provide current working capital, there is no assurance
      that the Company will be able to generate the required revenues to sustain
      its
      current working capital requirements or to raise additional debt or equity
      capital that may be required to meet its objectives in the future. The Company's
      challenging financial circumstances may make the terms, conditions, and cost
      of
      any available capital relatively unfavorable. If additional debt or equity
      capital is not readily available, the Company will be forced to further scale
      back its operations, including its efforts to complete new sales. The Company's
      short term needs for capital may force it to consider and potentially pursue
      other strategic options sooner than it might otherwise have desired. These
      conditions raise substantial doubt about the Company's ability to continue
      as a
      going concern. The financial statements do not include any adjustments to
      reflect the possible future effects on the recoverability of and classification
      of assets, or the amounts and classification of liabilities that may result
      from
      the outcome of this uncertainty.





*Off-Balance
      Sheet Arrangements*





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





*Future
      Obligations*





We
      project our working capital needs to be approximately $1,200,000 over the next
      twelve months for corporate overhead and equipment purchases to continue to
      deploy our services to carrier customers. Management believes that current
      cash
      and cash equivalents and cash that may be generated from operations will be
      sufficient to meet these anticipated capital requirements and to finance
      marketing initiatives for the next twelve months. Such projections have been
      based on revenue trends from current customers and customers which are currently
      in trial utilizing the revenue rates that we have experienced over the past
      six
      months with our currently installed customers and projections from trial carrier
      models and projected cash requirements to support installation, sales and
      marketing, and general overhead. We may be forced to raise additional capital
      through the issuance of new shares, the exercise of outstanding warrants, or
      reduce our current overhead. However, any projections of future cash needs
      and
      cash flows are subject to substantial uncertainty. If further funding is
      required, and we are unable to secure such funding, we would be forced to rely
      on existing cash and cash from operations which would greatly impact our ability
      to complete our product development and product rollout until such time as
      necessary funds are secured.




13




**Item
      3. Controls and Procedures**





*Evaluation
      of disclosure controls and procedures* .
      The
      Chief Executive Officer, who also acts as our Chief Financial Officer, of the
      Company has evaluated the effectiveness of the Company’s disclosure controls and
      procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities
      Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the
      quarter covered by this Quarterly Report on Form 10-QSB.  Based on that
      evaluation, the Chief Executive Officer of the Company has concluded that the
      Company’s disclosure controls and procedures as of the end of the quarter
      covered by this Quarterly Report on Form 10-QSB are effective as defined in Rule
      13a-15 (e)
      and Rule
      15d-15 (e)
      under
      the Exchange Act.





Due
      to
      the limited number of Company employees engaged in the authorization, recording,
      processing and reporting of transactions, there is inherently a lack of
      segregation of duties. The Company periodically assesses the cost versus benefit
      of adding the resources that would remedy or mitigate this situation and
      currently, does not consider the benefits to merit the cost of these
      resources.





*Changes
      in internal controls* .
      There
      were no changes in our internal controls over financial reporting identified
      in
      connection with our evaluation that occurred during our last fiscal quarter
      ended December 31, 2006 that materially affected, or was reasonably likely
      to
      materially affect our internal control over financial reporting.




**PART
      II.**  **OTHER
      INFORMATION**




Item
      1.  Legal
      Proceedings.





We
      are not a party to any material legal proceedings.





Item
      2.  Unregistered
      Sales of Securities and Use of Proceeds





None.





Item
      3.  Defaults
      upon Senior Securities.





None.





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





None





Item
      5.  Other
      Information.





None





Item
      6.
      Exhibits


ExhibitNumber
              
              Exhibit
                  Description31.1
              
              Certification
                  of Chief Executive Officer and Chief Financial Offier32.1
              
              Certification
                  Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section
                  906 of
                  the Sarbanes-Oxley Act of
                  2002




14




**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, 2007
            /s/
                Mary G. MerrittDate
            Mary
                G. MerrittChairman
                and Chief Executive Officer(Principal
                Executive Officer)




15