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
                               September 30, 2001.

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

Commission File Number  33-92894
                        --------

                              PREFERRED VOICE, INC.

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

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

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

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such shorter  periods that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes      X                 No
   ---------------           ---------------

                      Applicable Only to Corporate Issuers

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

Common Stock, $ 0.001 Par Value - 15,844,531 shares as of November 6, 2001.

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




<PAGE>


<TABLE>
<CAPTION>

                                      INDEX


                              Preferred Voice, Inc.

<S>      <C>                                                                                   <C>

Part I.  Financial Information                                                                  1

Item 1.  Financial Statements                                                                   1

         Balance Sheets-September 30, 2001, September 30, 2000 and March 31, 2001.              1

         Statements of Operations-Three Months Ended September 30, 2001 and
         2000, and Six Months Ended September 30, 2001 and 2000, and for the
         Year Ended March 31, 2001.                                                             3

         Statements of Cash Flows-Six Months Ended September 30, 2001 and 2000
         and for the Year Ended March 31, 2001.                                                 4

         Notes to Financial Statements - September 30, 2001.                                    6

Item 2.  Management's Discussion and Analysis of Financial Condition
              and Results of Operations                                                        21

Part II. Other Information                                                                     24

Item 1.  Legal Proceedings                                                                     25

Item 2.  Changes in Securities                                                                 25

Item 3.  Defaults upon Senior Securities                                                       25

Item 4.  Submission of Matters to a Vote of Security Holders                                   25

Item 5.  Other Information                                                                     25

Item 6.  Exhibits and Reports on Form 8-K                                                      27

Signatures                                                                                     28




</TABLE>

<PAGE>




Part I.  FINANCIAL INFORMATION
                                                     Preferred Voice, Inc.

<TABLE>
<CAPTION>
                                                         Balance Sheets
                                         September 30, 2001 and 2000 and March 31, 2001



                                                                 September 30,       September 30,          March 31,
                                                                     2001                 2000                 2001
                                                                  (Unaudited)         (Unaudited)           (Audited)

<S>   <C>                                                           <C>                 <C>               <C>
Assets
      Current Assets:
          Cash and Cash Equivalents                                 $    234,723        $   2,366,277     $   1,735,752
          Accounts Receivable, net of allowance
            for doubtful accounts of $ -0-, $-0-
          and $-0- respectively                                           88,880                  190            39,141
          Employee Advances                                                  -0-                  -0-               922
          Inventory                                                       49,085               47,785            49,085
          Prepaid expenses                                                   159              761,018               493
                                                               ------------------  -------------------  -------------------
      Total Current Assets                                          $    372,847        $   3,175,270     $   1,825,393
                                                               ------------------  -------------------  -------------------

      Property and Equipment:
         Computer Equipment                                         $  1,105,736        $     660,865     $     882,960
         Furniture and Fixtures                                           42,691               40,791            42,691
         Office Equipment                                                 62,997               21,545            61,889
                                                               ------------------------------------------------------------
                                                                    $  1,211,424        $     723,201     $     987,540
          Less Accumulated Depreciation                                  288,545              129,372           187,807
                                                               ------------------  -------------------  -------------------

         Net Property and Equipment                                 $    922,879        $    593,829      $     799,733
                                                               ------------------  -------------------  -------------------
      Other Assets:
        Capitalized Software Development Costs, net
          of accumulated amortization of $453,444,
          $237,226 and $324,747, respectively                       $    425,873        $    404,108      $     380,173
          Deposits                                                        15,687              90,195             14,093
         Trademarks                                                       52,365              23,676             48,533
                                                               ------------------  -------------------  -------------------
            Total Other Assets                                      $    493,925        $    517,979      $     442,799
                                                               ------------------  -------------------  -------------------
Total Assets                                                        $  1,789,651        $  4,287,078      $   3,067,925
                                                               ==================  ===================  ===================
</TABLE>
The accompanying notes are an integral part of these statements.

                                       1
<PAGE>

<TABLE>
<CAPTION>


                                                                  September 30,        September 30,          March 31,
                                                                       2001                 2000                 2001
                                                                   (Unaudited)          (Unaudited)           (Audited)
                                                                -------------------  -------------------  -------------------
<S>                                                                   <C>                  <C>                  <C>

Liabilities and Stockholders' Deficit
      Current Liabilities:
        Accounts Payable                                              $    376,388         $    376,010         $    338,270
        Accrued Operating Expenses                                          31,264               12,168               39,379
        Accrued Vacation Expenses                                           33,001               27,560               22,194
        Accrued Payroll and Related Tax                                     72,936                3,552                3,589
        Accrued Interest Payable                                            39,515               42,151               44,451
        Customer Deposits                                                  342,118              342,118              342,118
        Current Maturities of Long-Term Debt                                20,000               30,000               30,000
        Notes Payable                                                       50,866               50,866               50,866
        Notes Payable-Related Parties                                          -0-                  -0-                  -0-
                                                                -------------------  -------------------  -------------------
      Total Current Liabilities                                       $    966,088         $    884,425         $    870,867




      Commitments (Note J)



      Stockholders Deficit:
       Common Stock, $0.001 par value
         50,000,000 shares authorized;
         shares issued 15,744,571, 14,780,086
         and 15,672,586 respectively                                  $     15,745         $     14,780         $     15,674
      Additional  Paid In Capital                                       14,652,779           12,126,947           13,856,051
      Accumulated Deficit                                             (13,843,456)          (8,737,206)         (11,672,799)
      Treasury Stock - at cost                                             (1,505)              (1,868)              (1,868)
                                                                -------------------  -------------------  -------------------
      Total Stockholder Deficit                                       $    823,563        $   3,402,653        $   2,197,058
                                                                -------------------  -------------------  -------------------
Total Liabilities and Stockholder Deficit                            $   1,789,651        $   4,287,078        $   3,067,925
                                                                ===================  ===================  ===================


</TABLE>

The accompanying notes are an integral part of these statements.

                                       2
<PAGE>


                              Preferred Voice, Inc.

                            Statements of Operations
             For The Three Months Ended September 30, 2001 and 2000
            And For the Six Months Ended September 30, 2001 and 2000
                      And For the Year Ended March 31, 2001

<TABLE>
<CAPTION>


                                                  Three Months Ended                   Six Months Ended
                                            September 30,    September 30,      September 30,      September 30,        March 31,
                                              2001               2000               2001               2000                2001
                                           (Unaudited)        (Unaudited)       (Unaudited)         (Unaudited)         (Audited)
                                          --------------    ----------------  -----------------   ----------------   ---------------
<S>                                        <C>                  <C>                <C>               <C>                <C>

Sales                                      $    210,908         $    51,450       $    295,180       $     58,058       $   138,097


Cost of Sales                                    54,334              51,565             73,545             60,513           101,188
                                          --------------    ----------------  -----------------   ----------------   ---------------

  Gross Profit (loss)                      $    156,574         $     (115)       $    221,635       $    (2,455)       $   36,909
                                          --------------    ----------------  -----------------   ----------------   ---------------

Costs and Expenses:
  General & Administrative                 $  1,282,459             990,166       $  2,390,442          1,801,696       $4,011,608
  Interest Expense                                  700               1,150              1,850              2,300            4,600
                                          --------------    ----------------  -----------------   ----------------   ---------------

  Total Costs and Expenses                 $  1,283,159         $   991,316       $  2,392,292       $  1,803,996       $4,016,208
                                          --------------    ----------------  -----------------   ----------------   ---------------

Loss From Operations                       $(1,126,585)         $ (991,431)       $(2,170,657)       $(1,806,451)      $(3,979,299)

Other Income (Expense):
  Loss From Impairment of Assets                    -0-                 -0-                -0-                -0-         (837,120)
                                          --------------    ----------------  -----------------   ----------------   ---------------

Loss From Operations Before Income
     Taxes / Extraordinary Items           $(1,126,585)         $ (991,431)       $(2,170,657)       $(1,806,451)      $ (837,120)

Provision for Income Taxes                          -0-                 -0-                -0-                -0-              -0-
                                          --------------    ----------------  -----------------   ----------------   ---------------

Loss Before Extraordinary Item             $(1,126,585)         $ (991,431)       $(2,170,657)       $(1,806,451)     $(4,816,419)
                                          ==============    ================  =================   ================   ===============

Extraordinary Item:
  Gain from Extinguishment of Debt
   (less applicable income taxes of -0-)
   (Note L)                                         -0-                 -0-                -0-                -0-         74,375
                                          --------------    ----------------  -----------------   ----------------   ---------------

Net Loss                                   $(1,126,585)         $ (991,431)       $(2,170,657)       $(1,806,451)    $(4,742,044)
                                          ==============    ================  =================   ================   ===============


Per Share Amounts:

Loss from Operations                       $     (0.07)         $    (0.07)       $     (0.14)       $     (0.13)    $     (0.35)


 Gain from Extinguishment of Debt          $       -0-          $      -0-        $       -0-        $       -0-            0.01


Loss Per Share                             $     (0.07)         $    (0.07)       $     (0.14)       $     (0.13)    $     (0.34)

</TABLE>

The accompanying notes are an integral part of these statements.

                                       3
<PAGE>
<TABLE>
<CAPTION>

                                                  Preferred Voice, Inc.

                                                 Statement of Cash Flows
                                   For the Six Months Ended September 30, 2001 and 2000
                                           And For the Year Ended March 31,2001



                                                                September 30,        September 30,          March 31,
                                                                     2001                 2000                 2001
                                                                 (Unaudited)          (Unaudited)           (Audited)
                                                              -------------------  -------------------  -------------------
      <S>                                                         <C>                  <C>                  <C>

      Cash Flows from Operating Activities:
        Cash Received from customers                              $      245,441       $       12,918       $      54,006
        Cash Paid to suppliers and employees                         (2,151,420)          (1,598,678)         (3,643,002)
        Interest Paid                                                        -0-                  -0-                 -0-
                                                              -------------------  -------------------  -------------------
               Net Cash used by Operating Activities              $  (1,905,979)       $  (1,585,760)       $ (3,588,996)
                                                              -------------------  -------------------  -------------------

      Cash Flows from Investing Activities:
         Capital Expenditures                                     $    (379,639)       $    (601,523)       $    (948,089)
         Employee Advances                                                   922                  -0-                (922)
                                                              -------------------  -------------------  -------------------
               Net Cash used by Investing Activities              $    (378,717)       $    (601,523)       $    (949,011)
                                                              -------------------  -------------------  -------------------
      Cash Flows from Financing Activities:
         Proceeds from Sale of Stock (net)                        $      783,667       $    3,180,269       $    4,900,468
                                                              -------------------  -------------------  -------------------
               Net Cash provided by Financing Activities          $      783,667       $    3,180,269       $    4,900,468
                                                              -------------------  -------------------  -------------------

      Net Increase (Decrease) in Cash and
          Cash Equivalents                                        $  (1,501,029)       $      992,986       $      362,461

      Cash and Cash Equivalents:
         Beginning of Period                                           1,735,752            1,373,291            1,373,291
                                                              -------------------  -------------------  -------------------

         End of Period                                            $      234,723       $    2,366,277       $    1,735,752
                                                              ===================  ===================  ===================



      Supplemental Schedule of non-cash investing and
      financing activities:


           Issuance of Common Stock in
            Exchange for Debt                                     $       16,786       $       15,196       $          -0-
                                                              -------------------  -------------------  -------------------
      Total Non-Cash Investing Activities                         $       16,786       $       15,196       $          -0-
                                                              ===================  ===================  ===================

</TABLE>

The accompanying notes are an integral part of these statements.

                                       4
<PAGE>


<TABLE>
<CAPTION>





                                                                        September 30,          September 30,          March 31,
                                                                            2001                   2000                 2001
                                                                    ----------------------  -------------------- -------------------
                                                                         (Unaudited)            (Unaudited)           (Audited)
       <S>                                                                 <C>                   <C>                    <C>

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

       Net Loss                                                            $  (2,170,657)        $   (1,806,451)        $(4,742,044)
                                                                    ----------------------  -------------------- -------------------

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

          Depreciation                                                     $      210,793        $      113,455         $    278,052
          Loss on Sale of Fixed Assets                                            (3,291)                   -0-                  -0-
          Impairment loss                                                             -0-                   -0-              837,120
          Fair Value of Stock Warrants
            Issued in Exchange for Services                                                                                  131,162


          Changes in Assets and Liabilities:
            (Increase) Decrease in Accounts Receivable                           (49,739)                 3,734             (35,217)
            (Increase) Decrease in Inventory                                          -0-                36,939               35,639
            (Increase) Decrease in Patents and Trademarks                         (3,832)              (16,204)             (41,061)
            (Increase) Decrease in Deposits                                       (1,594)                   -0-              (5,081)
            (Increase) Decrease in Prepaid Expenses                                   334               (5,081)                (493)
             Increase (Decrease) in Accounts Payable                               38,118               118,388             (40,715)
             Increase (Decrease) in Customer Deposits                                 -0-              (48,874)             (48,874)
             Increase (Decrease) in Accrued Expenses                               73,889                18,334               42,516
                                                                    ----------------------------------------------------------------
                    Total Adjustments                                      $      264,678         $     220,691        $   1,153,048
                                                                    ----------------------  -------------------- -------------------
       Net Cash used by Operating Activities                               $  (1,905,979)         $ (1,585,760)        $ (3,588,996)
                                                                    ======================  ==================== ===================

</TABLE>

The accompanying notes are an integral part of these statements.

                                       5
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements


Note A - General organization:

   Preferred Voice, Inc. (the "Company") is a Delaware corporation  incorporated
in 1992. On February 25, 1997, the Company's  stockholders approved changing the
name of the Company to better reflect the nature of the Company's business.  The
Company  commenced  business on May 13, 1994, and was in the  development  stage
until  August 1,  1995.  The  Company  provides  products  and  services  to the
telecommunications  industry  throughout  the United  States and  maintains  its
principal offices in Dallas,  Texas. The preparation of financial  statements in
conformity with generally accepted accounting  principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from these
estimates.  Certain prior period amounts have been  reclassified  for comparison
purposes.


Note B - Summary of significant accounting policies:

   Cash and cash equivalents

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

   Accounts receivable

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

   Inventory

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

   Capitalized software development

     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. Amortization is computed on an
individual  product  basis using the  straight-line  method  over the  estimated
economic life of the product,  generally  three years.  During the three and six
months ended September 30, 2001 and 2000 and year ended March 31, 2001, software
development costs  capitalized were $88,459,  $155,755,  $140,379,  $256,648 and
$338,815,  respectively.  The amortization of capitalized  software  development
costs for the three and six months  ended  September  30,  2001 and 2000 and the
year ended March 31, 2001 was $84,664, $128,697,  $42,742, $78,326 and $184,488,
respectively.

   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.


                                       6
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements


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

      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

   Income taxes

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

   Fair value of financial instruments

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

   Revenue recognition

     The  Company is engaged as a provider  of  telecommunication  products  and
services.  Generally,  the Company  recognizes  revenue under the accrual method
when its  services  and  products  are  provided.  During the six  months  ended
September 30, 2001, the majority of the Company's  revenue  consisted of revenue
sharing receipts. During the six months ended September 30 2000, the majority of
the Company's  revenue  consisted of billing  end-users  for  services.  Revenue
sharing  income is  recognized  when the voice  dialing  services are  provided.
Revenue  sharing  income for the six months  ended  September  2001 and 2000 was
$291,207 and $-0-, respectively and $74,779 for the year ended March 31, 2001.

   Advertising expense

     The Company expenses advertising costs when the advertisement occurs. Total
advertising  expense amounted to $-0-,  $-0-,  $20,900 and $23,850 for the three
and six months ended September 30, 2001 and 2000, respectively,  and $74,158 for
the year ended March 31, 2001.

   Loss per share

     The Company  adopted the  provisions  of Statement of Financial  Accounting
Standards  (SFAS) No. 128,  Earnings per Share,  during the year ended March 31,
1998.  SFAS No. 128 reporting  requirements  replace  primary and  fully-diluted
earnings per share (EPS) with basic and diluted EPS.  Basic EPS is calculated by
dividing net income or loss (available to common  stockholders)  by the weighted
average number of common shares outstanding for the period. Diluted EPS reflects
the potential  dilution  that could occur if  securities  or other  contracts to
issue common stock were exercised or converted into common stock.

     Loss  per  share  is  based  on  the  weighted  average  number  of  shares
outstanding of 15,722,071,  15,656,708,  13,746,255 and 13,420,470 for the three
and six months ended September 30, 2001 and 2000,  respectively,  and 13,884,662
for the year ended March 31, 2001.


   Amortization

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

                                       7
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements


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

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

     The Company has adopted the provisions of SFAS No. 121,  Accounting for the
Impairment of  Long-Lived  Assets and for  Long-Lived  Assets to Be Disposed Of.
This  statement   requires  that  long-lived   assets  and  certain   identified
intangibles   be  reviewed  for  impairment   whenever   events  or  changes  in
circumstances  indicate  that  the  carrying  amount  of an  asset  may  not  be
recoverable.  Recoverability  of  assets  to be held and used is  measured  by a
comparison on the carrying  amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired,  the
impairment  to be  recognized  is measured  by the amount by which the  carrying
amount of the assets exceed the fair value of the assets.  Assets to be disposed
of are reported at the lower of the carrying  amount or fair value less costs to
sell. An  impairment  loss in the amount of $837,120 was  recognized  during the
year ended March 31, 2001 (See Note K).

   New accounting pronouncements

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


Note C - Note payable:

   Note payable consists of the following:
<TABLE>
<CAPTION>

                                                                               September           September          March
                                                                                  2001               2000              2001
                                                                              -------------      --------------     -----------
              <S>                                                                 <C>                <C>               <C>

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

</TABLE>

      The note to Brite Voice Systems, Inc. (Brite) is currently in dispute, and
   effective  April  1997 the  Company  discontinued  the  accrual  of  interest
   expense. Interest expense charged to operations related to the Brite note was
   $-0- for the three and six months ended  September  30, 2001 and 2000 and for
   the year ended March 31, 2001.







                                       8

<PAGE>

                             Preferred Voice, Inc.
                         Notes to Financial Statements


Note D - Long-term debt:

Long-term debt consists of the following:

<TABLE>
<CAPTION>

                                                                                  September           September          March
                                                                                     2001                2000             2001
                                                                                 -------------       -------------     -----------
              <S>                                                                <C>                 <C>               <C>

              Notes  payable  dated  various  dates  from May 20,  1996  through
                  September 9, 1996,  secured by common stock with principal and
                  accrued  interest  due at  maturity on various  dates  through
                  September  9, 1998.  216,250  warrants to  purchase  shares of
                  common  stock at $3.00 per share  expiring  on  various  dates
                  through  September  9, 1998 were  issued to the note  holders.
                  These notes were  converted  into  1,612,421  shares of common
                  stock on various dates through September 30,
                  2001.                                                          $     10,000        $     20,000      $  20,000

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

                                                                                 $     20,000        $     30,000      $  30,000
              Less current portion                                                     20,000              30,000         30,000
                                                                                 -------------       -------------     -----------

              Total                                                              $          0        $          0      $       0
                                                                                 =============       =============     ===========
</TABLE>


   Interest  expense  charged to operations  related to the  long-term  debt was
$700, $1,850, $1,150 and $2,300 for the three and six months ended September 30,
2001 and 2000, respectively, and $4,600 for the year ended March 31, 2001.


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 September  30, 2001,  the Company had  outstanding  warrants to purchase
2,831,203 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 on dates  ranging from  October 16, 2001 to April 19, 2006.  At September
30, 2001, 2,831,203 shares of common stock were reserved for that purpose.



                                       9
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements



Note E - Common stock (continued):

   Common stock reserved

      At  September  30,  2001,  shares of common  stock were  reserved  for the
following purposes:

             Exercise of stock warrants                             2,831,203
             Exercise of future grants of stock options
                and stock appreciation rights under the
                1994 stock option plan                                412,250
             Exercise of future grants of stock options
                and stock appreciation rights under the
                2000 stock option plan                              2,000,000
                                                                 --------------
                                                                    5,243,453
                                                                 ==============


Note F - Income taxes:

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

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

   The provision for income taxes consists of:

<TABLE>
<CAPTION>

                                    Three months        Six months        Three months          Six months
                                  ended September     ended September    ended September     ended September         March
                                        2001               2001               2000                 2000               2001
                                  -----------------    -------------     ----------------    ---------------     ---------------
  <S>                                     <C>                <C>                <C>                 <C>                 <C>

  Current income taxes                    $      0           $    0             $      0            $     0             $     0

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



</TABLE>








                                       10
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements



Note F - Income taxes (continued):

   Deferred tax (liabilities) assets consist of the following:
<TABLE>
<CAPTION>

                                                                        September 30,     September 30,         March 31,
                                                                             2001              2000                2001
                                                                       ----------------- -----------------   -----------------
                        <S>                                                <C>               <C>                 <C>


                        Accumulated depreciation                           $   (69,000)      $   (22,000)        $   (59,000)
                                                                       ----------------- -----------------   -----------------

                        Gross deferred tax liabilities                     $   (69,000)      $   (22,000)        $   (59,000)
                                                                       ----------------- -----------------   -----------------

                        Stock warrant compensation                         $     70,000      $          0        $     70,000
                        Accrued liabilities                                      11,000             9,000               8,000
                        Start-up expenditures                                         0             1,000                   0
                        Net operating loss carryforward                       4,621,000         2,941,000           3,881,000
                                                                       ----------------- -----------------   -----------------

                        Gross deferred tax assets                          $  4,702,000      $  2,951,000        $  3,959,000
                        Valuation allowance                                 (4,633,000)       (2,929,000)        $(3,900,000)
                                                                       ----------------- -----------------   -----------------

                        Net deferred tax assets                            $     69,000      $     22,000        $     59,000
                                                                       ----------------- -----------------   -----------------

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


                        The increase in the deferred tax valuation
                           allowance is as follows:                         $   733,000       $   612,000        $  1,608,000
                                                                       ================= =================   =================

</TABLE>

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

   The Company has  available  at  September  30,  2001,  a net  operating  loss
carryforward of  approximately  $13,591,000,  which can be used to offset future
taxable  income  through  the  year  2022.  Utilization  of net  operating  loss
carryforwards  in the future may be  limited if changes in the  Company's  stock
ownership  create a change of control as provided in Section 382 of the Internal
Revenue Code.


Note G - Stock option plan:

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

Under the terms of the  plan,  options  granted  may be either  nonqualified  or
incentive stock options,  and the exercise  price,  determined by the Committee,
may not be less  than the  fair  market  value of a share on the date of  grant.
Stock appreciation  rights granted in tandem with an option shall be exercisable
only to the extent the  underlying  option is  exercisable  and the grant  price
shall be equal to the exercise price of the underlying  option. At September 30,
2001,  options to purchase  385,334 shares at exercise  prices of $0.69 to $2.50
per share were  outstanding.  No stock  appreciation  rights had been granted at
September 30, 2001.

   On September  29,  2000,  the Company  adopted an incentive  stock option and
other equity  participation  plan which  permits the issuance of stock  purchase
agreements,  stock awards, incentive stock options,  non-qualified stock options
and stock appreciation rights to selected employees and independent  contractors
of the Company. The plan reserves 2,000,000 shares of

                                       11
<PAGE>

                              Preferred Voice, Inc.
                          Notes to Financial Statements



Note G- Stock option plan (continued):

common stock for grant and provides that the term of each award be determined by
the committee of the Board of Directors  (Committee)  charged with administering
the plan. These stock options vest over a period of two years.

    Under the terms of the plan,  options granted may be either  nonqualified or
incentive stock options,  and the exercise  price,  determined by the Committee,
may not be less than the fair market  value of a share on the date of the grant.
Stock appreciation  rights granted in tandem with an option shall be exercisable
only to the extent the  underlying  option is  exercisable  and the grant  price
shall be equal to the exercise price of the underlying  option. At September 30,
2001,  options to purchase  968,000 shares at exercise  prices of $1.40 to $3.00
per share were  outstanding.  No stock  appreciation  rights had been granted at
September 30, 2001.

    During the year ended March 31, 2001, the Company issued 105,000 warrants to
certain  officers or directors at exercise  prices  ranging from $0.84 to $2.93.
The warrants can be  exercised at any time and expire on various  dates  through
March 31, 2004.


Note H - Proforma information related to stock options and warrants:

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

<TABLE>
<CAPTION>

                                                      September 30, 2001     September 30, 2000        March 31, 2001
                                                     ---------------------   --------------------    -------------------
                        <S>                            <C>                    <C>                     <C>

                        Expected dividend yield             0.00%                   0.00%                  0.00%

                        Risk-free interest rate         4.13% - 4.78%           5.69% - 6.02%          4.14% - 6.35%

                        Expected life                  1.5 years to 3.5       2.5 years to 3.5        1.5 years to 3.5
                                                            years                   years                  years

                        Expected volatility                  168%                   139%                    172%



</TABLE>








                                       12
<PAGE>



                              Preferred Voice, Inc.
                          Notes to Financial Statements


Note H - Proforma information related to stock options and warrants (continued):

   If the Company  determined  compensation  cost based on the fair value at the
grant date for its stock  options under SFAS No. 123, the Company's net loss and
loss per share  would have been  increased  to the  proforma  amounts  indicated
below:
<TABLE>
<CAPTION>

                                 Three months       Six months         Three months         Six months
                                    ended             ended               ended               ended
                                 September 30,     September 30,       September 30,       September 30,
                                    2001               2001                2001                2001           March 31, 2001
                               -----------------   ----------------   ------------------ ------------------  ------------------
   <S>                            <C>                <C>               <C>                  <C>                <C>

   Net loss:
     As reported                  $ (1,126,584)      $ (2,170,657)     $   (991,431)        $ (2,170,657)      $ (4,742,044)
                               =================   ================   ================== ==================  ==================

                                        $
     Proforma                     $ (1,139,350)      $ (2,193,767)     $   (991,431)        $ (2,193,767)      $ (5,384,131)
                               =================   ================   ================== ==================  ==================

   Loss per common share:
     As reported                  $      (0.07)      $      (0.14)     $      (0.07)        $      (0.13)      $      (0.34)
                               =================   ================   ================== ==================  ==================

     Proforma                     $      (0.07)      $      (0.14)     $      (0.08)        $      (0.14)      $      (0.39)
                               =================   ================   ================== ==================  ==================

</TABLE>

   Proforma  loss  reflects  only  options  granted  during  the  periods  ended
September  30, 2001 and 2000 and March 31, 2001.  Therefore,  the full impact of
calculating  compensation  cost for  stock  options  under  SFAS No.  123 is not
reflected in the proforma net loss amounts presented above because  compensation
cost is reflected over the option's vesting period.

   Following is a summary of the stock award and incentive plans and warrants:

<TABLE>
<CAPTION>

                                                            2000 stock award and incentive plan
                             ---------------------------------------------------------------------------------------------------
                                   Three months ended               Six months ended
                                     September 2001                  September 2001                      March 2001
                             ------------------------------- -------------------------------- ----------------------------------
                                               Weighted                         Weighted                           Weighted
                                 Number         average          Number          average          Number            average
                                   of          exercise            of           exercise            of             exercise
                                 shares          price           shares           price           shares             price
                             -------------- ---------------- --------------- ---------------- ----------------  ----------------
<S>                              <C>           <C>            <C>              <C>             <C>                 <C>

Outstanding at beginning
of period                          572,000     $   1.45         576,000        $  1.45               0             $    1.45

Granted                            520,000         1.88         520,000           1.88         576,000                  1.88
Exercised                                0         0.00               0           0.00               0                  0.00
Expired                                  0         0.00               0           0.00               0                  0.00
Forfeited                        (124,000)       (1.61)       (128,000)         (1.61)               0                (1.61)
                             -------------- ---------------- --------------- ---------------- ----------------  ----------------

Outstanding at end of
  period                          968,000      $   1.66         968,000        $  1.66         576,000             $    1.66
                             ============== ================ =============== ================ ================  ================

Options exercisable at
end of period                     190,666      $   1.45         190,666        $  1.45         190,666             $    1.45

Weighted average fair
  value of options granted
  during the period               520,000      $   1.54         520,000        $  1.54         576,000             $    1.21

</TABLE>


                                       13
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements

Note H - Proforma information related to stock options and warrants (continued):
<TABLE>
<CAPTION>

                                                                      2000 stock award and incentive plan
                                               ----------------------------------------------------------------------------------
                                                           Three months ended                        Six months ended
                                                             September 2000                           September 2000
                                               ----------------------------------------------------------------------------------
                                                                         Weighted                              Weighted
                                                     Number                average            Number            average
                                                       of                 exercise              of              exercise
                                                     shares                 price             shares             price
                                               ------------------- -------------------  -----------------  ----------------------
<S>                                                       <C>          <C>                      <C>              <C>
Outstanding at beginning of period                        0            $     0.00               0                $    0.00


Granted                                                   0                  0.00               0                     0.00
Exercised                                                 0                  0.00               0                     0.00
Expired                                                   0                  0.00               0                     0.00
Forfeited                                                 0                  0.00               0                     0.00
                                               ------------------- -------------------  -----------------  ----------------------
Outstanding at end of period                              0            $     0.00               0                $    0.00
                                               =================== ===================  =================  ======================


Options exercisable at end of period                      0                   N/A               0                       N/A
Weighted average fair value of

   options granted during the period                      0                   N/A               0                       N/A

</TABLE>

<TABLE>
<CAPTION>


                                                                  1994 stock award and incentive plan
                                          ------------------------------------------------------------------------------------
                                              Three months ended           Six months ended
                                                September 2001               September 2001                March 2001
                                          ------------------------------------------------------------------------------------
                                                          Weighted                     Weighted                    Weighted
                                              Number       average        Number        average        Number      average
                                                of        exercise          of         exercise          of        exercise
                                              shares        price         shares         price         shares       price
                                          ------------------------------------------------------------------------------------
   <S>                                      <C>           <C>          <C>           <C>            <C>          <C>

   Outstanding at beginning of period       412,000       $ 1.02       $ 412,000     $  1.02        406,500      $ 0.96

   Granted                                        0         0.00               0        0.00         15,000        2.50
   Exercised                                      0         0.00               0        0.00         (9,500)      (1.00)
   Expired                                        0         0.00               0        0.00              0        0.00
   Forfeited                                (26,666)       (0.99)        (26,666)      (0.99)             0        0.00
                                          ------------------------------------------------------------------------------------
   Outstanding at end of period             385,334       $ 1.02       $ 385,334     $  1.02        412,000      $ 0.96
                                          ====================================================================================

   Options exercisable at end of period     293,667       $ 0.98       $ 293,667     $  0.94        392,000      $ 0.96

   Weighted average fair value of
      options granted during the period           0          N/A       $  15,000     $  2.13         15,000      $ 2.09


</TABLE>

                                       14
<PAGE>

                              Preferred Voice, Inc.
                          Notes to Financial Statements


Note H - Proforma information related to stock options and warrants (continued):
<TABLE>
<CAPTION>

                                                     1994 stock award and incentive plan
                                          --------------------------------------------------------
                                              Three months ended           Six months ended
                                                September 2000              September 2000
                                          --------------------------------------------------------
                                                          Weighted                     Weighted
                                             Number        average        Number       average
                                               Of         exercise          of         exercise
                                             shares         price         shares        price
                                          --------------------------------------------------------
   <S>                                    <C>            <C>              <C>          <C>

   Outstanding at beginning of period     412,000        $  0.00          406,500      $ 0.96

   Granted                                      0           0.00           15,000        2.50
   Exercised                                    0           0.00           (9,500)      (1.00)
   Expired                                      0           0.00                0        0.00
   Forfeited                                    0           0.00                0        0.00
                                          --------------------------------------------------------
   Outstanding at end of period           412,000        $  0.00          412,000      $ 1.02
                                          ========================================================

   Options exercisable at end of
   period                                 295,083        $  0.94          295,083      $  0.94

   Weighted average fair value of
      options granted during the
      period                                    0            N/A           15,000      $  2.13

</TABLE>

   Following is a summary of warrants issued to employees:
<TABLE>
<CAPTION>

                                                                               Warrants
                                          ------------------------------------------------------------------------------------
                                             Three months ended             Six months ended
                                                September 2001               September 2001               March 2001
                                          ------------------------------------------------------------------------------------
                                                          Weighted                     Weighted                    Weighted
                                             Number        average        Number       average        Number       average
                                               of         exercise          of         exercise         of         exercise
                                             shares         price         shares        price         shares        price
                                          ------------------------------------------------------------------------------------
   <S>                                      <C>          <C>            <C>             <C>           <C>         <C>

   Outstanding at beginning of period       905,000      $ 1.10         905,000         $ 1.02        800,000     $  0.96

   Granted                                        0        0.00               0           0.00        105,000        2.50
   Exercised                                      0        0.00               0           0.00              0       (1.00)
   Expired                                        0        0.00               0           0.00              0        0.00
                                          ------------------------------------------------------------------------------------

   Outstanding at end of period                905,000   $ 1.10         905,000           1.10        905,000     $  0.96
                                          ====================================================================================

   Options exercisable at end of period        905,000   $ 1.10         905,000           1.10        905,000     $  1.10

   Weighted average fair value of
      options granted during the period              0      N/A               0            N/A        105,000     $  1.96


</TABLE>
                                       15
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements

Note H - Proforma information related to stock options and warrants (continued):
<TABLE>
<CAPTION>

                                                                   Warrants
                                          ---------------------------------------------------------
                                             Three months ended           Six months ended
                                                September 2000              September 2000
                                          ---------------------------------------------------------
                                                          Weighted                     Weighted
                                             Number        average       Number        average
                                               of         exercise         of          exercise
                                             shares         price        shares         Price
                                          ---------------------------------------------------------

   <S>                                         <C>        <C>          <C>            <C>

   Outstanding at beginning of period          800,000    $ 0.90       800,000        $  0.96

   Granted                                     105,000      2.66       105,000           2.50
   Exercised                                         0      0.00             0          (1.00)
   Expired                                           0      0.00             0           0.00
                                          ---------------------------------------------------------

   Outstanding at end of period                905,000    $ 1.10       905,000        $  1.02
                                          =========================================================

   Options exercisable at end of period        905,000    $ 1.10       905,000        $  1.10

   Weighted average fair value of
      options granted during the period        105,000    $ 1.96       105,000        $  1.96

</TABLE>

Note I - Stock warrants:

   During the year ended March 31, 2001, the Company issued 151,035  warrants to
certain service  providers and business partners at exercise prices ranging from
$0.84 to $3.53.  The warrants can be exercised at any time and expire at various
dates through August 24, 2006.

   In accordance with SFAS No. 123, the Company  accounts for warrants issued to
non-employees  at fair value of the  warrants  at the grant  date.  The  Company
recognized $131,162 as compensation expense during the year ended March 31, 2001
related to warrants  issued to  non-employees.  No  warrants  were issued and no
compensation  expense was  recognized  by the Company  during the periods  ended
September 30, 2001 and 2000 with respect to warrants issued to non-employees.

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

<TABLE>
<CAPTION>

                                                          September 2001        September 2000           March 2001
                                                        --------------------  -------------------  -----------------------
                        <S>                                     <C>                  <C>           <C>

                        Expected dividend yield                 N/A                  N/A                   0.00%

                        Risk-free interest rate                 N/A                  N/A                   5.69%

                        Expected life                           N/A                  N/A           0.5 years to 3.5 years

                        Expected volatility                     N/A                  N/A                    172%


</TABLE>
                                       16
<PAGE>

                              Preferred Voice, Inc.
                          Notes to Financial Statements


Note I - Stock warrants (continued):

   Following is a summary of warrants  issued to  non-employees  in exchange for
goods and services:
<TABLE>
<CAPTION>

                                             Three months ended             Six months ended
                                                September 2001               September 2001                March 2001
                                          ---------------------------  ---------------------------- --------------------------
                                                         Weighted                      Weighted                    Weighted
                                             Number       average         Number        average        Number       average
                                               of        exercise           of         exercise          of        exercise
                                             shares        price          shares         price         shares        price
                                          ---------------------------  ---------------------------- --------------------------
   <S>                                      <C>        <C>                <C>         <C>              <C>            <C>

   Outstanding at beginning of period       621,035    $   1.76           621,035     $ 1.76           470,000        $  1.36

   Granted                                        0        0.00                 0       0.00           151,035           3.01
   Exercised                                      0        0.00                 0       0.00                 0           0.00
   Expired                                        0        0.00                 0       0.00                 0           0.00
                                          ---------------------------  ---------------------------- --------------------------

   Outstanding at end of period             621,035    $   1.76           621,035     $ 1.76           621,035        $  1.76
                                          ===========================  ============================ ==========================

   Options exercisable at end of period     612,035    $   1.76           612,035     $ 1.76           621,035        $  1.76

   Weighted average fair value of
      options granted during the period           0         N/A                 0        N/A           151,035        $  1.67


</TABLE>

<TABLE>
<CAPTION>

                                             Three months ended             Six months ended
                                                September 2000               September 2000
                                          ---------------------------  ----------------------------
                                                         Weighted                      Weighted
                                             Number       average         Number        average
                                               of        exercise           of         exercise
                                             shares        price          shares         price
                                          ---------------------------  ----------------------------
   <S>                                       <C>       <C>               <C>           <C>

   Outstanding at beginning of period        470,000   $ 1.36            470,000       $ 1.36

   Granted                                         0     2.66                  0         0.00
   Exercised                                       0     0.00                  0         0.00
   Expired                                         0     0.00                  0         0.00
                                          ---------------------------  ----------------------------

   Outstanding at end of period               470,000  $ 1.36            470,000       $ 1.36
                                          ===========================  ============================

   Options exercisable at end of period       470,000  $ 1.36            470,000       $ 1.36

   Weighted average fair value of
      Options granted during the period             0     N/A                  0           N/A



</TABLE>


                                       17

<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements

Note I - Stock warrants (continued):

   Following is an overall summary of the stock warrant activity:

<TABLE>
<CAPTION>

                                             Three months ended             Six months ended
                                                September 2001               September 2001                March 2001
                                          ---------------------------  ---------------------------- --------------------------
                                                          Weighted                     Weighted                    Weighted
                                             Number       average         Number        average        Number       average
                                               of         exercise          of         exercise          of        exercise
                                             shares        price          shares         price         shares        price
                                          ---------------------------  ---------------------------- --------------------------
   <S>                                       <C>           <C>          <C>              <C>          <C>            <C>

   Outstanding at beginning of period        2,851,203     $ 1.66       2,778,703        $ 1.75       2,303,203      $ 1.14

   Granted                                           0       0.00         197,500          1.95         973,000        2.39
   Exercised                                         0       0.00         (50,000)        (1.00)       (420,196)      (1.02)
   Expired                                     (20,000)     (2.75)        (95,000)        (3.04)        (77,304)      (2.01)
                                          ---------------------------  ---------------------------- --------------------------

   Outstanding at end of period              2,831,203     $ 1.65       2,831,203        $ 1.65       2,778,703      $ 1.75
                                          ===========================  ============================ ==========================

</TABLE>

<TABLE>
<CAPTION>

                                             Three months ended             Six months ended
                                                September 2000               September 2000
                                          ---------------------------  ----------------------------
                                                          Weighted                     Weighted
                                             Number       average         Number        average
                                               of         exercise          of         exercise
                                             shares        price          shares         price
                                          ---------------------------  ----------------------------
   <S>                                      <C>           <C>           <C>             <C>

   Outstanding at beginning of period       2,659,965     $ 1.36        2,303,203       $ 1.14

   Granted                                    476,750       2.66          541,750         2.50
   Exercised                                   (2,500)      0.00         (342,696)       (1.09)
   Expired                                    (25,000)      0.00          (49,804)       (3.00)
                                          ---------------------------  ----------------------------

   Outstanding at end of period             3,109,215     $ 1.36        2,452,453       $ 1.32
                                          ===========================  ============================

</TABLE>

Note J - 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
September 30, 2001:

                   Year ending
                   September 30,                            Amount
                 -----------------                       -------------

                      2002                               $ 196,070
                      2003                                 191,281
                      2004                                 188,620
                      2005                                 189,662
                      2006                                  47,415
                                                         -------------
                                                         $ 813,048
                                                         =============


Note J - Commitments (continued):

   Total rent  expense  charged to  operations  was $51,062,  $98,123,  $29,038,
$58,015 and $153,515 for the three and six months ended  September  30, 2001 and
2000 and for the year ended March 31, 2001, respectively.


                                       18
<PAGE>


                              Preferred Voice, Inc.
                          Notes to Financial Statements

Note K - Barter transaction:

   On June 3, 1996, the Company entered into a media purchase  agreement for the
promotion of its products and services with Proxhill Marketing, Ltd. (Proxhill).
Under the terms of the agreement,  the Company committed to purchase  $1,200,000
of media  advertising  time in exchange for 200,000  shares of common stock at a
value of $4.00 per share, and $400,000 in cash. The agreement is for a period of
five  years.  For each  purchase of media  advertising  time,  the Company  will
receive  a barter  credit  equal to  66.67% of the  transaction  value  with the
remaining  balance  payable in cash.  A prepaid  barter  credit in the amount of
$761,018 and prepaid media  commissions in the amount of $76,102 are included in
other  assets in the  accompanying  balance  sheet at  September  30,  2000.  In
connection with this  agreement,  the Company issued to Proxhill 50,000 warrants
to  purchase  the  Company's  common  stock at a price of $4.00 per  share.  The
options expired June 3, 2001. The Company and Proxhill are currently involved in
litigation over the agreement,  and due to the uncertainty of the realization of
the barter credits,  the Company  recognized an impairment loss in the amount of
$837,120 during the year ended March 31, 2001.


Note L - Extinguishment of debt:

   During the year ended March 31, 2001, the Company  negotiated  settlements of
amounts owed to certain of its vendors and employees. The negotiated settlements
resulted in a reduction of the Company's  accounts payable and accrued operating
expenses in the amount of $74,375,  which has been reported as an  extraordinary
item in the accompanying statements of operations.


Note M - Going concern:

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

   On June 3, 1999, the Company entered into a software  license  agreement with
KMC Telecom Holdings, Inc. (KMC). Under the terms of the agreement, KMC paid the
Company initial license fees of $570,000 for the rights to utilize the Company's
software  applications in certain  geographical  markets. The agreement is for a
period of ten years and  provides of a total of  thirty-nine  installations  and
grants KMC the ability to add up to 81 additional  installations.  The agreement
also calls for KMC to pay the Company a monthly  license fee ranging from $1,000
to $3,500 per month for each software and hardware installation beginning in the
25th month after each  installation.  As of September 30, 2001,  the Company had
completed one installation.

   On September 25, 2000, KMC notified the Company that the initial installation
would  not be  accepted  and KMC  intends  to  terminate  the  software  license
agreement. In addition, KMC requested the refund of the initial license fees and
other amounts paid to the Company.  The Company  believes it has fully  complied
with the terms and conditions of the agreement and intends to vigorously  defend
its position.  Accordingly,  no provision for losses in connection  with the KMC
agreement  has  been  charged  to  operations  in  the  accompanying   financial
statements.  If required to refund such  monies,  it would result in a charge to
revenue  in the  period  that the  refund is  ascertained  and could  impair the
Company's ability to continue as a going concern.  The Company filed a breach of
contract suit against KMC on November 16, 2000.

   In August 2000, the Company completed the issuance of an additional 1,142,858
common  shares  through a private  offering,  resulting in net proceeds  (net of
stock  issuance  costs) of  $2,787,531.  In connection  with the  offering,  the
Company  also issued  warrants to purchase  285,715  shares of common stock at a
price of $2.625 per share.

   In April 2001, the Company  completed a private  placement  offering in which
937,500  shares  of  common  stock  were  issued  at a price of $2.00  per share
resulting  in net  proceeds  (net of stock  issuance  costs) of  $1,752,500.  In
connection  with the  offering,  the Company  also  issued  warrants to purchase
593,750 shares of common stock at a price of $2.00 per share.

                                       19
<PAGE>

                              Preferred Voice, Inc.
                          Notes to Financial Statements


   As of September 30, 2001, the Company has entered into forty revenue  sharing
agreements  with various  telecommunication  service  providers  throughout  the
United States.  Generally, the agreements provide for the Company to receive 30%
to 70% of the revenue from the sale of the Company's services depending upon the
level of  revenue  generated.  The  Company  began  receiving  revenue  from the
agreements in November 2000.

Note M - Going concern (continued):

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


Note N - Concentrations:

   Concentrations of credit risk

      At September 30, 2001,  the Company had cash balances of $321,899 with one
   banking  institution,  which is in excess of the federally  insured amount of
   $100,000 per institution.  These balances are before considering  outstanding
   items.

    Concentration of business - major customers

      During  the  three  and  six-month   periods  ended  September  30,  2001,
   approximately $146,035 and $264,481 of the Company's revenue was derived from
   five  customers,   respectively.  During  the  year  ended  March  31,  2001,
   approximately  $118,000  of the  Company's  revenue  was  derived  from  four
   customers.




                                       20
<PAGE>

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


         This report contains  forward-looking  statements within the meaning of
Section 27A of the  Securities Act of 1933, as amended (the  "Securities  Act"),
and  Section  21E of the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange Act"). These  forward-looking  statements are subject to certain risks
and  uncertainties  that could cause actual  results to differ  materially  from
historical  results or  anticipated  results,  including  those set forth herein
under  "Management's  Discussion and Analysis of Financial Condition and Results
of Operations" and those set forth in the "Management's  Discussion and Analysis
of Financial  Condition and Results of Operations"  section of the Form 10-KSB/A
for the fiscal year ended March 31, 2001.  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
our 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.  All references to "we," "us," and "our"
refer to Preferred Voice, Inc.

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,  which  we  expect  to  occur  by the  end of  2001.  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.

         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, as of November 9,
2001,  we had signed forty (40) local  telephone  company and cell phone company
multi-year  contracts.  Also, as of November 9, 2001, eight system locations had
been fully implemented so that the systems installed  pursuant to such contracts
are already  generating  revenues for us. In the month ended September 30, 2001,
these eight locations generated revenues of approximately $83,000. Each of these
companies  has signed a revenue  sharing  agreement  with us and these  types of
revenue  sharing  arrangements  are the  standard  manner  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 other  contracting  phone companies are in the system acceptance
and early marketing stages, and we should generate revenues from these contracts
by the third  quarter of the fiscal year ending March 31, 2002.  Six  additional
contracting phone companies will start the installation and implementation phase
early in the third fiscal quarter.

         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  company  who  wants  their
employees  accessed by the caller  saying an employee name instead of asking the
caller to punch in an

                                       21
<PAGE>

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:

          o    secure  adequate  financial  and  human  resources  to  meet  our
               requirements,  including  adequate  numbers of technical  support
               staff to provide service for our phone company customers;

          o    establish and maintain relationships with phone companies;

          o    make sure the VIP system works with the telephone switches of all
               of the major manufacturers;

          o    establish a lead time for delivery of hardware;

          o    achieve user acceptance for our services;

          o    generate reasonable margins on our services;

          o    deploy  and  install  VIP  systems  on a  timely  and  acceptable
               schedule;

          o    respond to competitive developments;

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

          o    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  $2,170,657,  or $0.14 per  share,  for the
six-month period ended September 30, 2001,  compared to a net loss of $1,806,451
or $0.13 per share,  for the six-month  period ended September 30, 2000. For the
three-month  period  ended  September  30,  2001,  we  recorded  a net  loss  of
$1,126,585,  or $.07 per share  compared to a net loss of $991,431,  or $.07 per
share for the three-month period ended September 30, 2000.

         Total Sales

         Total revenue for the six-month  period ended  September 30, 2001,  was
$295,180  compared to $58,058 for the six-month period ended September 30, 2000.
Total revenue for the three-month  period ended September 30, 2001, was $210,908
compared  to $51,450  for the  three-month  period  ended  September  30,  2000.
Revenues in both the six-month and three-month  periods for both years consisted
of revenue  sharing  receipts from our customer phone  companies and billing our
direct end-users for individual services.  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 grow
gradually  in the second  half of our fiscal year 2002 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.

         Cost of Sales

         Cost of sales for the  six-month  period ended  September  30, 2001 was
$73,545  compared to $60,513 for the six-month  period ended September 30, 2000.
Cost of sales for the  three-month  period ended  September 30, 2001 was $54,334
compared to $51,565 for the three-month period ended September 30, 2000. 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.

                                       22
<PAGE>

         Selling, General and Administrative

         Selling,  general and administrative  expenses for the six-month period
ended  September  30,  2001  were  $2,390,442  compared  to  $1,801,696  for the
six-month period ended September 30, 2000.  Selling,  general and administrative
expenses for the  three-month  period ended  September 30, 2001 were  $1,282,459
compared to $990,166 for the  three-month  period ended  September 30, 2000. The
increases  from  2000  to 2001  are due to  increased  staffing  and  additional
marketing efforts by our marketing staff of our VIP system services to potential
parties  interested in our revenue sharing  agreements.  We expect that selling,
general and  administrative  expenses will continue to increase  through  fiscal
year 2002,  such  expenses to include  costs related to the number of employees,
office space  requirements and general overhead.  However,  we believe that such
expenses will not increase proportionately with revenue from sales.

         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 six
month periods  ended  September 30, 2001 and 2000,  software  development  costs
capitalized  were  $155,755,  and $256,648  respectively.  The  amortization  of
capitalized  software development costs for the periods ended September 30, 2001
and 2000 was $128,697, and $78,326 respectively.

         Income Taxes

         As of  September  30, 2001,  we had  cumulative  federal net  operating
losses of approximately $13.6 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 September 30, 2001 were  $234,723,  a
decrease  of  $1,501,029  from  $1,735,752  at March 31,  2001.  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 June 3, 1999, we entered into a software license agreement with KMC.
Under  the  terms  of the  agreement,  KMC  paid us an  initial  license  fee of
$570,000. It has also paid us $391,000 for hardware for eight installations. The
agreement provides for a total of 39 installations and grants KMC the ability to
add up to 81 additional installations.

         To date we have installed one system.  On September 25, 2000, KMC wrote
us and asserted that since it had not accepted the initial  installation  within
90 days,  it was  refusing  to accept  the system  and  exercising  its right to
terminate  the  agreement  with  cause  under  the  terms of the  contract.  KMC
requested  a refund of most monies  paid  relating  to the initial  market and a
refund of all monies paid for other markets.  We responded by informing KMC that
under  the  terms  of the  agreement,  KMC  had  already  accepted  the  initial
installation and, therefore,  had no right to terminate the agreement with cause
pursuant to the terms of the agreement.  If the judge were to determine that KMC
had properly  terminated  the contract for cause,  then KMC would be entitled to
the refund of money paid under the agreement.

         On November 16, 2000,  we filed a breach of contract  suit against KMC.
We continue to carry approximately $342,000 in deferred revenue related to sales
of  hardware  to KMC and we will  continue  to carry such  amounts  as  deferred
revenue  until the  conclusion  of and  final  judgment  on the case.  If we are
required to refund such monies in the period that the refund is ascertained,  it
could have a material  adverse effect on our financial  condition,  particularly
our liquidity.

         On March 1, 2001, KMC gave written notice to us that it was terminating
its agreement with us effective on the anniversary  date, June 3, 2001,  without
cause. Upon a termination without cause under the terms of the contract, neither
party would be entitled to receive any money back.  However, we will continue to
carry the $342,000 related to sales of hardware to KMC as deferred revenue until
final judgment is entered on this case.

                                       23
<PAGE>

         On August 24, 2000,  pursuant to Section 4(2) of the Securities Act and
Regulation D thereunder,  we conducted an offering of 1,142,858 units consisting
of shares of our common  stock and  warrants  to  purchase  shares of our common
stock at $2.625 per share  providing  us with net  proceeds of  $2,787,531,  for
working capital.  On April 11, 2001,  pursuant to Section 4(2) of the Securities
Act and  Regulation D  thereunder,  we conducted an offering of 1,187,500  units
consisting of shares of our common stock and warrants to purchase  shares of our
common stock at $2.00 per share  providing  us with net proceeds of  $1,752,500,
before  commissions  and  expenses,  for  working  capital.  We began  recording
revenues from our revenue sharing agreements in November of 2000. These revenues
are approximately $83,000 per month but we expect these to continue to rise to a
level to meet our monthly cash requirements by June of 2002,  subject to raising
needed funds.


         On October  11,  2001,  we entered  into a  Professional  Services  and
Development  Contract with VeriSign,  Inc.  ("VeriSign") (the  "Contract"),  the
terms of which are more fully set forth in Part II, Item 5 of this Form  10-QSB.
VeriSign has agreed to pay us an aggregate  contract  amount of $500,000 for all
of the  deliverables to be delivered under the Contract.  Sixty percent (60%) of
this amount was paid on the date the Contract was  executed,  and the  remaining
amounts  are to be  paid  upon  our  completion  of  milestones  related  to the
deliverables.   The  revenue  received  from  this  Contract  has  improved  our
liquidity.

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


Future Obligations

         We project our working capital needs to be $2,100,000 over the next six
months  for  corporate  overhead  and will  require  approximately  $950,000  of
equipment  financing  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 insufficient to meet these anticipated capital
requirements  and to  finance  continued  growth  for  the  foreseeable  future,
however, management is taking actions which it believes will provide the Company
with adequate  resources to meet its short-term  capital needs. We may be forced
to raise additional  capital through the issuance of new shares and the exercise
of  outstanding  warrants  and to 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. Subject to
our ability to fund the cost, we expect to hire or contract  with  approximately
thirty (30) additional  persons during the twelve (12) months ending in October,
2002,  primarily to support our  expanding  marketing  activities,  software and
hardware development, and system installations. At November 9, 2001, we employed
thirty-one (31) full time employees.


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

There have been no material  developments  in the  litigation  we have  reported
regarding  KMC in our Form  10-KSB/A  for the fiscal year ended March 31,  2001,
filed with the SEC on August 10, 2001.  With  respect to the Proxhill  Marketing
Limited litigation,  which was reported in the Form 10-KSB/A, we have received a
ruling in the  Colorado  state action  denying all  injunctive  and  declaratory
relief  and have also filed a motion to dismiss  the action in  Colorado  on the
basis that we filed claims first in the state of Texas and that case will settle
all issues that are part of the action filed in Colorado. We are also evaluating
the filing of a counterclaim in the Colorado action.  We are not involved in any
other material legal proceedings.

                                       24
<PAGE>

Item 2.  Changes in Securities.

(a)  Our stockholders approved the amendment of our certificate of incorporation
     to increase  the number of  authorized  common  stock of the  company  from
     20,000,000 to 50,000,000 shares.

(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.

     Our  Stockholders  met for the 2001 Annual Meeting of the  Stockholders  on
     September 21, 2001

     At that meeting, the following directors were elected : G. Ray Miller, Mary
     G.  Merritt,  Scott  V.  Ogilvie  and  Gerard  Hallaren.  Set  forth in the
     following chart are the matters voted upon and the votes cast for,  against
     or withheld,  as well as  abstentions  and broker  non-votes,  on each such
     matter:

<TABLE>
<CAPTION>

       Proposals                                        For          Withhold/         Abstain       Broker Non-
                                                                      Against                           Votes
       ------------------------------------------- -------------- ----------------- -------------- -----------------
       <S>                                             <C>                  <C>                <C>        <C>

       Directors:
        G. Ray Miller                                  9,739,607            31,703
        Mary G. Merritt                                9,739,607            31,703
        Scott V. Ogilvie                               9,738,607            32,703
        Gerard Hallaren                                9,739,607            31,703

       Adoption of Company's  2000 Stock Plan for      9,737,497            33,807              6
       Incentive  Stock  Options and Other Equity
       Participation, as amended

       Increase   of   Authorized   shares   from      9,739,197            32,109              4
       20,000,000 to 50,000,000

       Authorization of Class of Preferred Stock       5,417,540            65,106              6         4,288,658

</TABLE>

Item 5.   Other Information.

Philips Contract

         On October 5, 2001,  we entered into a Patent  License  Agreement  with
Koninklijke Philips Electronics N.V. ("Philips") (the "License  Agreement").  We
had  previously  signed a Volume  License  Agreement  with Philips,  dated as of
January 17, 2001 ("Volume License Agreement"), under which we received a license
to use certain  Philips  software  that is  incorporated  into our VIP System in
order to provide the services we provide through the VIP System. The new License
Agreement provides us with a worldwide, non-exclusive, non-transferable license,
without the right to sublicense,  to Philips' voice  activated  dialing  patents
("VAD Patents") in exchange for an initial license fee, license maintenance fees
and certain royalties. As long as we pay the fees provided for under the License
Agreement,  Philips has agreed not to assert any claim for  infringement  of the
VAD  Patents for our  offering  of  services  through the use of the VIP System,
which  services  involve the use of Philips' VAD Patents,  or against any of our
customers that have signed acknowledgements to the License Agreement.

                                       25
<PAGE>

         In addition to these basic license rights, Philips has also agreed that
it will not assert any claim for infringement of certain other voice patents for
services  provided through our VIP System against any of our existing and future
customers set forth in the License Agreement through October 5, 2005. After that
time period,  we may negotiate a new patent  license  agreement  related to such
other voice  patents  with  Philips.  Philips  has also  issued us seventy  (70)
Philips Speech Pearl 1999 or 2000 software copyright licenses under the terms of
the Volume License Agreement.

         The License  Agreement may be terminated by either party at any time on
thirty (30) days notice to the other party in the event that the other party has
committed a material breach of the obligations  under the License  Agreement and
the breach has not been cured within  thirty (30) days after  receipt of written
notice  specifying the nature of the breach.  The License  Agreement may also be
terminated if we file for bankruptcy or take similar  action.  Additionally,  if
there is a change of  control  or  ownership  of our  company  that  results  in
transfer of our assets to a direct  competitor  of Philips or a person or entity
that has been given notice of  infringement  concerning  Philips' patent rights,
then the royalty fees due under the License Agreement increase.  Our license for
the VAD Patents continues until the License Agreement is terminated.

VeriSign Contract

         On October  11,  2001,  we entered  into a  Professional  Services  and
Development  Contract with  VeriSign.  VeriSign has entered into the Contract to
utilize  our  professional   services  to  provide  reportable  results  on  the
functionality  of our and  VeriSign's  voice  recognition  directory  assistance
programs, or voice registry systems. Our program is called Business Connect, and
VeriSign's  program is called the Global Voice  Registry.  Our Business  Connect
service  is  designed  to  allow  subscribers  to  the  service  use  our  voice
recognition  software to access local business  listings,  and VeriSign's Global
Voice Registry is designed to allow subscribers to access national businesses.

         Under the  Contract,  we have  agreed to  configure  and launch a fully
functional voice registry module of Business Connect and applications that allow
access between our Voice User  Interface and the VeriSign  Global Voice Registry
software to demonstrate the functionality of the voice registry  systems.  Under
the  Contract,  we are  obligated  deliver  VeriSign  a number  of  agreed  upon
deliverables  in the  process  of  demonstrating  the  functionality  of our and
VeriSign's  voice registry  systems,  including the  reportable  results on such
functionality,  over a time period  beginning  on October 15, 2001 and ending on
December 31, 2001. For wireless and wireline carriers that choose to offer voice
registry   services  to  their  customers,   the  subscribers  to  the  Business
Connect/Global  Voice Registry integrated service will be able to speak the name
of any national or local business in the United States into the telephone and be
connected to the appropriate business.

         VeriSign  has the right,  at any time during the course of the project,
to make changes to the  statement of work,  the  deliverables  and various other
aspects of the work to be done by us by written notice.  Such changes may result
in a decrease  or an  increase  in the  amounts to be  received  by us under the
Contract. Additionally,  either party may terminate the Contract without default
or cause at any time upon thirty (30) days  notice to the other  party.  Both of
these  provisions  could affect the  aggregate  contract  amount that we receive
under the Contract.  VeriSign has agreed to pay us an aggregate  contract amount
of $500,000  for all of the  deliverables  to be delivered  under the  Contract,
subject to the amendment and termination provisions previously discussed.  Sixty
percent (60%) of this amount was paid on the date the Contract was executed, and
the remaining  amounts are to be paid upon our completion of milestones  related
to the deliverables.

         Pursuant  to the terms of the  Contract,  VeriSign  will own all of the
deliverables  set forth in the Contract,  excluding the Business  Connect System
and any other  software or other  proprietary  information  owned by us. We have
also granted VeriSign a perpetual, non-exclusive, irrevocable, worldwide license
for  VeriSign to use,  execute and display all or part of our  Business  Connect
System as it is incorporated into any of the deliverables  delivered pursuant to
the terms of the Contract. In conjunction with that license, we granted VeriSign
the right to use  documentation  we provided  to them  related to the use of the
Business  Connect  System and the regional  databases  we  developed  for use in
connection  with  our  Business  Connect  System.  VeriSign  has  granted  us  a
worldwide,  royalty free,  nonexclusive  license to use any of the  deliverables
solely for the  marketing  and  promotion of the Business  Connect/Global  Voice
Registry service.

                                       26
<PAGE>

Reduction in Work Force

         In  August,  2001,  we  laid  off  nine  employees:  six  in  Corporate
Operations,  and three in Sales and Marketing. Among those laid off was our Vice
President of Corporate Operations, William D. Sprague.

Item 6.  Exhibits and Reports on Form 8-K

(a)      Exhibits

Exhibit
Number            Exhibit Description

3.1      Certificate of Amendment.
10.1     Professional  Services and Development  Contract No.  1000003770 by and
         between Preferred Voice, Inc. and VeriSign, Inc.
10.2+    Patent  License  Agreement  by and between  Preferred  Voice,  Inc. and
         KoninklijkePhilips Electronic, N.V.


+ Confidential  material  deleted and filed  separately  with the Securities and
Exchange Commission.

(b)      Reports on Form 8-K

None.





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<PAGE>


                                   SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                         PREFERRED VOICE, INC.


   November  19, 2001                     /s/ G. Ray Miller
--------------------------------         --------------------------------------
         Date                            G. Ray Miller
                                         Chief Executive Officer and
                                         Chairman of the Board of Directors
                                         (Principal Executive Officer)





    November 19, 2001                     /s/ Mary G. Merritt
--------------------------------         --------------------------------------
         Date                            Mary G. Merritt
                                         Secretary, Treasurer and Vice President
                                         of Finance
                                         (Principal Financial Officer)






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