<PAGE>   1
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-Q

(Mark One)

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
         THE SECURITIES EXCHANGE ACT OF 1934

               For the quarterly period ended: September 30, 1999

                                       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: 0-27658

                            PREFERRED NETWORKS, INC.
             (Exact name of Registrant as Specified in its Charter)

                 GEORGIA                                58-1954892
     (State or other jurisdiction of                 (I.R.S. Employer
      incorporation or organization)              Identification Number)

                       850 Center Way, Norcross, GA 30071
                    (Address of principal executive offices)
                                   (Zip Code)
                                 (770) 582-3500
              (Registrant's telephone number including area code)

                                 Not Applicable
              (Former name, former address and former fiscal year,
                          if changed since last year)

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 such shorter period 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 [ ]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 16,369,302 shares of common
stock, no par value, as of November 11, 1999.


<PAGE>   2

                            PREFERRED NETWORKS, INC.

                               INDEX TO FORM 10-Q

<TABLE>
<CAPTION>

 PART I.                  FINANCIAL INFORMATION                                                   PAGE
                                                                                                 NUMBER
                                                                                                 ------
<S>           <C>                                                                                <C>
              Item 1.    Financial Statements

                         Condensed Consolidated Balance Sheets, September 30, 1999
                         (Unaudited) and December 31, 1998....................................        3

                         Condensed Consolidated Statements of Operations for the
                         Nine months ended September 30, 1999 and 1998
                         (Unaudited) .........................................................        4

                         Condensed Consolidated Statements of Cash Flows for the nine
                         months ended September 30, 1999 and 1998 (Unaudited) ................        5

                         Notes to Condensed Consolidated Financial Statements (Unaudited) ....        6

              Item 2.    Management's Discussion and Analysis of Financial Condition
                         and Results of Operations ...........................................        9

              Item 3.    Quantitative and Qualitative Disclosure of Market Risk ..............       15


PART II.                 OTHER INFORMATION

              Item 4.    Defaults Upon Senior Securities .....................................       15

              Item 5.    Exhibits and Reports on Form 8-K ....................................       15

                         Signatures ..........................................................       16
</TABLE>


<PAGE>   3

                            PREFERRED NETWORKS, INC.

                     CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                                                    SEPTEMBER 30,  DECEMBER 31,
                                                                                        1999          1998
                                                                                    -----------    -----------
                                                                                    (UNAUDITED)
<S>                                                                                 <C>            <C>
                                     ASSETS
Current assets
   Cash and cash equivalents .....................................................  $ 3,048,055    $ 6,474,139
   Accounts receivable, net ......................................................    3,638,173      3,029,334
   Inventory .....................................................................    2,228,285      2,928,217
   Prepaid expenses and other current assets .....................................    1,033,592        417,829
   Current assets of discontinued operations .....................................           --      1,809,249
                                                                                    -----------    -----------
     Total current assets ........................................................    9,948,105     14,658,768

Property and equipment, net ......................................................   17,428,358     20,447,962
Property and equipment  of discontinued operations, net ..........................           --      1,107,655
Goodwill net .....................................................................   11,117,379     11,788,554
Goodwill  of discontinued operations, net ........................................           --        639,025
FCC licenses, net ................................................................    8,405,605      8,838,444
Other assets, net ................................................................      875,058      2,552,135
                                                                                    -----------    -----------
                                                                                    $47,774,505    $60,032,543
                                                                                    ===========    ===========


                    LIABILITIES, REDEEMABLE PREFERRED STOCK,
                            AND STOCKHOLDERS' EQUITY
Current liabilities
   Accounts payable ..............................................................  $ 4,911,412    $ 4,356,885
   Accrued liabilities ...........................................................      943,885      1,060,966
   Accrued compensation ..........................................................      222,121        394,989
   Current portion of notes payable and capital lease obligations ................   12,028,917     18,635,308
   Current liabilities of discontinued operations ................................           --        714,678
                                                                                    -----------    -----------
     Total current liabilities ...................................................   18,106,335     25,162,826

Notes payable and capital lease obligations, less current portion of
    continuing operations ........................................................    3,623,904        218,389
Notes payable and capital lease obligations, less current portion of
    discontinued operations ......................................................           --        127,557

Class A Redeemable Preferred Stock, no par value, $1.50 per share redemption
   price; 13,500,000 shares authorized, 10,000,000 shares issued and
   outstanding (including $3,425,057 and $2,308,333 of undeclared
   dividends in 1999 and 1998, respectively) .....................................   17,321,699     15,879,309

Class B Senior Redeemable Preferred Stock, no par value, $1.50 per share
   redemption price; 5,500,000 shares authorized, 5,333,336 shares issued and
   outstanding (including $1,943,488 and $945,161 of undeclared
   dividends in 1999 and 1998, respectively) .....................................    9,228,228      8,088,693
                                                                                    -----------    -----------
     Total liabilities and Redeemable Preferred Stock ............................   48,280,166     49,476,774

Stockholders' equity
   Common Stock, no par value, 100,000,000 shares authorized
     in 1999 and 1998; 16,369,302 and 16,334,377 issued and
     outstanding in 1999 and 1998, respectively ..................................   59,393,438     61,458,690
   Accretion of  Redeemable Preferred Stock ......................................   (1,295,707)      (828,788)
   Accumulated deficit ...........................................................  (58,603,392)   (50,074,133)
                                                                                    -----------    -----------
       Total Stockholders' equity ................................................     (505,661)    10,555,769
                                                                                    -----------    -----------
                                                                                    $47,774,505    $60,032,543
                                                                                    ===========    ===========
</TABLE>

           See notes to condensed consolidated financial statements.


                                       3
<PAGE>   4

                            PREFERRED NETWORKS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                                    THREE MONTHS ENDED                NINE MONTHS ENDED
                                                                        SEPTEMBER 30,                    SEPTEMBER 30,
                                                               -----------------------------     -----------------------------
                                                                   1999             1998             1999             1998
                                                               ------------     ------------     ------------     ------------
<S>                                                            <C>              <C>              <C>              <C>
Revenues
     Network services .......................................  $  3,206,572     $  3,327,731     $  9,878,145     $  9,886,147
     Product sales ..........................................     1,623,607        3,691,126        7,406,638       11,206,610
     Other services .........................................     4,645,971        1,105,514       11,769,808        5,424,383
                                                               ------------     ------------     ------------     ------------
              Total revenues ................................     9,476,150        8,124,371       29,054,591       26,517,140

Costs of revenues
     Network services .......................................     2,164,820        2,160,809        6,309,007        6,501,601
     Product sales ..........................................     1,458,738        3,627,789        6,383,482        9,964,860
     Other services .........................................     3,943,104        1,157,410        9,888,638        4,542,862
                                                               ------------     ------------     ------------     ------------
              Total costs of revenues .......................     7,566,662        6,946,008       22,581,127       21,009,323
                                                               ------------     ------------     ------------     ------------
Gross margin ................................................     1,909,488        1,178,363        6,473,464        5,507,817

Selling, general and administrative expenses ................     2,085,947        3,780,743        8,633,964       10,705,668
Depreciation and amortization ...............................     1,574,434        1,531,509        4,281,696        4,826,271
                                                               ------------     ------------     ------------     ------------
              Operating loss ................................    (1,750,893)      (4,133,889)      (6,442,196)     (10,024,122)
Interest expense ............................................      (450,773)        (348,214)      (1,433,376)        (968,172)
Interest income .............................................        21,045           89,777           77,372          290,039
Gain/(loss) on asset disposal ...............................        12,314               --          (62,206)              --
                                                               ------------     ------------     ------------     ------------
Income from continuing operations before income taxes
  and cumulative effect of change in accounting principle ...    (2,168,307)      (4,392,326)      (7,860,406)     (10,702,255)
Income tax benefit ..........................................       120,000               --          400,000               --
                                                               ------------     ------------     ------------     ------------
Net loss from continuing operations before cumulative
  effect of change in accounting principle ..................    (2,048,307)      (4,392,326)      (7,460,406)     (10,702,255)
Discontinued operations:
     Net income (loss) from discontinued operations,
       net of income tax ....................................            --          109,553          (72,884)         121,536
     Gain on sale of PTS, net of income tax .................       191,506               --          836,428               --
                                                               ------------     ------------     ------------     ------------
     Net income from discontinued operations ................       191,506          109,553          763,544          121,536
Cumulative effect of change in accounting principle .........            --               --       (1,832,398)              --
                                                               ------------     ------------     ------------     ------------
         Net loss ...........................................    (1,856,801)      (4,282,773)      (8,529,260)     (10,580,719)
                                                               ============     ============     ============     ============
Accretion of Redeemable Preferred Stock .....................      (155,642)        (156,276)        (466,919)        (427,410)
Redeemable Preferred Stock dividend requirements ............      (724,968)        (675,000)      (2,115,051)      (1,770,161)
                                                               ------------     ------------     ------------     ------------
              Net loss attributable to Common Stock .........  $ (2,737,411)    $ (5,114,049)    $(11,111,230)    $(12,778,290)
                                                               ============     ============     ============     ============
Net income (loss) per share of Common Stock from:
         Continuing operations before cumulative effect
             of change in accounting principle ..............  $       (.18)    $       (.32)    $       (.61)    $       (.79)

         Discontinued operations, net of income tax .........  $        .01     $        .01     $        .04     $        .01
         Cumulative effect of change in
             accounting principle ...........................  $         --     $         --     $       (.11)    $         --

Net loss per share of Common Stock ..........................  $       (.17)    $       (.31)    $       (.68)    $       (.78)

Weighted average number of common shares used in
   calculating net loss per share of Common Stock ...........    16,369,302       16,265,377       16,337,940       16,228,877
Pro forma net loss assuming accounting principle is
   applied retroactively ....................................    (1,856,801)      (4,282,273)      (6,696,862)     (10,463,719)
Pro forma net loss attributable to Common Stock
   assuming change in accounting principle is applied
    retroactively ...........................................  $  2,737,411     $ (5,113,549)    $ (9,278,832)    $(12,661,290)
Pro forma net loss per share ................................  $       (.17)    $       (.31)    $       (.57)    $       (.78)
</TABLE>


                                       4
<PAGE>   5

                            PREFERRED NETWORKS, INC.

                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                         NINE MONTHS ENDED
                                                                                            SEPTEMBER 30,
                                                                                    ---------------------------
                                                                                        1999           1998
                                                                                    ------------   ------------
<S>                                                                                 <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss from continuing operations ..............................................  $ (8,456,375)  $(10,702,255)
Net loss from discontinued operations ............................................       (72,884)       121,536
Adjustments to reconcile net loss to net cash used in Operating activities:
   Cumulative effect of change in accounting principle ...........................     1,832,398             --
   Depreciation and amortization .................................................     4,281,696      4,826,271
   Maintenance service credit from sale of PTS ...................................       333,332             --
   Loss on asset disposal ........................................................        62,206             --
   Gain on sale of PTS, net of income taxes ......................................      (836,428)
   Bad debt expense ..............................................................       301,150        319,829
   Stock option and restricted stock grant compensation expense ..................        49,757         49,744
   Changes in operating assets and liabilities:
        Accounts receivable ......................................................      (909,989)       608,725
        Inventory ................................................................       699,932        134,351
        Prepaid expenses and other assets ........................................      (615,763)       283,234
        Accounts payable .........................................................       554,527        566,278
        Accrued liabilities ......................................................      (517,081)       (29,108)
        Accrued compensation .....................................................      (172,868)      (364,567)
                                                                                    ------------   ------------
   Net cash used in operating activities by continuing operations ................    (3,466,391)    (4,185,962)
   Net cash used in  operating activities by discontinued operations .............       255,620       (253,891)
                                                                                    ------------   ------------
   Net cash used in operating activities .........................................    (3,210,773)    (4,439,853)

CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment ...........................................................      (159,939)    (1,940,514)
Purchases of equipment for discontinued operations ...............................      (151,752)      (561,255)
Purchases of other assets and FCC licenses .......................................      (155,682)      (440,413)
Proceeds from sale of PTS ........................................................     3,088,625             --
                                                                                    ------------   ------------
   Net cash provided by investing activities .....................................     2,621,252     (2,942,182)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from borrowings .........................................................     1,167,136      1,000,000
Repayments of borrowings .........................................................    (3,776,887)    (1,437,994)
Payment of deferred loan costs ...................................................            --       (220,000)
Net proceeds from issuance of Redeemable Preferred Stock .........................            --      6,983,666
Net proceeds from issuance of Common Stock purchase warrants .....................            --        810,000
Issuance of Common Stock upon exercise of stock options ..........................            --        121,155
                                                                                    ------------   ------------
   Net cash used in financing activities of continuing operations ................    (2,609,751)     7,256,827
   Net cash used in financing activities of discontinued operations ..............      (226,813)            --
                                                                                    ------------   ------------
   Net cash used in financing activities .........................................    (2,836,564)     7,256,827

Net increase (decrease) in cash and cash equivalents .............................    (3,426,085)      (125,208)
Cash and cash equivalents, beginning of period ...................................     6,474,139      7,379,254
                                                                                    ------------   ------------
Cash and cash equivalents, end of period .........................................  $  3,048,054   $  7,254,046
                                                                                    ============   ============
</TABLE>


                                       5
<PAGE>   6

                            PREFERRED NETWORKS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1999
                                  (UNAUDITED)

1.       THE COMPANY

         Preferred Networks, Inc. ("PNI" or "the Company"), headquartered in
         metropolitan Atlanta, provides outsourcing solutions to the wireless
         industry which allow companies to offer branded wireless services
         directly to subscribers, while relying on PNI to provide high-quality
         network, technical, and product services. PNI offers its services
         through its Network Services Division, PNI Access Services ("Access"),
         a provider of wholesale paging network service and through its
         wholly-owned subsidiary: EPS Wireless, Inc. ("EPS"), a national
         provider of paging and cellular product repair services, sales of new,
         used and refurbished paging and cellular products and inventory
         management services.

         The Company has formed wholly-owned subsidiaries and limited liability
         companies to execute certain business transactions. All significant
         intercompany activity has been eliminated.

2.       BASIS FOR PRESENTATION

         The interim condensed consolidated financial information contained
         herein has been prepared by the Company, without audit, pursuant to
         the rules and regulations of the Securities and Exchange Commission
         ("SEC") and includes in the opinion of management, all adjustments,
         which are of a normal recurring nature necessary for a fair
         presentation of the financial position, results of operations and cash
         flows for the periods presented. Certain information and footnote
         disclosures normally included in financial statements prepared in
         accordance with generally accepted accounting principles ("GAAP") have
         been condensed or omitted pursuant to such rules and regulations. The
         Company believes, however, that its disclosures are adequate to make
         the information presented not misleading. These financial statements
         and related notes should be read in conjunction with the financial
         statements and notes as of December 31, 1998, included in the
         Company's Annual Report on Form 10-K (File No. 0-27658). Results of
         operations for the periods presented herein are not necessarily
         indicative of results to be expected for the full year or any other
         interim period.

3.       SUPPLEMENTAL CASH FLOW INFORMATION

         Cash and cash equivalents include investments in money market
         instruments, which are carried at fair market value. Cash payments
         made for interest, net of capitalized interest, during the nine months
         ended September 30, 1999 and 1998 were approximately $1.4 million and
         $968,000 respectively. There were no significant federal or state
         income taxes paid or refunded for the nine months ended September 30,
         1999 and 1998.

4.       LOSS PER SHARE

         Net loss per share was computed using the requirements of Statement of
         Financial Accounting Standards No. 128, Earnings per Share, and Staff
         Accounting Bulletin No. 98. Net loss per share-basic was computed by
         dividing net loss attributable to common stock by the weighted average
         number of shares of common stock outstanding during the period
         excluding unvested shares of restricted stock. The denominator for net
         loss per share-diluted also considers the dilutive effect of
         outstanding stock options, warrants, and convertible preferred stock.
         Due to the Company's net loss, the amounts reported for basic and
         diluted are the same. The following securities could potentially
         dilute basic earnings per share in the future and were not included in
         the computation of diluted net loss per share because they would have
         been antidilutive for the periods presented:

                                                  Nine months ended
                                                    September 30,
                                              ------------------------
                                                 1999          1998
                                              ----------    ----------
                 Common Stock Options          1,526,350     2,534,064
                 Common Stock Warrants        17,322,353    17,322,353
                 Unvested Restricted Stock        48,000        69,000
                                              ----------    ----------
                 Total Securities             18,896,703    19,925,417
                                              ==========    ==========


                                       6
<PAGE>   7

                            PREFERRED NETWORKS, INC.

5.       DISCONTINUED OPERATIONS

         On May 31, 1999, the Company completed the sale of substantially all
         of the assets of its wholly-owned subsidiary, Preferred Technical
         Services ("PTS"). Under the terms of the purchase agreement, an
         affiliate of Saratoga Partners, a New York based merchant bank, paid
         the Company approximately $4.5 million for PTS, subject to certain
         purchase price adjustments, with $3.5 million less holdbacks paid in
         cash and the balance paid in the form of a $1 million credit for
         maintenance services to be provided by PTS for the Company on its
         paging networks. Simultaneously, the Company entered into an agreement
         to purchase $1 million of such maintenance services from PTS over the
         next twelve months, which is payable with the aforementioned credit.
         The Company used $1.4 million of the cash proceeds from the sale of
         PTS to reduce its outstanding notes payable. A principal of Saratoga
         Partners serves as a director of the Company.

         Revenues for PTS for the five months ended May 31, 1999 and the six
         months ended 1998 were $2.7 million and $1.1 million, respectively.
         Net income (loss) of PTS for the five months ended May 31, 1999 and
         1998 was ($73,000) and $122,000, respectively. This subsidiary has
         been presented as a discontinued operation in the accompanying
         financial statements.



6.       POTENTIAL SALE OF SUBSIDIARY

         On November 1, 1999 the Company entered into a non-binding letter of
         intent to sell the business operations of its wholly-owned subsidiary,
         EPS Wireless, Inc. ("EPS"). The potential purchaser of EPS is an
         unaffiliated third party. The terms of the transaction are presently
         being negotiated by the parties, and the Company expects that a
         significant portion of the proceeds of any sale of EPS will be used to
         pay down indebtedness to its principal lenders. Consummation of the
         transaction is subject to numerous conditions, including the
         prospective buyer's completion of its due diligence investigation of
         EPS, obtaining the consent of certain of the Company's lenders to the
         transaction and the parties' agreement as to the terms and conditions
         of a stock purchase agreement and related transaction documents. While
         the Company hopes to consummate the sale of EPS prior to December 31,
         1999, there can be no assurance that the transaction will be completed
         in that time frame, if at all.



7.       IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

         In April 1998, the Accounting Standards Executive Committee issued
         Statement of Position 98-5, "Reporting on the Costs of Start-Up
         Activities" ("SOP 98-5"). SOP 98-5 requires entities to charge to
         expense start-up costs, including organizational costs, as incurred.
         In addition, SOP 98-5 requires a write-off of any previously
         capitalized start-up or organization costs, and must be reported as
         the cumulative effect of a change in accounting principle. SOP 98-5
         became effective January 1, 1999. The Company adopted SOP 98-5 on
         January 1, 1999 and has written off the unamortized balance of its
         market entry costs of $1.8 million and no longer capitalizes such
         costs.

         Pro forma amounts reflect adjustments to cease capitalization and
         amortization as if SOP 98-5 had been adopted prior to 1998. Additional
         amounts capitalized net of amortization expense during the three and
         nine months ended September 30, 1998 were ($500) and ($117,000)
         respectively.


                                       7
<PAGE>   8

                            PREFERRED NETWORKS, INC.

8.       SEGMENT INFORMATION

         In its continuing operations, the Company has two reportable segments
         organized by products or services sold: (i) one-way wireless networks,
         whereby companies purchase non-branded, wholesale network services
         from the Company for resale to their customers (through its PNI Access
         Services Division) and (ii) pager and cellular product repair
         services, product sales and inventory management and fulfillment
         (through EPS Wireless, Inc.).

         The Company evaluates performance and allocates resources based on
         earnings before interest, depreciation and other non-cash items. The
         accounting policies of the reportable segments are the same as those
         described in the summary of significant accounting policies.
         Intersegment sales are recorded with profit, which is then eliminated
         upon consolidation.

<TABLE>
<CAPTION>

                                                                PNI ACCESS
                                                               SERVICES AND          EPS
                                                                  OTHER*        WIRELESS, INC.  INTERSEGMENT       TOTALS
                                                              --------------   ---------------  ------------   -------------
<S>                                                           <C>              <C>              <C>             <C>
NINE MONTHS ENDED SEPTEMBER 30, 1999
Revenues .................................................... $ 13,232,119     $ 15,822,472     $        --     $ 29,054,591
Interest expense/income (net) ...............................    1,343,837           12,167              --        1,356,004
Depreciation and amortization expense .......................    3,770,549          511,147              --        4,281,696

Segment income (loss) after cumulative
  Effect of change in accounting principle ..................   (8,346,669)        (104,179)             --       (8,450,848)
Segment assets ..............................................   38,594,738        4,747,969       4,431,798       47,774,505

NINE MONTHS ENDED SEPTEMBER 30, 1998
Revenues ....................................................   14,345,049       12,804,755        (632,664)      26,517,140
Interest expense/income (net) ...............................      650,897           27,236              --          678,133
Depreciation and amortization expense .......................    4,344,671          481,600              --        4,826,271
Segment income (loss) after cumulative
  effect of change in accounting  principle .................   (9,489,404)      (1,213,029)            178      (10,702,255)
Segment assets ..............................................   52,426,406        5,638,582       4,612,277       62,677,265
</TABLE>

         * "Other" includes overhead expenses primarily in the area of SG&A
relating to executive management, information services, public reporting and
other similar expenses. The cumulative effect of the change in accounting
principle is reflected in PNI Access Services.


                                       8
<PAGE>   9

                            PREFERRED NETWORKS, INC.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS.

OVERVIEW

In this section, the Company makes reference to "EBITDA" which represents
earnings before interest expense, interest income, taxes, depreciation and
amortization. EBITDA is a financial measure commonly used in the
telecommunications industry and should not be construed as an alternative to
operating income (as determined in accordance with generally accepted
accounting principles ("GAAP")), as an alternative to cash flows from operating
activities (as determined in accordance with GAAP), or as a measure of
liquidity.

The table below provides the components of the Company's consolidated
statements of operations and EBITDA for each of the nine months ended September
30, 1999 and 1998, respectively, as a percentage of total revenues.

<TABLE>
<CAPTION>

                                                                       THREE MONTHS ENDED               NINE MONTHS ENDED
                                                                          SEPTEMBER 30,                    SEPTEMBER 30,
                                                                       ------------------               -----------------
                                                                         1999      1998                  1999      1998
                                                                       -------    -------               ------    -------
<S>                                                                    <C>        <C>                   <C>        <C>
Revenues
   Network services ...................................................  33.8%      41.0%                34.0%      37.2%
   Product sales ......................................................  17.1       45.4                 25.5       42.3
   Other services .....................................................  49.1       13.6                 40.5       20.5
                                                                        -----      -----                -----      -----
     Total revenues ................................................... 100.0      100.0                100.0      100.0
Cost of revenues
   Network services ...................................................  22.9       26.6                 21.7       24.5
   Product sales ......................................................  15.4       44.7                 22.0       37.6
   Other services .....................................................  41.6       14.2                 34.0       17.1
                                                                        -----      -----                -----      -----
     Total cost of revenues ...........................................  79.9       85.5                 77.7       79.2
                                                                        -----      -----                -----      -----
Gross margin ..........................................................  20.1       14.5                 22.3       20.8
Selling, general and administrative expenses ..........................  22.0       46.5                 29.7       40.4
Depreciation and amortization .........................................  16.5       18.9                 14.7       18.2
                                                                        -----      -----                -----      -----
     Operating loss ................................................... (18.4)     (50.9)               (22.2)     (37.8)
                                                                        -----      -----                -----      -----
Interest expense ......................................................  (4.8)      (4.3)                (4.9)      (3.7)
Interest income .......................................................   0.2        1.1                  0.3        1.1
Gain/(loss) on asset disposal .........................................   0.0         --                 (0.2)        --
Income from continuing operations before income taxes
  and cumulative effect of change in accounting principle ............. (22.8)     (54.1)               (27.0)     (40.4)
Income tax benefit ....................................................   1.3         --                  1.4         --
                                                                        -----      -----                -----      -----
Net loss from continuing operations before cumulative
  effect of change in accounting principle ............................ (21.5)     (54.1)               (25.6)     (40.4)
Discontinued operations:
     Income (loss) from operations, net of income tax .................   0.0        1.3                 (0.3)       0.5
     Gain on sale of PTS, net of income tax ...........................   2.0         --                  2.9         --
                                                                        -----      -----                -----      -----
     Net income from discontinued operations ..........................   2.0        1.3                  2.6        0.5
Cumulative effect of change in accounting principle ...................    --         --                 (6.3)        --
                                                                        -----      -----                -----      -----
 Net loss ............................................................. (19.5)     (52.8)               (29.2)     (39.9)
         Net loss attributable to Common Stock ........................ (28.8)     (62.9)               (38.2)     (48.2)
EBITDA ................................................................  (1.8)     (32.0)                (7.4)     (19.6)
                                                                        =====      =====                =====      =====
</TABLE>


The table below provides information about the Company's units in service on
the Company's networks by customer type.

<TABLE>
<CAPTION>
                                                 SEPTEMBER 30, 1999         PERCENTAGE INCREASE IN
                                                 ------------------         ----------------------
                                                   1999       1998            1999          1998
                                                 -------    -------         --------      --------
<S>                                              <C>        <C>             <C>           <C>
Units in service
   Reseller units .............................. 298,076    314,799           -8.7%         3.5%
   Direct Access units ......................... 238,866    189,042           20.2%        25.5%
                                                 -------    -------
   Total units in service ...................... 536,942    503,841           12.2%        10.8%
                                                 =======    =======
</TABLE>


                                       9
<PAGE>   10

                            PREFERRED NETWORKS, INC.


On May 31, 1999, the Company completed the sale of substantially all of the
assets of its wholly-owned subsidiary, Preferred Technical Services ("PTS").
Under the terms of the agreement, an affiliate of Saratoga Partners, a New York
based merchant bank, paid the Company approximately $4.5 million for PTS,
subject to certain purchase price adjustments, with $3.5 million less holdbacks
paid in cash and the balance paid in the form of a $1 million credit for
maintenance services to be provided by PTS for the Company on its paging
networks. Simultaneously, the Company entered into an agreement to purchase $1
million of such maintenance services from PTS over the next twelve months,
which is payable with the aforementioned credit. The Company used $1.4 million
of the cash proceeds from the sale of PTS to reduce its outstanding notes
payable. A principal of Saratoga Partners serves as a director of the Company.

Revenues for PTS for the five months ended May 31, 1999 and the nine months
ended September 30, 1998 were $2.7 million and $2.2 million, respectively. Net
income (loss) of PTS for the five months ended May 31, 1999 and for the nine
months ended September 30, 1998 was ($73,000) and $122,000, respectively. This
subsidiary has been presented as a discontinued operation in the accompanying
financial statements.


RESULTS OF OPERATIONS

Total revenues increased by $1.4 million or 16.6% to $9.5 million for the three
months ended September 30, 1999 from $8.1 million for the three months ended
September 30, 1998. Total revenues increased by $2.5 million, or 9.6%, to $29.1
million for the nine months ended September 30, 1999 from $26.5 million for the
nine months ended September 30, 1998.

Revenues from network services decreased by $121,000, or 3.6%, to $3.2 million
for the three months ended September 30, 1999 from $3.3 million for the three
months ended September 30, 1998. Revenues from network services decreased by
$8,000, to $9.9 million for the nine months ended September 30, 1999 from $9.9
million for the nine months ended September 30, 1998. The Company had 28
markets in service at September 30, 1999. Units in service increased by 33,101,
or 6.6%, to 536,942 at September 30, 1999 from 503,841 at September 30, 1998.
Airtime revenue per unit decreased by $0.21 to $2.06 for the nine months ended
September 30, 1999 from $2.27 for the nine months ended September 30, 1998.
This decrease is primarily due to an increase in units in service from Direct
Access customers as a percentage of total units in service. Units from Direct
Access customers increased to 44.5% of total units at September 30, 1999 from
37.5% at September 30, 1998. The Company incurs minimal marginal cost in
supplying only airtime to its Direct Access customers and therefore charges
these customers substantially less per unit in service per month than it
charges its reseller customers.

Revenues from product sales decreased by $2.1 million, or 56.0%, to $1.6
million for the three months ended September 30, 1999 from $3.7 million for the
three months ended September 30, 1998. Revenues from product sales decreased by
$3.8 million, or 33.9%, to $7.4 million for the nine months ended September 30,
1999 from $11.2 million for the nine months ended September 30, 1998. The
decreases in product sales revenue for each of the three and nine month periods
are due primarily to decreased sales at EPS of new, used and refurbished pager
products and to a lesser extent, decreased sales of new pagers to network
service customers at PNI Access Services.

Other services revenues increased by $3.5 million, or 320.3%, to $4.6 million
for the three months ended September 30, 1999 from $1.1 million for the three
months ended September 30, 1998. Other services revenues increased by $6.3
million, or 117.0%, to $11.8 million for the nine months ended September 30,
1999 from $5.4 million for the nine months ended September 30, 1998. The
increases in other services revenue are due to increases in cellular repair and
refurbishment volume and associated revenue at EPS.

Total costs of revenues increased by $621,000, or 8.9% to $7.6 million for the
three months ended September 30, 1999 from $6.9 million for the three months
ended September 30, 1998. Total costs of revenues increased by $1.6 million, or
7.5%, to $22.6 million for the nine months ended September 30, 1999 from $21.0
million for the nine months ended September 30, 1998.

Cost of network services increased by $4,000 to $2.2 million for the three
months ended September 30, 1999 from $2.2 million for the three months ended
September 30, 1998. Cost of network services decreased by $193,000, or 3.0%, to
$6.3 million for the nine months ended September 30, 1999 from $6.5 million for
the nine months ended September 30, 1998. Cost of network services as a
percentage of network services revenue increased to 67.5% for the three months
ended September 30, 1999 from 64.9% for the three months ended September 30,
1998, and decreased to 63.9% for the nine months ended September 30, 1999, from
65.8% for the nine months ended


                                      10
<PAGE>   11
                            PREFERRED NETWORKS, INC.

September 30, 1998. The decreases in costs of network services for the nine
month periods are the result of the Company's ongoing efforts to reduce its
fixed costs primarily in the areas of transmitter site rent, satellite expense
and telco expense.

Cost of product sales decreased by $2.2 million, or 59.9%, to $1.5 million for
the three months ended September 30, 1999 from $3.6 million for the three
months ended September 30, 1998. Cost of product sales decreased by $3.6
million, or 35.9%, to $6.4 million for the nine months ended September 30, 1999
from $10.0 million for the nine months ended September 30, 1998. Cost of
product sales as a percentage of product sales revenue decreased to 89.8% and
86.2% for the three and nine months ended September 30, 1999, respectively,
from 98.3% and 88.9% for the three and nine months ended September 30, 1998,
respectively. The decreases in cost of product sales are due primarily to the
decreases in product sales revenues. The decreases in cost of product sales as
a percentage of product revenues are due primarily to higher margins in product
sales revenue attributable to EPS, which sells used and refurbished pagers and
cellular product.

Cost of other services increased by $2.8 million, or 240.7% to $3.9 million for
the three months ended September 30, 1999 from $1.2 million for the three
months ended September 30, 1998. Cost of other services increased by $5.3
million, or 117.7% to $9.9 million for the nine months ended September 30, 1999
from $4.5 million for the nine months ended September 30, 1998. Cost of other
services as a percentage of other services revenue decreased for three months
and increased for nine months to 84.9% and 84.0% for the three and nine months
ended September 30, 1999, respectively, from 104.7% and 83.7% for the three and
nine months ended September 30, 1998, respectively. The decrease in cost of
other services for the three month period is due to the increased efficiencies
gained with higher cellular repair volume at EPS, whereas the increase for the
nine month period is due to the inefficiencies in the first half of 1999
associated with this increase in volume.

Selling, general and administrative (SG&A) expenses decreased by $1.7 million,
or 44.9%, to $2.1 million for the three months ended September 30, 1999 from
$3.8 million for the three months ended September 30, 1998. SG&A expenses
decreased by $2.1 million, or 19.4%, to $8.6 million for the nine months ended
September 30, 1999 from $10.7 million for the nine months ended September 30,
1998. SG&A expenses as a percentage of total revenues decreased to 22.0% and
29.7% for the three and nine months ended September 30, 1999, respectively,
from 46.5% and 40.4% for the three and nine months ended September 30, 1998,
respectively. The decreases in SG&A are due primarily to reduced sales and
administrative expenses resulting from the decreases in product sales revenues
at EPS and to reduced personnel at PNI Access Services. In addition, because
the Company does not market directly to end-users, it does not incur
subscriber-related acquisition and customer support costs and, accordingly, its
SG&A expenses do not increase in direct proportion to its revenue growth.

Depreciation and amortization increased by $43,000, or 2.8%, to $1.6 million
for the three months ended September 30, 1999 from $1.5 million for the three
months ended September 30, 1998. Depreciation and amortization decreased by
$545,000, or 11.3%, to $4.3 million for the nine months ended September 30,
1999 from $4.8 million for the nine months ended September 30, 1998.
Depreciation and amortization decreased as a percentage of total revenues to
16.6% and 14.7% for the three and nine months ended September 30, 1999,
respectively, from 18.9% and 18.2% for the three and nine months ended
September 30, 1998, respectively. The decrease for the nine month period is due
primarily to the absence of amortization expense of market start-up expenses in
1999 as a result of the adoption of SOP 98-5.

Interest expense, net of capitalized amounts, increased by $103,000, or 29.5%,
to $451,000 for the three months ended September 30, 1999 from $348,000 for the
three months ended September 30, 1998. Interest expense, net of capitalized
amounts, increased by $465,000, or 48.0%, to $1.4 million for the nine months
ended September 30, 1999 from $968,000 for the nine months ended September 30,
1998. The increase in interest expense is primarily due to no interest being
capitalized in 1999 since the Company had no construction activities during the
nine months ended September 30, 1999 as compared to the nine months ended
September 30, 1998, when $607,244 was capitalized.

Interest income decreased by $69,000 or 76.6% to $21,000 for the three months
ended September 30, 1999 from $90,000 for the three months ended September 30,
1998. Interest income decreased by $213,000 or 73.3% to $77,000 for the nine
months ended September 30, 1999 from $290,000 for the nine months ended
September 30, 1998. The decrease in interest income is due to a corresponding
decrease in cash and cash equivalents.


                                      11
<PAGE>   12

                            PREFERRED NETWORKS, INC.

Net loss from continuing operations before cumulative effect of change in
accounting principle for the three and nine months ended September 30, 1999
decreased to $2.0 million and $7.4 million, respectively, from $4.4 million and
$10.7 million for the three and nine months ended September 30, 1998,
respectively. The decreased losses are due to increases in gross profit and
decreases in SG&A, as described above. The cumulative effect of change in
accounting principle for the three and nine months ended September 30, 1999
resulting from the write-off of market start-up costs as required by SOP 98-5
was $0 and $1.8 million, respectively.

The net loss from discontinued operations, net of tax, for the nine months
ended September 30, 1999 was $73,000, compared to net income of $122,000 for
the nine months ended September 30, 1998. The losses in 1999 were the result of
lower revenues from contract engineering services during the second quarter of
1999.

The net loss per share of Common Stock for the three months ended September 30,
1999 decreased to $.16 from $.31 for the three months ended September 30, 1998.
The net loss per share of Common Stock for the nine months ended September 30,
1999 decreased to $.68 from $.78 for the nine months ended September 30, 1998.
The net loss attributable to Common Stock for the nine months ended September
30, 1999 decreased due to decreased operating losses and the gain on the sale
of PTS. This decrease was partially offset for the nine month period by an
increase in losses due to the cumulative effect of adopting the new accounting
principle for market entry costs.



LIQUIDITY AND CAPITAL RESOURCES

The Company's net cash used in operations was $1.0 million and $3.2 million for
the three and nine months ended September 30, 1999, respectively, compared to
$1.8 million and $4.4 million for the three and nine months ended September 30,
1998, respectively. The primary reasons for the reduction in net cash used in
operations were the decrease in the net loss from operations before the effect
of change in accounting principle and an increase in accounts payable compared
to the prior year period.

Capital expenditures were $101,000 and $519,000 for the three and nine months
ended September 30, 1999, respectively, compared to $448,000 and $1,300,000 for
the three and nine months ended September 30, 1998, respectively. The Company
has funded its expansion in the past by equity infusions, bank and finance
company debt, loans from stockholders, and vendor and seller financing.

As of December 31, 1998, the Company had an $11.0 million credit facility with
a financial institution, of which $7.25 million was used to finance paging
network acquisitions and $3.75 million represents a revolving credit facility
to be used for working capital purposes. Borrowings under this facility are
secured by substantially all the assets of the Company. This credit facility
contains various conditions, financial covenants and restrictions related to a
variety of issues. In May 1999, the Company received a waiver for certain
events of default, which had existed since January 1, 1999. Pursuant to an
amendment to the senior credit facility executed in May 1999, certain of the
Company's financial covenants were amended, including but not limited to a
requirement to maintain a minimum cash balance of $2.0 million at the end of
each calendar month and a requirement to achieve certain minimum quarterly
financial performance targets. Under the terms of the amendment, the Company
used $1 million of the cash proceeds from the sale of PTS, to reduce the $7.25
million term loan portion of its senior credit facility. Payments of principal
of $121,000 plus interest in arrears are due monthly. The remaining principal
balance is due and payable in full at April 30, 2000. The outstanding balance
under the amended facility bears interest at the prime rate of the lender plus
1 1/2% through September 30, 1999 and 2% through April 30, 2000. The amount
outstanding under this facility as of December 31, 1998 and September 30, 1999
was $10.5 million and $8.5 million, respectively. At September 30, 1999 there
was $275,000 additional availability.

The Company has a secured credit facility for $12.0 million of vendor financing
bearing interest at the five-year U.S. Treasury rate plus 6.5% payable in
various monthly installments of principal and interest over 60 months. This
credit facility contains various conditions, financial covenants and
restrictions and is secured by paging equipment. As of September 30, 1999,
there was $4.4 million outstanding under this facility, and no additional
amounts were available. In May 1999, the Company amended certain terms and
conditions of this facility, under which the Company received a waiver for
certain events of default and deferral of $1.5 million payments of monthly
principal until May 2000. Interest only is payable during 1999 and monthly
payments of principal and interest of approximately $156,000 will resume in
January 2000. With the waiver to the $11 million credit facility described
above, the Company remedied its default of certain covenants of this $12.0
million facility, which had existed since January 1, 1999.


                                      12
<PAGE>   13

                            PREFERRED NETWORKS, INC.

The Company has a secured credit facility for $5.0 million to finance paging
system equipment from a finance company bearing interest at 10% payable in
various monthly installments of principal and interest over 60 months. This
credit facility contains various conditions, financial covenants and
restrictions and is secured by paging equipment. As of September 30, 1999,
there was $2.5 million outstanding under this facility with no additional
availability. In May 1999, the Company amended certain terms and conditions of
this facility, under which the Company received deferral of payments of
$621,000 of monthly principal amortization until May 2000. Interest only is
payable during this time period and monthly principal payments of $56,000 will
resume in May 2000. With the waiver to the $11 million credit facility
described above, the Company remedied its default of certain covenants of this
$5.0 million facility, which had existed since January 1, 1999.

At September 30, 1999, the Company had $1.8 million invested in short-term
investment grade securities at various interest rates. The Company operates in
the wireless communications industry which has experienced and continues to
experience significant challenges including competing technologies, shifts in
customers' strategies, changes in the FCC regulatory environment, and limited
sources of capital. As a result, the Company is continually required to address
these and other matters, in its business strategy and operations.

Since its March 1996 initial public offering, the Company has invested $62
million in building its network infrastructure, acquiring FCC licenses and
other paging networks, and acquiring related companies. As a result of this
expansion and the development of the Company's business and the overall
wireless industry, the Company has experienced net losses and negative cash
flows, and future cash flows have been difficult to project.

The Company's projections include significant growth in revenues, from existing
products and services and also from new switching technologies which it has
recently developed, and improved profitability due to greater utilization of
the existing base of assets. The Company's business plan may change, or
unforeseen events may occur, requiring the Company to raise additional funds.
The sale of EPS would also result in a significant decrease in the Company's
overall revenues. The amounts of funds required by the Company will depend on
many factors, including successful deployment of the Company's proprietary,
patented switch technology, "Platform 1(TM)", its sales to customers, and the
expected cost savings to the Company in its own networks. The Company may
consider selling certain assets to generate funds necessary to continue its
business, and as described above, is presently negotiating the possible sale of
its subsidiary EPS.

The outcome of the uncertainties surrounding the Company and the industry are
difficult to predict. These uncertainties could affect the Company's ability to
recover the carrying value of its long-lived assets from its future cash flows
and operations, although management's current projections indicate that such
values will be recovered. Currently, generally accepted accounting principles
require companies to assess future cash flows and record impairment losses on
long-lived assets based on estimates of future cash flows if insufficient to
recover the carrying values. Should the Company's future projections not
materialize, the Company could experience an impairment of its long-lived
assets requiring a charge to its income statement. As of December 31, 1998 and
September 30, 1999, the Company had $45 million and $37 million, respectively,
in net book value of long-lived assets, including property and equipment, FCC
licenses, market entry costs and goodwill.

Due to the uncertainties described above, combined with the Company's $11.0
million credit facility which matures April 30, 2000 and has not yet been
refinanced, management believes it must conclude a successful sale of EPS and
must negotiate with its lenders the Company's retention of a sufficient amount
of cash proceeds of the sale of EPS in order for the Company to have sufficient
cash and cash equivalents on hand to meet its working capital, capital
expenditure and debt service requirements for the next twelve months. In the
absence of a sale of EPS, a sale of other assets of the Company, or a
refinancing, the Company does not expect its cash and cash equivalents on hand
to meet its working capital, capital expenditure and debt service requirements
beyond April 30, 2000. The Company believes that it will require additional
funds in the form of equity, bank debt or other debt financing in the future to
execute its business plan if the sale of EPS is not consummated, and may
require such additional funds even if the sale of EPS is consummated. However,
no assurances can be given that if additional funds are required, such funds
will be available on terms acceptable to the Company, if at all, and the
failure to obtain such funds could have a material adverse effect on the
Company.


                                      13
<PAGE>   14

                            PREFERRED NETWORKS, INC.

YEAR 2000 COMPUTER ISSUE

Many computer systems in use today were designed and developed using two
digits, rather than four, to specify the year. As a result, such systems will
recognize the year 2000 as "00." This may cause many computer applications to
fail completely or to create erroneous results unless corrective measures are
taken.

The Company utilizes software and related computer technologies essential to
its operations that will be affected by the Year 2000 issue.

In 1998, the Company designated a cross-functional team with members of its
Information Technology, Engineering, Finance and Administration departments to
evaluate the impact of the Year 2000 problem. Initially, this team organized
and explained each member's role in the process. Second, the team established
an inventory of potential areas where a problem could exist. The inventory
included an assessment of the Company's desktop and server hardware; software
systems; telephone system; billing system; accounting system; paging terminals;
paging transmitters; and other paging network equipment. Third, the team
established a plan and assigned responsibility. According to the established
plan, the Company's mission critical systems will all be Year 2000 compliant by
December 1999. Assessment of mission critical systems and applications has been
substantially completed and most third party vendors who supply these mission
critical systems have been contacted.

The Company intends to bring its mission critical systems into Year 2000
compliance through hardware and software upgrades, software replacement and
internally developed enhanced software. The Company has purchased maintenance
agreements with respect to its desktop and server hardware, software systems
and telephone system. These maintenance agreements have allowed the Company to
upgrade and remedy where necessary in order to become compliant at minimal
additional cost. The Company's subscriber control system is compliant. During
1998 and 1999, the Company contracted with a consultant to provide services
specifically related to an upgrade of its accounting software package. These
consulting services consist primarily of programming services and this upgrade
is expected to be completed during the fourth quarter of 1999. The Company's
paging terminals, transmitters and other paging network equipment are not date
sensitive.

The Company has not conducted its assessment of the reasonably likely worst
case scenario of systems failures and their related consequences. It is
expected that the planned testing of systems and the completed testing of
systems will greatly reduce the need for substantial contingency planning.

The Company believes that the cost of modifying its software and related
computer technologies will not exceed $350,000, of which approximately $20,000
was incurred and expensed in 1998 and $192,000 was incurred and expensed in the
first nine months of 1999. The remainder will be incurred in the fourth quarter
of 1999. Costs of the Year 2000 project are based on current estimates and
actual results may vary from such estimates once plans are fully implemented.



FORWARD-LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward-looking statements. Certain information included in this Quarterly
Report on Form 10-Q and other materials filed or to be filed by the Company
with the Securities and Exchange Commission (as well as information included in
oral statements or other written statements made or to be made by the Company)
contains statements that are or will be forward-looking, such as statements
relating to the possible sale of EPS and other acquisitions and dispositions,
construction and other business development activities, future capital
expenditures, timing of the Company's need for additional capital, financing
sources and availability and the effects of laws and regulations (including FCC
regulations) and competition. Such forward-looking information involves
important risks and uncertainties that could significantly affect anticipated
results in the future and, accordingly, such results may differ from those
expressed in any forward-looking statements made by or on behalf of the
Company. These risks and uncertainties include, but are not limited to,
uncertainties affecting the paging and wireless industries generally, risks
relating to the Company's acquisition, disposition, construction and other
business development activities, risks relating to technological change in the
paging and wireless industries, risks relating to leverage and debt service
(including availability of financing terms acceptable to the Company), risks
relating to the ability of the Company to obtain additional funds in the form
of debt or equity, risks relating to the availability of transmitters,
terminals, network project management services and network engineering support,
fluctuations in interest rates, and the existence of


                                      14
<PAGE>   15

                            PREFERRED NETWORKS, INC.

and changes to federal and state laws and regulations.

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

There have been no significant changes since December 31, 1998. See
Management's Discussion and Analysis.



PART II - OTHER INFORMATION

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Beginning in 1999 and continuing through May 1999, the Company was not in
compliance with certain of the financial covenants under its senior credit
facility, which would have allowed the lender to declare a default and
accelerate the maturity of the debt. In addition, beginning in 1999 and
continuing through May 1999, the Company had not made principal payments under
its equipment vendor credit facility, which would have allowed the lender to
declare an event of default. In addition, due to cross-default provisions under
these agreements, such noncompliance could have triggered an acceleration of
all of the Company's other debt, excluding capital lease obligations. However,
at May 31, 1999, the Company received waivers for these violations and amended
these facilities according to the terms and conditions further discussed in
Item 2. "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources". As of the date of
this filing, the Company was in compliance of its debt covenants.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a)      Exhibit:

         27       Financial Data Schedule (For SEC use only)

(b)      Reports on Form 8-K:

         1.       The registrant filed a report on Form 8-K on June 14, 1999
and a Form 8-K/A on August 13, 1999 with respect to the sale of PTS.


                                      15
<PAGE>   16

                            PREFERRED NETWORKS, INC.



                                   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.

<TABLE>
<CAPTION>

                                        PREFERRED NETWORKS, INC.


<S>                                     <C>
Date:  November 15, 1999                By: /s/ Mark H. Dunaway
                                            -------------------------------------------------
                                            Mark H. Dunaway
                                            Chief Executive Officer



Date:  November 15, 1999                By: /s/ Kathryn Loev Putnam
                                            -------------------------------------------------
                                            Kathryn Loev Putnam
                                            Senior Vice President and Chief Financial Officer
                                            (Principal Financial Officer and
                                            Principal Accounting Officer)
</TABLE>


                                      16