Aly Energy Services, Inc. - FORM 10-Q

Attached files

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EXCEL - IDEA: XBRL DOCUMENT - Aly Energy Services, Inc.	Financial_Report.xls
EX-31.1 - CERTIFICATION - Aly Energy Services, Inc.	preferred_ex311.htm
EX-32.1 - CERTIFICATION - Aly Energy Services, Inc.	preferred_ex321.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

Form 10-Q

x Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the

Period Ended December 31, 2011.

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

Transition Period From _____________to _____________

Commission File Number 33-92894

PREFERRED VOICE, INC.

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

6500 Greenville Avenue Suite 330 Dallas, TX		75206
(Address of Principal Executive Offices)		(Zip Code)

(214) 850-6830

(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 period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

Applicable Only to Corporate Issuers

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

Common Stock, $ 0.001 Par Value – 6,130,184 shares as of January 31, 2012.

INDEX

Preferred Voice, Inc.

		PAGE

Part I.	Financial Information		3

Item 1.	Financial Statements		3

	Balance Sheets-December 31, 2011 and March 31, 2011.		3 - 4

	Statements of Operations- Three Months Ended December 31, 2011 and 2010 and Nine Months Ended December 31, 2011 and 2010.		5

	Statements of Cash Flows-Nine Months Ended December 31, 2011 and 2010.		6

	Notes to Financial Statements – December 31, 2011.		7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		12

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		16

Item 4T.	Controls and Procedures		16

Part II.	Other Information		17

Item 1.	Legal Proceedings		17

Item 1A.	Risk Factors		17

Item 2.	Unregistered Sales of Securities and Use of Proceeds		17

Item 3.	Defaults upon Senior Securities		17

Item 4.	Removed and Reserved		17

Item 5.	Other Information		17

Item 6.	Exhibits and Reports on Form 8-K		18

Signatures			19

PART I. FINANCIAL INFORMATION

PREFERRED VOICE, INC.

CONDENSED BALANCE SHEETS

DECEMBER 31, 2011 AND MARCH 31, 2011

	December 31,		March 31,
	2011		2011
	(unaudited)		(audited)

Assets

Current assets:
Cash and cash equivalents	$	415,151	$	489,031
Accounts receivable, net of allowance for doubtful
accounts		6,949		6,771

Total current assets	$	422,100	$	495,802

Property and equipment:
Computer equipment	$	16,745	$	27,622
Furniture and fixtures		22,317		22,317
Office equipment		8,567		8,567

	$	47,629	$	58,506
Less accumulated depreciation		41,549		41,224

Net property and equipment	$	6,080	$	17,282

Other assets:
Deposits	$	4,485	$	4,485

Total other assets	$	4,485	$	4,485

Total assets	$	432,665	$	517,569

The accompanying notes are an integral part of these financial statements.

	December 31,			March 31,
	2011			2011
	(unaudited)			(audited)

Liabilities and stockholders' equity (deficit)

Current liabilities:
Accounts payable	$	76		$	1,082
Payroll taxes payable		25			698

Total current liabilities	$	101		$	1,780

Commitments and contingencies (Note E)

Stockholders' equity (deficit):
Common stock, $.001 par value;
100,000,000 shares authorized; 6,130,184
and 6,130,184 shares issued, respectively	$	6,130		$	6,130
Additional paid-in capital		20,481,148			20,481,148
Accumulated deficit		(20,053,208	)		(19,969,983	)
Treasury stock - 4,500 shares at cost		(1,506	)		(1,506	)

Total stockholders' equity (deficit)	$	432,564		$	515,789

Total liabilities and stockholders' equity (deficit)	$	432,665		$	517,569

The accompanying notes are an integral part of these financial statements.

PREFERRED VOICE, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND NINE MONTHS ENDED DECEMBER 31, 2011 AND 2010

	Three months			Nine months			Three months			Nine months
	ended			ended			ended			ended
	December 31,			December 31,			December 31,			December 31,
	2011			2011			2010			2010
	(unaudited)			(unaudited)			(unaudited)			(unaudited)

Net sales	$	3,376		$	10,342		$	6,167		$	22,503

Cost of sales		527			1,411			1,123			4,534

Gross profit	$	2,849		$	8,931		$	5,044		$	17,969

General and administrative expenses	$	24,836		$	81,279		$	60,533		$	198,659

Loss from operations	$	(21,987	)	$	(72,348	)	$	(55,489	)	$	(180,690	)

Other income (expense):
Gain on sale of assets	$	-		$	-		$	235		$	395
Impairment expense		(10,877	)		(10,877	)		-			(7,848	)

Total other expense	$	(10,877	)	$	(10,877	)	$	235		$	(7,453	)

Loss from continuing operations
before income taxes	$	(32,864	)	$	(83,225	)	$	(55,254	)	$	(188,143	)

Provision for income taxes		-			-			-			-

Loss from continuing operations	$	(32,864	)	$	(83,225	)	$	(55,254	)	$	(188,143	)

Income from discontinued operations		-			-			-			913,260
Gain on sale of discontinued operations		-			-			-			97,329

Net income (loss)	$	(32,864	)	$	(83,225	)	$	(55,254	)	$	822,446

Per share amounts:
Net loss from continuing operations
per common share	$	(0.006	)	$	(0.014	)	$	(0.009	)	$	(0.031	)

Net income from discontinued operations
per common share	$	-		$	-		$	-		$	0.165

Net income (loss) per common share	$	(0.006	)	$	(0.014	)	$	(0.009	)	$	0.134

The accompanying notes are an integral part of these financial statements.

PREFERRED VOICE, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED DECEMBER 31, 2011 AND 2010

	2011			2010
	(unaudited)			(unaudited)

Cash flows from operating activities:
Net (loss) income	$	(83,225	)	$	822,446
Adjustments to reconcile net loss to net cash provided
(used) by operating activities:
Income from discontinued operations, net of income taxes	$	-		$	(1,010,589	)
Depreciation and amortization		325			12,334
Gain on sale of assets		-			(395	)
Impairment of fixed assets		10,877			-
Changes in operating assets and liabilities:
(Increase) in accounts receivable		(178	)		(2,734	)
(Increase) decrease in inventory		-			9,777
(Decrease) increase in accounts payable		(1,679	)		12,472
Total adjustments	$	9,345		$	(979,135	)

Net cash used by continuing operating activities	$	(73,880	)	$	(156,689	)
Net cash provided by discontinued operating activities		-			1,067,816
Net cash (used) provided by operating activities	$	(73,880	)	$	911,127

Cash flows from investing activities:
Net cash provided by continuing investing activities
Proceeds from sale of assets	$	-		$	395
Net cash provided by discontinued investing activities
Proceeds from sale of assets		-			225,000
Net cash provided by investing activities	$	-		$	225,395

Cash flows from financing activities:
Net cash used by continuing financing activities	$	-		$	-
Net cash used by discontinued financing activities
Repayment of note payable		-			(1,111,500	)

Net cash used by financing activities	$	-		$	(1,111,500	)

Net (decrease) increase in cash and cash equivalents	$	(73,880	)	$	25,022

Cash and cash equivalents:
Beginning of period		489,031			600,647

End of period	$	415,151		$	625,669

Supplemental cash flow information:
Cash paid for interest	$	-		$	58,500

The accompanying notes are an integral part of these financial statements.

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note A - General organization and management’s plans:

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 provided enhanced services to the telecommunications industry throughout the United States and maintains its principal offices in Dallas, Texas.

On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc., a Delaware corporation (“CMM”) and ClearSky RBT, LLC, a Florida limited liability company (“CRBT”), a wholly-owned subsidiary of CMM, as purchasers. Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery products business (including the product line/application known as “Rockin’ Ringback”) to CMM and CRBT for $225,000 in cash.

The operations of the Company’s ringback tone and content delivery products are reflected in the financial statements as discontinued operations. The 2010 financial statements have been retrospectively adjusted to reflect the operations of the ringback tone and content delivery products as discontinued operations.

The Company has only its digital signage operations remaining which have been in decline since January of 2009. However, the Company has repaid all of its outstanding debt. The Company intends to explore strategic alternatives including merger with another entity. Currently, the Company does not have any agreement or understanding with any entity, and there is no assurance that such a transaction will ever be consummated. The Company believes that it will be able to meet its cash requirements throughout fiscal 2012 and continue its business development efforts.

Note B - Summary of significant accounting policies:

Basis of presentation

The accounting policies followed by Preferred Voice, Inc. are set forth in the Company’s financial statements that are a part of its March 31, 2011, Form 10K and should be read in conjunction with the financial statements for the three and nine months ended December 31, 2011, contained herein.

The financial information included herein as of December 31, 2011, and for the three and nine month periods ended December 31, 2011 and 2010, has been presented without an audit, pursuant to accounting principles for the interim financial information generally accepted in the United States of America and the rules of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the information presented not misleading. The information presented reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the period.

Cash and cash equivalents

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

Concentration of business, market and credit risks

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

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

Receivables and credit policies

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

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

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

The carrying amount of accounts receivable is reduced by a valuation allowance that reflects management’s best estimate of amounts that will not be collected. Management individually reviews all accounts receivable balances that exceed 90 days from invoice date and, based on an assessment of current creditworthiness, estimates that portion, if any, of the balance that will not be collected. Accounts receivable past 90 days due are $0 and $0 as of December 31, 2011 and March 31, 2011, respectively.

Property and equipment

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

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

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

Computer equipment	5 years
Furniture and fixtures	5 years
Office equipment	5 years

Fair value of financial instruments

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

Revenue recognition

For recognizing revenue, the Company applies the rules defined by the Revenue Recognition Topic of the FASB Accounting Standards Codification. In most cases, the services being performed do not require significant production, modification or customization of the Company’s software or services; therefore, revenues are recognized when evidence of a completed transaction exists, generally when services have been rendered. In situations where the Company receives an initial payment for future services, the Company defers recognition of revenue, and recognizes the revenue over the life of the respective contract.

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

Income or loss per share

The Company adopted the provisions of the Earnings Per Share Topic of the FASB Accounting Standards Codification. This standard replaces 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. For 2011 and 2010, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share.

Income per share for the three and nine months ended December 31, 2011 and 2010, respectively, is based on the weighted average number of shares outstanding of 6,130,184 for both periods.

Income taxes

For income taxes, the Company applies the rules defined by the Income Taxes Topic of the FASB Accounting Standards Codification. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates that will apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company has available at March 31, 2011, a net operating loss carry-forward of approximately $17,287,000, which can be used to offset future taxable income through the year 2031. Utilization of net operating loss carry-forwards 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.

Use of estimates

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

Stock-based compensation

For stock-based compensation, the Company applies the rules defined by the Compensation - Stock Compensation Topic of the FASB Accounting Standards Codification. This statement requires the Company to recognize compensation costs related to stock-based payment transactions (i.e. granting of stock options and warrants to employees) in the financial statements. With limited exceptions, the amount of compensation cost will be measured based on the grant-date fair value of the equity or liability instruments issued. In addition, liability awards will be remeasured each reporting period. Compensation cost will be recognized over the period that an employee provides services in exchange for the award. Compensation expense recognized during the three and nine months ended December 31, 2011 and 2010 was $-0- for both periods.

Subsequent events

In May 2009, the FASB issued new authoritative guidance for subsequent events. Such authoritative guidance establishes general standards of accounting for, and disclosure of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. In particular, this statement sets forth: (1) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, (2) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements and (3) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. This authoritative guidance is effective for the interim or annual financial periods ending after June 15, 2009. On June 30, 2009, the Company adopted the authoritative guidance for subsequent events. Such adoption did not have a material impact on the Company’s condensed consolidated financial statements.

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

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

In February 2010, the FASB amended its guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events, for both issued and revised financial statements. This amendment alleviates potential conflicts between the FASB’s guidance and the reporting rules of the SEC. Our adoption of this amended guidance, which was effective upon issuance, had no effect on our financial condition, results of operations, or cash flows. There were no subsequent events that would require adjustment to or disclosure in the financial statements.

Note C - Discontinued operations:

On August 5, 2010, the Board of Directors of the Company approved the sale of substantially all of the assets of the Company’s ringback tone and content delivery products business other than specified assets including cash and accounts receivables to ClearSky Mobile Media, Inc. and ClearSky RBT, LLC (collectively “Clearsky”).

On September 9, 2010, subsequent to the receipt of shareholder approval of the Asset Purchase Agreement, the Company completed the sale of the Company’s ringback tone and content delivery products business to Clearsky for $225,000 in cash.

In accordance with FASB Accounting Standards Codification, Presentation of Financial Statements – Discontinued Operations – Other Presentation Matters Topic, the Company has presented the results of the Company’s ringback tone and content delivery product business as discontinued operations in the accompanying statement of operations and statement of cash flows.

Income from discontinued operations in the periods presented were as follows:

	Three months		Nine months		Three months		Nine months
	ended		ended		ended		ended
	December 31,		December 31,		December 31,		December 31,
	2011		2011		2010		2010
	(unaudited)		(unaudited)		(unaudited)		(unaudited)

Net sales	$	-	$	-	$	-	$	2,428,255
Cost of sales		-		-		-		1,111,539

Gross profit	$	-	$	-	$	-	$	1,316,716

General and administrative expenses		-		-		-		379,764
Interest expense		-		-		-		23,692
Income from discontinued operations	$	-	$	-	$	-	$	913,260

PREFERRED VOICE, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

Note D - Common stock:

Stock purchase warrants

At December 31, 2011, the Company had outstanding warrants to purchase 109,000 shares of the Company's common stock at prices which ranged from $0.60 per share to $0.75 per share. The warrants are exercisable at any time and expire through September 7, 2012. At December 31, 2011, 109,000 shares of common stock were reserved for that purpose.

Common stock reserved

At December 31, 2011, shares of common stock were reserved for the following purposes:

Exercise of stock warrants and debt conversion			109,000
Exercise of future grants of stock options and stock
appreciation rights under the 2000 stock option plan			179,133
			288,133

Note E - Commitments:

The Company leases its office facilities and office equipment under operating leases expiring through December 31, 2012. Following is a schedule of future minimum lease payments required under the above operating leases as of December 31, 2011:

Year ending
March 31,	Amount

2012	$	6,720
2013		20,160
	$	26,880

The Company subleases a portion of its office facilities. The sublease is on a quarterly renewal. Total rent expense charged to operations was $1,551 and $17,154 for the nine months ended December 31, 2011 and 2010, respectively, and $524 and $700 for the three months ended December 31, 2011 and 2010, respectively.

The Company subleases 92% of its office space to a 3rd party under a month-to-month sublease that requires a 30-day notice to terminate. Payments received from sub-lessor reduce rent expense.

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-K for the fiscal year ended March 31, 2011. Notwithstanding the foregoing, the Company is not entitled to rely on the safe harbor for forward looking statements under 27A of the Securities Act or 21E of the Exchange Act as long as the Company’s stock is classified as a penny stock within the meaning of Rule 3a51-1 of the Exchange Act. A penny stock is generally defined to be any equity security that has a market price (as defined in Rule 3a51-1) of less than $5.00 per share, subject to certain exceptions.

Overview

We began operations in May 1994 as a traditional 1+ long-distance reseller. Recognizing the declines in telecommunications service prices and the decreasing margins being experienced in long distance sales, we decided to sell our long distance customer base and assets in early 1997. From 1997 until early 2005, we focused on the development of voice activated telecommunications services that would allow any consumer the ability to “dial” their calls using their voice. In the last five years we have focused our efforts on service applications that relate to the delivery of content to end users.

Our initial introduction to mobile entertainment led us to research the viability of personalized entertainment services that could be delivered through our network. On October 22, 2004 we announced the first commercial launch of a ringback service in the United States with the launch of our Rockin’ Ringback service. Our personalized ringback service provided a network-based personalized service that enabled users to choose an audio file that callers will listen to while the phone is ringing. We believed that since we already had a relationship with the carrier and were integrated with these carriers customer service departments and billing departments that we had an opportunity to introduce new products with minimal integration effort. At August 31, 2010 we had eight carrier customers providing My Phone Services Suite service in their marketplace.

For the past three years a major portion of the Company’s revenue, approximately 65% has been from one customer. In early May this customer gave notice that it would be canceling its contract and did effective August 31, 2010. The Company’s revenues from its remaining customers were insufficient to continue operational requirements.

On September 9, 2010, the Company entered into an Asset Purchase Agreement between the Company, as seller, and ClearSky Mobile Media, Inc. (“CMM”) and ClearSky RBT, LLC (“CRBT”). Pursuant to the Purchase Agreement, the Company sold all of the rights and assets utilized by the Company in its ringback tone and content delivery business to CMM and CRBT. CRBT is a wholly owned subsidiary of CMM. The Purchase Agreement was effective for accounting purposes as of September 1, 2010.

Under the Purchase Agreement, the Company transferred (i) to CMM, all of the Company’s business contracts executed in connection with the ringback tone and content delivery business, intellectual property rights (including patents and trademarks) relating to the ringback tone and content delivery business, key employee services, equipment, website content and telephone numbers, and (ii) to CRBT, all software, hardware and software development rights used in connection with the ringback tone and content delivery business at a purchase price of $225,000 in cash at the closing.

The Company has retained its digital signage support business and will continue to evaluate the viability of such business going forward.

Results of Operations

The operations of the Company’s ringback tone and content delivery business have been classified as discontinued in the Statements of Operations contained in the Company’s Financial Statements. The results of continuing operations include only the Company’s digital signage results and general overhead allocated to the continuing business enterprise.

We recorded a net loss from continuing operations of $83,225 or $.014 per share, for the nine-month period ended December 31, 2011, compared to a net loss of $188,143 or $.031 per share, for the nine-month period ended December 31, 2010. For the three-month period ended December 31, 2011, we recorded a net loss of $32,864 or $.006 per share compared to a net loss of $55,254 or $.009 per share for the three-month period ended December 31, 2010.

Total Sales

Total revenue for the nine-month period ended December 31, 2011, was $10,342 compared to $22,503 for the nine-month period ended December 31, 2010. Total revenue for the three-month period ended December 31, 2011, was $3,376 compared to $6,167 for the three-month period ended December 31, 2010. Revenue will continue to decline as the digital signage business is phased out.

Cost of Sales

Cost of sales for the nine-month period ended December 31, 2011 was $1,411 compared to $4,534 for the nine-month period ended December 31, 2010. Cost of sales for the three-month period ended December 31, 2011 was $527 compared to $1,123 for the three-month period ended December 31, 2010.

Selling, General and Administrative

Selling, general and administrative expenses for the nine-month period ended December 31, 2011 were $81,279 compared to $198,659 for the nine-month period ended December 31, 2010. Selling, general and administrative expenses for the three-month period ended December 31, 2011 were $24,836 compared to $60,533 for the three-month period ended December 31, 2010. General and administrative expenses will continue to drop as the overall overhead of the Company is reduced.

Other Income and Expense

We have recognized income from the sale of excess equipment of $-0-, for the nine-month period ended December 31, 2011 compared to $395 for the period ended December 31, 2010. We recognized income from the sale of excess equipment of $-0- for the three-month period ended December 31, 2011 compared to $235 for the three-month period ended December 31, 2010.

We also recognized an impairment expense on spare part equipment of $10,877, for the nine-month period ended December 31, 2011 compared to impairment of digital sign equipment of $7,848 for the period ended December 31, 2010. We recognized an impairment expense on spare part equipment of $10,877, for the three-month period ended December 31, 2011 compared to impairment expense of $-0- for the period ended December 31, 2010.

Income Taxes

As of December 31, 2011, we had cumulative federal net operating losses of approximately $17 million, which can be used to offset future income subject to federal income tax through the fiscal year 2031. Net operating loss limitations may be imposed if changes in stock ownership of the company create a change of control as provided in Section 382 of the Internal Revenue Code of 1986.

Discontinued Operations

As discussed above, the Company’s discontinued operations included the operations of the Company’s ringback tone and content delivery business in all periods presented. The income from discontinued operations in the three and nine months ended December 31, 2011 and 2010 were composed of the following:

	Three months		Nine months		Three months		Nine months
	ended		ended		ended		ended
	December 31,		December 31,		December 31,		December 31,
	2011		2011		2010		2010
	(unaudited)		(unaudited)		(unaudited)		(unaudited)

Net sales	$	-	$	-	$	-	$	2,428,255
Cost of sales		-		-		-		1,111,539

Gross profit	$	-	$	-	$	-	$	1,316,716

General and administrative expenses		-		-		-		379,764
Interest expense		-		-		-		23,692
Income from discontinued operations	$	-	$	-	$	-	$	913,260

Liquidity and Capital Resources

Our cash and cash equivalents at December 31, 2011 were approximately $415,151, a decrease of $73,880 from $489,031 at March 31, 2011.

The Company will explore strategic alternatives including merger with another entity. Currently, we do not have any agreement or understanding with any entity, and there is no assurance that such a transaction will ever be consummated. The Company currently has sufficient capital resources to continue its diminished operations and continue to evaluate viable opportunities.

Off-Balance Sheet Arrangements

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

Future Obligations

Management projects working capital needs to be approximately $90,000 over the next twelve months for corporate overhead to continue to maintain its current level of operation and continue as a reporting company. Management believes that current cash and cash equivalents are sufficient to meet this requirement.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required by smaller reporting companies.

Item 4T. Controls and Procedures

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

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

Changes in internal controls. There were no changes in our internal controls over financial reporting identified in connection with our evaluation that occurred during our last fiscal quarter ended December 31, 2011 that materially affected, or was reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

As a smaller reporting company, we are not required to provide the information required by this Item.

Item 2. Unregistered Sales of Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities.

None.

Item 4. Removed and Reserved

None

Item 5. Other Information.

None

Item 6. Exhibits

Exhibit Number		Exhibit Description

31.1		Certification of Chief Executive Officer and Chief Financial Officer

32.1		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

__________

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

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.

Date: February 10, 2012	By:	/s/ Mary G. Merritt
		Mary G. Merritt
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

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