<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             Washington, DC  20549

                                   FORM 10-Q

                                  (Mark One)

     [X]  Quarterly report pursuant to sections 13 or 15(d) of the Securities
                             Exchange Act of 1934

               For the quarterly period ended September 30, 2001

                                      OR

     [ ]  Transition report pursuant to sections 13 or 15 (d) of the Securities
                             Exchange Act of 1934
                 For the transition period from _____ to _____

                       Commission file number 333-33639

                                 EVERCOM, INC.
            (Exact name of Registrant as specified in its charter)


                Delaware                                 75-2680266
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                 Identification No.)

                              8201 Tristar Drive
                             Irving, Texas  75063
                                (972) 988-3737

  (Address, including zip code, and telephone number, including area code, of
                   Registrant's principal executive offices)

    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 such
filing requirements for the past 90 days.  Yes [X] No [ ]

    As of November 14, 2001, 30,770 shares of Class A common stock, par value
$0.01 per share, and 400 shares of Class B common stock, par value $0.01 per
share, were issued and outstanding.

                                       1
<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE


    Exhibits to the following documents filed with the Securities and Exchange
Commission have been incorporated by reference in Part II of this Quarterly
Report on Form 10-Q:

     1.  Registration Statement on Form S-4 (File No. 333-33639);
     2.  Quarterly Report on Form 10-Q, dated as of August 14, 1998; and
     3.  Quarterly Report on Form 10-Q, dated as of May 12, 1999;
     4.  Quarterly Report on Form 10-Q, dated as of June 7, 2001.

                                       2
<PAGE>

                        EVERCOM, INC. AND SUBSIDIARIES

                               TABLE OF CONTENTS



                         PART I - FINANCIAL INFORMATION


Item 1.    Financial Statements.............................   4

Item 2.    Management's Discussion and Analysis of Financial
           Condition and Results of Operations..............  11

Item 3.    Quantitative and Qualitative Disclosures about
           Market Risk......................................  26


                          PART II - OTHER INFORMATION


Item 1.    Legal Proceedings................................  27

Item 2.    Changes in Securities and Use of Proceeds........  27

Item 3.    Defaults Upon Senior Securities..................  27

Item 4.    Submission of Matters to a Vote of Stockholders..  27

Item 5.    Other Information................................  27

Item 6.    Exhibits and Reports on Form 8-K.................  28

                                       3
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

                        EVERCOM, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                             December 31,      September 30,
                                                                                 2000              2001
                                                                             ------------      ------------
                                                                                                (Unaudited)
<S>                                                                          <C>              <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                               $  4,195,034      $    582,164
     Accounts receivable, net                                                  38,302,469        44,047,104
     Refundable income taxes                                                      258,993           258,993
     Inventories                                                                4,167,609         6,948,404
     Prepaid expenses and other current assets                                    668,623           875,417
     Deferred income tax asset                                                  1,802,826         1,784,483
                                                                             ------------      ------------
          Total current assets                                                 49,395,554        54,496,565
PROPERTY AND EQUIPMENT, Net                                                    27,069,245        27,521,327
INTANGIBLE AND OTHER ASSETS, Net                                               85,991,382        83,790,417
                                                                             ------------      ------------
          TOTAL                                                              $162,456,181      $165,808,309
                                                                             ============      ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
     Accounts payable                                                        $ 21,122,288      $ 25,810,897
     Income taxes payable                                                         500,000           112,478
     Accrued expenses                                                          20,430,296        22,442,041
     Current portion of long-term debt                                         13,776,766        13,750,000
                                                                             ------------      ------------
          Total current liabilities                                            55,829,350        62,115,416
LONG-TERM DEBT                                                                152,750,000       141,937,500
OTHER LONG-TERM LIABLITIES                                                        100,000                 -
DEFERRED INCOME TAXES                                                           1,802,826         1,784,483
COMMITMENTS AND CONTINGENCIES (SEE NOTES)
STOCKHOLDERS' DEFICIT:
     Preferred stock, Senior and First Preferred Series A,
          $.01 par value; 6,000 and 5,000 shares authorized,
          5,925 and 5,000 shares issued and outstanding,
          respectively (cumulative liquidation value of
          $5,925,000 and $5,000,000 respectively) as of
          December 31, 2000 and September 30, 2001.                                   109               109
     Common stock, $.01 par value; 50,000 shares authorized,
          16,433 and 31,170 shares issued and outstanding as
          of December 31, 2000 and September 30, 2001, respectively                   164               311
     Additional paid-in capital                                                25,206,414        35,103,390
     Accumulated deficit                                                      (73,232,682)      (75,132,900)
                                                                             ------------      ------------
          Total stockholders' deficit                                         (48,025,995)      (40,029,090)
                                                                             ------------      ------------
          TOTAL                                                              $162,456,181      $165,808,309
                                                                             ============      ============
</TABLE>


                 See notes to consolidated financial statements

                                       4
<PAGE>

                         EVERCOM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                                  (Unaudited)


<TABLE>
<CAPTION>
                                                          Three Month Period                Nine Month Period
                                                          Ended September 30,              Ended September 30,
                                                     ----------------------------     -----------------------------
                                                         2000            2001             2000             2001
                                                     -----------     ------------     ------------     ------------
<S>                                                  <C>             <C>              <C>              <C>
OPERATING REVENUE                                    $57,958,392     $ 61,053,862     $176,370,057     $182,683,746
OPERATING EXPENSES:
     Telecommunication costs                          23,069,692       24,055,125       71,723,497       71,079,201
     Facility commissions                             18,598,601       20,690,866       56,326,410       60,756,625
     Field operations and maintenance                  1,725,027        1,972,364        5,001,794        5,675,025
     Selling, general and administrative               4,416,322        4,903,279       13,304,697       14,812,150
     Cost of equipment sales                             215,478          965,463          569,576        2,108,999
     Depreciation and impairment                       2,071,508        2,005,554        6,086,530        7,173,392
     Amortization of intangibles                       3,347,335        2,671,213       11,878,101        8,389,236
                                                     -----------     ------------     ------------     ------------

          Total operating expenses                    53,443,963       57,263,864      164,890,605      169,994,628
                                                     -----------     ------------     ------------     ------------

OPERATING INCOME                                       4,514,429        3,789,998       11,479,452       12,689,118
INTEREST EXPENSE, Net                                  4,780,033        4,631,969       14,445,986       13,990,186
                                                     -----------     ------------     ------------     ------------

LOSS BEFORE INCOME TAXES                                (265,604)        (841,971)      (2,966,534)      (1,301,068)
INCOME TAX EXPENSE                                        30,518          268,073           83,653          599,149
                                                     -----------     ------------     ------------     ------------

NET LOSS                                               ($296,122)     ($1,110,044)     ($3,050,187)     ($1,900,217)
                                                     -----------     ------------     ------------     ------------
PREFERRED STOCK DIVIDENDS
     AND ACCRETION OF DISCOUNT                           370,535          376,651        1,107,269        1,125,260
                                                     -----------     ------------     ------------     ------------

NET LOSS APPLICABLE TO COMMON STOCK                    ($666,657)     ($1,486,695)     ($4,157,456)     ($3,025,477)
                                                     ===========     ============     ============     ============
</TABLE>

                 See notes to consolidated financial statements

                                       5
<PAGE>

                         EVERCOM, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                    Nine Month
                                                                                   Period Ended
                                                                                  September 30,
                                                                              2000             2001
                                                                          ------------     ------------
<S>                                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Loss                                                              ($3,050,187)     ($1,900,217)
     Adjustments to reconcile net loss to
      net cash provided by operating activities
         Depreciation and impairment                                         6,086,530        7,173,392
         Amortization of intangible assets, including
          deferred financing costs and bond discount                        12,678,922        9,427,706
         Changes in operating assets and liabilities,
          net of effects of acquisitions:
             Accounts receivable                                              (524,998)      (5,744,635)
             Inventories                                                       (85,570)      (3,979,616)
             Prepaid expenses and other assets                                (212,879)        (315,253)
             Accounts payable                                                1,367,252        4,957,359
             Accrued expenses                                                 (990,845)       1,253,033
             Income taxes                                                      104,239         (387,522)
                                                                          ------------     ------------

                Net cash provided by operating activities                   15,372,464       10,484,247
                                                                          ------------     ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capital expenditures                                                   (8,105,921)      (9,410,058)
     Cash outflows for acquisitions                                         (1,729,607)      (1,859,270)
                                                                          ------------     ------------
                Net cash used in investing activities                       (9,835,528)     (11,269,328)
                                                                          ------------     ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from the issuance of debt                                      5,000,000
     Payment of credit facility amendment fees                                (382,186)        (611,865)
     Repayment of debt                                                     (11,320,168)     (10,839,266)
     Proceeds from the issuance of common stock and
      warrants, net of expenses                                                               8,623,342
                                                                          ------------     ------------

          Net cash used in financing activities                             (6,702,354)      (2,827,789)
                                                                          ------------     ------------

DECREASE IN CASH AND CASH EQUIVALENTS                                       (1,165,418)      (3,612,870)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                               1,987,732        4,195,034
                                                                          ------------     ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                  $    822,314     $    582,164
                                                                          ============     ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
     Cash paid for interest                                               $ 10,317,573     $  9,877,441
                                                                          ============     ============

     Cash paid (refunded) for income taxes                                    ($20,586)    $    985,332
                                                                          ============     ============

NONCASH TRANSACTIONS:
     Dividends payable                                                    $    665,501     $    778,406
                                                                          ============     ============

     Stock issued for acquisition of assets                               $          -     $  2,052,188
                                                                          ============     ============
</TABLE>

                 See notes to consolidated financial statements

                                       6
<PAGE>

                        EVERCOM, INC. AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  CONSOLIDATED FINANCIAL STATEMENTS

    The consolidated financial statements as of September 30, 2001 for the
three-month and nine-month periods ended September 30, 2000 and 2001, of
Evercom, Inc. and its subsidiaries (the "Company") have been prepared by the
Company without audit.

    In the opinion of management, all necessary adjustments (which include only
normal recurring adjustments) to present fairly, in all material respects, the
consolidated financial position, results of operations, and cash flows as of and
for the respective periods, have been made.  Certain information and footnote
disclosures normally included in annual consolidated financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission.  These financial statements should be read in conjunction with the
Company's 2000 consolidated financial statements contained in its Form 10-K as
filed with the Securities and Exchange Commission on June 1, 2001.

    Comprehensive Income

    Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1999.  This
statement requires companies to report and display comprehensive income and its
components (revenues, expenses, gains, and losses).  Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners.  For the Company,
comprehensive income is the same as net loss reported in the statements of
consolidated operations, since there were no other items of comprehensive income
for the periods presented.

    Business Combinations and Goodwill and Intangible Assets

    On June 29, 2001, the Financial Accounting Standards Board (FASB) approved
for issuance SFAS No. 141, "Business Combinations," effective July 1, 2001, and
SFAS No. 142, "Goodwill and Intangible Assets," effective January 1, 2002. SFAS
No. 141 prohibits pooling of interests accounting for acquisitions.  SFAS No.
142 specifies that goodwill and some intangible assets will no longer be
amortized, but instead, will be subject to periodic impairment testing.  The
Company is evaluating the financial statement impact of SFAS No. 142.

   In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. This statement supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed Of" and
related literature and establishes a single model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by sale.
The Company is required to adopt SFAS No. 144 for fiscal years beginning after
December 15, 2001. The Company is evaluating the financial statement impact of
SFAS No. 144.

    Reclassifications

    Certain reclassifications have been made in the three and nine months ended
September 30, 2000 consolidated financial statements to conform to the
classifications used in the three and nine months ended September 30, 2001.

2.  FINANCING PLANS

    The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company believes that if
current operating trends continue, the Company may be out of compliance with its
bank covenants for the quarter ending December 31, 2001, which could have an
adverse effect on the Company and which could effect its ability to satisfy its
cash needs under its current business plan. To address this situation, the
Company is discussing alternatives with its lenders and other potential
investors. The Company is attempting to resolve this issue, but can give no
assurance as to whether or when this effort will succeed. The financial
statements do not include any adjustments relating to the recoverability and
classification of recorded assets amounts or the amount and classification of
liabilities that might be necessary should the Company be unable to continue as
a going concern.

                                       7

<PAGE>

3.  ACCOUNTS RECEIVABLE

    Accounts receivable consist of the following:

<TABLE>
<CAPTION>
                                                                             December 31,    September 30,
                                                                                 2000            2001
                                                                             -----------     ------------
                                                                                              (Unaudited)
<S>                                                                         <C>               <C>
Trade accounts receivable, net of advance payments of $289,385
     and $0 at December 31, 2000 and September 30, 2001, respectively        $41,028,861      $46,832,676
Advance commissions receivable                                                 1,654,595        2,223,079
Recoverable Universal Service Fund fees                                          235,817           65,580
Employees and other                                                              453,704           41,769
                                                                             -----------      -----------
                                                                              43,372,977       49,163,104
Less allowance for unbillable and uncollectible chargebacks                   (5,070,508)      (5,116,000)
                                                                             -----------      -----------
                                                                             $38,302,469      $44,047,104
                                                                             ===========      ===========
</TABLE>

    At December 31, 2000 and September 30, 2001, the Company had advanced
commissions to certain inmate facilities of $1,758,299 and $2,416,389
(unaudited), which are recoverable from such facilities as a reduction of earned
commissions at specified monthly amounts. Amounts included in accounts
receivable represent the estimated recoverable amounts during the next fiscal
year with the remaining balance recorded in other assets.

4.  PROPERTY AND EQUIPMENT

    Property and equipment consist of the following:

                                             December 31,        September 30,
                                                 2000                2001
                                             ------------        ------------
                                                                  (Unaudited)

Leasehold improvements                       $    944,292        $    962,103
Telephone system equipment                     46,285,050          53,666,006
Vehicles                                          430,548             430,548
Office equipment                                2,727,911           2,921,022
                                             ------------        ------------
                                               50,387,801          57,979,679
Less accumulated depreciation                 (23,318,556)        (30,458,352)
                                             ------------        ------------
                                             $ 27,069,245        $ 27,521,327
                                             ============        ============

    Depreciation and impairment - Depreciation and impairment for the nine
months ended September 30, 2000 and 2001, includes depreciation expense of
$6,086,530 and $5,974,571, respectively. Also included in depreciation and
impairment for the nine months ended September 30, 2001, is an impairment loss
of $1.0 million on telephone system equipment removed from service.

                                       8
<PAGE>

5.  INTANGIBLE AND OTHER ASSETS

    Intangible and other assets consist of the following:

                                                  December 31,    September 30,
                                                      2000            2001
                                                  ------------    ------------
                                                                   (Unaudited)
Intangible assets:
     Acquired telephone contracts                 $ 71,566,718    $ 75,680,133
     Noncompete agreements                             568,611         568,611
     Deferred loan costs                             9,042,247       9,654,112
     Goodwill                                       84,730,834      87,118,881
     Other intangibles                                 783,096         783,096
                                                  ------------    ------------
                                                   166,691,506     173,804,833
   Less accumulated amortization                   (81,221,978)    (90,649,684)
                                                  ------------    ------------
Total intangible assets                             85,469,528      83,155,149
Deposits and other                                     418,150         441,958
Noncurrent portion of commission
 advances to facilities                                103,704         193,310
                                                  ------------    ------------
                                                  $ 85,991,382    $ 83,790,417
                                                  ============    ============
6.  ACCRUED EXPENSES

    Accrued expenses consist of the following:

                                                  December 31,    September 30,
                                                         2000            2001
                                                  -----------     ------------
                                                                   (Unaudited)

Facility commissions                              $ 8,204,779      $ 7,924,899
Billing and collection fees                         1,988,157        2,104,735
Accrued acquisition and financing costs               578,081          558,386
Accrued interest                                      541,530        3,615,805
Accrued excise taxes payable                        1,958,017        1,376,578
Accrued dividends on preferred stock                2,142,434        2,920,840
Accrued payroll and bonuses                           812,898        1,290,327
Accrued payable to joint venture partner            1,136,916          331,933
Deferred revenue                                    1,076,425        1,327,662
Other                                               1,991,059          990,876
                                                  -----------      -----------
                                                  $20,430,296      $22,442,041
                                                  ===========      ===========


                                       9
<PAGE>

7.  LONG-TERM DEBT

    The following is a summary of long-term debt:

                                                  December 31,    September 30,
                                                      2000            2001
                                                  ------------    ------------
                                                                   (Unaudited)

Senior Notes                                      $115,000,000    $115,000,000
Senior Credit Facility:
     Revolving loan facility                        13,500,000      13,000,000
     Term loan acquisition facility                 27,500,000      17,187,500
     Additional term loan facility                   5,500,000       5,500,000
     Second additional term loan facility            5,000,000       5,000,000
Other                                                   26,766               -
                                                  ------------    ------------
                                                   166,526,766     155,687,500
Less current portion of long-term debt             (13,776,766)    (13,750,000)
                                                  ------------    ------------
                                                  $152,750,000    $141,937,500
                                                  ============    ============

    Under the terms of the Senior Credit Facility, the term loan acquisition
facility is due in quarterly installments of $3,437,500, with the remaining
unpaid balance for all borrowings under the Senior Credit Facility being due on
December 31, 2002.   Both the revolving and the term loan facilities are
collateralized by substantially all of the assets of the Company.

    On June 29, 2001, the Company entered into an interest rate cap agreement
that has been designated as a hedge against the Company's variable interest rate
exposure under the Company's revolving and term loan agreement (the "Senior
Credit Facility").  At September 30, 2001, the interest rate cap has an
aggregate notional amount of $20.0 million, which matures in December 2002, and
caps interest on the London Interbank Offering Rate ("LIBOR") portion of the
term loan, up to the aggregate notional amount, at 7.5%, plus the applicable
LIBOR margin.

    On May 30, 2001, and in conjunction with the commitment from existing
shareholders and other investors to purchase 12,000 shares of the Company's
Common stock for $750 per share, the Company and its Senior Credit Facility
lenders amended the Company's Senior Credit Facility.  The amendment changed the
requirements and definitions of certain financial covenants through December 31,
2001, and increased the Company's ability to enter into capital lease
arrangements from $2.5 million to $5.0 million.  Additionally, the amendment
waived the Senior Credit Facility Lender's rights to the proceeds from the May
30, 2001 issuance of common stock and waived all outstanding defaults under the
Senior Credit Facility.  An amendment fee equal to 0.75% of outstanding
commitments, or $0.6 million, was paid to the Senior Credit Facility lenders to
effect this amendment.  Additionally, the amendment increased all interest rates
under the Senior Credit Facility by 0.5% (50 basis points).

                                       10
<PAGE>

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

    The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the financial
statements and the notes thereto contained elsewhere in this report.  Certain
information contained in the discussion and analysis set forth below included
forward-looking statements that involve risks and uncertainties.  See "Special
Note Regarding Forward-Looking Information; Risk Factors."

Overview

    The Company is a provider of collect and prepaid calling services to local,
county, state, and private correctional facilities in the U.S.  The Company
derives substantially all of its revenues from its operation of inmate
telecommunications systems located in correctional facilities in 43 states and
the District of Columbia.

    The Company's inmate telecommunications services consist of collect and
prepaid calling services.  The Company enters into multi-year agreements
(generally three to five years) with the correctional facilities, pursuant to
which the Company serves as the exclusive provider of telecommunications
services to inmates within each facility.  In exchange for the exclusive service
rights, the Company pays a percentage of its revenue from each correctional
facility as a commission to that facility.  Typically, the Company installs and
retains ownership of the telephones and related equipment and provides
additional services to correctional facilities that are tailored to the
specialized needs of the corrections industry and to the requirements of the
individual correctional facility, such as call activity reporting and call
blocking.  The Company also generates revenues from public pay telephones that
are ancillary to its inmate telephone business.

    The Company accumulates call activity data from its various installations
and bills its revenues related to this call activity through local exchange
carriers ("LECs") or through third-party billing services. In addition, the
Company accrues the related telecommunications costs for validating,
transmitting, billing and collection, and allowances for uncollectible accounts
based on historical experience.

    The Company's traditional inmate business consists of collect and prepaid
calling services provided to correctional facilities.  The Company also provides
its Solutions services, representing validation, fraud management and billing
services to third parties.  The Company's largest Solutions Customer is a major
RBOC.  Under the terms of the agreement, the Company acquires at a discount the
related inmate accounts receivable from the RBOC for the calls that the Company
processes.  When the receivables are purchased, the Company accepts
responsibility for all validation, uncollectible accounts, and billing and
collections costs, with no recourse to the RBOC.  However, under the terms of
the agreement, all purchased receivables must be processed and validated through
the Company's call management and billing system.  The Company's revenues from
this service equal the difference between the face value of the receivables
purchased and the amount it pays the RBOC for the discounted accounts
receivable.  Because the Company's revenues associated with this contract
represent only a percentage of the face value of the receivables purchased, the
associated uncollectible account expense and billing and collection fees
represent a much higher percentage of revenue as compared to the Company's
traditional inmate business.  Consequently, the Company's telecommunications
costs represent a higher percentage of revenue under this contract.  There are
minimal selling, general, and administrative ("SG&A") costs associated with this
contract.  The contract term is through January 31, 2003, and has no minimum
volume commitment.  The Company pays no facility commissions under this
agreement.  The RBOC notified the Company of its plan to exit the inmate market
and consequently, the Company expects its revenues to gradually decline from
this contract over the next several years.  The Company believes it is
reasonable to expect that some portion of the RBOC's customers will be converted
to Evercom's traditional inmate business.  The

                                       11
<PAGE>

Company also provides Solutions services to other inmate telecommunications
companies and is anticipating continued expansion of this business.

    The Company's principle operating expenses consist of (i) telecommunications
costs; (ii) commissions paid to correctional facilities, which are typically
expressed as a percentage of either gross or net revenues, (iii) field
operations and maintenance costs, which consist primarily of field service on
the Company's installed base of inmate telephones; and (iv) selling, general and
administrative ("SG&A") costs.

    Telecommunications Costs.  The principle components of telecommunication
costs are long distance transmission costs, local access costs, third party
billing costs, and costs of uncollectible accounts.  Historically, long distance
costs have consisted of charges for minutes of use purchased from interexchange
carriers ("IXCs").  The Company has also entered into agreements to lease lines
connecting urban areas and correctional facilities.  Local access charges
consist of monthly line and usage charges paid to RBOCs and other LECs for
interconnection to the local network for local calls, which are computed on a
flat monthly charge plus, for certain LECs, on a per message or per minute usage
rate based on the time and duration of the call.  Third-party billing charges
consist of payments to LECs and other billing service providers for billing and
collecting revenues from called parties.  Expenses associated with uncollectible
accounts are a significant cost in providing inmate telecommunications services.

    Commissions.  The Company pays a percentage of its revenue from each
facility to that facility as a commission. Commissions are generally set for the
duration of the Company's multi-year contract with the facility, and in some
cases are subject to monthly minimum amounts. Commission rates are one of the
primary bases of competition for obtaining and retaining contracts. The
Company's ability to offer increasingly attractive commission rates to
facilities depends on its ability to control its operating expenses. Generally,
contracts for larger facilities have higher commission rates, but these higher
commission rates are typically offset by lower network charges, field
maintenance, and SG&A expenses as a percentage of revenue. The commission rates
paid by the Company have increased in each period, from 36.1% for the quarter
ended September 30, 2000 to 38.7% for the quarter ended September 30, 2001. This
increase is due primarily to higher facility commissions on renewals and new
business. Commission rates are expected to gradually increase as a percentage of
revenues in the future. The overall commission percentage to total revenues of
33.9% for the quarter ended September 30, 2001 includes the effect of Solutions
services provided under the Company's agreement with a major RBOC, under which
no commissions are paid.

    Field Operations and Maintenance.  Field operations and maintenance consist
of maintenance costs associated with inmate phones and related equipment.  These
costs are relatively small and more constant components of operating expenses.

    Selling, General and Administrative.  SG&A expenses consist of corporate
overhead and selling expenses.  These costs are also relatively small and more
constant components of operating expenses.

                                       12
<PAGE>

Results of Operations

    The following table sets forth, for the three months and nine months ended
September 30, 2000 and 2001, respectively, the results of operations of the
Company.

<TABLE>
<CAPTION>
(Dollars in thousands)                        Three Month Period Ended September 30,        Nine Month Period Ended September 30,
                                                     2000                  2001                   2000                   2001
                                             -------------------    ------------------    -------------------    -------------------
<S>                                          <C>          <C>       <C>         <C>       <C>          <C>       <C>          <C>
Operating revenues                           $57,958      100.0%    $61,054     100.0%    $176,370     100.0%    $182,684     100.0%
Operating expenses:
  Telecommunication costs                     23,070       39.8%     24,056      39.4%      71,723      40.7%      71,080      38.9%
  Facility commissions                        18,599       32.1%     20,691      33.9%      56,326      31.9%      60,757      33.3%
  Field operations and maintenance             1,725        3.0%      1,972       3.2%       5,002       2.8%       5,675       3.1%
  Selling, general and administrative          4,416        7.6%      4,903       8.0%      13,305       7.5%      14,812       8.1%
  Cost of Equipment Sales                        215        0.4%        965       1.6%         570       0.3%       2,109       1.2%
  Depreciation and impairment                  2,072        3.6%      2,006       3.3%       6,087       3.5%       7,173       3.9%
  Amortization of intangibles                  3,347        5.8%      2,671       4.4%      11,878       6.7%       8,389       4.6%
                                             -------      -----     -------     -----     --------     -----     --------     -----

Total operating expenses                      53,444       92.2%     57,264      93.8%     164,891      93.5%     169,995      93.1%
                                             -------      -----     -------     -----     --------     -----     --------     -----

Operating income                               4,514        7.8%      3,790       6.2%      11,479       6.5%      12,689       6.9%
Interest expense, net                          4,780        8.2%      4,632       7.6%      14,446       8.2%      13,990       7.7%
                                             -------      -----     -------     -----     --------     -----     --------     -----

Loss before income taxes                        (266)      -0.5%       (842)     -1.4%      (2,967)     -1.7%      (1,301)     -0.7%
Income tax expense                                31        0.1%        268       0.4%          84       0.0%         599       0.3%
                                             -------      -----     -------     -----     --------     -----     --------     -----

Net Loss                                        (297)      -0.5%     (1,110)     -1.8%      (3,051)     -1.7%      (1,900)     -1.0%
                                             =======      =====     =======     =====     ========     =====     ========     =====
EBITDA                                       $ 9,933       17.1%    $ 8,467      13.9%    $ 29,444      16.7%    $ 28,251      15.5%
                                             =======      =====     =======     =====     ========     =====     ========     =====
</TABLE>

    Three Months Ended September 30, 2001 Compared to Three Months Ended
September 30, 2000.

    Operating Revenues.  The Company's operating revenues increased by $3.1
million, or 5.3%, from $58.0 million for the three months ended September 30,
2000, to $61.1 million for the three months ended September 30, 2001.  The
increase in operating revenue was primarily in the Company's traditional inmate
business as a result of new sales initiatives coupled with higher equipment
sales to Solutions customers.

    Operating Expenses.  Total operating expenses increased $3.9 million, from
$53.4 million for the three months ended September 30, 2000, to $57.3 million
for the three months ended September 30, 2001. Operating expenses as a
percentage of operating revenues increased 1.6% from 92.2% for the three months
ended September 30, 2000, to 93.8% for the three months ended September 30,
2001. The increase in operating expenses as a percentage of revenues is
primarily due to the factors discussed below.

    Telecommunication costs increased by $1.0 million from $23.1 million for the
three months ended September 30, 2000, to $24.1 million for the three months
ended September 30, 2001.  Telecommunications costs represented 39.8% of
operating revenues for the three months ended September 30, 2000, and 39.4% of
operating revenues for the three months ended September 30, 2001.  The decrease
in telecommunications costs as a percentage of operating revenues is primarily
due to savings generated from new long distance contracts, partially offset by
increased expenses associated with uncollectible accounts that were due in part
to changes in policies and procedures by several of the Company's LEC billing
agents.

                                       13
<PAGE>

    Facility commissions increased by $2.1 million, from $18.6 million for the
three months ended September 30, 2000, to $20.7 million for the three months
ended September 30, 2001.  Facility commissions represented 32.1% of operating
revenues for the three months ended September 30, 2000, and 33.9% of operating
revenues for the three months ended September 30, 2001, an increase of 1.8%.
Commission expense as a percentage of revenue for the Company's traditional
inmate business was 36.1% and 38.7% for the three months ended September 30,
2000 and 2001, respectively.  This increase is due to competition for new
business and increased commission rates on renewals.  Commission rates are
expected to gradually increase in the future.

    Field operations and maintenance costs were $1.7 million for the three
months ended September 30, 2000, and $2.0 million for the three months ended
September 30, 2001. Field operations and maintenance costs represented 3.0% of
operating revenues for the three months ended September 30, 2000, and 3.2% of
operating revenues for the three months ended September 30, 2001, an increase of
0.2%. The increase as a percentage of operating revenues is primarily due to
higher field equipment replacements during the three months ended September 30,
2001.

    SG&A costs increased by $0.5 million, from $4.4 million for the three months
ended September 30, 2000, to $4.9 million for the three months ended September
30, 2001.  SG&A represented 7.6% of operating revenues for the three months
ended September 30, 2000, and 8.0% of operating revenues for the three months
ended September 30, 2001, an increase of 0.4%.  The increase is primarily due to
increased staffing to execute new sales initiatives.

    Depreciation and impairment and amortization costs decreased by $0.7
million, from $5.4 million for the three months ended September 30, 2000, to
$4.7 million for the three months ended September 30, 2001. During the three
months ended September 30, 2001, the Company recorded an impairment loss of $0.2
million on telephone system equipment removed from service. Excluding this
impairment, depreciation and amortization costs represented 9.4% of operating
revenues for the three months ended September 30, 2000, and 7.4% of operating
revenues for the three months ended September 30, 2001, a decrease of 2.0%. The
decrease as a percentage of operating revenues is primarily due to amortization
expense associated with the acquisitions of inmate facility contracts by the
Company. The Company amortizes acquired inmate facility contracts over each
contract's remaining term at the acquisition date. As the contract terms expire,
the acquired inmate facility contracts become fully amortized and amortization
expense declines.

    Operating Income.  The Company's operating income decreased by $0.7 million,
from $4.5 million for the three months ended September 30, 2000, to $3.8 million
for the three months ended September 30, 2001, substantially due to the factors
described above.  The Company's operating income margin decreased from 7.8% for
the three months ended September 30, 2000, to 6.2% for the three months ended
September 30, 2001, primarily as a result of the factors described above.

    Interest Expense, net.  Interest expense, net, decreased from $4.8 million
for the three months ended September 30, 2000, to $4.6 million for the three
months ended September 30, 2001.  This decrease is primarily due to lower
average debt outstanding during the three months ended September 30, 2001.

    Net Loss.  The Company's net loss increased by $0.8 million, from $0.3
million for the three months ended September 30, 2000, to $1.1 million for the
three months ended September 30, 2001, primarily as a result of the factors
described above.

    EBITDA.  Earnings before interest, income taxes, depreciation, and
amortization ("EBITDA") decreased from $9.9 million for the three months ended
September 30, 2000, to $8.5 million for the three months ended September 30,
2001.  EBITDA as a percentage of operating revenues decreased from 17.1% for the
three months ended September 30, 2000, to 13.9% for the three months ended
September 30, 2001, primarily due to the factors

                                       14
<PAGE>

described above. Although EBITDA is not a measure of performance calculated in
accordance with generally accepted accounting principles, the Company has
included information concerning EBITDA in the Form 10-Q because it is commonly
used by certain investors and analysts as a measure of a company's ability to
service its debt obligations and is a component of the Company's debt compliance
ratios. EBITDA should not be used as an alternative to, or be considered more
meaningful than, operating income, net income, or cash flows as an indicator of
the Company's operating income. Two of the Company's subsidiaries are subject to
state income taxes. Consequently, the Company accrues income tax expense even in
a loss period.

Nine Months Ended September 30, 2001 Compared to Nine Months Ended September 30,
2000

   Operating Revenues.  The Company's operating revenues increased by $6.3
million, or 3.6%, from $176.4 million for the nine months ended September 30,
2000, to $182.7 million for the nine months ended September 30, 2001.  The
increase in operating revenues was primarily due to an increase in the Company's
traditional inmate business as a result of new sales initiatives and due to
higher equipment sales to Solutions customers.

   Operating Expenses.  Total operating expenses increased $5.1 million, from
$164.9 million for the nine months ended September 30, 2000, to $170.0 million
for the nine months ended September 30, 2001.  Operating expenses as a
percentage of operating revenues decreased 0.4% from 93.5% for the nine months
ended September 30, 2000, to 93.1% for the nine months ended September 30, 2001.
The decrease in operating expenses as a percentage of revenues is primarily due
to the factors discussed below.

   Telecommunications costs decreased by $0.6 million, from $71.7 million for
the nine months ended September 30, 2000, to $71.1 million for the nine months
ended September 30, 2001.  Telecommunications costs represented 40.7% of
operating revenues for the nine months ended September 30, 2000, and 38.9% of
operating revenues for the nine months ended September 30, 2001.  The decrease
in telecommunication costs as a percentage of operating revenues is primarily
due to savings generated from new long distance contracts.

   Facility commissions increased by $4.5 million, from $56.3 million for the
nine months ended September 30, 2000, to $60.8 million for the nine months ended
September 30, 2001.  Facility commissions represented 31.9% of operating
revenues for the nine months ended September 30, 2000, and 33.3% of operating
revenues for the nine months ended September 30, 2001, an increase of 1.4%.
Commission expense as a percentage of revenue for the Company's traditional
inmate business was 35.8% and 37.7% for the nine months ended September 30, 2000
and 2001, respectively.  This increase is due to competition for new business
and increased commission rates on renewals.  Commission rates are expected to
gradually increase in the future.

   Field operations and maintenance costs were $5.0 million for the nine months
ended September 30, 2000, and $5.7 million for the nine months ended September
30, 2001.  Field operations and maintenance costs represented 2.8% of operating
revenues for the nine months ended September 30, 2000, and 3.1% for the nine
months ended September 30, 2001, an increase of 0.3%.  This increase as a
percentage of operating revenues is primarily due to higher field equipment
replacements during the nine months ended September 30, 2001.

   SG&A costs increased by $1.5 million, from $13.3 million for the nine months
ended September 30, 2000, to $14.8 million for the nine months ended September
30, 2001.  SG&A represented 7.5% of operating revenues for the nine months ended
September 30, 2000, and 8.1% of operating revenues for the nine months ended
September 30, 2001, an increase of 0.6%.  This increase is primarily due to
increased staffing to support enhancements to the Company's information systems
and to execute new sales initiatives.  Additionally, the Company spent $0.2
million during the nine months ended September 30, 2001 for executive search
fees.

                                       15
<PAGE>

   Depreciation and impairment and amortization costs decreased by $2.4 million,
from $18.0 million for the nine months ended September 30, 2000 to $15.6 million
for the nine months ended September 30, 2001.  During the nine months ended
September 30, 2001, the Company recorded an impairment loss of $1.2 million on
telephone system equipment removed from service.  Excluding this impairment,
depreciation and amortization costs represented 10.2% of operating revenues for
the nine months ended September 30, 2000 and 7.9% of operating revenues for the
nine months ended September 30, 2001, a decrease of 2.3%.  The decrease as a
percentage of operating revenues is primarily due to amortization expense
associated with the acquisitions of inmate facility contracts by the Company.
The Company amortizes acquired inmate facility contracts over each contract's
remaining term at the acquisition date.  As the contract terms expire, the
acquired inmate facility contracts become fully amortized and amortization
expense declines.

   Operating Income.  The Company's operating income increased by $1.2 million,
from $11.5 million for the nine months ended September 30, 2000 to $12.7 million
for the nine months ended September 30, 2001, substantially due to the factors
described above.  The Company's operating income margin increased from 6.5% for
the nine months ended September 30, 2000 to 6.9% for the nine months ended
September 30, 2001, primarily as a result of the factors described above.

   Interest Expense, net.  Interest expense, net, decreased from $14.4 million
for the nine months ended September 30, 2000 to $14.0 million for the nine
months ended September 30, 2001.  This decrease is primarily due to lower
average debt outstanding during the nine months ended September 30, 2001.

   Net Loss.  The Company's net loss decreased by $1.2 million, from a $3.1
million for the nine months ended September 30, 2000 to $1.9 million for the
nine months ended September 30, 2001, primarily as a result of the factors
described above.

   EBITDA.  EBITDA decreased by $1.1 million from $29.4 million for the nine
months ended September 30, 2000 to $28.3 million for the nine months ended
September 30, 2001.  EBITDA as a percentage of operating revenues decreased from
16.7% for the nine months ended September 30, 2000 to 15.5% for the nine months
ended September 30, 2001, primarily due to the factors described above.
Although EBITDA is not a measure of performance calculated in accordance with
generally accepted accounting principles, the Company has included information
concerning EBITDA in the Form 10-Q because it is commonly used by certain
investors and analysts as a measure of a company's ability to service its debt
obligations and is a component of the Company's debt compliance ratios.  EBITDA
should not be used as an alternative to, or be considered more meaningful than,
operating income, net income, or cash flows as an indicator of the Company's
operating income.  Two of the Company's subsidiaries are subject to state income
taxes.  Consequently, the Company accrues income tax expense even in a loss
period.


                                       16
<PAGE>

Liquidity and Capital Resources

   The Company anticipates that its principal uses of liquidity will be to
provide working capital, meet debt service requirements, and to repay principal
under the Senior Credit Facility (as defined). The Company believes that if
current operating trends continue, the Company may be out of compliance with its
bank covenants for the quarter ending December 31, 2001, which could have an
adverse effect on the Company and which could effect its ability to satisfy its
cash needs under its current business plan. To address this situation, the
Company is discussing alternatives with its bank group and other potential
investors. The Company believes that it will reach a satisfactory resolution to
this issue, but can give no assurance as to whether or when this effort will
succeed. Regarding working capital, the Company received notice that one of its
billing agents intends to begin remitting funds to the Company in 44 days as
compared to their historical 30 day payment schedule. This change would reduce
the Company's end of month liquidity by approximately $8 million. The billing
agent has informally and tentatively agreed not to make this change until, at
the earliest, December of 2001. The Company expects that its principal sources
of funds will be cash flow from operations and borrowings under the existing or
new credit facilities. The Company anticipates that its primary capital
expenditures for the remainder of 2001 will be approximately $3.0 million for
capital items required to implement new contracts and contract renewals entered
into by the Company, upgrades to integrated systems, and capital expenditures
associated with acquisitions in current and prior years. Total capital
expenditures for the fiscal period ended December 31, 2001 are expected to be
$14.3 million. The Company does not have material commitments for capital
expenditures.

   On May 30, 2001, the Company acquired all of the capital stock of
FortuneLinx, Inc., for 2,736 shares of the Company's Class "A" Common stock.
1,368 of the shares issued to acquire FortuneLinx will be forfeited by the
sellers if certain financial performance objectives are not achieved within the
first twelve months after the effective date of the acquisition.  Additionally,
options were issued to the sellers allowing them to purchase 456 shares of the
Company's Class "A" Common Stock at an exercise price of $2,000 per share.  In
conjunction with the closing, a note payable to a FortuneLinx shareholder in the
principal amount of $0.8 million was repaid plus accrued interest.


Equity Offering and Senior Credit Facility Amendment

   On April 10, 2001, the Company's Board of Directors approved a plan to offer
to sell 12,000 shares of the Company's Class "A" Common stock for $750 per share
to the Company's existing shareholders.  The Company received $9 million of
proceeds from the issuance of this new equity on June 4, 2001.  As part of this
offer each subscribing shareholder received their pro-rata share of warrants
equal to 4.5% of the Company's fully diluted common stock.  The warrants expire
on December 31, 2007 and are convertible to the Company's Class "A" Common Stock
at $750 per share.

   On May 30, 2001, and in conjunction with the commitment from its existing
shareholders and other investors to purchase 12,000 shares of the Company's
Common stock for $750 per share, the Company and its Senior Credit Facility
lenders amended the Company's Senior Credit Facility.  The amendment changed the
requirements and definitions of certain financial covenants through December 31,
2001 and increased the Company's ability to enter into capital lease
arrangements from $2.5 million to $5 million.  Additionally, the amendment
waived the Senior Credit Facility Lender's rights to the proceeds from the May
30, 2001 issuance of common stock and waived all outstanding defaults under the
Senior Credit Facility.  An amendment fee equal to 0.75% of outstanding
commitments, or $0.4 million, was paid to the Senior Credit Facility lenders to
effect this

                                       17
<PAGE>

amendment. Additionally, the amendment increased all interest rates under the
Senior Credit Facility by 0.5% (50 basis points).

   In March 1999, the Company raised $5 million of equity from its existing
shareholders and warrant holders and/or their affiliates through the issuance of
5,000 investment units at a price of $1,000 per unit.  Each unit consists of one
share of newly authorized First Preferred Series "A" Stock and a warrant to
acquire one share of Common Stock for $1,000 per share.  The First Preferred
Series "A" Stock is entitled to receive dividends at the applicable First
Preferred Series "A" Rate, payable quarterly commencing on April 1, 1999.  Such
dividends are payable out of funds legally available therefore, are payable only
when, as, and if declared by the Board of Directors, are cumulative, and, if
undeclared or unpaid, shall bear interest at the applicable First Preferred
Series "A" Rate until paid.  The First Preferred Series "A" Rate was 8% per
annum through March 31, 2001, 10% per annum from April 1, 2001 through September
30, 2001, and thereafter will increase by 0.5% for each additional three month
period up to a maximum of 16% per annum.  The First Preferred Series "A" Stock
ranks senior to all classes of the Company's common stock but ranks junior to
the Senior Preferred Stock of the Company (the "Senior Preferred Stock") with
respect to dividend rights and rights upon liquidation.  The warrants have a
strike price of $1,000 per share and will expire, if not sooner exercised, on
December 31, 2007.  As a result of the issuance of the First Preferred Series
"A" Stock and warrants, the Company was required to obtain a waiver from its
Senior Credit Facility group of lenders that waived the lenders' rights to the
proceeds raised by the Company from the issuance.

   In conjunction with the March 1999 equity offering, the preferred dividend
rates on the original Senior Preferred Stock were modified to mirror the
preferred dividend rates on the First Preferred Series "A" Stock.

   Also, in March 1999 and in conjunction with the issuance of the First
Preferred Series "A" Stock and warrants, the Company amended and restated its
Senior Credit Facility. The amendment increased the Company's borrowing capacity
under the term loan facility of the Senior Credit Facility by $5.5 million,
which bears interest at similar rates to the existing borrowings under the
Senior Credit Facility. The Company borrowed the additional $5.5 million in
March 1999 and concurrently repaid $5 million under the revolving portion of the
Senior Credit Facility.

   Net cash provided by operating activities decreased by $4.9 million from
$15.4 million for the nine months ended September 30, 2000, to $10.5 million for
the nine months ended September 30, 2001. This decrease was due to a $1.1
million decrease in operating income before consideration of depreciation and
amortization, an increase in inventory of $4.0 million primarily due to new
installation activity and timing of certain cash receipts and disbursements in
the normal course of business.

   Cash used in investing activities was $9.8 million for the nine months ended
September 30, 2000, as compared to $11.3 million for the nine months ended
September 30, 2001, consisting primarily of both cash outflows for investments
in new business and customer contract renewals.

   Cash used in financing activities was $6.7 million for the nine months ended
September 30, 2000, as compared to $2.8 million for the nine months ended
September 30, 2001, consisting primarily of net proceeds raised through the
issuance of common stock and new borrowings under the Senior Credit Facility,
offset by principal repayments under the Senior Credit Facility.

   The Senior Credit Facility, as amended on May 30, 2001, consists of (a) $55.0
million term loan acquisition facility all of which has been borrowed and upon
which $34.3 million of scheduled principal payments had been made as of
September 30, 2001, (b) $10.5 million of additional term loan facilities which
has been borrowed as of September 30, 2001 (availability of a $2.5 million
additional term loan expired because the

                                       18
<PAGE>

Company did not achieve certain financial performance for the year ended
December 31, 2000), and (c) a $25.0 million revolving loan facility (which
includes a $10.0 million letter of credit facility) upon which $13.0 million had
been borrowed as of September 30, 2001. Scheduled principal payments under the
Senior Credit Facility bear interest, at the option of the Company, at either
(i) the Base Rate (i.e., the higher of Canadian Imperial Bank of Commerce's
("CIBC") reference rate or the overnight federal funds rate plus 0.5%) plus a
margin that varies from 150 to 350 basis points, depending on the Company's
Total Debt to EBITDA Ratio (as defined in the Senior Credit Facility); or (ii)
the LIBOR plus a margin that varies from 275 to 450 basis points, depending on
the Company's Total Debt to EBITDA Ratio.

   The Senior Credit Facility requires quarterly interest payments to be made on
base rate loans and periodic interest-only payments based on the applicable
interest period on LIBOR loans, at least quarterly, in each case until maturity.
In addition, the Senior Credit Facility requires mandatory prepayments out of
the proceeds of certain equity or debt offerings, asset dispositions, receipt of
insurance proceeds not applied as provided in the Senior Credit Facility, and
receipts of funds from certain escrow accounts. Remaining scheduled principal
payments on the term loan facilities are approximately $3.4 million and $24.2
million during the years ended 2001, and 2002, respectively. All outstanding
principal and interest under the Senior Credit Facility is due December 31,
2002. The Senior Credit Facility is secured by substantially all the assets of
the Company and its subsidiaries. The Senior Credit Facility also requires the
Company to meet certain financial tests on a consolidated basis, some of which
may be more restrictive in future years. Based on the Company's current
forecast, certain of these financial tests are likely to not be met by December
31, 2001. The Company's failure to comply with its obligations under the Senior
Credit Facility, or in agreements relating to indebtedness incurred in the
future, could result in an event of default under such agreements, which could
permit acceleration of the related debt and acceleration of debt under other
financing arrangements that may contain cross-acceleration or cross-default
provisions.

   On June 29, 2001, the Company entered into an interest rate cap agreement
that has been designated as a hedge against the Company's variable interest rate
exposure under the Senior Credit Facility. At September 30, 2001, the interest
rate cap has an aggregate notional amount of $20.0 million, which matures in
December, 2002 and caps interest on the LIBOR portion of the term loan, up to
the aggregate notional amount, at 7.5%, plus the applicable LIBOR margin.

   As of November 13, 2001, the Company had $8.9 million of available borrowing
capacity under the Senior Credit Facility and $0.5 million of cash.

   As of September 30, 2001 the Company had approximately $155.7 million of
long-term indebtedness outstanding including the current portion, a deficit in
stockholders' equity of $40.0 million, and $0.6 million of cash.

   The Company intends to evaluate additional acquisitions to expand its base
of installed inmate telephones and value added services and will continue to
evaluate possible acquisition opportunities. There can be no assurance that the
Company will have sufficient available capital resources to realize its
acquisition strategy. Such future acquisitions, depending on their size and the
form of consideration, may require the Company to seek additional debt or equity
financing.


Changes in Accounting Standards

   SFAS No. 141, "Business Combinations," effective July 1, 2001, and SFAS No.
142 "Goodwill and Intangible Assets," effective January 1, 2002 were issued on
June 29, 2001. SFAS No. 141 prohibits pooling of


                                       19
<PAGE>

interest accounting for acquisitions. SFAS No. 142 specifies that goodwill and
some intangible assets will no longer be amortized, but instead will be subject
to periodic impairment testing. The Company is evaluating the financial
statement impact of SFAS No. 142.

   In October 2001, the Financial Accounting Standards Board issued SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No.
144 addresses financial accounting and reporting for the impairment or disposal
of long-lived assets. This statement supersedes SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets for Long-Lived Assets to be Disposed Of" and
related literature and establishes a single model, based on the framework
established in SFAS No. 121, for long-lived assets to be disposed of by sale.
The Company is required to adopt SFAS No. 144 for fiscal years beginning after
December 15, 2001. The Company is evaluating the financial statement impact of
SFAS No. 144.

Special Note Regarding Forward-Looking Information

   Certain statements in this Quarterly Report Form 10-Q constitute forward-
looking statements.  These forward-looking statements are all statements that
are not statements of historical fact or that might otherwise be considered
opinion, belief, or projection.  These forward-looking statements involve known
and unknown risks, uncertainties, and other factors that may cause the actual
results, levels of activity, performance, or achievements of the Company, or
industry results, to be materially different from any future results, levels of
activity, performance, or achievements.  The risks, uncertainties, and other
factors to which forward-looking statements are subject include, among others,
those set forth under the caption "Risk Factors" below.

   Such factors include, without limitation, the following: competitors with
greater resources; risks associated with uncollectible accounts; risks
associated with carrying a large amount of debt; risks associated with our
limited operating history and accumulated deficits; risks associated with our
dependency on facilities-based carriers; risks associated with market growth
stagnating or declining; lack of patents and possible infringement;
technological change and new services; control by principal shareholders;
changes in the telecommunications industry; availability of key personnel; and
changes in or the failure to comply with, governmental regulations. All
subsequent written or oral forward-looking statements attributable to the
company or persons acting on its behalf are expressly qualified in their
entirety by such factors.

   In some cases, forward-looking statements can be identified by terminology
such as "may," "will," "should," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of such
terms or other comparable terminology. Although the Company believes that the
assumptions and expectations reflected in such forward-looking statements are
reasonable, as a result of the foregoing and other factors, no assurance can be
given as to future results, levels of activity, performance, or achievements,
and neither the Company nor any other person assumes responsibility for the
accuracy and completeness of such forward-looking statements. All forward-
looking statements included in the Quarterly Report on Form 10-Q are based on
information available to the Company on the date hereof, and the Company is
under no duty to update any of the forward-looking statements after the date
hereof.

Risk Factors

   Our Competitors Have Greater Resources Than We Do

   The inmate telecommunications industry is highly competitive. We compete with
numerous providers of inmate telephone services such as RBOCs, LECs, IXCs,
including major long distance carriers such as AT&T, MCI, and Sprint, and
independent public pay telephone and inmate telephone companies. Many of our
competitors are larger and better capitalized and have greater financial
resources available than we do. We believe that the principal competitive
factors in the inmate telecommunications market are

   .  rates of commissions paid to the correctional facilities;
   .  system features and functionality;
   .  system reliability and service;
   .  the ability to customize inmate call processing systems to the
      specifications and needs of the particular correctional facility; and
   .  relationships with correctional facilities.

                                       20
<PAGE>

If we are required to pay higher commissions to retain our existing contracts or
obtain new contracts, there could be a material adverse effect on us and on the
value of our Senior Notes.

     Historically, federal and state facilities, which are generally bid on a
system-wide basis, have been served by RBOCs, large LECs, and IXCs.  These
providers have generally not, however, focused on the smaller city and county
correctional systems, which are typically negotiated on a facility-by-facility
basis.  As a result, a significant portion of city and county correctional
facilities, which constitute a substantial majority of our customers, are served
by independent inmate telephone and independent public pay telephone companies.
A decision by RBOCs, large LECs, or IXCs to pursue actively contracts with city
and county correctional facilities could have a material adverse effect on us
and on the value of our Senior Notes.

     Our ability to offer competitive commission rates depends on effectively
controlling costs, which in turn necessitates capital expenditures for software
and systems.  If IXCs, RBOCs, and large LECs, which have significantly greater
financial resources than we do and are able to connect calls on their owned
networks for a negligible marginal cost, were to focus on the inmate
telecommunications market, we could face substantial competition and subsequent
increases in commission rates or reduction in market share, which could have a
material adverse effect on us and on the value of our Senior Notes.

Some of What We Bill is Uncollectible, and We May Underestimate This Number

     We are required to carry a reserve on our books for future charge-backs
from LECs and third party clearinghouses for uncollectible amounts when such
amounts exceed the reserves initially withheld by the LECs and clearinghouses.
We set the reserves on our books using historical data on charge-backs for each
LEC or other billing service providers.  The setting of these reserves requires
substantial use of estimation, and actual expenses associated with uncollectible
accounts could differ from our estimates.  Factors that could cause actual
expenses associated with uncollectible accounts to vary from our estimates
include difficulties in estimating reserves for acquired contracts and
variations in expenses associated with uncollectible accounts among LECs.  These
variations could potentially lead to an increase in our expenses associated with
uncollectible accounts, which could have a material adverse effect on us and on
the value of our Senior Notes.

Our Acquisition Strategy May Be Unsuccessful, and We Must Successfully Integrate
Companies That We Acquire

     We constantly evaluate acquisition opportunities and are currently
evaluating possible acquisition candidates.  We evaluate specific acquisition
opportunities based on market conditions and economic factors existing at the
time and intend to pursue favorable opportunities as they arise.  We may
encounter increased competition for acquisitions in the future, which could
result in higher prices for acquisition candidates.  We cannot assure you that
we will find suitable acquisition candidates at acceptable prices, have
sufficient available capital resources to realize our acquisition strategy, be
successful in entering into definitive agreements for desired acquisitions, or
that any such acquisitions, if consummated, will prove to be advantageous to us.

     The success of our growth strategy is also dependent on our ability to
integrate acquired operations into existing operations.  In addition, our
success is dependent on our ability to expand internal operations.  Our ability
to manage our anticipated future growth will depend on a number of factors,
including our ability to:

     .  evaluate new contract opportunities,
     .  monitor operations,
     .  control costs,

                                       21
<PAGE>

     .  maintain effective quality control,
     .  obtain satisfactory and cost- effective lease rights from and
        interconnection agreements with companies that own transmission lines,
        and
     .  expand our internal management, technical, and accounting systems.

Our rapid growth has placed, and our planned future growth will continue to
place, a significant strain on our financial, management, and operational
resources.  We cannot assure you that the integration of the operations of
future acquisitions and continued expansion of internal operations will not
require the investment of capital or result in unforeseen difficulties or absorb
significant management resources at levels higher than that anticipated by our
management, or that we will realize meaningful economies of scale or operating
efficiencies from our acquisitions.  In addition, acquisitions and the
establishment of new operations will entail considerable expenses in advance of
anticipated revenues and may cause substantial fluctuations in our operating
results.

     Our failure to successfully integrate acquired operations could have a
material adverse effect on us and the value of our Senior Notes.  Our
acquisition strategy results in the amortization of acquired contracts over a
relatively short period of time, generally one to three years.  We had
capitalized $75.7 million of acquired facility contracts as of September 30,
2001.  As of September 30, 2001, we had capitalized $87.1 million of goodwill.
This could lead to operating losses that could have a material adverse effect on
us and on the value of our Senior Notes.

We Are Carrying a Large Amount of Debt That Restricts Our Ability to Operate Our
Business

     We have significant debt and debt service obligations.  Our Senior Credit
Facility with Canadian Imperial Bank of Commerce as an agent for a syndicate of
lenders provides for (a) a term loan acquisition facility of $55.0 million (b)
an additional $10.5 million term loan facility and (c) a revolving loan facility
of $25.0 million (which includes a $10.0 million letter of credit facility).  In
addition, on June 27, 1997, we sold $115,000,000 principal amount of 11% Senior
Notes due 2007.  At September 30, 2001, we had approximately $155.7 million of
long-term debt outstanding (including current maturities).

     Our significant debt level will have several important consequences to
holders of our Common Stock, including, but not limited to, the following:

     .  we will be required to dedicate a substantial portion of our cash flow
        from operations to the payment of interest and principal repayment
        obligations in connection with the Senior Notes, the Senior Credit
        Facility, and other permitted indebtedness thereby reducing the funds
        available for our operations, capital expenditures, and other purposes;

     .  our debt level and the covenants contained in the Senior Credit Facility
        and the indenture with respect to the Senior Notes will limit our
        ability to obtain additional financing, pay dividends, repurchase stock,
        make investments, grant liens, and take other actions that may be in the
        best interests of our stockholders; and

     .  our substantial debt level may make us more vulnerable to economic
        fluctuations, limit our ability to withstand competitive pressures, and
        reduce our flexibility in responding to changing business and economic
        conditions.

     In addition, our indebtedness under the Senior Credit Facility bears
interest at floating rates, which could adversely affect our ability to service
our debt if interest rates rise.

                                       22
<PAGE>

     The Company believes that if current operating trends continue, the Company
may be out of compliance with its bank convenants for the quarter ending
December 31, 2001, which could have an adverse effect on the Company and which
could effect its ability to satisfy its cash needs under its current business
plan. To address this situation, the Company is discussing alternatives with its
lenders and other potential investors. The Company is attempting to resolve this
issue, but can give no assurance as to whether or when this effort will succeed.

     We cannot assure you that we will be able to meet our debt service
obligations.  If we are unable to generate sufficient cash flow or otherwise
obtain funds necessary to make required payments, or if we otherwise fail to
comply with the various covenants contained in our debt obligations, we would be
in default under the terms thereof, which would permit the holders of such
indebtedness to accelerate the maturity thereof and could cause defaults under
our other indebtedness.  Our ability to repay or refinance our obligations with
respect to our indebtedness will depend on our future financial and operating
results, which in turn, will be subject to prevailing economic and competitive
conditions and to certain financial, business, and other factors, many of which
are beyond our control.


We Have a Limited Operating History and Have Accumulated Deficits

     We were founded in December 1996.  Accordingly, we have a limited operating
history upon which an evaluation of us and our prospects can be based.  We
believe that our future success will depend on our ability to significantly
increase revenues, which we cannot assure you will happen.  Additionally, our
limited operating history makes the accurate prediction of future operating
results difficult or impossible, and we cannot assure you that our revenues will
increase or even continue at their current level or that we will maintain
profitability or generate cash from operations in future periods.  As of
September 30, 2001, we had an accumulated deficit of $75.1 million.  We may
experience losses in the future which could have a material adverse effect on us
and on the value of our Senior Notes.


We Are Dependent On Transmission Facilities-Based Carriers

     We do not own telecommunications transmission lines.  Accordingly,
telephone calls made from correctional facilities are connected through
transmission lines that we lease under a variety of arrangements with
transmission facilities-based long distance carriers, some of which are or may
become our competitors.  Our calls are transmitted via facilities leased on a
per minute or monthly basis.  Accordingly, we are vulnerable to increases in our
cost basis.  If there is an increase in demand for telecommunications services
(for example, data services) beyond the increase in supply of transmission
facilities, our costs could increase, which could have a material adverse effect
on us and on the value of our Senior Notes.


Changes in Regulation Could Adversely Affect Our Business

     The inmate telecommunications industry is regulated by both the Federal
Communications Commission (the "FCC") and state public utility commissions. Our
operations are also significantly affected by the regulation of other
telecommunications businesses, including LECs and IXCs.  Changes in the laws and
regulations governing our business or other telecommunications businesses could
have a material adverse effect on us and on the value of our Senior Notes.

     At the federal level, the industry is currently in a period of substantial
regulatory change in the aftermath of the Telecommunications Act of 1996 (the
"Telecom Act"), which, among other things, directed the FCC to restructure and
to change the regulatory framework of the pay telephone industry, including the
inmate telephone industry.  Because the FCC is still in the process of
implementing its new regulations, and because several aspects of rule changes
proposed by the FCC are subject to requests for reconsideration, clarification,
and final resolution in related proceedings, the ultimate effect of regulatory
changes on our business is uncertain.

                                       23
<PAGE>

     In addition to adopting regulations implementing the Telecom Act, the FCC
also recently adopted new regulations for interstate calls requiring inmate
telephone service providers to announce to called parties, before the called
party incurs any charges, that rate quotes may be obtained by dialing no more
than two digits or remaining on the line.  We were required to come into
compliance with these new rules by October 1, 1999, and we believe that we are
substantially in compliance.  Regulatory authorities do have authority to impose
fines and other sanctions for any violation of these rules.  These new
regulations could result in an increase in our costs by slightly increasing the
non-billable network hold time for interstate collect calls.  In addition, the
announcement of rate quotes may lead to called parties refusing to accept calls.
The exact effect of the new regulations is difficult to predict, as it will
depend in large part on how frequently called parties opt to receive a rate
quote.

     We charge relatively high rates for completing inmate collect, and prepaid
calls.  Many states have set maximum rates that can be charged for inmate
collect calls.  If regulators reduce the rates that may be charged, there could
be a material adverse effect on us and on the value of our Senior Notes.


Our Market Growth May Stagnate or Decline

     Our future growth could be affected by negative trends in the growth of the
number of correctional facilities or the number of prisoners.  If the societal
and political trends that have led to this growth rate abate, the growth of the
corrections industry could stagnate or decline, and this would have a material
adverse effect on us and on the value of our Senior Notes.  In particular, if
the drug laws or mandatory sentencing laws that have been enacted in the last
decade are repealed or reduced in scope, there could be an adverse effect on the
growth of the inmate population, which could effect our future success and the
value of our Senior Notes.  In addition, state prison authorities in the State
of Texas have adopted policies severely restricting the making of telephone
calls by inmates in state correctional facilities.  The adoption of similar
policies by other states could severely reduce the size of the inmate
telecommunications market and have a material adverse effect on us and on the
value of our Senior Notes.


Our New Business Line is Unproven For Us and May Prove Unsuccessful

     We are pursuing a new line of business that we call the "Solutions"
business.  The Solutions business is similar to the capabilities and services
that we provide to one of the RBOCs today.  The foundation of our Solutions
business is our intelligent call management, billing, and fraud control
capabilities.  We are strengthening the underlying Solutions applications, and
have been successful in creating interest with potential new customers as
evidenced by recent new contract activity.  We have limited experience in
obtaining contracts to provide, and in providing, such services to third
parties, and we cannot assure you that we will be successful in either of these
endeavors.  Our failure to secure opportunities to provide these services to
third parties, to successfully provide these services, or to generate revenues
from these services could have a material adverse effect on our future success
and on the value of our Senior Notes.


If We Cannot Recruit and Retain Key Personnel, We Will Have Difficulty Executing
Our Strategy

     Our success is dependent on the efforts of certain of our officers, senior
management, technical, and other personnel, and on our ability to continue to
attract, retain, and motivate qualified personnel.  The competition for such
employees is intense, and we believe that it would be difficult to replace the
expertise and experience of such persons in the event that the services of one
or more such persons were to become unavailable.  Accordingly, the loss of the
services of one or more of these individuals without adequate replacement could
have a material adverse effect on us and our ability to implement our business
strategy and to

                                       24
<PAGE>

achieve our goals, and could have a material adverse effect on the value of our
Senior Notes. In addition, our failure to attract and retain additional
management to support our business strategy could also have a material adverse
effect on us.


We Lack Patents and Might Be Challenged For Infringement

     None of our internally developed call processing technology has been
patented.  Accordingly, such technology and intellectual property rights could
infringe on other parties' intellectual property rights and could be contested
or challenged.  We have received notice from two parties that certain features
of our call processing technology may infringe upon such parties' patents.
Should our call processor or any material feature thereof be determined to
violate applicable patents, we would be required to cease using the technology
or features or seek to obtain appropriate licenses (which the Company may not be
able to obtain) for the use of such technology, either of which could have a
material adverse effect upon us and on the value of our Senior Notes.


We Have Governmental Entities As Customers

     Our customers include state and local governmental entities responsible for
the administration and operation of correctional facilities. We are subject,
therefore, to the administrative policies and procedures employed by, and the
regulations that govern the activities of, these governmental entities,
including policies, procedures, and regulations concerning the procurement and
retention of contract rights and the provision of services.  We cannot assure
you that our operations will not be adversely affected by the policies and
procedures employed by, or the regulations that govern the activities of, these
governmental entities or that we will not be limited in our ability to secure
additional customer contracts, renew existing customer contracts, or consummate
acquisitions as a result of such policies, procedures, and regulations.


Our Business Experiences Rapid Technological Change and New Services

     The telecommunications industry has been characterized by rapid
technological advancements, frequent new service introductions, and evolving
industry standards. Management believes that our future success will depend on
its ability to anticipate and respond to such changes and new technology.  We
cannot assure you that we will not be materially adversely affected by the
introduction and acceptance of new technology.  Some of our technology, such as
our call processor technology, has not yet been implemented in all of the
facilities that we service.

                                       25
<PAGE>

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     There were no material changes from the information reported in the
Company's Form 10-K, which information is incorporated herein by reference.

                                       26
<PAGE>

                          PART II - OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

     The Company is from time to time a party to legal proceedings that arise in
the ordinary course of business.  Management does not believe that the
resolution of any threatened or pending legal proceedings will have a material
adverse affect on the Company.

     None of the Company's internally developed call processing technology has
been patented. Accordingly, such technology and intellectual property rights
could infringe on other parties' intellectual property rights and could be
contested or challenged. The Company has received notice from two parties that
certain features of the Company's call processing technology may infringe upon
such parties' patents. A competitor holds certain patents, which, if valid,
might be relevant to our call processing technology and such competitor has
recently consolidated the ownership of certain intellectual property which may
increase the likelihood of a claim of infringement.  Should our call processor
or any material feature thereof be determined to violate applicable patents, we
would be required to cease using the technology or features or seek to obtain
appropriate licenses (which the Company may not be able to obtain) for the use
of such technology.


ITEM 2.   CHANGES IN SECURITIES AND USE OF PROCEEDS

     This item is not applicable to the Registrant.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

     None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF STOCKHOLDERS

 (With respect to Form 10-Q for the quarterly period ending September 30, 2001)

(a)  An annual meeting of shareholders was held on October 2, 2001.

(b)  The shareholders elected the following directors at the annual meeting,
     constituting the entire board of directors:

                               Richard H. Hochman
                                 Jay R. Levine
                                Nina E. McLemore
                                 Bruce I. Raben
                                Julius E. Talton
                                Richard Falcone
                                Gregg L. Engles
                                Todd W. Follmer
                                 David A. Sachs
                                Roger K. Sallee
                                 Joseph P. Urso

(c)  The shareholders voted upon 3 matters:

        (i)   The election of the Board of Directors of the Company;
        (ii)  The Amendment of the Amended and Restated Certificate of
              Incorporation of the Company to increase the number of shares of
              Class A Common Stock authorized for issuance thereunder by 50,000
              shares; and
        (iii) The Amendment of the 1998 Stock Option Plan (the "Plan") to
              increase to 5,000 shares, the number of share of Class A Common
              Stock which may be issued and sold pursuant to options granted
              under the Plan.

              22,498.41 votes were cast for the above matters and there were no
              votes cast against the matters or abstentions or broker nonvotes.

(d)  Not Applicable.

ITEM 5.   OTHER INFORMATION

     None.



                                       27
<PAGE>

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

  Exhibit
    No.      Description of Exhibit
  -------    ----------------------
    3.1      Certificate of Incorporation of the Company (filed as Exhibit 3.1
             to the Company's Registration Statement No. 333-33639 and
             incorporated herein by reference).
    3.2      Bylaws of the Company (filed as Exhibit 3.2 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
    3.3      Certificate of Amendment to Restated Certificate of Incorporation
             of the Company, dated as of July 23, 1998 (filed as Exhibit 3.3 to
             the Company's Quarterly Report on Form 10-Q, dated as of August 14,
             1998 and incorporated herein by reference).
    3.4      Certificate of Amendment to Restated Certificate of Incorporation
             of the Company, dated as February 11, 1999. (filed as Exhibit 3.4
             to the Company's Quarterly Report on Form-10-Q dated as of May 12,
             1999 and incorporated herein by reference).
    3.5*     Certificate of Amendment to Restated Certificate of Incorporation,
             dated as of October 2, 2001.
    4.1      Indenture, dated as of June 27, 1997, between the Company and U.S.
             Trust Company of Texas, N.A. (filed as Exhibit 4.1 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
    4.2      Form of Note (contained in Indenture filed as Exhibit 4.2 to the
             Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
    4.3      Form of Subsidiary Guaranty (contained in Indenture filed as
             Exhibit 4.3 to the Company's Registration Statement No. 333-33639
             and incorporated herein by reference).
    4.4      Registration Rights Agreement, dated as of June 27, 1997, between
             the Company and the Initial Purchaser (filed as Exhibit 4.4 to the
             Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
    4.5      Registration Rights Agreement, dated as of December 27, 1996m by
             and among the Company and certain Holders named therein (filed as
             Exhibit 4.5 to the Company's Registration Statement No. 333-33639
             and incorporated herein by reference).
    4.6      Shareholders Agreement, dated as December 27, 1996, by among the
             Company and certain Persons named therein (filed as Exhibit 4.6 to
             the Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
    4.7      Warrant Agreement, dated as of December 27, 1996, between the
             Company and CIBC Wood Gundy Ventures, Inc. (filed as Exhibit 4.7 to
             the Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
    4.8      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Gregg L. Engles (filed as Exhibit 4.8 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
    4.9      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Gregg L. Engles (filed as Exhibit 4.9 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.10      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Gregg L. Engles (filed as Exhibit 4.10 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.11      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Onyx Talton Partners, L.P. (filed as Exhibit 4.11 to
             the Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
   4.12      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Onyx Talton Partners, L.P. (filed as Exhibit 4.12 to
             the Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).

                                       28
<PAGE>

   4.13      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Onyx Talton Partners, L.P. (filed as Exhibit 4.13 to
             the Company's Registration Statement No. 333-33639 and incorporated
             herein by reference).
   4.14      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Joseph P. Urso (filed as Exhibit 4.14 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.15      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Joseph P. Urso (filed as Exhibit 4.15 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.16      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Joseph P. Urso (filed as Exhibit 4.16 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.17      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Todd W. Follmer (filed as Exhibit 4.17 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.18      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Todd W. Follmer (filed as Exhibit 4.18 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.19      Warrant Agreement, dated as of December 27, 1996, between the
             Company and Todd W. Follmer (filed as Exhibit 4.19 to the Company's
             Registration Statement No. 333-33639 and incorporated herein by
             reference).
   4.20      Form of Warrant Agreement, dated as of March 12, 1999 (filed as
             Exhibit 4.20 to the Company's Quarterly Report on Form 10-Q for the
             quarter ended March 31, 1999 and incorporated herein by reference).
   4.21      Form of Warrant Agreement, dated as of May 30, 2001 (filed as
             Exhibit 4.21 to the Company's Quarterly Report on Form 10-Q for the
             quarter ended March 31, 2001 and incorporated herein by reference).
   10.1*     Amendment to Stock Option Plan.


*  Filed herewith.


(b)  Reports on Form 8-K

No reports on Form 8-K have been filed during the period subject to this
Quarterly Report on Form 10-Q.


                                       29
<PAGE>

                                  SIGNATURES

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

                       EVERCOM, INC.


                       By:/s/  RICHARD FALCONE

                       Richard Falcone
                       Chief Executive Officer



                       By:/s/  KEITH KELSON

                       Keith Kelson
                       Chief Financial Officer



Date:  November 14, 2001


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