<PAGE>
================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                 ---------------

                                    FORM 10-Q

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

                                       OR

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

                      For the quarter ended March 31, 2002

                         Commission file number 0-25016

                                  T-NETIX, INC.

             (Exact name of registrant as specified in its charter)

               DELAWARE                               84-1037352
    (State or Other Jurisdiction of               (I.R.S. Employer
            Incorporation)                         Identification No.)


    2155 CHENAULT DRIVE, SUITE 410                       75006
        CARROLLTON, TEXAS 75006                        (Zip Code)
(Address of principal executive offices)

       Registrant's telephone number, including area code: (972) 241-1535

                                 ---------------

      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 and 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 [ ]

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

             CLASS                            OUTSTANDING AT MAY 10, 2002
             -----                            ---------------------------
Common stock, $0.01 stated value                       15,032,368


================================================================================


                                       1
<PAGE>
                         FORM 10-Q CROSS REFERENCE INDEX

                          PART I FINANCIAL INFORMATION

                                                                          PAGE
                                                                          ----
Item 1  Condensed Financial Statements (Unaudited)............. ........    4
Item 2  Management's Discussion and Analysis of Financial Condition
        and Results of Operations.......................................   12
Item 3  Quantitative and Qualitative Disclosure About Market Risk.......   17


                            PART II OTHER INFORMATION

Item 1  Legal Proceedings...............................................   18
Item 2  Changes in Securities and Use of Proceeds.......................   19
Item 3  Defaults Upon Senior Securities.................................   19
Item 4  Submission of Matters to a Vote of Security Holders.............   19
Item 5  Other Information...............................................   19
Item 6  Exhibits and Reports on Form 8-K................................   19




                                       2
<PAGE>
                                     PART I

ITEM 1. FINANCIAL STATEMENTS

              INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Condensed Consolidated Balance Sheets as of March 31, 2002
 and December 31, 2001 (Unaudited).....................................    3
Condensed Consolidated Statements of Operations for the
 Three Months Ended March 31, 2002 and 2001 (Unaudited)................    4
Condensed Consolidated Statements of Cash Flows for the
 Three Months Ended March 31, 2002 and 2001 (Unaudited)................    5
Notes to Condensed Consolidated Financial Statements (Unaudited).......    6




                                       3
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)


<TABLE>
<CAPTION>


                                                       MARCH 31,    DECEMBER 31,
                                                         2002           2001
                                                       ---------    ------------
<S>                                                <C>           <C>



                                 ASSETS

Cash and cash equivalents...........................    $ 1,685    $   995
Accounts receivable, net (note 2)...................     21,256     18,030
Prepaid expenses....................................      1,439      1,232
Inventories.........................................        557        705
                                                        -------    -------
       Total current assets.........................     24,937     20,962
Property and equipment, net (note 2)................     29,880     30,217
Goodwill, net.......................................      2,245      2,245
Deferred tax asset..................................      2,297      2,297
Intangible and other assets, net (note 2)...........      7,241      7,476
                                                        -------    -------
       Total assets.................................    $66,600    $63,197
                                                        =======    =======


                LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
   Accounts payable.................................    $10,795    $10,066
   Accrued liabilities (note 2).....................      8,604      5,089
   Subordinated note payable (note 3)...............      3,750      3,750
   Current portion of long-term debt (note 3).......     17,981     18,436
                                                        -------    -------
       Total current liabilities....................     40,401     38,070
   Long-term debt (note 3)..........................        161        218
                                                        -------    -------
       Total liabilities............................     40,562     38,288

Stockholders' equity:
   Preferred stock, $.01 stated value, 10,000,000
    shares authorized; no shares issued or outstanding
    at March 31, 2002 and December 31, 2001,
    respectively....................................         --         --
   Common stock, $.01 stated value, 70,000,000 shares
    authorized; 15,032,638 shares issued and outstanding
    at March 31, 2002 and December 31, 2001.........        150        150
   Additional paid-in capital.......................     41,831     41,831
   Accumulated deficit..............................    (15,943)   (17,072)
                                                        -------    -------
       Total stockholders' equity...................     26,038     24,909
                                                        -------    -------
Total liabilities and stockholders' equity..........    $66,600    $63,197
                                                        =======    =======
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.



                                       4
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                         THREE MONTHS ENDED
                                                              MARCH 31,
                                                         ------------------
                                                         2002          2001
                                                         ----          ----
<S>                                                  <C>          <C>

Revenue:
  Telecommunication services.......................    $15,264        $15,616
  Direct call provisioning.........................      8,217          6,480
  Internet services................................         --          6,851
  Equipment sales and other........................        977             58
                                                       -------        -------
      Total revenue................................     24,458         29,005
Operating Costs and Expenses:
  Operating costs
   Telecommunications services.....................      5,484          6,535
   Direct call provisioning........................      7,463          5,878
   Internet services...............................         --          4,916
   Cost of equipment sold and other................        531             41
                                                       -------        -------
      Total operating costs........................     13,478         17,370
  Selling, general and administrative..............      5,704          5,717
  Research and development.........................        700          1,215
  Depreciation and amortization....................      2,657          2,948
                                                       -------        -------
      Total operating costs and expenses...........     22,539         27,250
                                                       -------        -------
      Operating income ............................      1,919          1,755
Interest and other expenses........................        306            710
                                                       -------        -------
Income from continuing operations
  before income taxes..............................      1,613          1,045
Income tax expense.................................        135             --
                                                       -------        -------
  Net income from continuing operations............      1,478          1,045
Loss from discontinued operations..................       (349)          (678)
                                                       -------        -------
Net income before accretion of discount on
  redeemable convertible preferred stock...........      1,129            367
Accretion of discount on redeemable
  convertible preferred stock......................         --         (1,077)
                                                       -------        -------
Net income (loss) applicable to common
stockholders.......................................    $ 1,129        $  (710)
                                                       =======        =======
Income per common share from
  continuing operations
   Basic...........................................    $  0.10        $  0.07
                                                       =======        =======
   Diluted.........................................    $  0.10        $  0.07
                                                       =======        =======
Loss per common share from
  discontinued operations
   Basic...........................................    $ (0.02)       $ (0.05)
                                                       =======        =======
   Diluted.........................................    $ (0.02)       $ (0.05)
                                                       =======        =======
Income (loss) per common share applicable to
  common shareholders
   Basic...........................................    $  0.08        $ (0.05)
                                                       =======        =======
   Diluted.........................................    $  0.07        $ (0.05)
                                                       =======        =======
Shares used in computing net income
  (loss) per common share
   Basic...........................................     15,032         14,288
                                                       =======        =======
   Diluted.........................................     15,450         14,288
                                                       =======        =======
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       5
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                       THREE MONTHS ENDED
                                                            MARCH 31,
                                                       ------------------
                                                       2002          2001
                                                       ----          ----
<S>                                               <C>           <C>

Cash flows from operating activities:
Net income from continuing operations...............  $ 1,478      $ 1,045
Adjustments to reconcile net income to
net cash provided by operating activities from
 continuing operations:
Depreciation and amortization.......................    2,657        2,948
Changes in operating assets and
liabilities:
      Accounts receivable, net......................   (3,226)       4,222
      Prepaid expenses..............................     (207)        (334)
      Inventories...................................      148          713
      Intangibles and other assets..................      121           72
      Accounts payable..............................     (730)      (1,292)
      Accrued liabilities...........................    3,515          178
                                                      -------      -------
       Cash provided by operating activities of
            continuing operations...................    3,756        7,552
                                                      -------      -------
Cash used in investing activities:
  Purchase of property and equipment................   (2,112)      (2,541)
  Acquisition of business or business assets........       --       (1,477)
  Other investing activities........................      (93)          --
                                                      -------      -------
       Cash used in investing activities............   (2,205)      (4,018)
                                                      -------      -------
Cash flows from financing activities:
  Net proceeds from (payments on) line of credit....      145       (2,022)
  Payments on other debt............................     (657)         (13)
                                                      -------      -------
       Cash used in financing activities............     (512)      (2,035)
Cash used by discontinued operations................     (349)        (502)
                                                      -------      -------
Net increase in cash and cash equivalents...........      690          997
Cash and cash equivalents at beginning of period....      995          102
                                                      -------      -------
Cash and cash equivalents at end of period..........  $ 1,685      $ 1,099
                                                      =======      =======
Supplemental Disclosures:
  Cash paid during the period for:
      Interest......................................  $   306      $   615
                                                      =======      =======
      Income taxes..................................  $    42      $    --
                                                      =======      =======
</TABLE>


See accompanying notes to unaudited condensed consolidated financial statements.


                                       6
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)


(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Unaudited Financial Statements

      The accompanying unaudited consolidated financial statements reflect all
adjustments which, in the opinion of management, are necessary to reflect a fair
presentation of the financial position and results of operations of T-NETIX,
Inc. and subsidiaries (the Company) for the interim periods presented. All
adjustments, in the opinion of management, are of a normal and recurring nature.
Some adjustments involve estimates, which may require revision in subsequent
interim periods or at year-end. The financial statements have been presented in
accordance with generally accepted accounting principles. Refer to notes to
consolidated financial statements, which appear in the 2001 Annual Report on
Form 10-K for the Company's accounting polices, which are pertinent to these
statements.

Acquisitions

      On January 19, 2001 the Company completed the purchase of all the
outstanding shares of common stock, not already owned, of TELEQUIP Labs, Inc., a
provider of inmate calling systems. The purchase price was $605 per share, of
which $573 per share was paid upon closing. The remaining $32 per share, payable
on the first anniversary of the closing date upon determination that all
representations and warranties were materially true and accurate as of the
closing date and all covenants have been substantially fulfilled, has been paid.
The excess of the purchase price over the fair value of the net identifiable
assets acquired has been recorded as goodwill and is being amortized on a
straight line basis over seven years. The total cash paid in January 2001 was
$1.5 million. The acquisition has been accounted for as a purchase and,
accordingly, the results of operations of TELEQUIP Labs, Inc. have been included
in the Company's consolidated financial statements from January 19, 2001.

Earnings (Loss) Per Common Share

      Earnings (loss) per common share are presented in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, Earnings Per
Share ("SFAS 128"). Basic earnings per share excludes dilution for common stock
equivalents and is computed by dividing income or loss available to common
shareholders by the weighted average number of common shares outstanding during
the period. Diluted earnings per share reflect the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or
converted into common stock.

      The following is a reconciliation of the numerators and denominators of
the basic and diluted earnings per share computations (in thousands):

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED
                                                           MARCH 31,
                                                      ------------------
                                                      2002          2001
                                                      ----          ----
<S>                                               <C>         <C>

Numerator:
   Net income (loss) applicable to common
     shareholders................................    $1,129       $ (710)
                                                     ======       ======
Denominator:
   Denominator for basic earnings per share......    15,032       14,288
   Effect of dilutive securities:
     Stock options...............................       393           --
     Warrants....................................        25           --
                                                     ------       ------
   Denominator for diluted earnings per share....    15,450       14,288
                                                     ======       ======
</TABLE>

      For the three months ended March 31, 2002 and 2001, common stock
equivalents of 1,548,000 and 61,000, respectively, were not included in the
diluted earnings per share calculation, as their effect would be anti-dilutive.


                                       7
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)

Recently Issued Accounting Pronouncements

      In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141, "Business
Combinations", which requires the use of the purchase method and eliminates the
option of using pooling-of-interests method of accounting for all business
combinations. The provisions in this statement apply to all business
combinations initiated after June 30, 2001, and to all business combinations
accounted for using the purchase method for which the date of acquisition is on
or near July 1, 2001. As the Company did not have any significant business
acquisitions, the adoption of this statement did not have a material impact on
the Company's financial position, results of operations, or cash flows.

      In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" ("SFAS 142"). In general, SFAS 142 is effective for fiscal years
beginning after December 15, 2001. SFAS 142 addresses financial accounting and
reporting for acquired goodwill and other intangible assets, and requires that
all intangible assets acquired, other than those acquired in a business
combination, be initially recognized and measured based on fair value. In
addition, the intangible assets should be amortized based on useful life. If the
intangible asset is determined to have an indefinite useful life, it should not
be amortized, but shall be tested for impairment at least annually. The Company
adopted the provisions of SFAS 142 on January 1, 2002. The effect of adoption
was the cessation of amortization of goodwill recorded on previous purchase
business combinations. Goodwill amortization recorded in the quarter ended March
31, 2001 was $0.2 million. The Company reviewed the recorded goodwill for
impairment upon adoption of SFAS 142. To accomplish this, we identified the
reporting units and determined the carrying value of each reporting unit. The
Company defines its reporting unit to be the same as the reportable segments
(see note 5). To the extent a reporting unit's carrying amount exceeds its fair
value, the reporting unit's cost in excess of fair value of net assets acquired
may be impaired and we must perform the second step of the transitional
impairment test. In the second step, we must compare the implied fair value of
the reporting unit's fair value to all of its assets (recognized and
unrecognized) and liabilities in a manner similar to a purchase price allocation
in accordance with SFAS No. 141, to its carrying amount, both of which would be
measured as of January 1, 2002. Any transactional impairment loss is recognized
as the cumulative effect of a change in accounting principle in our statement of
operations. No impairment loss was recognized for the three months ended March
31, 2002 as a result of the transitional test discussed above.

      In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". This statement addresses the financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS 143 requires that the
fair value of a liability for an asset retirement obligation be recognized in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and reported as a liability. This
statement is effective for fiscal years beginning after June 15, 2002. The
Company is currently evaluating the impact of the adoption of SFAS 143.

      In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". This statement establishes a
single accounting model, based on the framework established in SFAS 121, for
long-lived assets to be disposed of by sale, whether previously held and used or
newly acquired, and broadens the presentation of discontinued operations to
include more disposal transactions. This statement is effective for fiscal years
beginning after December 15, 2001. The adoption of this statement had no
material impact upon the Company's financial position or results of operations.

Reclassification

      Certain amounts in the 2001 financial statements have been reclassified to
conform to the 2002 presentation.

(2) BALANCE SHEET COMPONENTS

    Accounts receivable consist of the following:
<TABLE>
<CAPTION>
                                                 MARCH 3,      DECEMBER 31,
                                                  2002             2001
                                                 --------      ------------
<S>                                           <C>           <C>

Accounts receivable, net:
  Trade accounts receivable...................   $15,518         $12,540
  Direct call provisioning receivable.........     7,542           7,040
  Other receivables...........................       307           1,030
                                                 -------         -------
                                                  23,367          20,610
     Less: Allowance for doubtful accounts....    (2,111)         (2,580)
                                                 -------         -------
                                                 $21,256         $18,030
                                                 =======         =======
</TABLE>

      Bad debt expense was $2.5 million and $1.2 million for the three months
ended March 31, 2002 and 2001, respectively.

                                       8
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)


   Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                          MARCH 31,      DECEMBER 31,
                                            2002            2001
                                          ---------      ------------
<S>                                   <C>             <C>
Property and equipment, net:
  Telecommunications equipment........     $68,225         $67,615
  Construction in progress............       5,993           4,898
  Office equipment....................      14,820          13,835
                                           -------         -------
                                            89,038          86,348
     Less: Accumulated depreciation
      and amortization................     (59,158)        (56,131)
                                           -------         -------
                                           $29,880         $30,217
                                           =======         =======
</TABLE>

      Intangible and other assets consist of the following:
<TABLE>
<CAPTION>
                                                MARCH 31,       DECEMBER 31,
                                                  2002             2001
                                                ---------       ------------
<S>                                         <C>            <C>
Intangible and other assets, net:
  Purchased technology assets.................   $ 2,487          $ 2,487
  Capitalized software development costs......     1,783            1,690
  Acquired software technologies..............       420              409
  Acquired contract rights....................     1,391            1,391
  Patent defense and application costs........     2,914            2,914
  Deposits and long-term prepayments..........     2,210            2,110
  Other.......................................       951            1,170
                                                 -------          -------
                                                  12,156           12,171
     Less: Accumulated amortization...........    (4,915)          (4,695)
                                                 -------          -------
                                                 $ 7,241          $ 7,476
                                                 =======          =======
</TABLE>

      Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                                MARCH 31,       DECEMBER 31,
                                                  2002             2001
                                                ---------       ------------
<S>                                         <C>            <C>
Accrued liabilities:
  Deferred revenue and customer advances....     $3,243           $1,215
  Compensation related......................      3,397            3,172
  Other.....................................      1,964              702
                                                 ------           ------
                                                 $8,604           $5,089
                                                 ======           ======
</TABLE>

(3) DEBT

      Debt consists of the following:
<TABLE>
<CAPTION>
                                                MARCH 31,       DECEMBER 31,
                                                  2002             2001
                                                ---------       ------------
<S>                                         <C>            <C>
Debt:
  Bank lines of credit.......................    $17,741          $18,247
  Subordinated note payable..................      3,750            3,750
  Other......................................        401              407
                                                 -------          -------
                                                 $21,892          $22,404
     Less current portion....................     21,731           22,186
                                                 -------          -------
     Non current portion.....................    $   161          $   218
                                                 =======          =======
</TABLE>


      In September 1999, the Company entered into a Senior Secured Revolving
Credit Facility (the "Credit Facility") with its commercial bank. The Credit
Facility provides for maximum credit of $40.0 million subject to limitations
based on certain financial covenants. In April 2001, the Company's lenders
extended the maturity date on its credit agreement to March 31, 2002. The
maximum available borrowings on the facility was reduced to $30 million and
interest was set at prime rate plus 1.25% effective March 31, 2001 increasing by
0.25% each quarter thereafter on June 30, September 30 and December 31, 2001.
The Company also pays a fee of 0.40% per annum on the unused portion of the line
of credit. In March 2002, the maturity date of our Credit Facility was

                                       9
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)

extended to June 30, 2002. Within the terms of the March 2002 extension, maximum
available borrowing from the facility was reduced to $21.8 million, consisting
of a $7.8 million term portion and a $14.0 million line of credit. Effective
March 31, 2002, interest was set at prime plus 2.25% (7.0% at March 31, 2002).
In addition, monthly payments of $0.2 million on the term loan will continue
through the maturity date. In April 2002, the Company obtained a commitment from
the bank to extend, at the option of the Company, this facility beyond June 30,
2002 to January 2003. The Credit Facility under this commitment requires
interest payments, principal and borrowing base reductions and banking fees. The
Company has retained J.P. Morgan Securities Inc. to explore and advise us on
various financing opportunities and strategies.

      The Credit Facility is collateralized by substantially all of the assets
of the Company. Under the terms of the Credit Facility, the Company is required
to maintain certain financial ratios and other financial covenants. These ratios
include a debt to a four quarter rolling earnings before interest, taxes and
depreciation and amortization (EBITDA) ratio, a ratio of fixed charges (interest
and debt payments) to EBITDA, and minimum quarterly EBITDA. The Agreement also
prohibits the Company from incurring additional indebtedness. The Company
believes it is in compliance with all debt covenants.

      The Company issued a subordinated note payable of $3.75 million, due April
30, 2001, to a director and significant shareholder of the Company. The note
bears interest at prime rate plus one percent per annum (5.75% at March 31,
2002) which is payable every six months. The lender received warrants, which are
immediately exercisable, to purchase 25,000 shares of common stock at an
exercise price of $6.05 per share for a period of five years. This note was
extended in April 2001 to April 30, 2002 at which time the lender received
additional warrants, which are immediately exercisable, to purchase 25,000
shares of common stock at an exercise price of $2.75 per share for a period of
five years. The estimated fair value of the stock purchase warrants, calculated
using the Black-Scholes model, has been recorded as deferred financing fees and
is being amortized over the term of the debt. In March 2002 this note was
extended to July 30, 2002. In April 2002 this note was extended to February 2003
to facilitate the refinancing of our overall financing structure. Warrants to
purchase 25,000 shares of common stock at an exercise price of $2.75 per share
have been issued to the lender on terms similar to previous warrants; however,
shares will vest proportionately over the term of the note extension.

(4) DISCONTINUED OPERATIONS AND NET ASSETS FOR SALE

      In August 2001, the Company formalized the decision to offer for sale its
voice verification business unit, which includes the SpeakEZ speaker
verification products. The SpeakEZ Voice Print technology is proprietary
software that compares the speech pattern of a current speaker with a stored
digital voiceprint of the authorized person to confirm or reject claimed
identity. To date, SpeakEZ revenues have been insignificant and operations have
been substantially curtailed. Accordingly, related operating results have been
reported as discontinued operations. The financial information for the
discontinued speaker verification operations is as follows:

<TABLE>
<CAPTION>

                                      THREE MONTHS ENDED
                                           MARCH 31,
                                      ------------------
                                      2002          2001
                                      ----          ----
<S>                             <C>           <C>
Revenue..........................     $  78         $  28
Operating loss...................      (349)         (678)
Net loss.........................      (349)         (678)
</TABLE>

      In September 2001, the Company announced that it had entered into an
agreement to sell all of the assets of the SpeakEZ division; however, the
transaction was not completed and the agreement was terminated. We are actively
seeking strategic alternatives including the sale of these assets to other
interested parties. As of December 31, 2001, the Company had been unsuccessful
in its attempt to sell the SpeakEZ speaker verification assets. For this reason,
a one-time charge of $1.1 million, net of taxes, was recognized in 2001 related
to the write off of the voice print patent and license assets related to the
SpeakEZ product line. This write-off was based on an analysis which concluded
that the carrying value of our voice print assets exceeded the present value of
estimated future cash flows given current operating results and the absence of a
definitive agreement to sell these assets.


                                       10
<PAGE>
                         T-NETIX, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
           (AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
                                   (UNAUDITED)

(5) SEGMENT INFORMATION - CONTINUING OPERATIONS

      During 2001, the Company had two reportable business segments: the
Corrections and Internet Services divisions. Effective November 2001,
substantially all services under the Qwest Agreement (see ITEM 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations)
ceased. Substantially all revenue of the Internet Services division was derived
through the Qwest Agreement. Currently, the Company derives substantially all of
its revenues from its Corrections division, which remains and is expected to
remain the core business focus. Accordingly, segment reporting has been
conformed to correspond to the current presentation.

      The Company formerly reported a third business segment, the SpeakEZ
Speaker Verification division. In August 2001, the Company formalized its
decision to offer for sale its voice print business unit, which includes the
SpeakEZ speaker verification products. Pursuant to this strategy, related
operating results have been recorded as discontinued operations in the
consolidated financial statements to reflect the results of operations of the
speaker verification business.

      The Company evaluates performance based on earnings (loss) before income
taxes. Additional measures include operating income, depreciation and
amortization, and interest expense. There are no intersegment sales. The
Company's reportable segments are specific business units that offer different
products and services. They are managed separately because each business
requires different technology and marketing strategies. The accounting policies
of the reportable segments are the same as those described in the summary of
significant accounting policies. Segment information for the three months ended
March 31, 2002 and the comparable 2001 period is as follows:

<TABLE>
<CAPTION>
                                      THREE MONTHS ENDED MARCH 31,
                                      ----------------------------
                                         2002               2001
                                      --------            --------
<S>                                <C>               <C>
REVENUE FROM EXTERNAL CUSTOMERS:
  Corrections Division.............    $24,458            $22,154
  Internet Services Division.......         --              6,851
                                       -------            -------
                                       $24,458            $29,005
                                       =======            =======
RESEARCH AND DEVELOPMENT
  Corrections Division.............    $   700            $ 1,215
  Internet Services Division.......         --                 --
                                       -------            -------
                                       $   700            $ 1,215
                                       =======            =======
DEPRECIATION AND AMORTIZATION
  Corrections Division.............    $ 2,657            $ 2,948
  Internet Services Division.......         --                 --
                                       -------            -------
                                       $ 2,657            $ 2,948
                                       =======            =======
INTEREST AND OTHER EXPENSE
  Corrections Division.............    $   306            $   710
  Internet Services Division.......         --                 --
                                       -------            -------
                                       $   306            $   710
                                       =======            =======
OPERATING INCOME (LOSS):
  Corrections Division.............    $ 1,919            $  (180)
  Internet Services Division.......         --              1,935
                                       -------            -------
                                       $ 1,919            $ 1,755
                                       =======            =======
SEGMENT EARNINGS (LOSS) FROM
CONTINUING OPERATIONS
 BEFORE INCOME TAX:
  Corrections Division.............    $ 1,613            $  (890)
  Internet Services Division.......         --              1,935
                                       -------            -------
                                       $ 1,613            $ 1,045
                                       =======            =======
</TABLE>

<TABLE>
<CAPTION>
                                       MARCH 31,         DECEMBER 31,
                                         2002               2001
                                       ---------         ------------
<S>                                <C>               <C>
SEGMENT ASSETS:
  Corrections Division.............    $66,600            $63,197
  Internet Services Division.......         --                 --
                                       -------            -------
                                       $66,600            $63,197
                                       =======            =======
</TABLE>


      Substantially all revenue reported by our Internet Services Division for
the three months ended March 31, 2001 was attributable to our GSP agreement with
Qwest which expired in November 2001. There was no intersegment revenue for the
three months ending March 31, 2002 and the comparable 2001 period. Consolidated
total assets included eliminations of approximately $0.1 million as of March 31,
2002. Eliminations consist of intercompany receivables in the Corrections
Division and intercompany payables in the TELEQUIP Labs subsidiary related
solely to intercompany borrowings.

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

      For a comprehensive understanding of our financial condition and
performance, this discussion should be considered in the context of the
condensed consolidated financial statements and accompanying notes and other
information contained herein.


                                       11
<PAGE>
      The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information contained in this
Management's Discussion and Analysis of Financial Condition and Results of
Operations and elsewhere in this Form 10-Q includes forward-looking statements.
Important factors that could cause actual results to differ materially from
those in the forward-looking statements include, but are not limited to, those
listed under the caption "Risk Factors" in the Company's Form 10-K for the year
ended December 31, 2001 which may affect the potential technological
obsolescence of existing systems, the renewal of existing site specific
Corrections Division customer contracts, the ability to retain the base of
current site specific customer contracts, the ability to perform under
contractual performance requirements, the continued relationship with existing
customers, the ability of our existing telecommunications service provider
customers such as Verizon, AT&T and SBC Communications, to win new contracts for
our products and services to maintain their market share of the inmate calling
market, the effect of economic conditions, the effect of regulation, including
the Telecommunications Act of 1996, that could affect our sales or pricing, the
impact of competitive products and pricing in the our Corrections Division, our
continuing ability to develop hardware and software products, commercialization
and technological difficulties, manufacturing capacity and product supply
constraints or difficulties, actual purchases by current and prospective
customers under existing and expected agreements, and the results of financing
efforts, along with the other risks detailed therein.

      We make forward-looking statements in this report and may make such
statements in future filings with the Securities and Exchange Commission. We
also may make forward-looking statements in press releases or other public
communications. These forward-looking statements are subject to risks and
uncertainties and include information about our expectations and possible or
assumed future results of operations. When we use any of the words "believe",
"expect", "anticipate", "estimate" or similar expressions, we are making a
forward-looking statement. While we believe that forward-looking statements are
reasonable, you should not place undue reliance in such forward-looking
statements, which speak only as of the date made.

      Other factors not currently anticipated by management may also materially
and adversely affect our results of operations. Except as required by applicable
law, we do not undertake any obligation to publicly release any revisions which
may be made to any forward-looking statements to reflect events or circumstances
occurring after the date of this report.

CORRECTIONS DIVISION

      In the Corrections Division we derive revenue from three main sources:
telecommunications services, direct call provisioning and equipment sales. Each
form of revenue has specific and varying operating costs associated with such
revenue. Selling, general and administrative expenses, along with research and
development and depreciation and amortization are common expenses regardless of
the revenue generated.

      Telecommunications services revenue is generated under long-term contracts
(generally, three to five years) with our telecommunications service provider
customers including Verizon, AT&T, SBC Communications, Qwest and Sprint. Here,
we provide the equipment, security enhanced call processing, call validation,
and service and support through the provider, rather than directly to the
facility. The provider does the billing. We are paid a prescribed fee by our
telecommunications services providers for each call completed. We receive
additional fees for validating the phone numbers dialed by inmates.

      Our Corrections Division also provides our inmate calling services
directly as a certified telecommunications provider to correctional facilities,
or "Direct Customers". In a typical arrangement, we operate under site-specific
contracts, generally for a period of two to three years. We provide the
equipment, security enhanced call processing, call validation, and customer
service and support directly to the facility. We then use the services of third
parties to bill the calls on the called party's local exchange carrier bill.
Direct call provisioning revenue is substantially higher than the percentage of
revenue or transaction based pricing compensation associated with
telecommunications services because we receive the entire retail value of the
collect call. Due to commissions and other operating costs, including
uncollectible costs, the gross margin percentage from this model is lower than
our telecommunication service arrangements.

      Equipment sales and other revenue include the sales of our inmate calling
system (primarily the systems of our wholly owned subsidiary, TELEQUIP Labs,
Inc., and digital recording systems. Currently, sales of inmate calling systems
are generally made by TELEQUIP to a limited number of telecommunication service
provider customers.




                                       12
<PAGE>
INTERNET SERVICES DIVISION

      In December 1999, the Company entered into a master service agreement with
US WEST ENTERPRISE (now named Qwest America, Inc.) (The "Qwest Agreement") to
provide interLATA Internet services to Qwest customers. The Qwest Agreement,
which commenced December 1, 1999, called for us to buy, resell and process
billing of Internet bandwidth to these customers. The initial term of the Qwest
Agreement was for a minimum of sixteen months until March 2001. Although the
Qwest Agreement expired on March 2001, we continued providing services under the
Qwest Agreement through October 2001. Effective November 2001, substantially all
services under this agreement had ceased.

      Factors affecting margin include a negotiated base management fee and
contract incentive payments based on cost savings. The costs associated with
this contract are primarily the costs for Internet bandwidth. There were no
capital outlays required to begin provisioning these services.

SPEAKER VERIFICATION DIVISION

      The Company formerly reported a third business segment, the SpeakEZ
Speaker Verification division. The SpeakEZ Voice Print technology is proprietary
software that compares the speech pattern of a current speaker with a stored
digital voiceprint of the authorized person to confirm or reject claimed
identity. To date, SpeakEZ revenues have been insignificant and operations have
been substantially curtailed. Management of T-NETIX believes that its decision
to curtail operations of this portion of the Company will enhance overall
Company performance by reducing the negative impact on both the net earnings and
cash flow of the Company. Pursuant to this strategy, related operating results
of our SpeakEZ voice verification division have been recorded as discontinued
operations in the consolidated financial statements. See Note 4 of "Notes to
Condensed Consolidated Financial Statements".



                                       13
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO
MARCH 31, 2001

The following table sets forth certain statement of operations data as a
percentage of total revenue for the years ended March 31, 2002 and 2001.

<TABLE>
<CAPTION>

                                            2002      2001
                                            ----      ----
<S>                                       <C>      <C>
Revenue:
 Telecommunications services.............    62%       54%
 Direct call provisioning................    34        22
 Internet services.......................    --        24
 Equipment sales and other...............     4        --
                                            ---       ---
  Total revenue..........................   100       100
Expenses:
 Operating costs.........................    55        60
 Selling, general and administrative.....    23        20
 Research and development................     3         4
 Depreciation and amortization...........    11        10
                                            ---       ---
  Operating income.......................     8         6
 Interest and other expense..............     1         2
                                            ---       ---
  Income from continuing operations before    7         4
  income taxes...........................
 Income tax expense......................     1        --
                                            ---       ---
  Net income from continuing operations..     6         4
 Loss from discontinued operations.......    (1)       (2)
  Accretion of discount as redeemable
  convertible preferred stock............    --        (4)
                                            ---       ---
  Net Income (loss) applicable to common
  stock..................................     5%       (2)%
                                            ===       ===
</TABLE>


      Total Revenue. Total revenue for 2002 was $24.5 million, a decrease of 16%
from $29.0 million for the corresponding 2001 period. This decrease was
attributable to decreases in Internet services of $6.9 million and
telecommunications services of $0.3 million, offset in part by increases in
direct provisioning of $1.7 million and equipment sales and other of $0.9
million. The decline in revenues from the Internet services segment was the
result of the expiration of the Qwest Agreement in 2001. Effective November
2001, operations of this segment had substantially ceased, including those under
the Qwest Agreement.

      Telecommunications services revenue decreased 2% to $15.3 million for the
three months ended March 31, 2002, from $15.6 million for the corresponding
prior period. This modest decrease was primarily due to a decline in call
volumes.

      Direct call provisioning revenue increased 27% to $8.2 million for the
three months ended March 31, 2002, from $6.5 million in the corresponding prior
period. This increase was primarily due to the recent awarding of several
department of corrections contracts for which we are provisioning comprehensive
or the long distance communication service. The addition of these sites is a
result of our being successful in providing competitive bidding arrangements for
contracts directly with correctional facilities.

      Equipment sales and other revenue increased 1,578% to $1.0 million for the
three month period ended March 31, 2002 from $0.1 million in the corresponding
prior period. This increase was largely attributable to the acquisition of
TELEQUIP Labs, Inc., an inmate equipment provider, in January 2001. The TELEQUIP
sales of equipment are primarily associated with a limited number of
telecommunication service providers and revenue associated with such sales are
dependent upon the timing of sales and installations for these customers.

      Operating costs. Total operating costs decreased 22% to $13.5 million for
the three months ended March 31, 2002 from $17.4 million in the corresponding
prior period. The decrease was primarily due to decreases in Internet services
of $4.9 million and telecommunication services of $1.1 million, offset partially
by an increase in direct call provisioning expenses of $1.6 million and the cost
of equipment sold of $0.4 million. The decline in operating costs for the
Internet services segment was the result of the expiration of the Qwest
Agreement in 2001. Effective November 2001, operations of this segment had
substantially ceased, including those under the Qwest Agreement.

      Operating costs of telecommunications services primarily consist of
service administration costs for correctional facilities, including salaries and
related personnel expenses, communication costs and inmate calling systems
repair and maintenance expenses. Operating costs of telecommunications services
also includes costs associated with call validation procedures, primarily
network expenses and database access charges. Operating costs associated with
direct call provisioning include the costs associated with

                                       14
<PAGE>
telephone line access, long distance charges, commissions paid to correctional
facilities, costs associated with uncollectible accounts and billing charges.
Internet Services operating costs consist of purchased Internet bandwidth costs.

      The following table sets forth the operating costs and expenses for each
type of revenue as a percentage of corresponding revenue for the three months
ended March 31, 2002 and 2001.
<TABLE>
<CAPTION>

                                      2002    2001
                                      ----    ----
<S>                                <C>     <C>

Operating costs and expenses:
  Telecommunications services......    36%     42%
  Direct call provisioning.........    91      91
  Internet services................    --      72
  Cost of equipment sold and other.    54      70
</TABLE>


      Operating costs associated with providing telecommunications services as a
percentage of corresponding revenue was 36% for the three months ended March 31,
2002, a decrease from 42% for the comparable 2001 period. Total
telecommunications services operating costs were $5.5 million for the three
months ended March 31, 2002 and $6.5 million for the corresponding prior period.
The decrease in 2002 was due to lower contract labor, travel and communications
expenses, partially offset by increased repairs and maintenance.

      Direct call provisioning costs, as a percentage of applicable revenue,
were 91% of revenue for the three months ended March 31, 2002 and 2001,
respectively. Total direct call provisioning operating costs were $7.5 million
for the three months ended March 31, 2002 and $5.9 million for the corresponding
2001 period. This increase was due primarily to higher uncollectables and to a
proportional increase in commission expenses associated with the increase in
direct call provisioning revenue.

      Cost of equipment sold and other as a percentage of applicable revenue
decreased to 54% of revenue for the three months ended March 31, 2002 from 70%
for the corresponding prior period. Due to increased equipment sales of TELEQUIP
Labs, Inc., total costs of equipment sold and other were $0.5 million for the
three months ended March 31, 2002 compared to $0.1 million for the corresponding
2001 period. The decrease in costs as a percentage of applicable revenue was
primarily due to the change in the revenue mix for equipment and other sales.

      Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $5.7 million for the three months ended March 31,
2002 and 2001, respectively.

      Research and Development Expenses. Research and development expenses were
$0.7 million in the three months ended March 31, 2002 compared to $1.2 million
for the corresponding prior period. This decrease was primarily due to
reductions in personnel and contract labor expense in 2002, as compared to 2001
levels.

      Depreciation and Amortization Expenses. Depreciation and amortization
expense was $2.7 million for the three months ended March 31, 2002, a decrease
from $2.9 million for the comparable 2001 period. Amortization expense declined
to $0.2 million in the three months ended March 31, 2002 versus $0.4 million for
the corresponding 2001 period. This decrease was primarily due to the impairment
charge in 2001 related to the Contain(R) and Lock&Track(TM) jail management
system products and to the adoption of SFAS 142, "Goodwill and Other Intangible
Assets" in 2002.

      Interest and Other Expenses. Interest and other expense was $0.3 million
for the three months ended March 31, 2002 compared to $0.7 million for the
corresponding prior period. The decrease in 2002 was attributable to a decrease
in the average amount of indebtedness outstanding and lower applicable interest
rates. The average debt balance decreased primarily due to the pay down of debt
as the result of improved operating results.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

      The Company has historically relied upon operating cash flow, debt
financing and the sale of equity securities to fund operations and capital
needs. Our capital needs consist primarily of additions to property and
equipment for site telecommunication equipment, upgrades to existing systems and
to fund acquisitions.


                                       15
<PAGE>
      Cash provided by continuing operations was $3.8 million for the three
months ended March 31, 2002 compared to $7.6 million in the corresponding 2001
period. This decrease was primarily due to a $3.9 million decrease in net
working capital, offset partially by a $0.5 million improvement in net income
from continuing operations.

      Net cash used in investing activity of continuing operations was $2.2
million for the three months ended March 31, 2002 compared to $4.0 million in
the corresponding 2001 period. This decrease was primarily due to the
acquisition of TELEQUIP Labs, Inc. in 2001 for $1.5 million, combined with a
$0.4 million reduction in capital expenditures in 2002 from the comparable 2001
period. The decrease in 2002 spending was the result of a lower level of new
calling system installations and upgrades to existing systems, as compared to
2001 levels.

      We anticipate that our capital expenditures in 2002 will increase over
2001 levels based on our anticipated growth in installed systems at correctional
facilities. We believe our cash flows from operations and our availability under
our Credit Facility will be sufficient in order for us to meet our anticipated
cash needs for new installations of inmate call processing systems, upgrades of
existing systems, and to finance our operations for at least the next nine
months.

      Cash used in financing activities of continuing operations consisted
primarily of net payments on the Company's Credit Facility of $0.5 million
during the three months ended March 31, 2002 compared to net payments of $2.0
million in the corresponding 2001 period.

Capital Resources

      In September 1999, the Company entered into a Senior Secured Revolving
Credit Facility ("Credit Facility") with a commercial bank for working capital
and general corporate purposes. In July 2000 our lenders amended our credit
agreement to revise certain financial covenants. The maximum available amount of
credit under the Credit Facility available was dependent upon our financial
performance. Based on these financial covenants, our maximum borrowings at
December 31, 2000 were $40.0 million. In April 2001 our lenders extended the
Credit Facility maturity date to March 31, 2002. The maximum available borrowing
on the facility was reduced to $30 million consisting of a $10 million term
portion and a $20 million line of credit. Interest was set at prime rate plus
1.25% effective March 31, 2001, increasing by 0.25% each quarter thereafter on
June 30, September 30, and December 31, 2001 (7.50% as of December 31,2001). In
addition, monthly payments of $0.2 million on the term loan commenced on April
30, 2001. In March 2002 the maturity date of our Credit Facility was extended to
June 30, 2002. Maximum available borrowing from the facility was reduced to
$21.8 million, consisting of a $7.8 million term portion and a $14.0 million
line of credit. Effective March 31, interest was set at prime plus 2.25% (7.0%
at March 31, 2002). In addition, monthly payments of $0.2 million on the term
loan will continue through the maturity date. In April 2002, the Company
obtained a commitment from the bank to extend, at the option of the Company,
this facility beyond June 30, 2002 to January 2003. The Credit Facility under
this commitment requires interest payments, principal and borrowing base
reductions and banking fees. The Company believes it is in compliance with all
debt covenants. The Company has retained J.P. Morgan Securities Inc. to explore
and advise us on various financing opportunities and strategies.

      In April 2000, we raised $7.5 million of debt and equity financing. The
net proceeds of approximately $7.2 million were used to reduce the outstanding
balance on the Credit Facility. The Company issued 3,750 shares of series A
non-voting redeemable convertible preferred stock and five-year stock purchase
warrants to acquire 340,909 common shares for net proceeds of $3.5 million. In
November 2000, 500 shares of the preferred stock were converted into 250,630
shares of common stock at a conversion price of $2.09 per share. In February of
2001, the remaining 3,250 shares of preferred stock were converted into
1,770,179 shares of common stock at an average conversion price of $1.95. The
unamortized discount on the preferred stock of $1.1 million was recognized as a
charge to income (loss) applicable to common stockholders.

      The Company also issued a subordinated note payable of $3.75 million, due
April 30, 2001, to a director and significant shareholder of the Company. The
note bears interest at prime rate plus one percent per annum (5.75% at March 31,
2002) which is payable every six months. The lender received warrants, which are
immediately exercisable, to purchase 25,000 shares of common stock at an
exercise price of $6.05 per share for a period of five years. This note was
extended in April 2001 to April 30, 2002, at which time the lender received
additional warrants, which are immediately exercisable, to purchase 25,000
shares of common stock at an exercise price of $2.75 per share for a period of
five years. In March 2002, this note was extended to July 30, 2002. In April
2002 this note was extended to February 2003 to facilitate the refinancing of
our overall financing structure. Warrants to purchase 25,000 shares of common
stock at an exercise price of $2.75 per share have been issued to the lender on
terms similar to previous warrants; however, shares will vest proportionately
over the term of the note extension.


                                       16
<PAGE>
CONTRACTUAL OBLIGATIONS AND COMMITMENTS

      Set forth below is a summary of the Company's material contractual
obligations and commitments as of March 31, 2002:

<TABLE>
<CAPTION>
                              DUE IN ONE     DUE IN    DUE IN    DUE AFTER
                             YEAR OR LESS  2-3 YEARS  4-5 YEARS   5 YEARS    TOTAL
                             ------------  ---------  ---------  ---------   -----
                                              ($ IN THOUSANDS)
<S>                       <C>           <C>        <C>        <C>        <C>

Bank credit facility........   $17,741       $ --       $ --                $17,741
Subordinated note payable...     3,750         --         --          --      3,750
Operating leases............       722        771        277          --      1,770
Capital lease and other.....       240        161         --          --        401
                               -------       ----       ----         ---    -------
Total contractual obligations
  and commitments...........   $22,453       $932       $277          --    $23,662
                               =======       ====       ====         ===    =======
</TABLE>

      Under the Company's existing Credit Facility, acceleration of principal
payments would occur upon payment default, violation of debt covenants not cured
within 30 days or breach of certain other conditions set forth in this Credit
Facility. Subject to certain subordination terms, the subordinated note payable
is subject to the same conditions of the Company's Credit Facility through cross
default provisions. At March 31, 2002, the Company was in compliance with all of
its debt covenants. There are no provisions within the Company's leasing
arrangements that would trigger acceleration of future lease payments. (See Note
3 of "Notes to Condensed Consolidated Financial Statements").

   The Company does not use securitization of trade receivables, affiliation
with special purpose entities or synthetic leases to finance its operations.
Additionally, the Company has not entered into any arrangement requiring the
Company to guarantee payment of third party debt or to fund losses of an
unconsolidated special purpose entity.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

   We are exposed to interest rate risk as discussed below.

Interest Rate Risk

   We have current debt outstanding under the Credit Facility of $ 17.7 million
at March 31, 2002. Under the terms of the debt agreement the maximum credit
available at March 31, 2001 is $21.8 million. The loan bears interest at prime
rate plus 2.25% (7.0% at March 31, 2002) with interest payable monthly. Since
the interest rate on the loan outstanding is variable and is reset periodically,
we are exposed to interest risk. An increase in interest rates of 1% would
increase estimated annual interest expense by approximately $0.2 million based
on the amount of borrowings outstanding under the Credit Facility at March 31,
2002.

                                       17
<PAGE>
                                     PART II

                                OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      From time to time we have been, and expect to continue to be subject to
various legal and administrative proceedings or various claims in the normal
course of our business. We believe the ultimate disposition of these matters
will not have a material affect on our financial condition, liquidity, or
results of operations.

      During 2000 Gateway won a dismissal of a case brought in the First
Judicial District Court of the State of New Mexico, styled Valdez v. State of
New Mexico, et al. An appeal of the case was certified and is still pending. The
case named as defendants the State of New Mexico, several political subdivisions
of the State of New Mexico, and several inmate telecommunications service
providers, including Gateway. The complaint included a request for certification
by the court of a plaintiffs' class action consisting of all persons who had
been billed for and paid for telephone calls initiated by an inmate confined in
a jail, prison, detention center or other New Mexico correctional facility. The
complaint alleged violations of New Mexico Unfair Practices Act, the New Mexico
Antitrust Act and the New Mexico Constitution, and also alleged unjust
enrichment, constructive trust, economic compulsion, constructive fraud and
illegality of contracts, all in connection with the provision of "collect only"
inmate telecommunications services. The case was never certified as a class
action suit.

      T-NETIX is a defendant in a state case brought in the Superior Court of
Washington for King County, styled Sandy Judd, et al. v. American Telephone and
Telegraph Company, et al. In this case, the complaint joined several inmate
telecommunications service providers as defendants, including T-NETIX. The
complaint includes a request for certification by the court of a plaintiffs'
class action consisting of all persons who have been billed for and paid for
telephone calls initiated by an inmate confined in a jail, prison, detention
center or other Washington correctional facility. The complaint alleges
violations of the Washington Consumer Protection Act (WCPA) and requests an
injunction under the Washington Consumer Protection Act and common law to enjoin
further violations. The trial court dismissed all claims with prejudice against
all defendants except T-NETIX and AT&T. Plaintiffs have appealed the dismissal
of the other defendants and T-NETIX has cross appealed. The T-NETIX and AT&T
claims have been referred to the Washington Utilities and Transportation
Commission while the trial court proceeding is in abeyance. The Commission has
not yet commenced any proceedings.

      Gateway has been litigating an appeal from a favorable ruling in Kentucky
federal court in the case Gus "Skip" Daleure, Jr., et al vs. Commonwealth of
Kentucky, et al. Plaintiffs, a class of relatives of prisoners incarcerated in
Kentucky correctional facilities, sued the Commonwealth of Kentucky, the
Kentucky Department of Corrections, the state of Missouri, several municipal
entities in the states of Kentucky, Missouri, Arizona and Indiana and various
private telephone providers alleging antitrust violations and excessive rates in
connection with the provision of telephone services to inmates. The plaintiffs
alleged Sherman Act, Robinson-Patman Act, and Equal Protection violations. The
district court held, on motions to dismiss, that Kentucky did not have personal
jurisdiction over defendants not located in or doing business in the state of
Kentucky; that telephone calls are not goods or commodities and thus are not
subject to the antitrust provisions of the Robinson-Patman Act; that Plaintiffs
did not state a claim for relief under the Equal Protection Clause of the
Fourteenth Amendment; and that Plaintiffs had not shown any harm in support of
its antitrust claim under Section 1 of the Sherman Act. The trial judge did not,
however, dismiss the Plaintiff's petition for injunctive relief, despite these
findings. Recently, the appeal brought by the Plaintiffs has been dismissed and
no further action has been taken.

      In another case styled Robert E. Lee Jones, Jr. vs. MCI Communications, et
al, plaintiffs, 43 inmates of the Bland Correctional Center in Virginia, filed a
pro se action alleging constitutional violations, RICO Act violations and
violations of federal wiretapping laws. This case was dismissed on all counts in
November 2001 and plaintiffs have appealed.

      In October 2001, relatives of prisoners incarcerated in Oklahoma
Department of Correctional facilities filed a putative class action against
T-NETIX, AT&T, Evercom and the Oklahoma Department of Corrections for claims in
anti-trust, under due process, equal protection and the First amendment. This
case, styled Kathy Lamon, et al v. Ron Ward, et al, is in the very early stages,
but T-NETIX has filed its motion to dismiss, which is still pending.

      In September 2001, T-NETIX filed patent litigation against MCI WorldCom,
Inc. and Global Tel*Link Corporation. The lawsuit, filed in the Eastern District
of Texas, alleges infringement of six United States patents protecting call
processing equipment and services for the inmate calling industry. The case is
in its very early discovery stages.


                                       18
<PAGE>
      Since September 1997, and pursuant to a written agreement entered into in
connection with settlement of an arbitration proceeding, the Company has been
making monthly payments to a vendor of query transport services with the
understanding that the payments were for future services to be utilized by the
Company. The vendor (Illuminet, Inc.) notified the Company in November 2001 that
no credits for such services would be honored. In January 2002 Illuminet filed a
claim before the original arbitration panel in Fairway, Kansas requesting money
damages for T-NETIX' breach and declaratory relief that no credits are due
T-NETIX. As of March 31, 2002, the Company has made payments totaling
approximately $2.1 million pursuant to this written agreement. The payments are
classified as a long-term prepayment included in Intangible and Other Assets at
March 31, 2002 (See Note 2 of "Notes to Condensed Consolidated Financial
Statements"). The Company intends to vigorously pursue its rights under the
agreement. In the event the Company is not supported in the arbitration or any
related litigation, the prepaid expense of $2.1 million could be impaired.

      We believe the ultimate disposition of the forgoing matters will not have
a material affect on our financial condition, liquidity, or results of
operations.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

      None

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

      None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      None

ITEM 5. OTHER INFORMATION

      None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K




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<PAGE>
                                   SIGNATURES

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

                                               T-NETIX, INC.

                                               By: /s/ THOMAS E. LARKIN
                                                   ---------------------------
                                                       Thomas E. Larkin,
                                                    Chief Executive Officer

                                               By: /s/ HENRY G. SCHOPFER
                                                   ---------------------------
                                                      Henry G. Schopfer,
                                                   Chief Financial Officer

   Date: May 14, 2002






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