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


                                    FORM 10-Q

(Mark One)

(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 For the quarterly period ended March 31, 2002

                                       or

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

    For the transition period from __________ to __________

Commission File Number:    1-9293

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


                          PRE-PAID LEGAL SERVICES, INC.
             (Exact name of registrant as specified in its charter)

               Oklahoma                                73-1016728
   (State or other jurisdiction of                  (I.R.S. Employer
    incorporation or organization)                 Identification No.)


         321 East Main Street
           Ada, Oklahoma                               74821-0145
(Address of principal executive offices)               (Zip Code)

                                 (580) 436-1234
              (Registrants' telephone number, including area code)
         --------------------------------------------------------------

     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
               -----     ------

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common stock as of April 15, 2002:

Common Stock                     $.01 par value                       20,143,579



                                    CONTENTS




Part I.  Financial Statements
Item 1.  Financial Statements of Registrant:

Consolidated Balance Sheets
as of March 31, 2002 (Unaudited) and
December 31, 2001

Consolidated Statements of Income
(Unaudited) for the three months ended
March 31, 2002 and 2001

Consolidated Statements of Comprehensive Income
(Unaudited) for the three months ended
March 31, 2002 and 2001

Consolidated Statements of Cash Flows
(Unaudited) for the three months ended
March 31, 2002 and 2001

Notes to Consolidated Financial Statements (Unaudited)

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

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Part II.  Other Information

Item 1.  Legal Proceedings

Item 6.  Exhibits and Reports on Form 8-K




ITEM 1.  FINANCIAL STATEMENTS OF REGISTRANT
         ----------------------------------




                          PRE-PAID LEGAL SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                      (Amounts in 000's, except par values)


                                     ASSETS

                                                                                          March 31,       December 31,
                                                                                             2002             2001
                                                                                         (Unaudited)
Current assets:                                                                         ------------     ------------
                                                                                                   
  Cash and cash equivalents........................................................     $     9,477      $    14,290
  Available-for-sale investments, at fair value....................................           5,900            6,070
  Membership income receivable.....................................................           5,300            5,472
  Inventories......................................................................           1,009              922
  Deferred member and associate service costs......................................          15,163           14,228
  Deferred income taxes............................................................           3,469            3,413
                                                                                        ------------     ------------
      Total current assets.........................................................          40,318           44,395
Available-for-sale investments, at fair value......................................          13,815           13,386
Investments pledged................................................................           4,291            4,315
Property and equipment, net........................................................          16,262           14,755
Deferred member and associate service costs........................................           3,021            2,907
Other assets.......................................................................           6,224            5,962
                                                                                        ------------     ------------
        Total assets...............................................................     $    83,931      $    85,720
                                                                                        ------------     ------------

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Membership benefits..............................................................     $     7,807      $     7,664
  Deferred revenue and fees........................................................          22,227           20,893
  Income taxes payable.............................................................           4,319            1,087
  Accounts payable and accrued expenses............................................          13,636            9,678
                                                                                        ------------     ------------

    Total current liabilities......................................................          47,989           39,322
  Deferred revenue and fees........................................................           4,326            4,158
  Deferred income taxes ...........................................................              63               16
                                                                                        ------------     ------------
      Total liabilities............................................................          52,378           43,496
                                                                                        ------------     ------------

Stockholders' equity:
  Common stock, $.01 par value; 100,000 shares authorized; 24,860 and
    24,806 issued at March 31, 2002 and December 31, 2001, respectively............             249              248
  Capital in excess of par value...................................................          67,361           66,223
  Retained earnings................................................................          63,110           54,240
  Accumulated other comprehensive income (loss)....................................            (139)             186
  Treasury stock, at cost; 4,852 and 3,989 shares held at
    March 31, 2002 and December 31, 2001, respectively.............................         (99,028)         (78,673)
                                                                                        ------------     ------------
      Total stockholders' equity...................................................          31,553           42,224
                                                                                        ------------     ------------
        Total liabilities and stockholders' equity.................................     $    83,931      $    85,720
                                                                                        ------------     ------------



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





                          PRE-PAID LEGAL SERVICES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                  (Amounts in 000's, except per share amounts)
                                   (Unaudited)
                                                                                     Three Months Ended March
                                                                                                31,
                                                                                    -------------------------
                                                                                        2002          2001
                                                                                    -----------   -----------
Revenues:
                                                                                            
  Membership fees................................................................   $   71,894    $   59,287
  Associate services.............................................................        9,019        10,137
  Other..........................................................................        1,118           901
                                                                                    -----------   -----------
                                                                                        82,031        70,325
Costs and expenses:
  Membership benefits............................................................       24,312        20,041
  Commissions....................................................................       27,808        23,626
  Associate services and direct marketing........................................        7,568         8,186
  General and administrative.....................................................        7,802         6,322
  Other, net.....................................................................          999           982
                                                                                    -----------   -----------
                                                                                        68,489        59,157

Income from continuing operations before income taxes............................       13,542        11,168
Provision for income taxes.......................................................        4,672         3,650
                                                                                    -----------   -----------
Income from continuing operations................................................        8,870         7,518
Income from operations of discontinued UFL segment, net of applicable
  income tax of $0...............................................................            -           158
                                                                                    -----------   -----------
Net income.......................................................................   $    8,870    $    7,676
                                                                                    -----------   -----------

Basic earnings per common share from continuing operations.......................   $     .44     $     .34
Basic earnings per common share from discontinued operations.....................        -              .01
                                                                                    -----------   -----------
Basic earnings per common share..................................................   $     .44     $     .35
                                                                                    -----------   -----------

Diluted earnings per common share from continuing operations.....................   $     .43     $     .34
Diluted earnings per common share from discontinued operations...................        -              .01
                                                                                    -----------   -----------
Diluted earnings per common share................................................   $     .43     $     .35
                                                                                    -----------   -----------


        The accompanying notes are an integral part of these financials.






                          PRE-PAID LEGAL SERVICES, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                               (Amounts in 000's)
                                   (Unaudited)


                                                                                     Three Months Ended March
                                                                                                31,
                                                                                    -------------------------
                                                                                        2002          2001
                                                                                    -----------   -----------
                                                                                            
Net income.......................................................................   $    8,870    $    7,676
                                                                                    -----------   -----------
Other comprehensive income (loss), net of tax:
  Foreign currency translation adjustment........................................           42           (92)
                                                                                    -----------   -----------
  Unrealized gains (losses) on investments:
    Unrealized holding gains (losses) arising during period......................         (334)          416
      Less: reclassification adjustment for realized gains included in net income          (33)          (12)
                                                                                    -----------   -----------
                                                                                          (367)          404
                                                                                    -----------   -----------
Other comprehensive income, net of income taxes of ($88) and $168................         (325)          312
                                                                                    -----------   -----------
Comprehensive income.............................................................   $    8,545    $    7,988
                                                                                    -----------   -----------


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







                          PRE-PAID LEGAL SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (Amounts in 000's)
                                   (Unaudited)
                                                                                     Three Months Ended March
                                                                                                31,
                                                                                    -------------------------
                                                                                        2002          2001
                                                                                    -----------   -----------
Cash flows from operating activities:
                                                                                            
Net income.......................................................................   $    8,870    $    7,676
Adjustments to reconcile net income to net cash provided
  by operating activities:
  Income from discontinued operations............................................            -          (158)
  Provision for deferred income taxes............................................          189         1,434
  Depreciation and amortization..................................................        1,197           928
  Tax benefit on exercise of stock options.......................................          164             -
  Decrease in Membership income receivable.......................................          172           289
  (Increase) decrease in inventories.............................................          (87)          477
  Increase in deferred member and associate service costs........................       (1,049)       (1,975)
  Increase in other assets.......................................................         (262)         (549)
  Increase in accrued Membership benefits........................................          143           363
  Increase in deferred revenue and fees..........................................        1,502         1,783
  Increase (decrease) in income taxes payable....................................        3,232          (396)
  Increase in accounts payable and accrued expenses..............................        3,992           917
                                                                                    -----------   -----------
    Net cash provided by operating activities of continuing operations...........       18,063        10,789
                                                                                    -----------   -----------
Cash flows from investing activities:
  Additions to property and equipment............................................       (2,704)       (2,857)
  Purchases of investments - available for sale..................................       (5,867)            -
  Maturities and sales of investments - available for sale.......................        5,067         5,191
                                                                                    -----------   -----------
    Net cash (used in) provided by investing activities of continuing operations.       (3,504)        2,334
                                                                                    -----------   -----------
Cash flows from financing activities:
  Proceeds from exercise of common stock options.................................          983             -
  Decrease in capital lease obligations..........................................            -           (84)
  Purchases of treasury stock....................................................      (20,355)      (12,804)
                                                                                    -----------   -----------
    Net cash used in financing activities of continuing operations...............      (19,372)      (12,888)
                                                                                    -----------   -----------
Net (decrease) increase in cash and cash equivalents.............................       (4,813)          235
Cash and cash equivalents at beginning of period.................................       14,290        10,866
                                                                                    -----------   -----------
Cash and cash equivalents at end of period.......................................   $    9,477    $   11,101
                                                                                    -----------   -----------
Supplemental disclosure of cash flow information:
  Net cash used in discontinued operations.......................................   $        -    $     (237)
                                                                                    -----------   -----------
  Cash paid for interest.........................................................   $        -    $        1
                                                                                    -----------   -----------
  Income taxes paid..............................................................   $    1,087    $    1,000
                                                                                    -----------   -----------

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




                          PRE-PAID LEGAL SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Except for per share amounts, dollar amounts in tables are in thousands unless
                              otherwise indicated)
                                   (Unaudited)

Note 1 - Basis Of Presentation

     The accompanying  consolidated  financial statements and notes thereto have
been  prepared  pursuant  to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Accordingly,  certain  disclosures  normally  included in
financial statements prepared in accordance with accounting principles generally
accepted  in the  United  States of  America  ("GAAP")  have been  omitted.  The
accompanying  consolidated financial statements and notes thereto should be read
in  conjunction  with the  consolidated  financial  statements and notes thereto
included in the Company's 2001 Annual Report on Form 10-K.

     The consolidated  financial  statements include the financial statements of
the Company and its wholly  owned  subsidiaries.  All  significant  intercompany
balances and transactions have been eliminated in consolidation.

     In  the  opinion  of  management,   the  accompanying  unaudited  financial
statements  as of March 31, 2002,  and for the three months ended March 31, 2002
and 2001,  reflect  adjustments  (which were normal and recurring) which, in the
opinion of  management,  are  necessary  for a fair  statement of the  financial
position and results of operations of the interim periods presented. Results for
the three months ended March 31, 2002 are not necessarily  indicative of results
expected for the full year.

     The  preparation  of financial  statements  in conformity  with  accounting
principles   generally  accepted  in  the  United  States  of  America  requires
management to make estimates and assumptions that affect the reported amounts of
assets and  liabilities  and disclosure of contingent  assets and liabilities at
the date of the financial  statements  and the reported  amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Note 2 - Contingencies

     The  Company  and  various  of its  executive  officers  have been named as
defendants in a putative  securities class action originally filed in the United
States District Court for the Western District of Oklahoma in early 2001 seeking
unspecified  damages on the basis of  allegations  that the Company issued false
and  misleading  financial  information,  primarily  related  to the  method the
Company  used  to  account  for  commission   advance   receivables  from  sales
associates.  On March 5, 2002, the Court granted the Company's motion to dismiss
the  complaint,  with  prejudice,  and  entered  a  judgment  in  favor  of  the
defendants.  The plaintiffs have filed a motion to reconsider and an appeal, and
the Company has responded to the motion for  reconsideration and will respond to
the appeal according to a schedule to be set by the appellate court.

     On June 7, 2001 and August 3, 2001,  shareholder  derivative  actions  were
filed by alleged company shareholders,  Bruce A. Hansen and Donna L. Hansen, and
Roger  Strykowski,  respectively,  against all of the  directors  of the Company
seeking  unspecified  actual and punitive damages on behalf of the Company based
on allegations of breach of fiduciary duty, corporate waste and mismanagement by
the defendant  directors.  On August 14, 2001, Mr.  Strykowski  filed an amended
complaint,  which  added  Deloitte  & Touche,  the  Company's  previous  outside
auditors,  as  defendants.  The complaints  allege that the defendant  directors
caused the  Company to violate  generally  accepted  accounting  principles  and
federal securities laws by improperly capitalizing  commission expenses,  caused
the Company to allegedly pay increased salaries and bonuses based upon financial
performance which was allegedly improperly  inflated,  and caused the Company to
expend  significant  dollars in  connection  with the defense of its  accounting
policy, including cost incurred in connection with the defense of the securities
class actions  described above, and in connection with the repurchase of its own
shares on the open  market at  allegedly  artificially  inflated  prices.  These
derivative  actions  are  related  to  the  putative  securities  class  actions
described  above,  which have been dismissed with  prejudice.  On March 1, 2002,
plaintiffs filed a consolidated  amended derivative  complaint making claims and
allegations  similar to those contained in the original  derivative  complaints.
The plaintiffs'  have sought to stay their action and have agreed to dismiss the
case if judgment on the  securities  action is affirmed on appeal.  The Pre-Paid
defendants  have  opposed  plaintiffs'  motion to stay  because  the  defendants
believe  the claims  are  entirely  without  merit and wish to bring a motion to
dismiss them summarily.  While the outcome of these cases is uncertain, based on
the  information  currently  available  to the  Company,  it  appears  that  the
complaint  should be dismissed  because the plaintiffs  failed to make or excuse
the requisite demand that the Company pursue the claims of alleged misconduct as
well as for failure to state a claim.

     In the second  quarter  of 2001 and  through  January  30,  2002,  multiple
lawsuits were filed  against the Company,  certain  sales  associates  and other
unnamed  defendants in Alabama state courts by current or former members seeking
unspecified actual and punitive damages for alleged breach of contract and fraud
in connection  with the sale of  memberships.  As of April 22, 2002, the Company
was aware of 20 separate  lawsuits  involving  approximately 113 plaintiffs that
have been filed in  multiple  counties  in Alabama,  and  additional  suits of a
similar nature have been  threatened to be filed in Alabama and elsewhere by one
or more of the counsel involved in these suits in Alabama. One such similar suit
has been filed by one plaintiff and a different  attorney in Mississippi.  These
cases make  allegations  similar to allegations  made in cases  previously filed
against the Company in Alabama  state courts by multiple  plaintiffs  which were
previously settled for a payment of $1.5 million to settle claims by 97 separate
claimants.  In  January  2002,  one of the  law  firms  representing  individual
plaintiffs  filed a putative  class  action on behalf of all  Alabama  residents
purchasing  memberships  seeking damages and injunctive  relief based on alleged
failures  to provide  coverage  under the  memberships.  Based on the  Company's
preliminary  investigation  of the new  cases,  the facts  involved  are in many
respects significantly different from the facts involved in the case the company
previously settled. These cases are all in various stages of litigation, and the
ultimate  outcome of any particular case is not  determinable.  One of the suits
has  been  dismissed  with  prejudice  by the  plaintiff  due to her  attorney's
assessment of the merits of the case.

     On April 19, 2002, counsel in certain of the above-referenced Alabama suits
also filed a similar  suit in Oklahoma on behalf of two members  making  similar
allegations and seeking  "nationwide"  class  certification.  The case is in the
preliminary stages and the ultimate outcome is not determinable.

     On June 29,  2001,  an action was filed in the  District  Court of Canadian
County,  Oklahoma by Gina Cotwitz against the Company. This action is a putative
class  action on  behalf of all sales  associates  of the  Company  and  alleges
violations  of the  Oklahoma  Consumer  Protection  Act,  the  Oklahoma  Uniform
Consumer  Credit Code and breach of contract in  connection  with certain of the
Company's practices relating to advancing  commissions to sales associates.  The
Company  has  filed  an  answer  denying  the  plaintiff's  claims  and  raising
affirmative  defenses and intends to vigorously defend this case. The case is in
the preliminary stages and the ultimate outcome is not determinable.

     On March 1, 2002, an action was filed in the United States  District  Court
for the Western District of Oklahoma by Caroline Sandler, Robert Schweikert, Sal
Corrente,  Richard Jarvis and Vincent  Jefferson against the Company and certain
executive officers.  This action is putative class action filed on behalf of all
sales  associates of the Company and alleges that the marketing  plan offered by
the Company  constitutes a security  under the  Securities Act of 1933 and seeks
remedies  for  failure to  register  the  marketing  plan as a security  and for
violations of the  anti-fraud  provisions of the  Securities Act of 1933 and the
Securities  Exchange Act of 1934 in connection with  representations  alleged to
have been made in connection with the marketing plan. The Complaint also alleges
violations of the Oklahoma  Securities Act, the Oklahoma Business  Opportunities
Sales Act, breach of contract, breach of duty of good faith and fair dealing and
unjust  enrichment  and violation of the Oklahoma  Consumer  Protection  Act and
negligent  supervision.  The Company intends to vigorously defend this case. The
case is in the preliminary stages and the ultimate outcome is not determinable.

     The Company is a defendant  in various  other  legal  proceedings  that are
routine and incidental to its business.  The Company will vigorously  defend its
interests in these proceedings.  While the ultimate outcome of these proceedings
is not  determinable,  the  Company  does not  currently  anticipate  that these
contingencies  will  result in any  material  adverse  effect  to its  financial
condition or results of operation.

     The  Company  is  constructing  a new  corporate  office  complex  with  an
estimated completion date of June 2003 at an estimated cost of approximately $30
million.  Costs incurred  through March 31, 2002 of  approximately  $3.2 million
have been paid from existing  resources and cash flow. The Company  continues to
consider  incurring  indebtedness in order to finance the remaining costs of its
new  corporate  headquarters  in order to allow  cash  flow from  operations  to
continue to be used to purchase  treasury  stock.  Since  December 31, 2001, the
Company has entered into a  construction  contract in the amount of $2.9 million
with the general contractor  pertaining to site work for the new office complex.
The Company  expects to enter into similar types of  construction  contracts for
various phases of construction during the remainder of the construction  period.
Total remaining costs of construction are estimated at approximately $27 million
during the 15-month period beginning April 1, 2002.

Note 3 - Treasury Stock Purchases

     The Company  announced on April 6, 1999, a treasury stock purchase  program
authorizing  management to acquire up to 500,000 shares of the Company's  common
stock.  The Board of Directors has  increased  such  authorization  from 500,000
shares to 4.5 million  shares during  subsequent  board  meetings.  At March 31,
2002,  the Company had purchased 4.1 million  shares under these  authorizations
for a total  consideration  of $95.3  million,  an  average  price of $23.51 per
share.

     Treasury  stock  purchases  will be  made at  prices  that  are  considered
attractive by  management  and at such times that  management  believes will not
unduly impact the Company's liquidity. No time limit has been set for completion
of the  purchase  program.  The  Company  obtained  on  November 6, 2001 a $17.5
million line of credit facility that may be used for additional  purchases.  The
Company had not drawn on this available credit line as of April 22, 2002.

Note 4 - Earnings Per Share

     Basic  earnings  per  common  share are  computed  by  dividing  net income
applicable to common  stockholders  by the weighted  average number of shares of
common stock outstanding during the respective periods.

     Diluted  earnings  per common  share are  computed by  dividing  net income
applicable to common  stockholders  by the weighted  average number of shares of
common  stock and common stock  equivalents  outstanding  during the  respective
periods. The weighted average number of common shares is increased by the number
of shares  issuable on the exercise of options less the number of common  shares
assumed  to have been  purchased  with the  proceeds  from the  exercise  of the
options  pursuant to the treasury stock method;  those  purchases are assumed to
have been made at the average  price of the common stock  during the  respective
period.



                                                                                                Three Months Ended
                                                                                                    March 31,
                                                                                               -------------------
                                                                                                 2002       2001
Basuc Earnings Per Share:                                                                      --------- ---------
Earnings:
                                                                                                   
Income from continuing operations applicable to common stockholders.........................   $   8,870 $   7,518
                                                                                               --------- ---------
Shares:
Weighted average shares outstanding.........................................................      20,304    22,002
                                                                                               --------- ---------


Diluted Earnings Per Share:
Earnings:
Income from continuing operations available to common stockholders
  after assumed conversions.................................................................   $   8,870 $   7,518
                                                                                               --------- ---------
Shares:
Weighted average shares outstanding.........................................................      20,304    22,002
Assumed exercise of options.................................................................         140        31
                                                                                               --------- ---------
Weighted average number of shares, as adjusted..............................................      20,444    22,033
                                                                                               --------- ---------


Note 5 - Discontinued Operations

     On December  31, 2001 the Company  completed  the sale of its wholly  owned
subsidiary  Universal  Fidelity  Life  Insurance  Company  ("UFL").  The Company
received a $2.8  million  dividend and $1.2 million from the sale of 100% of UFL
stock.  The results of  operations of the UFL segment have been  segregated  and
reported as discontinued operations in the Consolidated Statements of Income for
the three  months  ended  March 31,  2001.  Cash flow  impacts  of  discontinued
operations have been segregated in the Consolidated Statements of Cash Flows for
the three  months  ended March 31,  2001.  Details of income  from  discontinued
operations are as follows:



                                                                          Three Months Ended
                                                                            March 31, 2001
                                                                          ------------------
                                                                              
Revenues...............................................................          $   285
                                                                          ------------------
Income from discontinued operations, net of tax expense of $0..........          $   158
                                                                          ------------------



Note 6 - Recent Issued Accounting Pronouncements and Accounting Change

     In  July  2001,  the  Financial   Accounting  Standards  Board  issued  new
pronouncements:  SFAS 142, "Goodwill and Other Intangible Assets"; and SFAS 143,
"Accounting for Asset Retirement  Obligations."  SFAS 142 requires that goodwill
as well as other  intangible  assets  be  tested  annually  for  impairment.  In
addition, the Statement eliminates the previous requirement to amortize goodwill
or intangible  assets with indefinite  lives,  and is effective for fiscal years
beginning  after December 15, 2001.  SFAS 142 was adopted  effective  January 1,
2002 and did not have a material impact on the Company's  financial  position or
results of operations.  SFAS 143 requires entities to record the fair value of a
liability  for an  asset  retirement  obligation  in the  period  in which it is
incurred  and a  corresponding  increase in the  carrying  amount of the related
long-lived  asset.  SFAS 143 is effective for fiscal years  beginning after June
15, 2002. The Company does not expect SFAS 143 to materially impact its reported
results.

     SFAS No. 144,  "Accounting  for the  Impairment  or Disposal of  Long-Lived
Assets",  (SFAS 144") is effective for the Company for the fiscal year beginning
January 1, 2002,  and addresses  accounting  and reporting for the impairment or
disposal of long-lived assets. SFAS 144 supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
and APB Opinion No. 30,  "Reporting  the Results of  Operations - Reporting  the
Effects  of  Disposal  of a  Segment  of  a  Business."  SFAS  144  retains  the
fundamental provisions of SFAS No. 121 and expands the reporting of discontinued
operations to include all  components of an entity with  operations  that can be
distinguished  from the rest of the entity and that will be eliminated  from the
ongoing operations of the entity in a disposal transaction.  The Company adopted
SFAS 144  effective  January 1, 2002.  The new  standard did not have a material
impact on the Company's financial statements.


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

         Results of Operations

     The  Company  reported  net  income  applicable  to  common  shares of $8.9
million,  or $.43 per diluted common share, for the three months ended March 31,
2002, up 16% from net income applicable to common  stockholders of $7.7 million,
or $.35 per diluted common share,  for the comparable  period of the prior year.
Diluted  earnings per share  increased 23 percent due to increased net income of
16 percent and an  approximate 7 percent  decrease in the number of  outstanding
shares.

     Membership fees totaled $71.9 million during 2002 compared to $59.3 million
for 2001, an increase of 21%. Membership fees and their impact on total revenues
in any period are  determined  directly by the number of active  Memberships  in
force during any such period.  The active Memberships in force are determined by
both the number of new Memberships  sold in any period together with the renewal
rate of existing Memberships. New Membership sales increased 9% during the three
months ended March 31, 2002 to 200,780 from 183,712 during the comparable period
of 2001. At March 31, 2002,  there were  1,287,199  active  Memberships in force
compared to 1,114,437 at March 31, 2001, an increase of 16%.  Additionally,  the
average annual fee per Membership has increased from $246 for all Memberships in
force at March 31, 2001 to $253 for all  Memberships in force at March 31, 2002,
a 3%  increase.  This  increase  is a  result  of a  higher  portion  of  active
Memberships containing additional benefits at an additional cost.

     Associate  services revenue  decreased 11% from $10.1 million for the first
three months of 2001 to $9.0 million during the same period of 2002 primarily as
a result of a reduced associate entry fee of $149 during the month of March 2002
compared to the  typical  associate  fee of $249 and due to  slightly  fewer new
associates  recruited.  The associate entry fee has been reduced periodically in
the past and may  continue  to be reduced at  certain  times in future  periods.
Although the reduction in price may lead to lower  associate  services  revenues
overall, the reduced price typically increases the number of new associates that
join and to a great extent offsets the overall reduction in revenue. As a result
of this lower fee for part of the 2002 quarter, the Fast Start program generated
training  fees of  approximately  $3.6 million  during the first three months of
2002  compared to $6.0  million  for the  comparable  period of 2001.  The field
training  program,  titled  Fast  Start to  Success  ("Fast  Start") is aimed at
increasing the level of new Membership sales per associate. Fast Start typically
requires a training fee of $184 per new associate, except for special promotions
the Company implements from time to time, and upon successful  completion of the
program provides for the payment of certain training  bonuses.  The $3.6 million
and $6.0  million for the three month  periods  ending  March 31, 2002 and 2001,
respectively, in training fees was collected from approximately 31,187 new sales
associates  who  elected to  participate  in Fast Start  during the first  three
months of 2002  compared  to 32,790  that  participated  during  the  comparable
quarter of 2001. Total new associates  enrolled during the first three months of
2002 were 33,493  compared to 34,286 for the same period of 2001,  a decrease of
2%. The number of new  associates  recruited  in the first three  months of 2001
represents the highest recruiting quarter in the Company's history.

     Other  income  increased  24%, to $1.1  million for the three  months ended
March 31, 2002 from $900,000 for the comparable  period of 2001 primarily due to
an increase in enrollment fees of $200,000.

     Primarily as a result of the increase in Membership  fees,  total  revenues
increased to $82.0  million for the three months ended March 31, 2002 from $70.3
million during the comparable period of 2001, an increase of 17%.

     Membership  benefits totaled $24.3 million for the three months ended March
31,  2002  compared  to $20.0  million for the  comparable  period of 2001,  and
represented  34% of  Membership  fees for both the 2002 and 2001  periods.  This
Membership  benefit  ratio  (Membership  benefits as a percentage  of Membership
fees) should remain near current levels as substantially all active  Memberships
provide for a capitated cost.

     Commissions  to  associates  increased  18% to $27.8  million for the three
months ended March 31, 2002 compared to $23.6 million for the comparable  period
of 2001, and represented 39% and 40% of Membership fees for such periods.  These
amounts  were  reduced by  $438,000  and  $582,000,  respectively,  representing
Membership  lapse fees.  Prior to March 1, 2002,  these fees were  determined by
applying the prime interest rate to the advance commission balance pertaining to
lapsed  Memberships.  The Company realizes and recognizes this fee only when the
amount of the calculated fee is collected by withholding  from cash  commissions
payments due the  associate,  because the  Company's  ability to recover fees in
excess of current payments is primarily  dependent on the associate  selling new
Memberships which qualify for advance commissions.  The Company eliminated these
fees for Memberships  sold after March 1, 2002 in conjunction with the change in
the  commission  structure as discussed in  "Liquidity  and Capital  Resources".
Commissions  to  associates  are  primarily  dependent  on  the  number  of  new
memberships  sold during a period.  New memberships sold during the three months
ended March 31, 2002 totaled 200,780, a 9% increase from the 183,712 sold during
the comparable period of 2001. Commissions to associates per new membership sold
were $138 per  membership  for the three months ended March 31, 2002 compared to
$129  for  the  comparable  period  of  2001.  The  average  commission  per new
membership sold varies depending on the compensation  structure that is in place
at the  time a new  membership  is  sold  and  the  amount  of any  charge-backs
(recoupment of previous commission advances) that are deducted from amounts that
would otherwise be paid to the various sales associates that are compensated for
the membership sale.

     Associate  services and direct marketing expenses decreased to $7.6 million
for the three months  ended March 31, 2002 from $8.2 million for the  comparable
period of 2001.  Fast Start  bonuses  incurred were  approximately  $1.6 million
during  the first  three  months of 2002  compared  to $3.6  million in the same
period of 2001. Fast Start bonuses are typically  eliminated  during those times
the Company reduces the sales associate entry fee as it did in March 2002. These
Fast  Start  training  bonuses  are also  affected  by the  number  of new sales
associates that successfully meet the qualification  criteria established by the
Company,  i.e.  more  training  bonuses will be paid when a higher number of new
sales  associates  meet such  criteria.  These  expenses also include  marketing
costs, other than commissions,  that are directly associated with new Membership
sales.

     General and administrative expenses during the three months ended March 31,
2002 and 2001 were $7.8 million and $6.3 million,  respectively, and represented
11%  of  Membership  fees  for  each  period.  Management  expects  general  and
administrative  expenses  as a  percentage  of  Membership  fees to remain  near
current  levels in the near term but to gradually  decrease as a  percentage  of
Membership fees as a result of certain economies of scale.

     Other  expenses,  net,  which include  depreciation  and  amortization  and
premium taxes reduced by interest income,  were  approximately  $1.0 million for
both  three-month  periods.  Depreciation  and  amortization  increased  to $1.2
million  for the first three  months of 2002 from  $948,000  for the  comparable
period of 2001 but premium taxes decreased  $295,000 from $580,000 for the three
months ended March 31, 2001 to $285,000 for the comparable period of 2002 due to
a change in the tax  structure  of one of the states in which the  Company  pays
premium taxes.  Interest income decreased by approximately $61,000 for the first
three  months of 2002 to  $483,000  from  $544,000  for the 2001 period due to a
decrease in investment balances.

     The Company has recorded a provision  for income taxes of $4.7 million (35%
of pretax  income) for the first three  months of 2002  compared to $3.7 million
(33% of pretax income) for the same period of 2001. The lower effective tax rate
for the  2001  period  was  primarily  attributable  to the  utilization  of net
operating loss carryforwards and tax credits.

     The results of  operations  of the UFL  segment  have been  segregated  and
reported as discontinued  operations in the  Consolidated  Statements of Income.
Income from discontinued  operations,  net of income tax of $0, was $158,000 for
the three months ended March 31, 2001. UFL was sold on December 31, 2001.


     Liquidity and Capital Resources
     General
     Consolidated  net cash  provided  by  operating  activities  of  continuing
operations was $18.1 million for the first three months of 2002 compared to cash
provided of $10.8  million for the 2001  period.  The  increase of $7.3  million
resulted  primarily  from the  increase  in net  income of $1.2  million,  a net
increase  in the  change in  income  taxes  payable  of $3.6  million  and a net
increase in the change in accounts payable and accrued expenses of $3.1 million,
partially  offset by a decrease  in the  provision  for  deferred  taxes of $1.2
million.

     Consolidated net cash used in investing activities of continuing operations
was $3.5  million  for the  first  three  months  of 2002  compared  to net cash
provided by investing  activities of $2.3 million for the  comparable  period of
2001. This $5.8 million increase in cash used in investing  activities  resulted
primarily from the $5.9 million increase in the purchases of investments.

     Net cash used in financing  activities of continuing  operations during the
first three months of 2002 was $19.4  million  compared to $12.9 million for the
comparable  period of 2001. This $6.5 million change was primarily  comprised of
the $7.6 million  increase in treasury  stock  purchases  during the first three
months of 2002  compared  to the  first  three  months of 2001  offset by a $1.0
million  increase in proceeds from the exercise of stock options during the 2002
period when compared to the comparable period of 2001.

     Primarily due to the large amount of treasury stock  purchases in the first
three  months  of  2002  of  approximately  $20.4  million,  the  Company  had a
consolidated  working  capital  deficit  of $7.7  million at March 31,  2002,  a
decrease of $12.7 million compared to a consolidated  working capital surplus of
$5.1 million at December 31, 2001.  More than $7 million of the working  capital
deficit at March 31, 2002 is related to  deferred  revenue and fees in excess of
deferred member and associate service costs. These amounts will be eliminated by
the  passage of time  without the  utilization  of other  current  assets or the
Company incurring other current liabilities.  Additionally,  at the current rate
of cash flow provided by continuing  operations  ($18.1 million during the first
quarter  of  2002),  the  Company's   ability  to  control  the  timing  of  its
discretionary treasury stock purchases and the availability pursuant to its line
of credit,  the Company does not expect any  difficulty in meeting its financial
obligations in the short term or the long term.

     At March 31,  2002 the  Company  reported  $29.2  million  in cash and cash
equivalents and unpledged  investments  (after utilizing more than $20.4 million
to purchase  approximately  862,800  shares of its common stock during the three
months ended March 31, 2002) compared to $33.7 million at December 31, 2001. The
Company's  investments consist of common stocks,  investment grade (rated Baa or
higher)  preferred  stocks  and  investment  grade  bonds  primarily  issued  by
corporations,  the United States Treasury, federal agencies, federally sponsored
agencies and  enterprises  as well as  mortgage-backed  securities and state and
municipal tax-exempt bonds.

     The  Company  generally  advances  significant  commissions  at the  time a
Membership  is sold.  During the three months ended March 31, 2002,  the Company
advanced  commissions of $29.3 million on new Membership sales compared to $25.2
million  for the same  period of 2001.  Since  approximately  94% of  Membership
premiums are collected on a monthly  basis,  a significant  cash flow deficit is
created at the time a  Membership  is sold.  This  deficit is reduced as monthly
premiums are remitted and commissions  payable on those Memberships are withheld
to  recover  the  advance.  Effective  March  1,  2002,  and in  order  to offer
additional  incentives for increased  Membership  retention  rates,  the Company
returned  to  a  differential   commission   structure  with  advance  rates  of
approximately 80% of first year Membership  premiums on new Memberships  written
and variable  renewal  commission rates ranging from zero to 25% per annum based
on  the  first  year  Membership   retention  rate  of  the  associate's   sales
organization.  This 12-month advance structure  replaces the prior  compensation
structure  utilized  by the  Company  that  included  up to a 3-year  commission
advance  based  on an  average  commission  rate  of  approximately  27% for all
membership years.

     The Company  expenses advance  commissions  ratably over the first month of
the related  membership.  As a result of this accounting  policy,  the Company's
commission  expenses are all recognized over the first month of a Membership and
there is no commission  expense  recognized for the same  Membership  during the
remainder  of the  advance  period.  The  Company  tracks its  unearned  advance
commission  balances  outstanding in order to ensure the advance commissions are
recovered before any renewal  commissions are paid and for internal  purposes of
analyzing  its  commission  advance  program.  While not  recorded  as an asset,
unearned advance commission balances from associates as of March 31, 2002 were:



                                                                                 (Amounts in 000's)
                                                                                 ------------------
                                                                                 
Beginning unearned advance commission payments (1)...............................   $   211,609
Advance commission payments, net.................................................        29,310
Earned commissions applied.......................................................       (18,473)
Advance commission payment write-offs............................................          (564)
                                                                                    -------------
Ending unearned advance commission payments before
  estimated unrecoverable payments (1)...........................................       221,882
Estimated unrecoverable advance commission payments (1)..........................       (17,562)
                                                                                    -------------
Ending unearned advance commission payments, net (1).............................   $   204,320
                                                                                    -------------


    (1) These amounts do not represent fair value, as they do not take into
                 consideration timing of estimated recoveries.

     The ending unearned advance  commission  payments,  net, above includes net
unearned advance commission payments to non-vested associates of $22 million. As
such, at March 31, 2002 future commission payments and related expense should be
reduced as unearned advance  commission  payments of $182 million are recovered.
Commissions are earned by the associate as Membership premiums are earned by the
Company, usually on a monthly basis. For additional information concerning these
commission  advances,  see the  Company's  Annual  report on Form 10-K under the
heading  Commissions  to  Associates  in Item 7 -  Management's  Discussion  and
Analysis of Financial Condition and Results of Operations.

     The Company  believes that it has significant  ability to finance  expected
future growth in Membership  sales based on its existing amount of cash and cash
equivalents  and unpledged  investments at March 31, 2002 of $29.2 million.  The
Company  expects to maintain cash and  investment  balances,  including  pledged
investments,  on an on-going basis of approximately  $25 to $35 million in order
to meet expected working capital needs and regulatory capital requirements. Cash
balances in excess of this amount would be used for discretionary  purposes such
as treasury  stock  purchases.  The  Company  continues  to  consider  incurring
indebtedness  in order to  continue  or  increase  the  rate of  treasury  stock
purchases,  including financing its new corporate headquarters in order to allow
cash flow from operations to continue to be used to purchase treasury stock.

     The Company is constructing a new corporate office complex.  Costs incurred
through  March  31,  2002 of  approximately  $3.2  million  have  been paid from
existing  resources  and cash flow.  Since  December 31,  2001,  the Company has
entered  into a  construction  contract in the amount of $2.9  million  with the
general  contractor  pertaining  to site work for the new  office  complex.  The
Company  expects to enter  into  similar  types of  construction  contracts  for
various phases of construction during the remainder of the construction  period.
Total remaining costs of construction are estimated at approximately $27 million
during the 15-month period beginning April 1, 2002.

     On  November 6, 2001,  the Company  entered  into a $17.5  million  line of
credit with Bank of Oklahoma,  N.A. in order to fund  additional  treasury stock
purchases.  The line of credit  provides  for  immediate  funding of up to $17.5
million with repayments  originally scheduled to begin February 15, 2002 and end
November 15, 2002 with interest at the Libor rate plus 2% per annum or the prime
rate minus 1/2 percent per annum as selected by the  Company.  Since the Company
did not access this line of credit prior to February  15, 2002,  the Company has
asked the bank to amend the terms of the loan to allow for  advances  subsequent
to February 15, 2002 without  extending the repayment  time frame.  The bank has
indicated  their  willingness  to  make  such  amendment  and  submitted  formal
amendment  documentation  to the  Company,  but  those  documents  have not been
finalized.  The loan is secured by the  Company's  rights to receive  membership
fees on a portion  of its  memberships.  The  terms of this  loan  have  various
covenants customary for similar transactions.  The Company had not drawn on this
available credit line as of April 22, 2002.

     Actions that May Impact Retention in the Future
     The potential  impact on the Company's future  profitability  and cash flow
due to future changes in Membership retention can be significant.  While blended
retention  rates have not changed  significantly  over the past five years,  the
Company  has  recently  taken  actions  that may impact  retention  rates in the
future.  Since  December  31,  2001,  the  Company has  implemented  several new
initiatives  aimed at  improving  the  retention  rate of both new and  existing
Memberships.   Such  initiatives  include  a  revised  compensation   structure,
effective March 1, 2002,  featuring  variable  renewal  commission rates ranging
from zero to 25% per annum based on the first year Membership  retention rate of
the   associate's   sales   organization;   implementation   of  a   "non-taken"
administrative  fee to sales  associates of $35 for any  Membership  application
that is processed by the Company after March 1, 2002, but for which a payment is
never received;  and, an increase in the amount of the commission  "charge-back"
for Memberships  written after March 1, 2002 which are  subsequently  terminated
from 50% of the unearned  Membership  commission  advance balance to 100% of the
unearned  Membership  commission  advance  balance.  The  Company is also in the
process  of  designing  and   implementing   an  enhanced  member  "life  cycle"
communication   process  aimed  at  both   increasing   the  overall  amount  of
communication  from the Company to the members as well as more  specific  target
messaging  to  members  based  on the  length  of  their  Membership  as well as
utilization characteristics. The Company believes that such efforts may increase
the utilization by members and therefore lead to higher retention rates.

     Parent Company Funding and Dividends
     Although the Company is the  operating  entity in many  jurisdictions,  the
Company's  subsidiaries  serve as  operating  companies  in various  states that
regulate  Memberships as insurance or specialized  legal expense  products.  The
most significant of these wholly owned subsidiaries are Pre-Paid Legal Casualty,
Inc.  ("PPLCI") and Pre-Paid Legal  Services,  Inc. of Florida  ("PPLSIF").  The
ability  of PPLCI and  PPLSIF to  provide  funds to the  Company is subject to a
number of  restrictions  under various  insurance laws in the  jurisdictions  in
which PPLCI and PPLSIF conduct business,  including limitations on the amount of
dividends  and  management  fees that may be paid and  requirements  to maintain
specified levels of capital and reserves.  In addition PPLCI will be required to
maintain its stockholders'  equity at levels sufficient to satisfy various state
or  provincial  regulatory  requirements,  the  most  restrictive  of  which  is
currently $3 million. Additional capital requirements of PPLCI or PPLSIF will be
funded  by  the  Company  in  the  form  of  capital  contributions  or  surplus
debentures.  At March 31, 2002,  PPLSIF did not have funds available for payment
of substantial  dividends without the prior approval of the respective insurance
commissioner.  PPLCI had approximately $5 million in surplus funds available for
payment of an ordinary dividend.

     Forward-Looking Statements
     All statements in this report concerning Pre-Paid Legal Services, Inc. (the
"Company") other than purely historical  information,  including but not limited
to, statements  relating to the Company's future plans and objectives,  expected
operating results, and the assumptions on which such forward-looking  statements
are based, constitute "Forward-Looking Statements" within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934 and are based on the Company's historical operating trends and financial
condition  as of March 31, 2002 and other  information  currently  available  to
management. The Company cautions that the Forward-Looking Statements are subject
to all the risks and uncertainties  incident to its business,  including but not
limited to risks described below. Moreover, the Company may make acquisitions or
dispositions of assets or businesses,  enter into new marketing  arrangements or
enter into financing transactions. None of these can be predicted with certainty
and, accordingly, are not taken into consideration in any of the Forward-Looking
Statements  made herein.  For all of the foregoing  reasons,  actual results may
vary  materially  from the  Forward-Looking  Statements.  The Company assumes no
obligation  to  update  the  Forward-Looking  Statements  to  reflect  events or
circumstances occurring after the date of the statement.

     Risk Factors
     There  are a  number  of risk  factors  that  could  affect  our  financial
condition  or results of  operations.  See Note 2 -  Contingencies  and Item 1 -
Legal  Proceedings.  Please refer to page 33 and 34 of the Company's 2001 Annual
Report on Form 10-K for a description of other risk factors.


ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

     The  Company's  consolidated  balance  sheets  include a certain  amount of
assets and liabilities  whose fair values are subject to market risk. Due to the
Company's significant  investment in fixed-maturity  investments,  interest rate
risk  represents  the  largest  market  risk  factor   affecting  the  Company's
consolidated financial position.  Increases and decreases in prevailing interest
rates  generally  translate into decreases and increases in fair values of those
instruments.  Additionally,  fair values of interest rate sensitive  instruments
may be  affected by the  creditworthiness  of the  issuer,  prepayment  options,
relative  values of  alternative  investments,  liquidity of the  instrument and
other general market conditions.

     As of March 31, 2002,  substantially all of the Company's  investments were
in  investment   grade  (rated  Baa  or  higher)   fixed-maturity   investments,
interest-bearing   money  market  accounts  and  a   collateralized   repurchase
agreement.  The  Company  does not hold any  investments  classified  as trading
account assets or derivative financial instruments.

     The table below summarizes the estimated effects of hypothetical  increases
and  decreases  in interest  rates on the  Company's  fixed-maturity  investment
portfolio. It is assumed that the changes occur immediately and uniformly,  with
no effect  given to any steps  that  management  might take to  counteract  that
change. The hypothetical  changes in market interest rates reflect what could be
deemed best and worst case  scenarios.  The fair values  shown in the  following
table are based on  contractual  maturities.  Significant  variations  in market
interest  rates  could  produce  changes  in the  timing  of  repayments  due to
prepayment  options  available.  The  fair  value of such  instruments  could be
affected and, therefore, actual results might differ from those reflected in the
following table (dollars in 000's):



                                                                                               Estimated fair value
                                                                        Hypothetical change       after hypothetical
                                                                         in interest rate        change in interest
                                                             Fair Value  (bp=basis points              rate
                                                             ---------- -------------------    ---------------------
                                                                                  
Fixed-maturity investments at March 31, 2002 (1)............ $   19,834   100 bp increase           $     18,356
                                                                          200 bp increase                 17,030
                                                                          50 bp decrease                  20,544
                                                                          100 bp decrease                 21,254

Fixed-maturity investments at December 31, 2001 (1)......... $   18,983   100 bp increase           $     17,635
                                                                          200 bp increase                 16,437
                                                                          50 bp decrease                  19,575
                                                                          100 bp decrease                 20,167


--------------------
(1)  Excluding short-term investments with a fair value of $3.3 million at March
     31, 2002 and December 31, 2001, respectively.

     The table above illustrates,  for example,  that an instantaneous 200 basis
     point increase in market  interest rates at March 31, 2002 would reduce the
     estimated  fair  value  of  the  Company's  fixed-maturity  investments  by
     approximately  $2.8  million  at  that  date.  At  December  31,  2001,  an
     instantaneous  200 basis point increase in market interest rates would have
     reduced  the  estimated   fair  value  of  the   Company's   fixed-maturity
     investments  by  approximately  $2.5 million at that date.  The  definitive
     extent of the interest rate risk is not  quantifiable or predictable due to
     the variability of future interest rates,  but the Company does not believe
     such risk is material.

     The  Company  primarily  manages  its  exposure  to  interest  rate risk by
purchasing  investments that can be readily  liquidated should the interest rate
environment begin to significantly change.


                           PART II. OTHER INFORMATION


ITEM 1. LEGAL PROCEEDINGS.
        ------------------

     See Note 2 of the Notes to Consolidated  Financial  Statements  included in
Part I, Item 1 of this report for information with respect to legal proceedings.


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

(a) Exhibits: none

(b) Reports on Form 8-K: none



                                   SIGNATURES
                                   ----------

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

                                   PRE-PAID LEGAL SERVICES, INC.


Date: April 22, 2002               /s/ Randy Harp
                                   ------------------------------------------
                                   Chief Operating Officer
                                   (Duly Authorized Officer)

Date: April 22, 2002               /s/ Steve Williamson
                                   ------------------------------------------
                                   Chief Financial Officer
                                   (Principal Accounting Officer)