U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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


|X|   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended October 31, 2001

|_|   Transition report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the transition period from ____ to ____


                          Commission File No. 000-24996


                        INTERNET COMMERCE CORPORATION
            (Exact name of registrant as specified in its charter)


          Delaware                                         13-3645702
  ------------------------                           ----------------------
  (State of incorporation)                              (I.R.S. Employer
                                                     Identification Number)


                           805 Third Avenue, 9th Floor
                            New York, New York 10022
          ------------------------------------------------------------
          (Address of principal executive offices, including zip code)


                                 (212) 271-7640
              ----------------------------------------------------
              (Registrant's 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 |_|

      As of December 14, 2001 the registrant had outstanding  11,021,096  shares
of Class A Common Stock.

<PAGE>


                               INDEX TO FORM 10-Q


                                                                            PAGE

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

         Consolidated balance sheets as of October 31, 2001
         (unaudited) and July 31, 2001....................................     3

         Consolidated statements of operations and comprehensive
         loss for the three months ended October 31, 2001
         (unaudited) and October 31, 2000 (unaudited) ....................     4

         Consolidated statements of cash flows for the three
         months ended October 31, 2001(unaudited) and October 31,
         2000 (unaudited).................................................     5

         Notes to consolidated financial statements.......................  6-10

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations ............................. 11-15

Item 3   Quantitative and Qualitative Disclosures About Market Risk.......    15


PART II. OTHER INFORMATION

Item 2.  Changes in Securities and Use of Proceeds........................    15

Item 6.  Exhibits and Reports on Form 8-K ................................    15

SIGNATURES................................................................    16


<PAGE>

INTERNET COMMERCE CORPORATION

Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                          October 31,              July 31,
                                                                             2001                    2001
                                                                         ------------            ------------
                                                                          (unaudited)
<S>                                                                      <C>                     <C>
ASSETS
Current assets:
  Cash and cash equivalents                                              $  3,505,845            $  2,223,487
  Marketable securities                                                       423,788                 665,552
  Accounts receivable, net of allowance for doubtful
    accounts of $259,613 and $224,022, respectively                         1,800,777               1,588,242
  Prepaid expenses and other current assets                                   611,040                 401,334
                                                                         ------------            ------------
    Total current assets                                                    6,341,450               4,878,615

Restricted cash                                                               276,635                 276,635
Property and equipment, net                                                 1,711,883               1,920,662
Software development costs, net                                               461,410                 425,471
Goodwill, net                                                               3,904,684               2,194,067
Other intangible assets, net                                                3,824,000               5,917,854
Other assets                                                                   58,649                  60,794
                                                                         ------------            ------------
    Total assets                                                         $ 16,578,711            $ 15,674,098
                                                                         ============            ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                       $    668,469            $    713,670
  Accrued expenses                                                          2,321,325               2,381,788
  Accrued dividends - preferred stock                                         336,335                 273,289
  Deferred revenue                                                            255,734                 306,764
  Capital lease obligation                                                    304,089                 328,480
  Other liabilities                                                           211,908                 228,189
                                                                         ------------            ------------
          Total current liabilities                                         4,097,860               4,232,180

Capital lease obligation - less current portion                               256,111                 255,009
                                                                         ------------            ------------
          Total liabilities                                                 4,353,971               4,487,189
                                                                         ------------            ------------

Commitments and contingencies

Stockholders' Equity:
Preferred stock:
     Preferred stock - 5,000,000 shares authorized,
       including 10,000 shares series A, 10,000 shares
       series C and 175 shares series S:
     Series A preferred stock - par value $.01 per share,
       225 shares issued and outstanding (liquidation
       value of $228,002)                                                           2                       2
     Series C preferred stock - par value $.01 per share,
       44.76 votes per share; 10,000 shares issued and
       outstanding (liquidation value of $10,333,333)                             100                     100
Common stock:
     Class A - par value $.01 per share, 40,000,000 shares
       authorized, one vote per share; 10,957,822 and
       9,770,180 shares issued and outstanding, respectively                  109,578                  97,702
     Class B - par value $.01 per share, 2,000,000 shares
       authorized, six votes per share; 1,930 shares issued
       and outstanding                                                             19                      19
Additional paid-in capital                                                 83,808,747              80,750,153
Accumulated deficit                                                       (71,366,376)            (69,261,320)
Accumulated other comprehensive loss                                         (269,290)               (209,728)
Deferred compensation - restricted stock                                      (58,040)               (190,019)
                                                                         ------------            ------------
          Total stockholders' equity                                       12,224,740              11,186,909
                                                                         ------------            ------------

          Total liabilities and stockholders' equity                     $ 16,578,711            $ 15,674,098
                                                                         ============            ============
</TABLE>


                 See notes to consolidated financial statements

                                       3
<PAGE>

INTERNET COMMERCE CORPORATION

Consolidated Statements of Operations and Comprehensive Loss (unaudited)

<TABLE>
<CAPTION>
                                                                                             Three Months Ended
                                                                                                October 31,
                                                                                      -------------------------------
                                                                                          2001                2000
                                                                                      -----------         -----------
<S>                                                                                   <C>                 <C>
Revenues:
     Services                                                                         $ 3,045,927         $ 1,316,385
                                                                                      -----------         -----------
Expenses:
    Cost of services (excluding non-cash compensation of $93,058 in 2002)               2,482,453           1,059,014
    Product development and enhancement                                                   244,742             152,198
    Selling and marketing (excluding non-cash compensation of $16,205 in 2002)            975,556           1,177,917
    General and administrative (excluding non-cash compensation of $22,716 and
      $450,111, respectively)                                                           1,359,824           1,959,362
    Non-cash charges for stock-based compensation and services                            131,979             450,111
                                                                                      -----------         -----------
                                                                                        5,194,554           4,798,602
                                                                                      -----------         -----------

Operating loss                                                                         (2,148,627)         (3,482,217)
                                                                                      -----------         -----------

Other income and expense:
     Interest and investment income                                                        72,585             217,799
     Interest expense                                                                     (29,014)            (15,936)
                                                                                      -----------         -----------
                                                                                           43,571             201,863
                                                                                      -----------         -----------

Net loss                                                                              $(2,105,056)        $(3,280,354)

Dividends on preferred stock                                                              (63,046)           (106,226)
                                                                                      -----------         -----------

Loss attributable to common stockholders                                              $(2,168,102)        $(3,386,580)
                                                                                      ===========         ===========

Basic and diluted loss per common share                                               $      (.22)        $      (.51)
                                                                                      ===========         ===========

Weighted average number of common shares outstanding-- basic and diluted
    loss per share                                                                      9,813,593           6,616,766
                                                                                      ===========         ===========

Comprehensive loss:
-------------------
   Net loss                                                                            (2,105,056)         (3,280,354)
   Other comprehensive loss:
     Unrealized holding loss                                                              (59,562)            (75,430)
                                                                                      -----------         -----------

Comprehensive loss                                                                    $(2,164,618)        $(3,355,784)
                                                                                      ===========         ===========
</TABLE>





                    See notes to consolidated financial statements

                                       4
<PAGE>

INTERNET COMMERCE CORPORATION

Consolidated Statements of Cash Flows (unaudited)

<TABLE>
<CAPTION>
                                                                           Three Months Ended October 31,
                                                                        -----------------------------------
                                                                             2001                  2000
                                                                        ------------           ------------
<S>                                                                     <C>                    <C>
Cash flows from operating activities:
 Net loss                                                               $ (2,105,056)          $ (3,280,354)
 Adjustments to reconcile net loss to net cash
   used in operating activities:
      Depreciation and amortization                                          562,481                201,408
      Allowance for doubtful accounts                                         53,877                     --
      Gain on sale of marketable securities                                  (64,637)                    --
      Non-cash charges for equity instruments issued
        for compensation and services                                        131,979                450,111
      Changes in:
          Accounts receivable                                               (266,412)               129,217
          Prepaid expenses and other assets                                  (65,468)              (131,269)
          Accounts payable                                                   (45,201)              (131,382)
          Accrued expenses                                                  (139,414)               (44,235)
          Deferred revenue                                                   (51,031)              (270,206)
          Other liabilities                                                  (16,281)                14,757
                                                                        ------------           ------------
          Net cash used in operating activities                           (2,005,163)            (3,061,953)
                                                                        ------------           ------------

Cash flows from investing activities:
   Payment for purchase of acquisition, net of cash acquired                      --                293,289
   Capitalization of software development costs                              (95,264)                    --
   Purchases of property and equipment                                        (1,429)              (102,713)
   Purchase of certificate of deposits                                            --                (14,010)
   Proceeds from sales of marketable securities                              246,839                     --
                                                                        ------------           ------------
          Net cash provided by investing activities                          150,146                176,566
                                                                        ------------           ------------

Cash flows from financing activities:
   Proceeds from issuance of common stock and warrants, net                3,189,219                     --
   Proceeds from exercise of employee stock options                           23,249                154,912
   Payments of capital lease obligations                                     (75,093)               (82,244)
                                                                        ------------           ------------
          Net cash provided by financing activities                        3,137,375                 72,668
                                                                        ------------           ------------

Net increase (decrease) in cash and cash equivalents                       1,282,358             (2,812,719)

Cash and cash equivalents, beginning of period                             2,223,487             14,003,329
                                                                        ------------           ------------
Cash and cash equivalents, end of period                                $  3,505,845           $ 11,190,610
                                                                        ============           ============

Supplemental disclosure of cash flow information:
     Cash paid for interest during the period                           $     29,014           $     15,936
     Noncash investing and financing activities:
         Issuance of common stock for services performed                      77,400                     --
         Property acquired under capital lease                                51,804                     --
         Conversion of note to equity of RTCI                                     --              5,063,699
Amounts related to business acquisition:
      Fair value of assets acquired, net of cash acquired                         --              3,684,540
         Less:
              Liabilities assumed                                                 --                479,633
              Fair value of equity instruments issued                             --              3,308,754
              Transactions costs paid in prior period                             --                189,442
                                                                        ------------           ------------
                                                                                  --              3,977,829
                                                                        ------------           ------------
       Payment for purchase of acquisitions, net of cash acquired                 --                293,289

</TABLE>


                 See notes to consolidated financial statements

                                       5
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Financial Statements
October 31, 2001


1.    BASIS OF PRESENTATION

      The  accompanying  unaudited  financial  statements  have been prepared in
      accordance with  accounting  principles  generally  accepted in the United
      States of America  ("GAAP")  for  interim  financial  information.  In the
      opinion of management,  all  adjustments  (consisting of normal  recurring
      accruals)  considered  necessary for fair presentation have been included.
      Operating  results for the  three-month  period ended October 31, 2001 are
      not  necessarily  indicative  of the results  that may be expected for the
      fiscal year ending July 31, 2002.

      The  balance  sheet at July 31,  2001 has been  derived  from the  audited
      financial  statements at that date, but does not include all the footnotes
      required  by  GAAP  for  complete   financial   statements.   For  further
      information,  refer to the  audited  financial  statements  and  footnotes
      thereto  included in Internet  Commerce  Corporation's  (the  "Company" or
      "ICC") Annual Report on Form 10-K for the fiscal year ended July 31, 2001.


2.    ORGANIZATION AND NATURE OF BUSINESS

      The Company was  incorporated  under the name  Infosafe  Systems,  Inc. in
      November 1991 in the State of Delaware.

      ICC  provides   Internet-based   services  for  the  electronic   commerce
      business-to-business  communication  services market.  ICC.NET, our global
      Internet-based   value  added  network,  or  VAN,  provides  supply  chain
      connectivity  solutions  for  electronic  data  interchange,  or EDI,  and
      electronic  commerce  and  offers  users a vehicle  to  securely  send and
      receive files of any format and size.

      The ICC.NET system uses the Internet and proprietary technology to deliver
      customers'   documents   and  data  files  to  members  of  their  trading
      communities,  many of which have incompatible systems, by translating such
      documents  and data files into any format  required by the  receiver.  The
      ICC.Net  system can be accessed  using a standard web browser or virtually
      any other communications protocol.

      The acquisition of Research Triangle  Commerce,  Inc. ("RTCI") on November
      6, 2000,  gives the Company the capability to facilitate  the  development
      and operations of comprehensive  business-to-business  electronic commerce
      solutions. RTCI specializes in electronic commerce solutions involving EDI
      and EAI (Enterprise Application Integration) by providing mission critical
      electronic commerce consulting,  electronic commerce software,  outsourced
      electronic commerce services and technical resource management.

      Through the acquisition of Intercoastal Data Corporation ("IDC") on August
      3, 2000, ICC expanded its  capabilities  to include an EDI service bureau,
      which  provides  EDI  services  to small and  mid-sized  companies.  These
      services  include the conversion of electronic  forms into hard copies and
      the  conversion  of  hard  copies  to an EDI  format.  IDC  also  provides
      Universal  Product Code,  or UPC,  services and maintains UPC catalogs for
      our customers.

      In October 2001, we sold in a private placement  1,159,716 shares of class
      A common stock and warrants to purchase 347,915 additional shares of class
      A common stock for gross  proceeds of $3,189,219.  The warrants  expire in
      October  2006 and are  exercisable  at $3.58 per share.  As of October 31,
      2001,  we had cash and  cash  equivalents  and  marketable  securities  of
      $3,930,000.   We  believe  these  resources  provide  us  with  sufficient
      liquidity to continue in operation through July 31, 2002.  However, if our
      cost  reductions  do not  achieve  sufficient  savings,  if  our  expenses
      increase  more than  anticipated,  if our  revenue  does not  increase  as
      anticipated  because of  competitive  or other  reasons or if our accounts
      receivable  increases further as a result of a further  lengthening of the
      collection  cycle,  our cash  resources may not be sufficient  and we will
      require additional financing. There can be no assurances that the terms of
      any  financing  will be available or that the terms will be  acceptable to
      us, or that any financing will be consummated.


                                       6
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Financial Statements
October 31, 2001


3.    SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES

      Principles of consolidation:

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

      Revenue recognition:

      The Company derives its revenue from subscriptions to its ICC.NET service,
      which  include  transaction,   mailbox  and  fax  transmission  fees.  The
      subscription  fees are comprised of both fixed and usage-based fees. Fixed
      subscription fees are recognized on a pro-rata basis over the subscription
      period. Usage fees are recognized in the period the services are rendered.
      The  Company  also  derives  revenue  through   implementation   fees  and
      interconnection fees.  Implementation fees are recognized over the life of
      the subscription period, generally one year. Interconnection fees are fees
      charged to connect to another VAN service and are recognized when the data
      is transmitted to the connected service.

      The  Company  also  provides  a  broad  range  of  professional   services
      consisting  of  EDI  and  electronic  commerce  consulting,  data  mapping
      services  and EDI  education  and  training at seminars  hosted by leading
      universities  around the United  States.  Revenue from EDI and  electronic
      commerce  consulting  and education and training are  recognized  when the
      services are provided.  Revenue from data mapping  services are recognized
      when the map has been  completed and  delivered to the customer.  Revenues
      from  fixed  fee  professional  service  contracts  are  recognized  using
      contract accounting based on the estimated percentage of completion.

      The Company also derives revenue from its service  bureau.  Service bureau
      revenues  are  comprised  of  EDI  services,  including  data  translation
      services,  purchase order and invoice  processing  from  EDI-to-print  and
      print-to-EDI,  UPC services,  including UPC number generation, UPC catalog
      maintenance  and UPC label  printing.  The  service  bureau  also  derives
      revenue from software  licensing  and provides  software  maintenance  and
      support.  Revenues  from the EDI services and UPC services are  recognized
      when the services are provided.  The Company accounts for its EDI software
      license  sales in  accordance  with the  American  Institute  of Certified
      Public  Accountants'   Statement  of  Position  97-2,   "Software  Revenue
      Recognition."  Revenues from software  licenses are recognized when all of
      the  following  conditions  are met: (1) a  non-cancelable  non-contingent
      license  agreement  has been  signed;  (2) the  software  product has been
      delivered;  (3) there are no  material  uncertainties  regarding  customer
      acceptance;  and (4)  collection of the resulting  receivable is probable.
      Revenues from software  maintenance  and support  contracts are recognized
      ratably over the life of the  contract.  The  Company's  software  license
      revenues were not significant in any of the periods presented.

      Deferred revenue:

      Deferred  revenue  is  comprised  of  deferrals  for  subscription   fees,
      professional  services,  license  fees  and  maintenance  associated  with
      contracts  for which  amounts have been received in advance of services to
      be performed or prior to the shipment of software.

      Recent Accounting Pronouncements:

      In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations"  and
      SFAS No.  142,  "Goodwill  and  Other  Intangible  Assets."  SFAS No.  141
      requires  that all business  combinations  subsequent to June 30, 2001, be
      accounted for under the purchase  method of  accounting.  SFAS No.141 also
      requires  that  the fair  value  of an  assembled  workforce  acquired  be
      included  in the  amount  initially  recorded  as  goodwill.  The  Company
      reclassified  $1,710,617  initially  recorded as other  intangible  assets
      related to the value of the  workforce  into  goodwill as required by this
      statement.  SFAS No. 142  requires  that upon  adoption,  amortization  of
      goodwill will cease;  and instead,  the carrying value of goodwill will be
      evaluated  for  impairment  on at least an annual  basis.  SFAS No. 142 is
      effective for fiscal years beginning after December 15, 2001; however, the
      Company has adopted this  standard as of the  beginning of its 2002 fiscal
      year, August 1, 2001. See Note 8 for effects of adoption of this standard.
      In  addition,  the Company will need to evaluate  goodwill for  impairment
      within six months.


                                       7
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Financial Statements
October 31, 2001


3.    SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES (continued)

      In  October  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for the
      Impairment or Disposal of Long-Lived Assets." SFAS No. 144 supercedes SFAS
      No. 121,  "Accounting  for the  Impairment  of  Long-Lived  Assets and for
      Long-Lived  Assets to be Disposed  Of." SFAS No. 144  addresses  financial
      accounting  and  reporting  for the  impairment  or disposal of long-lived
      assets.  The  provisions  of SFAS No. 144 are  effective  for fiscal years
      beginning  after  December 15, 2001. The Company is required to adopt SFAS
      No. 144 by the first  quarter of fiscal  2003.  The  Company is  currently
      evaluating  the  potential  impact  of  SFAS  No.  144 on its  results  of
      operations and financial position.


4.    PRIVATE PLACEMENT OF COMMON STOCK

      On October 29, 2001, the Company sold  1,159,716  shares of class A common
      stock and warrants to purchase  347,915 shares of class A common stock for
      gross proceeds of $3,189,219. The warrants are immediately exercisable and
      have an exercise  price of $3.58 per share.  The warrants are  exercisable
      for a  five-year  period.  The  Company  may redeem the  warrants,  at its
      option,  at any time  beginning  180  calendar  days after the sale if the
      closing bid price of the class A common stock exceeds 200% of the exercise
      price for a period of 30 consecutive trading days. The redemption price is
      ten cents per  warrant.  The Company is  required  to file a  registration
      statement on Form S-3, within 75 days of the sale,  covering the resale of
      these  shares of class A common  stock,  including  the  shares of class A
      common stock issuable upon exercise of these warrants.

      In  connection  with the private  placement  the Company  incurred fees of
      $152,111.  Of such fees, $35,000 will be paid in cash and $117,511 will be
      paid by  issuing  warrants  to  purchase  50,000  shares of class A common
      stock. The warrants will have  substantially the same terms and conditions
      as the warrants issued in the private placement.


5.    CONTINGENCY

      In October 2000,  Thomas Lipscomb,  a former President and Chief Executive
      Officer of the Company,  commenced an action against Alan Alpern, a former
      officer of the Company,  and against Arthur Medici, a former officer and a
      current director of the Company,  in the Supreme Court of the State of New
      York, County of New York. In the action,  Mr. Lipscomb claims that Messrs.
      Alpern and Medici tortuously interfered with his employment agreement with
      the  Company.  Mr.  Lipscomb  seeks  compensatory  damages of $672,000 and
      punitive  damages of $1  million.  Both  Messrs.  Alpern  and Medici  have
      requested  that the Company  indemnify  them pursuant to its by-laws.  The
      Company  is  currently  considering  such  requests.  It is the  Company's
      understanding  that both  Messrs.  Alpern and Medici  intend to defend the
      action  vigorously.  The Company is unable to predict the ultimate outcome
      of this claim since this action is in its preliminary stage.

      Subsequently,  by Demand for  Arbitration  dated  November 30,  2001,  Mr.
      Lipscomb  commenced an arbitration  against the Company arising out of the
      same alleged breach of his employment agreement that formed the underlying
      basis for his suit against Messrs.  Alpern and Medici. In the arbitration,
      Mr.  Lipscomb  seeks  recovery  of  $751,000  before  interest,  costs and
      attorneys' fees. The Company intends to defend the arbitration  vigorously
      and is unable to predict the ultimate outcome of this claim.


6.    CONCENTRATION OF CREDIT RISK

      For the quarter ended October 31, 2001, no single  customer  accounted for
      more than 10% of revenue.  One customer  accounted  for 19% of revenue for
      the quarter ended October 31, 2000.

      No single customer  accounted for more than 10% of accounts  receivable as
      of October 31, 2001 and 2000.


                                       8
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Financial Statements
October 31, 2001


7.    BUSINESS SEGMENT INFORMATION

      The Company has three operating  segments.  These three operating segments
      are:

      ICC.NET service - Our ICC.NET service, the company's global Internet-based
      value  added  network,  or VAN,  uses  the  Internet  and our  proprietary
      technology to deliver our  customers'  documents and data files to members
      of their trading communities, many of which may have incompatible systems,
      by  translating  the documents and data files into any format  required by
      the receiver.

      Service  Bureau - Our service  bureau  manages and  translates the data of
      small and mid-sized  companies that exchange EDI data with large companies
      and provides  various EDI and UPC (universal  product code) services.  Our
      services bureau also licenses EDI software.

      Professional   Services  -  Our  professional  services  segment  provides
      comprehensive business-to-business electronic commerce solutions including
      electronic  commerce  infrastructure  solutions and data mapping services.
      Our   professional   services   segment   also   conducts   a  series   of
      product-independent one-day EDI seminars for electronic commerce users.

      The table below  summarizes  information  about  operations and long-lived
      assets as of and for the three months ended October 31, 2001 and 2000.

<TABLE>
<CAPTION>
                                                                                  Service         Professional
                                                                ICC.NET            Bureau          services(A)         Total
                                                              -----------       -----------       ------------      -----------
<S>                                                           <C>               <C>                 <C>               <C>
      Three Months - October 31, 2001
      Revenues from external customers                        $ 1,567,750       $   419,588         1,058,589         3,045,927
                                                              ===========       ===========       ===========       ===========

      Operating loss                                           (1,202,061)          (14,094)         (932,472)       (2,148,627)
      Other income, net                                            67,312                --           (23,741)           43,571
                                                              -----------       -----------       -----------       -----------
                                                               (1,134,749)      $   (14,094)         (956,213)       (2,105,056)
                                                              ===========       ===========       ===========       ===========

      Supplemental segment information:
           Amortization and depreciation                      $   204,633       $    21,315       $   336,533       $   562,481
           Non-cash charges for stock-based compensation               --                --           131,979           131,979

      As of October 31, 2001
      Property and equipment, net                             $   917,680       $    59,122       $   735,081         1,711,883
      Software development costs, net                             177,972           283,438                --           461,410
      Goodwill, net                                                    --         2,194,067         1,710,617         3,904,684
      Other intangible assets, net                                     --                --         3,824,000         3,824,000
                                                              -----------       -----------       -----------       -----------
      Long lived assets, net                                  $ 1,095,652       $ 2,536,627       $ 6,269,698       $ 9,901,977
                                                              ===========       ===========       ===========       ===========
</TABLE>



                                       9
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Financial Statements
October 31, 2001


7.    BUSINESS SEGMENT INFORMATION (CONTINUED)

<TABLE>
<CAPTION>
                                                                                  Service       Professional
                                                                ICC.NET            Bureau        services(A)       Total
                                                              -----------       -----------     ------------    -----------
<S>                                                           <C>               <C>                 <C>         <C>
      Three Months - October 31, 2000
      Revenues from external customers                         $   905,160       $   411,225       $    --        1,316,385
                                                               ===========       ===========       =======      ===========

      Operating loss                                            (3,441,045)          (41,172)           --       (3,482,217)
      Other income, net                                            201,863                --            --          201,863
                                                               -----------       -----------       -------      -----------
                                                               $(3,239,182)      $   (41,172)      $    --      $(3,280,354)
                                                               ===========       ===========       =======      ===========

      Supplemental segment
      information:
           Amortization and depreciation                       $   140,576       $    60,832       $    --      $   201,408
           Non-cash charges for stock-based compensation           450,111                --            --          450,111

      As of October 31, 2000
      Property and equipment, net                                  986,448            79,931            --        1,066,379
      Software development costs, net                              415,268                --            --          415,268
      Goodwill, net                                                143,728         2,372,466            --        2,516,194
                                                               -----------       -----------       -------      -----------
      Long lived assets, net                                   $ 1,545,444       $ 2,452,397       $    --      $ 3,997,841
                                                               ===========       ===========       =======      ===========
</TABLE>

      (A) - The Company's professional services segment was acquired on
            November 6, 2000.


8.    GOODWILL - EFFECT OF ADOPTION OF SFAS 142

      The following table reports what net loss and loss per basic and diluted
      share would have been in all periods presented exclusive of goodwill
      amortization expense recognized in those periods.

                                                        Three Months Ended
                                                            October 31
                                                   ----------------------------
                                                       2001            2000
                                                   -----------      -----------
Reported net loss                                  $(2,105,056)     $(3,280,354)
Add back:  Goodwill amortization                            --          100,031
                                                   -----------      -----------
Adjusted net loss                                  $(2,105,056)      (3,180,323)
                                                   ===========      ===========

Reported basic and diluted loss per common share   $      (.22)     $      (.51)
Add back:  Goodwill amortization                            --              .01
                                                   -----------      -----------
Adjusted basic and diluted loss per share          $      (.22)     $      (.50)
                                                   ===========      ===========




                                       10
<PAGE>


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

      This Quarterly  Report on Form 10-Q contains a number of  "forward-looking
statements"  within the meaning of Section 27A of the Securities Act of 1933, as
amended (the "Securities  Act"), and Section 21E of the Securities  Exchange Act
of 1934, as amended (the "Exchange  Act").  Specifically,  all statements  other
than statements of historical  facts included in this Quarterly Report regarding
our financial position, business strategy and plans and objectives of management
for future  operations are  forward-looking  statements.  These  forward-looking
statements are based on the beliefs of management,  as well as assumptions  made
by and information currently available to management.  When used in this report,
the  words  "anticipate,"   "believe,"   "estimate,"  "expect,"  "may,"  "will,"
"continue" and "intend," and words or phrases of similar import,  as they relate
to our  financial  position,  business  strategy  and plans,  or  objectives  of
management,   are  intended  to  identify  forward-looking   statements.   These
"cautionary  statements"  reflect our current view with respect to future events
and are  subject  to risks,  uncertainties  and  assumptions  related to various
factors including, without limitation, those listed below the heading "Overview"
and  in  our  registration  statements  and  periodic  reports  filed  with  the
Securities  and Exchange  Commission  under the  Securities Act and the Exchange
Act.

      Although we believe that our expectations are reasonable, we cannot assure
you  that our  expectations  will  prove  to be  correct.  Based  upon  changing
conditions,  should any one or more of these risks or uncertainties materialize,
or should any underlying  assumptions  prove incorrect,  actual results may vary
materially  from  those  described  in this  quarterly  report  as  anticipated,
believed, estimated, expected or intended.

Overview

      We  are  a  leader  in  the   electronic   commerce   business-to-business
communication   services  market  that  provides  complete  electronic  commerce
infrastructure  solutions.  Our business operates in three segments: our ICC.Net
service, our professional services and our service bureau.

      Our ICC.NET  service,  the  Company's  global  Internet-based  value added
network, or VAN, uses the Internet and our proprietary technology to deliver our
customers'  documents  and data files to members of their  trading  communities,
many of which may have  incompatible  systems,  by translating the documents and
data files into any format required by the receiver. We believe that our ICC.NET
service has significant  advantages over  traditional  VANs, and email-based and
other  Internet-based  systems,  because our  service has a lower cost,  greater
transmission  speed  and  more  features,  including  authentication  and  audit
services.  Our  professional  services  segment  facilitates the development and
operations of comprehensive  business-to-business electronic commerce solutions.
Our  service  bureau  manages  and  translates  the data of small and  mid-sized
companies that exchange EDI data with large companies.

      Through  July 2000,  our  business  was  entirely  focused on our  ICC.NET
service.  During fiscal 2001, we made two acquisitions that enable us to offer a
more  complete  range of  services  and allow  our  customers  to  expand  their
electronic  commerce trading  communities and bridge their legacy systems to the
Internet.

      In August  2000,  we acquired  IDC through  which we acquired  our service
bureau.  IDC  is  engaged  in  the  development,   marketing,   sale  and  other
exploitation  of  business-to-business  EDI  standards-based   applications  for
standard-based  EDI exchange over VANs, private networks,  exchanges,  extranets
and the Internet.

      In November 2000, we completed the  acquisition of RTCI,  through which we
acquired our  professional  services  segment.  RTCI is an  electronic  commerce
infrastructure  solutions  company serving the  business-to-business  electronic
commerce market. RTCI helps its clients conduct business  electronically through
a continuum of services including eConsulting, data transformation mapping (EDI,
EAI, XML) and  internetworking.  RTCI has developed a business model that offers
remote service delivery,  fixed and value-based  pricing and reusable solutions.
Subsequent  to the  acquisition,  due to a reduction of the workforce of RTCI, a
steep decline in value of companies similar to RTCI,  continued operating losses
and a significant  reduction in the forecasted  future operating  profits of our
professional services segment,  management determined that triggering events had
occurred  related to certain  intangible  assets.  Projected  cash flow analysis
related to those  assets  determined  that the assets had been  impaired.  These
intangible  assets  were  written  down  to  fair  value  based  on the  related
discounted expected future cash flows in fiscal year 2001.


                                       11
<PAGE>


      Our revenues are derived from subscriptions to our ICC.NET service,  which
include  transaction,  mailbox and fax transmission  fees. The subscription fees
are comprised of both fixed and usage-based  fees. Fixed  subscription  fees are
recognized  on a pro-rata  basis over the  subscription  period.  Usage fees are
recognized  in the period the  services are  rendered.  The Company also derives
revenue through  implementation  fees and interconnection  fees.  Implementation
fees are  recognized  over the life of the  subscription  period,  generally one
year.  Interconnection  fees are fees  charged to connect to another VAN service
and are recognized when the data is transmitted to the connected service.

      We also provides a broad range of professional  services consisting of EDI
and electronic commerce consulting,  data mapping services and EDI education and
training at seminars  hosted by leading  universities  around the United States.
Revenue  from EDI and  e-commerce  consulting  and  education  and  training are
recognized  when the services are provided.  Revenue from data mapping  services
are  recognized  when the map has been  completed and delivered to the customer.
Revenues from fixed fee  professional  service  contracts are  recognized  using
contract accounting based on the estimated percentage of completion.

      We also  derive  revenue  from our  service  bureau.  Our  service  bureau
revenues are comprised of EDI services,  including  data  translation  services,
purchase order and invoice  processing from  EDI-to-print and print-to- EDI, UPC
services,  including UPC number  generation and UPC catalog  maintenance and UPC
label printing.  Our service bureau also derives revenue from software licensing
and provides  software  maintenance and support.  Revenues from our EDI services
and UPC services are  recognized  when the services are provided.  Revenues from
software  licenses are recognized when all of the following  conditions are met:
(1) a non-cancelable  non-contingent  license agreement has been signed; (2) the
software  product has been  delivered;  (3) there are no material  uncertainties
regarding customer acceptance; and (4) collection of the resulting receivable is
probable.   Revenues  from  software   maintenance  and  support  contracts  are
recognized ratably over the life of the contract.  Our software license revenues
were not significant in any of the periods presented.

      Deferred  revenue  is  comprised  of  deferrals  for  subscription   fees,
professional  services,  license fees and maintenance  associated with contracts
for which  amounts have been  received in advance of services to be performed or
prior to the shipment of software.

Results of Operations and Financial Condition

Three Months Ended October 31, 2001 Compared with Three Months Ended
October 31, 2000.

      Our revenue was  $3,046,000  in the quarter  ended October 31, 2001 ("2002
Quarter") and $1,316,000 in the quarter ended October 31, 2000 ("2001 Quarter").
Revenue  related  to our  ICC.NET  service  was  $1,568,000,  or 51% of the 2002
Quarter  revenue.  Our ICC.NET  service revenue  increased  $663,000 in the 2002
Quarter compared to the 2001 Quarter. The 2001 Quarter includes $250,000 of fees
from Triaton GmbH, a subsidiary of ThyssenKrupp Information Services GmbH, under
a Joint Services  Agreement dated July 28, 2000. No such fees were recognized in
the 2002 Quarter.  Transaction fees from our ICC.NET service increased  $815,000
as a result of a larger billable  customer base and increased  volume usage from
additional  customers.  Revenue  in the amount of  $420,000,  or 13% of the 2002
Quarter  revenue,  was generated from our service bureau compared to $411,000 in
the 2001 Quarter.  The service bureau's revenue was primarily generated from the
services performed,  customer support and licensing fees. Professional services,
acquired in November 2000, accounted for $1,059,000, or approximately 35% of the
2002 Quarter revenue.  Revenue generated from professional  services consists of
consulting, custom solutions and mapping services.

      Cost  of  services  increased  to  $2,482,000  in the  2002  Quarter  from
$1,059,000 in the 2001 Quarter. Cost of services relating to our ICC.NET service
was  $934,000,  or 60% of revenue  derived from the service in the 2002 Quarter,
versus  $899,000,  or 99% of revenue in the 2001 Quarter.  Salaries and employee
benefits  related to the  ICC.NET  service  increased  $149,000.  Data lines and
support increased $37,000,  depreciation and amortization  decreased $26,000 and
consulting fees decreased $88,000 in the 2002 Quarter from the 2001 Quarter.  We
anticipate  that our  ICC.NET  cost of  services  will  continue to decline as a
percentage  of revenue in future  periods due to  increased  utilization  of our
existing  communications  infrastructure  as we expect the use of our service to
increase.  Cost of services relating to our service bureau totaled $236,000,  or
56% of revenue  derived from the service bureau in the 2002 Quarter  compared to
$160,000, or 39% of revenue derived from the service bureau in the 2001 Quarter.
Consulting fees increased $40,000 and salaries and employee benefits relating to
our service bureau increased $36,000.  Cost of services relating to professional
services were $1,311,000,  or 124% of revenue derived from


                                       12
<PAGE>


professional  services  in the 2002  Quarter.  Salaries  and  employee  benefits
relating to our  professional  services were $496,000 and  consulting  fees were
$235,000  in  the  2002  Quarter.   Other  cost  of  services  relating  to  our
professional  services included amortization of acquired intangibles relating to
proprietary technology in the amount of $238,000.

      Product  development and enhancement  costs related to the maintenance and
improvement  of our  products  and  services  increased  to $245,000 in the 2002
Quarter  from  $152,000  in  the  2001  Quarter.  Product  and  development  and
enhancement  costs  related to our  ICC.NET  service  were  $199,000 in the 2002
Quarter compared to $58,000 in the 2001 Quarter.  Consulting fees related to our
ICC.NET service decreased  $30,000 and salaries and employee benefits  increased
$200,000.  Product  development  and  enhancement  costs incurred by our service
bureau were $45,000 in the 2002 Quarter versus $95,000 in the 2001 Quarter.  The
decrease  was  primarily  attributable  to a decrease in salaries  and  employee
benefits of $22,000 and a decrease in consulting fees of $31,000.

      Selling and marketing  expenses  decreased to $976,000 in the 2002 Quarter
from $1,178,000 in the 2001 Quarter.  Selling and marketing  expenses related to
our ICC.NET service were $725,000 in the 2002 Quarter  compared to $1,154,000 in
the 2001 Quarter.  Salaries and employee benefits related to our ICC.NET service
decreased  $177,000,  consulting  fees  decreased  $86,000,  travel,  meals  and
entertainment  decreased $83,000 and advertising decreased $38,000.  Selling and
marketing  expenses  related  to our  service  bureau  were  $29,000 in the 2002
Quarter compared to $24,000 in the 2001 Quarter.  Selling and marketing expenses
related to professional  services were $221,000 in the 2002 Quarter,  which were
comprised primarily of salaries and related expenses of $183,000.

      General and  administrative  costs  decreased  to  $1,360,000  in the 2002
Quarter from $1,959,000 in the 2001 Quarter. General and administrative expenses
supporting  our ICC.NET  service  decreased to $912,000 in the 2002 Quarter from
$1,785,000 in the 2001 Quarter. Salaries and related employee benefits decreased
$557,000  primarily due to a decrease in personnel.  Legal and professional fees
decreased  $230,000,   consulting  fees  decreased  $114,000,   recruiting  fees
decreased $87,000 and insurance  increased  $39,000.  General and administrative
expenses  supporting  our  service  bureau  were  $123,000  in the 2002  Quarter
compared to $174,000 in the 2001 Quarter.  General and  administrative  expenses
supporting our professional services in the 2002 Quarter accounted for $325,000,
which was  comprised  primarily of salaries  and employee  benefits of $177,000,
communication  expenses  of $30,000,  facility  charges of $25,000 and legal and
professional services of $22,000.

      Non-cash charges for  compensation  and services  decreased to $132,000 in
the 2002 Quarter from  $450,000 in the 2001  Quarter.  In the 2002  Quarter,  we
recognized  $132,000 of  stock-based  compensation  expenses  related to assumed
unvested  restricted  shares  issued to RTCI  employees in  connection  with our
acquisition  of RTCI. In March 2000,  ICC granted an option to purchase  100,000
shares of class A common stock pursuant to a consulting  agreement with a former
executive officer and board member. Non-cash charges for this option amounted to
$450,000 in the 2001 Quarter.

      Interest and  investment  income  decreased to $73,000 in the 2002 Quarter
from  $218,000 in the 2001  Quarter.  The decrease was due to lower average cash
balances in the 2002 Quarter compared to the 2001 Quarter.

Liquidity and Capital Resources

      Current  assets  increased  to  $6,341,000  as of  October  31,  2001 from
$4,879,000 as of July 31, 2001. The increase was primarily due to an increase in
cash and cash equivalents of $1,282,000,  a decrease in marketable securities of
$242,000,  an  increase in accounts  receivable  of $213,000  and an increase in
prepaid and other assets of $210,000.  The increase in cash and cash equivalents
was  principally  due to gross  proceeds of $3,189,000  received from an October
2001 private placement and sales of marketable  securities of $247,000 offset by
net cash used in operating  activities of  $2,005,000.  The increase in accounts
receivable  is due to  increased  business  activity  and a slower than  average
collection cycle during the three months ended October 31, 2001. The increase in
prepaid  expenses  and other  current  assets  is  primarily  attributable  to a
receivable due from a former employee that will be paid in January 2002 upon the
transfer of 23,684 shares of class A common stock held by that individual to the
Company.

      Total  liabilities  decreased  to  $4,354,000  as of October 31, 2001 from
$4,487,000 as of July 31, 2001.

      At October 31, 2001, working capital increased to $2,244,000 from $646,000
at July 31, 2001.  The increase was the result of proceeds from the October 2001
private placement offset by continuing operating losses.


                                       13
<PAGE>


      We have financed our operations  through private  placements during fiscal
1994,  our initial  public  offering  during fiscal 1995 (the "IPO"),  a private
placement in March 1997, a private  placement of bridge note units during fiscal
1998 and 1999, a private  placement  of series A preferred  stock in April 1999,
private  placements  of our class A common stock,  series C preferred  stock and
warrants in November  1999 and a private  placement  of our class A common stock
and warrants in October  2001. We anticipate  losses  through  fiscal 2002 as we
continue to expand the  commercial  markets for our ICC.NET  service and service
bureau.

      Our  principal  sources of  liquidity,  which  consisted  of cash and cash
equivalents and marketable securities, increased to $3,930,000 as of October 31,
2001 from $2,889,000 as of July 31, 2001. Net cash used in operating  activities
was $2,005,000 for the 2002 Quarter compared to $3,062,000 for the 2001 Quarter.
The decrease in cash used in operating  activities  was  primarily the result of
the  decreased  operating  losses.  Cash flows from  investing  activities  were
$150,000 in the 2002 Quarter compared to $177,000  provided by the 2001 Quarter.
The decrease in cash flows from  investing  activities  was primarily due to the
proceeds from the sale of marketable  securities of $247,000 offset by additions
to  software  development  costs of $95,000 in the 2002  Quarter and in the 2001
Quarter we received  net cash of $293,000 for the  acquisition  of IDC offset by
the  purchase  of  $103,000  of property  and  equipment.  Net cash  provided by
financing  activities  was  $3,137,000  in the 2002 Quarter  compared to $73,000
provided by  financing  activities  in the 2001  Quarter.  The cash  provided by
financing  activities  in the 2002 quarter was  primarily the result of proceeds
from the October 2001 private  placement  described below. No such  transactions
occurred in the 2001 Quarter.

      In October 2001, we sold in a private placement  1,159,716 shares of class
A common stock and  warrants to purchase  347,915  additional  shares of class A
common stock for gross  proceeds of $3,189,219.  The warrants  expire in October
2006 and are exercisable at $3.58 per share,  subject to adjustment  pursuant to
customary antidilution adjustments for stock splits, dividends and combinations.
In connection with the private  placement the Company incurred fees of $152,111.
Of such fees,  $35,000  will be paid in cash and  $117,511  will paid by issuing
warrants to purchase  50,000 shares of class A common  stock.  The warrants will
have  substantially  the same terms and conditions as the warrants issued in the
private placement.

      As of October 31, 2001, we had cash and cash  equivalents  and  marketable
securities of $3,930,000.  We believe these resources provide us with sufficient
liquidity to continue in operation through July 31, 2002.  However,  if our cost
reductions do not achieve sufficient savings, if our expenses increase more than
anticipated,  if our  revenue  does  not  increase  as  anticipated  because  of
competitive or other reasons or if our accounts receivable  increases further as
a result of a further  lengthening of the collection  cycle,  our cash resources
may not be sufficient and we will require additional financing.  There can be no
assurances  that the terms of any financing  will be available or that the terms
will be acceptable to us, or that any financing will be consummated.

      We have a net operating loss  carryforward of approximately $72 million to
offset future taxable income for federal income tax purposes. The utilization of
the loss  carryforward to reduce any such future income taxes will depend on our
ability to generate sufficient taxable income prior to the expiration of the net
operating loss  carryforwards.  The carryforward  expires from 2007 to 2021. The
Internal  Revenue  Code of 1986,  as amended,  and the  regulations  promulgated
thereunder  contain  provisions  which limit the use of available  net operating
loss  carryforwards in any given year should  significant  changes (greater than
50%) in  ownership  interests  occur.  Due to the IPO,  the net  operating  loss
carryover of approximately  $1.9 million incurred prior to the IPO is subject to
an annual  limitation of  approximately  $400,000  until that portion of the net
operating loss is utilized or expires.  Due to the private placement of series A
preferred stock in April 1999, the net operating loss carryover of approximately
$18  million  incurred  prior to the private  placement  is subject to an annual
limitation of  approximately  $1 million until that portion of the net operating
loss is utilized or expires.  Also, due to a 100% ownership  change of RTCI, the
acquired net operating loss of approximately  $6.5 million incurred prior to the
ownership  change is  subject  to an annual  limitation  of  approximately  $1.4
million until that portion of the net operating loss is utilized or expires.

      In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations"  and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
all business  combinations  subsequent  to June 30, 2001, be accounted for under
the purchase method of accounting. SFAS No.141 also requires that the fair value
of an assembled  workforce acquired be included in the amount initially recorded
as goodwill.  The Company  reclassified  $1,710,617  initially recorded as other
intangible  assets  related  to the  value of the  workforce  into  goodwill  as
required  by  this  statement.   SFAS  No.  142  requires  that  upon  adoption,
amortization of goodwill will cease; and instead, the carrying value of goodwill
will be evaluated for  impairment  on at least an annual basis.  SFAS No. 142 is
effective  for fiscal years  beginning  after  December 15, 2001;  however,  the
Company has adopted this  standard as of the  beginning of its 2002 fiscal year,
August 1, 2001.  The  adoption  of this  standard  resulted  in a  reduction  of
amortization  expense in the amount of $136,484  during the three  months  ended
October 31, 2001, as compared to the fourth  quarter of fiscal 2001,  due to the
suspension  of goodwill  amortization.  In  addition,  the Company  will need to
evaluate goodwill for impairment within six months.


                                       14
<PAGE>


      In  October  2001,  the FASB  issued  SFAS No.  144,  "Accounting  for the
Impairment or Disposal of Long-Lived  Assets." SFAS No. 144 supercedes  SFAS No.
121,  "Accounting  for the  Impairment of Long-Lived  Assets and for  Long-Lived
Assets to be  Disposed  Of." SFAS No. 144  addresses  financial  accounting  and
reporting for the impairment or disposal of long-lived assets. The provisions of
SFAS No. 144 are effective for fiscal years  beginning  after December 15, 2001.
The  Company is  required  to adopt SFAS No. 144 by the first  quarter of fiscal
2003. The Company is currently  evaluating the potential  impact of SFAS No. 144
on its results of operations and financial position.

Item 3:     Quantitative and Qualitative Disclosures About Market Risk

      During the first quarter ended October 31, 2001, there were no significant
changes related to the Company's market risk exposure.


PART II.    OTHER INFORMATION

Item 2:     Changes in Securities and Use of Proceeds

      On October 29, 2001, the Company sold  1,159,716  shares of class A common
stock and warrants to purchase  347,915 shares of class A common stock for gross
proceeds of $3,189,219.  The warrants are  immediately  exercisable  and have an
exercise price of $3.58 per share.  The warrants are exercisable for a five year
period.  The  Company  may  redeem  the  warrants,  at its  option,  at any time
beginning 180 calendar days after the sale if the closing bid price of the class
A common  stock  exceeds  200% of the  exercise  price  for a period  of  thirty
consecutive  trading days.  The  redemption  price is ten cents per warrant.  We
intend to use the proceeds from this private  placement to fund operations.  The
securities  described in this section  were issued by ICC in a  transaction  not
involving a public offering,  to investors that made  representations  that they
were  "accredited"  investors who were purchasing the securities with investment
intent and not with an intent to distribute the securities.  The issuance of the
securities was exempt from registration under Section 4(2) of the Securities Act
of 1933, as amended.

Item 6:     Exhibits and Reports on Form 8-K

(a)         Exhibits.
            --------

            None.


(b)         Reports on Form 8-K
            --------------------

            On  September  24,  2001,  we filed a Current  Report on Form 8-K to
            report the resignation of a director of the Company.







                                       15
<PAGE>


                                   SIGNATURES


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


INTERNET COMMERCE CORPORATION
-----------------------------
(Registrant)



Date: December 17, 2001        By: /s/ Walter M. Psztur
                                   --------------------------------------------
                                   Walter M. Psztur
                                   Chief Financial Officer
                                   (Principal Financial and Accounting Officer)







                                       16