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

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 MARCH 31, 2002

                        COMMISSION FILE NUMBER 0-020992
                                 ______________

                             INSIGHTFUL CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)


                 DELAWARE                                04-2842217
     (STATE OR OTHER JURISDICTION OF                  (I.R.S. EMPLOYER
      INCORPORATION OR ORGANIZATION)                   IDENTIFICATION)


      1700 WESTLAKE AVENUE NORTH, SUITE 500 SEATTLE, WASHINGTON 98109-3044
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (206) 283-8802
               REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
                                 ______________

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
                                (TITLE OF CLASS)
                                 ______________

     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 May 9, 2002, there were 11,441,884 shares of Common Stock, $.01 par value
per share outstanding.

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


<PAGE>
<TABLE>
<CAPTION>
                                             TABLE OF CONTENTS



PART I.     FINANCIAL INFORMATION                                                                      Page
<S>         <C>                                                                                        <C>
  ITEM 1.   Consolidated Financial Statements (Unaudited)

              Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001. . . . . . . . . .   1

              Consolidated Statements of Operations for the three months ended March 31, 2002 and 2001.   2

              Consolidated Statements of Cash Flows for the three months ended March 31, 2002 and 2001.   3

              Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . .   4

  ITEM 2.   Management's Discussion and Analysis of Financial Condition and Results of Operations . . .   9

  ITEM 3.   Quantitative and Qualitative Disclosure of Market Risk. . . . . . . . . . . . . . . . . . .  22

PART II.    OTHER INFORMATION

  ITEM 1.   Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

  ITEM 2.   Changes in Securities and Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . .  23

  ITEM 4.   Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . .  23

  ITEM 5.   Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

  ITEM 6.   Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  23

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  25
</TABLE>


                                        i
<PAGE>
PART I.     FINANCIAL INFORMATION

ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                INSIGHTFUL CORPORATION AND SUBSIDIARIES

                                      CONSOLIDATED BALANCE SHEETS
                                              (UNAUDITED)


                                                                            MARCH 31,     DECEMBER 31,
                                                                              2002            2001
                                                                          -------------  --------------
<S>                                                                       <C>            <C>
                                ASSETS
Current Assets:
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . .   $  5,883,723   $   6,277,869
  Accounts receivable, net. . . . . . . . . . . . . . . . . . . . . . .      3,249,605       3,688,022
  Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . .      1,000,247       1,003,412
  Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .        127,712          70,406
  Prepaid expenses. . . . . . . . . . . . . . . . . . . . . . . . . . .        717,601         252,962
                                                                          -------------  --------------
        Total current assets. . . . . . . . . . . . . . . . . . . . . .     10,978,888      11,292,671

                                                                             1,921,879       2,052,374
Property and Equipment, net
Goodwill, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      2,024,272       1,874,124
Other Intangibles, net. . . . . . . . . . . . . . . . . . . . . . . . .        379,451         374,172
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         83,175         101,495
                                                                          -------------  --------------
                                                                          $ 15,387,665   $  15,694,836
                                                                          =============  ==============


                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Current portion of capital lease obligations and equipment financings   $     20,860   $      44,163
  Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . .        948,639       1,374,665
  Accrued expenses and other current liabilities. . . . . . . . . . . .      2,464,613       3,021,100
  Deferred revenue. . . . . . . . . . . . . . . . . . . . . . . . . . .      3,942,602       3,818,258
                                                                          -------------  --------------
        Total current liabilities . . . . . . . . . . . . . . . . . . .      7,376,714       8,258,186

Capital Lease Obligations and Equipment Financings, less current portion       178,577               -
Commitments and contingencies
Stockholders' Equity:
  Preferred stock, $0.01 par value-
  Authorized-1,000,000 shares
  Issued and outstanding-none . . . . . . . . . . . . . . . . . . . . .              -               -
  Common stock, $0.01 par value-
    Authorized-20,000,000 shares
    Issued and outstanding-11,424,965 and 11,326,441, shares at . . . .        114,250         113,264
      March 31, 2002 and December 31, 2001, respectively
  Additional paid-in capital. . . . . . . . . . . . . . . . . . . . . .     34,100,468      33,866,997
  Deferred stock-based compensation . . . . . . . . . . . . . . . . . .       (337,710)       (382,145)
  Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . .    (26,015,469)    (25,799,723)
  Subscription receivable from director . . . . . . . . . . . . . . . .              -        (380,843)
  Cumulative translation adjustment . . . . . . . . . . . . . . . . . .        (29,165)         19,100
                                                                          -------------  --------------
                                                                             7,832,374       7,436,650
                                                                          -------------  --------------
        Total stockholders' equity. . . . . . . . . . . . . . . . . . .   $ 15,387,665   $  15,694,836
                                                                          =============  ==============


    The accompanying notes are an integral part of these consolidated financial
                                  statements.
</TABLE>


                                        1
<PAGE>
<TABLE>
<CAPTION>
                               INSIGHTFUL CORPORATION AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF OPERATIONS
                                             (UNAUDITED)


                                                                     THREE MONTHS ENDED MARCH 31,
                                                                  ----------------------------------
                                                                        2002              2001
                                                                  ----------------  ----------------
<S>                                                               <C>               <C>
Revenues:
  Software related:
    Software licenses. . . . . . . . . . . . . . . . . . . . . .  $     1,559,251   $     1,810,228
    Software maintenance . . . . . . . . . . . . . . . . . . . .        1,326,931         1,288,611
                                                                  ----------------  ----------------
      Total software related revenue . . . . . . . . . . . . . .        2,886,182         3,098,839
Professional services and other. . . . . . . . . . . . . . . . .        1,505,092         1,005,582
                                                                  ----------------  ----------------
      Total revenues . . . . . . . . . . . . . . . . . . . . . .        4,391,274         4,104,421
                                                                  ----------------  ----------------
Cost of Revenues:
  Software related . . . . . . . . . . . . . . . . . . . . . . .          343,196           482,814
  Professional services and other. . . . . . . . . . . . . . . .        1,155,254           870,418
                                                                  ----------------  ----------------
      Total cost of revenues . . . . . . . . . . . . . . . . . .        1,498,450         1,353,232
                                                                  ----------------  ----------------
      Gross profit . . . . . . . . . . . . . . . . . . . . . . .        2,892,824         2,751,189
                                                                  ----------------  ----------------
Operating Expenses:
  Sales and marketing. . . . . . . . . . . . . . . . . . . . . .        1,713,775         1,389,513
  Research and development . . . . . . . . . . . . . . . . . . .        2,018,990         1,895,019
  Less-Funded research . . . . . . . . . . . . . . . . . . . . .       (1,254,582)       (1,356,000)
                                                                  ----------------  ----------------
      Research and development, net. . . . . . . . . . . . . . .          764,408           539,019
  General and administrative . . . . . . . . . . . . . . . . . .          580,713           722,654
  Amortization of goodwill and other intangibles . . . . . . . .           45,012            16,426
  Amortization of stock-based compensation . . . . . . . . . . .           44,435                 -
                                                                  ----------------  ----------------
      Total operating expenses . . . . . . . . . . . . . . . . .        3,148,343         2,667,612
                                                                  ----------------  ----------------
      Income (loss) from continuing operations . . . . . . . . .         (255,519)           83,577
Interest and Other Income. . . . . . . . . . . . . . . . . . . .           54,579           107,469
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . .           (3,138)           (5,984)
                                                                  ----------------  ----------------
  Income (loss) before income taxes. . . . . . . . . . . . . . .         (204,078)          185,062
Income tax expense . . . . . . . . . . . . . . . . . . . . . . .           11,668             9,585
                                                                  ----------------  ----------------
  Income (loss) from continuing operations . . . . . . . . . . .         (215,746)          175,477
Discontinued Operations:
  Loss from discontinued operations, net of tax. . . . . . . . .                -          (737,411)
  Gain on disposal of discontinued operations, net of tax. . . .                -         3,492,663
                                                                  ----------------  ----------------
      Net income (loss). . . . . . . . . . . . . . . . . . . . .  $      (215,746)  $     2,930,729
                                                                  ================  ================
Basic and Diluted Income (Loss) per Share-Continuing Operations.  $         (0.02)  $          0.02
                                                                  ================  ================
Basic Income (Loss) per Share-Discontinued Operations. . . . . .  $          0.00   $          0.26
                                                                  ================  ================
Diluted Income (Loss) per Share-Discontinued Operations. . . . .  $          0.00   $          0.25
                                                                  ================  ================
Basic Net Income (Loss) per Share. . . . . . . . . . . . . . . .  $         (0.02)  $          0.28
                                                                  ================  ================
Diluted Net Income (Loss) per Share. . . . . . . . . . . . . . .  $         (0.02)  $          0.27
                                                                  ================  ================
Weighted Average Number of Common Shares Outstanding . . . . . .       11,188,635        10,706,586
                                                                  ================  ================
Weighted Average Number Common Shares Outstanding Assuming
  Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . .       11,188,635        10,818,538
                                                                  ================  ================


    The accompanying notes are an integral part of these consolidated financial
                                  statements.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                  INSIGHTFUL CORPORATION AND SUBSIDIARIES

                                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (UNAUDITED)


                                                                            THREE MONTHS ENDED MARCH 31,
                                                                         ----------------------------------
                                                                               2002              2001
                                                                         ----------------  ----------------
<S>                                                                      <C>               <C>
Operating Activities:
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . .   $      (215,746)  $     2,930,729
  Less-Income from discontinued operations . . . . . . . . . . . . . .                 -         2,755,252
                                                                         ----------------  ----------------
        Income (loss) from continuing operations . . . . . . . . . . .          (215,746)          175,477
  Adjustments to reconcile net income (loss) from continuing
    operations to net cash provided by operating activities-
    Depreciation and amortization  . . . . . . . . . . . . . . . . . .           336,004           167,646
    Currency translation adjustment. . . . . . . . . . . . . . . . . .           (50,725)           67,176
    Changes in current assets and liabilities:
      Accounts and other receivables . . . . . . . . . . . . . . . . .           441,582           501,431
      Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . .           (57,306)           45,987
      Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . .          (464,639)         (540,576)
      Accounts payable . . . . . . . . . . . . . . . . . . . . . . . .          (426,026)          403,291
      Accrued expenses, payroll and other current liabilities. . . . .          (458,254)         (339,926)
      Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . .           124,344          (286,762)
                                                                         ----------------  ----------------
        Net cash (used in) provided by continuing operating activities          (770,766)          193,744
                                                                         ----------------  ----------------
Investing Activities:
  Purchases of property and equipment. . . . . . . . . . . . . . . . .          (116,062)         (212,197)
  Decrease (increase) in other assets. . . . . . . . . . . . . . . . .            18,320           (65,510)
  Capitalized patent costs . . . . . . . . . . . . . . . . . . . . . .           (22,030)                -
  Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . .          (175,949)                -
                                                                         ----------------  ----------------
        Net cash used in investing activities. . . . . . . . . . . . .          (295,721)         (277,707)
                                                                         ----------------  ----------------
Financing Activities:
  Payments on capital lease obligations and equipment financings . . .           (23,303)           (6,936)
  Cash received on subscription receivable from director . . . . . . .           380,843                 -
  Proceeds from equipment financings . . . . . . . . . . . . . . . . .           178,577                 -
  Proceeds from exercise of stock options, and employee stock
     purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . .           234,457            49,684
                                                                         ----------------  ----------------
        Net cash provided by financing activities. . . . . . . . . . .           770,574            42,748
                                                                         ----------------  ----------------
Net cash (used in) provided by continuing operations . . . . . . . . .          (295,913)           41,215
                                                                         ----------------  ----------------
Net cash (used in)provided by discontinued operations. . . . . . . . .           (98,233)        6,191,747
                                                                         ----------------  ----------------
Net (Decrease) Increase in Cash and Cash Equivalents . . . . . . . . .          (394,146)        6,150,532
                                                                         ----------------  ----------------
Cash and Cash Equivalents, beginning of Period . . . . . . . . . . . .         6,277,869         3,745,112
                                                                         ----------------  ----------------
Cash and Cash Equivalents, end of Period . . . . . . . . . . . . . . .   $     5,883,723   $     9,895,644
                                                                         ================  ================
Supplemental Disclosure of Cash Flow Information:
  Cash paid  for:
    Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   $         3,138   $         5,984
                                                                         ================  ================
    Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .   $        11,668   $         9,585
                                                                         ================  ================


    The accompanying notes are an integral part of these consolidated financial
                                  statements.
</TABLE>


                                        3
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
                                 MARCH 31, 2002


(1)  DESCRIPTION OF BUSINESS

     CONTINUING  OPERATIONS

     Insightful Corporation and subsidiaries ("Insightful") provides enterprises
with scalable data analysis solutions that drive decisions by revealing
patterns, trends and relationships.  Insightful is a supplier of software and
services for statistical data mining, business analytics, knowledge management,
and information retrieval enabling clients to gain intelligence from numerical
data, text, and images.

     Insightful products, including InFact(TM), Insightful Miner, S-PLUS(R),
StatServer(R), S-PLUS Analytic Server(TM) and VisiMine(TM) play a key role in
data warehousing and business intelligence initiatives by delivering analytical
tools and graphical reports that convert data into insight. Insightful also
provides consulting, application development outsourcing, data integration and
training focused on data analysis and predictive modeling. Insightful consulting
services provide specialized expertise and proven processes for the design,
development and deployment of customized solutions.

     The Company has been delivering solutions for fifteen years to companies in
financial services, pharmaceuticals, biotechnology, telecommunications,
manufacturing, plus government and research institutions.

     Headquartered in Seattle, Insightful has offices in New York City, North
Carolina, France, Germany, Switzerland, and the United Kingdom with distributors
around the world.

     DISCONTINUED  OPERATIONS

     On January 23, 2001,Insightful sold the operations of its Engineering and
Education Products Division (EEPD). The assets of EEPD were transferred to a
newly created wholly owned subsidiary and then sold to a third party for cash
proceeds of $7,000,000. The sale of EEPD resulted in a gain of $3,492,663 for
the three months ended March 31, 2001, after taking into account net assets
transferred and certain liabilities arising from the transaction including
severance and transaction costs. The liabilities included accruals related to a
contingency resulting from the disposition.  As of March 31, 2002, approximately
$360,000 remains in accrued liabilities related to this contingency.  The
contingency is expected to be resolved no later than December 31, 2002.

     The results of EEPD are presented on a net basis in the accompanying
consolidated statements of operations as discontinued operations.

     Components of income (loss) from discontinued operations are as follows:

<TABLE>
<CAPTION>
                                          THREE MONTHS
                                         ENDED MARCH 31,
                                              2001
                                        -----------------
<S>                                     <C>
     Revenues. . . . . . . . . . . . .  $         74,000
     Costs and Expenses. . . . . . . .         ( 811,000)
                                        -----------------
     Loss from Discontinued Operations  $       (737,000)
                                        =================
</TABLE>


(2)  SIGNIFICANT  ACCOUNTING  POLICIES

     (a)  UNAUDITED INTERIM FINANCIAL INFORMATION

     The accompanying unaudited consolidated condensed financial statements have
been prepared by Insightful Corporation (or the "Company") pursuant to United
States generally accepted accounting principles and the rules and regulations of
the Securities and Exchange Commission regarding interim financial reporting.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements
and should be read in conjunction with the consolidated financial statements and
notes thereto for the fiscal year ended December 31, 2001 included in the
Company's Annual Report on Form 10K.  The accompanying consolidated condensed
financial statements reflect all adjustments (consisting solely of normal,
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of results for the interim periods presented.  The results of
operations for the three-month period ended March 31, 2002 are not necessarily
indicative of the results to be expected for the entire fiscal year.


                                        4
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  - (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 2002

     (b)  PRINCIPLES OF CONSOLIDATION

     The accompanying consolidated financial statements include the accounts of
Insightful and its wholly owned subsidiaries. All intercompany accounts and
transactions have been eliminated in consolidation.


     (c)  REVENUE RECOGNITION

     Insightful records revenue in accordance with Statement of Position (SOP)
No. 97-2, Software Revenue Recognition, as amended by SOP No. 98-9, Software
Revenue Recognition, with Respect to Certain Transactions and related
interpretations including Technical Practice Aids. License revenue consists
principally of revenue earned under fixed-term and perpetual software license
agreements and is generally recognized upon shipment of the software if
collection of the resulting receivable is probable, the fee is fixed or
determinable, undelivered elements are not deemed essential, and vendor-specific
objective evidence exists for all undelivered elements. Revenues under such
arrangements, which may include several different software products and services
sold together, are allocated based on the residual method in accordance with SOP
No. 98-9. Under the residual method, the fair value of the undelivered elements
is deferred and subsequently recognized when earned. Insightful has established
vendor specific objective evidence for professional services, training and
maintenance and support services. Vendor-specific objective evidence is based on
the price charged when an element is sold separately or, in case of an element
not yet sold separately, the price established by authorized management, if it
is probable that the price, once established, will not change before market
introduction. Standard terms for license agreements typically call for payment
within 30 days. Probability of collection is based upon the assessment of the
customer's financial condition through the review of their current financial
statements or credit reports. For existing customers, prior payment history is
also used to evaluate probability of collection. Insightful provides for
estimated returns at the time of sale.

     Insightful offers maintenance contracts and training on certain of its
products. Maintenance revenue is recognized ratably over the term of the related
contracts, generally one year. Consulting revenues are primarily related to
implementation services performed on a time-and-materials basis under separate
service arrangements. Revenues from consulting and training services are
recognized as services are performed. Standard terms for renewal of customer
support contracts, consulting services and training call for payment within 30
days.

     Fees from licenses sold together with consulting are generally recognized
upon shipment of the software, provided that the above criteria are met, payment
of the license fees are not dependent upon the performance of the services, and
the consulting services are not essential to the functionality of the licensed
software. If the services are essential to the functionality of the software, or
payment of the license fees are dependent upon the performance of the services,
both the software license and consulting fees are recognized under the
percentage of completion method of contract accounting. All sales made through
indirect channels including value added resellers, or VARs, and distributors are
accounted for using the sell-through method.

     If the fee is not fixed or determinable, revenue is recognized as payments
become due from the customer. If an acceptance period is required, revenues are
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period.

     Amounts received in advance for maintenance agreements are recorded as
deferred revenue on the accompanying consolidated balance sheets.


     (d)  RECLASSIFICATION OF AMOUNTS

     Certain prior year amounts have been reclassified to conform to the current
year presentation.


(3)  CHANGE  IN  ACCOUNTING  FOR  GOODWILL  AND  CERTAIN  OTHER  INTANGIBLES

     In July 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standard No. 141, "Business Combinations," and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 prospectively
prohibits the pooling of interest method of accounting for business
combinations, and broadens the criteria for recording intangible assets separate
from goodwill. SFAS 141 was effective for all business combinations after June
30, 2001. SFAS No. 142 discontinues amortization of goodwill and other
intangible assets unless they have finite useful lives, and, instead,
establishes a new method of testing goodwill for impairment on an annual basis
or on an interim basis if an event occurs or circumstances change that would
reduce the fair value of a reporting unit below its carrying value. Intangible
assets with finite useful lives will continue to be amortized over their useful
lives.


                                        5
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  - (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 2002

     As required under the transition provisions of SFAS 142, the Company
applied the non-amortization provisions of SFAS 142 for goodwill to all business
combinations completed after June 30, 2001. The Company adopted SFAS 142 in its
entirety on January 1, 2002. The accompanying 2002 consolidated financial
statements do not provide for amortization of goodwill, representing the excess
purchase price over the fair value of net assets acquired in business
acquisitions accounted for under the purchase method of accounting (with a March
31, 2002 balance of $2,024,270). Pursuant to SFAS 142, Insightful will test
goodwill for impairment using a two-step approach. The first step is to screen
for potential impairment, while the second step measures the amount of
impairment, if any. Insightful will complete the test for goodwill impairment
during the second quarter 2002 and, if impairment is indicated, record such
impairment as a cumulative effect of accounting change effective January 1,
2002. Insightful is currently evaluating the effect that the impairment review
may have on its consolidated results of operation and financial position.

     Insightful's net loss and income for the three months ended March 31, 2002
and 2001, adjusted to exclude goodwill amortization was as follows:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED MARCH 31,
                                             ---------------------------------
                                                   2002             2001
                                             ----------------  ---------------
<S>                                          <C>               <C>
Reported net income (loss). . . . . . . . . .$      (215,746)  $     2,930,729
Add back goodwill amortization, net of tax. .              -            16,100
                                             ----------------  ---------------

Adjusted net income (loss). . . . . . . . . .$      (215,746)  $     2,946,829
                                             ================  ===============
</TABLE>


     There was no impact on basic or diluted income or loss per share due to the
amortization of goodwill, net of taxes.

     For the three months ended March 31, 2002, goodwill of $125,474 and other
intangible assets of $31,333 were acquired through the purchase of the German
data analysis business completed on January 1, 2002 (See Note 9). Balances are
contingent upon the final purchase price allocation and are subject to change.

     All Other Intangibles were acquired subsequent to March 31, 2001. As of
March 31, 2002, Other Intangibles consisted of the following:

<TABLE>
<CAPTION>
                               GROSS                        OTHER
                             CARRYING    ACCUMULATED     INTANGIBLES,
                              AMOUNT     AMORTIZATION        NET
                             ---------  --------------  -------------
<S>                          <C>        <C>             <C>
Non-compete agreements. . . .$ 177,120  $     (36,446)  $     140,674
Customer relationships. . . .  164,158        (41,041)        123,117
Capitalized patent expenses .  132,598        (16,938)        115,660
                             ---------  --------------  -------------

Other intangibles . . . . . .$ 473,876  $     (94,425)  $     379,451
                             =========  ==============  =============
</TABLE>


     Other intangibles are scheduled to be fully amortized by December 31, 2003
with corresponding amortization estimated to be $181,464, and $197,987, for the
remainder of 2002 and 2003, respectively.

(4)  LINE  OF  CREDIT

     In March 2002, Insightful entered into a $3.0 million working capital
revolving line of credit and security agreement with Silicon Valley Bank (SVB)
that is secured by Insightful's accounts receivable. This facility allows
Insightful to borrow up to the lesser of (a) 75% of its eligible accounts
receivable as determined by SVB's accounts receivable audit (advances against US
Government accounts will be permitted up to 20% of the amount outstanding under
the line of credit) or (b) $3.0 million and bears interest at SVB's prime rate,
which was 4.75% as of March 31, 2002, plus 1%. As of March 31, 2002, Insightful
had no outstanding borrowings under the working capital facility.

     The loan and security agreement with SVB requires Insightful to maintain
certain financial covenants. Insightful was in compliance with these covenants
at March 31, 2002.


                                        6
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  - (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 2002

(5)  EQUIPMENT  TERM  LOAN

     In March 2002, Insightful entered into an equipment term loan and security
agreement with SVB, which provides up to $1.5 million in two tranches to finance
the purchase of equipment and fixtures. This facility allows insightful to take
advances on the cost of eligible equipment less than 90 days old and bears
interest at SVB's prime rate, which was 4.75% as of March 31, 2002, plus 1%.
Interest only is due until the expiration of each tranche period, at which point
monthly payments of principal and interest begin. Advances are repaid over a
42-month period or a 36-month period, for the first and second tranche,
respectively. As of March 31, 2002, borrowings under this equipment term loan
totaled $179,000.

     The loan and security agreement with SVB requires Insightful to maintain
certain financial covenants. Insightful was in compliance with these covenants
at March 31, 2002.

(6)  NET  INCOME  (LOSS)  PER  SHARE

     Basic net income (loss) loss per share is calculated using the
weighted-average number of shares of common stock outstanding. Stock issued
subject to restrictions are excluded from the calculation. Diluted net income
(loss) per share reflects the dilutive effect of common stock equivalents,
(including stock options and warrants) unless their effect on earnings per share
from continuing operations is anti-dilutive.

     A reconciliation of basic and diluted shares outstanding is as follows:

<TABLE>
<CAPTION>
                                                               THREE MONTHS ENDED MARCH 31,
                                                              ------------------------------
                                                                   2002            2001
                                                              --------------  --------------
<S>                                                           <C>             <C>
Weighted average common shares outstanding . . . . . . . . . .    11,188,635      10,706,586
Effect of dilutive stock options. . .. . . . . . . . . . . . .             -         111,952
                                                              --------------  --------------

Weighted average common shares outstanding assuming dilution .    11,188,635      10,818,538
                                                              ==============  ==============
</TABLE>


     The following securities were not included in computing diluted earnings
per share because their effect would be antidilutive:

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED MARCH 31,
                                                         ------------------------------
                                                              2002            2001
                                                         --------------  --------------
<S>                                                      <C>             <C>
Weighted average antidilutive stock options and warrant.      3,447,771       1,438,614
                                                         ==============  ==============
</TABLE>


(7)  OTHER  COMPREHENSIVE  INCOME  (LOSS)

     SFAS No. 130, Reporting Comprehensive Income, establishes standards for
reporting and display of comprehensive income and its components in the
financial statements. The only item of other comprehensive income (loss), which
the Company currently reports, are foreign translation adjustments. Total
comprehensive income (loss) is as follows:

<TABLE>
<CAPTION>
                                              THREE MONTHS ENDED MARCH 31,
                                              -----------------------------
                                                   2002            2001
                                              --------------  -------------
<S>                                           <C>             <C>
Net income (loss)                             $    (215,746)  $   2,930,729
Change in cumulative translation adjustment. .      (48,265)         67,176
                                              --------------  -------------

Comprehensive income (loss). . . . . . . . .  $    (264,011)  $   2,997,905
                                              ==============  =============
</TABLE>


(8)  SEGMENT  REPORTING

     SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for reporting information about operating
segments in annual financial statements. It also establishes standards for
related disclosures about products, services, geographical areas and major
customers. Insightful currently operates in a single business segment related to
data mining, analysis and knowledge retrieval software and services. No
additional disclosure is required.


                                        7
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  - (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 2002

(9)  ACQUISITION

     On January 1, 2002, Insightful's German subsidiary completed the
acquisition of a data analysis business from Graphische Systeme GmbH (GraS),
Insightful's German distributor. Consideration for the acquisition was cash of
$157,000. This transaction was accounted for as an asset purchase in the first
quarter of 2002. The results of the acquired data analysis business have been
included in the operating results of Insightful since the acquisition date.  The
Company is in the process of valuing certain intangible assets; thus, the
allocation of the purchase price is subject to refinement.


                                        8
<PAGE>
                    INSIGHTFUL CORPORATION AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  - (CONTINUED)
                                  (UNAUDITED)
                                 MARCH 31, 2002

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

FORWARD-LOOKING STATEMENTS

     Our disclosure and analysis in this report contain forward-looking
statements, which provide our current expectations or forecasts of future
events. Forward-looking statements in this report include, without limitation:

     -    information concerning possible or assumed future results of
          operations, trends in financial results and business plans, including
          those relating to earnings growth and revenue growth;

     -    statements about the level of our costs and operating expenses
          relative to our revenues, and about the expected composition of our
          revenues;

     -    statements about our future capital requirements and the sufficiency
          of our cash, cash equivalents, investments and available bank
          borrowings to meet these requirements;

     -    information about the anticipated release dates of new products;

     -    other statements about our plans, objectives, expectations and
          intentions; and

     -    other statements that are not historical facts.

     Words such as "believes," "anticipates" and "intends" may identify
forward-looking statements, but the absence of these words does not necessarily
mean that a statement is not forward-looking. Forward-looking statements are
subject to known and unknown risks and uncertainties and are based on
potentially inaccurate assumptions that could cause actual results to differ
materially from those expected or implied by the forward-looking statements. Our
actual results could differ materially from those anticipated in the
forward-looking statements for many reasons, including the factors described in
the section entitled "Important Factors That May Affect Our Business, Our
Operating Results and Our Stock Price" in this report. Other factors besides
those described in this report could also affect actual results. You should
carefully consider the factors described in the section entitled "Important
Factors That May Affect Our Business, Our Operating Results and Our Stock Price"
in evaluating our forward-looking statements.

     You should not unduly rely on these forward-looking statements, which speak
only as of the date of this report. We undertake no obligation to publicly
revise any forward-looking statement to reflect circumstances or events after
the date of this report, or to reflect the occurrence of unanticipated events.
You should, however, review the factors and risks we describe in the reports we
file from time to time with the Securities and Exchange Commission, or SEC.

DESCRIPTION OF THE COMPANY

     Insightful Corporation and subsidiaries ("Insightful") provides enterprises
with scalable data analysis solutions that drive better decisions faster by
revealing patterns, trends and relationships.  Insightful is a supplier of
software and services for statistical data mining, business analytics, knowledge
management, and information retrieval enabling clients to gain intelligence from
numerical data, text, and images.

     Insightful products, including InFact(TM), Insightful Miner, S-PLUS(R),
StatServer(R), S-PLUS Analytic Server(TM) and VisiMine(TM) play a key role in
data warehousing and business intelligence initiatives by delivering analytical
tools and graphical reports that convert data into insight. Insightful also
provides consulting, application development outsourcing, data integration and
training focused on data analysis and predictive modeling. Insightful consulting
services provide specialized expertise and proven processes for the design,
development and deployment of customized solutions.

     The Company has been delivering industry-leading, high return-on investment
solutions for fifteen years to thousands of companies in financial services,
pharmaceuticals, biotechnology, telecommunications, manufacturing, plus
government and research institutions.

     Headquartered in Seattle, Insightful has offices in New York City, North
Carolina, France, Germany, Switzerland and the United Kingdom with distributors
around the world.


                                        9
<PAGE>
HISTORY OF OPERATIONS

     Insightful (formally known as Mathsoft) was originally incorporated in
Massachusetts in October 1984 under the name Engineering Specific Products Corp.
and changed its name to MathSoft, Inc. in January 1986.

     As of December 31, 1999 we operated three divisions consisting of our Data
Analysis Products Division (DAPD), Engineering and Education Products Division
(EEPD), and FreeScholarships.com (FSC). In September 2000, we discontinued
operations of our internet business, FSC. In October 2000, we signed a letter of
intent to sell the operations of our technical calculation software business,
EEPD, to a third party. Consistent with this letter of intent, we sold the EEPD
division on January 23, 2001. Following the closing of our internet business FSC
in September 2000 and the sale of our EEPD in January 2001, we relocated our
headquarters from Boston, Massachusetts, to Seattle, Washington, where DAPD is
located. This business was acquired by Mathsoft in June 1993 through the
acquisition of substantially all the assets of Statistical Sciences, Inc.

     In June of 2001, the stockholders voted to change our company name to
Insightful Corporation from MathSoft, Inc. and to change the jurisdiction of
incorporation of the Company from Massachusetts to Delaware.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

     Our discussion and analysis of Insightful's` financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, we evaluate our critical
accounting policies and estimates, including those related to revenue
recognition, bad debts, intangible assets, restructuring, and contingencies and
litigation. We base our estimates on historical experience and on various other
assumptions that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values
of assets and liabilities that are not readily apparent from other sources.
Actual results may differ from these estimates under different assumptions or
conditions. We believe the following critical accounting policies affect the
more significant judgments and estimates used in the preparation of our
consolidated financial statements.

Revenue Recognition

     Revenue recognition rules for software companies are very complex. We
follow very specific and detailed guidelines in measuring revenue; however,
certain judgments affect the application of our revenue policy. Revenue results
are difficult to predict, and any shortfall in revenue or delay in recognizing
revenue could cause our operating results to vary significantly from quarter to
quarter and could result in future operating losses.

     We record revenue in accordance with Statement of Position (SOP) No. 97-2,
Software Revenue Recognition, as amended by SOP 98-9 Software Revenue
Recognition, with Respect to Certain Transactions and related interpretations
including Technical Practice Aids. License revenue consists principally of
revenue earned under fixed-term and perpetual software license agreements and is
generally recognized upon shipment of the software, collection of the resulting
receivable is probable, the fee is fixed or determinable, and vendor-specific
objective evidence exists for all undelivered elements. Revenues under such
arrangements, which may include several different software products and services
sold together, are allocated based on the residual method in accordance with SOP
98-9. Under the residual method, the fair value of the undelivered elements is
deferred and subsequently recognized when earned. We have established vendor
specific objective evidence for professional services, training and maintenance
and support services. Vendor-specific objective evidence is based on the price
charged when an element is sold separately or, in case of an element not yet
sold separately, the price established by authorized management, if it is
probable that the price, once established, will not change before market
introduction. Standard terms for license agreements call for payment within 30
days. Probability of collection is based upon the assessment of the customer's
financial condition through the review of their current financial statements or
credit reports. For existing customers, prior payment history is also used to
evaluate probability of collection. We provide for estimated returns at the time
of sale.

     We offer maintenance contracts and training on certain of its products.
Maintenance revenue is recognized ratably over the term of the related contracts
generally for one year or less. Consulting revenues are primarily related to
implementation services performed on a time-and-materials basis under separate
service arrangements. Revenues from consulting and training services are
recognized as services are performed. Standard terms for renewal of customer
support contracts, consulting services and training call for payment within 30
days.

     Fees from licenses sold together with consulting are generally recognized
upon shipment of the software, provided that the above criteria are met, payment
of the license fees are not dependent upon the performance of the services, and
the consulting services are not essential to the functionality of the licensed
software. If the services are essential to the functionality of the software, or
payment of the license fees are dependent upon the performance of the services,
both the software license and consulting fees are recognized under the
percentage of completion method of contract accounting. All sales made through
indirect channels including value added resellers, or VARs, and distributors are
accounted for using the sell through method.


                                       10
<PAGE>
     If the fee is not fixed or determinable, revenue is recognized as payments
become due from the customer. If an acceptance period is required, revenues are
recognized upon the earlier of customer acceptance or the expiration of the
acceptance period.

     Amounts received in advance for maintenance agreements are recorded as
deferred revenue on the balance sheets.

     Bad Debts

     We are required to estimate the collectibility of our trade receivables. A
considerable amount of judgment is required when we assess the ultimate
realization of receivables including assessing the aging of the amounts and
reviewing the current credit-worthiness of each customer.

     Impairment of Goodwill and Other Intangible Assets

     We periodically evaluate acquired business for potential impairment
indicators. Our judgments regarding the existence of impairment indicators are
based on legal factors, market conditions and operational performance of our
acquired businesses. Future events could cause us to conclude that impairment
indicators exist and that goodwill associated with our acquired business is
impaired.

     Goodwill and other intangibles represent the excess of the purchase price
over the fair value of net tangible assets acquired. Before 2002, we amortized
goodwill and other intangibles on a straight-line basis over lives ranging from
two to five years. With required adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets," beginning January 1, 2002, we no longer amortize goodwill
and other intangibles with indefinite lives to earnings. Instead goodwill will
be reviewed for impairment on an annual basis or on an interim basis if
circumstances change or if events occur that reduce the fair value of a
reporting unit below its carrying value. Impairment losses will be charged to
earnings in the period in which they are identified. Separable Intangible assets
that do not have indefinite lives will continue to be amortized over their
useful lives.

     Deferred Taxes

     We record a valuation allowance to reduce our deferred tax assets to the
amount that is more likely than not to be realized. While Insightful has
considered future taxable income and ongoing prudent and feasible tax planning
strategies in assessing the need for the valuation allowance, in the event the
Company were to determine that it would be able to realize its deferred tax
assets in the future in excess of its net recorded amount, an adjustment to the
deferred tax asset would increase income in the period such determination was
made. Likewise, should the Company determine that it would not be able to
realize all or part of its net deferred tax asset in the future, an adjustment
to the deferred tax asset would be charged to income in the period such
determination was made.

RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
2001

REVENUES

     Total revenues, which consist of software license, maintenance and service
revenues, increased 7.0%, from $4,104,000 for the three months ended March 31,
2001 to $4,391,000 for the three months ended March 31, 2002.

     Software related revenues (software licenses, subscriptions, and
maintenance) accounted for 65.7% of total revenues and decreased 6.9% from
$3,099,000 for the three months ended March 31, 2001 to $2,886,000 for the three
months ended March 31, 2002. This decrease is attributed to the generally weak
economic environment that has adversely affected corporate spending on
information technology in many of the industries that Insightful serves.

     Professional services revenues generated from consulting and training
activities represented 34.3% of total revenues and increased 49.7% from
$1,006,000 for the three months ended March 31, 2001 to $1,505,000 for the three
months ended March 31, 2002. The revenue growth in professional services is
primarily attributable to worldwide expansion of the Company's consulting
resources in the pharmaceutical and CRM markets in the US and Europe.

     Revenues from International operations increased 52.3%, from $904,000 for
the three months ended March 31, 2001 to $1,377,000 for the three months ended
March 31, 2002, reflecting the Company's expansion in international direct
channels.

COST OF REVENUES

     Total cost of revenues increased 10.7%, from $1,353,000 for the three
months ended March 31, 2001 to $1,498,000 for the three months ended March 31,
2002. The increase in total cost of revenues as a percentage of total revenues
was primarily attributable to a product mix shift toward lower margin services
such as consulting.

     The cost of software licenses, which consists of royalties for third-party
software, product media, product duplication and manuals, decreased as a
percentage of total software related revenues to 11.9% from 15.6% for the three
months ended March 31, 2002 and 2001, respectively. This decrease is attributed
to the increase in maintenance revenue as a percent of total software related
revenues to 46% from 42% for the three months ended March 31, 2002 and 2001,
respectively.  Maintenance revenue carries a low cost of sales component. We are
a worldwide licensee of the "S" programming language from Lucent Technologies
Inc. Under the license, we have the right to use, sublicense and support the "S"
programming language from Lucent Technologies in exchange for royalties, which
are included in the cost of software licenses.

     The cost of professional services includes primarily the salaries, and
other operating costs of employees who provide consulting services and product
training. The increase in cost of professional services for the three months
ended March 31, 2002, as compared to the three months ended March 31, 2001, from
$870,000 to $1,155,000 was primarily due to increased investment in professional
services resources, including acquired businesses, to help the Company scale and
leverage additional product sales. The cost of professional services decreased
as a percentage of total professional services revenues to 76.8% from 86.6% for
the three months ended March 31, 2002 and 2001, respectively. This improvement
in the professional services margin is attributed to the increased utilization
of existing resources.


                                       11
<PAGE>
OPERATING EXPENSES

     Sales and marketing expenses consist primarily of salaries, travel,
facility costs for sales and marketing personnel, promotional activities, and
costs of advertising and trade shows. Sales and marketing expenses increased
23.3%, from $1,390,000 for the three months ended March 31, 2001 to $1,714,000
for the three months ended December 31, 2002. This increase primarily reflected
additions to the sales force to expand our sales opportunities, as well as
additional marketing expenses to communicate Insightful's new positioning as a
Company focused on data analysis software and services.

     Net research and development expenses increased 41.8%, from $539,000 for
the three months ended March 31, 2001 to $764,000 for the three months ended
March 31, 2002, and increased as a percentage of total revenues from 13.1% to
17.4%, respectively. Research and development expenses consist primarily of
salaries and related benefits, equipment for software developers, facility
costs, and payments to outside contractors. The overall increase in net research
and development expenses was primarily attributable to investments in new
product development, as well as ongoing investments in enhancing current
products, combined with a decrease in research funding. Funded research, which
consists primarily of government grants for research projects, decreased 7.5%,
from $1,356,000 for the three months ended March 31, 2001 to $1,255,000 for the
three months ended March 31, 2002. The decrease in funded research is
attributable to a decrease in awards granted and a delay in government
financing.

     General and administrative expenses, which consist primarily of salaries
and related costs associated with finance, accounting, investor relations, human
resources, administration and facilities activities, decreased 19.6% from
$723,000 for the three months ended March 31, 2001 to $581,000 for the three
month ended March 31, 2002, and decreased as a percentage of total revenues from
17.6% to 13.2%, respectively. The decrease in general and administrative costs
during the first three months of  2002 in comparison to the first three months
of 2001 relates to the reduction of costs associated with divesting the MathSoft
Engineering and Educations Products Division and migrating the corporate
headquarters from Cambridge, Massachusetts to Seattle, Washington, and
management's actions to reduce expenses.

     Amortization of goodwill and other intangibles increased from $16,000 for
the three months ended March 31, 2001 to $45,000 for the three months ended
March 31, 2002. This increase is attributable an increase in other intangibles
with finite useful lives as a result of business acquisitions completed in the
third quarter of 2001 and first quarter of 2002. In accordance with SFAS 142,
"Goodwill and Other Intangibles", we have discontinued amortizing goodwill
originating in business combinations completed prior to June 30, 2001, which
effectively decreased the amortization expense that would have been recognized
by approximately $16,000 for the three months ended March 31, 2002.

     Amortization of deferred stock-based compensation totaled $44,000 for the
three months ended March 31, 2002, and relates to stock issued as part of the
acquisition of Predict AG in the third quarter of 2001, which is subject to
restriction. The value of the restricted shares is being amortized over a
three-year vesting period using a graded vesting approach.

INTEREST AND OTHER INCOME

     The decrease in interest income for the three months ended March 31, 2002,
as compared to the three months ended March 31, 2001, was primarily due to a
decrease in cash and cash equivalents upon which we earn interest as well as a
decrease in the prevailing interest rates.

DISCONTINUED OPERATIONS

     On January 23, 2001, Insightful transferred the assets of EEPD to a newly
created wholly owned Insightful subsidiary that was than sold to a third party
for cash proceeds of $7,000,000. As a result of this transaction, Insightful has
recorded the operations of EEPD as discontinued operations. The net gain of
$3,493,000 on the sale of EEPD is presented in the accompanying consolidated
statements of operations as a gain on disposal of discontinued operations for
the three months ended March 31, 2001.

     EEPD's operating loss totaling $737,000 represents revenues earned of
approximately $74,000, offset by costs and expenses totaling approximately
$811,000 for the 23-day period ending January 23, 2001.

NET OPERATING RESULTS

     The net loss from continuing operations for the three months ended March
31, 2002 was $216,000 compared to net income from continuing operations of
$175,000 for the three months ended March 31, 2001. The net loss from continuing
operations for the three months ended March 31, 2002, reflects a decrease in
software revenues due to prevailing economic conditions as well as a change in
the revenue mix which, in turn, negatively impacted net income. The net loss
from continuing operations for the three months ended March 31, 2002, was
further impacted due to both new acquisition related amortization and deferred
compensation charges of $89,000.


                                       12
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

     Cash and cash equivalents at January 1, 2002 amounted to $6,278,000.
Insightful's continuing operations resulted in net cash outflows of $771,000 for
the three months ended March 31, 2002. Operating cash outflows for the three
months ended March 31, 2002 were primarily the result of a loss from continuing
operations adjusted for noncash depreciation and amortization, a large increase
in prepaid expenses due to a prepaid royalty of $450,000 made once annually and
decreases in accounts receivable and current liabilities.

     Investing activities in the first quarter of 2002 resulted in cash outflows
of $296,000, primarily due to capital expenditures of $138,000 related to
continuing operations and $176,000 for acquisitions and related transaction
expenses.

     Financing activities provided cash inflows of $771,000 in the first quarter
of 2002 primarily due to proceeds from the exercise of stock options and stock
issued through the employee stock purchase plan, proceeds from equipment
financing and receipt of an outstanding subscription receivable.

     In March 2002, Insightful entered into a $3.0 million working capital
revolving line of credit and security agreement with Silicon Valley Bank (SVB)
that is secured by Insightful's accounts receivable. This facility allows
Insightful to borrow up to the lesser of (a) 75% of its eligible accounts
receivable as determined by SVB's accounts receivable audit (advances against US
Government accounts will be permitted up to 20% of the amount outstanding under
the line of credit) or (b) $3.0 million and bears interest at SVB's prime rate,
which was 4.75% as of March 31, 2002, plus 1%.

     In March 2002, Insightful entered into an equipment term loan and security
agreement with SVB, which provides up to $1.5 million in two tranches to finance
the purchase of equipment and fixtures. This facility allows insightful to take
advances on the cost of eligible equipment less than 90 days old and bears
interest at SVB's prime rate, which was 4.75% as of March 31, 2002, plus 1%.

     These credit facilities will be utilized to finance future capital
investments, including technology necessary to support our new product lines.
These credit facilities expand Insightful's liquid resources and ability to
maintain an adequate balance of cash-on-hand.

     Cash outflows for discontinued operations relating to employee severance
and termination benefits amounted to $98,000, which brought the cash and cash
equivalent balance at March 31, 2002 to $5,884,000.

     At March 31, 2002, Insightful's principal unused sources of liquidity
consisted of cash and cash equivalents of $5,884,000. Insightful's liquidity
needs are principally for financing of accounts receivable, capital assets,
strategic investments, product development, and flexibility in a dynamic and
competitive operating environment.

     The following are our contractual commitments associated with our operating
and capital leases and equipment financings:

<TABLE>
<CAPTION>
                      NINE MONTHS ENDING
                         DECEMBER 31,
                      -------------------          YEAR ENDING DECEMBER 31,
                             2002            2003      2004      2005      2006    THEREAFTER     TOTAL
                      -------------------  --------  --------  --------  --------  -----------  ----------
<S>                   <C>                  <C>       <C>       <C>       <C>       <C>          <C>
Commitments:
Capital leases . . .  $            20,860  $      -  $      -  $      -  $      -  $         -  $   20,860
Equipment financings                    -    38,268    51,024    51,024    38,261            -     178,577
Operating leases . .              622,827   835,574   897,178    70,432    32,755       47,623   2,506,389
                      -------------------  --------  --------  --------  --------  -----------  ----------
Total commitments. .  $           643,687  $873,842  $948,202  $121,456  $ 71,016  $    47,623  $2,705,826
                      ===================  ========  ========  ========  ========  ===========  ==========
</TABLE>

     As of March 31, 2002 we had net operating loss carryforwards of
approximately $21.4 million and research and development credit carryforwards of
approximately $2.9 million. The net operating loss and credit carryforwards will
expire at various dates through 2021, if not used. Under the provisions of the
Internal Revenue Code, substantial changes in our ownership may limit the amount
of net operating loss carryforwards that could be utilized annually in the
future to offset taxable income. A full valuation allowance has been established
in our financial statements to reflect the uncertainty of our ability to use
available tax loss carryforwards and other deferred tax assets.

     We believe that our existing cash and cash equivalents, investments and
available bank borrowings will be sufficient to meet our capital requirements
for at least the next 12 months. However, if during that time, we choose to
increase our investment in current or new product and marketing initiatives,
market conditions worsen, or if other unforeseen events should occur, we would
likely deem it necessary to seek additional funds through public or private
equity financing or from other sources in order to fund our operations and


                                       13
<PAGE>
pursue our growth strategy. Any financing we obtain may contain covenants that
restrict our freedom to operate our business or may require us to issue
securities that have rights, preferences or privileges senior to our common
stock and may dilute your ownership interest in Insightful.

BUSINESS OUTLOOK

     We launched Insightful Miner, the industry's newest, scalable data mining
software at the end of the first quarter of 2002. Insightful Miner was designed
specifically to solve data analysis problems involving data set sizes too large
for existing products to handle without ignoring significant data.

     We are working on a focused solution built on top of the Insightful Miner
platform that provides both technology and methodology optimized for analytic
CRM for retail banks and merchandisers. This solution is designed specifically
to allow Insightful and its partner network to cost-effectively derive higher
ROI for enterprises that have invested in CRM systems.

     Historically, the data analysis market has focused solely on solutions that
analyze numbers; information contained in text, images, maps, charts, and graphs
has not been adequately utilized. We believe Insightful has the vision and the
technology to leverage quantitative information (often structured and stored in
databases) and conceptual information (often unstructured and hidden in
documents, emails, or presentations).

     Recently, industry analysts recognized the need for data analysis solutions
that extract information from text documents which enterprises collect. To
address this opportunity, we've produced and recently announced the general
availability of InFact(TM), Insightful's new software solution for extracting
meaning from documents containing text, tables of number, and images such as
graphs, charts, and maps. InFact peruses entire documents and extracts the
meaning from every sentence, allowing the user to ask free-form, natural
language questions and get back precise answers (not just a list of documents
which may contain the answer).  In addition, InFact can synthesize answers that
are not directly contained within documents.  We believe that our heritage with
sophisticated analytics, our experience with client/server computing, and our
advanced research in information retrieval give Insightful the foundation to
deliver superior solutions. Our short- and medium-term goals are to acquire
reference customers using our direct sales force while ultimately targeting
channel partners, systems integrators and consulting firms, for broad-scale
enterprise deployment.

     In Q1 2002, we announced the award of two significant multi-year government
funded research grants to enhance VisiMine(TM), the Company's software for
automated categorization and image retrieval. NASA awarded $450,000 to
Insightful to develop and enhance VisiMine by integrating NASA's powerful
multispectral image interpretation technology. VisiMine will help scientists and
analysts at NASA's Goddard Space Flight Center (GSFC) quickly identify patterns,
relationships, and changes in satellite imagery. The National Library of
Medicine awarded $750,000 to Insightful to build a distributed collaborative
framework for VisiMine to allow users at disparate locations to rapidly search
healthcare image and multimedia databases. We account for research contracts of
this nature as an offset to research and development expense.

     Looking forward, we expect that our core domestic S-PLUS business,
including desktop and server licenses as well as consulting and training
revenue, will continue to be flat and possibly down, on a quarter-to-quarter
basis for the foreseeable future due to reductions in IT spending.

     It is still our expectation that the majority of our revenue growth in 2002
will come from our new products, namely Insightful Miner and InFact.  We believe
that revenues from these new products will help offset potential short-term
weakness in our core statistics business.  Insightful Miner and InFact have
price points that are several times higher than our core desktop products and
thus forecasting our customer's ability to make such significant capital
expenditure in this economic climate makes giving specific guidance very
difficult.   However we remain very optimistic about the longer term potential
that these products provide us.


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<PAGE>
IMPORTANT FACTORS THAT MAY AFFECT OUR BUSINESS, OUR OPERATING RESULTS AND OUR
STOCK PRICE

OUR OPERATING RESULTS FLUCTUATE AND COULD FALL BELOW EXPECTATIONS OF SECURITIES
ANALYSTS AND INVESTORS, RESULTING IN A DECREASE IN OUR STOCK PRICE.

     Our operating results have varied widely in the past, and we expect that
they could continue to fluctuate in the future. If our operating results for a
particular quarter or year fall below the expectations of securities analysts
and investors, it could result in a decrease in our stock price. Some of the
factors that could affect the amount and timing of our revenues and related
expenses and cause our operating results to fluctuate include:

     -    general economic conditions, which may affect our customers'
          purchasing decisions;

     -    our ability to obtain government research contracts;

     -    our ability to compete in the highly competitive markets;

     -    rate of market acceptance of our software products and solutions;

     -    our reliance on a one product family;

     -    our ability to expand our sales and support infrastructure;

     -    the loss of any of our key employees or management team members;

     -    our ability to develop, introduce and market new products on a timely
          basis;

     -    our ability to successfully expand our international operations;

     -    our ability to maintain our relationships with key partners; and

     -    the cost and financial accounting effects of any acquisitions of
          companies or complementary technologies that we may complete.

     As a result of these factors, we cannot predict our revenues with
certainty, and future product revenues may differ from historical patterns. It
is particularly difficult to predict the timing or amount of our license
revenues because:

     -    our sales cycles are lengthy and variable, typically ranging between
          two and eight months from our initial contact with a potential
          customer;

     -    for our newest products, we have no history by which to gauge the
          sales cycles or acceptance rates;

     -    a substantial portion of our sales are completed at the end of the
          quarter and, as a result, a substantial portion of our license
          revenues are recognized in the last days of a quarter;

     -    the amount of unfulfilled orders for our products at the beginning of
          a quarter is typically small; and

     -    delay of new product releases can result in a customer's decision to
          delay execution of a contract or, for contracts that include the new
          release as an element of the contract, will result in deferral of
          revenue recognition until such release.

     Even though our revenues are difficult to predict with certainty, we base
our decisions regarding our operating expenses on anticipated revenue trends.
Many of our expenses are relatively fixed, and we cannot quickly reduce spending
if our revenues are lower than expected. As a result, revenue shortfalls could
result in significantly lower income or greater loss than anticipated for any
given period, which could result in a decrease in our stock price.


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<PAGE>
IF POTENTIAL CUSTOMERS DO NOT CONTINUE TO PURCHASE THE S-PLUS PRODUCT FAMILY,
OUR REVENUES WILL FALL AND WE MAY INCUR MORE LOSSES.

     Prior to the sale of our Engineering and Educational Products Division in
January of 2001, our product offerings included those related to the MathCad(R)
line addressing the calculation needs of the technical, professional and
education markets. Since the divestiture we have relied on a one-product family,
the S-PLUS line, for the success of our business, and license revenues from the
S-PLUS product and add-on modules accounted for nearly all of our license
revenues in 2001. We expect license revenues from the S-PLUS product family to
continue to account for a substantial amount of our future revenues. As a
result, factors adversely affecting the pricing of or demand for the S-PLUS
product family, such as competition or technological change, could dramatically
affect our operating results. If we are unable to successfully deploy current
versions of the S-PLUS product family and to develop, introduce and establish
customer acceptance of new and enhanced versions of the S-PLUS product family,
our revenues will fall, leading to more losses.

IF WE ARE UNABLE TO PENETRATE NEW VERTICAL AND END-USER MARKETS WITH OUR CURRENT
AND FUTURE PRODUCTS, THE GROWTH OF OUR BUSINESS WILL BE LIMITED.

     We currently serve a relatively small number of customers in a narrow
market, and we believe that the statistics market we currently serve with the
S-PLUS product family will grow at a slower rate than it has in the past. In
order to grow our business at a satisfactory rate, we will need to expand into
new end-user markets and new vertical markets for our statistics software, and
we must simultaneously develop and sell new products that address these and
other markets. We will need to invest in the expansion of our statistics product
and service offerings beyond the "statistics guru" segment into the business
mainstream, in the expansion of our product and service offerings into new
vertical markets, and in the development of our data mining, business analytics,
and information retrieval products. These simultaneous investments may strain
our financial resources and diffuse management's time and attention. If any of
these initiatives fails, or if we fail to maintain adequate revenues from our
traditional business during the transition to any of these initiatives, our
business will not grow and could fail.

IF WE ARE UNABLE TO COMPETE SUCCESSFULLY IN THE STATISTICS, DATA MINING,
BUSINESS ANALYTICS, AND INFORMATION RETRIEVAL MARKETS, OUR BUSINESS WILL FAIL.

     Our S-PLUS product suite targets the statistics market. This market is
highly competitive, fragmented and mature. We face competition in the statistics
market primarily from large enterprise software vendors and our potential
customers' information technology departments. These departments may seek to
develop data analysis solutions that utilize R, a free software package that
performs operations similar to the S language that forms the core of S-PLUS. The
dominant competitor in our industry is SAS Institute. Other companies with which
we compete include, but are not limited to, SPSS, Inc., StatSoft Inc. and
Minitab, Inc. In addition to competition from other statistical software
companies, we also face competition from providers of software for specific
statistical applications.

     In the data mining, business analytics, and information retrieval markets,
we face competition from many companies, including SAS Institute, SPSS, IBM,
NCR, Autonomy, Verity, Inxight, ClearForest, Iphrase, Inktomi and Ask Jeeves /
Jeeves Solutions, many of which are much larger than we are. With the exception
of SAS and SPSS, these competitors do not currently offer the range of
analytical capability that we offer, and as a result are both competitors and
potential partners for our technology.

     In addition, as we develop other new products, or attempt to expand our
sales into new vertical and end-user markets, we may begin competing with
companies with whom we have not previously competed. It is also possible that
new competitors will enter the market. An increase in competitive pressures in
our market or our failure to compete effectively may result in pricing
reductions, reduced gross margins and loss of market share. Many of our
competitors have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical, marketing and
other resources than we do. We could also experience competition from companies
in other sectors of the broader market for business intelligence software, like
providers of OLAP (On-Line Analytical Processing), Business Intelligence and
analytical application software, as well as from companies in other sectors.

MANY POTENTIAL CUSTOMERS ARE NOT YET AWARE OF THE BENEFITS OF DATA MINING,
BUSINESS ANALYTICS, AND INFORMATION RETRIEVAL SOLUTIONS, AND OUR PRODUCTS MAY
NOT ACHIEVE MARKET ACCEPTANCE.

     The markets for data mining, business analytics, and information retrieval
solutions are still emerging and continued growth in demand for and acceptance
of these solutions remains uncertain. Even if these markets grow, businesses may
purchase our competitors' solutions or develop their own. We intend to spend
considerable resources educating potential customers not only about our
solutions but also about the value of such systems in general. Even with these
educational efforts, however, market acceptance of our solutions may not
increase. If our products do not achieve market acceptance, our results will
suffer.


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<PAGE>
OUR BUSINESS IS SENSITIVE TO THE RISKS ASSOCIATED WITH GOVERNMENT FUNDING
DECISIONS.

     We regularly apply for and are granted research contracts from a variety of
government agencies and funding programs. Over the last three fiscal years,
these contracts have generated an average of $4.7 million per year in offsets to
our research and development expenses. We may not receive new funded research
contracts or any renewals of government-funded projects currently in process.
The personnel and other costs associated with these programs are relatively
fixed in the short run, and a sudden cancellation or non-renewal of a major
funding program or multiple smaller programs would be harmful to our quarterly
results. A substantial portion of the research grant money we receive is granted
to us based on our status as a small business, the definition of which varies
depending on the individual contract terms. If and when the number of our
employees or the amount of our revenues grow beyond the limits prescribed in any
of these contracts, we will no longer be eligible for such research contracts
and we will have to incur certain research and development expenses without the
benefit of offsets.

     Furthermore, a significant portion of our license revenues come from
foreign and domestic government entities, as well as institutions, healthcare
organizations and private businesses that contract with or are funded by
government entities. Government appropriations processes are often slow and
unpredictable and may be affected by factors outside of our control. In
addition, proposals are currently being made in various countries, including the
United States, to reduce government spending. Reductions in government
expenditures and termination or renegotiation of government-funded programs or
contracts will seriously affect our revenue and operating results.

WE MAY BE UNABLE TO EXPAND OUR SALES ORGANIZATION, WHICH COULD HARM OUR ABILITY
TO EXPAND OUR BUSINESS.

     To date, we have sold our desktop products primarily through our telesales
department while we have relied on our field sales force to sell our
server-based solutions and place orders for multiple desktop licenses. We
believe our future revenue growth will depend in large part on recruiting,
training and retaining direct sales personnel, including those whose experience
and qualifications differ from those of our current sales force. Our growth will
further depend on expanding our indirect distribution channels. These indirect
channels include value added resellers, or VARs, distributors, original
equipment manufacturer ("OEM") partners, system integrators and consultants. We
have experienced and continue to experience difficulty in recruiting qualified
direct sales personnel and in establishing third-party relationships with VARs,
distributors, OEM partners and systems integrators and consultants. Our efforts
to restructure or expand our sales force may not prove successful and our
ability to retain top sales personnel may be affected, which could reduce our
sales or limit our sales growth. Even if we successfully expand our sales force
and other distribution channels, the expansion may not result in expected
revenue growth.

IF WE ARE UNABLE TO DEVELOP AND MAINTAIN EFFECTIVE LONG-TERM RELATIONSHIPS WITH
OUR KEY PARTNERS, OR IF OUR KEY PARTNERS FAIL TO PERFORM, OUR ABILITY TO SELL
OUR SOLUTION WILL BE LIMITED.

     We rely on our existing relationships with a number of key partners,
including management consulting firms, system integrators, VARs, distributors
and third-party technology vendors, that are important to worldwide sales and
marketing of our solutions. We expect an increasing percentage of our revenues
to be derived from sales that arise out of our relationships with these key
partners. In addition, to be successful and to more effectively sell our
products to larger customers, we must develop successful new relationships with
other key partners. These key partners often provide enterprise software,
consulting, implementation and customer support services, and endorse our
solution during the competitive evaluation stage of the sales cycle. Although we
seek to maintain relationships with our key partners, and to develop
relationships with new partners, many of these existing and potential key
partners have similar, and often more established, relationships with our
competitors. These existing and potential partners, many of which have
significantly greater resources than we have, may in the future market software
products that compete with our solution or reduce or discontinue their
relationships with us or their support of our solution.

OUR SALES CYCLE IS VARIABLE, AND SALES DELAYS COULD CAUSE OUR OPERATING RESULTS
TO FLUCTUATE, WHICH COULD CAUSE A DECLINE IN OUR STOCK PRICE.

     An enterprise's decision to purchase statistics, data mining, business
analytics, and information retrieval software and services is discretionary,
involves a significant commitment of its resources and is influenced by its
budget cycles. Our sales cycles are long and variable, typically ranging between
two and eight months from our initial contact with a potential customer to the
issuance of a purchase order or signing of a license or services agreement,
although the amount of time varies substantially from customer to customer and
occasionally sales require substantially more time. When economic conditions
weaken, sales cycles for software products and related services tend to
lengthen, and as a result, we experienced longer sales cycles in 2001, and we
expect to continue to experience longer sales cycles in 2002. Sales delays could
cause our operating results to fall below the expectations of securities
analysts or investors, which could result in a decrease in our stock price.


                                       17
<PAGE>
IF WE DO NOT EXPAND OUR INTERNATIONAL OPERATIONS AND SUCCESSFULLY OVERCOME THE
RISKS INHERENT IN INTERNATIONAL BUSINESS ACTIVITIES, THE GROWTH OF OUR BUSINESS
WILL BE LIMITED.

     To be successful, we must continue to expand our international operations
and enter new international markets. This expansion may be delayed as a result
of operating expense reduction measures and general economic conditions. If we
do expand internationally, it will require significant management attention and
financial resources to successfully translate and localize our software products
to various languages and to develop direct and indirect international sales and
support channels. Even if we successfully translate our software and develop new
channels, we may not be able to maintain or increase international market demand
for our solutions. We, or our VARs or distributors, may be unable to sustain or
increase international revenues from licenses or from consulting and customer
support. In addition, our international sales are subject to the risks inherent
in international business activities, including

     -    costs of customizing products for foreign countries;

     -    export and import restrictions, tariffs and other trade barriers;

     -    the need to comply with multiple, conflicting and changing laws and
          regulations;

     -    reduced protection of intellectual property rights and increased
          liability exposure; and

     -    regional economic, cultural and political conditions, including the
          direct and indirect effects of terrorist activity and armed conflict
          in countries in which we do business.

     Our foreign subsidiaries operate primarily in local currencies, and their
results are translated into U.S. dollars. We do not currently engage in currency
hedging activities, but we may do so in the future. Changes in the value of the
U.S. dollar relative to foreign currencies have not materially affected our
operating results in the past. Our operating results could, however, be
materially harmed if we enter into license or service agreements providing for
significant amounts of foreign currencies with extended payment terms or
extended implementation timeframes if the values of those currencies fall in
relation to the U.S. dollar over the payment period of the agreement.

DELIVERY OF OUR SOLUTION MAY BE DELAYED IF WE CANNOT CONTINUE TO LICENSE
THIRD-PARTY TECHNOLOGY THAT IS IMPORTANT TO THE FUNCTIONALITY OF OUR SOLUTION.

     We incorporate into our products software that is licensed to us by
third-party software developers, including Lucent Technologies, from whom we
license the S programming language that forms the core of our S-PLUS product.
Under the license, we have the worldwide, exclusive right, through February
2007, to use, sublicense and support the "S" language in exchange for royalties.
Any modifications, enhancements, adaptations or derivations of the language are
our property. After February 18, 2007, we, at our election, may extend this
license for five-year terms in perpetuity, provided that we continue to comply
with our obligations under the license. Although sudden termination of this
license would harm our operations because Lucent Technologies is the sole
licensor of the "S" programming language, we are not presently aware of any
circumstances that would prevent us from fulfilling our obligations under the
license.

     In addition, numerous individual and institutional licensors have
contributed software code to S-PLUS in exchange for little or no consideration.
The third-party software currently offered in conjunction with our solution may
become obsolete or incompatible with future versions of our products. Further,
some third parties may choose to revise or revoke their licensing terms with us.
A significant interruption in the supply of this technology could delay our
sales until we can find, license and integrate equivalent technology. This could
take a significant amount of time, perhaps several months, which would cause our
operating results to fall below the expectations of securities analysts or
investors and result in a decrease in our stock price

INTEGRATION OF RECENT OR FUTURE ACQUISITIONS MAY BE DIFFICULT AND DISRUPTIVE.

     We have completed several acquisitions of businesses with complementary
technologies or service offerings, including our recent acquisitions of Predict
AG, Waratah Corporation, Graphische Systeme GmbH and Sigma-Plus. In the future,
we may acquire additional complementary companies or technologies. Managing
these acquisitions has entailed, and may in the future entail, numerous
operational and financial risks and strains, including

     -    dilution of stockholders' equity;

     -    difficulty and cost in combining the operations and personnel of
          acquired businesses with our operations and personnel;

     -    disruption of our ongoing business and diversion of management's time
          and attention to integrating or completing the development or
          commercialization of any acquired technologies;


                                       18
<PAGE>
     -    impairment of relationships with key customers of acquired businesses
          due to changes in management and ownership of the acquired businesses;
          and

     -    inability to retain key employees of any acquired businesses.

     If we do not successfully integrate any technologies, products, personnel
or operations of companies that we have acquired or that we may acquire in the
future, our business will be harmed.

WE HAVE INCURRED LOSSES IN RECENT PERIODS, AND MAY CONTINUE TO DO SO, WHICH
COULD CAUSE A DECREASE IN OUR STOCK PRICE.

     If we do not return to profitability in future quarters, our stock price
could decrease. We incurred net losses in the fourth quarter of 2001 and the
first quarter of 2002. As of March 31, 2002, we had an accumulated deficit of
$26 million. In the near-term, we believe our revenues will increase to a level
that is closer to our expected costs and operating expenses, allowing us to
continue to invest in accordance with our strategic priorities. We may not,
however, realize the anticipated revenue increases from our new product and
positioning initiatives in future periods. In addition, we may be unable to
achieve cost savings without adversely affecting our business and operating
results. We may continue to experience losses and negative cash flows in the
near term, even if sales of our products and services continue to grow.

     We believe that we may need to significantly increase our sales and
marketing, product development and professional services efforts to expand our
market position and further increase acceptance of our products. We may not be
able to increase our revenues sufficiently to keep pace with these growing
expenditures, if at all, and, as a result, may be unable to achieve or maintain
profitability in the future.

FLUCTUATIONS IN SERVICE REVENUES COULD DECREASE OUR TOTAL REVENUES OR DECREASE
OUR GROSS MARGINS, WHICH COULD CAUSE A DECREASE IN OUR STOCK PRICE.

     During the year ended December 31, 2001, our service revenues represented a
higher percentage of our total revenues than in past periods, which negatively
impacted our profitability. To the extent that this trend continues, our
profitability will continue to suffer. Consulting and training (service)
revenues represented 27% of our total revenues in 2000 and 32% in 2001. We
anticipate that service revenues will continue to represent a significant
percentage of total revenues. Because service revenues have lower gross margins
than license revenues, a continued increase in the percentage of total revenues
represented by service revenues or any decrease in license revenues could have a
detrimental effect on our overall gross margins and thus on our operating
results.

WE HAVE A LIMITED OPERATING HISTORY UNDER OUR NEW BUSINESS MODEL, NO OPERATING
HISTORY WITH OUR NEW PRODUCTS, AND ARE SUBJECT TO THE RISKS OF NEW ENTERPRISES.

     In connection with our divestiture of our Engineering and Educational
Products Division in 2001 we changed our name, headquarters location,
jurisdiction of incorporation, and more significantly, our management team and
business model. Our new business model calls for significant contributions from
our data mining, business analytics, and information retrieval products. Our
limited operating history in these markets makes it difficult to predict how our
business will develop. Accordingly, we face all of the risks and uncertainties
encountered by early-stage companies, such as:

     -    no history of sustained profitability under our new business model;

     -    uncertain growth in the market for, and uncertain market acceptance
          of, our new solutions;

     -    the evolving nature of the data mining, business analytics, and
          information retrieval markets;

     -    reliance on new and unproven products to maintain our revenue
          projections;

     -    the risk that competition, technological change or evolving customer
          preferences could harm sales of our products or services.

OUR WORKFORCE REDUCTION AND FINANCIAL PERFORMANCE MAY PLACE ADDITIONAL STRAIN ON
OUR RESOURCES AND MAY HARM THE MORALE AND PERFORMANCE OF OUR PERSONNEL AND OUR
ABILITY TO HIRE NEW PERSONNEL.

     In connection with our effort to streamline our operations, reduce costs
and bring our staffing and structure in line with our revenue base, we
restructured our organization with reductions in our workforce by 25 employees
in November 2001. There have been and may continue to be substantial costs
associated with the workforce reduction related to severance and other
employee-related costs, and our restructuring plan may yield unanticipated
consequences, such as attrition beyond our planned reduction in workforce. In
addition, many of the employees who were terminated possessed specific knowledge
or expertise, and that knowledge or expertise may prove to have been important
to our operations. In that case, their absence may create significant
difficulties. Further, the reduction in workforce may reduce employee morale and
may create concern among potential and existing employees about job security at
Insightful, which may lead to difficulty in hiring and increased turnover in our


                                       19
<PAGE>
current workforce. In addition, this headcount reduction may subject us to the
risk of litigation, which could result in substantial costs to us and could
divert management's time and attention away from business operations. Any
further workforce reductions may significantly strain our operational and
financial resources and may result in increasing responsibilities for each of
our management personnel. As a result, our ability to respond to unexpected
challenges may be impaired, and we may be unable to take advantage of new
opportunities.

WE MAY BE UNABLE TO OBTAIN THE FUNDING NECESSARY TO SUPPORT THE EXPANSION OF OUR
BUSINESS.

     Our future revenues may be insufficient to support the expenses of our
operations and the expansion of our business. We may therefore need additional
equity or debt capital to finance our operations. If we are unable to generate
sufficient cash flow from operations or to obtain funds through additional
financing, we may have to reduce some or all of our development and sales and
marketing efforts and limit the expansion of our business.

     We believe that our existing cash and cash equivalents, investments and
available bank borrowings will be sufficient to meet our capital requirements
for at least the next twelve months. However, if during that time market
conditions worsen, or if other unforeseen events such as those of September 11,
2001 should occur, we may need additional funds through public or private equity
financing or from other sources in order to fund our operations and pursue our
growth strategy. We have no commitment for additional financing, and we may
experience difficulty in obtaining funding on favorable terms, if at all. Any
financing we obtain may contain covenants that restrict our freedom to operate
our business or may require us to issue securities that have rights, preferences
or privileges senior to our common stock and may dilute your ownership interest
in Insightful.

ECONOMIC CONDITIONS COULD ADVERSELY AFFECT OUR REVENUE GROWTH AND ABILITY TO
FORECAST REVENUE.

     Our revenue growth and potential for profitability depend on the overall
demand for statistics, data mining, business analytics, and information
retrieval software and services. Because our sales are primarily to corporate
customers, our business also depends on general economic and business
conditions. A softening of demand for computer software caused by the weakened
economy, both domestic and international, has affected our sales and may
continue to result in decreased revenues and growth rates. As a result of the
economic downturn, we have also experienced and may continue to experience
difficulties in collecting outstanding receivables from our customers. In
addition, recent terrorist attacks on the United States, and the armed conflict
that has followed, have added or exacerbated economic, political and other
uncertainties, which could adversely affect our sales and thus our revenue
growth.

PRIVACY AND SECURITY CONCERNS MAY LIMIT THE EFFECTIVENESS OF AND REDUCE THE
DEMAND FOR OUR SOLUTION.

     The effectiveness of our solution relies on the storage and use of data
collected from various sources, including personal information. The collection
and use of such data by our customers for customer profiling may raise privacy
and security concerns. Our customers generally have implemented security
measures to protect customer data from disclosure or interception by third
parties. However, the security measures may not be effective against all
potential security threats. If a well-publicized breach of customer data
security were to occur, our solution may be perceived as less desirable, which
could limit our revenue growth.

     In addition, due to privacy concerns, some Internet commentators, consumer
advocates and governmental or legislative bodies have suggested legislation to
limit the use of customer profiling technologies. The European Union and some
European countries have already adopted some restrictions on the use of customer
profiling data. If major countries or regions adopt legislation or other
restrictions on the use of customer profiling data, our solution would be less
useful to customers, and our sales could decrease.

IF WE DO NOT RETAIN OUR KEY EMPLOYEES OR MANAGEMENT TEAM, AND INTEGRATE OUR NEW
SENIOR MANAGEMENT PERSONNEL, OUR ABILITY TO EXECUTE OUR BUSINESS STRATEGY WILL
BE LIMITED.

     Our future performance will depend largely on the efforts and abilities of
our key technical, sales, customer support and managerial personnel and on our
ability to attract and retain them. In addition, our ability to execute our
business strategy will depend on our ability to recruit additional experienced
management personnel and to retain our existing executive officers. The


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<PAGE>
competition for qualified personnel in the computer software and technology
markets is particularly intense. We have in the past experienced difficulty in
hiring qualified technical, sales, customer support and managerial personnel,
and we may be unable to attract and retain such personnel in the future. In
addition, due to the intense competition for qualified employees, we may be
required to increase the level of compensation paid to existing and new
employees, which could materially increase our operating expenses. Our key
employees are not obligated to continue their employment with us and could leave
at any time.

RAPID CHANGES IN TECHNOLOGY COULD RENDER OUR PRODUCTS OBSOLETE OR UNMARKETABLE,
AND WE MAY BE UNABLE TO INTRODUCE NEW PRODUCTS AND SERVICES SUCCESSFULLY AND IN
A TIMELY MANNER.

     The business software market is characterized by rapid change due to
changing customer needs, rapid technological developments and advances
introduced by competitors. Existing products can become obsolete and
unmarketable when products using new technologies are introduced and new
industry standards emerge. New technologies, including the rapid growth of the
Internet, could change the way software is sold or delivered. We may also need
to modify our products when third parties change software that we integrate into
our products. As a result, the life cycles of our products are difficult to
estimate.

     To be successful, we must continue to enhance our current product line and
develop new products that successfully respond to changing customer needs,
technological developments and competitive product offerings. We may not be able
to successfully develop or license the applications necessary to respond to
these changes, or to integrate new applications with our existing products. We
may not be able to introduce enhancements or new products successfully or in a
timely manner in the future. If we delay release of our products and product
enhancements, or if they fail to achieve market acceptance when released, it
could harm our reputation and our ability to attract and retain customers, and
our revenues may decline. In addition, customers may defer or forego purchases
of our products if we, our competitors or major hardware, systems or software
vendors introduce or announce new products or product enhancements.

WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR PROPRIETARY RIGHTS, WHICH MAY LIMIT
OUR ABILITY TO COMPETE EFFECTIVELY.

     Our success depends in part on our ability to protect our proprietary
rights. To protect our proprietary rights, we rely primarily on a combination of
patent, copyright, trade secret and trademark laws, confidentiality agreements
with employees and third parties, and protective contractual provisions such as
those contained in license agreements with consultants, vendors and customers,
although we have not signed these agreements in every case. Despite our efforts
to protect our proprietary rights, unauthorized parties may copy aspects of our
products and obtain and use information that we regard as proprietary.
Generally, our products are not physically copy-protected. In order to retain
exclusive ownership rights to all software developed by Insightful, we license
all software and provide it in executable code only, with contractual
restrictions on copying, disclosure and transferability. As is customary in the
industry, we generally license our products to end-users by use of a
'shrink-wrap' license. Certain specialized products may utilize a written,
signed license agreement with the customer. The source code for most of our
products is protected as a trade secret and as unpublished copyrighted work.
Other parties may breach confidentiality agreements and other protective
contracts we have entered into, and we may not become aware of, or have adequate
remedies in the event of, a breach. We face additional risk when conducting
business in countries that have poorly developed or inadequately enforced
intellectual property laws. While we are unable to determine the extent to which
piracy of our software products exists, we expect piracy to be a continuing
concern, particularly in international markets and as a result of the growing
use of the Internet. In any event, competitors may independently develop similar
or superior technologies or duplicate the technologies we have developed, which
could substantially limit the value of our intellectual property.

INTELLECTUAL PROPERTY CLAIMS AND LITIGATION COULD SUBJECT US TO SIGNIFICANT
LIABILITY FOR DAMAGES AND RESULT IN INVALIDATION OF OUR PROPRIETARY RIGHTS.

     In the future, we may have to resort to litigation to protect our
intellectual property rights, to protect our trade secrets or to determine the
validity and scope of the proprietary rights of others. Any litigation,
regardless of its success, would probably be costly and require significant time
and attention of our key management and technical personnel. Although we have
not been sued for intellectual property infringement, we may face infringement
claims from third parties in the future. The software industry has seen frequent
litigation over intellectual property rights, and we expect that participants in
the industry will be increasingly subject to infringement claims as the number
of products, services and competitors grows and the functionality of products
and services overlaps. Infringement litigation could also force us to

     -    stop or delay selling, incorporating or using products that
          incorporate the challenged intellectual property;

     -    pay damages;

     -    enter into licensing or royalty agreements, which may be unavailable
          on acceptable terms; or

     -    redesign products or services that incorporate infringing technology,
          which we might not be able to do at an acceptable price, in a timely
          fashion or at all.


                                       21
<PAGE>
OUR PRODUCTS MAY SUFFER FROM DEFECTS OR ERRORS, WHICH COULD RESULT IN LOSS OF
REVENUES, DELAYED OR LIMITED MARKET ACCEPTANCE OF OUR PRODUCTS, INCREASED COSTS
AND REPUTATIONAL DAMAGE.

     Software products as complex as ours frequently contain errors or defects,
especially when first introduced or when new versions are released. Our
customers are particularly sensitive to such defects and errors because of the
importance of accuracy in software used in analyzing data. We have had to delay
commercial release of past versions of our products until software problems were
corrected, and in some cases have provided product updates to correct errors in
released products. Our new products or releases may not be free from errors
after commercial shipments have begun. Any errors that are discovered after
commercial release could result in loss of revenues or delay in market
acceptance, diversion of development resources, damage to our reputation,
increased service and warranty costs or claims against us.

     In addition, the operation of our products could be compromised as a result
of errors in the third-party software we incorporate into our software. It may
be difficult for us to correct errors in third-party software because that
software is not in our control.

THE CONCENTRATED OWNERSHIP OF OUR COMMON STOCK COULD DELAY OR PREVENT A CHANGE
OF CONTROL, WHICH COULD CAUSE A DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK.

     As of December 31, 2001, our current officers, directors and affiliated
entities together beneficially owned 3,502,348 shares of our common stock
(excluding stock options) or approximately 31% of the total shares outstanding.
Taken together, this group also held stock options representing 750,625 shares
that will be vested and exercisable on or before May 3, 2002. As a result, these
stockholders may, as a practical matter, be able to exert significant influence
over all matters requiring stockholder approval, including the election of
directors and approval of significant corporate transactions such as
acquisitions, and to block unsolicited tender offers. This concentration of
ownership may delay, deter or prevent a third party from acquiring control over
us at a premium over the then current market price of our common stock, which
could result in a decrease in our stock price.

OUR STOCK PRICE MAY BE VOLATILE.

     The price of our common stock has been volatile over the past 12-months.
Our common stock reached a high of $4.44 per share on August 20, 2001 and traded
as low as $1.25 per share on April 4, 2001. As a result of fluctuations in the
price of our common stock, you may be unable to sell your shares at or above the
price you paid for it. The trading price of our common stock could be subject to
fluctuations for a number of reasons, including

     -    future announcements concerning us or our competitors;

     -    actual or anticipated quarterly variations in operating results;

     -    changes in analysts' earnings projections or recommendations;

     -    announcements of technological innovations;

     -    the introduction of new products;

     -    changes in product pricing policies by us or our competitors;

     -    loss of key personnel;

     -    proprietary rights litigation or other litigation; or

     -    changes in accounting standards that adversely affect our revenues and
          earnings.

     In addition, stock prices for many technology companies fluctuate widely
for reasons that may be unrelated to operating results of these companies. These
fluctuations, as well as general economic, market and political conditions, such
as national or international currency and stock market volatility, recessions or
military conflicts, may materially and adversely affect the market price of our
common stock, regardless of our operating performance and may expose us to class
action securities litigation which, even if unsuccessful, would be costly to
defend and distracting to management. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against these companies. Litigation
brought against us could result in substantial costs and a diversion of
management's attention and resources, which could have a material adverse effect
on our business, financial condition and operating results.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     We develop products in the United States and sell them worldwide. As a
result, our financial results could be affected by factors such as changes in
foreign currency exchange rates or weak economic conditions in foreign markets.
Since our sales are currently priced in U.S. dollars and translated into local
currency amounts, a strengthening of the dollar could make our products less


                                       22
<PAGE>
competitive in foreign markets. We operate in the United Kingdom, Germany,
France and Switzerland and incur expenses denominated in those local currencies.
However, we do not believe that these operating expenses will harm our results
of operations. Interest income and expense are sensitive to changes in the
general level of U.S. interest rates, particularly since the Company's
investments are in short-term instruments. Based on the short term nature and
current levels of our investments and debt, however, we do not believe that
there is any material market risk or exposure.

     Our general investing policy is to limit the risk of principal loss and
ensure the safety of invested funds by limiting credit and market risk. We
currently invest in highly liquid money market accounts and short-term
investments. All highly liquid investments with original maturities of three
months or less are considered to be cash equivalents.


PART II.     OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

     None

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

     None

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

     None

ITEM 5.    OTHER INFORMATION

     None

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)    Exhibits

EXHIBIT
NUMBER         DESCRIPTION
-------------  -----------------------------------------------------------------

3.1            Amended and Restated Certificate of Incorporation of the
               Registrant (Exhibit 3.1) (A)

3.2            Amended and Restated Bylaws of the Registrant (Exhibit 3.2) (A)

4.1            2001 Stock Option and Incentive Plan (Exhibit 4.1) (B)

4.2            Form of Incentive Stock Option Agreement under the 2001 Stock
               Option and Incentive Plan (Exhibit 4.2) (B)

4.3            Form of Non-Qualified Stock Option Agreement under 2001 Stock
               Option and Incentive Plan (Exhibit 4.3) (B)

4.4            2001 Employee Stock Purchase Plan (Exhibit 4.4) (B)

4.5            2001 Employee Stock Purchase Plan Enrollment/Authorization Form
               (Exhibit 4.5) (B)

4.6            2001 Non-Employee Director Stock Option Plan (Exhibit 4.6) (B)

4.7            Form of Stock Option Agreement under the 2001 Non-Employee
               Director Stock Option Plan (Exhibit 4.) (B)

10.1           Satisfaction, Release and Termination Agreement, dated January 8,
               2002, by and between Insightful Corporation and Charles Digate
               (Exhibit 10.1) (C)

10.2           Loan and Security Agreement, dated March 29, 2002, by and between
               Insightful Corporation and Silicon Valley Bank (D)

10.3           Negative Pledge Agreement, dated March 29, 2002, by and between
               Insightful Corporation and Silicon Valley Bank (D)

----------------
(A)  Incorporated  by  reference  to  the  designated  exhibit  included  with
Insightful's  Quarterly  Report  on Form 10-Q (No. 0-20992) for the period ended
September  30,  2001,  filed  on  November  14,  2001.
(B)  Incorporated  by  reference  to  the  designated  exhibit  included  with
Insightful's  Registration  Statement on Form S-8 (No. 333-64724), filed on July
6,  2001.
(C) Incorporated by reference to the designated exhibit included in Insightful's
Current  Report  on  Form  8-K  (No.  0-20992),  filed  on  January  31,  2002.
(D)  Filed  herewith.

     (b)    Reports on Form 8-K.

     On January 28, 2002, we filed a Current Report on Form 8-K dated January 7,
2002 announcing the preliminary Q4 2001 and year ended December 31, 2001
operating results.

     On January 31, 2002, we filed a Current Report on Form 8-K dated January 9,
2002 reporting the final satisfaction of a full recourse promissory note in
favor of the Company by Charles Digate and providing the Satisfaction, Release
and Termination Agreement, dated January 8, 2002, by and between the Company and
Charles Digate

     On February 5, 2002, we filed a Current Report on form 8-K dated January
31, 2002 announcing the results for the fourth quarter and year ended December
31, 2001.


                                       24
<PAGE>
                                   SIGNATURES

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

                                        INSIGHTFUL  CORPORATION

May 13, 2002

                                   By:  /s/  SHAWN F. JAVID
                                        ----------------------------------------
                                        Shawn F. Javid
                                        President and Chief Executive Officer
                                        (Principal Executive Officer)

May 13, 2002

                                   By:  /s/  SARWAT  H.  RAMADAN
                                        ----------------------------------------
                                        Sarwat  H.  Ramadan
                                        Vice President, Chief Financial Officer,
                                        Treasurer  and  Secretary  (Principal
                                        Financial  and  Accounting  Officer)


                                       25
<PAGE>
                                  EXHIBIT INDEX

EXHIBIT
NUMBER         DESCRIPTION
-------------  -----------------------------------------------------------------

3.1            Amended and Restated Certificate of Incorporation of the
               Registrant (Exhibit 3.1) (A)

3.2            Amended and Restated Bylaws of the Registrant (Exhibit 3.2) (A)

4.1            2001 Stock Option and Incentive Plan (Exhibit 4.1) (B)

4.2            Form of Incentive Stock Option Agreement under the 2001 Stock
               Option and Incentive Plan (Exhibit 4.2) (B)

4.3            Form of Non-Qualified Stock Option Agreement under 2001 Stock
               Option and Incentive Plan (Exhibit 4.3) (B)

4.4            2001 Employee Stock Purchase Plan (Exhibit 4.4) (B)

4.5            2001 Employee Stock Purchase Plan Enrollment/Authorization Form
               (Exhibit 4.5) (B)

4.6            2001 Non-Employee Director Stock Option Plan (Exhibit 4.6) (B)

4.7            Form of Stock Option Agreement under the 2001 Non-Employee
               Director Stock Option Plan (Exhibit 4.) (B)

10.1           Satisfaction, Release and Termination Agreement, dated January 8,
               2002, by and between Insightful Corporation and Charles Digate
               (Exhibit 10.1) (C)

10.2           Loan and Security Agreement, dated March 29, 2002, by and between
               Insightful Corporation and Silicon Valley Bank (D)

10.3           Negative Pledge Agreement, dated March 29, 2002, by and between
               Insightful Corporation and Silicon Valley Bank (D)

----------------
(A)  Incorporated  by  reference  to  the  designated  exhibit  included  with
Insightful's  Quarterly  Report  on Form 10-Q (No. 0-20992) for the period ended
September  30,  2001,  filed  on  November  14,  2001.
(B)  Incorporated  by  reference  to  the  designated  exhibit  included  with
Insightful's  Registration  Statement on Form S-8 (No. 333-64724), filed on July
6,  2001.
(C) Incorporated by reference to the designated exhibit included in Insightful's
Current  Report  on  Form  8-K  (No.  0-20992),  filed  on  January  31,  2002.
(D)  Filed  herewith.


                                       26
<PAGE>