U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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


|X|   Quarterly report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934 for the quarterly period ended January 31, 2002


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



                          Commission File No. 000-24996

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

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

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


                                 (212) 271-7640

              (Registrant's telephone number, including area code)

      Indicate by check mark  whether the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes |X| No |_|

      As of February 28, 2002 the registrant had outstanding  11,144,288  shares
of Class A Common Stock.

<PAGE>

                          INTERNET COMMERCE CORPORATION

                               INDEX TO FORM 10-Q

                                                                            PAGE
                                                                            ----
PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements

Consolidated balance sheets as of January 31, 2002 (unaudited)
      and July 31, 2001..................................................     3

Consolidated statements of operations and comprehensive loss
      for the three and six months ended January 31, 2002
      (unaudited) and January 31, 2001 (unaudited).......................     4

Consolidated statements of cash flows for the six months
      ended January 31, 2002 (unaudited) and January 31, 2001
      (unaudited)........................................................     5

Notes to consolidated financial statements...............................  6-12

Item 2. Management's Discussion and Analysis of Financial Condition
        and Results of Operations........................................ 13-18

Item 3. Quantitative and Qualitative Disclosures About
        Market Risk......................................................    18


PART II.  OTHER INFORMATION

Item 4.  Submission of Matters to a Vote of Security Holders.............    19

Item 6.  Exhibits and Reports on Form 8-K ...............................    19

SIGNATURES...............................................................    20

<PAGE>

<TABLE>
<CAPTION>

INTERNET COMMERCE CORPORATION

Consolidated Balance Sheets

                                                               January 31,      July 31,
                                                                  2002            2001
                                                             -------------   ------------
                                                              (unaudited)
ASSETS
Current assets:
<S>                                                          <C>             <C>
  Cash and cash equivalents                                  $  1,959,906    $  2,223,487
  Marketable securities                                           446,212         665,552
  Accounts receivable, net of allowance for doubtful
    accounts of $250,887 and $224,022, respectively             1,485,119       1,588,242
  Prepaid expenses and other current assets                       524,646         401,334
                                                             ------------    ------------
    Total current assets                                        4,415,883       4,878,615

Restricted cash                                                   204,107         276,635
Property and equipment, net                                     1,492,688       1,920,662
Software development costs, net                                   441,556         425,471
Goodwill, net                                                   3,904,684       2,194,067
Other intangible assets, net                                    3,585,000       5,917,854
Other assets                                                      125,004          60,794
                                                             ------------    ------------
    Total assets                                             $ 14,168,922    $ 15,674,098
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                           $    559,892    $    713,670
  Accrued expenses                                              1,885,551       2,381,788
  Accrued dividends - preferred stock                              38,827         273,289
  Deferred revenue                                                202,420         306,764
  Capital lease obligation                                        257,320         328,480
  Other liabilities                                               204,274         228,189
                                                             ------------    ------------
     Total current liabilities                                  3,148,284       4,232,180

Capital lease obligation - less current portion                   217,835         255,009
                                                             ------------    ------------
     Total liabilities                                          3,366,119       4,487,189
                                                             ------------    ------------

Commitments and contingencies

Stockholders' Equity:
Preferred stock:
  Preferred stock - 5,000,000 shares authorized, including
    10,000 shares of series A, 10,000 shares of series C
    and 175 shares of series S:
  Series A preferred stock - par value $.01 per share, 175
    and 225 shares issued and outstanding, respectively
    (liquidation value of $179,947)                                     2               2
  Series C preferred stock - par value $.01 per share,
    44.76 votes per share; 10,000 shares issued and
    outstanding (liquidation value of $10,033,880)                    100             100
Common stock:
  Class A - par value $.01 per share, 40,000,000 shares
    authorized, one vote per share; 11,144,288 and
    9,770,180 shares issued and outstanding, respectively         111,443          97,702
  Class B - par value $.01 per share, 2,000,000 shares
    authorized, six votes per share; 1,930 shares issued
    and outstanding in 2001                                          --                19
Additional paid-in capital                                     84,326,480      80,750,153
Accumulated deficit                                           (73,388,356)    (69,261,320)
Accumulated other comprehensive loss                             (246,866)       (209,728)
Deferred compensation - restricted stock                             --          (190,019)
                                                             ------------    ------------
     Total stockholders' equity                                10,802,803      11,186,909
                                                             ------------    ------------

     Total liabilities and stockholders' equity              $ 14,168,922    $ 15,674,098
                                                             ============    ============
</TABLE>


                 See notes to consolidated financial statements.


                                       3
<PAGE>

<TABLE>
<CAPTION>

INTERNET COMMERCE CORPORATION

Consolidated Statements of Operations and Comprehensive Loss (unaudited)

                                                                    Three Months Ended               Six Months Ended
                                                                        January 31,                    January 31,
                                                                ----------------------------    ----------------------------
                                                                   2002             2001            2002           2001
                                                                ------------    ------------    ------------    ------------
<S>                                                             <C>             <C>             <C>             <C>
Revenue:
  Services                                                      $  2,689,599    $  2,582,385    $  5,735,526    $  3,898,770
                                                                ------------    ------------    ------------    ------------

Expenses:
  Cost of services (excluding non-cash compensation of
       $40,371 and $133,429 for the three months and
       six months ended January 31, 2002, respectively)            2,146,638       2,521,194       4,629,091       3,580,209
  Product development and enhancement                                254,588         285,445         499,330         437,642
  Selling and marketing (excluding non-cash compensation of
       $6,904 and $23,109 for the three months and six months
       ended January 31, 2002, respectively)                         924,717       1,526,128       1,900,273       2,704,046
  General and administrative (excluding non-cash compensation
       of $10,765 and $33,481 for the three and six months
       ended January 31, 2002, respectively, and $450,110 for
       the six months ended January 31, 2001)                      1,294,456       3,062,939       2,654,280       5,022,301
  Non-cash charges for stock-based compensation and services          58,040            --           190,019         450,110
                                                                ------------    ------------    ------------    ------------

                                                                   4,678,439       7,395,706       9,872,993      12,194,308
                                                                ------------    ------------    ------------    ------------

Operating loss                                                    (1,988,840)     (4,813,321)     (4,137,467)     (8,295,538)
                                                                ------------    ------------    ------------    ------------

Interest and investment income                                         4,345         159,230          76,930         377,029
Interest expense                                                     (25,965)        (22,710)        (54,979)        (38,647)
Other income (loss)                                                  (11,520)           --           (11,520)           --
                                                                ------------    ------------    ------------    ------------

                                                                     (33,140)        136,520          10,431         338,382
                                                                ------------    ------------    ------------    ------------

Net loss                                                        $ (2,021,980)   $ (4,676,801)   $ (4,127,036)   $ (7,957,156)
                                                                ============    ============    ============    ============

Dividends on preferred stock                                        (102,492)       (106,083)       (165,538)       (212,309)
                                                                ------------    ------------    ------------    ------------

Loss attributable to common stockholders                        $ (2,124,472)   $ (4,782,884)   $ (4,292,574)   $ (8,169,465)
                                                                ============    ============    ============    ============

Basic and diluted loss per common share                         $      (0.19)   $      (0.52)   $      (0.41)   $      (1.03)
                                                                ============    ============    ============    ============

Weighted average number of common shares
  outstanding--

   basic and diluted loss per share                               11,005,793       9,262,204      10,407,658       7,946,713
                                                                ============    ============    ============    ============

COMPREHENSIVE LOSS:
------------------
Net loss                                                        $ (2,021,980)   $ (4,676,801)   $ (4,127,036)   $ (7,957,156)
Other comprehensive (loss) income:
   Unrealized (losses) gains                                          22,424          56,942         (37,138)        (18,488)
                                                                ------------    ------------    ------------    ------------

Comprehensive loss                                              $ (1,999,556)   $ (4,619,859)   $ (4,164,174)   $ (7,975,644)
                                                                ============    ============    ============    ============
</TABLE>


                 See notes to consolidated financial statements.


                                       4
<PAGE>

<TABLE>
<CAPTION>
INTERNET COMMERCE CORPORATION

Consolidated Statements of Cash Flows (unaudited)

                                                              Six Months Ended January 31,
                                                            ------------------------------
                                                                2002             2001
                                                            ------------    --------------
<S>                                                         <C>             <C>
Cash flows from operating activities:
 Net loss                                                   $ (4,127,036)   $ (7,957,156)
 Adjustments to reconcile net loss to net
 cash used in operating activities:
    Depreciation and amortization                              1,113,424       1,241,099
    Allowance for doubtful accounts                              126,884            --
    Gain on sale of marketable securities                        (64,637)           --
    Non-cash charges for equity instruments
      issued for compensation and services                       190,019         450,110
    Changes in:
      Accounts receivable                                        (23,761)       (369,291)
      Prepaid expenses and other assets                         (128,180)        (38,908)
      Accounts payable                                          (153,778)       (311,204)
      Accrued expenses                                          (438,111)            (43)
      Deferred revenue                                          (104,344)       (341,502)
      Other liabilities                                          (23,915)         41,234
                                                            ------------    ------------

      Net cash used in operating activities                   (3,633,435)     (7,285,661)
                                                            ------------    ------------

Cash flows from investing activities:
   Payment for purchase of acquisition, net of
     cash acquired                                                  --           (22,055)
   Capitalization of software development costs                 (134,733)           --
   Purchases of property and equipment                           (36,998)        (50,125)
   Purchase of certificate of deposits                              --           (18,162)
   Proceeds from maturity of certificate of deposits              72,528            --
   Proceeds from sales of marketable securities                  246,839            --
                                                            ------------    ------------

      Net cash provided by (used in) investing activities        147,636         (90,342)
                                                            ------------    ------------

Cash flows from financing activities:
   Proceeds from issuance of common stock and warrants,
     net                                                       3,107,269            --
   Proceeds from exercise of employee stock options              215,312         196,265
   Proceeds from exercise of warrants                             59,775            --
   Payments of capital lease obligations                        (160,138)       (150,404)
                                                            ------------    ------------

      Net cash provided by financing activities                3,222,218          45,861
                                                            ------------    ------------

Net (decrease) in cash and cash equivalents                     (263,581)     (7,330,142)

Cash and cash equivalents, beginning of period                 2,223,487      14,003,329
                                                            ------------    ------------

Cash and cash equivalents, end of period                    $  1,959,906       6,673,187
                                                            ============    ============

Supplemental disclosure of cash flow information:
  Cash paid for interest during the period                  $     54,979          14,084
  Noncash investing and financing activities:
    Issuance of common stock for services performed               77,400            --
    Issuance of common stock for dividends on preferred
      stock                                                      400,000            --
    Property acquired under capital lease                         51,804            --
Amounts related to business acquisition:
  Fair value of assets acquired, net of cash acquired               --        27,842,257
    Less:
      Liabilities assumed                                           --         1,921,092
      Fair value of equity instruments issued                       --        20,529,624
      Note receivable                                                          5,000,000
      Transactions costs paid in prior period                       --           369,486
                                                            ------------    ------------

                                                                    --        27,820,202
                                                            ------------    ------------
  Payment for purchase of acquisitions, net of
    cash acquired                                                   --            22,055
</TABLE>


                 See notes to consolidated financial statements.


                                       5
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002

1.    BASIS OF PRESENTATION

      The accompanying  unaudited  consolidated financial statements of Internet
      Commerce  Corporation  (the  "Company"  or "ICC")  have been  prepared  in
      accordance with  accounting  principles  generally  accepted in the United
      States of America  ("GAAP")  for  interim  financial  information.  In the
      opinion of management, such statements include all adjustments (consisting
      only of normal recurring  adjustments) necessary for the fair presentation
      of the Company's financial position,  results of operations and cash flows
      at the dates and for the periods  indicated.  Pursuant to the requirements
      of the Securities and Exchange Commission  applicable to Quarterly Reports
      on Form 10-Q, the accompanying financial statements do not include all the
      disclosures  required by GAAP for annual financial  statements.  While the
      Company  believes that the disclosures  presented are adequate to make the
      information  not   misleading,   these  interim   consolidated   financial
      statements  should  be read in  conjunction  with  the  audited  financial
      statements  and related notes  included in the Company's  Annual Report on
      Form 10-K for the year  ended July 31,  2001.  Operating  results  for the
      three and six-month  periods  ended  January 31, 2002 are not  necessarily
      indicative  of the results that may be expected for the fiscal year ending
      July 31, 2002.

      Certain  2001  items  have been  reclassified  to  conform  to their  2002
      presentation.


2.    ORGANIZATION AND NATURE OF BUSINESS

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

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

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

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

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

      In October 2001, we sold in a private placement  1,159,716 shares of class
      A common stock and warrants to purchase 347,915 additional shares of class
      A common stock for gross  proceeds of $3,189,219.  The warrants  expire in
      October 2006 and are  immediately  exercisable  at $3.58 per share.  As of
      January  31,  2002,  we had  cash  and  cash  equivalents  and  marketable
      securities  of  $2,406,000.  We believe  these  resources  provide us with
      sufficient  liquidity  to continue in  operation  through  July 31,  2002.
      However,  if our cost reductions do not achieve sufficient savings, if our
      expenses increase more than anticipated,  if our revenue does not increase
      as anticipated  because of competitive or other reasons or because we lose
      existing  customers because the new  interconnection  arrangements we have
      provided are inadequate for our customers' business purposes (see "Item 2.
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations - Overview") or if our accounts receivable increase as a result
      of a lengthening  of the collection  cycle,  our cash resources may not be
      sufficient  and we will  require  additional  financing.  There  can be no
      assurances  that any financing will be available or that the terms will be
      acceptable to us, or that any financing will be consummated.


                                       6
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002


3.    SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES

      Principles of consolidation:

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

      Revenue recognition:

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

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

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

      Deferred revenue:

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

      Recent Accounting Pronouncements:

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


                                       7
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002


3.    SIGNIFICANT ACCOUNTING POLICIES AND PROCEDURES (continued)

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

      In November  2001,  the  Emerging  Issues Task Force  ("EITF") of the FASB
      reached a consensus on Issue No. 01-14, "Income Statement Characterization
      of  Reimbursements  Received  for  `Out-of-Pocket'  Expenses  Incurred." A
      consensus  was reached  that  reimbursements  received  for  out-of-pocket
      expenses  incurred  should  be  characterized  as  revenue  in the  income
      statement. The Company currently includes the reimbursements and costs for
      out-of-pocket  expenses in cost of  services.  The  adoption of this issue
      will result only in the  reclassification  of reimbursements  from cost of
      services  to  revenue.  Management  believes  that  the  adoption  of this
      standard  will not have a significant  impact on the  Company's  financial
      position or results of operations.


4.    PRIVATE PLACEMENT OF COMMON STOCK

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

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

5.    CONTINGENCY

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

      Subsequently,  by Demand for  Arbitration  dated  November 30,  2001,  Mr.
      Lipscomb  commenced an arbitration  against the Company arising out of the
      same alleged breach of his employment agreement that formed the underlying
      basis for his suit against Messrs.  Alpern and Medici. In the arbitration,
      Mr.  Lipscomb  seeks  recovery  of  $614,000  before  interest,  costs and
      attorneys' fees. The Company intends to defend the arbitration  vigorously
      and is unable to predict the ultimate outcome of this claim.


                                       8
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002


6.    CONCENTRATION OF CREDIT RISK

      For the three and  six-month  periods  ended  January 31, 2002,  no single
      customer  accounted  for  more  than  10% of the  Company's  revenue.  One
      customer  accounted for 12.8% of the Company's  revenue for the six months
      ended January 31, 2001. No single customer  accounted for more than 10% of
      the Company's revenue for the three months ended January 31, 2001.

      No single customer  accounted for more than 10% of the Company's  accounts
      receivable as of January 31, 2002 or July 31, 2001.


7.    BUSINESS SEGMENT INFORMATION

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

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

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

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

      The tables on pages 10 and 11 summarize  information  about operations and
      long-lived  assets of our  operating  segments as of and for the three and
      six-months ended January 31, 2002 and 2001.


                                       9
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002

<TABLE>
<CAPTION>

7.    BUSINESS SEGMENT INFORMATION (CONTINUED)

                                                         Service       Professional
                                          ICC.NET        Bureau         Services       Total
                                          -------        ------         --------       -----

<S>                                     <C>            <C>            <C>            <C>
Three Months - January 31, 2002

Revenues from external customers        $ 1,452,991    $   378,804    $   857,804    $ 2,689,599
                                        ===========    ===========    ===========    ===========

Operating loss                           (1,435,216)       (47,480)      (506,144)    (1,988,840)
Other income, net                           (14,383)          --          (18,757)       (33,140)
                                        -----------    -----------    -----------    -----------
                                        $(1,449,599)   $  (524,901)   $   (47,480)   $(2,021,980)
                                        ===========    ===========    ===========    ===========

Supplemental segment
information:
     Amortization and depreciation      $   201,142    $    19,027    $   330,774    $   550,943
     Non-cash charges for stock-based
       compensation                            --             --           58,040         58,040

Six Months - January 31, 2002

Revenues from external customers        $ 3,020,741    $   798,392    $ 1,916,393    $ 5,735,526
                                        ===========    ===========    ===========    ===========

Operating loss                           (2,637,277)       (61,574)    (1,438,616)    (4,137,467)

Other income, net                            52,929           --          (42,498)        10,431
                                        -----------    -----------    -----------    -----------
                                        $(2,584,348)   $   (61,574)   $(1,481,114)   $(4,127,036)
                                        ===========    ===========    ===========    ===========

Supplemental segment
information:
     Amortization and depreciation      $   405,775    $    40,342    $   667,307      1,113,424
     Non-cash charges for stock-based
       compensation                            --             --          190,019        190,019

As of January 31, 2002

Property and equipment, net             $   808,070    $    39,966    $   644,652      1,492,688
Software development costs, net             118,648        322,908           --          441,556
Goodwill, net                                26,132      2,167,935      1,710,617      3,904,684
Other intangible assets, net                   --             --        3,585,000      3,585,000
                                        -----------    -----------    -----------    -----------
Long lived assets, net                  $   952,850    $ 2,530,809    $ 5,940,269    $ 9,423,928
                                        ===========    ===========    ===========    ===========
</TABLE>


                                       10
<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002

<TABLE>
<CAPTION>

7.    BUSINESS SEGMENT INFORMATION (CONTINUED)

                                                                 Service        Professional
                                                 ICC.NET         Bureau         services (A)      Total
                                              ------------    ------------    --------------  ------------
      Three Months - January 31, 2001

<S>                                           <C>             <C>             <C>             <C>
      Revenues from external customers        $  1,034,918    $    345,959    $  1,201,508    $  2,582,385
                                              ============    ============    ============    ============

      Operating loss                            (2,628,147)        (29,591)     (2,155,583)     (4,813,321)
      Other income, net                             96,976            --            39,544         136,520
                                              ------------     -----------    ------------    ------------
                                                (2,531,171)   $    (29,591)   $ (2,116,039)   $ (4,676,801)
                                              ============    ============    ============    ============

      Supplemental segment
      information:
           Amortization and depreciation      $     44,266    $       --      $    995,425    $  1,039,691

      Six Months - January 31, 2001

      Revenues from external customers        $  1,940,078    $    757,184    $  1,201,508    $  3,898,770
                                              ============    ============    ============    ============

      Operating loss                            (6,130,024)         (9,931)     (2,155,583)     (8,295,538)
      Other income, net                            298,838            --            39,544         338,382
                                              ------------    ------------    ------------    ------------
                                                (5,831,186)   $     (9,931)   $ (2,116,039)   $ (7,957,156)
                                              ============    ============    ============    ============

      Supplemental segment
      information:
           Amortization and depreciation      $    245,674    $       --      $    995,425    $  1,241,099
           Non-cash charges for stock-based
              compensation                         450,110            --              --           450,110

      As of January 31, 2001

      Property and equipment, net                1,014,721    $     79,931    $  1,139,305    $  2,233,957
      Software development costs, net              355,944            --              --           355,944
      Goodwill, net                                104,530       2,305,618      16,046,334      18,456,482
      Other intangible assets, net                    --              --         9,526,600       9,526,600
                                              ------------    ------------    ------------    ------------
      Long lived assets, net                  $  1,475,195    $  2,385,549    $ 26,712,239    $ 30,572,983
                                              ============    ============    ============    ============
</TABLE>

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


                                       11

<PAGE>

INTERNET COMMERCE CORPORATION

Notes to Consolidated Financial Statements
January 31, 2002


8.    GOODWILL - EFFECT OF ADOPTION OF SFAS 142

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

<TABLE>
<CAPTION>

                                       Three Months Ended               Six Months Ended
                                           January 31,                    January 31,
                                -----------------------------     ------------------------------
                                     2002             2001            2002             2001
                                -------------    -------------     ------------    -------------

<S>                             <C>              <C>              <C>              <C>
Reported net loss               $  (2,021,980)   $  (4,676,801)   $  (4,127,036)   $  (7,957,156)
Add:  Goodwill amortization              --            511,159             --            611,190
                                -------------    -------------    -------------    -------------
Adjusted net loss               $  (2,021,980)   $  (4,165,642)   $  (4,127,036)   $  (7,345,966)
                                =============    =============    =============    =============

Reported basic and diluted
  loss per common share         $       (0.19)   $       (0.52)   $       (0.41)   $       (1.03)
Add:  Goodwill amortization              --               0.06             --               0.08
                                -------------    -------------    -------------    -------------
Adjusted basic and diluted      $       (0.19)   $       (0.46)   $       (0.41)   $       (0.95)
  loss per share                =============    =============    =============    =============
</TABLE>


9.    SUBSEQUENT EVENT

      On  February  18,  2002,  234,140  class A warrants  and  263,835  class B
      warrants  expired.  The  warrants  were  exercisable  for an  aggregate of
      1,002,200 shares of the Company's class A common stock.



                                       12
<PAGE>

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

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

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

Overview

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

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

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

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

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


                                       13
<PAGE>

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

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

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

      We rely on many of our competitors to  interconnect,  at reasonable  cost,
with  our  service.  We have  interconnection  arrangements  with  more  than 50
business-to-business  networks  for the  benefit  of our  customers.  Two of the
largest networks, GE Global Exchange Services ("GXS") and Sterling Commerce have
chosen to discontinue  their  interconnect  arrangements  with the Company.  GXS
discontinued its interconnection with our service in September 2001 and Sterling
Commerce will discontinue its interconnection with our service on April 8, 2002.
We  have  entered  into  arrangements  with  Peregrine  Systems,  Inc.  and  IBM
Corporation so our customers can continue to  communicate  through us with their
trading communities. As a result of these new interconnection  arrangements,  we
will incur additional costs and may lose existing  customers if the arrangements
we have  provided  are  inadequate  for their  business  purposes.  We  believe,
however,  that the arrangements we have made will satisfy our existing customers
and that our  business  and  financial  condition  will  not be  materially  and
adversely affected as a result of these new arrangements.

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

Results of Operations and Financial Condition

Three Months Ended January 31, 2002 Compared with Three Months Ended January 31,
2001.

      Our revenue was  $2,690,000  in the quarter  ended January 31, 2002 ("2002
Quarter") and $2,582,000 in the quarter ended January 31, 2001 ("2001 Quarter").
Revenue  related  to our  ICC.NET  service  was  $1,453,000,  or 54% of the 2002
Quarter  revenue.  Our ICC.NET  service revenue  increased  $418,000 in the 2002
Quarter from the 2001 Quarter.  The 2001 Quarter included  $250,000 of fees from
Triaton GmbH, a subsidiary of ThyssenKrupp  Information  Services GmbH,  under a
Joint Services  Agreement  dated July 28, 2000. No such fees were  recognized in
the 2002 Quarter.  Transaction fees from our ICC.NET service increased  $730,000
as a result of a larger billable customer base and increased volume usage by new
and existing  customers.  Revenue in the amount of $379,000,  or 14% of the 2002
Quarter  revenue,  was generated from our service bureau  compared to revenue of
$346,000  in the 2001  Quarter.  The  service  bureau's  revenue  was  primarily
generated  from  services  performed,   customer  support  and  licensing  fees.
Professional  services,  acquired in November 2000,  accounted for $858,000,  or
approximately  32% of the 2002 Quarter revenue compared to revenue of $1,202,000
in the 2001 Quarter.  Revenue generated from  professional  services consists of
consulting, educational and mapping services.

                                       14
<PAGE>

      Cost  of  services  decreased  to  $2,147,000  in the  2002  Quarter  from
$2,521,000 in the 2001 Quarter. Cost of services relating to our ICC.NET service
was $1,039,000,  or 72% of revenue derived from the service in the 2002 Quarter,
compared  to  $854,000,  or 82% of revenue  in the 2001  Quarter.  Salaries  and
employee benefits related to the ICC.NET service increased  $96,000.  Data lines
and support  increased  $103,000,  primarily due to additional  fees incurred to
offer  our  customers  and  their  trading   partners   enhanced   connectivity.
Depreciation  and  amortization  decreased  $26,000,  consulting  fees decreased
$31,000 and facility charges increased $41,000 in the 2002 Quarter from the 2001
Quarter.  We  anticipate  that our  ICC.NET  cost of services  will  continue to
decline  as  a  percentage  of  revenue  in  future  periods  due  to  increased
utilization of our existing  communications  infrastructure as we expect the use
of our  service to  increase.  Cost of services  relating to our service  bureau
totaled $219,000,  or 58% of revenue derived from the service bureau in the 2002
Quarter, compared to $135,000, or 39% of revenue derived from the service bureau
in the 2001 Quarter. The increase was primarily the result of a $51,000 increase
in salaries and employee  benefits as a result of hiring temporary  employees to
stabilize  our  workforce.  In  addition,  in the 2002  Quarter we paid a larger
percentage of the cost of medical  benefits for employees of the service bureau.
This was done to provide a consistent level of benefits  throughout the Company.
Cost of services  relating to  professional  services were $888,000,  or 104% of
revenue  derived from  professional  services in the 2002  Quarter,  compared to
$1,533,000,  or 128% of  revenue  in the 2001  Quarter.  Salaries  and  employee
benefits relating to our professional  services  decreased  $419,000 in the 2002
Quarter,  compared to the 2001 Quarter due to a reduction in the workforce. Cost
of software and hardware  purchased for resale  decreased  $220,000 and facility
charges increased $68,000 in the 2002 Quarter.

      Product  development and enhancement  costs related to the maintenance and
improvement  of our  products  and  services  decreased  to $255,000 in the 2002
Quarter  from  $285,000  in  the  2001  Quarter.  Product  and  development  and
enhancement  costs  related to our  ICC.NET  service  were  $213,000 in the 2002
Quarter,  compared to $193,000 in the 2001  Quarter.  The increase was primarily
the result of a $35,000  increase in salaries  and  employee  benefits.  Product
development and enhancement costs incurred by our service bureau were $42,000 in
the 2002  Quarter,  compared to $92,000 in the 2001  Quarter.  The  decrease was
primarily  attributable  to a decrease  in  salaries  and  employee  benefits of
$36,000 and a decrease in consulting fees of $20,000.

      Selling and marketing  expenses  decreased to $925,000 in the 2002 Quarter
from $1,526,000 in the 2001 Quarter.  Selling and marketing  expenses related to
our ICC.NET service were $759,000 in the 2002 Quarter  compared to $1,176,000 in
the 2001 Quarter.  Salaries and employee benefits related to our ICC.NET service
decreased  $298,000,  primarily due to the  elimination of our telesales  force.
Consulting fees decreased  $48,000,  travel,  meals and entertainment  decreased
$24,000 and facility charges decreased $42,000 in the 2002 Quarter.  Selling and
marketing  expenses  related  to our  service  bureau  were  $32,000 in the 2002
Quarter, compared to $19,000 in the 2001 Quarter. Selling and marketing expenses
related to professional services were $134,000 in the 2002 Quarter,  compared to
$332,000 in the 2001  Quarter.  The decrease  was  primarily  attributable  to a
decrease in salaries  and benefits of $154,000  primarily  due to a reduction in
the workforce, and a decrease in advertising of $44,000.

      General and  administrative  costs  decreased  to  $1,294,000  in the 2002
Quarter from $3,063,000 in the 2001 Quarter. General and administrative expenses
supporting  our ICC.NET  service  decreased  to  $877,000  in the 2002  Quarter,
compared  to  1,440,000  in the 2001  Quarter.  Salaries  and  related  employee
benefits  decreased  $374,000,  due to a reduction in the  workforce.  Legal and
professional fees decreased $69,000, consulting fees decreased $93,000 primarily
as a result of a consulting  contract with a former  officer of the Company that
resulted in a charge in the 2001  Quarter.  No such  charge was  required in the
2002 Quarter. Also, depreciation and amortization decreased $53,000. General and
administrative  expenses supporting our service bureau were $134,000 in the 2002
Quarter,  compared to $130,000 in the 2001 Quarter.  General and  administrative
expenses supporting our professional services were $284,000 in the 2002 Quarter,
compared  to  $1,493,000  in  the  2001  Quarter.  The  decrease  was  primarily
attributable  to a decrease in  depreciation  and  amortization  of $665,000,  a
result of the  Company's  implementation  of SFAS No. 142,  effective  August 1,
2001,  which  requires  goodwill to be tested for impairment on a periodic basis
and no longer permits the  amortization of goodwill.  In addition,  depreciation
and  amortization  also  decreased due to the write-off of certain  identifiable
intangibles for which  impairment  charges were recorded in the third and fourth
quarters  of  2001.  In  addition,  salaries  and  employee  benefits  decreased
$239,000,  primarily  due to a  reduction  in the  workforce,  and a decrease in
facility charges of $134,000.

      Non-cash  charges for  compensation  and services were $58,000 in the 2002
Quarter. In the 2002 Quarter, we recognized $58,000 of stock-based  compensation
expenses related to assumed unvested  restricted shares issued to RTCI employees
in connection with our  acquisition of RTCI. In the 2001 Quarter,  there were no
such charges.

                                       15
<PAGE>

      Interest  and  investment  income  decreased to $4,000 in the 2002 Quarter
from  $159,000 in the 2001  Quarter.  The decrease was due to lower average cash
balances in the 2002 Quarter, compared to the 2001 Quarter.

Six Months Ended  January 31, 2002  Compared  with Six Months Ended  January 31,
2001.

      Our revenue was $5,736,000 in the six months ended January 31, 2002 ("2002
Six Months") and  $3,899,000 in the six months ended January 31, 2001 ("2001 Six
Months").  Revenue related to our ICC.NET service was $3,021,000,  or 53% of the
2002 Six Months revenue. Our ICC.NET service revenue increased $1,081,000 in the
2002 Six Months from the 2001 Six Months.  The 2001 Six Months includes $500,000
of fees from Triaton GmbH, a subsidiary  of  ThyssenKrupp  Information  Services
GmbH,  under a Joint Services  Agreement  dated July 28, 2000. No such fees were
recognized  in the 2002 Six Months.  Transaction  fees from our ICC.NET  service
increased  $1,545,000  as a  result  of a  larger  billable  customer  base  and
increased volume usage by new and existing  customers.  Revenue in the amount of
$798,000,  or 14% of the 2002 Six Months revenue, was generated from our service
bureau,  compared  to $757,000  in the 2001 Six  Months.  The  service  bureau's
revenue was primarily  generated from the services  performed,  customer support
and licensing fees. Professional services,  acquired in November 2000, accounted
for $1,916,000,  or  approximately  33% of the 2002 Six Months revenue.  Revenue
generated from  professional  services  consists of consulting,  educational and
mapping  services.  Revenue  related to  professional  services for the 2001 Six
Months in the amount of  $1,202,000,  reflects the results of  operations of our
professional services group from November 6, 2000, the acquisition date of RTCI.

      Cost of  services  increased  to  $4,629,000  in the 2002 Six Months  from
$3,580,000  in the 2001 Six  Months.  Cost of  services  relating to our ICC.NET
service was  $1,973,000,  or 65% of revenue derived from the service in the 2002
Six Months,  compared to $1,753,000,  or 90% of revenue, in the 2001 Six Months.
Salaries  and  employee  benefits  related  to  the  ICC.NET  service  increased
$238,000. Data lines and support increased $140,000, primarily due to additional
fees  incurred  to offer our  customers  and  their  trading  partners  enhanced
connectivity.  Depreciation  and amortization  decreased  $52,000 and consulting
fees  decreased  $119,000 in the 2002 Six Months  from the 2001 Six  Months.  We
anticipate  that our  ICC.NET  cost of  services  will  continue to decline as a
percentage  of revenue in future  periods due to  increased  utilization  of our
existing  communications  infrastructure  as we expect the use of our service to
increase.  Cost of services relating to our service bureau totaled $455,000,  or
57% of revenue derived from the service bureau in the 2002 Six Months,  compared
to $295,000,  or 39% of revenue  derived from the service bureau in the 2001 Six
Months.  Consulting fees increased  $37,000,  facility charges increased $20,000
and salaries  and employee  benefits  relating to our service  bureau  increased
$89,000 as a result of hiring temporary employees to stabilize our workforce. In
addition,  in the 2002 Six  Months  we paid a larger  percentage  of the cost of
medical benefits for employees of the service bureau. This was done to provide a
consistent level of benefits  throughout the Company.  Cost of services relating
to  professional  services  were  $2,201,000,  or 115% of revenue  derived  from
professional  services  in the 2002 Six  Months.  Cost of  services  related  to
professional  services  for the 2001 Six  Months,  in the amount of  $1,533,000,
reflects  the results of  operations  of our  professional  services  group from
November 6, 2000, the acquisition date of RTCI.

      Product  development and enhancement  costs related to the maintenance and
improvement  of our products and services  increased to $499,000 in the 2002 Six
Months  from  $438,000  in the 2001 Six  Months.  Product  and  development  and
enhancement  costs related to our ICC.NET  service were $412,000 in the 2002 Six
Months  compared to $251,000 in the 2001 Six Months.  Consulting fees related to
our ICC.NET service  decreased  $21,000,  facility charges decreased $38,000 and
salaries and employee  benefits  increased  $238,000.  Product  development  and
enhancement  costs  incurred by our service  bureau were $87,000 in the 2002 Six
Months  versus  $187,000  in the 2001 Six Months.  The  decrease  was  primarily
attributable  to a decrease in salaries and  employee  benefits of $48,000 and a
decrease in consulting fees of $51,000.

      Selling and  marketing  expenses  decreased to  $1,900,000 in the 2002 Six
Months from  $2,704,000 in the 2001 Six Months.  Selling and marketing  expenses
related to our ICC.NET  service were  $1,484,000 in the 2002 Six Months compared
to $2,330,000 in the 2001 Six Months.  Salaries and employee benefits related to
our ICC.NET service decreased $475,000,  primarily due to the elimination of our
telesales  force.   Consulting  fees  decreased  $133,000,   travel,  meals  and
entertainment  decreased  $107,000,   facility  charges  decreased  $73,000  and
advertising expense decreased $53,000. Selling and marketing expenses related to
our service  bureau were  $62,000 in the 2002 Six Months  compared to $42,000 in
the 2001 Six Months.  Selling and  marketing  expenses  related to  professional
services were $355,000 in the 2002 Six Months.  Selling and marketing related to
professional  services,  for the 2001 Six  Months,  in the  amount of  $332,000,
reflects  the results of  operations  of our  professional  services  group from
November 6, 2000, the acquisition date of RTCI.

                                       16
<PAGE>

      General and  administrative  costs decreased to $2,654,000 in the 2002 Six
Months  from  $5,022,000  in the 2001 Six  Months.  General  and  administrative
expenses  supporting our ICC.NET service decreased to $1,749,000 in the 2002 Six
Months from  $3,286,000  in the 2001 Six Months.  Salaries and related  employee
benefits  decreased  $929,000 in the 2002 Six Months,  due to a reduction in the
workforce.  Legal and  professional  fees decreased  $298,000,  consulting  fees
decreased $207,000 and depreciation and amortization decreased $106,000. General
and administrative  expenses  supporting our service bureau were $256,000 in the
2002 Six  Months,  compared  to  $244,000  in the 2001 Six  Months.  General and
administrative  expenses  supporting our  professional  services in the 2002 Six
Months were $609,000.  General and administrative  costs related to professional
services,  for the 2001 Six Months,  in the amount of  $1,493,000,  reflects the
results of operations of our professional  services group from November 6, 2000,
the acquisition date of RTCI.

      Non-cash charges for  compensation  and services  decreased to $190,000 in
the 2002 Six  Months  from  $450,000  in the  2001 Six  Months.  In the 2002 Six
Months, we recognized $190,000 of stock-based  compensation  expenses related to
assumed unvested  restricted  shares issued to RTCI employees in connection with
our  acquisition  of RTCI.  In March  2000,  ICC  granted an option to  purchase
100,000 shares of class A common stock pursuant to a consulting agreement with a
former executive officer and board member.  Non-cash consulting charges for this
stock option amounted to $450,000 in the 2001 Six Months.

      Interest and investment income decreased to $77,000 in the 2002 Six Months
from $377,000 in the 2001 Six Months. The decrease was due to lower average cash
balances in the 2002 Six Months, compared to the 2001 Six Months.

Liquidity and Capital Resources

      Our  principal  sources  of  liquidity,  which  consists  of cash and cash
equivalents and marketable securities, decreased to $2,406,000 as of January 31,
2002 from $2,889,000 as of July 31, 2001. We believe these resources  provide us
with  sufficient  liquidity  to continue in  operation  through  July 31,  2002.
However,  if our cost  reductions  do not  achieve  sufficient  savings,  if our
expenses  increase  more than  anticipated,  if our revenue does not increase as
anticipated  because of competitive or other reasons or because we lose existing
customers  because the new  interconnection  arrangements  we have  provided are
inadequate  for our  customers'  business  purposes (see  "Overview")  or if our
accounts  receivable  increase as a result of a  lengthening  of the  collection
cycle,  our cash resources may not be sufficient and we will require  additional
financing.  There can be no assurances  that any financing  will be available or
that  the  terms  will be  acceptable  to us,  or  that  any  financing  will be
consummated.

      We  anticipate  losses  through  fiscal  2002 as we continue to expand the
commercial markets for our ICC.NET service and service bureau.

      Our cash and cash  equivalents  decreased to  $1,960,000 as of January 31,
2002 from  $2,223,000 as of July 31, 2001. This decrease is primarily the result
of net proceeds of $3,107,000  from a private  placement of class A common stock
and warrants to purchase class A common stock in October 2001,  $275,000  raised
from the exercise of options and warrants and the sale of marketable  securities
and the maturity of  certificates  of deposit of $319,000 offset by cash used in
operating  activities of  $3,633,000,  payments of capital lease  obligations of
$160,000  and  capital   investments   for  property,   equipment  and  software
development costs of $172,000.

      Net cash used in  operating  activities  was  $3,633,000  for the 2002 Six
Months,  compared to  $7,286,000  for the 2001 Six Months.  The decrease in cash
used in operating activities was primarily the result of the decreased operating
losses.  Our  operating  losses  decreased  as a result  of a  combination  of a
decrease  in  operating  expenses of  $2,321,000  and an increase in revenues of
$1,837,000  in the 2002 Six Months  compared to the 2001 Six Months.  Cash flows
provided by investing  activities  were $148,000 in the 2002 Six Months compared
to $90,000 used in investing  activities in the 2001 Six Months. The increase in
cash flows provided from investing  activities was primarily due to the proceeds
from the sale of  marketable  securities  of  $247,000  offset by  additions  to
software  development  costs  of  $135,000.   Net  cash  provided  by  financing
activities was $3,222,000 in the 2002 Six Months,  compared to $46,000  provided
by financing  activities in the 2001 Six Months.  The cash provided by financing
activities  in the 2002 Six Months was primarily the result of proceeds from the
October 2001 private placement described below. No such transactions occurred in
the 2001 Six Months.

      Working  capital  increased  to  $1,268,000  as of January  31,  2002 from
$646,000 as of July 31, 2001.

                                       17
<PAGE>

      We have financed our operations  through private  placements during fiscal
1994,  our initial  public  offering  during fiscal 1995 (the "IPO"),  a private
placement in March 1997, a private  placement of bridge note units during fiscal
1998 and 1999, a private  placement  of series A preferred  stock in April 1999,
private  placements  of our class A common stock,  series C preferred  stock and
warrants in November  1999 and a private  placement  of our class A common stock
and warrants in October 2001.

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

      We have a net operating loss  carryforward of approximately $74 million to
offset future taxable income for federal income tax purposes. The utilization of
the loss  carryforward to reduce any such future income taxes will depend on our
ability to generate sufficient taxable income prior to the expiration of the net
operating loss  carryforwards.  The carryforward  expires from 2007 to 2021. The
Internal  Revenue  Code of 1986,  as amended,  and the  regulations  promulgated
thereunder  contain  provisions  which limit the use of available  net operating
loss  carryforwards in any given year should  significant  changes (greater than
50%) in  ownership  interests  occur.  Due to the IPO,  the net  operating  loss
carryover of approximately  $1.9 million incurred prior to the IPO is subject to
an annual  limitation of  approximately  $400,000  until that portion of the net
operating loss is utilized or expires.  Due to the private placement of series A
preferred stock in April 1999, the net operating loss carryover of approximately
$18  million  incurred  prior to the private  placement  is subject to an annual
limitation of  approximately  $1 million until that portion of the net operating
loss is utilized  or expires.  Also,  due to the 100%  ownership  change when we
acquired RTCI, RTCI's net operating loss of approximately  $6.5 million incurred
prior  to  the  ownership   change  is  subject  to  an  annual   limitation  of
approximately  $1.4  million  until that  portion of the net  operating  loss is
utilized or expires.

      In July 2001, the FASB issued SFAS No. 141,  "Business  Combinations"  and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that
all business combinations subsequent to June 30, 2001 be accounted for under the
purchase method of accounting.  SFAS No.141 also requires that the fair value of
an assembled  workforce acquired be included in the amount initially recorded as
goodwill. As required by this statement,  the Company reclassified into goodwill
$1,710,617 initially recorded as other intangible assets related to the value of
the  assembled  workforce  of RTCI.  SFAS No. 142 requires  that upon  adoption,
amortization of goodwill will cease, and instead, the carrying value of goodwill
will be evaluated for  impairment  on at least an annual basis.  SFAS No. 142 is
effective  for fiscal years  beginning  after  December 15, 2001;  however,  the
Company has adopted this  standard as of the  beginning of its 2002 fiscal year,
August 1, 2001 as permitted  under the  provisions of SFAS No. 142. The adoption
of this standard resulted in no charges for amortization of goodwill in the 2002
Quarter and the 2002 Six Months.  Amortization expense in the amount of $511,000
and $611,000 were charged in the 2001 Quarter and 2001 Six Months, respectively,
prior to the  adoption of SFAS No. 142. The Company has  evaluated  goodwill for
impairment  and has  determined  that no impairment  exists at August 1, 2001 as
permitted under the provisions of SFAS No. 142.

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

Item 3: Quantitative and Qualitative Disclosures About Market Risk

      During  the  second  quarter  ended  January  31,  2002,   there  were  no
significant changes related to the Company's market risk exposure.

                                       18
<PAGE>


PART II.  OTHER INFORMATION
---------------------------

Item 4.  Submission of Matters to a Vote of Security Holders

      The 2001  Annual  Meeting of the  Stockholders  of the Company was held on
December 6, 2001. For more information on the following proposals,  reference is
made to the Company's  proxy  statement  dated  November 5, 2001.  The following
items were voted upon and passed.

      The stockholders elected the following Class I directors for a term of two
years expiring at the second succeeding annual meeting of stockholders in 2003:

Name                        Votes For       Votes Against
----                        ---------       -------------
Spencer I Browne            6,967,490           7,093
Kim D. Cooke                6,965,813           8,770
Charles C. Johnston         6,965,813           8,770

      The  stockholders  elected the following  Class II directors for a term of
three years expiring at the third  succeeding  annual meeting of stockholders in
2004:

Name                        Votes For       Votes Against
----                        ---------       -------------
G. Michael Cassidy          6,967,336           7,247
Arthur R. Medici            6,965,813           8,770

      The  stockholders  elected the following Class III directors for a term of
one year expiring at the next annual meeting of stockholders in 2002:

Name                        Votes For       Votes Against
----                        ---------       -------------
Peter J. Boni               6,969,013           5,570
Sarah Byrne-Quinn           6,965,813           8,770

        In addition, the following item was voted upon and passed:

      The  appointment  of  Deloitte & Touche LLP as the  Company's  independent
public accountants for the fiscal year ending July 31, 2002 was ratified.

          Votes For       Votes Against    Abstentions
          ---------       -------------    -----------
          6,963,154           7,349           4,080


Item 6: Exhibits and Reports on Form 8-K

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

      None.

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

      On January 30,  2002,  we filed a Current  Report on Form 8-K to report an
agreement  with  IBM   Corporation   that  will  allow  ICC  to  offer  enhanced
connectivity to all of ICC's customers and their trading  partners.  The Current
Report also disclosed that Sterling Commerce will terminate its  interconnection
arrangement  with ICC on March 9, 2002. The  termination  date has  subsequently
been changed to April 8, 2002.


                                       19
<PAGE>


                                   SIGNATURES

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

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


Date:  March 1, 2002                     By: /s/ Walter M. Psztur
                                            --------------------------------
                                             Walter M. Psztur
                                             Chief Financial Officer
                                             (Principal Financial and
                                             Accounting Officer)



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