FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

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

For the quarterly period ended March 31, 2002
                                       OR

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

For the transition period from ________ to ___________

Commission file number: 0-21479

                              I-SECTOR CORPORATION

             (Exact name of Registrant as specified in its charter)

          DELAWARE                                   76-0515249
     (State of incorporation)             (I.R.S. Employer Identification No.)
6401 SOUTHWEST FREEWAY

       HOUSTON, TEXAS                                     77074
  Address of principal executive offices)               (Zip code)

Registrant's telephone number including area code: (713) 795-2000

                              Allstar Systems, Inc.

(Former name, former address, and former fiscal year, if changed since last
 report)

     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___

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:

     Indicate by check mark whether the  registrant  has filed all documents and
reports  required  to be  filed by  Section  12,  13 or 15(d) of the  Securities
Exchange Act of 1934 subsequent to the  distribution of securities  under a plan
confirmed by a court.

Yes ____ No ____

 (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date.

Title                                             Outstanding

Common Stock, $.01 par value per share            As of May 3, 2001
                                                  3,849,525 shares outstanding


<PAGE>


PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                      I-SECTOR CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

               (In thousands, except share and par value amounts)

<CAPTION>
                                                                     March 31,          December 31,
                                                                       2002                  2001
                                                                       ----                  ----
                                                                                (Unaudited)
ASSETS
<S>                                                               <C>                   <C>
Current assets:
     Cash and cash equivalents                                    $        1,736        $       3,434
     Accounts receivable, net                                              5,838                4,302
     Accounts receivable - affiliates                                        279                  250
     Accounts receivable - other                                              21                   21
     Notes Receivable                                                        156                  169
     Inventory                                                               591                  587
     Cost and estimated earnings in excess of billings                     2,122                1,695
     Income taxes receivable                                               1,330                  151
     Other current assets                                                    369                  302
                                                                     -----------          -----------
         Total current assets                                             12,442               10,911
Property and equipment                                                     1,273                1,226
Intangible assets                                                          1,307                1,356
Other assets                                                                  43                   55
                                                                     -----------          -----------
Total                                                             $       15,065        $      13,548
                                                                     ===========          ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Current portion of long term debt                            $          233        $         213
     Accounts payable                                                      2,672                1,772
     Billings in excess of cost and estimated earnings                        68                   72
     Accrued expenses                                                      2,104                2,091
     Net liabilities related to discontinued operations                      519                  654
     Deferred service revenue                                                 96                  126
                                                                     -----------          -----------
         Total current liabilities                                         5,692                4,928
Long term debt                                                               358                  410
Deferred credit - stock warrants                                             195                  195

Commitments and contingencies
Stockholders' equity:

     Preferred stock, $.01 par value, 5,000,000 shares
         authorized, no shares issued
     Common stock:
         $.01 par value, 15,000,000 shares authorized,
         4,441,325 and 4,441,325 shares issued at
         March 31, 2002 and December 31, 2001                                 44                   44
     Additional paid in capital                                           10,184               10,184
     Treasury stock (591,800 shares, at cost)
         at March 31, 2002 and December 31, 2001                          (1,187)              (1,187)
     Retained earnings                                                      (221)              (1,026)
                                                                     -----------          -----------
         Total stockholders' equity                                        8,820                8,015
                                                                     -----------          -----------
Total                                                             $       15,065        $      13,548
                                                                     ===========          ===========
</TABLE>
                 See notes to consolidated financial statements


<PAGE>


<TABLE>
                      I-SECTOR CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF INCOME

               (In thousands, except share and per share amounts)
                                   (Unaudited)
<CAPTION>
                                                                      Three Months Ended March 31,

                                                                       2002                  2001
                                                                       ----                  ----

<S>                                                               <C>                   <C>
Total revenue                                                     $        9,208        $       4,601
Cost of sales and services                                                 6,974                3,507
                                                                     -----------          -----------
Gross profit                                                               2,234                1,094
Selling, general and administrative expenses                               2,622                2,819
                                                                     -----------          -----------
Operating loss                                                              (388)              (1,725)
Interest and other income                                                      5                   96
                                                                     -----------          -----------
Loss from continuing operations before
     (benefit ) provision  for income taxes                                 (383)              (1,629)
(Benefit) provision for income taxes                                      (1,182)                  37
                                                                     -----------          -----------
Net income (loss)  from continuing operations                                799               (1,666)
Discontinued Operations:
     Net loss from discontinued operations, net of taxes                                          (71)
     Gain on disposal, net of taxes                                            6
                                                                     -----------          -----------
Net income (loss) income                                          $          805        $      (1,737)
                                                                     ===========          ===========


Net income (loss) per share:
Basic:
         Net income (loss) from continuing operations             $        0.21         $       (0.41)
         Net loss from discontinued operations                                                  (0.03)
         Gain on disposal, net of taxes                                    0.00
                                                                     -----------          -----------
              Net income (loss) per share                         $        0.21         $       (0.44)
                                                                     ==========           ===========
Diluted:
         Net income (loss) from continuing operations             $        0.21         $       (0.41)
         Net loss from discontinued operations                                                  (0.03)
         Gain on disposal, net of taxes                                    0.00
                                                                     -----------          -----------
              Net income (loss) per share                         $        0.21         $       (0.44)
                                                                     ==========           ===========

Weighted average shares outstanding:

         Basic                                                         3,849,525            3,945,842
                                                                     ===========          ===========
         Diluted                                                       3,849,525            3,945,842
                                                                     ===========          ===========
</TABLE>


                 See notes to consolidated financial statements


<PAGE>


                      I-SECTOR CORPORATION AND SUBSIDIARIES
<TABLE>

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                 (In thousands)

                                   (Unaudited)

<CAPTION>
                                                                   Three Months Ended March 31,

                                                                       2002                  2001
                                                                       ----                  ----

<S>                                                               <C>                   <C>
Net income (loss)                                                 $          805        $      (1,737)
Adjustments to reconcile net loss to net cash
     provided by (used in) operating activities:
     Net loss from discontinued operations                                                        (71)
     Gain on disposal of discontinued operations                              (6)
     Depreciation and amortization                                           139                  200
     Loss on retirement of assets                                              8
Changes in assets and liabilities that provided (used) cash:

     Accounts receivable, net                                             (1,536)                 745
     Accounts receivable - affiliates                                        (29)                  45
     Inventory                                                               (96)                   2
     Income tax receivable                                                (1,179)
     Notes receivable                                                         13
     Other current assets                                                    (67)                  (8)
     Cost and estimated earnings in excess of billings                      (427)
     Other assets                                                                                  29
     Accounts payable                                                        900                 (252)
     Accrued expenses                                                         13                  386
     Billings in excess of cost and estimated earnings                        (4)                (374)
     Deferred service revenue                                                (30)                  13
                                                                     -----------          -----------

Net cash  (used in) provided by continuing operating
     activities                                                           (1,496)              (1,022)
Net operating activities from discontinued activities                       (128)                (357)
                                                                     -----------          -----------
     Net cash (used in) provided by operating activities                  (1,624)              (1,379)

Cash flows from investing activities:

     Acquisition costs                                                                            (25)
     Capital expenditures                                                    (42)                 (17)
                                                                     -----------          -----------

     Net cash used in  investing activities:                                 (42)                 (42)
                                                                     -----------          -----------

Cash flows from financing activities:

     Purchase of treasury stock                                                                   (54)
     Payments on long term debt                                              (32)
                                                                     -----------          -----------

     Net cash used in financing activities:                                  (32)                 (54)
                                                                     -----------          -----------

Net decrease in cash and cash equivalents                                 (1,698)              (1,475)
Cash and cash equivalents at beginning of period                           3,434                8,346
                                                                     -----------          -----------
Cash and cash equivalents at end of period                        $        1,736        $       6,871
                                                                     ===========          ===========
Supplemental disclosures of cash flow information:
     Cash paid for interest                                       $            0        $           0
                                                                     ===========          ===========
     Cash paid for taxes                                          $            0        $           0
                                                                     ===========          ===========
</TABLE>

                 See notes to consolidated financial statements


<PAGE>


                      I-SECTOR CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

               (In thousands, except share and per share amounts)

1.   DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     I-Sector  Corporation  and  subsidiaries  ("I-Sector")  is  engaged  in the
business of providing computer services and of selling  associated  hardware and
telephony software products.  I-Sector's  operations are conducted through three
segments:

o    Allstar  Solutions,  Inc.  ("Allstar")  provides  customers  with  turn-key
     outsourced IT helpdesk solutions,  helpdesk solutions  consulting services,
     on-site and carry-in computer repair, application support, operating system
     support and network  migration  services,  network  support and management,
     network design and  implementation,  IT project  management,  and technical
     staff augmentation for IT helpdesk operations.

o    Internetwork  Experts, Inc. ("INX") is a professional services organization
     that  focuses  on  the  design,   deployment  and  support  of  large-scale
     networking infrastructure  requirements that are Cisco centric. INX's areas
     of    practice    include    network    baseline    assessment,     network
     design/architecture,  implementation,  network security audits and firewall
     design, network management, project management and knowledge transfer.

o    Stratasoft, Inc. ("Stratasoft") creates and markets software related to the
     integration of computer and telephone  technologies.  Stratasoft's products
     are designed to improve the  efficiency  of a  professional  call center or
     other  type of high  volume  calling  application,  for  both  inbound  and
     outbound calls.

     A substantial portion of I-Sector's sales and services are authorized under
arrangements  with product  manufacturers.  I-Sector's  operations are dependent
upon maintaining its approved status with such manufacturers.  Should I-Sector's
approved status lapse, revenues and gross profit could be adversely affected.

     The condensed  consolidated financial statements presented herein as of and
for the three months ended March 31, 2002 and 2001 are unaudited;  however,  all
adjustments  which are,  in the  opinion  of  management,  necessary  for a fair
presentation of the financial position, results of operations and cash flows for
the  periods  covered  have  been made and are of a  normal,  recurring  nature.
Accounting  measurements at interim dates inherently involve greater reliance on
estimates  than  at  year-end.  The  results  of the  interim  periods  are  not
necessarily  indicative of results for the full year. The  consolidated  balance
sheet at  December  31,  2001 is derived  from  audited  consolidated  financial
statements  but  does  not  include  all  disclosures   required  by  accounting
principles  generally  accepted  in  the  United  States  of  America.  Although
management  believes the  disclosures  are  adequate,  certain  information  and
disclosure  normally included in the notes to the financial  statements has been
condensed or omitted as permitted by the rules and regulations of the Securities
and Exchange Commission.

     Reclassifications   -  Certain  amounts  in  the   consolidated   financial
statements  presented  herein have been  reclassified to conform to current year
presentation.

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

     Revenue  Recognition - Revenue from the sale of products is recognized when
the  product is  shipped.  Service  income is  recognized  as the  services  are
performed. Revenues resulting from installations of equipment for which duration
is in  excess of three  months  and that  require  substantial  modification  or
customization  are recognized  using the  percentage-of-completion  method.  The
percentage of revenue  recognized on each contract is determined  principally on
the basis of the  relationship  of the cost of work performed on the contract to
estimated  total costs.  Revisions of estimates  are  reflected in the period in
which the facts  necessitating  the  revisions  become  known;  when a  contract
indicates a loss, a provision is made for the total anticipated loss.


<PAGE>



     The following  reflects the amounts  relating to  uncompleted  contracts at
March 31, 2002 and December 31, 2001:

       Costs incurred on uncompleted contracts              $ 1,098    $   995
       Estimated earnings                                     3,299      1,930
                                                             ------     ------

                                                              4,397      2,925
       Less: Billings to date                                 2,343      1,158
                                                             ------     ------

       Cost and estimated earnings in excess of billings    $ 2,122    $ 1,695
                                                             ======     ======
       Billings in excess of cost and estimated earnings    $    68    $    72
                                                             ======     ======


     Accounting  Pronouncements  - In June 2001,  SFAS No. 143  "Accounting  for
Asset Retirement Obligations" was approved by the Financial Accounting Standards
Board ("FASB").  SFAS No. 143 requires that the fair value of a liability for an
asset retirement obligation be recognized in the period in which it is incurred.
I-Sector is required to implement SFAS No. 143 on January 1, 2003 and it has not
determined the impact, if any, that this statement will have on its consolidated
financial position or its results of operations.

2.   DISCONTINUED OPERATIONS

     On  November  6,  2001,  I-Sector  approved  a plan to sell or close its IT
Staffing business. A sale was finalized on December 31, 2001. Under the terms of
the sale  I-Sector  received  a note  receivable  for $52,  $50 for the  ongoing
operations of IT Staffing, Inc. and $2 for certain fixed assets of I-Sector. The
note  receivable   bears  interest  at  5%  per  annum  and  is  collectible  in
installments  based on the total  monthly  revenue  of the buyer  over 24 months
beginning  in March,  2002.  A  disposal  loss,  including  an  estimate  of the
operating  results from the  measurement  date,  November 6, 2001 to the closing
date of the sale of $17, and  estimates  for  impairment of assets caused by the
disposal  decision of $43,  totaling  $11 (net of income tax savings of $5), was
recognized  in 2001. A gain of $7 (net of tax of $4)  recognized  in the quarter
ended March 31, 2002.  I-Sector has retained accounts  receivable of $82 and $0,
net of  reserves,  at December 31, 2001 and March 31,  2002,  respectively.  The
balance  sheet  caption "Net  Liabilities  related to  discontinued  operations"
contains $80 and $39 at December 31, 2001 and March 31, 2002, respectively.

     Previously  on March 16, 2000,  I-Sector  entered into an agreement to sell
certain assets of and the ongoing  operations of its Computer Products Division.
The sale transaction closed on May 19, 2000 after shareholder and other required
consents were obtained.  Additionally on November 2, 1999,  I-Sector  approved a
plan to sell or close its Telecom Division.  The sale was finalized on March 16,
2000.

     During the quarter ended March 31, 2002,  I-Sector recognized a net gain on
disposal of these three businesses as follows:

         IT Staffing, Inc. (net of taxes of $4)                  $  7
         Computer Products Division (net of tax benefit of $2)     (4)
         Telecom Division (net of tax of $1)                        3
                                                                 ----

         Net gain on disposal                                    $  6
                                                                  ===

     The  balance  sheet  caption  "Net  Liabilities   related  to  discontinued
operations"  contains  $519 and $654 at March 31, 2002 and  December  31,  2001,
respectively,  of estimated  future expenses related to the winding up of the IT
Staffing business,  the Telecom Division and the Computer Products Division, and
include  amounts  related to  settlement  of pending  litigation  and to Telecom
warranties.


<PAGE>

3.   SEGMENT INFORMATION

     I-Sector  has  four  reportable  segments:  Allstar,  INX,  Stratasoft  and
Corporate.  The  accounting  policies of the  business  segments are the same as
those for  I-Sector.  I-Sector  evaluates  performance  of each segment based on
operating  income.  Management  only views  accounts  receivable,  and not total
assets, by segment in their  decision-making.  Inter-segment sales and transfers
are not  significant  and are shown in the  Elimination  column in the following
table. The tables below show the results of the four reportable segments:

<TABLE>
For the quarter ended March 31, 2002:

<CAPTION>
                                               Allstar     INX      Stratasoft  Corporate Elimination Consolidated

<S>                                          <C>         <C>         <C>        <C>
Total  revenue                               $ 1,465     $ 5,713     $ 2,171     $           $  (141)     $ 9,208
Cost of sales and services                     1,150       5,128         837                    (141)       6,974
                                              ------      ------      ------      ------      ------       ------
Gross profit                                      315        585       1,334                       0        2,234
Selling, general and
     administrative expenses                      653        789       1,011         169           0        2,622
                                              ------      ------      ------      ------      ------       ------
Operating (loss) income                      $  (338)    $  (204)    $   323     $  (169)    $     0         (388)
                                              ======      ======      ======      ======      ======
Interest and other income                                                                                       5
                                                                                                           ------
Loss before benefit for income tax                                                                           (383)
Benefit for income tax                                                                                     (1,182)
                                                                                                           ------
Net income from continuing operations                                                                         799
Net gain on disposal, net of taxes                                                                              6
                                                                                                           ------
Net income                                                                                                   $805
                                                                                                           ======

Accounts receivable, net                     $ 1,013     $ 3,882     $   946     $    (3)    $     0        5,838
                                              ======      ======      ======      ======      ======
Accounts receivable retained from
     discontinued operations, net                                                                               0
                                                                                                           ------
Total accounts receivable, net                                                                            $ 5,838
                                                                                                           ======


For the quarter ended March 31, 2001:

                                               Allstar     INX      Stratasoft  Corporate Elimination Consolidated

Total  revenue                               $ 1,216     $ 1,718     $ 1,682     $    (4)    $   (11)     $ 4,601
Cost of sales and services                     1,080       1,714         710          14         (11)       3,507
                                              ------      ------      ------      ------      ------       ------
Gross profit (loss)                              136           4         972         (18)          0        1,094
Selling, general and
     administrative expenses                     940         608         746         525           0        2,819
                                              ------      ------      ------      ------      ------        -----
Operating (loss) income                      $  (804)    $  (604)    $   226     $  (543)    $     0       (1,725)
                                              ======      ======      ======      ======      ======
Interest and other income                                                                                      96
                                                                                                           ------
Loss before provision for income tax                                                                       (1,629)
Provision for income tax                                                                                       37
                                                                                                           ------
Net loss from continuing operations                                                                        (1,666)
Net loss from discontinued operations,
     net of taxes                                                                                             (71)
Net loss on disposal, net of taxes
                                                                                                           ------
Net loss                                                                                                  $(1,737)
                                                                                                           ======
</TABLE>


<PAGE>

     International sales accounted for $742 or 8.1% of consolidated revenues and
34.2% of the  Stratasoft  segment  revenues in the three  months ended March 31,
2002. In the three months ended March 31 2001 international  sales accounted for
$274 or 6.0% of  consolidated  revenues  and  16.3%  of the  Stratasoft  segment
revenues.  The following  table  represents the  reconciliation  of products and
services included in total revenues:

                     Reconciliation of Products and Services

                          Three Months Ended March 31,

                                                2002               2001
                                                ----               ----

   Product revenue                            $ 7,640            $ 3,134
  Service revenues                              1,568              1,467
                                                -----              -----

    Total revenues                            $ 9,208            $ 4,601
                                               ======              =====


<PAGE>

4.EARNINGS PER SHARE

     Basic EPS is computed by dividing net income (loss) by the weighted-average
number of common shares outstanding for the period.  Diluted EPS is based on the
weighted-average number of shares outstanding during each period and the assumed
exercise of dilutive  stock  options  and  warrants  less the number of treasury
shares  assumed to be purchased from the proceeds using the average market price
of the Company's common stock for each of the periods presented.

     There were no potentially dilutive options for the three months ended March
31, 2002 because the market  price was below the  exercise  price of all options
outstanding.  The potentially  dilutive  options  totaling 261,046 for the three
months ended March 31, 2001,  calculated  under the treasury stock method,  were
not used in the  calculation  of diluted  earnings per share since the effect of
potentially  dilutive  securities  in  computing a loss per share on  continuing
operations is antidilutive.

     There were  warrants to  purchase  176,750  shares of common  stock for the
three  months ended March 31, 2002 and 2001 which were not included in computing
diluted earnings per share because the inclusion would have been antidilutive.

5.  CURRENT DEBT OBLIGATIONS

     On September 27, 2001, Stratasoft, a subsidiary of I-Sector,  signed a note
payable  to a third  party for $725,  payable in  monthly  installments  through
February,  2007.  The note  does not bear  interest  and  I-Sector  has  imputed
interest  at 5.5% to record  the debt and  related  patent  asset  and  recorded
interest  of $8 in  the  three  months  ended  March  31,  2002.  This  note  is
collaterized  by Stratasoft's  patent assets.  Stratasoft has granted a security
interest to its pending patent application and the next two patent  applications
filed by Stratasoft. In connection with this note payable, I-Sector has reported
short-term  debt maturing  within one year of $220 and long-term debt of $337 at
March 31, 2002.

     In October 2001,  I-Sector  signed a non-interest  bearing note payable for
$39 payable in monthly  installments  through  October 2004. In connection  with
this note payable,  I-Sector has reported  short-term  debt maturing  within one
year of $13 and long-term debt of $20 at March 31, 2002.

         On January 31,  2002  I-Sector  entered  into a credit  agreement  with
Textron  Financial  Corporation  ("Textron") for a revolving line of credit (the
"Textron  Facility").  The total credit  available under the Textron facility is
$2,500 subject to borrowing base limitations that are generally  computed as 80%
eligible accounts  receivable and 90% of identifiable  inventory purchased under
this  agreement and 40% of all other  inventory.  I-Sector may use up to $500 of
the line for working  capital  advances  under approved  conditions.  Borrowings
accrue interest at the prime rate plus 2.5% on outstanding  balances that extend
beyond the vendor approved free interest period and on working capital  advances
from date of advance.  Inventory floor plan borrowings are reflected in accounts
payable on the accompanying balance sheets. At March 31, 2002, I-Sector had $145
outstanding  on  inventory  floor plan finance  borrowings,  $0  outstanding  on
working capital advances and had total credit availability of $2,355.

     This agreement is collaterized by  substantially  all of I-Sector's  assets
except its patent assets. The agreement contains  restrictive  covenants,  which
require us to maintain  minimum  tangible  capital  funds and a minimum  debt to
tangible  capital funds ratio.  At March 31, 2002 I-Sector was not in compliance
with a certain covenant for which it subsequently received a waiver.


<PAGE>

6.LITIGATION

     In July 2000,  Benchmark Research and Technology,  Inc. made a verbal claim
against  I-Sector,  claiming that I-Sector breached its contract with Benchmark,
and that I-Sector was negligent and breached various warranties, committed fraud
and  violated  the  Deceptive  Trade  Practices  Act.  The case was  mediated in
November 2000 but no agreement was reached.  I-Sector  knows of no lawsuit being
filed.  I-Sector  believes  that the  claim is  without  merit  and  intends  to
vigorously contest the demand.

     In October 2000,  I-Sector's  wholly-owned  subsidiary,  Stratasoft,  Inc.,
filed suit in the Harris  County  Texas County Court of Law against its customer
Accelerated  Telemarketing  for a  remaining  balance  of $47  on its  contract.
Thereafter,  Accelerated  Telemarketing  filed a separate legal action  claiming
breach of  contract,  breach  of  warranty,  violation  of the  Deceptive  Trade
Practices  Act and other  claims.  The case is in the early stages of discovery,
and therefore I-Sector is unable to determine the ultimate costs of this matter.
I-Sector  believes  that this suit is without  merit and  intends to  vigorously
contest the suit.

     In October 2001,  Inacom Corp. wrote a demand letter claiming that I-Sector
owed the sum of  approximately  $570 to Inacom as a result of  termination  of a
Vendor Purchase Agreement between Inacom and I-Sector.  I-Sector is unaware of a
formal lawsuit being filed, although one has been threatened.  I-Sector believes
that the demand is without merit and intends to vigorously contest the demand.

     I-Sector is party to litigation  and claims which  management  believes are
normal in the course of its operations; while the results of such litigation and
claims cannot be predicted with certainty,  I-Sector  believes the final outcome
of such  matters  will not have a  materially  adverse  effect on its results of
operations or financial position.

7.  INCOME TAX BENEFIT

     On March 9, 2002,  President  Bush  signed  into law the Job  Creation  and
Worker  Assistance  Act of 2002.  The new law provides for the  carryback of net
operating losses for any taxable year ending during 2001 and 2002 to each of the
5 tax years preceding the loss year.  Previously,  a net operating loss was only
eligible  to be carried  back to the 2 years  preceding  the year of loss.  As a
result of the change in the carryback period,  I-Sector recognized a tax benefit
of $1,179 in the three months ended March 31, 2002.


<PAGE>


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

                              I-SECTOR CORPORATION

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     The  following  discussion  is  qualified in its entirety by, and should be
read in  conjunction  with,  the Company's  consolidated  financial  statements,
including  the  notes  thereto  included  elsewhere  in this  Form  10-Q and the
Company's  Form  10-K,   previously  filed  with  the  Securities  and  Exchange
Commission.

Overview

     I-Sector's revenue is derived from three segments.  Allstar Solutions, Inc.
("Allstar")  provides  customers  with  on-site and  carry-in  computer  repair,
application  support,  operating system and network migration services,  turnkey
outsourced IT helpdesk  solutions,  technical staff augmentation for IT helpdesk
operations and helpdesk solutions  consulting  services.  Internetwork  Experts,
Inc.  ("INX")  focuses on the  design,  deployment  and  support  of  networking
infrastructure.  INX  provides  professional  services for  customers  that have
large-scale  network  infrastructure  requirements  that are Cisco centric.  The
areas of  practice  for INX  include  network  design,  implementation,  turnkey
support,  security audits and firewall design, network infrastructure management
and network infrastructure consulting services.  Stratasoft, Inc. ("Stratasoft")
develops and markets  proprietary  software that integrates  business  telephone
systems  and  networked  computer  systems.   Stratasoft's  basic  products  are
sometimes  customized  to suit a customer's  particular  needs and are sometimes
bundled  with  computer  hardware  supplied  by us at  the  customer's  request.
Stratasoft  products include software for call center management,  both in-bound
and out-bound, as well as interactive voice response software.

     We market our services  businesses  in Texas from  locations in the Houston
and  Dallas-Fort  Worth  metropolitan  areas.  Stratasoft  markets its  products
worldwide through a direct sales force and an authorized dealer network.  During
the three months ended March 31, 2002,  Allstar and INX produced  15.9 and 62.0%
of total revenues,  while  Stratasoft  produced 23.6% of total  revenues.  Gross
margin varies substantially between each of these business segments. .

     On  November  6,  2001 we  determined  to exit  the IT  Staffing  business.
Effective December 31, 2001, the business was sold to Echelon Staffing,  Inc., a
corporation  owned  by our  former  employee.  Under  the  terms  of the sale we
received a note for $52, of which $50 was for the ongoing  operations and $2 for
certain fixed assets  relating to this  business.  The note bears interest at 5%
per annum and is collectible in installments  based on the total monthly revenue
of the buyer over 24 months  beginning in March 2002.  In the three month period
ended  December 31, 2001,  we  recognized a disposal  loss of $11 (net of tax of
$5),  including an estimated loss for the operating results from the measurement
date, November 6, 2001 to the closing date of the sale of $37, and estimates for
impairment  of assets  caused  by the  disposal  decision  of $34.  We  retained
accounts  receivable of $82, net of reserves and  liabilities  related to the IT
Staffing business at December 31, 2001.  Retained accounts  receivable are $0 at
March 31, 2002.


<PAGE>

     Our  ability to attract and retain  qualified  professional  and  technical
personnel is critical to the success of all of our services businesses. The most
significant  portion of the costs  associated  with the  delivery of services is
personnel costs. Therefore,  in order to be successful,  our billable rates must
be in excess of the personnel costs and our margin is dependent upon maintaining
high utilization of our service personnel. In addition, the competition for high
quality personnel has generally intensified,  causing both our and other service
provider's  personnel  costs to  increase.  In markets  where we do not maintain
branch offices, we often subcontract for necessary technical personnel.

     A  significant  portion  of our cost of  services  for each of our  service
businesses  is comprised of labor.  Labor has a somewhat  fixed nature such that
higher levels of service revenue produces higher gross margin while lower levels
of service  revenue  produces  less gross  margin.  Management  of labor cost is
important in order to prevent erosion of gross margin.

     A significant portion of our selling,  general and administrative  expenses
in all of our businesses  relate to personnel costs,  some of which are variable
and others of which are  relatively  fixed.  Our  variable  personnel  costs are
substantially  comprised of sales  commissions,  which are typically  calculated
based upon our gross profit on a particular sales transaction and thus generally
fluctuate with our overall gross profit.  The remainder of selling,  general and
administrative  expenses are relatively fixed and does not vary in proportion to
increases in revenue as directly.

     Special notice regarding forward-looking statements

     This  quarterly  report on Form 10-Q  contains  forward-looking  statements
within  the  meaning of the  Private  Securities  Litigation  Reform Act of 1995
relating to future events or our future financial performance including, but not
limited to,  statements  contained  in Item 2. -  "Management's  Discussion  and
Analysis  of  Financial  Condition  and  Results  of  Operations."  Readers  are
cautioned  that  any  statement  that is not a  statement  of  historical  fact,
including  but not  limited  to,  statements  which may be  identified  by words
including,  but not  limited to,  "anticipate,"  "appear,"  "believe,"  "could,"
"estimate,"  "expect," "hope,"  "indicate,"  "intend," "likely," "may," "might,"
"plan,"  "potential," "seek," "should," "will," "would," and other variations or
negative  expressions thereof, are predictions or estimations and are subject to
known and unknown risks and uncertainties.  Numerous factors,  including factors
which we have  little or no  control  over,  may affect  the  I-Sector's  actual
results and may cause actual results to differ  materially  from those expressed
in  the  forward-looking   statements   contained  herein.  In  evaluating  such
statements,  readers  should  consider  the various  factors  identified  in the
I-Sector's annual report on Form 10-K, as filed with the Securities and Exchange
Commission including matters set forth in Item 1.- "Factors Which May Affect The
Future Results Of Operations,"  which could cause actual events,  performance or
results to differ materially from those indicated by such statements.


<PAGE>


Three Months Ended March 31, 2002 Compared To Three Months Ended March 31, 2001
                             (Dollars in thousands)

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
financial data derived from our unaudited consolidated  statements of operations
for the three months ended March 31, 2002 and 2001. The discussion below relates
only to our continuing operations, unless otherwise noted.

<TABLE>
                                     Three months ended March 31,

<CAPTION>
                                                                 2002                    2001
                                                                 ----                    ----
                                                           Amount      %           Amount       %
                                                           ------    -----         ------     -----
<S>                                                      <C>          <C>        <C>          <C>
Revenue

Allstar                                                  $   1,465    15.9       $   1,216    26.4
  INX                                                        5,713    62.0           1,718    37.3
Stratasoft                                                   2,171    23.6           1,682    36.6
Corporate                                                                               (4)   (0.1)
Elimination                                                   (141)   (1.5)            (11)   (0.2)
                                                           -------   -----         -------   -----
         Total revenue                                       9,208   100.0           4,601   100.0
Gross profit (loss):
Allstar Systems, Inc.                                          315    21.5             136    11.1
  INX                                                          585    10.2               4     0.2
Stratasoft                                                   1,334    61.4             972    57.8
Corporate                                                        0     N/A             (18)    N/A
Elimination                                                      0     0.0               0     0.0
                                                           -------   -----         -------   -----
         Total gross profit                                  2,234    24.3           1,094    23.8
Selling, general and administrative expenses:
Allstar                                                        653    44.6             940    77.3
  INX                                                          789    13.8             608    35.4
Stratasoft                                                   1,011    46.6             746    44.4
Corporate                                                      169     N/A             525     N/A
                                                           -------   -----         -------   -----
         Total selling, general and administrative
         Expenses                                            2,622    28.5           2,819    61.3
Operating (loss) income:
Allstar                                                       (338)  (23.1)           (804)  (66.1)
  INX                                                         (204)   (3.6)           (604)  (35.2)
Stratasoft                                                     323    14.9             226    13.4
Corporate                                                     (169)    N/A            (543)    N/A
                                                           -------   -----         -------   -----
         Total operating (loss) income                        (388)   (4.2)         (1,725)  (37.5)
Interest and other income                                        5     0.0              96     2.1
                                                           -------   -----         -------   -----
Loss before benefit (provision) for income taxes              (383)   (4.2)         (1,629)  (35.4)
Benefit (provision) for income taxes                         1,182    12.8             (37)   (0.8)
                                                           -------   -----         -------   -----
Net income (loss)  from continuing operations                  799     8.6          (1,666)  (36.2)
Discontinued operations:
Net loss from discontinued operations                                                   71     1.5
Gain on disposal                                                 6     0.1
                                                           -------   -----         -------   -----
Net income (loss)                                        $     805     8.7       $  (1,737)  (37.8)
                                                           =======   =====         =======   =====
</TABLE>


<PAGE>


     TOTAL REVENUE. Total revenue increased by $4,607 (100.1%) to $9,208 in 2002
from $4,601 in 2001.

     Allstar revenue  increased by $249 (20.5%) to $1,465 in 2002 from $1,216 in
2001.  As a percentage of total revenue  Allstar  revenue  decreased to 15.9% in
2002  from  26.4% in  2001.  The  increase  in  Allstar  revenue  was  primarily
attributable to increased  software product sales in the quarter ended March 31,
2002.

     INX revenue  increased by $3,995  (232.5%) to $5,713 in 2002 from $1,718 in
2001. As a percentage of total revenue,  INX revenue  increased to 62.0% in 2002
from 37.3% in 2001.  The increase in INX revenue in the quarter  ended March 31,
2002 is directly  attributable  the  achievement of gold status with Cisco,  its
primary product line  manufacturer,  which allows INX to purchase  directly from
Cisco at lower pricing levels and which enhances INX's  relationship  with Cisco
in the areas of lead generation, joint marketing and technical support.

     Stratasoft  revenue increased by $489 (29.1%) to $2,171 in 2002 from $1,682
in 2001.  Stratasoft  revenue,  as a percentage of total  revenue,  decreased to
23.6% in 2002 from 36.6% in 2001. Stratasoft's increased revenues were primarily
the result of increased sales in the international sector, better recognition of
Stratasoft  products in the market  place,  the expansion of the sales staff and
dealer network and to increased advertising and marketing efforts.

     GROSS PROFIT.  Gross profit  increased by $1,140 (104.2%) to $2,234 in 2002
from $1,094 in 2001. Gross margin increased to 24.3% in 2002 from 23.8% in 2001.

     Allstar  gross profit  increased by $179 (131.6%) to $315 in 2002 from $136
in 2001. Gross margin for Allstar increased to 21.5% in 2002 from 11.1% in 2001.
Allstar  cost  of  service  consists  primarily  of  labor  cost  for  which  we
experienced improved labor utilization in 2002.

     INX gross  profit  increased  $581  (14,525.0%)  to $585 in 2002 from $4 in
2001.  Gross margin for INX increased to 10.2% in 2002 from 0.2% in 2001.  INX's
product gross profit has increased $525 to $689 in 2002 from $164 in 2001 due to
both sale  volume  increase  and to higher  gross  margin  rates  (12.9% in 2002
compared  to 11.7% in  2001).  INX's  labor  utilization  has  improved  but not
sufficiently  to achieve  positive  gross profit for its service  business which
produced  gross  loss of $104 in 2002 as  compared  to $160 in 2001  with  gross
margin rates of (27.9%) in 2002 as compared to (49.8%) in 2001.

     Stratasoft  gross  profit  increased by $362 (37.2%) to $1,334 in 2002 from
$972 in 2001  as  revenue  increased  by  29.1%.  Gross  margin  for  Stratasoft
increased  to 61.4% in 2002 from 57.8% in 2001.  The  increased  gross profit is
consistent with the increased sales volume. Gross margin is also impacted by the
mix of sales  between  systems  sales,  which include a hardware  component,  as
compared to  software  only  sales,  which do not have a hardware  cost of goods
component.  Stratasoft's  increased  gross  margin  rates  is  primarily  due to
changing the mix of product sales to include a reduced hardware component.

     SELLING,  GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses  decreased by $197 (7.0%) to $2,622 in 2002 from $2,819
in 2001. As a percentage of revenue, these expenses decreased by 32.7%, to 28.5%
of  revenue  in  2002  from  61.3%  of  revenue  in  2001.  Overall,  our  sales
compensation  was up by $277 in 2002 as compared to 2001,  of which $128 was for
INX which had a large increase in revenues and $202 was for  Stratasoft,  offset
by a $53 decrease in Allstar.  Administrative wages decreased by $260 in 2002 as
compared to 2001,  primarily due to efforts to reduce  overhead at Corporate and
throughout the  subsidiaries.  General office expenses  decreased $91 in 2002 as
compared to 2001.


<PAGE>

     INTEREST AND OTHER INCOME (NET).  Interest income decreased by $91 to $5 in
2002 compared to interest income of $96 in 2000,  primarily due to the reduction
of invested  available  cash,  lower interest rates on invested cash and imputed
interest expense of $7.

     DISCONTINUED  OPERATIONS.  On  December  31,  2001 we sold our IT  Staffing
business.  On March 16, 2000 we entered into an agreement to sell certain assets
of, and the ongoing  operation  of, our  Computer  Products  Division.  The sale
transaction  closed on May 19,  2000.  During 1999 we sold our  Telecom  Systems
business.  As a consequence of these events,  the operations of these businesses
are reported as discontinued  operations.  For the quarters ended March 31, 2002
and 2001, respectively, income from discontinuing operations was $0 and $71 (net
of taxes of $0 and $37) and the gain on disposal  related to these  business was
$6 and $0, net of taxes of $3 and $0.

     NET INCOME (LOSS). Net income on continuing operations in the quarter ended
March  31,  2002  was  $799.  As a result  of the  changes  in the tax  law,  we
recognized a tax benefit of $1,179 in the quarter  ended March 31, 2002.  No tax
benefit had been  recorded for the loss in the three months ended March 31, 2002
because,  due to our recurring losses, a valuation  allowance was recorded.  Net
loss on continuing operations in the quarter ended March 31, 2001 was $1,737.

Liquidity and Capital Resources

     Our working  capital  was $6,750 and $5,983 at March 31, 2002 and  December
31, 2001,  respectively.  As of March 31, 2002, we had outstanding borrowings of
$145 and available  borrowing base of $2,355 under our Textron Finance  Division
credit facility. We expect to satisfy our capital requirements from our existing
cash balances,  collection of our accounts  receivables and borrowings under our
credit facilities.

Cash Flow

     Operating  activities used net cash totaling $1,624 during the three months
ended  March 31,  2002.  Operating  activities  used net cash  during the period
primarily due to an increase in accounts receivable of $1,536, to an increase in
cost and estimated  earnings in excess of billings of $427 and to fund operating
losses ($383), and in discontinued  activities ($128). These uses were offset by
a provision relating to an increase in accounts payable

     Investing  activities  used cash totaling $42 during the three months ended
March 31, 2002 and financing activities used cash totaling $32.

Asset Management

     Our cash flow from operations has been affected  primarily by the timing of
our collection of accounts  receivable.  We have typically sold our products and
services on  short-term  credit  terms and seek to  minimize  our credit risk by
performing  credit checks and  conducting  our own  collection  efforts.  We had
accounts  receivable,  net of  allowance  for doubtful  accounts,  of $5,838 and
$4,302 at March 31, 2002 and December 31, 2001, respectively.


<PAGE>

Current Debt Obligations

     Historically,  we have satisfied our cash requirements  principally through
borrowings under our lines of credit and through operations. On January 31, 2002
we  entered  into  a  credit  agreement  with  Textron   Financial   Corporation
("Textron") for a revolving line of credit (the "Textron  Facility").  The total
credit  available under the Textron facility is $2,500 subject to borrowing base
limitations that are generally computed as 80% eligible accounts  receivable and
90% of  identifiable  inventory  purchased  under this  agreement and 40% of all
other inventory.  We may use up to $500 of the line for working capital advances
under approved  conditions.  Borrowings  under the accrue  interest at the prime
rate plus 2.5% on  outstanding  balances that extend beyond the vendor  approved
free  interest  period and on working  capital  advances  from date of  advance.
Inventory  floor  plan  borrowings  are  reflected  in  accounts  payable on the
accompanying  balance  sheets.  At March 31, 2002,  we had $145  outstanding  on
inventory  floor plan finance  borrowings,  $0  outstanding  on working  capital
advances and had total credit availability of $2,355.

     This agreement is  collaterized by  substantially  all of our assets except
our patent assets. The agreement contains restrictive  covenants,  which require
us to maintain  minimum  tangible  capital  funds and a minimum debt to tangible
capital funds ratio.  At March 31, 2002 we were not in compliance with a certain
covenant for which we subsequently received a waiver.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk

     We incur certain market risks related to interest rate  variations  because
we hold floating rate debt.  Based upon the average  amount of debt  outstanding
during the three months ended March 31, 2002, a one-percent increase in interest
rates paid by us on our debt would not have  resulted in an increase in interest
for the period.


<PAGE>



PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     In July 2000,  Benchmark Research and Technology,  Inc. made a verbal claim
against  I-Sector,  claiming that we breached our contract with  Benchmark,  and
that we were  negligent and breached  various  warranties,  committed  fraud and
violated the Deceptive  Trade  Practices  Act. The case was mediated in November
2000 but no agreement was reached. We know of no lawsuit being filed. We believe
that the claim is without merit and intend to vigorously contest the demand.

     In October 2000, our wholly-owned subsidiary, Stratasoft, filed suit in the
Harris  County  Texas  County  Court of Law  against  its  customer  Accelerated
Telemarketing  for a  remaining  balance  of $47 on  its  contract.  Thereafter,
Accelerated  Telemarketing  filed a separate  legal  action  claiming  breach of
contract, breach of warranty, violation of the Deceptive Trade Practices Act and
other claims. The case is in the early stages of discovery, and therefore we are
unable to determine the ultimate costs of this matter. We believe that this suit
is without merit and intend to vigorously contest the suit.

     In October 2001,  Inacom Corp.  wrote a demand letter claiming that we owed
the sum of  approximately  $570 to Inacom as a result of termination of a Vendor
Purchase  Agreement  between  Inacom and us. We are unaware of a formal  lawsuit
being  filed,  although one has been  threatened.  We believe that the demand is
without merit and intend to vigorously contest the demand.

     We are party to other litigation and claims which  management  believes are
normal in the course of its operations; while the results of such litigation and
claims cannot be predicted with certainty.  We believe the final outcome of such
matters will not have a materially  adverse  effect on its results of operations
or financial position.

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.

                  I-Sector Corporation.

May 3, 2002       By:      /s/ JAMES H. LONG
                           -----------------
Date              James H. Long, Chief Executive Officer, President and Chairman
                  of the Board

                  By:      /s/ PATRICIA L. WINSTEAD
                           ------------------------
                  Patricia L. Winstead, Vice President and Controller,
                  Chief Accounting Officer