<PAGE>

                                  UNITED STATES
                       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 ACTOF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2001

                                       OR

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

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

                         Commission File Number 1-07149

                                    ITIS INC.
             (Exact Name of Registrant as specified in its charter)


                 DELAWARE                             82-0277987
      (State or other jurisdiction of              (I.R.S. Employer
       incorporation or organization)             Identification No.)

 4301 WINDFERN ROAD, SUITE 200, HOUSTON, TEXAS            77041
     (Address of principal executive office)            (Zip Code)

       Registrant's telephone number, including area code: (281) 600-6000


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 [ ]


The number of shares of the registrant's common stock outstanding as of November
16, 2001 was 36,682,280.


<PAGE>

                                    ITIS INC.

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001

                                      INDEX
                                                                           PAGE


PART I - FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements....................     3

Item 2.  Management's Discussion and Analysis of Financial
            Condition and Results of Operations.........................    22

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.....    27

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings..............................................    28

Item 2.  Changes in Securities and Use of Proceeds......................    29

Item 6.  Exhibits and Reports on Form 8-K...............................    29

SIGNATURES..............................................................    35



                                       2

<PAGE>

ITIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  SEPTEMBER 30,          DECEMBER 31,
                                                                                      2001                  2000
                                                                                   -----------           -----------
                                                                                   (Unaudited)
<S>                                                                                <C>                   <C>
                                   ASSETS

Current assets:

    Cash and cash equivalents, including $-0- and $1,761
        respectively, distributable to the stockholders of
        Planet Resources, Inc.                                                     $    12,347           $    29,867
    Accounts receivable, net of allowance for doubtful accounts
       of $-0- and $9,342, respectively                                                893,086               151,876
    Investments available for sale, at fair market value                                15,025                    --
    Note receivable                                                                    502,142                    --
    Other current assets                                                                18,795                57,103
    Current assets of entity to be disposed of                                          39,736                88,189
                                                                                   -----------           -----------
       Total current assets                                                          1,481,131               327,035
                                                                                   -----------           -----------

Fixed assets and intangibles, net of amortization and depreciation
    Database content and software costs                                             14,607,849            14,237,586
    Furniture and equipment                                                            356,921               424,731
    Intangible assets                                                                1,536,859             2,561,338
    Net fixed assets and intangibles of entity to be disposed of                        11,899             2,042,164
                                                                                   -----------           -----------
       Total fixed assets and intangibles, net                                      16,513,528            19,265,819
                                                                                   -----------           -----------

       Total assets                                                                $17,994,659           $19,592,854
                                                                                   ===========           ===========
</TABLE>

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


                                       3
<PAGE>

ITIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30,           DECEMBER 31,
                                                                                     2001                    2000
                                                                                 ------------            ------------
                                                                                  (Unaudited)
<S>                                                                              <C>                     <C>
                       LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Bank overdraft                                                               $    117,600            $         --
    Notes payable-other                                                               824,655                 510,048
    Disputed note payable to Cootes Drive LLC                                         500,000                 500,000
    Accounts payable                                                                  814,519                 369,647
    Acrrued interest                                                                  211,237                 141,420
    Accrued liabilities                                                               353,396                 155,110
    Deferred revenue                                                                  273,444                 105,684
    Assets distributable to stockholders                                                   --                   1,761
    Current liabilities of entity to be disposed of                                   107,887                 138,108
                                                                                 ------------            ------------
      Total current liabilities                                                     3,202,738               1,921,778
    Long term notes payable from Chairman                                           2,205,117               2,230,050
                                                                                 ------------            ------------
Total liabilities                                                                   5,407,855               4,151,828
                                                                                 ------------            ------------

    Commitments and contingencies

Stockholders' equity:
    Series A Convertible Preferred stock, par value $.001;
      50,000,000 shares authorized; 161.08 shares issued and
      outstanding, respectively                                                     2,027,526               2,027,526
    Common stock, par value $.001, 100,000,000 shares
      authorized;  38,363,396 and 35,421,284 shares
      issued, respectively;  36,682,280 and 35,410,546 shares
      outstanding, respectively                                                        38,363                  35,422
    Warrants                                                                        1,213,372               1,167,372
    Additional paid in capital                                                     24,553,403              23,447,757
    Deferred compensation                                                                  --                 (15,625)
    Accumulated deficit                                                           (14,923,055)            (11,178,242)
    Treasury stock, at cost, 1,681,116 shares
      and 10,738 shares, respectively                                                (284,554)                (43,184)
    Accumulated other comprehensive income,
      unrealized gain on investments                                                    6,584                      --
    Less notes receivable issued for purchase of
      common stock                                                                    (44,835)                     --
                                                                                 ------------            ------------
      Total stockholders' equity                                                   12,586,804              15,441,026
                                                                                 ------------            ------------

      Total liabilities and stockholders' equity                                 $ 17,994,659            $ 19,592,854
                                                                                 ============            ============
</TABLE>


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



                                        4
<PAGE>

ITIS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)

<TABLE>
<CAPTION>
                                                       For the nine months ended               For the three months ended
                                                               September 30,                          September 30,
                                                    --------------------------------        --------------------------------
                                                        2001                2000                2001                2000
                                                    ------------        ------------        ------------        ------------
<S>                                                 <C>                 <C>                 <C>                 <C>
REVENUE, NET OF DEFERRED INCOME                     $  3,185,425        $    724,232        $  1,628,109        $    264,652

OPERATING EXPENSES:
  Selling and marketing                                  837,815           1,118,973             221,067             597,223
  General and administrative                           2,401,208           3,097,186             608,631             760,367
  Production and computer service                        257,561             365,054              96,239             133,689
  Amortization and depreciation                        1,866,649           1,104,957             626,940             493,608
                                                    ------------        ------------        ------------        ------------

  Total operating expenses                             5,363,233           5,686,170           1,552,877           1,984,887
                                                    ------------        ------------        ------------        ------------

INCOME (LOSS) FROM CONTINUING
  OPERATIONS                                          (2,177,808)         (4,961,938)             75,232          (1,720,235)

DISCONTINUED OPERATIONS (Note 6):
  Income (Loss) from operations of
    discontinued business segment                       (865,850)                 --            (254,697)                 --
  Loss on disposal of business segment,
    including provision for operating
    losses during phase-out period                      (871,430)                 --            (871,430)                 --

INTEREST INCOME (EXPENSE), net                          (240,607)            (60,127)            (82,576)            (21,876)
GAIN ON SALE OF INVESTMENTS
  AND EQUIPMENT                                          410,882                  --             256,675                  --
                                                    ------------        ------------        ------------        ------------

NET LOSS                                              (3,744,813)         (5,022,065)           (876,796)         (1,742,111)

DEEMED PREFERRED STOCK DIVIDENDS                              --            (906,250)                 --             (80,916)
                                                    ------------        ------------        ------------        ------------

NET LOSS APPLICABLE TO COMMON
  SHAREHOLDERS                                        (3,744,813)         (5,928,315)           (876,796)         (1,823,027)

OTHER COMPREHENSIVE INCOME
  Unrealized gain (loss) on investments
    available for sale                                     6,584                  --            (238,536)                 --
                                                    ------------        ------------        ------------        ------------

NET AND COMPREHENSIVE LOSS
  APPLICABLE TO COMMON
  SHAREHOLDERS                                      $ (3,738,229)       $ (5,928,315)       $ (1,115,332)       $ (1,823,027)
                                                    ============        ============        ============        ============

BASIC LOSS PER COMMON SHARE                         $      (0.10)       $      (0.21)       $      (0.02)       $      (0.06)
                                                    ============        ============        ============        ============

WEIGHTED AVERAGE SHARES USED IN
  COMPUTING BASIC LOSS
  PER COMMON SHARE                                    37,336,044          28,300,535          38,270,363          28,541,099
                                                    ============        ============        ============        ============
</TABLE>


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



                                       5

<PAGE>

ITIS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                        For the Nine Months ended September 30,
                                                                        ---------------------------------------
                                                                              2001                   2000
                                                                          -----------             -----------
<S>                                                                       <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                              $(3,744,813)            $(5,022,065)
    Adjustments to reconcile net loss to net
      cash used in operating activities:
      Issuance of common stock, options,
         or warrants for goods or services                                    195,130                 939,376
      Note payable assumed for services                                            --                  33,668
      Amortization of deferred compensation                                    15,625                      --
      Amortization and depreciation                                         1,866,649               1,104,957
      Gain on sales of investments                                           (405,013)                     --
      Gain on sale of equipment                                                (5,869)                     --
      Services provided for investments                                      (812,858)                     --
      Compass Data disposal                                                 1,924,030                      --
      Changes in:
         Accounts receivable                                                 (741,210)                 14,851
         Due from affiliated company                                               --                  55,423
         Notes receivable                                                    (502,142)                     --
         Accrued interest on notes receivable                                  (3,500)                     --
         Other current assets                                                  38,308                (179,390)
         Accounts payable                                                     444,872                  19,599
         Accrued liabilities                                                  151,199                  97,952
         Deferred revenue                                                     167,760                 (30,938)
         Assets distributable to stockholders                                  (1,761)                     --
                                                                          -----------             -----------

      Net cash used in operating activities                                (1,413,593)             (2,966,567)
                                                                          -----------             -----------

CASH FLOWS FROM INVESTMENT ACTIVITIES:
    Purchases of investments                                                   (8,711)             (1,850,000)
    Proceeds from sales of investments                                      1,218,141               2,145,000
    Proceeds from sale of equipment                                             6,269                      --
    Additions to database content and software costs                       (1,124,786)             (1,345,137)
    Additions to furniture and equipment                                      (20,237)               (170,042)
                                                                          -----------             -----------

      Net cash provided by (used in) investment activities                     70,676              (1,220,179)
                                                                          -----------             -----------
</TABLE>

                                                                    (continued)


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


                                       6
<PAGE>

ITIS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE>
<CAPTION>
                                                                           For the Nine Months Ended September 30,
                                                                           --------------------------------------
                                                                                2001                    2000
                                                                            ------------            ------------
<S>                                                                         <C>                     <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
    Bank overdraft                                                          $    117,600            $         --
    Proceeds from notes payable                                                1,022,617               1,400,000
    Payments on notes payable                                                    (57,893)                     --
    Payment on note acquired in acquisition                                           --                 (20,000)
    Payments received on notes receivable                                        176,365                      --
    Proceeds from sale of common stock                                            11,837                      --
    Issuance of preferred stock                                                       --               2,870,000
    Shareholder contribution to paid in capital                                   40,991                      --
    Distribution of Planet Resources assets and liabilities                       13,880                      --
                                                                            ------------            ------------

      Net cash provided by financing activities                                1,325,397               4,250,000
                                                                            ------------            ------------


NET INCREASE/(DECREASE) IN CASH
    AND CASH EQUIVALENTS                                                         (17,520)                 63,254

CASH AND CASH EQUIVALENTS, beginning of period                                    29,867                  78,544
                                                                            ------------            ------------

CASH AND CASH EQUIVALENTS, end of period                                    $     12,347            $    141,798
                                                                            ============            ============


SUPPLEMENTAL CASH FLOW INFORMATION:
    Cash paid for interest                                                  $    174,587            $      4,387
    Cash paid for income taxes                                              $         --            $         --
    Non cash investing and financing transactions:
      Fair value of warrants issued                                         $     46,000            $         --
      Fair value of common stock issued as
         note reduction                                                     $    250,000            $         --
      Fair value of common stock issued as
         compensation for goods and services                                $     42,130            $         --
      Fair value of common stock issued
         for acquisitons                                                    $         --            $ 11,900,000
      Notes receivable issued for exercise
         of stock options                                                   $    217,700            $         --
      Unrealized gains on investments                                       $      6,584            $         --
      Long-term debt forgiveness by Chairman                                $    425,050            $         --

</TABLE>

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


                                       7
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1-BUSINESS:

ITIS Inc., formerly known as Internet Law Library and Planet Resources before
that, is a Delaware corporation that provides electronic publishing services and
database content through Internet sites with subscription access, licenses and
transaction fees for databases through its subsidiaries, National Law Library,
Inc., GoverNet Affairs, Inc., and Brief Reporter, LLC. The content of the
databases consists of pending legislation, statutory law, rules and case law at
the federal and state levels. Legal briefs from certain important cases before
federal and state courts are also available, as are litigation forms. This
material can be useful to legislators, corporate regulatory personnel,
lobbyists, individual lawyers, judges, law firms, corporate legal departments,
government agencies, and businesses and individuals involved in legislative
efforts, litigation and corporate legal planning. Interfacing with these
databases are retrieval engines that are owned by ITIS or its subsidiaries. ITIS
also provides database content, data conversion, automated litigation support,
software, and hardware through its subsidiary, ITIS, Inc., a Texas corporation,
which conducts business as Litidex(R).

Prior to October 31, 2001, ITIS also provided training and support with federal
regulations through its wholly owned subsidiary, Venco Compliance, Inc., and
marketed a CD-Rom product and Website that assisted in medical billing through
Compass Data Systems, Inc. As more fully disclosed in Note 6 and Note12, on
October 31, 2001, the stock of Venco was sold and transferred by ITIS to Venco's
former shareholders and the operations and management of Compass Data Systems
were turned over to current Compass employees.

ITIS's common stock is traded on the over-the-counter Bulletin Board under the
symbol "ITII.OB."

As reflected in the accompanying financial statements, ITIS has incurred
$14,923,055 in losses since inception, has a working capital deficit of
$1,721,607 at September 30, 2001, and has used significant amounts of cash in
operating the company. Should future operating revenues not be sufficient to
fund operations, management plans to continue to utilize additional loans from
Mr. Carr (president and chairman of the board of directors of ITIS) and other
directors and investors as long as funds from these sources remain available. If
adequate funding from operations or other sources is not available, ITIS may not
be able to remain in business.

NOTE 2-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

BASIS OF PRESENTATION - In management's opinion, the accompanying unaudited
interim consolidated financial statements of ITIS have been prepared by
management of ITIS in accordance with generally accepted accounting principles
and the rules adopted by the United States Securities and Exchange Commission
and should be read in conjunction with the audited consolidated financial
statements and notes thereto contained in ITIS's latest Annual Report filed with
the SEC on Form 10-K. In the opinion of management, all adjustments, consisting
of normal recurring adjustments, necessary for a fair presentation of financial
position and the results of operations in accordance with generally accepted
accounting principles for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
consolidated financial statements, which would substantially duplicate the
disclosure contained in the audited consolidated financial statements for the
most recent fiscal year as reported in ITIS's 2000 Form 10-K, have been omitted.

PRINCIPLES OF CONSOLIDATION-The accompanying consolidated financial statements
include the accounts of ITIS Inc. and its wholly owned subsidiaries, National
Law Library, GoverNet Affairs,



                                       8
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Brief Reporter, ITIS, Inc. (Litidex(R)), and Venco Compliance. All significant
inter-company balances and transactions have been eliminated in consolidation.

INVESTMENTS-Investments include available-for-sale securities at fair value. For
the available-for- sale securities, any unrealized holding gains and losses are
excluded from operating results and are recognized as other comprehensive
income. The fair values of the securities are determined based on prevailing
market prices.

REVENUE RECOGNITION-Revenues consist of subscription and other fees charged for
access to ITIS's databases, products and services and are recognized in
accordance with the provisions of Staff Accounting Bulletin No. 101, REVENUE
RECOGNITION IN FINANCIAL STATEMENTS, as follows:

      PRODUCT REVENUE- Revenue from the sales of products is recognized after
      shipment of the products and fulfillment of acceptance terms, if any.

      SERVICES REVENUE-Revenue from subscriptions, transactional fees, customer
      training, technical support and other services is recognized as the
      service is performed.

USE OF ESTIMATES-The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
revenues and expenses and the disclosure of contingent assets and liabilities.
Actual results could differ from those estimates.

 BASIC LOSS PER SHARE-Basic loss per share has been computed by dividing net
loss by the weighted average number of shares outstanding. All options
outstanding at September 30, 2001 and 2000 have not been included because they
are anti-dilutive. Accordingly, basic and diluted loss per share is the same for
all periods presented.

NEW ACCOUNTING PRONOUNCEMENTS-Statement of Financial Accounting Standards
("SFAS") No. 141, "Business Combinations", was issued in June 2001 and
effectively eliminates the use of the "pooling of interests" method to account
for business combinations after July 1, 2001. Management believes that the
adoption of this statement will not adversely impact future operations, and all
potential future acquisitions, if consummated, will be accounted for using the
"purchase" method.

Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and
Other Intangible Assets", was issued in June 2001. Required adoption of this
statement is effective for all fiscal years beginning after December 31, 2001.
This statement amends SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", to exclude from its scope
goodwill and intangible assets that are not amortized.

Under SFAS No. 142, goodwill and intangible assets with indeterminate lives will
no longer be amortized as expense over estimated useful lives after December 31,
2001 for assets acquired prior to July 1, 2001, and no amortization will occur
for any goodwill and intangible assets acquired after June 30, 2001. These costs
are to be tested for impairment at least annually, or more frequently if events
or changes in circumstances indicate that the asset might be impaired.

Because database content and software costs represent case law that can be used
indefinitely, management believes that this asset qualifies as an intangible
asset that will no longer be amortized under SFAS No. 142. However, impairment
of ITIS's database content, goodwill and other intangible assets represent
estimates that could materially change in the near term as discussed in Note 4.
Accordingly, adoption of SFAS No. 142 could have a material adverse



                                       9
<PAGE>

ITIS INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)



impact upon the financial results of ITIS if future impairment is determined to
exist under the terms of the new standard.

SFAS NO. 143, "Accounting for Asset Retirement Obligations", addresses financial
reporting for obligations associated with the retirement of long-lived assets
that result from the acquisition, construction, development and (or) the normal
operation of a long-lived asset (except for certain obligations of lessees) and
is effective for financial statements issued for fiscal years beginning after
June 15, 2002.

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets",
addresses financial accounting and reporting for the impairment or disposal of
long-lived assets and is effective for financial statements issued for fiscal
years beginning after December 15, 2001. ITIS has elected to early adopt this
statement. Accordingly, ITIS has recorded a loss on discontinued operations of
$1,737,280 for the disposal of Compass Data Systems, Inc., as more fully
disclosed in Note 6.

RECLASSIFICATION OF ACCOUNTS-Certain reclassifications have been made to the
December 31, 2000 balance sheet accounts to conform to current year presentation
with no effect on net income.


NOTE 3-BUSINESS SEGMENTS

For the quarter and nine months ended September 30, 2001, ITIS and its
subsidiaries were engaged in the business of providing Internet services,
compliance and safety training materials, and automated litigation support
services. As of October 31, 2001 we no longer provide compliance and safety
training materials.

<TABLE>
<CAPTION>
                                                                      SEGMENT INFORMATION
                                                                      -------------------

                                                             INCOME
NINE MONTHS ENDED                                          (LOSS) FROM          INTEREST           TOTAL          DEPRECIATION/
SEPTEMBER 30, 2001                        NET SALES         OPERATIONS          EXPENSE            ASSETS         AMORTIZATION
-------------------------------          -----------       -----------        -----------       -----------       -----------
<S>                                      <C>               <C>                <C>               <C>               <C>
Internet Services                        $ 1,015,680       $(2,857,177)       $   229,422       $15,863,583       $ 1,036,242
Compliance and Safety
  Training Materials                          39,345           (20,261)                --            79,756            13,590
Automated Litigation Support               2,130,400           699,630             14,981         2,051,320           816,817
                                         -----------       -----------        -----------       -----------       -----------
Total, ITIS Inc.                         $ 3,185,425       $(2,177,808)       $   244,403       $17,994,659       $ 1,866,649
                                         ===========       ===========        ===========       ===========       ===========


                                                             INCOME
NINE MONTHS ENDED                                          (LOSS) FROM          INTEREST           TOTAL          DEPRECIATION/
SEPTEMBER 30, 2000                        NET SALES         OPERATIONS          EXPENSE            ASSETS         AMORTIZATION
-------------------------------          -----------       -----------        -----------       -----------       -----------

Internet Services                        $   724,232       $(4,961,938)       $    95,628       $18,777,640       $ 1,104,957
Compliance and Safety
  Training Materials                              --                --                 --                --                --
Automated Litigation Support                      --                --                 --                --                --
                                         -----------       -----------        -----------       -----------       -----------
Total, ITIS Inc.                         $   724,232       $(4,961,938)       $    95,628       $18,777,640       $ 1,104,957
                                         ===========       ===========        ===========       ===========       ===========

</TABLE>

                                       10
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>
<CAPTION>
                                                            INCOME
THREE MONTHS ENDED                                        (LOSS) FROM         INTEREST          TOTAL           DEPRECIATION/
September 30, 2001                      NET SALES         OPERATIONS          EXPENSE           ASSETS          AMORTIZATION
------------------------------         -----------       -----------        -----------       -----------       ------------
<S>                                    <C>               <C>                <C>               <C>               <C>
Internet Services                      $   334,650       $  (792,202)       $    71,391       $15,863,583       $   349,817
Compliance and Safety
  Training Materials                        13,059            (6,407)                --            79,756             4,530
Automated Litigation Support             1,280,400           873,841             14,981         2,051,320           272,593
                                       -----------       -----------        -----------       -----------       -----------
Total, ITIS Inc.                       $ 1,628,109       $    75,232        $    86,372       $17,994,659       $   626,940
                                       ===========       ===========        ===========       ===========       ===========


                                                            INCOME
THREE MONTHS ENDED                                        (LOSS) FROM         INTEREST          TOTAL           DEPRECIATION/
September 30, 2000                      NET SALES         OPERATIONS          EXPENSE           ASSETS          AMORTIZATION
------------------------------         -----------       -----------        -----------       -----------       ------------

Internet Services                      $   264,652       $(1,720,235)       $    21,876       $18,777,640       $   493,608
Compliance and Safety
  Training Materials                            --                --                 --                --                --
Automated Litigation Support                    --                --                 --                --                --
                                       -----------       -----------        -----------       -----------       -----------
Total, ITIS Inc.                       $   264,652       $(1,720,235)       $    21,876       $18,777,640       $   493,608
                                       ===========       ===========        ===========       ===========       ===========

</TABLE>

NOTE 4-IMPAIRMENT OF LONG-LIVED ASSETS:

Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," requires that long-lived assets and certain identifiable intangibles to be
held and used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Additionally, subsequent to December 31, 2001, Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets," will require that goodwill no longer be amortized to earnings, but
instead be reviewed for impairment (see note 2).

In connection with its revised operating plan to restructure and stabilize its
business, ITIS, with the assistance of an independent appraisal firm, conducted
a strategic review of certain aspects of its business. The strategic review
included review and evaluation of certain long-lived assets including content,
goodwill and other intangibles. The revised projections provided the basis for
measurement of the asset impairment charge. Accordingly, ITIS recorded non-cash
impairment charges and wrote down capitalized database content and software
costs by $748,024 at December 31, 2000.

ITIS has continued to address the impairment of its database content, goodwill
and other intangibles in 2001. Although ITIS has not obtained substantial new
capital or long-term funding, management believes that no additional impairment
exists at September 30, 2001 due to the current and anticipated automated
litigation support revenues of Litidex(R) and the future revenue


                                       11

<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

projections of National Law Library. This opinion of management is based on
valuation estimates using the independent appraisal of December 31, 2000,
replacement cost, and net cash flows projected over the estimated useful lives
of the assets. The opinion of management also assumes that Litidex(R) will
continue to obtain litigation projects and that the revenues of National Law
Library will increase as needed to maintain current operating levels and provide
for positive cash flow for that business segment. Further, it is management's
opinion that the database content and software are not only of value to National
Law Library, but to the litigation support activities of Litidex(R) as well.

The net cash flow estimates used by management assume revenue growth of National
Law Library using historical growth rates for the next three years with
decreasing revenue growth rates in future years. The estimates also assume
continued costs to maintain and update the database content. Management believes
that its current estimates are reasonable and attainable, while acknowledging
that the revenues of National Law Library are subject to a high degree of
volatility and are extremely difficult to accurately predict.

At this time, ITIS has been unable to secure the additional debt or equity
capital that will insure its ability to continue at its current level of
expansion and meet its operational forecasts. Management believes that
additional funding may not be needed as a result of the proceeds of a new $1
million loan on October 24, 2001. However, if additional funding proves
necessary and is not obtained, it is reasonably possible that additional
impairment could result that would have a material impact on the consolidated
financial statements, asset values, and ongoing operations of ITIS. Management
believes that the evaluation of potential future impairment of content,
goodwill, and other intangibles continues to represent an estimate made by
management that is subject to impact in the near term in accordance with the
American Institute of Certified Public Accountant's Statement of Position (SOP)
94-6 "Disclosure of Certain Significant Risks and Uncertainties".
Continued evaluation of impairment will be addressed at year-end and thereafter
until ITIS has an established history on which to better assess anticipated cash
flows.

NOTE 5-SPIN-OFF OF PLANET RESOURCES:

Under an Agreement and Plan of Distribution dated March 25, 1999 between ITIS
(then Planet Resources, Inc.) and National Law Library, ITIS was obligated to
distribute certain assets consisting of cash and mining rights to its original
stockholders. Effective March 27, 2001, the foregoing cash and mineral rights
were indirectly distributed to the original stockholders of ITIS pursuant to an
Amended and Restated Agreement and Plan of Distribution dated March 13, 2001,
whereby Planet Resources, one of ITIS's wholly owned subsidiaries, was spun-off
from ITIS and acquired the cash and mining rights. ITIS no longer maintains any
interest in these properties.

NOTE 6-ACQUISITIONS & DISPOSITIONS:

ITIS,INC. (LITIDEX(R))

On March 23, 2000, ITIS's board of directors approved the purchase of ITIS, Inc.
(Litidex(R)), a Texas corporation, subject to certain final reviews and
negotiations that were concluded in April 2000. According to the terms of a
Stock Exchange Agreement, effective April 30, 2000, ITIS exchanged 5,044,903
shares of its common stock, of which all were unregistered shares, for all of




                                       12
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


the shares of Litidex(R). In addition to the exchange of stock, ITIS assumed
liabilities to Hunter M. A. Carr (ITIS's president and chairman of the board of
directors) in the amount of $425,050. Mr. Carr forgave these liabilities in
September 2001.

Since National Law Library's inception on November 30, 1998 until ITIS's
acquisition of Litidex(R) on April 30, 2000, Litidex(R) served as one of
National Law Library's primary vendors of new case law content while also
providing various executive, sales, production, and administrative services. In
addition, Litidex(R) is a provider of automated litigation support services.
During the period from National Law Library's inception to December 31, 1999,
Hunter M.A. Carr was the sole stockholder of Litidex(R). During the three months
ended March 31, 2000, Mr. Carr sold or otherwise conveyed approximately 92% of
his stock in Litidex(R) to various individuals and entities, some of which are
either directors or officers of ITIS or are entities controlled by directors of
ITIS. Of the 5,044,903 shares issued to Litidex(R) stockholders, 1,721,003
shares were issued to five directors of ITIS or their beneficiaries and 332,300
shares were issued to five officers of ITIS. The results of operations of
Litidex(R) have been included in ITIS's consolidated financial statements as of
the acquisition date.

The acquisition has been accounted for under the purchase method of accounting.
The total purchase price of $11,917,400 includes ITIS's allocation to intangible
assets for this acquisition of $6.9 million to database content and software
costs and $2 million to contractual agreements, based on the results of an
independent appraisal.

COMPASS DATA SYSTEMS

On July 27, 2000, ITIS's board of directors approved the purchase of a
controlling interest in Compass Data Systems, Inc. (Compass), a private
Nevada corporation that provides electronic information publishing services
in a completely searchable information database to industries and
organizations. Stock purchase agreements by and between ITIS and three
stockholders of Compass were signed with each of the sellers effective as of
October 1, 2000. Under the terms of these stock purchase agreements, ITIS
agreed to issue an aggregate of 1,676,105 restricted, unregistered shares of
ITIS's common stock, valued at approximately $2.3 million, for approximately
63% of the total outstanding shares of Compass. As of September 30, 2001,
1,670,378 shares had been issued to the selling shareholders. Compass had a
negative net worth as of the date of acquisition and has continued to incur
net operating losses. Therefore, no minority interest for the remaining 37%
was recorded in the financial statements. The issuances of ITIS stock were
made in reliance upon the Section 4(2) private placement exemption from
registration. None of the sellers received registration rights for the ITIS
shares they received in this transaction. The acquisition was accounted for
under the purchase method of accounting. The total purchase price of
$2,294,425 included ITIS's allocation of $1,294,425 to database content and
software costs and $1 million to a contractual agreement, based on the
results of an independent appraisal.

In August 2001, certain shareholders of Compass filed suit in Washoe County,
Nevada against the aforementioned three shareholders, alleging that the stock
the three individuals delivered was not valid, and that as a result, ITIS has no
ownership interest in Compass. The wrongful actions as alleged in the suit
relate to stock ownership of a predecessor of Compass. ITIS is not a party to
this lawsuit and intends to place the shares of Compass received in the
transaction in the registry of the Nevada Court and to cancel the restricted
shares of ITIS that were issued to the three individuals.



                                       13
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Under the terms of the purchase agreement dated October 2000, sixty-eight
percent of Compass stock was to be delivered; the required percentage was never
received. Further, it appears that the three Compass shareholders never took
appropriate action with respect to the sale of their shares of Compass stock. As
of October 31, 2001, the operations and management of Compass, previously
reported as a subsidiary of ITIS, were turned over to current Compass employees.

As a result of the foregoing, ITIS has written off $1,229,704 in assets at
September 30, 2001, representing the net book value of the Compass database
content and software costs originally valued at $1,294,425. The $1 million value
assigned to a contractual agreement of Compass at the time of acquisition has
been fully amortized as of the date of this report. After accrual of other
expenses relating to the disposition of Compass and providing for operating
losses during the phase-out period, a loss of $871,430 on disposal has been
recorded as of September 30, 2001.


VENCO COMPLIANCE

On September 28, 2000, ITIS's board of directors approved the purchase of all of
the stock of Venco Compliance, Inc., a private Texas corporation in the business
of selling compliance and safety training information to businesses such as dry
cleaners and others that deal with hazardous chemicals, biomaterials and other
regulated substances. In connection with this acquisition, ITIS issued an
aggregate of 100,000 unregistered shares of its common stock at closing on
October 1, 2000, valued then at $90,600, to Donald E. and Cathryn V. Tull. These
issuances were made in reliance upon Section 4(2) private placement exemption
from registration. Neither of the two sellers received registration rights for
the shares of ITIS they received in this transaction. The results of operations
of Venco Compliance and the fair value of tangible and intangible assets
acquired and liabilities assumed have been included in ITIS's consolidated
financial statements as of the acquisition date.

The acquisition was accounted for under the purchase method of accounting and
resulted in $90,600 of the purchase price being allocated to goodwill. As
discussed further in Note 12, on October 31, 2001, the stock of Venco was sold
and transferred by ITIS to Venco's former shareholders.

NOTE 7-NOTES PAYABLE AND FINANCING AGREEMENTS:

During the year ended December 31, 2000, ITIS borrowed a total of $1,805,000
from Hunter M.A. Carr, its CEO, to fund working capital requirements.
Additionally, Mr. Carr advanced $255,000 during January and February 2001. The
borrowings through February 28, 2001 were evidenced by unsecured promissory
notes, each bearing an annual interest rate of 11.75% and payable in full with
accrued interest after six months. On February 28, 2001, the notes through that
date were consolidated into one demand note in the amount of $2,060,000 bearing
interest at the rate of prime plus two percent per year, payable in cash on
demand after one year. At Mr. Carr's option and with 30 days written notice, the
note may be repaid in common stock of ITIS at a discounted price based on the
lowest price at which ITIS has sold its common stock during the one-year period
preceding the exercise of this option. On March 10, 2001, ITIS retired $250,000
in principal from this note by issuing 1,153,828 restricted shares of common
stock to Mr. Carr at a price of $.216667 per share. New promissory notes,
totaling $340,117 (including $45,000 in advances made during October 2001) and
bearing the same terms, have been issued to Mr. Carr



                                       14
<PAGE>


ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


for advances to ITIS since March 1, 2001. With respect to these notes payable,
Mr. Carr has provided written commitment to ITIS to provide forbearance and
extend the due date on such notes to at least July 15, 2002, if to demand
payment would impair ITIS's ability to meet its other existing liabilities and
commitments. As of September 30, 2001, the total principal amount and accrued
but unpaid interest owed to Mr. Carr was $2,205,117 and $128,173, respectively.

In connection with the acquisition of Litidex(R), ITIS assumed liabilities to
Hunter M. A. Carr in the amount of $425,050. In September 2001 Mr. Carr forgave
this debt and the $425,050 was recorded as additional paid in capital.

In October 2000, ITIS executed demand notes for $400,000 and $50,000 in favor of
George A. Roberts and W. Allyn Hoaglund, respectively, members of its board of
directors. The notes bear interest at the rate of prime plus two percent per
year and are payable in cash on demand after one year. At the option of the
holder and with 30 days written notice, the notes may be repaid in common stock
of ITIS at a discounted price based on the lowest price at which ITIS has sold
its common stock during the one-year period preceding the exercise of this
option.

In November and December 2000 ITIS entered into financing agreements with Cootes
Drive LLC as described below. Due to recent litigation in regard to these
financing agreements, it is not expected that any further funding will occur
from this source (see note 9).

On November 20, 2000, ITIS entered into an equity line financing arrangement
with Cootes Drive LLC. This arrangement was the successor to the intermediate
financing agreement of May 11, 2000. The financing arrangement was in the form
of a Securities Purchase Agreement providing for the purchase by Cootes Drive of
up to $25 million worth of shares of common stock of ITIS over an 18-month
period. Under the terms of the Securities Purchase Agreement, ITIS could have
delivered a put to Cootes Drive specifying the dollar amount of shares ITIS
intended to sell on each put. The maximum amount that ITIS could have received
under the Securities Purchase Agreement was $25 million or a lesser amount
depending on the limitation on the number of shares Cootes Drive (and its
affiliates) were permitted to hold at any one time. Certain conditions had to be
met before Cootes Drive was obligated to accept a put from ITIS. Due to recent
litigation in regard to the foregoing financing agreement (see note 9), it is
not expected that Cootes Drive would honor a put even if ITIS were to meet the
funding requirements in the future.

On December 5, 2000, ITIS executed a convertible promissory note in the face
amount of $500,000 in favor of Cootes Drive. The note was a demand note to
accrue interest at the rate of 5% per annum, and the principal could have been
converted to common stock of ITIS. In connection with this promissory note, ITIS
issued a warrant to Cootes Drive for 41,650 shares of ITIS common stock at an
exercise price of $0.288 per share. A commission of $17,500 and legal fees of
$30,000 related to the equity line financing arrangement were paid from the
proceeds of this note. On December 5, 2000, ITIS also entered into a side letter
agreement that obligated Cootes Drive to provide an additional $500,000 on
January 14, 2001, in exchange for another convertible promissory note, on
similar terms. This additional funding never occurred.

ITIS disputes the validity of the $500,000 convertible promissory note dated
December 5, 2000, on the grounds that this convertible note is a part of Cootes
Drive's efforts to defraud ITIS and to manipulate the price of ITIS's stock.
This convertible note and the associated funding transactions are all the
subject of ITIS's suit against Cootes Drive and others (see note 9).




                                       15
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


On December 5, 2000, ITIS granted registration rights to Cootes Drive for up to
17,541,650 shares of common stock it could have acquired under the equity line
financing, the convertible promissory note financings and the warrants granted
in connection with all of these financings. ITIS filed a registration statement
with the SEC covering the resale of these shares that was declared effective on
January 11, 2001.

Due to recent litigation in regard the financing agreements described above with
Cootes Drive LLC (see note 9), it is not expected that any further funding will
occur from this source.
On January 16, 2001, ITIS executed a demand promissory note in the amount of
$100,000 payable to an unaffiliated third party. The note bears interest at 10%
per year and is payable in cash on demand after one year. At the option of the
holder and with 30 days written notice, the note may be repaid in common stock
of ITIS at a discounted price based on the lowest price at which ITIS has sold
its common stock during the one-year period preceding the exercise of this
option. On August 30, 2001, Hunter M.A. Carr (president and CEO of ITIS) assumed
ownership of this note by transferring 400,000 shares of ITIS stock under his
control to the unaffiliated third party.

On February 1, 2001, ITIS executed a demand note for $190,000 in favor of George
A. Roberts, a member of its board of directors. The note bears interest at the
rate of prime plus two percent per year and is payable in cash on demand after
one year. At the option of the holder and with 30 days written notice, the note
may be repaid in common stock of ITIS at a discounted price based on the lowest
price at which ITIS has sold its common stock during the one-year period
preceding the exercise of this option.

 On February 28, 2001, ITIS executed a demand promissory note in the amount of
$25,000 payable to an unaffiliated third party. The note bears interest at the
rate of prime plus two percent per year and is payable in cash on demand after
one year. At the option of the holder and with 30 days written notice, the note
may be repaid in common stock of ITIS at a discounted price based on the lowest
price at which ITIS has sold its common stock during the one-year period
preceding the exercise of this option.

On February 5, March 21, April 11, and May 16, 2001, ITIS executed demand
promissory notes for $50,000, $70,000, $25,000, and $12,500, respectively, in
favor of W. Paul Thayer, a member of the board of directors. The notes bear
interest at the rate of prime plus two percent per year and are payable in cash
on demand after one year. At the option of the holder and with 30 days written
notice, the notes may be repaid in common stock of ITIS at a discounted price
based on the lowest price at which ITIS has sold its common stock during the
one-year period preceding the exercise of this option.

 NOTE 8-INCOME TAXES:

ITIS has had losses since inception and, therefore, has not been subject to
federal income taxes. As of December 31, 2000, ITIS had an accumulated net
operating loss ("NOL") carryforward for income tax purposes of approximately
$11.2 million, resulting in a deferred tax asset of approximately $3,200,000.
This carryforward begins to expire in 2018 through 2020. The Tax Reform Act of
1986 provided for an annual limitation on the use of NOL and tax credit
carryforwards following certain ownership changes that limit ITIS's ability to
utilize this carryforward. Additionally, because U.S. tax laws limit the time
during which NOL and tax credit carryforwards may be applied against future
taxable income and tax liabilities, ITIS may



                                       16
<PAGE>

ITIS INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)


not be able to take full advantage of its NOL and tax credits for federal income
tax purposes. Since ITIS has had a net operating loss carryforward since
inception and there is no assurance of future taxable income, a valuation
allowance has been established to fully offset the deferred tax asset.

NOTE 9-COMMITMENTS AND CONTINGENCIES:

LITIGATION

On January 26, 2001, in order to protect ITIS and its stockholders, ITIS
(formerly Internet Law Library) filed a lawsuit in United States District Court
for the Southern District of Texas, Houston Division, against Southridge Capital
Management and several other defendants, including Cootes Drive LLC, an alleged
"straw man," for damages resulting from alleged stock manipulation, federal
securities law violations, civil RICO, fraud, violations of Texas securities
laws and other Texas statutes, and conspiracy. The case also alleges
misrepresentations by co-conspirators in connection with certain funding
transactions by the defendants with ITIS. All defendants filed a joint motion to
transfer this case to New York to be consolidated with the lawsuit filed against
us as described below. The United States District Judge granted this motion and
the case has been transferred to the Southern District of New York. We intend to
prosecute the case vigorously. Our litigation counsel has advised us that the
case is not sufficiently advanced to evaluate the outcome, and that resolution
of the suit is not anticipated in the short term.

On February 5, 2001, Cootes Drive LLC filed a suit against ITIS in the Southern
District of New York alleging breach of one of the financing agreements with us
for failure to honor a conversion of its preferred shares to common stock. The
suit seeks monetary damages of $10,000 per day and seeks to compel ITIS to issue
shares of common stock to Cootes Drive LLC. ITIS filed an answer to this
lawsuit. Cootes Drive LLC filed a motion requesting leave to amend their
complaint in order to add allegations that ITIS is in default on a $500,000
promissory note in favor of Cootes Drive LLC (the alleged default occurring
after the filing of ITIS's suit against Cootes Drive LLC and others); that ITIS
has not honored a notice of redemption of preferred shares held by Cootes Drive
LLC in the amount of $2,214,012 (allegedly occurring after the filing of ITIS's
suit against Southridge Capital Management, Cootes Drive LLC, and others); and
that ITIS defrauded Cootes Drive by failing to disclose material information
with respect to the background of a key officer at ITIS. The United States
District Judge granted this motion, and the suit has been amended. ITIS's answer
was timely filed on July 20, 2001. The preferred shares and the associated
funding transactions at issue are the subject matter of ITIS's suit against
Southridge Capital Management and others. ITIS intends to defend this case
vigorously. Litigation counsel has advised us that the case is not sufficiently
advanced to evaluate the outcome, and that resolution of the suit is not
anticipated in the short term.

On June 4, 2001, Cootes Drive LLC filed a suit against certain directors of ITIS
on behalf of itself as a holder of preferred stock and allegedly derivatively on
behalf of ITIS, alleging that the directors breached their fiduciary duty to the
stockholders by approving repayment in common stock of loans made to ITIS by its
directors. The lawsuit asserts that actions of the directors of ITIS will dilute
the potential stock ownership interest of Cootes Drive through a series of
self-interested convertible loans. This suit was filed in the Court of Chancery
of Delaware in and for New Castle County. ITIS intends to vigorously defend this
suit, and asserts that the directors




                                       17
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


would not have had to lend money to ITIS but for the fraudulent and manipulative
acts of Cootes Drive and its co-conspirators. ITIS further asserts that the
price at which any such investor loans can be converted to stock is the same
price at which Cootes Drive LLC converted its preferred stock. On or about June
8, 2001, Cootes Drive amended its suit, requesting that the court enjoin
defendants from converting loan amounts into ITIS stock, stay discovery, rescind
the loan agreements, and impose a constructive trust over the loan agreements
and shares. On June 28, 2001, the Court refused to stay discovery and ordered
that any discovery be coordinated with the New York action. The Court further
ruled that the fundamental issues between the parties are those in the cases in
United States District Court. ITIS has filed an affidavit with the court stating
that any stock issued in repayment of loans made by the directors/investors
would be restricted stock that would not be eligible for sale before March 8,
2002. ITIS is represented by Mr. David J. Margules of the Wilmington, Delaware
firm of Bouchard, Margules & Friedlander, and Mr. Kurt Hayman of the Bayard Firm
of Wilmington, Delaware represents the directors. John M. O'Quinn, our
Texas-based litigation counsel, has agreed to represent ITIS and our directors,
if necessary, in all of these lawsuits as part of the 50% contingent fee basis,
with his law firm paying all expenses of the litigation. The fee will be
calculated after all expenses have been reimbursed to Mr. O'Quinn's law firm.

On October 2, 2001, Dominion Digital, Inc. sued National Law Library, a wholly
owned subsidiary of ITIS, in Charlottesville, Virginia. The suit alleges that
National Law Library owes the plaintiff $30,719 for consulting services and
expenses. Counsel in Virginia has answered for National Law Library. The suit is
too recent for an evaluation of the claim by counsel. No amount has been accrued
for this contingency.

NOTE 10-STOCKHOLDER'S EQUITY:

COMMON AND PREFERRED STOCK

On May 11, 2000, ITIS entered into an intermediate financing agreement with
Cootes Drive LLC, and privately placed 300 shares of 5% Series A Convertible
Preferred Stock for $3 million. This preferred stock was convertible into shares
of ITIS's common stock based on a price equal to the lesser of (i) $3.2375 or
(ii) 80% of the average of the three lowest closing bid prices during a 20-day
trading period prior to the date of conversion. ITIS was entitled to redeem the
convertible preferred stock at a cash price equal to 120% of the issue price,
provided there was an effective registration statement for the underlying shares
of common stock. On July 5, 2000, the SEC declared the registration statement
filed by ITIS effective, which registered an amount of shares of its common
stock then sufficient to satisfy any conversion, warrant exercise, and dividend
requirements under the terms of this financing agreement. The convertible
preferred stock purchased by the investor was subject to mandatory redemption by
ITIS upon the occurrence of a change in control or certain other events. As part
of this financing agreement and in consideration for negotiating a $25 million
equity line completed on November 20, 2000, ITIS agreed to issue a five-year
warrant to the investor for the purchase of 500,000 shares of its common stock
at an exercise price of $3.56 per share. In the equity line agreement completed
on November 20, 2000, this warrant was replaced with 2 five-year warrants for
the purchase of 250,000 shares each at exercise prices of $3.56 and $.60 per
share. The estimated fair value of these warrants totals $710,397 and has been
recorded in stockholders' equity. Additionally, at May 11, 2000, ITIS




                                       18

<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


agreed to issue a five-year warrant to a third party for the purchase of 200,000
common shares at an exercise price of $3.3994 per share. The estimated fair
value of this warrant totals $448,817 and has been recorded in stockholders'
equity. On December 5, 2000 ITIS agreed to issue a five- year warrant to Cootes
Drive for the purchase of 41,650 shares of its common stock at an exercise price
of $.288 per share. The estimated value of this warrant totals $8,158 and has
been recorded in stockholders' equity. A commission of $100,000 and legal fees
of $30,000 related to this financing arrangement were recorded net of preferred
stock proceeds in stockholders' equity. As of September 30, 2001, ITIS did not
meet the funding conditions and was not able to obtain any funds under this
financing arrangement.

On January 26, 2001, in order to protect ITIS and its stockholders, ITIS filed a
lawsuit in the United States District Court against Cootes Drive and several
other defendants for damages resulting from alleged stock manipulation, SEC
violations, civil RICO, fraud, violations of Texas securities laws, and other
Texas statutes and conspiracy. Due to this recent litigation it is not expected
that any further funding will occur from this private capital fund, and that
Cootes Drive will not honor a put even if ITIS were to meet the requirements of
this financing agreement in the future. For more information on this litigation
and a suit filed by Cootes Drive on February 5, 2001 against ITIS see note 9.

On March 10, 2001, in accordance with conversion terms in the February 28, 2001
demand note payable to Hunter M.A. Carr, ITIS issued 1,153,828 restricted shares
of common stock priced at $.216667 per share to Mr. Carr, representing payment
of $250,000 towards the note payable to Mr. Carr in the original amount of
$2,060,000.

On April 6, 2001, ITIS issued 125,000 shares of common stock, valued at $23,248,
as compensation to its outside directors. These awards were recorded as
compensation expense in April 2001.

On April 19, 2001, ITIS issued 1,000,000 shares of common stock to Kelley V.
Kirker, Director and Chief Operations Office of ITIS who purchased the shares
pursuant to exercising stock options issued to him under the 2001 Executive
Stock Option Plan.

On May 17, 2001, ITIS issued 500,000 shares of common stock to Joanna Hoover,
Chief Financial Officer of ITIS, who purchased the shares pursuant to exercising
stock options issued to her under the 2001 Executive Stock Option Plan.

On July 20, 2001, ITIS issued 50,000 shares of common stock to Robert Sarlay,
previously Vice President for Special Programs and Shareholder Relations for
ITIS, who was awarded the shares pursuant to exercising stock options issued to
him under the 2001 Executive Stock Option Plan.

 In September 2001, ITIS entered into an agreement with a vendor pursuant to
which ITIS agreed to issue 47,139 shares of unregistered common stock, valued at
$10,842, as consideration for insurance coverage. Insurance expense of $10,842
was recorded on September 5, 2001.

Pursuant to the 1999 Employee Stock Purchase Plan, 66,145 shares of ITIS common
stock were issued to employees of ITIS and its subsidiaries in September 2001.
The employees paid an aggregate $11,836.88 for these shares.

STOCK OPTIONS AND WARRANTS

On February 22, 2001, ITIS issued warrants to James W. Christian to purchase
300,000 shares of



                                       19
<PAGE>


ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


ITIS's common stock at an exercise price of $0.15 per share, at any time and
from time to time from and after February 22, 2001 and through and including
February 22, 2006. These warrants were issued in exchange for services provided
to ITIS and have an estimated value of $46,000.

At the September 2001 annual meeting, stockholders ratified the 2001 Executive
Stock Option Plan which had been approved by the board of directors in March
2001.Under the Plan, the stock option committee of the board of directors,
consisting of at least two non-employee members of the board of directors, may
grant stock options to purchase up to 7 million shares of common stock of ITIS
(either incentive or non-qualified stock options) to employees of ITIS or its
subsidiary corporations. The stock option committee has discretion to determine
the terms and conditions upon which the options may be exercised.

On April 16, 2001, pursuant to the 2001 Executive Stock Option Plan, ITIS
awarded 1,000,000 stock options to Kelley V. Kirker, Director and Chief
Operations Officer of ITIS. These options were fully vested at the grant date
and were exercisable in whole or in part at any time for a period of 3 years at
an exercise price equal to 67% of the bid price of common shares of ITIS at the
date of exercise. Mr. Kirker exercised these options on April 18, 2001, and
1,000,000 shares of ITIS common stock were issued to Mr. Kirker on April 19,
2001. Compensation expense of $69,000 was recorded in April 2001 as a result of
this award.

On April 19, 2001, pursuant to the 2001 Executive Stock Option Plan, ITIS
awarded 500,000 stock options to Joanna Hoover, Chief Financial Officer of ITIS.
These options were fully vested at the grant date and were exercisable in whole
or in part at any time for a period of 3 years at an exercise price equal to 67%
of the bid price of common shares of ITIS at the date of the exercise. Ms.
Hoover exercised these options on May 16, 2001, and 500,000 shares of ITIS
common stock were issued to Ms. Hoover on May 17, 2001. Compensation expense of
$38,000 was recorded in April 2001 as a result of this award.

In July 2001, pursuant to the 2001 Executive Stock Option Plan, ITIS issued
50,000 stock options to Robert Sarlay, previously Vice President for Special
Programs and Shareholder Relations for ITIS in appreciation of his service to
ITIS. These options were fully vested at the grant date and were exercisable in
whole or in part at any time for a period of 3 years at an exercise price equal
to 67% of the bid price of common shares of ITIS at the date of exercise. Mr.
Sarlay exercised these options and 50,000 shares of ITIS common stock were
issued to him on July 20, 2001. Compensation expense of $8,040 was recorded as a
result of this award.

NOTE 11-CONDITIONS AFFECTING ONGOING OPERATIONS

ITIS's financial statements are prepared using principles applicable to a going
concern, which contemplates the realization of assets and liquidation of
liabilities in the normal course of business. While we have recently obtained $1
million in new financing, revenues to be generated by the automated litigation
support services of Litidex(R) will be critical in providing the necessary funds
to continue company operations and to execute the business plan of ITIS. While
management believes that such revenues will be adequate to fund company
operations, it is possible that such revenues may not be sufficient to meet
company needs. While additional automated litigation support contracts are
anticipated, the revenues of Litidex(R) cannot be sustained if no additional
contracts are obtained. If this should be the case, management plans to continue
to utilize additional loans from Mr. Carr (president and chairman of the board
of directors of ITIS) and other directors and investors as long as funds from
these sources remain



                                       20
<PAGE>

ITIS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


available. If adequate funding from the operations of Litidex(R) or other
sources is not available, ITIS may not be able to stay in business.

We may in the future experience significant fluctuations in the results of our
operations. Such fluctuations may result in significant volatility in the price
and/or value of ITIS's common stock. Shortfalls in revenues, financing or
capital may adversely and disproportionately affect the results of operations.
Management believes that period-to-period comparisons of results of operations
should not be relied upon as an indication of future results of operations.

Our internally generated cash flows from operations have historically been
insufficient for our cash needs. While management projects that the internal
source of liquidity will continue to improve, this objective may not be achieved
in the near term, if ever.

We continue to reduce administrative costs and have implemented plans to
increase the revenue of National Law Library through improved marketing and
increases in prices. Litidex(R), our litigation support subsidiary, has several
new litigation support contracts in negotiations. While many factors can impact
future operations and the improvements that have been implemented cannot be
assured of success, the management of ITIS intends to take all actions deemed
prudent and necessary.

NOTE 12-SUBSEQUENT EVENTS:

DISPOSITION OF ASSETS

On October 31, 2001, the stock of wholly owned subsidiary Venco Compliance, Inc.
was sold and transferred by ITIS to its former shareholders, Donald E. and
Cathryn V. Tull. ITIS will receive $1,000 on December 1, 2001 and 5% or any
future revenues of Venco in excess of $10,000 per month. At October 31, 2001,
average monthly revenues of Venco were approximately $3,700. Including a
provision for operating losses during phase-out period, a loss on disposition of
approximately $75,000 will be recorded in the quarter ended December 31, 2001.

NOTES PAYABLE

On October 24, 2001, ITIS wholly owned subsidiary ITIS, Inc., a Texas
corporation that conducts business as Litidex(R), executed a promissory note for
$1,000,000 in favor of George A. Roberts, a member of its board of directors.
The note bears interest at an annual fixed rate equal to the lesser of the
maximum amount allowed by law as adjusted from time to time or 18%, and is
payable in full with accrued interest after one year. The note is secured by a
Security Agreement covering all accounts, contract rights and general
intangibles arising out of the litigation support project among Litidex(R), the
law firm of Christian & Smith, and the law firm of O'Quinn, Laminack & Pirtle.
Legal fees of $29,100 were paid from the proceeds of this note.





                                       21
<PAGE>

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


The following discussion should be read in conjunction with the condensed,
consolidated financial statements of ITIS Inc., which are included elsewhere in
this Form 10-Q. Included in this discussion are certain forward-looking
statements regarding ITIS's expectations for its business and its capital
resources. These expectations are subject to various uncertainties and risks
that may cause actual results to differ significantly from these forward-looking
statements.

ITIS Inc., formerly known as Internet Law Library and Planet Resources before
that, is a Delaware corporation that provides electronic publishing services and
database content through Internet sites with subscription access, licenses and
transaction fees for databases through its subsidiaries, National Law Library,
Inc., GoverNet Affairs, Inc., and Brief Reporter, LLC. The content of the
databases consists of pending legislation, statutory law, rules and case law at
the federal and state levels. Legal briefs from certain important cases before
federal and state courts are also available, as are litigation forms. This
material can be useful to legislators, corporate regulatory personnel,
lobbyists, individual lawyers, judges, law firms, corporate legal departments,
government agencies, and businesses and individuals involved in legislative
efforts, litigation and corporate legal planning. Interfacing with these
databases are retrieval engines that are owned by ITIS or its subsidiaries. ITIS
also provides database content, data conversion, automated litigation support,
software, and hardware through its subsidiary, ITIS, Inc., a Texas corporation,
which conducts business as Litidex(R).

On October 1, 2000, ITIS acquired controlling interest in Compass Data Systems,
Inc., a private Nevada corporation that provided electronic information
publishing services in a completely searchable information database to
industries and organizations. Under the terms of stock purchase agreements with
three stockholders of Compass Data Systems, ITIS issued an aggregate of
1,676,105 restricted, unregistered shares of ITIS's common stock for
approximately 63% of the total outstanding shares of Compass Data Systems.

In August 2001, certain shareholders of Compass filed suit in Washoe County,
Nevada against the aforementioned three shareholders, alleging that the stock
the three individuals delivered was not valid, and that as a result, ITIS has no
ownership interest in Compass. The wrongful actions as alleged in the suit
relate to stock ownership of a predecessor of Compass. ITIS is not a party to
this lawsuit and intends to place the shares of Compass received in the
transaction in the registry of the Nevada Court and to cancel the restricted
shares of ITIS that were issued to the three individuals.

Under the terms of the purchase agreement dated October 2000, sixty-eight
percent of Compass stock was to be delivered; the required percentage was never
received. Further, it appears that the three Compass shareholders never took
appropriate action with respect to the sale. As of October 31, 2001, the
operations and management of Compass, previously reported as a subsidiary of
ITIS, were turned over to current Compass employees.

On October 31, 2001, the stock of Venco Compliance was sold and transferred by
ITIS to Venco's former shareholders, Donald E. and Cathryn V. Tull. ITIS will
receive $1,000 on December 1, 2001 and 5% or any future revenues of Venco in
excess of $10,000 per month. At October 31, 2001, average monthly revenues of
Venco were approximately $3,700. Including a provision for operating losses
during phase-out period, a loss on disposition of approximately $75,000 will be
recorded in the quarter ended December 31, 2001.

The following is management's discussion and analysis of certain significant
factors that have affected ITIS's financial condition and results of operations
during the nine and three months ended September 30, 2001 and 2000.



                                       22
<PAGE>

RESULTS OF OPERATIONS

REVENUES. Revenues increased by $2,461,193 to $3,185,425 during the nine months
ended September 30, 2001, from $724,232 recorded for the nine months ended
September 30, 2000. Revenues also increased by $1,363,457 for the quarter ended
September 30, 2001, to $1,628,109, as compared to revenues of $264,652 for the
quarter ended September 30, 2000. The revenue increase for the Internet services
segment of our business for the nine months ended September 30, 2001 was
approximately $291,000, of which $76,000 relates to increased revenues of
GoverNet Affairs and $215,000 relates to increased revenues of National Law
Library. Subsidiary Litidex(R) generated increased revenues of $2,130,400 for
the nine months ended September 30, 2001 and $1,280,400 for the quarter ended
September 30, 2001 as a result of four contracts to provide automated litigation
support services. While additional contracts to provide these services are
anticipated, this increase in revenues may not be sustained if no additional
contracts are obtained. For the three months ended September 30, 2001, our
Internet services segment generated increased revenues of approximately $70,000.
Revenues of subsidiary Venco Compliance account for approximately $39,000 of the
increase for the nine months ended September 30, 2001 and $13,000 for the
quarter ended September 30, 2001.

SALES AND MARKETING EXPENSE. Sales and marketing expense decreased by $281,158
to $837,815 during the nine months ended September 30, 2001, from $1,118,973 for
the corresponding period ended September 30, 2000. Sales and marketing expense
also decreased by $376,156 during the quarter ended September 30, 2001, to
$221,067, from $597,223 for the quarter ended September 30, 2000. Venco
Compliance, which was acquired in the fourth quarter of 2000, resulted in
increased sales and marketing expense of $54,000 during the nine months ended
September 30, 2001, and $18,000 in increased expense during the quarter ended
September 30, 2001. While there was no sales expense related to the litigation
support services of Litidex(R) during the quarter ended September 30, 2001,
Litidex(R) accounts for $50,000 in expense for the nine months ended September
30, 2001. Sales and marketing expense related to our Internet services segment
decreased $385,000 and $394,000 for the nine months and quarter ended September
30, 2001, respectively. National Law Library and GoverNet Affairs, which share a
sales force, have reduced the number of sales personnel and eliminated costly
non-productive advertising. Non personnel-related sales efforts for the Internet
services segment are largely concentrated in placing banner ads on Internet
sites, print advertising in legal publications, and participation in major legal
industry meetings and conferences. Additionally, in a partnership arrangement
with an agent of America On Line, National Law Library and GoverNet affairs are
now featured legal research engines available in Netscape Navigator.

GENERAL AND ADMINISTRATIVE EXPENSE. During the nine months ended September 30,
2001, general and administrative expense totaled $2,401,208, resulting in a
decrease of $695,978 from $3,097,186 during the corresponding period ending
September 30, 2000. For the quarter ended September 30, 2001, general and
administrative expense decreased $151,736, to $608,631, from $760,367 for the
quarter ended September 30, 2000. The activation of the automated litigation
support services of Litidex(R) resulted in increased general and administrative
expense of approximately $130,000 and $60,000 for the nine months and quarter
ended September 30, 2001 respectively. Subsidiary Venco Compliance accounted for
$5,000 and $1,000 in expense during the nine months and quarter ended September
30, 2001 respectively. Decreases in general and administrative expense of
approximately $268,000 during the nine months ended September 30, 2001 and
$64,000 during the quarter ended September 30, 2001 were obtained through the
elimination of non-essential overhead expenses and administrative personnel.
Non-cash stock and option awards decreased approximately $563,000 during the
nine months ended September 30, 2001and $149,000 during the quarter ended
September 30, 2001.



                                       23

<PAGE>

PRODUCTION AND COMPUTER SERVICE EXPENSE. Production and computer service expense
decreased by $107,493 to $257,561 for the nine months ended September 30, 2001,
from $365,054 for the nine months ended September 30, 2000. Production and
computer service expense also decreased by $37,450 during the quarter ended
September 30, 2001, to $96,239, from $133,689 for the quarter ended September
30, 2000. Production and computer service expense relates primarily to Internet
service provider co-location costs, contract programming expense, and payroll
expense relating to ongoing maintenance of computer equipment and software for
all subsidiaries and ongoing updates of legislative information. The decreased
expense for both reporting periods results primarily from decreased use of
contract programmers and implementation of a streamlined labor force.

AMORTIZATION AND DEPRECIATION EXPENSE. Amortization and depreciation expense
increased by $761,692 to $1,866,649 for the nine months ended September 30,
2001, from $1,104,957 for the nine months ended September 30, 2000. Amortization
and depreciation expense also increased by $133,332 during the quarter ended
September 30, 2001, to $626,940, from $493,608 for the quarter ended September
30, 2000. The increase is primarily attributable to amortization of intangible
assets relating to the acquisitions of Litidex(R) and Venco Compliance.

INTEREST EXPENSE. Interest expense increased by $148,775 to $244,403 for the
nine months ended September 30, 2001, from $95,628 for the nine months ended
September 30, 2000. Interest expense also increased by $29,355 for the quarter
ended September 30, 2001, to $86,372, from $57,377 for the quarter ended
September 30, 2000. For the nine months and quarter ended September 30, 2001,
interest expense includes accrued interest payable to Hunter M. A. Carr and
other directors and investors in ITIS in the amount of $219,816 and $66,827
respectively. Interest is based on the terms of various interest bearing notes
payable to Mr. Carr totaling $2,205,117; various promissory notes payable to
directors of ITIS totaling $772,500; and two notes payable totaling $525,000
payable to unrelated third parties/investors. The balance of the interest
expense relates to other notes payable.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended September 30, 2001, ITIS's cash and cash equivalents
decreased in total by $135,120 from the December 31, 2000 balance of $29,867 to
$12,347 in available cash and a bank overdraft in the amount of $117,600 at
September 30, 2001. Cash used in operating activities was $1,413,593 while cash
provided by investment activities was $70,676. During the nine months ended
September 30, 2001, ITIS borrowed a total of $550,117 from Hunter M.A. Carr, its
CEO, to fund working capital requirements. The borrowings through February 28,
2001were evidenced by unsecured promissory notes, each bearing an annual
interest rate of 11.75% and payable in full with accrued interest after six
months. On February 28, 2001, the notes through that date were consolidated into
one demand note in the amount of $2,060,000 bearing interest at the rate of
prime plus two percent per year, payable in cash on demand after one year. At
Mr. Carr's option and with 30 days written notice, the note may be repaid in
common stock of ITIS at a discounted price based on the lowest price at which
ITIS has sold its common stock during the one-year period preceding the exercise
of this option. On March 10, 2001, ITIS retired $250,000 in principal from this
note by issuing 1,153,828 restricted shares of common stock to Mr. Carr at a
price of $.216667 per share. New promissory notes, totaling $340,117 (including
$45,000 in advances made during October 2001) and bearing the same terms, have
been issued to Mr. Carr for advances to ITIS since March 1, 2001. With respect
to these notes payable, Mr. Carr has provided written commitment to ITIS to
provide forbearance and extend the due date on such notes to at least July 15,
2002, if to demand payment would impair ITIS's ability to meet its other
existing liabilities and commitments. As of September 30, 2001, the total
principal amount and accrued but unpaid interest owed to Mr. Carr was $2,205,117
and $128,173, respectively.



                                       24
<PAGE>

In November and December 2000 ITIS entered into financing agreements with Cootes
Drive LLC as described below. Due to recent litigation in regard to these
financing agreements, it is not expected that any further funding will occur
from this source (see page 28).

On November 20, 2000, ITIS entered into an equity line financing arrangement
with Cootes Drive LLC. This arrangement was the successor to the intermediate
financing agreement of May 11, 2000. The financing arrangement was in the form
of a Securities Purchase Agreement providing for the purchase by Cootes Drive of
up to $25,000,000 worth of shares of common stock of ITIS over an 18-month
period. Under the terms of the Securities Purchase Agreement, ITIS could have
delivered a put to Cootes Drive specifying the dollar amount of shares ITIS
intended to sell on each put. The maximum amount that ITIS could have received
under the Securities Purchase Agreement was $25,000,000 or a lesser amount
depending on the limitation on the number of shares Cootes Drive (and its
affiliates) were permitted to hold at any one time. Certain conditions had to be
met before Cootes Drive was obligated to accept a put from ITIS. Due to recent
litigation in regard to the foregoing financing agreement (see page 28), it is
not expected that Cootes Drive would honor a put even if ITIS were to meet the
funding requirements in the future.

On December 5, 2000, ITIS executed a convertible promissory note in the face
amount of $500,000 in favor of Cootes Drive. The note was a demand note to
accrue interest at the rate of 5% per annum, and the principal could have been
converted to common stock of ITIS. In connection with this promissory note, ITIS
issued a warrant to Cootes Drive for 41,650 shares at an exercise price of
$0.288 per share. A commission of $17,500 and legal fees of $30,000 related to
the equity line financing arrangement were paid from the proceeds of this note.
On December 5, 2000, ITIS also entered into a side letter agreement that
obligated the same private capital fund to provide an additional $500,000 on
January 14, 2001, in exchange for another convertible promissory note, on
similar terms. This additional funding never occurred.

ITIS disputes the validity of the $500,000 convertible promissory note dated
December 5, 2000, on the grounds that this convertible note is a part of Cootes
Drive's efforts to defraud ITIS and to manipulate the price of ITIS's stock.
This convertible note and the associated funding transactions are all the
subject of ITIS's suit against Cootes Drive and others (see page 28).

On December 5, 2000, ITIS granted registration rights to Cootes Drive for up to
17,541,650 shares of common stock it could have acquired under the equity line
financing, the convertible promissory note financings and the warrants granted
in connection with all of these financings. ITIS filed a registration statement
with the SEC covering the resale of these shares that was declared effective on
January 11, 2001.

Due to recent litigation in regard the financing agreements described above with
Cootes Drive LLC, as discussed in detail on page 28 of this Report, it is not
expected that any further funding will occur from this source.

On January 16, 2001, ITIS executed a demand promissory note in the amount of
$100,000 payable to an unaffiliated third party. The note bears interest at 10%
per year and is payable in cash on demand after one year. At the option of the
holder and with 30 days written notice, the note may be repaid in common stock
of ITIS at a discounted price based on the lowest price at which ITIS has sold
its common stock during the one-year period preceding the exercise of this
option. On August 30, 2001, Hunter M.A. Carr (president and CEO of ITIS) assumed
ownership of this note by transferring 400,000 shares of ITIS stock under his
control to the unaffiliated third party.




                                       25
<PAGE>

On February 1, 2001, ITIS executed a demand note for $190,000 in favor of George
A. Roberts, a member of its board of directors. The note bears interest at the
rate of prime plus two percent per year and is payable in cash on demand after
one year. At the option of the holder and with 30 days written notice, the note
may be repaid in common stock of ITIS at a discounted price based on the lowest
price at which ITIS has sold its common stock during the one-year period
preceding the exercise of this option.

On February 28, 2001, ITIS executed a demand promissory note in the amount of
$25,000 payable to an unaffiliated third party. The note bears interest at the
rate of prime plus two percent per year and is payable in cash on demand after
one year. At the option of the holder and with 30 days written notice, the note
may be repaid in common stock of ITIS at a discounted price based on the lowest
price at which ITIS has sold its common stock during the one-year period
preceding the exercise of this option.

On February 5, March 21, April 11, and May 16, 2001 ITIS executed demand
promissory notes for $50,000, $70,000, $25,000, and $12,500, respectively, in
favor of W. Paul Thayer, a member of the board of directors. The notes bear
interest at the rate of prime plus two percent per year and are payable in cash
on demand after one year. At the option of the holder and with 30 days written
notice, the notes may be repaid in common stock of ITIS at a discounted price
based on the lowest price at which ITIS has sold its common stock during the
one-year period preceding the exercise of this option.

On October 24, 2001, ITIS wholly owned subsidiary ITIS, Inc., a Texas
corporation which conducts business as Litidex(R), executed a promissory note
for $1,000,000 in favor of George A. Roberts, a member of its board of
directors. The note bears interest at an annual fixed rate equal to the lesser
of the maximum amount allowed by law as adjusted from time to time or 18%, and
is payable in full with accrued interest after one year. The note is secured by
a Security Agreement covering all accounts, contract rights and general
intangibles arising out of the litigation support project among Litidex(R), the
law firm of Christian & Smith, and the law firm of O'Quinn, Laminack & Pirtle.
Legal fees of $29,100 were paid from the proceeds of this note.

As of September 30, 2001, exclusive of the revenues generated by the automated
litigation support services of subsidiary Litidex(R), ITIS's regular monthly
cash operating expenditures exceeded monthly cash receipts by approximately
$200,000. In its report on ITIS's Financial Statements for the year ended
December 31, 2000, Harper & Pearson Company, ITIS's independent auditors, state
that ITIS's recurring losses from operations, negative working capital and cash
flows, and retained deficits derived from its continuing losses raise
substantial doubt about its ability to continue as a going concern. While we
have recently obtained $1 million in new financing, revenues to be generated by
the automated litigation support services of Litidex(R) will be critical in
providing the necessary funds to continue company operations and to execute the
business plan of ITIS. While management believes that such revenues will be
adequate to fund company operations, it is possible that such revenues may not
be sufficient to meet company needs. If this should be the case, management
plans to continue to utilize additional loans from Mr. Carr (president and
chairman of the board of directors of ITIS) and other directors and investors as
long as funds from these sources remain available. If adequate funding from the
operations of Litidex(R) or other sources is not available, ITIS may not be able
to stay in business.

We continue to reduce administrative costs and have implemented plans to
increase the revenue of National Law Library through increased marketing and
increases in prices. Litidex(R), our litigation support subsidiary, has several
new litigation support contracts in negotiations. Management's decisions to
dispose of Compass Data Systems and Venco Compliance (see Notes 6 and 12) will
have an immediate positive effect on our cash flow. While many factors can
impact


                                       26
<PAGE>


future operations and these improvements cannot be assured of success, the
management of ITIS intends to take all actions deemed prudent and necessary.


ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

ITIS is exposed to interest rate risk as a result of the existing financing
arrangements with various lenders as well as the risk that additional financing
will be required. The interest rate that ITIS will be able to obtain on such
financing will depend, among other things, on the financial and operational
condition of ITIS and external market conditions at the time such financing is
sought.



                                       27
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS


On January 26, 2001, in order to protect ITIS and its stockholders, ITIS
(formerly Internet Law Library) filed a lawsuit in United States District Court
for the Southern District of Texas, Houston Division, against Southridge Capital
Management and several other defendants, including Cootes Drive LLC, an alleged
"straw man," for damages resulting from alleged stock manipulation, federal
securities law violations, civil RICO, fraud, violations of Texas securities
laws and other Texas statutes, and conspiracy. The case also alleges
misrepresentations by co-conspirators in connection with certain funding
transactions by the defendants with ITIS. All defendants filed a joint motion to
transfer this case to New York to be consolidated with the lawsuit filed against
us as described below. The United States District Judge granted this motion and
the case has been transferred to the Southern District of New York. We intend to
prosecute the case vigorously. Our litigation counsel has advised us that the
case is not sufficiently advanced to evaluate the outcome, and that resolution
of the suit is not anticipated in the short term.

On February 5, 2001, Cootes Drive LLC filed a suit against ITIS in the Southern
District of New York alleging breach of one of the financing agreements with us
for failure to honor a conversion of its preferred shares to common stock. The
suit seeks monetary damages of $10,000 per day and seeks to compel ITIS to issue
shares of common stock to Cootes Drive LLC. ITIS filed an answer to this
lawsuit. Cootes Drive LLC filed a motion requesting leave to amend their
complaint in order to add allegations that ITIS is in default on a $500,000
promissory note in favor of Cootes Drive LLC (the alleged default occurring
after the filing of ITIS's suit against Cootes Drive LLC and others); that ITIS
has not honored a notice of redemption of preferred shares held by Cootes Drive
LLC in the amount of $2,214,012 (allegedly occurring after the filing of ITIS's
suit against Cootes Drive LLC and others); and that ITIS defrauded Cootes Drive
by failing to disclose material information with respect to the background of a
key officer at ITIS. The United States District Judge granted this motion, and
the suit has been amended. ITIS's answer was timely filed on July 20, 2001. The
preferred shares and the associated funding transactions at issue are the
subject matter of ITIS's suit against Southridge Capital Management and others.
ITIS intends to defend this case vigorously. Litigation counsel has advised us
that the case is not sufficiently advanced to evaluate the outcome, and that
resolution of the suit is not anticipated in the short term.

On June 4, 2001, Cootes Drive LLC filed a suit against certain directors of ITIS
on behalf of itself as a holder of preferred stock and allegedly derivatively on
behalf of ITIS, alleging that the directors breached their fiduciary duty to the
stockholders by approving repayment in common stock of loans made to ITIS by its
directors. The lawsuit asserts that actions of the directors of ITIS will dilute
the potential stock ownership interest of Cootes Drive through a series of
self-interested convertible loans. This suit was filed in the Court of Chancery
of Delaware in and for New Castle County. ITIS intends to vigorously defend this
suit, and asserts that the directors would not have had to lend money to ITIS
but for the fraudulent and manipulative acts of Cootes Drive and its
co-conspirators. ITIS further asserts that the price at which any such investor
loans can be converted to stock is the same price at which Cootes Drive LLC
converted its preferred stock. On or about June 8, 2001, Cootes Drive amended
its suit, requesting that the court enjoin defendants from converting loan
amounts into ITIS stock, stay discovery, rescind the loan agreements, and impose
a constructive trust over the loan agreements and shares. On June 28, 2001, the
Court refused to stay discovery and ordered that any discovery be coordinated
with the New York action. The Court further ruled that the fundamental issues
between the parties are



                                       28
<PAGE>

those in the cases in United States District Court. ITIS has filed an affidavit
with the court stating that any stock issued in repayment of loans made by the
directors/investors would be restricted stock that would not be eligible for
sale before March 8, 2002. ITIS is represented by Mr. David J. Margules of the
Wilmington, Delaware firm of Bouchard, Margules & Friedlander, and Mr. Kurt
Hayman of the Bayard Firm of Wilmington, Delaware represents the directors.

John M. O'Quinn, our Texas-based litigation counsel, has agreed to represent
ITIS and our directors, if necessary, in all of these lawsuits on a 50%
contingent fee basis with his law firm paying all expenses of the litigation.
The fee will be calculated after all expenses have been reimbursed to Mr.
O'Quinn's law firm.

On October 2, 2001, Dominion Digital, Inc. sued National Law Library, a wholly
owned subsidiary of ITIS, in Charlottesville, Virginia. The suit alleges that
National law Library owes the plaintiff $30,719.03 for consulting services and
expenses. Counsel in Virginia has answered for National Law Library. The suit is
too recent for an evaluation of the claim by counsel.


ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

During the three months ended September 30, 2001, ITIS issued and sold
unregistered shares of its common stock to the persons described below:


      1.    In September 2001, we issued 47,139 shares of our common stock to a
            vendor as consideration for insurance coverage.


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits


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

2.1              Agreement and Plan of Reorganization dated March 25, 1999,
                 between Planet Resources, National Law Library and the
                 stockholders of National Law Library (incorporated by reference
                 to Exhibit A to ITIS's Form 8-K filed on April 2,
                 1999).

2.2              First Amendment to Agreement and Plan of Reorganization dated
                 as of March 30, 1999, between Planet Resources, National Law
                 Library and the stockholders of National Law Library
                 (incorporated by reference to Exhibit 2.2 to ITIS's Form 10-K
                 filed on October 13, 1999).

2.3              Agreement and Plan of Distribution dated as of March 25, 1999,
                 between Planet Resources, New Planet Resources, Inc. and
                 National Law Library (incorporated by reference to Annex B to
                 ITIS's Information Statement Pursuant to Section 14(c) of the
                 Securities Exchange Act of 1934 filed on April 19, 1999).

2.4              Contract for Sale of Stock, dated November 8, 1999, by and
                 between John R. Marsh, Ronald W. Hogan, and Charles E. Bowen,
                 Jr., as Sellers, and ITIS as Buyer (incorporated by reference
                 to Exhibit 2.1 to Internet Law's Form 8-K filed on November 30,
                 1999).

2.5              Option Agreement to Purchase Stock, dated November 8, 1999, by
                 and between ITIS as Seller, and Ronald W. Hogan, as Optionee
                 (incorporated by reference to Exhibit 2.2 to ITIS's Form 8-K
                 filed on November 30, 1999).


                                       29
<PAGE>

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

2.6              Option Agreement to Purchase Stock, dated November 8, 1999, by
                 and between ITIS as Seller, and Charles E. Bowen, Jr., as
                 Optionee (incorporated by reference to Exhibit 2.3 to ITIS's
                 Form 8-K filed on November 30, 1999).

2.7              Option Agreement to Purchase Stock, dated November 8, 1999, by
                 and between ITIS as Seller, and John R. Marsh, as Optionee
                 (incorporated by reference to Exhibit 2.4 to ITIS's Form 8-K
                 filed on November 30, 1999).

2.8              Contract for Sale of Stock, dated December 8, 1999, by and
                 between David P. Harriman, Andrew Wyszkowski, Eugene Meyung,
                 Suzanne Meyung, and Christina Brown, as Sellers, and ITIS as
                 Buyer (incorporated by reference to Exhibit 2.7 to ITIS's Form
                 8-K filed December 23, 1999).

2.9              Stock Exchange Agreement by and among ITIS and the Shareholders
                 of ITIS relating to the acquisition of all of the outstanding
                 stock of ITIS dated April 30, 2000 (incorporated by reference
                 to Exhibit 2.9 to ITIS's Form 10-K/A filed on May 19, 2000).

2.10             Stock Purchase Agreement by and between ITIS and Jeremiah Kane,
                 dated July 27, 2000, as amended by that amendment dated
                 effective October 1, 2000 (incorporated by reference to Exhibit
                 2.10 to ITIS's Form 8-K filed with the SEC on October 16,
                 2000).

2.11             Stock Purchase Agreement by and between ITIS and John McHugh,
                 dated July 27, 2000, as amended by that amendment dated
                 effective October 1, 2000 (incorporated by reference to Exhibit
                 2.11 to ITIS's Form 8-K filed with the SEC on October 16,
                 2000).

2.12             Stock Purchase Agreement by and between ITIS and Jack Ben Ezra,
                 dated July 27, 2000, as amended by that amendment dated
                 effective October 1, 2000 (incorporated by reference to Exhibit
                 2.12 to ITIS's Form 8-K filed with the SEC on October 16,
                 2000).

2.13             Stock Exchange Agreement by and among ITIS and all of the
                 shareholders of Venco Compliance, Inc., a Texas corporation,
                 dated effective October 1, 2000 (incorporated by reference to
                 Exhibit 2.13 to ITIS's Form 8-K filed with the SEC on October
                 16, 2000).

2.14             Amended and Restated Agreement and Plan of Distribution dated
                 as of March 13, 2001, between Planet Resources, National Law
                 Library and the stockholders of National Law Library
                 (incorporated by reference to Exhibit 2.14 to ITIS's Form 10-K
                 filed with the SEC on April 17, 2001)

3.1              Amended and Restated Certificate of Incorporation of ITIS
                 (incorporated by reference to the Annex A of ITIS's Definitive
                 Proxy Statement on Schedule 14A filed on January 31, 2000).

3.2              Bylaws of Internet Law, as amended (incorporated by reference
                 to Exhibit 3.2 to Company's Form 10-K filed on October 13,
                 1999).


                                       30

<PAGE>

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

3.3              Certificate of Designation for ITIS's 5% Series A Convertible
                 Preferred Stock (incorporated by reference to Exhibit 3.3 to
                 Form 10-K/A filed on May 19, 2000).

3.4              2001 Executive Stock Option Plan dated effective March 15, 2001
                 (incorporated by reference to Exhibit 4.4 to ITIS's
                 Registration Statement on Form S-8 filed on March 30, 2001).

10.1             Stock Option Agreement between ITIS and Hunter M. A. Carr
                 (incorporated by reference to Exhibit B to Schedule 13D filed
                 on October 12, 1999, by Hunter M. A. Carr).

10.2             Stock Option Agreement between ITIS and Jack I. Tompkins
                 (incorporated by reference to Exhibit B to Schedule 13D filed
                 on October 12, 1999, by Jack I. Tompkins).

10.3             Consulting Agreement between National Law Library and Castle
                 Development, Ltd. (incorporated by reference to Exhibit 4(A) to
                 ITIS's Registration Statement on Form S-8 filed on April 2,
                 1999).

10.4             Continuing Service Agreement between National Law Library and
                 ITIS, effective December 1, 1998 (incorporated by reference to
                 Exhibit 10.4 to ITIS's Form 10-K filed on October 13, 1999).

10.5             Management and Financial Services Agreement between National
                 Law Library and ITIS, effective March 1, 1999 (incorporated by
                 reference to Exhibit 10.5 to ITIS's Form 10-K filed on October
                 13, 1999).

10.6             Software Development and Consulting Agreement between National
                 Law Library and ITIS dated March 24, 1999 (incorporated by
                 reference to Exhibit 10.6 to ITIS's Form 10-K filed on October
                 13, 1999).

10.7             Option Agreement to Purchase Stock, effective March 30, 1999,
                 by and between ITIS and Jonathan Gilchrist (incorporated by
                 reference to Exhibit 10.7 to ITIS's Form 10-K filed on October
                 13, 1999).

10.8             Planet Resources 1999 Stock Option Plan (incorporated by
                 reference to Exhibit 10.1 to ITIS's Form 10-K/A filed on
                 October 28, 1999).

10.9             Planet Resources Employee Stock Purchase Plan (incorporated by
                 reference to Exhibit 10.2 to ITIS's Form 10-K/A filed on
                 October 28, 1999).

10.10            New Planet Resources, Inc. Stock Incentive Plan (incorporated
                 by reference to Exhibit 10.3 to ITIS's Form 10-K/A filed on
                 October 28, 1999).

10.11            Planet Resources 1999 Director Option Plan (incorporated by
                 reference to Exhibit 10.4 to ITIS's Form 10-K/A filed on
                 October 28, 1999).



                                       31
<PAGE>

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

10.12            Consulting and Option Agreement by and between ITIS, Frank
                 Fisher and Steve Tebo, dated January 22, 2000, as amended
                 (incorporated by reference to Exhibit 10.12 to ITIS's Form
                 10-K/A filed on May 19, 2000).

10.13            Convertible Preferred Stock Purchase Agreement by and among
                 ITIS and Cootes Drive LLC, dated May 11, 2000 (incorporated by
                 reference to Exhibit 10.13 to ITIS's Form 10-K/A filed on May
                 19, 2000).

10.14            Warrant to purchase 500,000 shares of ITIS's common stock
                 issued to Cootes Drive LLC, dated May 11, 2000 (incorporated by
                 reference to Exhibit 10.14 to ITIS's Form 10-K/A filed on May
                 19, 2000).

10.15            Registration Rights Agreement by and among ITIS and Cootes
                 Drive LLC, dated May 11, 2000 (incorporated by reference to
                 Exhibit 10.15 to ITIS's Form 10-K/A filed on May 19, 2000).



                                       32
<PAGE>

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

10.16            Warrant to purchase 200,000 shares of ITIS's common stock
                 issued to Aspen Capital Partners, Inc., dated May 19, 2000
                 (incorporated by reference to Exhibit 10.16 to ITIS's Form
                 10-K/A filed on May 19, 2000)

10.17            Securities Purchase Agreement by and between ITIS and Cootes
                 Drive LLC, dated November 20, 2000 (incorporated by reference
                 to Exhibit 10.16 to ITIS's Form S-1 filed on December 22, 2000)

10.18            Amended and Restated Registration Rights Agreement by and
                 between ITIS and Cootes Drive LLC, dated November 20, 2000
                 (incorporated by reference to Exhibit 10.17 to ITIS's Form S-1
                 filed on December 22, 2000)

10.19            Warrant to purchase 250,000 shares of ITIS's common stock
                 issued to Cootes Drive LLC, dated May 11, 2000 (incorporated by
                 reference to Exhibit 10.18 to ITIS's Form S-1 filed on December
                 22, 2000)

10.20            Warrant to purchase 250,000 shares of ITIS's common stock
                 issued to Cootes Drive LLC, dated November 20, 2000
                 (incorporated by reference to Exhibit 10.19 to ITIS's Form S-1
                 filed on December 22, 2000)

10.21            Minimum Commitment Warrant to purchase up to 100,000 shares of
                 ITIS's common stock issued to Cootes Drive LLC, dated November
                 20, 2000 (incorporated by reference to Exhibit 10.20 to ITIS's
                 Form S-1 filed on December 22, 2000)

10.22            Vesting Warrant to purchase 1,000 shares of ITIS's common stock
                 per $100,000 invested issued to Cootes Drive LLC, dated
                 November 20, 2000 (incorporated by reference to Exhibit 10.21
                 to ITIS's Form S-1 filed on December 22, 2000)

10.23            Convertible Promissory Note made by ITIS in favor of Cootes
                 Drive LLC in the principal amount of $500,000, dated December
                 5, 2000 (incorporated by reference to Exhibit 10.22 to ITIS's
                 Form S-1 filed on December 22, 2000)

10.24            Warrant to purchase 41,650 shares of ITIS's common stock issued
                 to Cootes Drive LLC, dated December 5, 2000 (incorporated by
                 reference to Exhibit 10.23 to ITIS's Form S-1 filed on December
                 22, 2000)

10.25            Side Letter Agreement dated December 5, 2000, by and between
                 ITIS and Cootes Drive LLC to enter into a convertible
                 Promissory Note financing arrangement for $500,000
                 (incorporated by reference to Exhibit 10.24 to ITIS's Form S-1
                 filed on December 22, 2000)

10.26            Consulting Agreement by and between Venco Compliance, Inc. and
                 Cathryn Tull d/b/a First Choice Consulting, dated October 1,
                 2000 (incorporated by reference to Exhibit 10.17 to ITIS's Form
                 8-K filed with the SEC on October 16, 2000).


10.27            Warrant to purchase 300,000 shares of ITIS's common stock
                 issued to James W. Christian dated February 22, 2001
                 (incorporated by reference to Exhibit 10.27 to ITIS's
                 Form 10-Q filed with the SEC on May 15, 2001).



                                       33
<PAGE>

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

16.1             Letter, dated April 5, 2000, from Harper & Pearson Company to
                 the Securities and Exchange Commission (incorporated by
                 reference to Exhibit 16.1 to ITIS's Form 8-K/A filed on April
                 5, 2000).

16.2             Letter, dated February 21, 2001, from Arthur Andersen LLP to
                 the Securities and Exchange Commission (incorporated by
                 reference to Exhibit 16.2 to ITIS's Form 8-K filed on February
                 23, 2001)



(b)   Reports on Form 8-K

      No reports on Form 8-K were filed during the quarter for which this report
      is filed.




                                       34
<PAGE>

                                   SIGNATURES


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



                                        ITIS INC.



November 19, 2001                       /s/ HUNTER M.A. CARR
                                        ----------------------
                                          Hunter M.A. Carr
                                          President and Chief Executive Officer

                                       /s/ JOANNA HOOVER
                                       -----------------------
November 19, 2001                         Joanna Hoover
                                          Principal Accounting Officer




                                       35