SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
               ---------------------------------------------------

                                   FORM 10-QSB

[X]        Quarterly Report under Section 13 or 15d of the Securities Exchange
           Act of 1934 for the quarterly period ended: June 30, 2002

[ ]        Transition report pursuant to Section 13 or 15d of the Securities
           Exchange Act of 1934 For the Transition period from

           ------------------------------ to ---------------------------

                         Commission file number: 1-12966

                                   INSCI CORP.
                     (FORMERLY INSCI-STATEMENTS.COM, CORP.)
             (Exact name of registrant as specified in its charter)

      DELAWARE                                     06-1302773
--------------------                            --------------------
(State of incorporation)                   (IRS employer identification number)

                          Two Westborough Business Park
                              Westborough, MA 01581
                    (Address of principal executive offices)

         Issuer's telephone number, including area code: (508) 870-4000

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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  __
     ---


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

TITLE OF EACH CLASS                        OUTSTANDING AUGUST 8, 2002
-------------------                        --------------------------
Common Stock, par value $.01                         52,761,299

Transitional Small Business Disclosure Format (check one)
Yes         No  X
     ----     -----



<PAGE>



                                   INSCI CORP.

                                      INDEX

PART I     FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheet as of June 30, 2002                  3

           Consolidated Statements of Operations for the Three Months      4
               Ended June 30, 2002 and 2001

           Consolidated Statements of Cash Flows for the Three Months      5
               Ended June 30, 2002 and 2001

           Consolidated Statement of Stockholders's Deficit for the        6
               Three Months Ended June 30, 2002

           Notes to Financial Statements                                   7

Item 2.    Management's Discussion and Analysis or Plan of Operation      11


PART II    OTHER INFORMATION

Item 1.    Legal Proceedings                                              14

Item 2.    Change in Securities                                           14

Item 3.    Defaults Upon Senior Securities                                14

Item 4.    Submission of Matters to a Vote of Security Holders            14

Item 5.    Other Information                                              14

Item 6.    Exhibits and Reports on Form 8-K                               14

               (a)  Exhibits.

                    Exhibit 99.1, Certification pursuant to 18 U.S.C. Section
                    1350 as adopted pursuant to Section 906 of the
                    Sarbanes-Oxley Act of 2002.

           Signature                                                      15





<PAGE>


<TABLE>
<CAPTION>



                                   INSCI CORP.
                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2002
                                   (UNAUDITED)
                    (in thousands, except per share amounts)


ASSETS
  Current assets:
<S>                                                                    <C>
    Cash                                                                    $    729
    Accounts receivable, net of allowance for doubtful accounts of $100        1,898
    Prepaid expenses and other current assets                                    295
                                                                            --------

        Total current assets                                                   2,922
  Property and equipment, net                                                    222
  Other assets                                                                   175
                                                                            --------

                                                                            $  3,319
                                                                            ========

LIABILITIES AND STOCKHOLDERS' DEFICIT
  Current liabilities:
    Accounts payable and accrued expenses                                   $  3,316
    Advances against receivables sold with recourse                            1,040
    Deferred revenue                                                           1,678
    Convertible debt                                                           2,795
                                                                            --------

        Total current liabilities                                              8,829
                                                                            --------
  Commitments and contingencies
  Series A Convertible Redeemable Preferred Stock, $.01 par value,
    authorized 4,308 shares: issued none                                         --
  Series B Convertible Redeemable Preferred Stock, $.01 par value,
    authorized 100 shares: issued none                                           --
  Stockholders' deficit:
    Convertible Preferred Stock, $.01 par value, authorized 5,592 shares:
      8% Convertible Redeemable Preferred Stock, 74 shares issued and
        outstanding, no liquidation preference
                                                                                   1
    Common Stock, $.01 par value, authorized 185,000 shares: issued and
      Outstanding 52,761 shares                                                  527
    Additional paid-in capital                                                47,018
    Accumulated deficit                                                      (53,056)
                                                                            --------

      Total stockholders' deficit                                             (5,510)
                                                                            --------

                                                                            $  3,319
                                                                            ========
</TABLE>



        THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.



                                       3

<PAGE>


<TABLE>
<CAPTION>

                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (UNAUDITED)
                    (in thousands, except per share amounts)

                                              2002        2001
                                              ----        ----

Revenue
<S>                                     <C>          <C>
  Product                                  $     793    $    936
  Services                                     1,477       1,549
                                           ---------    --------
    Total revenue                              2,270       2,485
                                           ---------    --------

Cost of revenue
  Product                                         65          32
  Services                                       333         459
                                           ---------    --------
    Total cost of revenue                        398         491
                                           ---------    --------
Gross profit                                   1,872       1,994
                                           ---------    --------

Expenses
  Sales and marketing                            510         623
  Product development                            447         593
  General and administrative                     537         803
                                           ---------    --------
                                               1,494       2,019
                                           ---------    --------

Operating income (loss)                          378         (25)

Interest expense, net                           (134)       (110)
                                           ---------    --------

Net income (loss)                          $     244    $   (135)
                                           =========    ========

Basic earnings (loss) per common share     $   0.005    $ (0.014)
                                           =========    ========

Diluted earnings (loss) per common share   $   0.003    $ (0.014)
                                           =========    ========

Weighted average shares outstanding:
  Basic                                       54,177      16,129
                                           =========    ========

  Diluted                                    102,751      16,129
                                           =========    ========

</TABLE>









       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.





                                       4
<PAGE>

<TABLE>
<CAPTION>


                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                    THREE MONTHS ENDED JUNE 30, 2002 AND 2001
                                   (UNAUDITED)
                    (in thousands, except per share amounts)

                                                      2002      2001*
                                                      ----      ----
Cash flows from operating activities:
<S>                                                 <C>      <C>
  Net income (loss)                                   $ 244    $(135)
  Reconciliation of net income (loss) to net cash
    used in  operating activities:
    Depreciation and amortization                        39       88
    Convertible debentures issued for services           75       30
    Stock issued for services                            --       20
    Changes in assets and liabilities:
      Accounts receivable                              (629)       6
      Prepaid expenses and other current assets        (169)     (66)
      Other assets                                       --       54
      Accounts payable and accrued expenses            (121)    (216)
      Deferred revenue                                  195       74
                                                      -----    -----

Net cash used in operating activities                  (366)    (145)
                                                      -----    -----

Cash flows from investing activities:
  Capital expenditures                                   (4)      (1)
  Proceeds from sale of fixed assets                     --       17
                                                      -----    -----

Net cash (used in) provided by investing activities      (4)      16
                                                      -----    -----

Cash flows from financing activities:
  Repayments on short term debt                        (304)    (130)
  Net advances (repayments) from sale
     of receivables                                     991     (149)
  Proceeds from convertible debt                         --      250
                                                      -----    -----

Net cash provided by (used in) financing activities     687      (29)
                                                      -----    -----

Net increase (decrease)  in cash                        317     (158)
Cash at beginning of period                             412      460
                                                      -----    -----

Cash at end of period                                 $ 729    $ 302
                                                      =====    =====

<FN>
  *  Reclassified for comparative purposes
</FN>
</TABLE>








       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.




                                       5


<PAGE>


<TABLE>
<CAPTION>



                                   INSCI CORP.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                    FOR THE THREE MONTHS ENDED JUNE 30, 2002
                                   (UNAUDITED)


                                                                                             Additional      Accum-
                                            Preferred Stock             Common Stock          Paid-in        ulated
                                           Shares       Amount      Shares       Amount      Capital        Deficit        Total
                                       -------------- ---------- ------------- ----------- ------------- ------------- -------------

<S>                                  <C>            <C>           <C>        <C>         <C>             <C>             <C>
BALANCE, MARCH 31, 2002                      80        $  1          52,647    $   526     $  47,019       $(53,300)       $(5,754)

  8% preferred stock conversion to
    common stock                            (6)           -             114          1            (1)            --             --
Net income                                   -            -               -          -            -             244            244

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

BALANCE, JUNE 30, 2002                      74         $  1          52,761    $   527     $  47,018       $(53,056)       $(5,510)

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




</TABLE>




























       THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED
                             FINANCIAL STATEMENTS.






                                       6

<PAGE>




                                   INSCI CORP.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



NATURE OF BUSINESS AND BASIS OF PRESENTATION

           The consolidated financial statements included in this report have
been prepared by INSCI Corp., (the "Company" or "INSCI"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission
regarding interim financial reporting. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
condensed or omitted pursuant to such rules and regulations. However, the
Company believes that the disclosures contained herein are adequate to make the
information presented not misleading. The financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-KSB for the fiscal year ended March 31, 2002.
The results of the three months ended June 30, 2002 may not be indicative of the
results that may be expected for the year ended March 31, 2003.

           INSCI Corp., formerly known as insci-statements.com, corp. ("INSCI")
develops and provides software for electronic document distribution, storage and
presentment.

           The accompanying consolidated financial statements have been prepared
in conformity with generally accepted accounting principles, which contemplate
continuation of the company as a going concern. The company, however, has
sustained operating losses in prior years and has a working capital deficit and
an accumulated deficit as of June 30, 2002, which creates uncertainty about the
Company's ability to continue as a going concern. The Company's ability to
continue operations as a going concern and to realize its assets and to
discharge its liabilities is dependent upon obtaining additional financing
sufficient for continued operations, its ability to settle claims from creditors
as well as the achievement and maintenance of a level of profitable operations.
Management believes that the current business plan if successfully implemented
may provide the opportunity for the Company to continue as a going concern. The
consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

           In the opinion of the management of the Company, the accompanying
unaudited financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary to present fairly the financial position
of the Company as of June 30, 2002 and the results of operations and cash flows
for the three months ended June 30, 2002 and 2001.

           The accompanying consolidated financial statements for the three
months ended June 30, 2002 and 2001 include the operations of INSCI and its
wholly-owned subsidiary, Lognet 2000, Inc. ("Lognet"). The consolidated
financial statements also include the Company's wholly-owned subsidiaries,
InfiniteSpace.com, Corp. ("InfiniteSpace"), The Internet Broadcasting Company,
Inc. ("IBC"), and INSCI (UK) Limited. which are no longer active effective with
the end of the second quarter of fiscal 2001. All significant intercompany
transactions and balances have been eliminated in the preparation of these
financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

           In July 2001, the FASB issued SFAS No. 141, "Business Combinations,"
and SFAS No. 142, "Goodwill and Other Intangible Assets." Under these new
standards, all acquisitions subsequent to June 30, 2001 must be accounted for
under the purchase method of accounting, and purchased goodwill is no longer
amortized over its useful life. Rather, goodwill will be subject to a periodic
impairment test based upon its fair value. In fiscal 2002 the Company adopted
this statement which did not impact the consolidated results of operations,
financial position or cash flows.

           In June 2001, the FASB issued SFAS No. 143, "Accounting for Assets
Retirement Obligations" ("SFAS 143"). SFAS 143 established accounting standards
for recognition and measurement of a liability for the cost of asset retirement
obligations. Under SFAS 143, the costs of retiring an asset will be recorded as
a liability when the retirement obligation arises, and will be amortized to
expense over the life of the assets. The Company is required





                                       7



<PAGE>



to adopt this statement no later than January 1, 2003 and does not expect it to
have a material impact on its consolidated financial statements.

           In October 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment of Disposal of Long-Lived Assets ("SFAS 144"). SFAS 144 addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets and discontinued operations. The Company is currently evaluating the
impact of these pronouncements to determine the effect, if any, they may have on
the consolidated financial position and results of operations. The Company
adopted this statement on April 1, 2002 with no material impact on our
consolidated financial statements.

EARNINGS (LOSS) PER COMMON SHARE

           Basic earnings (loss) per common share was computed by dividing net
income (loss) applicable to common shares by the weighted average number of
common shares outstanding during the period. Diluted earnings (loss) per common
share was calculated by dividing net income by the sum of the weighted average
number of common shares outstanding plus all additional common shares that would
have been outstanding if potentially dilutive common shares had been issued. For
the three months ended June 30, 2002, approximately 9.9 million shares from
stock options, warrants and convertible securities were excluded because their
exercise price exceeded market value. For the three months ended June 30, 2001,
8.9 million stock options, warrants and convertible securities were excluded due
to their anti-dilutive effect.

<TABLE>
<CAPTION>


The income (loss) used in determining basic and diluted                                      THREE MONTHS ENDED
  earnings (loss) per share consisted of the following:                                           JUNE 30,
                                                                                           2002             2001
                                                                                       ------------- -- --------------
BASIC
<S>                                                                                  <C>               <C>
     Net income (loss)                                                                  $   244           $     (135)
     Preferred Stock Dividend                                                                -                   (89)
                                                                                       -------------    --------------
                                                                                        $   244           $     (224)
                                                                                       =============    ==============

DILUTED
     Net income (loss)                                                                  $   244           $     (135)
     Interest expense for Convertible debt with Series B
       Convertible Redeemable Preferred Stock                                                27                  -
     Preferred Stock Dividend                                                                -                   (89)
                                                                                       -------------    --------------
                                                                                        $   271          $      (224)
                                                                                       =============    ==============

A reconciliation from the number of shares used in the basic earnings (loss) per
  share computation to the number of shares used in the diluted earnings per
  share computation is as follows:

Weighted average shares of common stock outstanding
  during the period - Basic                                                              54,177               16,129
Weighted average common equivalent shares due to stock
  options and warrants                                                                      -                  -
Convertible debt with Series A Convertible Redeemable
  Preferred Stock                                                                           -                  -
Convertible debt with Series B Convertible Redeemable
  Preferred Stock                                                                        48,574                -
                                                                                       -------------    --------------
Weighted average shares of common stock outstanding                                     102,751               16,129
                                                                                       =============    ==============


</TABLE>


SEGMENT REPORTING AND SIGNIFICANT CUSTOMERS

           For the three months ended June 30, 2002, sales to two of our
customers represented 16% and 14% of total revenues. For the three months ended
June 30, 2001, INSCI received 20% and 7%, respectively, of its total revenues
from these customers. These two customers and another customer accounted for
31%, 10% and 22%,






                                       8



<PAGE>





respectively, of the Company's accounts receivable at June 30, 2002. At June 30,
2001, these customers accounted for 24% and 24%, respectively, of the Company's
accounts receivable. A decline in revenues from either of these customers in
future quarters could materially affect the revenues, operating results and
liquidity of the Company.

The Company operates as a single reportable segment as a developer and seller of
software for electronic document distribution, storage and presentment.

Revenue was derived from customers in the following geographic areas (in
thousands)

                                      THREE MONTHS ENDED JUNE 30,
                                     2002                     2001
                             -------------------- --- -------------------

North America                            $ 2,042                 $ 2,187
Europe                                       100                     174
Other                                        128                     124
                             --------------------     -------------------
                                         $ 2,270                 $ 2,485
                             ====================     ===================

ADVANCES AGAINST RECEIVABLES SOLD WITH RECOURSE

           During May 2002, the Company entered into an agreement with a
commercial financing company, which provides for the sale of all of the eligible
domestic accounts receivable of the Company with recourse. Pursuant to the terms
of the agreement, the Company will receive 80% of the face amount of an accepted
account and will be charged a commission equal to 2.25% of the accepted amount.
The Company granted to the financing company a security interest in all of the
Company's assets and accounts receivable. The Company agreed upon an early
termination arrangement of a prior financing agreement so that it could enter
into this new agreement.

           As part of this new financing arrangement, the Company was required
to payoff its loan in full to the Pennsylvania Business Bank in the sum of
$285,000.

CONVERTIBLE DEBT

           During June 2001, the Company entered into an Investment Agreement
("Agreement") with Selway Partners, LLC ("Selway") an affiliate of the Company.
The Agreement provides up to a sum of $700,000 of subordinated convertible
debentures (the "Debentures"). The Company has received $585,000 through June
30, 2002. The Debentures bear an annual interest rate of 13 percent payable in
cash or in additional Debentures and are convertible into Series B Convertible
Redeemable Preferred Stock (the "Series B Preferred") at a price of $10.00 per
share which are convertible into shares of common stock of the Company, as
defined in the agreement. The Debentures are secured by a junior lien on all of
INSCI's assets. Unless previously converted into shares of Series B Preferred,
principal and interest on the Debentures are payable at the earlier of June 15,
2002 or upon demand by the holder. An amendment to the Agreement extends the
maturity date of the Debentures to September 1, 2002.

           The independent members of the Board of Directors of the Company
authorized the Agreement, and the two Selway-designated Directors did not
negotiate the terms of the agreement or participate in the vote by the Company's
Board to proceed with the transaction.

           In connection with the Agreement, the Company amended its Management
Agreement with Selway Management, Inc. The amended management agreement reduced
the monthly management fee from $20,000 per month to $15,000 per month. The
monthly management fee is payable at the option of Selway in either cash or
additional subordinated convertible debentures ("Management Debentures"). The
Company satisfied $210,000 of management fees by the issuance of Management
Debentures to Selway Management, Inc. as of June 30, 2002. The Management
Debentures have terms similar to the Debentures except for the Series B
Preference Amount. The Management Debentures do not reduce the total amount
available to the Company under the Agreement.

           The Convertible Debt has a number of covenant requirements and also
contains certain registration rights. The Company has not complied with some of
these covenants and may be deemed in default. As of the date of these financial
statements, the Investors have not declared a default, but Selway has not waived
its rights, and there can be no assurance that the Company will not be declared
in default in the future. In the event a default was declared





                                       9


<PAGE>



which was uncured, the Investors could accelerate the principal and interest on
the Convertible Debt and further assert a claim against the security pledged by
the Company. In the event of a default, the entire $2,795,000 of convertible
debt, which includes the $2.0 million financing in November 2000, will be in
default as to the terms of the agreement. Accordingly, the Company has
classified the principal as current in the accompanying consolidated balance
sheet.

RELATED PARTY TRANSACTIONS

           The Company incurred $10,000 during the quarter ended June 30, 2002
in loan guarantee fees to Selway, a related party, in connection with the loan
from the Pennsylvania Business Bank ("Bank Loan"). As a result of the repayment
of the Bank Loan, the Company was able to discontinue its monthly payment
obligation in the sum of $5,000 per month to Selway. The Pennsylvania Business
Bank cancelled both the Selway guarantee and the personal guarantee of the loan
by the Company's Chairman, who had been a guarantor prior to his affiliation
with the Company.

<TABLE>
<CAPTION>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                                THREE MONTHS ENDED JUNE 30,
                                                                      2002        2001
                                                                      ----        ----

<S>                                                                <C>         <C>
Cash paid for interest                                               $   45      $   63
Noncash investing and financing activities:
  Common Stock issued for the conversion of 8% Convertible
    Redeemable Preferred Stock                                          114          -
  8% Convertible Redeemable Preferred Stock issued as dividends          -          383

</TABLE>

CONTINGENCIES

LEGAL PROCEEDINGS

           The Company is a defendant in an action commenced by one of its
vendors for non-payment in the aggregate amount of $588,000, which has been
included in accounts payable and accrued expenses. The Company is contesting
this action and is asserting a number of affirmative defenses to the action. A
resolution by settlement is being actively pursued. The outcome of these
proceedings cannot be determined with certainty.

           It is the opinion of management that an unfavorable final
determination of this action will have a material adverse effect on the
Company's business, financial position and operating results. The Company may
either voluntarily or involuntarily seek protection under the Federal Bankruptcy
law.

FINANCIAL STATEMENT PRESENTATION

           Certain amounts in the Statement of Cash Flows for the three months
ended June 30, 2001 have been reclassified to conform to the presentation for
the three months ended June 30, 2002.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

           The following discussion of management's analysis of operations for
the three months ("First Quarter of Fiscal 2003") ended June 30, 2002 and the
three months ("First Quarter of Fiscal 2002") ended June 30, 2001, and
discussion of financial condition at June 30, 2002, should be read in
conjunction with the financial statements and notes thereto contained elsewhere
in this report.



                                       10



<PAGE>

           We develop, sell, install and support scalable digital document
storage solutions that provide capture, warehousing and delivery functions via
networks or the Internet. Our products bridge back-office functions with
front-office mission critical and customer-centric applications by displaying
legacy-generated reports, bills, statements and other documents.

              Sales to end-users generally include software, systems
integration, implementation and customization services, and training.
ASP-enabling sales of our software and services also include integration and
implementation services, and training with the added opportunity to build a
recurring revenue stream by sharing the transaction revenue that our partners or
customers generate from their ASP operations. Post-installation maintenance and
customer support is available under the terms of a separate contract at an
additional charge.

           We distribute our products through a combination of a direct sales
force and through VARs, distributors and sales alliances with companies
including Unisys Corporation and Xerox Corporation. Revenue is net of discounts
and allowances given to third-party VARs and distributors.

           Our revenues fluctuate because of a variety of factors including the
amount of revenue generated from our alliances with other companies selling our
products, the length of the sales cycle for our products, demand for our
products and the introduction of new products and product enhancements.

           The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. As of June 30,
2002, the Company had an accumulated deficit of $53.1 million and a working
capital deficit of $5.9 million.

           Additional sources of capital, such as additional debt or equity
offerings, will be necessary to fund our currently proposed activities for
future periods. There can be no assurances, however, that we will be successful
in obtaining funds from any such sources or be qualified to draw down on the
convertible debt facility. There exists substantial doubt about the Company's
ability to continue as a going concern.

COMPARISON OF RESULTS OF OPERATIONS
-----------------------------------

           The following table sets forth, for the periods indicated, the
percentage relationship that certain items of the Company's results of
operations bear to total revenue:

<TABLE>
<CAPTION>

                                                THREE MONTHS ENDED
                                                     JUNE 30,
                                               2002             2001
                                                 %               %
Revenue
<S>                                       <C>               <C>
  Product                                        35                38
  Services                                       65                62
                                          ------------     -----------
    Total revenue                               100               100
                                          ------------     -----------
Cost of revenue
  Product                                          3                1
  Services                                        15               19
                                          ------------     -----------
    Total cost of revenue                         18               20
                                          ------------     -----------
Gross profit                                      82               80
                                          ------------     -----------
Expenses
  Sales and marketing                             22               25
  Product development                             20               24
  General and administrative                      23               32
                                          ------------     -----------
    Total expenses                                65               81
                                          ------------     -----------
Operating income (loss)                           17               (1)
Interest expense, net                             (6)              (4)
                                          ------------     -----------
Net income (loss)                                 11               (5)
                                          ============     ===========

</TABLE>





                                       11


<PAGE>

FIRST QUARTER OF FISCAL 2003 AS COMPARED TO FIRST QUARTER OF FISCAL 2002:

REVENUE

           We develop, sell, install and support electronic document repository
software with integrated internet, imaging, electronic distribution,
presentation and archive (COLD) software for the enterprise level (high volume
production) market. Sales to end-users generally include software, systems
integration and consulting services including customizaton, installation, and
training. Post-installation maintenance and customer support is available under
the terms of a separate contract at an additional charge. We sell our products
through a combination of a direct sales force and indirectly through VARs,
distributors and sales alliances with companies including Unisys Corporation and
Xerox Corporation. Revenue is net of discounts and allowances given to third
party VARs and distributors.

           Revenues for the First Quarter of Fiscal 2003 totaled $2.3 million
and decreased by $215,000 (9%) compared to revenues of $2.5 million for the
First Quarter of Fiscal 2002. The decline was primarily due to a decline in
product revenues attributed to the change in general economic conditions over
the last year.

           For the First Quarter of Fiscal 2003 we received 16% and 14% of our
total revenues from two of our customers. For the First Quarter of Fiscal 2002
we received 20% and 7% of our total revenues from these customers. A decline in
revenues from either of these customers in future quarters could materially
affect the revenues, operating results and liquidity of the Company.

GROSS PROFIT

           Gross profit for the First Quarter of Fiscal 2003 was $1.9 million
and decreased $122,000 (6%) compared to gross profit of $2.0 million for the
prior year period. Gross margin improved from 80% for the First Quarter of
Fiscal 2002 to 82% for the current year period. The decline in gross profit is
directly related to the decline in revenue as previously noted.

SALES AND MARKETING

           Sales and marketing expenses for the First Quarter of Fiscal 2003
were $510,000, a decline of $113,000 (18%) from the prior year period expenses
of $623,000. This decrease reflects various cost reduction efforts enacted in
the latter part of the First Quarter of Fiscal 2002.

PRODUCT DEVELOPMENT

           Product development expenses declined $146,000 (25%) from the First
Quarter of Fiscal 2002 level of $593,000 to $447,000 in the current year period.
The decline was due to INSCI's reduced reliance on outside consultants and
professional services, as well as the cost reduction efforts enacted in the
latter part of the First Quarter of Fiscal 2002.

GENERAL AND ADMINISTRATIVE

           General and administrative expenses were $537,000 for the First
Quarter of Fiscal 2003, a decline of $266,000 (33%) from the prior year period.
The balance of the decline was primarily due to the various cost reduction
efforts enacted for Fiscal 2002, as well as a lower provision for doubtful
accounts and less reliance on consultants.

INTEREST EXPENSE, NET

           Interest expense for the First Quarter of Fiscal 2003 was $134,000,
an increase of $24,000 (22%) from the prior year period. This increase was due
to the higher level of borrowings in the current fiscal quarter.


                                       12



<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

           At June 30, 2002, the Company had $729,000 of cash and working
capital deficit of $5.9 million in comparison to $412,000 of cash and working
capital deficit of $6.2 million at March 31, 2002. Accounts receivable were $1.9
million at June 30, 2002 and $1.3 million at March 31, 2002.

The Company's cash flows are summarized below for the periods indicated: (in
thousands)

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED JUNE 30,
                                                                  2002                   2001
                                                                  ----                   ----
<S>                                                       <C>                   <C>
Cash provided by (used in)
  Operating activities                                          $(366)                $ (145)
  Investing activities                                             (4)                    16
  Financing activities                                            687                    (29)
                                                             ---------------       ----------------
    Net increase (decrease) in cash and cash equivalents        $ 317                 $ (158)
                                                             ===============       ================
Cash at end of period                                           $ 729                 $  302
                                                             ===============       ================
</TABLE>

           In May 2002, we entered into a new receivable financing arrangement
with Benefactor Funding Corp ("Benefactor"), whereas Benefactor agreed to
finance all eligible accounts receivable of the Company on a secured basis.
Pursuant to the terms of the agreement, the Company will receive 80% of the
factored receivables and be charged a commission of 2.25% of the factored
invoice. The factoring agreement is secured by the Company's assets and accounts
receivable.

           As of June 30, 2002 we have $8.8 million in liabilities and $3.3
million in assets for a net capital deficiency of $5.5 million. This net capital
deficiency, unless remedied, can result in us not being able to continue our
business operations. We believe that our current business plan, if successfully
implemented, may provide the opportunity for the Company to continue as a going
concern. However, in the event that satisfactory arrangements cannot be made
with creditors, we may be required to seek protection under the Federal
Bankruptcy law.

           There can be no assurance, assuming that INSCI successfully raises
additional funds or enters into a business alliance, that it will continue to
maintain profitability and positive cash flow. If additional funds from such
activities are not available, we will be required to significantly modify the
implementation and execution of our business plan and may not be able to
continue as a going concern or may be required to seek protection under the
Federal Bankruptcy law. Our new independent accountants have informed the
Company that they will issue an unqualified opinion for our fiscal year ended
March 31, 2002 with an explanatory paragraph discussing the existence of
substantial doubt about our ability to continue as a going concern. Our former
independent accountants for the prior fiscal year were Arthur Andersen LLP;
therefore, the Company, pursuant to SEC Release No. 33-8070, did not file
audited financial statements for the fiscal year ended March 31, 2002, but filed
unaudited financial statements as a part of its Form 10-KSB filed on July 15,
2002. It is anticipated that an amendment to Form 10-KSB with audited financial
statements will be filed prior to August 28, 2002.



"FORWARD-LOOKING" STATEMENTS UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT:

           This Quarterly Report contains statements which constitute
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended. These statements appear in a number of places in this Annual Report
and include all statements that are not statements of historical fact regarding
the intent, belief or expectations of INSCI and its management. These statements
are based upon a number of assumptions and estimates, which are subject to
significant uncertainties, many of which are beyond our control. Words such as
"may," "would," "could," "will," "expect," "anticipate," "believe," "intend,"
"plan" and "estimate" are meant to identify such forward-looking statements.
Such forward-looking statements are not guarantees and actual results may differ
materially from those expressed or implied by such forward-looking statements.
Factors that could cause actual results to differ materially include, but are
not limited to our ability to achieve or maintain growth or profitability, our
ability to execute our business strategy successfully, our ability to obtain
financing and to pay off our existing liabilities and fund our working capital
needs, our relationship with our existing lenders, our relationship with our
customers and suppliers, increased competition,





                                       13



<PAGE>






possible system failures and rapid changes in technology and other factors
discussed in this Quarterly Report and in our other filings with the Securities
and Exchange Commission.

QUARTERLY RESULTS:

           Quarterly revenues and results of operations may fluctuate as the
result of a variety of factors, including the lengthy sales cycle for our
products, the proportion of revenues attributable to software license fees
versus services, the amount of revenue generated by alliances with other
companies selling our products, demand for our products, the size and timing of
individual license transactions, the introduction of new products and product
enhancements by us or our competitors, changes in customer budgets, competitive
conditions in the industry and general economic conditions. Additionally, the
sale of our products generally involves a significant commitment of capital by
our customers and may be delayed due to time-consuming authorization procedures
within an organization. Other factors affecting our operating results include
our ability to design and introduce on a timely basis new products which compete
effectively on the basis of price and performance and which address customer
requirements, product obsolescence, technological changes, competition and
competitive pressures on price, the ability to hire and retain qualified
personnel and general economic conditions affecting the investment by potential
customers in technology based investments. There is no assurance that we can
maintain or increase our sales volume going forward or that we will be able to
achieve a profit in the marketing of our products.

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

ITEM 1.    LEGAL PROCEEDINGS

           The Company is a defendant in an action commenced on May 17, 2002 by
Key Corporate Capital (formerly Leasetec)., ("Leasetec") in Worcester Superior
Court, Docket No. 02-1047C. The Leasetec claim is for contracted lease payments
as well as an action in replevin for the leased equipment. This claim is for the
sum of $588,148.15 plus attorneys' fees and interest. The Company is contesting
the claim, and has asserted a number of affirmative defenses to the claim. A
resolution of the action by settlement is being actively pursued.

ITEM 2.  CHANGE IN SECURITIES

         This item is not applicable.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

         This item is not applicable.

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

         This item is not applicable.

ITEM 5. OTHER INFORMATION

         This item is not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS.

         Exhibit 99.1, Certification pursuant to 18 U.S.C. Section 1350 as
         adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(B)      REPORTS ON FORM 8-K.

          A Current Report of Form 8-K was filed by the Company on May 31,
          2002 dated May 17, 2002 which reported the Company entering into
          a new financing agreement with Benefactor Funding Corp. whereby
          all eligible domestic receivables will be financed on a secured
          basis.



                                       14



<PAGE>

          A Current Report of Form 8-K was filed by the Company on May 24,
          2002 dated May 20, 2002 which reported a change in the Company's
          certifying accountants from Arthur Andersen LLP to Goldstein and
          Morris Certified Public Accountants.











                                    SIGNATURE

     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.

                                                   INSCI CORP.

Date:  August 9, 2002                    By:       /S/ HENRY F. NELSON
                                                   ---------------------------
                                                   Henry F. Nelson
                                                   Chief Executive Officer,
                                                   President and
                                                   Chief Financial Officer









                                       15