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: December 31, 2003

[  ]     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.
             (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 FEBRUARY 10, 2004
-------------------                            -----------------------------
Common Stock, par value $.10                            5,992,287

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



<PAGE>




                                   INSCI CORP.

                                      INDEX


                                                                          PAGE
PART I   FINANCIAL INFORMATION

Item 1.   Financial Statements

Consolidated Balance Sheet as of December 31, 2003                          3

Consolidated Statements of Operations for the Three Months and
     Nine Months Ended December 31, 2003 and 2002                           5

Consolidated Statements of Stockholders' Deficit for the
     Nine Months Ended December 31, 2003                                    6

Consolidated Statements of Cash Flows for the Nine Months
     Ended December 31, 2003 and 2002                                       7

Notes to Consolidated Financial Statements                                  8

Item 2.   Management's Discussion and Analysis or Plan of Operation        16

Item 3.   Controls and Procedures                                          27


PART II  OTHER INFORMATION

Item 1.   Legal Proceedings                                                27

Item 2.   Change in Securities                                             28

Item 3.   Defaults Upon Senior Securities                                  29

Item 4.   Submission of Matters to a Vote of Security Holders              30

Item 5.   Other Information                                                30

Item 6.   Exhibits and Reports on Form 8-K                                 30

Signature                                                                  31

Certification pursuant to 18 U.S.C. Section 1350 as adopted
  pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                32


Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
  Section 906 of the Sarbanes-Oxley Act of 2002                            33






                                      -2-
<PAGE>
<TABLE>
<CAPTION>


                                   INSCI CORP.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                   (UNAUDITED)
                    (in thousands, except per share amounts)

                                     ASSETS

Current assets:
<S>                                                                       <C>
    Cash                                                                  $1,214
    Accounts receivable, net of allowance for
        doubtful accounts of $10                                           1,550
    Prepaid expenses and other current assets                                425
                                                                          ------

          Total current assets
                                                                           3,189

Property and equipment, net                                                  984
Goodwill                                                                   1,174
Other assets                                                                 141
                                                                          ------

                                                                          $5,488
                                                                          ======












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

</TABLE>


                                      -3-
<PAGE>
<TABLE>
<CAPTION>


                                   INSCI CORP.
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2003
                                   (UNAUDITED)
                    (in thousands, except per share amounts)


                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
<S>                                                                    <C>
    Accounts payable                                                   $    612
    Accrued expenses                                                      1,254
    Advances against receivables sold with recourse                         682
    Deferred revenue                                                      2,191
    Convertible debt, current portion                                       647
    Capital leases, current portion                                          88
                                                                       --------

          Total current liabilities                                       5,474
                                                                       --------

Long term liabilities:
    Long term convertible debt, net of current portion                    1,118
    Capital leases, net of current portion                                   61
                                                                       --------

          Total long term liabilities                                     1,179
                                                                       --------

Commitments and contingencies

          Total liabilities                                               6,653
                                                                       --------

Stockholders' deficit:
    Series A Convertible Preferred Stock, $.01 par value,
      authorized 2,500 shares: issued none                                 --
    Series B Convertible Preferred Stock, $.01 par value,
      authorized  4,317 shares: issued and outstanding 123                    1
    Series C Convertible Preferred Stock, $.01 par value,
      authorized 3,183 shares: issued and outstanding 1,804                  18
    8% Convertible Redeemable Preferred Stock, $.01 par value,
      originally authorized 3,192 shares: issued and outstanding 74           1
    Common stock, $.10 par value, authorized 185,000 shares:
      issued and outstanding 5,992                                          599
    Additional paid-in capital                                           52,548
    Accumulated deficit                                                 (54,332)
                                                                       --------

          Total stockholders' deficit                                    (1,165)
                                                                       --------

                                                                       $  5,488
                                                                       ========






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

</TABLE>






                                      -4-
<PAGE>

<TABLE>
<CAPTION>



                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                           (UNAUDITED) (in thousands,
                            except per share amounts)

                                             THREE MONTHS ENDED      NINE MONTHS ENDED
                                                 DECEMBER 31,           DECEMBER 31,
                                             2003         2002        2003        2002
                                           --------    --------    --------    --------
Revenue
<S>                                        <C>         <C>         <C>         <C>
  Product                                  $    603    $  1,191    $  2,153    $  3,005
  Services                                    1,626       1,340       3,944       4,076
                                           --------    --------    --------    --------

    Total revenue                             2,229       2,531       6,097       7,081
                                           --------    --------    --------    --------

Cost of revenue
  Product                                        34          24         115         111
  Services                                      743         290       1,428         946
                                           --------    --------    --------    --------

    Total cost of revenue                       777         314       1,543       1,057
                                           --------    --------    --------    --------

Gross profit                                  1,452       2,217       4,554       6,024
                                           --------    --------    --------    --------

Expenses
  Sales and marketing                           873         575       2,167       1,601
  Product development                           958         514       2,268       1,429
  General and administrative                    775         527       1,649       1,561
  Non-recurring items                          --          --           380        --
                                           --------    --------    --------    --------


                                              2,606       1,616       6,464       4,591
                                           --------    --------    --------    --------

Operating income (loss)                      (1,154)        601      (1,910)      1,433

Interest expense, net                          (130)       (155)       (338)       (463)
                                           --------    --------    --------    --------

Income (loss) before extraordinary item      (1,284)        446      (2,248)        970

Extraordinary item - Gain from
  extinguishment of certain debt               --          --          --           192
                                           --------    --------    --------    --------

Net income (loss)                          $ (1,284)   $    446    $ (2,248)   $  1,162
                                           ========    ========    ========    ========

Basic earnings (loss) per common share
 Income (loss) before extraordinary item   $ (0.228)   $  0.085    $ (0.433)   $  0.184
 Extraordinary item                           0.000       0.000       0.000       0.035
                                           --------    --------    --------    --------

  Total                                    $ (0.228)   $  0.085    $ (0.433)   $  0.219
                                           ========    ========    ========    ========

Diluted earnings (loss) per common share
 Income (loss) before extraordinary item   $ (0.228)   $  0.047    $ (0.433)   $  0.109
 Extraordinary item                           0.000       0.000       0.000       0.019
                                           --------    --------    --------    --------

  Total                                    $ (0.228)   $  0.047    $ (0.433)   $  0.128
                                           ========    ========    ========    ========

Weighted average shares outstanding:
  Basic                                       5,992       5,276       5,583       5,276
                                           ========    ========    ========    ========

  Diluted                                     5,992      10,293       5,583       9,915
                                           ========    ========    ========    ========




              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>




                                      -5-
<PAGE>
<TABLE>
<CAPTION>



                                   INSCI CORP.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                   FOR THE NINE MONTHS ENDED DECEMBER 31, 2003
                                 (UNAUDITED)
                    (in thousands, except per share amounts)


                                                                                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, 2003                 197    $      2       5,276   $    527   $ 48,338   $(51,917)   $ (3,050)
  Issuance of Series C preferred
    shares                            1,804          18        --         --        3,482       --         3,500
  Issuance of common shares for
    purchase of net assets of
    WebWare Corporation                --          --           716         72        728       --           800
  Series B preferred dividend          --          --          --         --         --         (123)       (123)
  Series C preferred dividend          --          --          --         --         --          (44)        (44)
  Net (loss)                           --          --          --         --         --       (2,248)     (2,248)

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

BALANCE, DECEMBER 31, 2003            2,001    $     20       5,992   $    599   $ 52,548   $(54,332)   $ (1,165)
                                   ========    ========    ========   ========   ========   ========    ========


















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

</TABLE>


                                      -6-
<PAGE>

<TABLE>
<CAPTION>


                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                  NINE MONTHS ENDED DECEMBER 31, 2003 AND 2002
                                   (UNAUDITED)
                    (in thousands, except per share amounts)

                                                              2003        2002
                                                            -------     -------

Cash flows from operating activities:
<S>                                                         <C>         <C>
  Net income (loss)                                         $(2,248)    $ 1,162
  Reconciliation of net income (loss) to
    net cash (used in) provided by
    operating activities:
    Depreciation and amortization                               152         123
    Non-cash restructuring and other charges                   (180)       --
    Convertible debentures issued for services                 --           130
    Gain from extinguishment of certain debt                   --          (192)
    Changes in assets and liabilities:
      Accounts receivable                                       780        (601)
      Prepaid expenses and other current assets                  (6)        (77)
      Other assets                                               31           3
      Accounts payable and accrued expenses                    (153)       (173)
      Deferred revenue                                          (15)        440
                                                            -------     -------

Net cash (used in) provided by operating activities          (1,639)        815
                                                            -------     -------

Cash flows from investing activities:
  Purchase of net assets of WebWare Corporation                (627)       --
  Capital expenditures                                         (207)        (76)
                                                            -------     -------

Net cash used in investing activities                          (834)        (76)
                                                            -------     -------

Cash flows from financing activities:
  Proceeds from issuance of Series C preferred stock          3,500        --
  Repayments on long term convertible debt                     (252)       --
  Repayments on long term debt                                 --           (14)
  Repayments on capital leases                                  (33)       --
  Repayments on short term debt                                --          (304)
  Net advances (repayments) from sale of receivables           (176)        775
  Series B preferred dividends paid                            (123)       --
                                                            -------     -------

Net cash provided by financing activities                     2,916         457
                                                            -------     -------

Net increase in cash                                            443       1,196
Cash, beginning of period                                       771         412
                                                            -------     -------

Cash, end of period                                         $ 1,214     $ 1,608
                                                            =======     =======






              THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE
                       CONSOLIDATED FINANCIAL STATEMENTS.
</TABLE>


                                      -7-
<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 of America 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, 2003.
The results of the three months and nine months ended December 31, 2003 may not
be indicative of the results that may be expected for the year ending March 31,
2004.

         INSCI Corp., formerly known as insci-statements.com, corp. ("INSCI")
develops and markets certain software and services for the enterprise content
management (ECM) market. The Company's products are distributed on an
international basis.

         In the opinion of the management of the Company, the accompanying
unaudited financial statements reflect all adjustments (of a normal and
recurring nature) that are necessary to present fairly the financial position of
the Company as of December 31, 2003 and the results of operations for the three
and nine months ended December 31, 2003 and 2002 and cash flows for the nine
months ended December 31, 2003.

         The accompanying consolidated financial statements for the three months
and nine months ended December 31, 2003 and 2002 include the operations of INSCI
and its wholly-owned subsidiaries, WCORP, Inc. ("WCORP") and Lognet 2000, Inc.
("Lognet"). WCORP was established August 26, 2003 to acquire certain assets and
liabilities of WebWare Corporation ("WebWare"). WCORP acquired certain assets
and assumed certain liabilities of WebWare on September 5, 2003; and as such the
financial results of the Company include the results of WCORP from September 5,
2003 forward. Additional subsidiaries of the Company are InfiniteSpace.com,
Corp. ("InfiniteSpace"), The Internet Broadcasting Company, Inc. ("IBC") and
INSCI (UK) Limited, all of which are no longer active. All significant
intercompany transactions and balances have been eliminated in the preparation
of these financial statements.

RECENTLY ISSUED ACCOUNTING STANDARDS

         In December 2003, the Financial Accounting Standards Board ("FASB")
issued a revised FASB Interpretation ("FIN") No. 46, CONSOLIDATION OF VARIABLE
INTEREST ENTITIES. FIN No. 46R addresses consolidation by business enterprises
of variable interest entities and significantly changes the application of
consolidation policies to variable interest entities and thus, improves
comparability between enterprises engaged in similar activities when those
activities are conducted through variable interest entities. The Company does
not hold any variable interest entities.

         In May 2003, the FASB issued Statement of Financial Accounting
Standards ("SFAS") No. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. SFAS No. 150 requires that
certain financial instruments, which under previous guidance were accounted for
as equity, must now be accounted for as liabilities. The financial instruments
affected include mandatorily redeemable stock, certain financial instruments
that require or may require the issuer to buy back some of its shares in
exchange for cash or other assets and certain obligations that can be settled
with shares of stock. Subsequently, FASB Staff Position 150-3 indefinitely
deferred certain classification and measurement requirements of SFAS No. 150.
SFAS No. 150 is effective for all financial instruments entered into or modified
after May 31, 2003 and must be applied to existing instruments for the first
interim period beginning after June 15, 2003. The adoption of SFAS No.150 had no
effect on the Company's financial position, results of operations, or cash
flows.


                                      -8-
<PAGE>


ACQUISITION

         On September 5, 2003, the Company's wholly owned subsidiary, WCORP,
acquired certain assets and assumed certain liabilities of WebWare Corporation
("WebWare") from Diablo Management Group, as assignee for the benefit of
creditors of WebWare. The total purchase price was $1.3 million. Additionally,
the Company incurred closing costs of $127,000. The Company paid cash of
$500,000 and issued 716,204 shares of its common stock valued at $800,000. The
Company has granted registration rights for these shares, which are subject to a
lock up agreement. This transaction has been accounted for as a purchase and
accordingly, the operating results have been included in the Company's
consolidated results of operations from the date of acquisition. The allocation
of the purchase price is preliminary and subject to revision, which is not
expected to be material, based on the fair value of net assets acquired.

The components of the purchase price and allocation are as follows (in
thousands):

PURCHASE PRICE:
      Cash                                                                $  500
      716,204 shares of INSCI common stock                                   800
      Acquisition costs                                                      127
                                                                          ------

           Total consideration plus acquisition costs                     $1,427
                                                                          ======

ALLOCATION OF PURCHASE PRICE:
      Fair value of assets acquired, net of $739
          in liabilities assumed                                          $  253
      Purchase price in excess of fair value
          of net assets acquired allocated to goodwill                     1,174
                                                                          ------

           Total                                                          $1,427
                                                                          ======

         Goodwill, in accordance with SFAS No. 142, will be tested for
impairment annually and whenever there is an impairment indicator.

         Unaudited proforma operating results for the nine months ended December
31, 2003 and 2002 for the Company, assuming the purchase of the assets of
WebWare occurred on March 31, 2002, are as follows (in thousands):

                                                         NINE MONTHS ENDED
                                                            DECEMBER 31,
                                                        2003            2002


Revenue                                               $  6,686        $  7,336
Income (loss) from continuing operations                (4,531)         (3,005)
Basic and diluted loss per share from continuing
  operations                                            (0.812)         (0.570)

STOCKHOLDERS' DEFICIT

         There were 185,000,000 shares of common stock with a par value of $.01
authorized and 59,923,340 shares issued and outstanding at December 31, 2003. On
January 2, 2004, the Company effected a 1:10 reverse stock split resulting in a
nine-tenths reduction in the number of shares issued. After the reverse stock
split there were 5,992,287 shares of common stock outstanding with a par value
of $.10. The number of authorized shares of common stock was not affected. All
share and per share references for all periods presented have been restated to
reflect the reverse stock split.



                                      -9-
<PAGE>
PAGE>


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 (loss) 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 and nine months ended December 31, 2003,
approximately 10.7 million and 8.3 million, respectively, of shares from stock
options, warrants and convertible securities were excluded due to their
anti-dilutive effect. Additionally, for the three months and nine months ended
December 31, 2003, approximately 200,000 shares from stock options and warrants
were excluded because their exercise price exceeded market value. For the three
months and nine months ended December 31, 2002, approximately 700,000 shares
from stock options, warrants and convertible securities were excluded because
their exercise price exceeded market value.
<TABLE>
<CAPTION>

The income (loss) used in determining basic and
  diluted earnings per shares consisted of the          THREE MONTHS ENDED     NINE MONTHS ENDED
  following:                                               DECEMBER 31,           DECEMBER 31,
                                                         2003       2002        2003       2002
                                                        -------    -------    -------    -------
BASIC
<S>                                                     <C>        <C>        <C>        <C>
  Net income (loss)                                     $(1,284)   $   446    $(2,248)   $ 1,162
  Preferred Stock dividend                                  (83)      --         (167)      --
                                                        -------    -------    -------    -------

                                                        $(1,367)   $   446    $(2,415)   $ 1,162
                                                        =======    =======    =======    =======

DILUTED
  Net income (loss)                                     $(1,284)   $   446    $(2,248)   $ 1,162
  Interest expense for Convertible debt with Series B
    Convertible Redeemable Preferred Stock                 --           33       --          114
  Preferred Stock dividend                                  (83)      --         (167)      --
                                                        -------    -------    -------    -------

                                                        $(1,367)   $   479    $(2,415)   $ 1,276
                                                        =======    =======    =======    =======

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 (loss)   THREE MONTHS ENDED     NINE MONTHS ENDED
  per share computation is as follows:                       DECEMBER 31,         DECEMBER 31,
                                                          2003       2002       2003       2002
                                                         ------     ------     ------     ------
Weighted average shares of common stock
  outstanding during the period - Basic                   5,992      5,276      5,583      5,276
  8% Convertible Redeemable Preferred Stock                --          142       --          142
  Convertible debt with Series B Convertible
    Redeemable Preferred Stock                             --        4,875       --        4,497
                                                         ------     ------     ------     ------

                                                          5,992     10,293      5,583      9,915
                                                         ======     ======     ======     ======
</TABLE>

MAJOR CUSTOMERS

         For the nine months ended December 31, 2003, sales to two customers
accounted for approximately 17% and 11% of total revenue and accounted for 11%
and 12%, respectively, of the Company's accounts receivable at December 31,
2003. For the three months ended December 31, 2003, sales to one customer
represented approximately 15% of total revenue.




                                      -10-
<PAGE>


SEGMENT INFORMATION

         The Company operates as a single reportable segment as a developer and
distributor of software solutions for the enterprise content management (ECM)
market.

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

                                   THREE MONTHS ENDED          NINE MONTHS ENDED
                                       DECEMBER 31,              DECEMBER 31,
                                    2003         2002         2003         2002
                                    ----         ----         ----         ----

North America                      $1,921       $1,906       $5,301       $6,018
Europe                                190          335          421          583
Other                                 118          290          375          480
                                   ------       ------       ------       ------

                                   $2,229       $2,531       $6,097       $7,081
                                   ======       ======       ======       ======

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 the
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.

CONVERTIBLE DEBT

         The Series A Debentures bear an interest rate of 10% per annum with
principal and interest payments of $45,000 per month, $65,000 per month and
$80,000 per month in each successive twelve month period commencing December 1,
2002 and a final payment of approximately $308,000 due December 1, 2005. The
Series A Debentures are secured by a subordinated lien on all of the Company's
assets. Unless previously converted into shares of Series A Preferred, principal
and accrued interest on Convertible Debentures is payable by redemption at the
option of the investors at any time after March 31, 2004. As of December 31,
2003, the Convertible Debt is convertible into Series A Convertible Redeemable
Preferred Stock (the "Series A Preferred"), which is in turn convertible into
1,604,858 shares of the Company's Common Stock at a price of $1.10 per share.
This financing may result in dilution to INSCI's stockholders.

Long-term convertible debt as of December 31, 2003 is as follows (in thousands):

Series A Convertible Debentures                             $1,765
Less: current portion                                          647
                                                         ----------

                                                            $1,118
                                                         ==========

Future payments required under the terms of the long-term convertible debt are
as follows (in thousands):

YEAR ENDING MARCH 31,
2004                                                        $ 152
2005                                                          708
2006                                                          905
                                                         ---------

                                                           $1,765
                                                         =========






                                      -11-
<PAGE>


SERIES C CONVERTIBLE PREFERRED STOCK

         On December 31, 2003, the Company entered into an agreement with CSSMK,
LLC ("CSSMK"), an entity which is majority owned by Henry F. Nelson, the
Company's President and Chief Executive Officer, wherein CSSMK purchased 257,785
shares of Series C Convertible Preferred Stock ("Series C Preferred") for the
sum of $500,000 or $1.9396 per share. The 257,785 shares of Series C Preferred
are convertible on a 2:1 basis into 515,570 shares of common stock at the option
of the holder. In connection with this agreement, CSSMK entered in to a
Stockholder's Agreement with SCP Private Equity Partners II, LP ("SCP"). (See
Related Party Transactions)

         On September 5, 2003, the Company and SCP, a private equity fund,
entered into an agreement wherein SCP agreed to purchase 1,546,711 shares of
Series C Preferred in the Company at a price of $1.9396 per share for a total of
$3 million. SCP purchased 515,571 shares on closing for the sum of $1 million.
As of December 31, 2003, the Company had received the balance of $2 million from
SCP and had issued 1,031,140 shares of its Series C Preferred to SCP. The
1,546,711 shares of Series C Preferred are convertible on a 2:1 basis into
3,093,422 shares of common stock at the option of the holder. This conversion
may result in dilution to INSCI's stockholders.

         Series C Preferred provides for annual cumulative dividends at 8% of
the original issue price of $1.9396 per share, payable semi-annually in cash or
in additional shares of Series C Preferred at the company's option.

         Holders of shares of Series C Preferred shall be entitled to vote
equally with the shares of the Company's common stock and not as a separate
class, at any annual or special meeting of stockholders of the Company on the
following basis: each holder of shares of Series C Preferred shall be entitled
to such number of votes as shall be equal to the number of shares of Common
Stock into which the holder's Series C Preferred shares would convert
immediately after the close of business on the record date fixed for such
meeting. In addition, the holders of shares of Series C Preferred shall be
entitled as a separate single class to elect two members to the Board at each
election of directors.

         In the event of any liquidation, whether voluntary of involuntary,
before any distribution or payment shall be made to any holders of any junior
stock, the holders of Series C Preferred shall be entitled to be paid out of the
assets of the Company an amount per share equal to the greater of (a) 200% of
the Series C original issue price plus an amount equal to all accrued and unpaid
dividends or (b) the price per share a holder of Series C Preferred would have
been entitled to receive had all shares of outstanding preferred stock been
converted into common stock immediately preceding such liquidation. The Series C
Preferred provides for anti-dilution protection. All outstanding shares of
Series C Preferred may be redeemed, out of legally available funds, at the
request of holders of a majority in interest of the Series C Preferred on
September 1, 2009.

         As a part of the investment agreement with SCP for the purchase of the
Series C Preferred, the Company amended its agreements with Selway Partners LLC
("Selway") and CIP Capital LP ("CIP") with respect to the rights associated with
the Company's Series A and Series B convertible preferred stock. Selway is an
affiliate of SCP in that SCP is the majority shareholder of Selway and CIP is an
affiliate of SCP in that Mr. Winston Churchill is a managing partner in both.

SERIES B CONVERTIBLE PREFERRED STOCK

         On December 8, 2003, the Company filed an Amended and Restated
Certificate of Designation of the Preferred Stock in connection with the
designation of the rights and preferences for the Series B Convertible Preferred
Stock ("Series B Preferred"), which modified and clarified the rights and
preferences of the Company's Series B Preferred.

         Series B Preferred is convertible on a 70:1 basis. As of December 31,
2003, the Company has issued 123,344 shares of its Series B Preferred, which is
convertible into 8,634,080 shares of the Company's common stock. This modifies
the earlier designations in which Series B Preferred was convertible as follows:
(i) such number of shares of common stock as represents the "Current Value
Percentage" (as defined) of total issued and outstanding common stock as of the
date of conversion, plus (ii) such additional shares of common stock issuable
after the date of conversion as may be necessary to maintain such Current Value
Percentage upon the conversion or exercise of other convertible instruments.



                                      -12-
<PAGE>


         Series B Preferred provides for annual cumulative dividends at 1.915%
of the original issue price of $67.886 per share, payable monthly in cash or in
additional shares of Series C Preferred at the holder's option.

         Holders of shares of Series B Preferred shall be entitled to vote
equally with the shares of the Company's common stock and not as a separate
class, at any annual or special meeting of stockholders of the Company on the
following basis: each holder of shares of Series B Preferred shall be entitled
to such number of votes as shall be equal to the number of shares of Common
Stock into which the holder's Series B Preferred shares would convert
immediately after the close of business on the record date fixed for such
meeting. In addition, the holders of shares of Series B Preferred shall be
entitled as a separate single class to elect two members to the Board at each
election of directors.

         In the event of any liquidation, whether voluntary of involuntary,
before any distribution or payment shall be made to any holders of any junior
stock, the holders of Series B Preferred shall be entitled to be paid out of the
assets of the Company an amount per share equal to the greater of (a) 51.6% of
the Series B original issue price, which is equivalent to 350% of the original
investment, plus an amount equal to all accrued and unpaid dividends or (b) the
price per share a holder of Series B Preferred would have been entitled to
receive had all shares of outstanding preferred stock been converted into common
stock immediately preceding such liquidation. The Series B Preferred provides
for anti-dilution protection. All outstanding shares of Series B Preferred may
be redeemed, out of legally available funds, at the request of holders of at
least 25% of the Series B Preferred on March 31, 2006.

SERIES A CONVERTIBLE PREFERRED STOCK

         On December 8, 2003, the Company filed an Amended and Restated
Certificate of Designation of the Preferred Stock in connection with the
designation of the rights and preferences for the Series A Convertible Preferred
Stock ("Series A Preferred"), which clarified the rights and preferences of the
Company's Series A Preferred.

         The Company has not issued any shares of Series A Preferred. Series A
Preferred, when issued, would be convertible into common stock on a 1.181818:1
basis. Series A Preferred provides for annual cumulative dividends at an annual
floating rate equal to prime plus 2.5% of the original issue price of $1.30 per
share, payable at the end of each fiscal quarter in shares of Series A
Preferred.

         Holders of shares of Series A Preferred shall be entitled to vote
equally with the shares of the Company's common stock and not as a separate
class, at any annual or special meeting of stockholders of the Company on the
following basis: each holder of shares of Series A Preferred shall be entitled
to such number of votes as shall be equal to the number of shares of Common
Stock into which the holder's Series A Preferred shares would convert
immediately after the close of business on the record date fixed for such
meeting. In addition, the holders of shares of Series A Preferred shall be
entitled as a separate single class to elect three members to the Board at each
election of directors.

         In the event of any liquidation, whether voluntary of involuntary,
before any distribution or payment shall be made to any holders of any junior
stock, the holders of Series A Preferred shall be entitled to be paid out of the
assets of the Company an amount per share equal to the greater of (a) the Series
A original issue price plus an amount equal to all accrued and unpaid dividends
or (b) the price per share a holder of Series A Preferred would have been
entitled to receive had all shares of outstanding preferred stock been converted
into common stock immediately preceding such liquidation. The Series A Preferred
provides for anti-dilution protection. All outstanding shares of Series A
Preferred may be redeemed, out of legally available funds, at the request of
holders of a at least 25% of the Series A Preferred on a date that is five years
following the Company's first issuance of Series A Preferred Stock.



                                      -13-
<PAGE>


RELATED PARTY TRANSACTIONS

         Pursuant to the purchase by CSSMK of 257,785 shares of Series C
Preferred Stock for the sum of $500,000, CSSMK entered into a Stockholders
Agreement with SCP, wherein the transfer and assignment of its Series C
Preferred Stock is restricted pursuant to the terms of the Stockholders
Agreement, which also grants SCP rights of first refusal and certain voting
rights. CSSMK may be deemed an affiliate of SCP as a result of the agreement
entered into by and between CSSMK and SCP whereby CSSMK agrees to vote in
accordance with SCP on certain matters as stated in the agreement. Henry F.
Nelson, Chief Executive Officer and President of the Company, is a majority
owner of CSSMK.

         The Company incurred interest expense on its convertible debt during
the three months ended December 31, 2003 and 2002 of approximately $45,000 and
$94,000, respectively, and for the nine months ended December 31, 2003 and 2002
in the amounts of approximately $143,000 and $271,000, respectively. This debt
is held by Selway and CIP, both related parties. Selway is a related party of
INSCI in that two of INSCI's five board of directors' members are affiliated
with Selway. CIP is a related party of INSCI in that it is an affiliate of SCP,
which is a related party of INSCI. Payments on the convertible debt during the
three months and nine months ended December 31, 2003 totaled $155,000 and
$380,000, respectively, for principal and interest.

         The Company paid dividends in the amount of approximately $54,000 and
$122,000, respectively, to shareholders of its Series B Preferred during the
three months and nine months ended December 31, 2003. The Series B Preferred is
held by Selway and Selway Management, Inc. and CIP, all related parties. The
Company accrued dividends of $44,000 on its Series C Preferred, held by SCP and
CSSMK, related parties, for the period ended December 31, 2003. Accrued
dividends are included under the caption of accrued expenses as of December 31,
2003 in the accompanying consolidated balance sheet.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

                                                             NINE MONTHS ENDED
                                                               DECEMBER 31,
                                                            2003          2002
                                                           -------------------

Cash paid for interest                                     $  330       $  168
Noncash investing and financing activities:
  Common Stock issued in connection with
    the purchase of certain assets of WebWare                 800          --
  Capital lease obligations assumed with the
    purchase of certain assets of WebWare                     181          --
  Goodwill and other assets acquired in
    connection with the purchase of certain
    assets of WebWare                                       1,898          --
  Common Stock issued for the conversion
    of 8% Convertible
    Redeemable Preferred Stock                                 --          114
  Conversion of trade payable to long term debt                --          169

STOCK-BASED COMPENSATION

         The Company has elected to follow Accounting Principles Board Opinion
("APB") No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations in accounting for its employee stock options. Under APB No. 25,
when the exercise price of employee stock options is equal to or greater than
the market price of the underlying stock on the date of grant no compensation
expense is recorded. The Company discloses information relating to the fair
value of stock-based compensation awards in accordance with SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION. No stock options or warrants were
granted to employees during the nine months ended December 31, 2003 and 2002.



                                      -14-
<PAGE>


COMMITMENTS AND CONTINGENCIES

LEGAL PROCEEDINGS

         The Company is a defendant in an action commenced by one of its
customers for the return of certain pre-petition payments made prior to the
customer's bankruptcy petition in the amount of approximately $121,000. The
Company is contesting the action and is asserting a number of affirmative
defenses on its behalf. The outcome of these proceedings cannot be determined
with certainty. The Company does not believe that the resolution of this matter
will have a material adverse effect on the Company's consolidated financial
position or results of operations.

EMPLOYMENT AGREEMENTS

         On December 31, 2003, effective as of April 1, 2003, the Company
entered into an Amended and Restated Employment Agreement with Henry F. Nelson
for a period of three years. The Employment Agreement provides for a base salary
of $350,000 per annum and an annual bonus equal to 10% of the Company's
operating income for each fiscal year, as reported in its annual audited
financial statements, subject to adjustment for any non-recurring items as
determined by the Compensation Committee. The Company's Compensation Committee
and its Board of Directors approved the Employment Agreement.

         Additionally, the Company further agreed, subject to stockholders
approval to increase the number of shares reserved under the Company's 1997
Equity Incentive Plan to 3,000,000 shares of common stock, to grant stock
options to Mr. Nelson in the form of three successive grants aggregating
1,469,378 pre-split shares of the Company's Common Stock at an exercise price of
$1.00 per share as follows: (i) 489,793 shares fully vested on the date of the
grant;(ii) an option to purchase 489,792 shares, of which 163,264 shares shall
vest on each successive anniversary of the date of the grant for three years;
and (iii) an option to purchase 489,793 shares of Common Stock which shall
become fully vested upon the date the Common Stock has averaged a price of at
least $3.00 per share for any 60 consecutive day period as quoted in the Over
the Counter market.

LEASE COMMITMENTS

         On October 30, 2003, the Company entered into an operating lease for
office space, which expires in April 2011. The lease provides for base rent, as
well as a proportionate share of increases in real estate taxes and operating
expenses over base period amounts. The minimum monthly payments under the
operating lease commence as of February 2005. The Company will relocate to this
office space before March 31, 2004. Rent is expensed on a straight-line basis
over the term of the operating lease.

Minimum payments for the leased property for subsequent years are as follows (in
thousands):

YEAR ENDING MARCH 31,
2004                                              $       --
2005                                                      64
2006                                                     413
2007                                                     441
2008                                                     441
2009                                                     441
2010                                                     468
2011                                                     496
2012                                                      41
                                                 ------------

                                                      $2,805
                                                 ============



                                      -15-
<PAGE>


Minimum payments for subsequent years under the operating lease for its
currently occupied office space, which expires September 30, 2004, are as
follows (in thousands):

YEAR ENDING MARCH 31,
2004                             $    127
2005                                  254
                                 --------
                                 $    381
                                 ========

The Company sublets portions of its office space under sublease arrangements,
which expire September 30, 2004.

Minimum future sublease income for subsequent years is as follows (in
thousands):

YEAR ENDING MARCH 31,
2004                       $      39
2005                              78
                           ---------
                           $     117
                           =========

NON-RECURRING ITEMS

         For the nine months ended December 31, 2003, non-recurring charges
totaling $380,000 have been charged to operating results. These charges,
consisting primarily of severance, relocation and moving expenses, will be
incurred as part of a plan to realign the operations of the Company's newly
formed subsidiary's operations.

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

         The following discussion of management's analysis of operations for the
three months ("Third Quarter of Fiscal 2004") and nine months ("First Three
Quarters of Fiscal 2004") ended December 31, 2003 and the three months ("Third
Quarter of Fiscal 2003") and nine months ("First Three Quarters of Fiscal 2003)
ended December 31, 2002, and discussion of financial condition at December 31,
2003, should be read in conjunction with the financial statements and notes
thereto contained elsewhere in this report.

         INSCI is a leading provider of solutions to the enterprise content
management (ECM) market. INSCI's highly scalable solutions provide storage,
access and presentment for mission-critical documents, reports, statements,
e-mail and high value digital assets necessary for business functions or
regulatory compliance. The industry recognized highly scalable archive solution
supports high volume ingestion, digital asset preservation, and on-line
presentment and delivery functions via internal networks or via the World Wide
Web. With the addition of web-enabled capabilities, INSCI's customers can take
advantage of e-commerce to improve communication, customer satisfaction and
productivity while decreasing costs. For over ten years INSCI has been
recognized for its ability to capture and store high volumes of electronic
information. The Company recently acquired certain assets and liabilities of
WebWare, a leading provider of content management solutions for the digital
asset management (DAM) market. These advanced solutions offer broad management
capability for rich media content such as video, voice, audio, graphics and
related media.

         INSCI was originally founded to capture and preserve high volumes of
mission critical business information. The Company's product offering includes
web-based presentment capabilities for documents such as bank statements, 401(k)
statements, customer and vendor statements, explanation of benefits (EOB's) and
transaction confirmation documents. The Company has expanded its product
offerings to include e-mail archiving and notification capabilities as well as
the ability to capture, store and deliver high value digital assets such as
spreadsheets, word documents, presentations and schedules. This offers our
customers the ability to provide increased internal communication, productivity
improvements and improved customer satisfaction and communication. With the
addition of the WebWare ActiveMedia(TM) product offering the Company has
substantially expanded its digital archive and rich media asset management
capabilities and supports business efforts such as video and voice on demand,
product launches, global marketing efforts, rich asset management and brand
management.



                                      -16-
<PAGE>


         The ESP+(TM) archive solution provides a robust platform to meet the
demands of high-volume desktop and Internet-based content retrieval by thousands
of users. The ESP+(TM) Solution Suite is built on a three tier scalable
architecture and will support multiple platforms. Access to archived content is
offered through both Windows-client and browser-based desktop solutions.
Additionally, an industry-standard Java-based Application Program Interface
(API) offers seamless integration with third-party applications, such as
Websites, Customer Relationship Management (CRM), service providers, and
Healthcare Information Technology (HIT) providing a platform for expanded market
presence.

         ActiveMedia(TM) provides a secure, central repository where rich media
files such as images, documents, video, animation, voice and other formats of
rich media are required to be organized and stored, and may be delivered to
desktops, websites, print publications, video on demand as they are needed. The
application is offered as a standard licensed application and is also available
in a web based hosted environment on a subscription basis.. The flexible J2EE
based design offers a scaleable three-tier architecture that takes advantage of
industry standard Web Services description language and a standard operating
access protocol (SOAP) application program interface (API). The advanced
interoperability architecture offers substantially increased market
opportunities through the seamless integration with other third party
application services providers.

         Sales to end-users generally include software license, professional
services and maintenance contracts. Additionally, the ActiveMedia(TM) product is
offered under a web based hosting contract. ASP-enabling sales typically include
recurring revenues that are transaction based. As a long-standing provider of
advanced and cost-effective solutions, INSCI has licenses at more than 500
companies across a host of industries - including financial services,
telecommunications, insurance, utilities, manufacturing, healthcare, media,
pharmaceutical and global product marketing companies - enhancing their
bottom-line performance through highly-scalable fixed content and rich media
asset management and electronic presentment applications. Since the archive and
presentment solution is vertically non-specific, the Company's market
opportunity is broad. INSCI also markets and licenses products on an
international basis through its Alliance Partners. INSCI's strategic
relationships include Unisys Corporation, Xerox Corporation, EMC, PFPC and IFIN
Sistemi.

         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, seasonality, capital
spending trends, demand for our products, the introduction of new products and
product enhancements and general economic conditions.




                                      -17-
<PAGE>


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:

                                                   THREE MONTHS    NINE MONTHS
                                                      ENDED           ENDED
                                                   DECEMBER 31,     DECEMBER 31,
                                                   2003    2002    2003    2002
                                                     %       %       %       %
Revenues
  Product                                            27      47      35      42
  Services                                           73      53      65      58
                                                   ----    ----    ----    ----

    Total revenues                                  100     100     100     100
                                                   ----    ----    ----    ----
Cost of revenues
  Product                                             2       1       2       2
  Services                                           33      11      23      13
                                                   ----    ----    ----    ----

    Total cost of revenues                           35      12      25      15
                                                   ----    ----    ----    ----

Gross profit                                         65      88      75      85
                                                   ----    ----    ----    ----
Expenses
  Sales and marketing                                39      23      36      23
  Product development                                43      20      37      20
  General and administrative                         35      21      27      22
  Non-recurring item                               --      --         6    --
                                                   ----    ----    ----    ----

    Total expenses                                  117      64     106      65
                                                   ----    ----    ----    ----

Operating income (loss)                             (52)     24     (31)     20
Interest expense, net                                (6)     (6)     (6)     (7)
                                                   ----    ----    ----    ----

Income (loss) before extraordinary item             (58)     18     (37)     13
Extraordinary item                                 --      --      --         3
                                                   ----    ----    ----    ----

Net income (loss)                                   (58)     18     (37)     16
                                                   ====    ====    ====    ====




The following tables compare total revenues for the periods indicated (in
thousands):
<TABLE>
<CAPTION>

                                                    THREE MONTHS ENDED DECEMBER 31,
                                                    2003       2002           % CHANGE
                                                 -------------------------------------

<S>                                                 <C>          <C>            <C>
Product revenues                                    $ 603        $ 1,191        (49)%
Professional services                                 346            318          9
Maintenance and hosting contract revenues           1,280          1,022         25
                                                 ---------    -----------

      Total revenues                              $ 2,229        $ 2,531        (12)
                                                 =========    ===========


                                                     NINE MONTHS ENDED DECEMBER 31,
                                                    2003         2002        % CHANGE
                                                 -------------------------------------

Product revenues                                  $ 2,153          $ 3,005      (28)%
Professional services                                 670              874      (23)
Maintenance and hosting contract revenues           3,274            3,202        2
                                                 ---------    -------------

      Total revenues                              $ 6,097          $ 7,081      (14)
                                                 =========    =============

</TABLE>





                                      -18-
<PAGE>


THIRD QUARTER OF FISCAL 2004 AS COMPARED TO THIRD QUARTER OF FISCAL 2003:

REVENUES

         Revenues for the Third Quarter of Fiscal 2004 totaled $2.2 million and
decreased by $302,000 or 12% compared to revenues of $2.5 million for the Third
Quarter of Fiscal 2003. The current quarter revenues include $556,000 from
WCORP. Product revenues decreased by $588,000 or 49% to $603,000 in the Third
Quarter of Fiscal 2004 as compared to $1.2 million in the Third Quarter of
Fiscal 2003. Professional service revenues of $346,000 increased $28,000, or 9%,
in the Third Quarter of Fiscal 2004 as compared to $318,000 in the Third Quarter
of Fiscal 2003. Maintenance and hosting revenues increased $258,000, or 25%,
compared to the Third Quarter of Fiscal 2003. Maintenance contract revenues are
earned ratably over the term of the contract commencing upon receipt of payment
or when other acceptance is received. Hosting contract revenues are earned
ratably over the period invoiced, typically monthly or quarterly.

         For the Third Quarter of Fiscal 2004 we received 15% of our total
revenues from one customer. For the Third Quarter of Fiscal 2003 we received 27%
and 11% of our total revenues from two customers.

GROSS PROFIT

         Gross profit for the Third Quarter of Fiscal 2004 was $1.5 million and
decreased $765,000 or 35% compared to gross profit of $2.2 million for the prior
year period. The decline in aggregate gross profit is related to the decline in
product revenue as previously noted and the costs associated with the hosting
center. Gross margin decreased to 65% for the Third Quarter of Fiscal 2004 from
88% for the prior year period. The decrease in the gross margin percentage is
primarily attributable to a decrease in product sales, which contribute a higher
profit margin, and $446,000 in costs attributable to WCORP. The hosting center
operates at a lower gross margin percentage.

SALES AND MARKETING

         Sales and marketing expenses for the Third Quarter of Fiscal 2004 were
$873,000, an increase of $298,000 or 52% from the prior year period. The
increase reflects sales and marketing expenses attributable to WCORP of
$273,000.

PRODUCT DEVELOPMENT

         Product development expenses of $958,000 increased $444,000 or 86% from
the Third Quarter of Fiscal 2003. Development costs incurred by WCORP
contributed $357,000, or 80% of the increase. The increase is also reflective of
the Company's increased product development efforts for additional products for
the Enterprise Content Management (ECM) market.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses were $775,000 for the Third Quarter
of Fiscal 2004 as compared to $527,000 for the prior year period, an increase of
$248,000 or 47%. The portion of general and administrative expenses attributable
to WCORP was $227,000. General and administrative expenses, exclusive of WCORP,
increased by $21,000 for the Third Quarter of Fiscal 2004 as compared to the
prior year period.

INTEREST EXPENSE, NET

         Interest expense for the Third Quarter of Fiscal 2004 was $130,000, a
decrease of $25,000 or 16% from the prior year period. The decrease was due to
the lower level of borrowings in the current fiscal quarter as a portion of the
convertible debt was converted to Series B Convertible Redeemable Preferred
Stock as of March 31, 2003, as well as a lower interest rate on the refinanced
convertible debt.



                                      -19-
<PAGE>


FIRST THREE QUARTERS OF FISCAL 2004 AS COMPARED TO FIRST THREE QUARTERS OF
FISCAL 2003:

REVENUES

         Revenues for the First Three Quarters of Fiscal 2004 totaled $6.1
million and decreased by $984,000 or 14% compared to revenues of $7.1 million
for the First Three Quarters of Fiscal 2003. Product revenues decreased by
$852,000 or 28% to $2.2 million in the First Three Quarters of Fiscal 2004 as
compared to $3.0 million in the First Three Quarters of Fiscal 2003. Services
revenues decreased $132,000 or 3% from $4.1 million in the First Three Quarters
of Fiscal 2003 as compared to $3.9 million in the First Three Quarters of Fiscal
2004. Service revenues, exclusive of contract revenues, declined $204,000 or 23%
as the Company experienced a decline in large-scale conversion contracts
compared to the prior year period. Maintenance and hosting revenues increased
$72,000 or 2% due to the inclusion of WCORP revenue totaling $265,000, offset by
timing differences related to collection and revenue recognition. Maintenance
revenues are earned ratably over the term of the contract commencing upon
receipt of payment or when other acceptance is received. Hosting contract
revenues are earned ratably over the period invoiced, typically monthly or
quarterly.

         For the First Three Quarters of Fiscal 2004 we received 17% and 11% of
our total revenues from two of our customers. For the First Three Quarters of
Fiscal 2003 we received 17%, 11% and 10% of our total revenues from three of our
customers.

GROSS PROFIT

         Gross profit for the First Three Quarters of Fiscal 2004 was $4.6
million and decreased $1.5 million or 24% compared to gross profit of $6.0
million for the prior year period. The decline in aggregate gross profit is
related to the decline in revenue as previously noted and the inclusion of costs
associated with WCORP. Gross margin decreased to 75% for the First Three
Quarters of Fiscal 2004 from 85% for the prior year period. The decrease in the
gross margin percentage is primarily a result of lower product sales, which
contribute a higher profit margin, and the increase in cost of services as a
result of the addition of the costs of the hosting center, which operates at a
lower profit margin.

SALES AND MARKETING

         Sales and marketing expenses for the First Three Quarters of Fiscal
2004 were $2.2 million, an increase of $566,000 or 35% from the prior year
period. The increase reflects the Company's expanded sales effort and its
investments in marketing efforts to stimulate future sales as well as the
inclusion of sales and marketing expenses attributable to WCORP of $328,000.

PRODUCT DEVELOPMENT

         Product development expenses increased $839,000 or 59% from the First
Three Quarters of Fiscal 2003 level of $1.4 million to $2.3 million in the
current year period. The increase is reflective of the Company's increased
product development efforts in additional products for the Enterprise Content
Management (ECM) market and the establishment of a formalized quality assurance
department. The operations of WCORP contributed $443,000 for the period.

GENERAL AND ADMINISTRATIVE

         General and administrative expenses were $1.6 million for the First
Three Quarters of Fiscal 2004, an increase of $88,000 or 6% from the prior year
period. The operations of WCORP contributed $285,000 to General and
Administrative expenses. Total expenses, exclusive of WCORP, declined by
$197,000 compared to the prior period. The decrease is primarily attributable to
a $180,000 reduction in the reserve for restructuring expenses accrued in Fiscal
2001.



                                      -20-
<PAGE>


NON-RECURRING ITEMS

         Non-recurring items in the First Three Quarters of Fiscal 2004 total
$380,000 consisting of severance, relocation and moving expenses and other
charges to be incurred as part of a plan to realign the operations of the
Company's newly formed subsidiary's operations.

INTEREST EXPENSE, NET

         Interest expense for the First Three Quarters of Fiscal 2004 was
$338,000, a decrease of $125,000 or 27% from the prior year period. The decrease
was due to the lower level of borrowings in the current fiscal quarter as a
portion of the convertible debt was converted to Series B Convertible Redeemable
Preferred Stock as of March 31, 2003, as well as a lower interest rate on the
refinanced convertible debt and receivables financing.

LIQUIDITY AND CAPITAL RESOURCES

         As of December 31, 2003, the Company had $1.2 million of cash and
working capital deficit of $2.3 million in comparison to $1.6 million of cash
and working capital deficit of $4.8 million at December 31, 2002. As of March
31, 2003, the Company had $771,000 of cash and working capital deficit of $1.9
million. Accounts receivable were $1.5 million at December 31, 2003 and $2.1
million at March 31, 2003. For the period ended December 31, 2003, the days
sales outstanding (DSO) was 63 days compared to 88 days for the quarter ended
March 31, 2003 and 66 days for the prior year period.

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

                                                           NINE MONTHS ENDED
                                                              DECEMBER 31,
                                                         2003            2002
                                                         ----            ----
Cash provided by (used in)
  Operating activities                                 $(1,639)         $   815
  Investing activities                                    (834)             (76)
  Financing activities                                   2,916              457
                                                       -------          -------

Net increase in cash                                       443            1,196
Cash, beginning of period                                  771              412
                                                       -------          -------

Cash, end of period                                    $ 1,214          $ 1,608
                                                       =======          =======

         Net cash used in operating activities was $1.6 in the First Three
Quarters of Fiscal 2004 compared to net cash generated from operating activities
of $815,000 in the prior year period. The increased use of cash is primarily
due to the increase in operating expenses and reduced revenues.

         Net cash used in investing activities was $834,000 in the First Three
Quarters of Fiscal 2004 compared to $76,000 in the prior year period. The
increase in cash used primarily consists of $627,000 used for the purchase of
the WebWare assets.

         Net cash generated by financing activities was $2.9 million in the
First Three Quarters of Fiscal 2004 compared to net cash generated by financing
activities of $457,000 in the prior year period. The increase in cash provided
by financing activities was due to investments in the Company's Series C
Preferred Stock.



                                      -21-
<PAGE>


"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, 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 distributing our products, demand for our products and services, 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 and capital expenditures, 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, 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.

BUSINESS RISKS

         An investment in our common stock involves a high degree of risk. You
should consider carefully the following risks, and consult with your own legal,
tax and financial advisors.

WE RECENTLY COMPLETED AN ACQUISITION OF THE ASSETS OF A COMPANY WITH A HISTORY
OF OPERATING LOSSES:

         The company recently completed an acquisition of the assets of a
company with a history of operating losses and there is no assurance that the
Company will be successful in reducing such losses. Such losses for the year
ended December 31, 2002 were $8,796,000 and for the three months ended June 30,
2003 were $1,624,000. The extent to which such losses are not reduced would
represent a significant business risk to the Company.

THE MARKET FOR THE ACQUIRED PRODUCTS IS NOT ASSURED.

         The market for the digital asset market (DAM) is relatively limited at
the current time and characterized by evolving technology and erratic adoption
rates relative to vertical markets. Competitive performance within these markets
requires significant investment in product development and market awareness.
There is no assurance that such investments will yield increased revenues in the
immediate future.



                                      -22-
<PAGE>


WE HAVE A HISTORY OF LOSSES AND OUR ABILITY TO BE PROFITABLE DEPENDS ON A NUMBER
OF FACTORS THAT WE MAY BE UNABLE TO CONTROL.

         We have cumulative losses since our business began in 1989 and although
recently profitable, there is no guarantee we will maintain profitability. While
we reported our first two consecutive profitable fiscal periods for the fiscal
year ended March 31, 2002 and fiscal year ended March 31, 2003, we have reported
losses of $1,284 for the current quarter ended December 31, 2003. Our prior
financial performance was the result of a restructuring plan focused on a return
to the core operations of the business and a reduction in expenses. There can be
no assurance that the expense reductions that have been implemented are
sustainable over future periods or that revenues will increase.

OUR QUARTERLY OPERATING RESULTS MAY EXPERIENCE VARIABILITY

         Our quarterly sales and operating results have varied significantly and
may vary in the future as a result of several factors such as:

    o    Size and timing of software license orders
    o    Completion of backlog orders
    o    Acceptance and sign off of service contracts
    o    Market acceptance of existing products
    o    Expansion of market demand for rich media based products and services
    o    Seasonality
    o    Customer budgetary constraints and timelines
    o    Availability of embedded third party products or tool sets
    o    Availability of Alliance Partner products
    o    Financial condition of Alliance Partners
    o    Variations of Alliance Partner strategy
    o    Product introduction and acceptance
    o    Competitive pricing
    o    License revenues as a percentage of revenues
    o    Changes in product distribution channels
    o    Changes in sales force
    o    Variations in expense levels
    o    Change of business strategy
    o    Competition
    o    International exchange rates
    o    Changes in accounting pronouncements

         A significant amount of our license and service revenues are derived
from a limited number of customers. Such orders are typically placed within the
specific financial quarter when revenue is recognized, and we expect this trend
to continue. The placement of such orders is typically at the end of a fiscal
quarter requiring shipment, and if a new customer, the implementation of the
licensed product. The sales cycle is typically lengthy for a new licensed
customer and less time for an existing customer. Revenue recognition for service
contracts requires the acceptance and sign off from a customer. The amount of
license product and service backlog at the end of a quarter is typically
immaterial. We also experience variations in product demand due to customer
budgetary constraints that may be imposed within a fiscal year. As a
consequence, the Company experiences difficulty in forecasting license and
service revenues within any period.

         The Company distributes products through Alliance Partners. Changes in
the market strategy, product offering, financial condition, material changes in
the sales distribution strategy, availability of hardware or software products,
product defects and material changes in customer support may affect product
orders and revenues in any period(s).



                                      -23-
<PAGE>


         License revenue gross margins are substantially higher than other
revenue sources. The percentage of license revenues to the overall revenues in a
fiscal period may materially change the overall gross margins and profitability
for any period. Variations in expense levels compared to other periods may
result in changes in operating income within a fiscal period.

ACQUISITION OF CERTAIN ASSETS OF WEBWARE CORPORATION

         On September 5, 2003, we reported that we purchased certain assets of
WebWare Corporation ("WebWare") from Diablo Management Group, as assignee for
the benefit of creditors of WebWare Corporation. The acquisition, which included
the ActiveMedia(TM) products, was for cash and stock, for the assets, which now
enables us to offer our customers a digital asset management (DAM) application
for integrating rich media content, such as images, video, audio, graphics and
on-demand features into content management systems, web publishing systems, and
e-commerce portals.

         Our entering into this new area of business requires additional working
capital and management expertise, and we will be competing with companies with
far greater resources and staff, so that there is no assurance that we will be
successful in reversing the losses sustained by the former WebWare business.

BECAUSE WE HAVE EXPERIENCED LOSSES WE MAY NEED ADDITIONAL WORKING CAPITAL TO
IMPLEMENT OUR BUSINESS PLAN.

          We believe that we may need additional financing to operate our
business and implement our business plan. As of December 31, 2003 we had $1.2
million of cash and working capital deficit of $2.3 million in comparison to
$1.6 million of cash and working capital of $4.8 million as of December 31,
2002. There can be no assurances, however, that we will be successful in
obtaining funds from any such sources. If we issue equity securities, this will
result in dilution to our stockholders. If additional funds are not available,
we will be required to modify execution of our business plan.

         The WCORP business model utilizes a hosting service as a material
component of its sales and service product offering. INSCI plans to incorporate
such offering internally to further reduce the costs of such service. The
consolidation will require substantial initial cash outlays to fund the
implementation of such offering. There can be no assurance that service to the
WCORP customer base will be impacted to the extent that the cash requirements
will exceed that of management estimates.

PRODUCT REVENUE CONCENTRATION.

         The Company generates a substantial portion of license revenues and
services from the ESP+ archive solution. We expect that this trend will continue
and any changes to this assumption such as general economic, technology based
and competition may have a material adverse effect on the revenues and operating
results of the Company. We do not expect that there will be a substantial change
in revenue until the WebWare products contribute to our revenue growth.

EXPANSION OF DIRECT SALES.

         To date, the Company has significantly relied on the indirect sales
channel for sales leads and product revenues. The Company has invested, and
expects to continue to invest, in the development and growth of a direct sales
channel. To the extent that the Company is not successful in such efforts,
future revenue growth and operating margins may be adversely affected.

OUR BUSINESS GREATLY DEPENDS ON INDIRECT SALES.

         We depend upon introductions to potential customers by companies with
which we maintain strategic alliances for a significant percentage of our sales.
Although we have written agreements with UNISYS, Xerox Corporation, PFPC and
other value added resellers; the agreements do not require customer
introductions or provide for minimum required purchases of our products. If any
of the companies with which we maintain strategic alliances decides not to refer
potential customers to us, our sales may be reduced and operating losses
increased. In addition, there is no assurance that we will be able to maintain
our strategic alliances on current terms.


                                      -24-
<PAGE>


DEPENDENCE ON LICENSED TECHNOLOGY.

         INSCI depends on certain software products that are licensed from third
parties, which are embedded and used in our products. The company believes that
there are replacement alternatives for such third party products; however, the
interruption of the availability of such products may have an adverse impact on
the delivery of our products. Additionally, we expect our third party vendors to
maintain and continually improve their products. To the extent that such
products became obsolete or inoperable with other industry standard
applications, we may experience an adverse effect on revenues, operating results
and a decrease in customer satisfaction.

DEPENDENCE ON INTERNET ACCEPTANCE, ACCESSIBILITY, INFRASTRUCTURE AND SECURITY.

         INSCI developed and realized revenues from its Internet based products
and related services. The Internet is a new technology and as such, is
characterized by rapid technology changes, evolving standards and adoption
rates. Future revenues and services are dependent upon the acceptance of the
Internet as a recognized method of commercial competence.

         The accessibility of the Internet has expanded over the last several
years. Technology enhancements and improvements have accelerated the
availability of Internet access. To the extent that continued developments in
communications, communication standards, availability and accessibility do not
continue to expand, the rate of adoption may decline. Additionally, the
corporate expansion of the Internet as a commercial communications platform
typically requires a capital expenditure and support infrastructure. To the
extent that corporate capital expenditures decline or funding for Internet based
programs are reduced, the accessibility and necessary supporting infrastructure
may reduce the adoption and performance on the Internet.

         To the extent that there is an increase in the use of the Internet, or
an increase in bandwidth, the infrastructure may not be able to effectively
support demand and result in a degradation of commercial acceptance. Reduced
response times may also affect the acceptance of the Internet.

RAPID TECHNOLOGY CHANGES IN OUR INDUSTRY MAY ADVERSELY AFFECT OUR BUSINESS.

         Our business is subject to technological advances and possible product
obsolescence. The market for our products is characterized by rapidly changing
technology, intense competition, technological complexity and evolving industry
standards. We must insure that our products are compatible with those products
offered by third-party vendors, including server platforms for our software and
various storage devices and platforms. We have no contracts with third-party
vendors; therefore there is no assurance that we will be able to make our
software products compatible with new products that are introduced by others.
Our WebWare suite of products is subject to continued technological evolution
and adoption which requires a continued investment by our Company to remain
competitive.

WE DEPEND ON PROPRIETARY TECHNOLOGY, WHICH IS NOT PROTECTED BY PATENTS.

         Our business depends on proprietary software technology for which we
have no patent protection. Although we require our employees and others to whom
we disclose proprietary information to sign non-disclosure agreements, this
protection may not be sufficient. Our business will be adversely affected if
anyone improperly uses or discloses our proprietary software or other
proprietary information.

BECAUSE OF THE HIGH COST, WE LACK PRODUCT LIABILITY INSURANCE.

         We develop, market, install and service electronic information and
document management systems, which now include the WebWare product line. Failure
of our products may result in a claim against us. Because of the high cost of
product liability insurance, we do not maintain insurance to protect against
claims associated with the use of our products. Any claim against us may result
in costs to us in defending litigation. Further, any claim may require
management's time and the use of our resources.



                                      -25-
<PAGE>


WE DEPEND UPON CERTAIN KEY EMPLOYEES TO DEVELOP OUR PRODUCTS.

         We do not have the financial resources to compete with larger more
established companies to attract and retain certain key technological employees.
The loss of current technological employees or our inability to recruit and
retain employees with certain key technology skills will have an adverse effect
on product development and our business.

THE BOARD OF DIRECTORS OWNS A LARGE PERCENTAGE OF OUR COMMON STOCK AND CAN
INFLUENCE MATTERS REQUIRING THE VOTE OF SHAREHOLDERS.

         On December 31, 2003, our directors and officers beneficially owned, as
defined by the SEC Rules, approximately 16.0 million shares of common stock,
representing 75.9% of the outstanding common stock. Holders of Series A (if
convertible debt is converted in Series A Preferred), B and C preferred stock
can vote on an as if converted basis and can therefore obtain shareholder
approval or ratification of shareholder resolutions. Based on their ownership,
our directors and officers have the ability to direct matters requiring a
stockholder vote, including the election of directors, the amendment of charter
documents, the merger or dissolution of our company and the sale of all or
substantially all of our assets. Their voting power also may discourage or
prevent any proposed takeover, or control whether a potential purchaser acquires
the Company.

LIQUIDITY.

         Our stock is traded on the Over the Counter Bulletin Board (OTCBB)
under the symbol "INCC". As of December 31, 2003 we have 5,992,287 shares
outstanding. Selway and CIP hold 123,344 shares of Series B Convertible
Redeemable Preferred Stock, which, as of December 31, 2003, was convertible into
8,634,080 shares of the Company's Common Stock. Selway and CIP also hold $1.8
million of convertible debt, which if converted, would be convertible into
1,604,858 shares of the Company's Common Stock. As of December 31, 2003, SCP
holds 1,546,711 shares of Series C Convertible Preferred Stock and CSSMK holds
257,785 shares of Series C Convertible Preferred Stock, which is convertible
into 3,608,992 shares of the Company's Common Stock. The average trading volume
for the 30-day trading period ended January 26, 2004 is 7,500.

THE POTENTIAL ISSUANCE OF ADDITIONAL SHARES OF SERIES C OR OTHER CLASSES OF
PREFERRED STOCK MAY NEGATIVELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND
SHAREHOLDER RIGHTS.

          Our certificate of incorporation empowers the board of directors with
the right to determine the designations, rights, preferences and privileges of
the holders of one or more series of preferred stock. The board of directors can
issue, without stockholder approval, preferred stock with voting, dividend,
conversion, liquidation or other rights, which could adversely affect the voting
power and equity interest of common stock holders.

BECAUSE OF CERTAIN PROVISIONS IN OUR BY-LAWS, AND THE ISSUED AND OUTSTANDING
SHARES OF SERIES B AND SERIES C PREFERRED STOCK, CHANGE IN CONTROL MAY BE
DIFFICULT.

         Our by-laws and the Delaware General Corporation Law contain provisions
including a shareholders rights plan that may make a change in control more
difficult or delay attempts by others to obtain control of us, even when this
may be in the interests of stockholders. The Delaware General Corporation Law
also imposes conditions on certain business combinations with "interested
stockholders", as defined by Delaware law. Under certain agreements with key
personnel, we also have provided stock options in the event of a change of
control and a termination of those employment agreements without cause.
Additionally, we have provided that if a change of control occurs, certain
directors will receive immediate vesting of stock options granted under our 1992
Directors Option Plan. Change of control shall occur, in this instance, if a
majority of the directors elected at any Annual Meeting are persons other than
those nominated by management in the proxy statement distributed for such Annual
Meeting. Additionally, Series A, Series B and Series C preferred stock have
certain restrictive rights with respect to the issuance of other classes of
preferred stock as well as liquidation preferences which can inhibit a change of
control.



                                      -26-
<PAGE>


DIVIDENDS ON OUR COMMON STOCK ARE NOT LIKELY.

         We do not anticipate paying any cash dividends on our common stock. We
intend to keep future earnings, if any, to finance the operation and expansion
of our business.

WE MAY BE REQUIRED TO PAY DIVIDENDS ON OUR SERIES B AND SERIES C PREFERRED STOCK
IN SHARES OF SERIES C PREFERRED STOCK.

         We currently pay cash dividends on our Series B preferred stock.
Dividends on the Series B preferred stock are payable in cash or shares of
Series C preferred stock, at the option of the holder. While we may pay cash
dividends on our Series C preferred stock, it is unlikely that we will do so at
this time, and will pay dividends in shares of Series C stock, which, if
converted into shares of the Company's common stock will result in further
dilution to our common stockholders.

A DECLINE IN THE MARKET PRICE OF OUR COMMON STOCK AFTER THE 1:10
REVERSE STOCK SPLIT MAY RESULT IN A GREATER PERCENTAGE DECLINE THAN WOULD HAVE
OCCURRED IN THE ABSENCE OF A REVERSE STOCK SPLIT, AND THE LIQUIDITY OF OUR
COMMON STOCK COULD BE ADVERSELY AFFECTED FOLLOWING THE REVERSE STOCK SPLIT.

         We have experienced a decline in the market price of our common stock
following the effective date of the 1:10 reverse stock split. If the market
price of our common stock continues to decline following the split, the
percentage decline may be greater than would have occurred in the absence of a
reverse stock split. The market price of our common stock will also, however, be
based on our performance and other factors, which are unrelated to the number of
shares outstanding. Furthermore, although it does not appear to have done so at
this time, the reduced number of shares outstanding after the reverse stock
split could adversely affect the future liquidity of our common stock.

ITEM 3.       CONTROLS AND PROCEDURES

         The Company maintains controls and procedures designed to ensure that
information required to be disclosed in the reports that the Company files or
submits under the Securities and Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the rules and forms
of the Securities and Exchange Commission. Based upon their evaluation of those
controls and procedures performed within 90 days of the filing date of this
report, the executive officers of the Company concluded that the Company's
disclosure controls and procedures were adequate.

         There have not been any significant changes in the Company's internal
controls or other factors that could affect these controls subsequent to the
date of evaluation."


PART II       OTHER INFORMATION

ITEM 1.       LEGAL PROCEEDINGS

         The Company is a defendant in an action commenced on May 16, 2003 by
Lason, Inc. ("Lason") in the United States Bankruptcy Court for the District of
Delaware. The Lason action is seeking the return of certain pre-petition
payments made prior to the bankruptcy petition of Lason in the amount of
approximately $121,000. The Company is contesting the action and has asserted a
number of affirmative defenses to the action.






                                      -27-
<PAGE>


ITEM 2.       CHANGE IN SECURITIES

         On April 4, 2003, the Company completed two (2) Amendments to
refinancing transactions. The first refinancing was with Selway Partners LLC
("Selway") and CIP Capital LP ("CIP") of a November 28, 2000 financing
transaction. The second refinancing was for a separate refinancing for a June
21, 2001 financing transaction with Selway. The two Amendments were made as of
November 30, 2002.

         With respect to the Selway-CIP November 28, 2000 financing transaction,
the Company agreed that it would repay to Selway-CIP the balance of principal
and interest of $2,505,000. On January 17, 2003, the Company paid approximately
$305,000 toward the outstanding interest due to Selway-CIP, resulting in the
balance due of $2,200,000, which will be paid in 36 monthly installments with
interest of 10% per annum. The Selway-CIP refinancing agreement further provided
for an extension of one year for the optional redemption of Selway-CIP to demand
repayment of the principal and interest due on all of the outstanding
Convertible Debentures. The Convertible Debentures are convertible into Series A
Preferred Stock of the Company and ultimately into Common Stock. Series A
Preferred Stock has a dividend of 2.5% plus prime per annum. In accordance with
the terms of the Amendment, the conversion price for the Convertible Debentures
convertible to Series A Preferred Stock and ultimately to Common Stock was
repriced from $6.50 per share to $1.10 per share.

         The Company also amended its June 21, 2001 financing arrangement with
Selway which provides that Selway has the right to convert issued and
outstanding Convertible Debentures in the aggregate sum of $575,000, issued to
Selway as a part of the June 21, 2001 transaction convertible into Series B
Preferred Stock, which is ultimately convertible into Common Stock of the
Company. Additionally, the Company had also issued to Selway Management, Inc.
("Selway Management") debentures in payment of management consulting fees, as
per its Consulting Agreement with Selway Management in the sum of $460,000. The
Company also entered into Amendment No. 2 to the Selway Management Agreement.

         The Convertible Debentures issued to Selway Management provided for the
right of Selway Management to convert the Debentures into Series B Convertible
Preferred Stock, which is ultimately convertible into Common Stock. Series B
Convertible Stock has an annual dividend of 13%. Selway advised the Company that
it assigned the sum of $193,230.33 in Convertible Debentures to CIP. Selway and
CIP disclaim any affiliation with respect to their respective interest in the
Convertible Debentures issued by the Company.

         On April 3, 2003, Selway, Selway Management and CIP converted their
respective Convertible Debentures in the aggregate amount of $1,035,000 into the
aggregate of 123,344 shares of Series B Convertible Stock as follows: Selway
converted the sum of $381,769.67 of Convertible Debentures into 49,073 shares of
Series B Preferred Stock; Selway Management converted the sum of $460,000 into
51,013 Convertible Debentures; and CIP converted the sum of $193,230.33 of
Convertible Debentures into 23,258 Series B Convertible Preferred Stock. Shares
of Series B Convertible Preferred Stock are convertible into shares of Common
Stock of the Company.

         The 173,077 previously issued stock warrants to purchase Series A
Preferred Stock issued to Selway Partners, LLC were extended to November 30,
2007, as well as the 173,077 warrants to purchase Series A Preferred stock
issued to CIP Capital, L.P. Additionally, the 57,692 warrants to purchase Series
A Preferred Stock issued to Selway Partners, LLC and CIP Capital, L.P. were
extended to January 30, 2008, and the 20,000 warrants to purchase common stock
which were previously issued to Selway Management, Inc. were extended to
November 30, 2008.

         The Company amended its Certificate of Incorporation on March 31, 2003
with respect to the Series A and Series B Preferred Stock, in that the Series A
Preferred Stock conversion into Common Stock was reduced from $6.50 per share to
$1.10 per share, and the Series B Preferred Stock authorization was increased
from 100,000 shares of Series B Preferred Stock to 200,000 shares of Series B
Preferred Stock.

         The Registrant (the "Company"), on September 5, 2003, entered into an
agreement with SCP Private Equity Partners II, LP ("SCP"), a private equity
fund, as of September 4, 2003, wherein SCP agreed to purchase, 1,546,711 shares
of Series C Convertible Preferred Stock in the Company at $1.9396 per share (the
"Series C Preferred Stock") for the sum of $3,000,000.





                                      -28-
<PAGE>


         The 1,546,711 shares of Series C Preferred Stock are convertible into
3,093,442 shares of common stock, or approximately 51.6% of the issued and
outstanding shares of common stock of the Company.

         SCP purchased 515,571 shares of Series C Preferred Stock on closing for
the sum of $1,000,000. Thereafter, SCP purchased the balance of 1,031,140 shares
of Series C Preferred Stock for the aggregate sum of $2,000,000. As a part of
the Purchase Agreement for the Series C Preferred Stock, Selway and CIP agreed
to negotiate with the Company to modify certain provisions of the Series A and
Series B convertible preferred stock. Selway is an affiliate of SCP in that SCP
is the majority shareholder of Selway and CIP is an affiliate of SCP in that Mr.
Winston Churchill is a managing partner in both.

         As a result of its purchase of Series C Preferred Stock and SCP's
affiliate relationships with Selway and CIP, SCP is deemed the beneficial owner
of 1,357,957 shares of Series A preferred stock (issuable upon the conversion of
the Company's convertible debt), 123,344 shares of Series B preferred stock,
1,546,711 shares of Series C preferred stock, 461,538 warrants to purchase
shares of Series A preferred stock and 596,520 shares of common stock of the
Company which aggregate to 70.8% of the issued and outstanding common stock of
the Company on a fully diluted basis. In accordance with the terms of the Series
C Preferred Stock Purchase Agreement, the Company has filed a Certificate of
Designation setting forth the rights and preferences for the Series C Preferred
Stock.

         The Company has entered into a modification agreement with Selway and
CIP to amend certain provisions of the Series A and Series B preferred stock
pursuant to the Purchase Agreement for the Series C Preferred Stock. The Company
amended its Certificate of Incorporation on December 8, 2003 with respect to the
Series B Preferred Stock, in that the Series B Preferred Stock conversion into
Common Stock was amended to convert on a 70:1 basis, replacing the following
conversions formula: (i) such number of shares of common stock as represents the
"Current Value Percentage" (as defined) of total issued and outstanding common
stock as of the date of conversion, plus (ii) such additional shares of common
stock issuable after the date of conversion as may be necessary to maintain such
Current Value Percentage upon the conversion or exercise of other convertible
instruments. Additionally, the Series A, Series B and Series C Preferred Stock
authorizations were amended to 2,500,000 shares, 4,317,040 shares and 3,182,960
shares, respectively from 4,307,693 shares, 200,000 shares and 2,300,000 shares,
respectively.

         On December 22, 2003 the Company filed an amendment to the Company's
Certificate of Incorporation to implement a reverse stock split of the
outstanding shares of the Company's common stock at a ratio of 1:10 pursuant to
prior shareholder approval. The 1:10 reverse stock split was effective as of
January 2, 2004. There were 185,000,000 shares of common stock with a par value
of $.01 authorized and 59,923,340 shares issued and outstanding at December 31,
2003. On January 2, 2004, the 1:10 reverse stock split resulted in a nine-tenths
reduction in the number of shares issued. After the reverse stock split there
were 5,992,287 shares of common stock outstanding with a par value of $.10. The
reverse split will not affect the Company's authorized shares of common and
preferred stock.

         On December 31, 2003, the Company entered into an agreement with CSSMK,
LLC ("CSSMK"), an entity which is majority owned by Henry F. Nelson, the
Company's President and Chief Executive Officer, wherein CSSMK purchased 257,785
shares of Series C Convertible Preferred Stock ("Series C Preferred") for the
sum of $500,000 or $1.9396 per share. The 257,785 shares of Series C Preferred
are convertible on a 2:1 basis into 515,570 shares of common stock at the option
of the holder.

ITEM 3.       DEFAULTS UPON SENIOR SECURITIES

         This item is not applicable.






                                      -29-
<PAGE>


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

         On January 29, 2004, INSCI Corp held its Annual Meeting of
Shareholders, and the shareholders resolved the following:

(1)            Election of Yaron I. Eitan, Henry F. Nelson, Francis X. Murphy,
               Derek Dunaway, Mitchell Klein, Amit Avnet, Steven Morgenthal, Adi
               Raviv, George Calhoun and Thomas G. Rebar to serve as directors
               until the next annual meeting.
(2)            Appointment of Goldstein and Morris Certified Public Accountants
               as the independent public accountants for the Company's fiscal
               year ended March 31, 2003.
(3)            Ratification of the Board of Directors resolution to increase the
               authorized number of stock options under the Company's 1997
               Equity Incentive Plan to 3,000,000 shares.

ITEM 5.       OTHER INFORMATION

         On January 2, 2004, the Company effected a 1:10 reverse stock split
resulting in a nine-tenths reduction in the number of shares issued. The
Company's common stock is trading on the Over-the-Counter Bulletin Board
("OCTBB") under its new trading symbol "INCC" as of January 14, 2004. There were
185,000,000 shares of common stock with a par value of $.01 authorized and
59,923,340 shares issued and outstanding at December 31, 2003. After the reverse
stock split there were 5,992,287 shares of common stock outstanding with a par
value of $.10. The number of authorized shares of common stock was not affected.
All share and per share references for all periods presented have been restated
to reflect the reverse stock split.

ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K

(A)      EXHIBITS

            Exhibit 3.9           Copy of the form of Amendment of Certificate
                                  of Incorporation
            Exhibit 10.79         Copy of Amended and Restated Certificate
                                  of Designation of the Series A, Series B and
                                  Series C Preferred Stock
            Exhibit 10.80         Copy of Amendment No. 1 to the Series C
                                  Convertible Preferred Stock Purchase
                                  Agreement
            Exhibit 10.81         Copy of Stockholders Agreement
            Exhibit 10.82         Copy of Employment Agreement
            Exhibit 31.1 *        Certification pursuant to 18 U.S.C. Section
                                  1350 as adopted pursuant to Section
                                  302 of the Sarbanes-Oxley Act of 2002
            Exhibit 32.1 *        Certification pursuant to 18 U.S.C. Section
                                  1350 as adopted pursuant to Section
                                  906 of the Sarbanes-Oxley Act of 2002

Unless otherwise noted, the exhibit is incorporated by reference to the
Company's Current Reports on Form 8-K filed January 13, 2004 and dated December
31, 2003.

* Annexed hereto

(B)      REPORTS ON FORM 8-K

                  A Current Report of Form 8-K/A was filed by the Company on
         November 19, 2003 dated September 5, 2003, amending the Current Report
         on Form 8-K filed by the Company on September 19, 2003 dated September
         5, 2003, which reported the acquisition by WCORP, Inc., the Company's
         wholly owned subsidiary, of certain assets of WebWare Corporation from
         Diablo Management Group, as assignee for the benefit of creditors. The
         Company amended its Form 8-K to report the financial statements of the
         business acquired.

                  A Current Report of Form 8-K was filed by the Company on
         January 13, 2004 dated January 2, 2004, which reported the 1:10 reverse
         stock split effective on January 2, 2004. The Company filed an
         amendment to its Certificate of Incorporation to implement the reverse
         stock split of the outstanding shares of the Company's common stock at
         a ratio of 1:10. The Company's authorized shares of common and
         preferred stock will not be affected by the reverse split.



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                  A Current Report on Form 8-K was filed by the Company on
         January 13, 2004 dated December 31, 2003, which reported an agreement
         with CSSMK, LLC ("CSSMK"), an entity which is majority owned by Henry
         F. Nelson, the Company's President and Chief Executive Officer, to
         purchase 257,785 shares of Series C Preferred Stock for the sum of
         $500,000 or $1.9396 per share. Additionally, CSSMK also entered into a
         Stockholders Agreement with SCP, wherein the transfer and assignment of
         its Series C Preferred Stock is restricted pursuant to the terms of the
         Stockholders Agreement, which also grants SCP rights of first refusal
         and certain voting rights. The Company also reported, on December 31,
         2003, effective as of April 1, 2003, it entered into an Employment
         Agreement with Henry F. Nelson for a period of three years.





                                    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:  February 12, 2004           By: /S/ HENRY F. NELSON
                                       ----------------------------------------
                                       Henry F. Nelson
                                       Chief Executive Officer, President and
                                       Chief Financial Officer





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