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, 2001

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


                         Commission file number: 1-12966

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

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

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes   X     No
     ---       ---


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

TITLE OF EACH CLASS                       OUTSTANDING FEBRUARY 12, 2002
-------------------                       -----------------------------
Common Stock, par value $.01                      50,275,567


Transitional Small Business Disclosure Format (check one)

Yes         No  X
     ---       ---



<PAGE>

                                   INSCI CORP.

                                      INDEX

PART I     FINANCIAL INFORMATION

Item 1.    Financial Statements

           Consolidated Balance Sheet as of December 31, 2001                3

           Consolidated Statements of Operations for the Three Months        4
               and Nine Months Ended December 31, 2001 and 2000

           Consolidated Statements of Cash Flows for the Nine Months         5
               Ended December 31, 2001 and 2000

           Notes to Financial Statements                                     7

Item 2.    Management's Discussion and Analysis or Plan of Operation        12


PART II    OTHER INFORMATION

Item 1.    Legal Proceedings                                                18

Item 2.    Change in Securities                                             18

Item 3.    Defaults Upon Senior Securities                                  18

Item 4.    Submission of Matters to a Vote of Security Holders              18

Item 5.    Other Information                                                19

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

           Signature                                                        19


<PAGE>



<TABLE>
<CAPTION>


                                   INSCI CORP.
                           CONSOLIDATED BALANCE SHEET
                    (in thousands, except per share amounts)
                                   (unaudited)

                                                                           December 31,
                                                                              2001
                                                                              ----
ASSETS
<S>                                                                     <C>
  Current assets:
    Cash and cash equivalents                                               $    241
    Accounts receivable, net of allowance for doubtful accounts of $171        1,382
    Prepaid expenses and other current assets                                    162
                                                                            --------
        Total current assets                                                   1,785
  Property and equipment, net                                                    288
  Other assets                                                                   175
                                                                            --------
        Total assets                                                        $  2,248
                                                                            ========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
  Current liabilities:
    Advances on receivables and bank debt                                   $    359
    Convertible debt                                                           2,560
    Accounts payable                                                           1,342
    Accrued expenses and other current liabilities                             2,103
    Capital lease obligations                                                    329
    Deferred revenue                                                           1,555
                                                                            --------
        Total current liabilities                                              8,248
                                                                            --------
  Commitments and contingencies
  Series A Convertible Redeemable Preferred Stock, $.01 par value,
    authorized 4,308 shares: issued none                                        --
  Series B Convertible Redeemable Preferred Stock, $.01 par value,
    authorized 100 shares: issued none                                          --
  Stockholders' equity (deficit):
    Convertible Preferred Stock, $.01 par value, authorized 5,592 shares:
      8% Convertible Redeemable Preferred Stock, 804 shares issued and
        outstanding, no liquidation preference                                     8
    Common Stock, $.01 par value, authorized 185,000 shares: issued and
      Outstanding 38,558 shares                                                  386
    Additional paid-in capital                                                47,153
    Accumulated deficit                                                      (53,547)
                                                                            --------
      Total stockholders' equity (deficit)                                    (6,000)
                                                                            --------
        Total liabilities and stockholders' equity (deficit)                $  2,248
                                                                            ========




</TABLE>



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



                                       3

<PAGE>



<TABLE>
<CAPTION>

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

                                         Three months ended      Nine months ended
                                            December 31,           December 31,
                                         2001         2000       2001         2000
                                         ----         ----       ----         ----
Revenue
<S>                                  <C>         <C>         <C>         <C>
  Product                              $    582    $  1,109    $  2,362    $  3,341
  Services                                1,391       1,575       4,319       4,728
                                       --------    --------    --------    --------
    Total revenue                         1,973       2,684       6,681       8,069
                                       --------    --------    --------    --------
Cost of revenue
  Product                                    41         237         127         762
  Services                                  399         683       1,313       2,521
                                       --------    --------    --------    --------
    Total cost of revenue                   440         920       1,440       3,283
                                       --------    --------    --------    --------
Gross profit                              1,533       1,764       5,241       4,786
                                       --------    --------    --------    --------
Expenses
  Sales and marketing                       469         668       1,572       2,683
  Product development                       382       1,104       1,376       4,858
  General and administrative                531       1,029       1,884       3,365
  Non-recurring expenses:
    Restructuring and other charges        --          --          --         8,516
                                       --------    --------    --------    --------
                                          1,382       2,801       4,832      19,422
                                       --------    --------    --------    --------
Income (loss) from operations               151      (1,037)        409     (14,636)

Interest (expense) income, net              (71)       (225)       (287)       (219)
                                       --------    --------    --------    --------
Net income (loss)                            80      (1,262)        122     (14,855)
Preferred stock dividend                   --           (70)       (213)       (207)
                                       --------    --------    --------    --------
Net income (loss) applicable to
  common shares                        $     80    $ (1,332)   $    (91)   $(15,062)
                                       ========    ========    ========    ========
Net income (loss) per common share -
  Basic and diluted                    $   0.00    $  (0.09)   $   0.00    $  (1.00)
                                       ========    ========    ========    ========
Weighted average common shares
 outstanding - basic                     54,177      15,655      28,879      15,086
                                       ========    ========    ========    ========
Weighted average common shares
 outstanding - diluted                   92,483      15,655      28,879      15,086
                                       ========    ========    ========    ========

</TABLE>



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



                                       4
<PAGE>



<TABLE>
<CAPTION>

                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                   (unaudited)

                                                                 NINE MONTHS ENDED
                                                                    DECEMBER 31,
                                                              2001            2000
                                                              ----            ----
<S>                                                       <C>             <C>
Cash flows from operating activities:
  Net income (loss)                                         $   122        $(14,855)
  Reconciliation of net income (loss) to net cash
    used in  operating activities:
    Depreciation and amortization                               260           1,151
    Restructuring charge                                       --             8,516
    Stock options and warrants granted for services            --               113
    Stock granted for services and incentive compensation        20              13
    Changes in assets and liabilities:
      Accounts receivable                                        80             (19)
      Prepaid expenses and other current assets                --               (97)
      Other assets                                               61             191
      Accounts payable                                         (371)            252
      Accrued expenses and other current liabilities           (421)           (720)
      Deferred revenue                                           34             777
                                                            -------        --------
Net cash used in operating activities                          (215)         (4,678)
                                                            -------        --------
Cash flows from investing activities:
  Capital expenditures                                           (7)           (443)
  Proceeds from sale of property and equipment                   17            --
  Cash acquired upon purchase of Lognet, net of
    acquisition costs                                          --             2,845
                                                            -------        --------
Net cash provided by investing activities                        10           2,402
                                                            -------        --------
Cash flows from financing activities:
  Net repayments of advances on receivables and bank debt      (543)           (136)
  Principal payments on capital lease obligations               (31)           (316)
  Payment of preferred dividend                                --               (70)
  Proceeds from convertible debt                                560           1,500
  Proceeds from exercise of options of common stock            --               160
                                                            -------        --------
Net cash provided by (used in) financing activities             (14)          1,138
                                                            -------        --------
Effect of exchange rate changes on cash                        --               (61)
                                                            -------        --------
Net change in cash and cash equivalents                        (219)         (1,199)
Cash and cash equivalents at beginning of period                460           1,911
                                                            -------        --------
Cash and cash equivalents at end of period                  $   241        $    712
                                                            =======        ========



SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest                                      $   114        $    108
                                                            =======        ========
Cash paid for income taxes                                  $  --          $   --
                                                            =======        ========

</TABLE>

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




                                       5
<PAGE>


                                   INSCI CORP.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)


SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING AND INVESTING ACTIVITIES:

     During the nine months ended December 31, 2001 and December 31, 2000, the
Company issued 22,041,554 and 337,082 shares, respectively, of its Common Stock
for the conversion of its 8% Convertible Redeemable Preferred Stock.

     During the nine months ended December 31, 2001 and December 31, 2000, the
Company issued 1,111,387 and 46,024 shares, respectively, of its 8% Convertible
Redeemable Preferred Stock as dividends.

     During the nine months ended December 31, 2000, the Company issued
2,500,000 restricted shares of its Common Stock to acquire all of the common
shares of Lognet 2000, Inc.

     During the nine months ended December 31, 2000, the Company acquired
property and equipment under capital leases with a value of $26,000.

     During the nine months ended December 31, 2000, the Company acquired
software program rights in exchange for 40,000 shares of its Common Stock.

     During the nine months ended December 31, 2000, the Company issued
preferred stock warrants which may be converted into 923,000 shares of its
Common Stock at $.72 per share as part of a convertible debenture financing.

     During the nine months ended December 31, 2000, the Company issued 200,000
Common stock warrants at an exercise price of $.72 per share in payment of
services rendered in connection with a convertible debenture financing.



















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



                                       6


<PAGE>
                                   INSCI CORP.
                          NOTES TO FINANCIAL STATEMENTS
                                   (unaudited)


BASIS OF PRESENTATION, BUSINESS ENVIRONMENT AND MANAGEMENT'S PLAN

           The 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 (the "Commission").
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures contained herein
are adequate to make the information presented not misleading. The financial
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's annual report on Form 10-KSB for the fiscal
year ended March 31, 2001. The results of the three months and nine months ended
December 31, 2001 may not be indicative of the results that may be expected for
the year ended March 31, 2002.

           INSCI develops and markets software for electronic document
distribution, storage and presentment. The accompanying financial statements for
the nine months ended December 31, 2001 have been prepared on a going concern
basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. INSCI incurred a
net loss of $17.5 million for the year ended March 31, 2001, and as of December
31, 2001 had an accumulated deficit of $53.5 million and a working capital
deficit of $6.5 million. INSCI's revenues fluctuate because of a variety of
factors including the amount of revenue generated from its alliances with other
companies selling its products, the length of the sales cycle for its products,
demand for its products, the introduction of new products and product
enhancements, and general economic conditions. INSCI is currently past due on a
number of its current obligations and commitments to creditors. At the present
time, a number of creditors and vendors have threatened action against INSCI.
While there is no assurance that creditors will continue to supply goods and
services to the Company, or that they will not commence legal action against
INSCI that may result in INSCI either voluntarily or involuntarily seeking
protection under the Federal Bankruptcy Law, INSCI has entered into a number of
settlement agreements and is continuing to pursue settlements with creditors.
Effective with the close of INSCI's second quarter of fiscal 2001, there was a
redirection of its business strategy resulting in a restructuring and other
charge of $8.9 million to the results of operations for fiscal 2001. At the same
time, INSCI closed on a $2.0 million subordinated convertible debt financing and
began to implement INSCI's redirected business strategy. During May 2001, a new
management team was hired and INSCI announced it would seek strategic
partnerships or alliances, obtain new commercial and/or equity financing, and
other business combinations. The new management team revised INSCI's operating
plan and implemented several cost reduction programs. During June 2001, INSCI
entered into a subordinated convertible debt facility of up to $700,000 as an
interim financing solution.

           INSCI's Board of Directors is actively pursuing potential merger,
partnering opportunities and/or asset sale. INSCI expects that these efforts
will result in the introduction of other parties with interests and resources,
which may be compatible with that of INSCI. However, no assurance can be given
that INSCI will be successful in raising additional capital or entering into a
business alliance. Further, there can be no assurance, assuming that INSCI
successfully raises additional funds or enters into a business alliance, that it
will achieve profitability or achieve positive cash flow. These factors, as well
as certain other risk factors enumerated in the filings, raise substantial doubt
concerning the Company's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the outcome of these uncertainties.

           In the opinion of the management of the Company, the accompanying
unaudited financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary to present fairly the financial position
of the Company as of December 31, 2001 and the results of operations and cash
flows for the nine months ended December 31, 2001 and 2000.

           The accompanying consolidated financial statements give effect to
INSCI's acquisition of Lognet 2000, Inc. ("Lognet") on May 24, 2000, which was
accounted for under the purchase method of accounting. Accordingly, operating


                                       7



<PAGE>

results for the nine months ended December 31, 2000 and the Statement of Cash
Flows for the nine months ended December 31, 2000 include the results of Lognet
subsequent to the date of acquisition. For Fiscal 2001, the results of
operations for Lognet prior to the acquisition date were not material to the
results of operations of INSCI.

           The accompanying financial statements for the nine months ended
December 31, 2000 also include the operations of INSCI and its wholly-owned
subsidiaries, InfiniteSpace.com, Corp. ("InfiniteSpace"), The Internet
Broadcasting Company, Inc. ("IBC"), and INSCI (UK) Limited. These subsidiaries
are no longer active and their operations have been terminated. The INSCI (UK)
Limited subsidiary was not financially significant to the consolidated results
of the Company. All significant intercompany transactions and balances have been
eliminated in the preparation of these financial statements.

           The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

INCOME (LOSS) PER SHARE

           Basic net income (loss) per common share is computed by dividing net
income (loss) applicable to common shares by the weighted average number of
common shares outstanding during the period. For the three months ended December
31, 2000 and the nine months ended December 31, 2001 and December 31, 2000,
diluted net loss per share was equal to the basic net loss per share as stock
options, warrants and convertible securities were excluded due to their
anti-dilutive effect. For the nine months ended December 31, 2001 and December
31, 2000, 48,016,000 and 8,605,000 shares, respectively, from stock options,
warrants and convertible securities would be anti-dilutive. A reconciliation
from the number of shares used in the basic net income (loss) per share
computation to the number of shares used in the diluted net income (loss) per
share computation is as follows:


<TABLE>
<CAPTION>

                                                                       Three months ended                 Nine months ended
                                                                          December 31,                       December 31,
                                                                     2001              2000             2001              2000
                                                                 --------------    -------------    --------------    -------------

<S>                                                            <C>               <C>             <C>               <C>
Weighted average shares of common stock outstanding
  during the period                                                    54,177          15,655            28,879            15,086
Weighted average common equivalent shares due to stock
  options and warrants                                                      2       anti-dilutive    anti-dilutive     anti-dilutive
8% Convertible Preferred Stock                                              -       anti-dilutive    anti-dilutive     anti-dilutive
Convertible debt with Series A Convertible Redeemable
  Preferred Stock                                                           -            N/A                N/A               N/A
Convertible debt with Series B Convertible Redeemable
  Preferred Stock                                                      38,304            N/A         anti-dilutive            N/A
                                                                 --------------    -------------    --------------    -------------
                                                                       92,483           15,655           28,879            15,086
                                                                 ==============    =============    ==============    =============
The income (loss) used in determining basic and diluted
 earnings (loss) per share consisted of the following:
Basic
     Net income (loss)                                                    80            (1,262)            122            (14,855)
     Preferred Stock Dividend                                               -              (70)           (213)              (207)
                                                                 --------------    -------------    --------------    -------------
                                                                          80            (1,332)            (91)           (15,062)
                                                                 ==============    =============    ==============    =============
Diluted
     Net income (loss)                                                    80            (1,262)            122            (14,855)
     Interest expense for Convertible debt with Series B
       Convertible Redeemable Preferred Stock                             17                -                -                 -
     Preferred Stock Dividend                                             -                (70)           (213)              (207)
                                                                 --------------    -------------    --------------    -------------
                                                                          97            (1,332)            (91)           (15,062)
                                                                 ==============    =============    ==============    =============

</TABLE>

                                       8



<PAGE>

ISSUANCE OF COMMON STOCK

           During August 2001, 387,482 shares of common stock were issued in
settlement of a claim by The Tail Wind Fund, Ltd.

           During April 2001, 60,953 shares of common stock were issued in
payment of management fees to Selway Management, Inc. an affiliate of Selway
Partners, LLC ("Selway") a technology holding company based in Paramus, New
Jersey. Selway is an affiliate of INSCI due to its beneficial ownership of
common stock and convertible securities of INSCI. Additionally, two of INSCI's
five board of directors' members are affiliated with Selway.

           During the nine months ended December 31, 2001, 1,168,459 shares of
preferred stock were converted into 22,041,554 shares of common stock. The terms
and conditions of INSCI's 1996 Unit Purchase Agreement (the "Unit Placement")
requires holders of INSCI's 8% Preferred Stock ("Preferred Stock") to
automatically convert the issued and outstanding shares of Preferred Stock into
shares of INSCI's Common Stock. In compliance with the Unit Placement, INSCI
determined that one share of Preferred Stock was convertible into 19.455 shares
of Common Stock. Additionally, INSCI's Board of Directors elected to pay the
final dividend on the Preferred Stock in kind, which amounted to approximately
728,000 shares of Preferred Stock. Accordingly, shareholders holding shares of
Preferred Stock are in the process of converting their preferred shares into
Common Stock. As of December 31, 2001, approximately 1.1 million shares of
Preferred Stock have been converted into approximately 22 million shares of
Common Stock. INSCI anticipates that the remaining shares of Preferred Stock
(approximately 800,000) will be converted into approximately 15.6 million shares
of Common Stock prior to March 31, 2002, INSCI's fiscal year end. The Company
received consideration for the issuance of the shares of Preferred Stock as a
result of the September 3, 1996 Unit Placement made to holders of Preferred
Stock. No part of the consideration paid to the Company was received from any
banking institution. On December 21, 2001, INSCI held a Special Meeting of
Shareholders, and the shareholders approved an amendment to the Company's
Articles of Incorporation to increase the number of authorized shares of Common
Stock from 40 million shares to 185 million shares. At December 31, 2001 the
total issued and outstanding Common Stock was approximately 38.6 million.

SIGNIFICANT CUSTOMERS

           For the nine months ended December 31, 2001, two of our strategic
sales partners represented 23% and 11% of total revenues. For the nine months
ended December 31, 2000, INSCI received 15% and 17%, respectively, of its total
revenues from these sales partners. For the year ended March 31, 2001, INSCI
received 14% and 18%, respectively, of its total revenues from these sales
partners. These two sales partners and another customer accounted for 30%, 25%
and 10%, respectively, of the Company's accounts receivable at December 31,
2001. At December 31, 2000, these sales partners accounted for 26% and 21%,
respectively, of the Company's accounts receivable. A decline in revenues from
either of these sales partners in future quarters could materially affect the
revenues, operating results and liquidity of the Company.

CONTINGENCIES

LEGAL PROCEEDINGS

           The Company was party to pending legal proceedings involving claims
for approximately $200,000 for services rendered to the Company. The Company has
resolved these claims for approximately $113,000. The Company has also received
several default notices and claims in the aggregate amount of approximately
$820,000. The outcome of these claims cannot be determined with certainty. Due
to the Company's limited capital resources, an adverse decision if claims are
formally instituted may cause the Company to either voluntarily or involuntarily
seek protection under the Federal Bankruptcy law. INSCI will continue to pursue
settlement of these claims.



                                       9



<PAGE>

MANAGEMENT CONSULTING ARRANGEMENT

           The Company entered into certain arrangements in November 2000 with
Landsbury, LLP ("Landsbury"), wherein Landsbury had agreed to act as a
management consultant to perform consulting services in exchange for the Company
issuing Common Stock Purchase Warrants to purchase approximately 10% of the then
issued and outstanding Common Stock of the Company at $.72 per share. The
arrangement also provided for a member of Landsbury to enter into an employment
agreement with the Company to act as its Chief Executive Officer ("CEO") and,
among other things, to receive options to purchase 825,000 shares of Common
Stock of the Company pursuant to the Company's Stock Option Plan. The stock
options are included in the computation of the 10% noted above. During May 2001,
the CEO resigned all positions held with the Company. Also during May 2001, two
other members of Landsbury tendered their resignations as directors of the
Company. None of the Common Stock Purchase Warrants have been issued to
Landsbury. Neither the former CEO nor Landsbury have notified the Company that
it has any claims under any agreements. In any event, the Company believes that
it would have a meritorious defense to any claim or claims.

DEBT


Advance on Receivables                            $   25
Promissory Note due October 1, 2002                  334
Convertible Debt                                   2,000
Convertible Debentures                               560
                                              -----------

                                                  $2,919
                                              ===========

           The Company entered into a receivables financing arrangement with
Prestige Capital Corporation ("Prestige") on March 8, 2001. At December 31,
2001, the balance of advances due to Prestige totaled $25,000 on receivables of
$33,000. The cash proceeds from this financing arrangement were used to fund
operations. During the nine months ended December 31, 2001, INSCI recorded
$84,000 of discounts taken by Prestige as interest expense in the accompanying
consolidated statements of operations.

           Pursuant to a $2.0 million convertible debt financing with Selway in
November 2000, the Convertible Debt is convertible into an aggregate of
approximately 1.5 million shares of INSCI Series A Convertible Redeemable
Preferred Stock (the "Series A Preferred") at a price of $1.30 per share. The
Series A Preferred is in turn convertible on a one-for-two basis into shares of
INSCI's Common Stock. The Convertible Debt bears interest at prime plus 2 1/2
percent payable in cash or in additional shares of Series A Preferred, at the
option of the Investors, and is secured by a subordinated lien on all of INSCI's
assets. Unless previously converted into shares of Series A Preferred, principal
and interest are payable at maturity in five years or upon an earlier redemption
on or after two years at the option of the Investors.

           The Convertible Debt has a number of non-financial convenant
requirements such as certain registration rights and the obligation of the
Company to obtain shareholder approval for the issuance of shares resulting from
the conversion of the Convertible Debt and warrants. The Company has not
complied with some of these convenants and may be deemed in default. As of the
date of these financial statements, the holders of the Convertible Debt have not
declared a default but there can be no assurance that the Company will not be
declared in default in the future. In the event a default was declared which was
uncured, the holders could accelerate the principal and interest on the
Convertible Debt and further assert a claim against the security pledged by the
Company. Accordingly, the Company has classified the principal as current in the
accompanying consolidated balance sheet.

           During June 2001, the Company entered into an Investment Agreement
("Agreement") with Selway. The Agreement provides up to a sum of $700,000 of
demand subordinated convertible debentures (the "Debentures"). The Company
received an initial $250,000 from the financing on June 27, 2001, an additional
$65,000 on August 9, 2001 and another $105,000 during the quarter ended December
31, 2001. The Debentures bear an annual interest rate of 13 percent payable in
cash or in additional Debentures and are convertible into Series B Convertible
Redeemable Preferred Stock (the "Series B Preferred") at a price of $10.00 per
share. The Debentures are secured by a junior lien on all of INSCI's assets.
Unless previously converted into shares of Series B Preferred, principal and
interest on the Debentures are payable at the earlier of June 15, 2002 or upon
demand by the holder.



                                       10

<PAGE>


           The Series B Preferred is convertible at the option of the holder
into Common Stock at a conversion price equal to (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 of
the 8% Preferred Stock and the Series A Preferred, or exercise of other
convertible instruments. The Debentures contain a beneficial conversion feature,
which will be recorded as interest expense upon conversion.

           In connection with the Agreement, the Company amended its Management
Agreement with Selway. The amended management agreement reduced the monthly
management fee from $20,000 per month to $15,000 per month. The monthly
management fee is payable at the option of Selway in either cash or additional
subordinated convertible debentures ("Management Debentures"). On June 27, 2001,
the Company satisfied $30,000 of management fees payable to Selway by issuing
$30,000 of Management Debentures to Selway. During the three months ended
December 31, 2001, INSCI satisfied an additional $75,000 of management fees
payable to Selway by issuing $75,000 of Management Debentures to Selway. The
Management Debentures have terms similar to the Debentures except for the Series
B Preference Amount. The Management Debentures do not reduce the total amount
available to the Company under the Agreement.

           INSCI entered into a change in terms agreement ("Note Agreement") for
its guarantee of a $354,000 Promissory Note which was due on October 1, 2001 to
the Pennsylvania Business Bank ("Bank"). Under the original Promissory Note,
INSCI had guaranteed all of Lognet, Inc.'s obligations to the Bank. The amount
due is to be repaid in monthly principal payments of $10,000 plus interest
beginning on November 1, 2001, with the final payment due on October 1, 2002.
Interest is payable at prime plus 2% with a minimum rate of 9%. The Promissory
Note is secured by a subordinated lien on all of the assets of INSCI. In
addition, and as a part of the change in terms agreement, Selway has pledged a
$105,000 money market account as additional collateral for the Promissory Note.
Selway and its Chief Executive Officer, Yaron Eitan, have guaranteed payment of
the Promissory Note. Mr. Eitan, as Chairman of the Board of INSCI, is an
affiliate of the Company, and the transaction may be deemed an affiliated
transaction. Additionally, the Bank released two other individual guarantors of
the Promissory Note as a part of the change in terms agreement. The Note
Agreement contains a Confession of Judgment by both the Company and the
guarantors, in the event of default and an acceleration of payment of the Note
is demanded by the Bank. Furthermore, the Note also contains a default provision
in the event of a significant change in ownership of the Company. In
consideration of Selway's guarantee and pledge of the money market account,
INSCI agreed to pay Selway an initial fee of $18,000 and a monthly fee of $5,000
for each month that the guarantee is outstanding. Such amounts are payable at
the option of INSCI in either cash or debentures. As of December 31, 2001, INSCI
issued $28,000 of Debentures to Selway to satisfy fees under this arrangement.
The Company incorporates, by reference, its prior 8-K filing with respect to the
acquisition of Lognet, Inc., as related to the payment obligation to the
Pennsylvania Business Bank.

RESTRUCTURING AND OTHER CHARGES

           Effective September 30, 2000, with the close of the Company's second
quarter of Fiscal 2001, there was a redirection of the Company's strategic
direction whereby the Company ceased operations of InfiniteSpace, IBC and INSCI
(UK), thereby reducing operating expenses and wrote down its investment in
Lognet. These changes and the costs of closing InfiniteSpace, IBC and INSCI
(UK); along with other costs associated with the realignment of INSCI's
strategy, were charged to the operating results for Fiscal 2001. The major
components of the charges were a write-down of $6.0 million for Lognet's
goodwill, a $900,000 non-cash provision primarily related to equipment of
terminated operations, $800,000 related to severance payments for approximately
20 terminated employees, $500,000 for lease termination costs and approximately
$300,000 of other expenses associated primarily with the closure of
InfiniteSpace and its data center.

           At December 31, 2001, the remaining accrual for restructuring costs
was $603,000, which was for remaining lease commitments and other exit costs.



                                       11



<PAGE>

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

           In June 1998, the FASB issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. In May 1999, the FASB delayed the effective
date of SFAS No. 133 for one year, to fiscal years beginning after June 15,
2000. SFAS No. 133, as amended by SFAS No. 137 and SFAS No. 138, establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts (collectively referred to as
derivatives), and for hedging activities. The Company adopted SFAS No. 133 on
April 1, 2001. The Company does not currently nor does it intend in the future
to use derivative instruments and therefore does not expect that the adoption of
SFAS No. 133 will have any impact on its financial position or results of
operations.

           In July 2001, the FASB issued SFAS No. 141, BUSINESS COMBINATIONS and
SFAS No. 142, GOODWILL AND OTHER INTANGIBLE ASSETS. These standards, among other
things, significantly modify the current accounting rules related to accounting
for business acquisitions, amortization of intangible assets and the method of
accounting for impairments. The Company does not believe that the adoption of
SFAS No. 141 and SFAS No. 142 will have a material affect on the Company's
financial position or results of operations.

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

           The following discussion of management's analysis of operations for
the nine months and three months ("Third Quarter of Fiscal 2002") ended December
31, 2001 and the nine months and three months ("Third Quarter of Fiscal 2001")
ended December 31, 2000, and discussion of financial condition at December 31,
2001, should be read in conjunction with the financial statements and notes
thereto contained elsewhere in this report.

           We develop, sell, install and support highly scalable digital
document repository solutions that provide high-volume document capture,
warehousing and delivery functions via Local Area Networks (LAN), Wide Area
Networks (WAN) or the Internet. Our products bridge back-office functions with
front-office mission critical and customer-centric applications by displaying
legacy-generated reports, bills, statements and other documents.

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

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

           The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities and commitments in the normal course of business. We incurred a
net loss of $17.5 million for the year ended March 31, 2001, and as of December
31, 2001 had an accumulated deficit of $53.5 million and a working capital
deficit of $6.5 million. Our revenues fluctuate because of a variety of factors
including the amount of revenue generated from our alliances with other
companies selling our products, the length of the sales cycle for our products,
demand for our products and the introduction of new products and product
enhancements. We are currently past due on many of our current obligations and
commitments to creditors. At the present time, a number of creditors and vendors
have threatened action against us. There is no assurance that creditors will
continue to supply goods and services to the Company, or that they will not
commence legal action against us that may result in the Company either
voluntarily or involuntarily seeking protection under the Federal Bankruptcy
Law. INSCI has entered into a number of settlement agreements and is continuing
to pursue settlements with creditors. Effective with the close of our second
fiscal quarter, September 30, 2000, there was a redirection of our business
strategy resulting in a restructuring and other charge of $8.9 million to the
results of operations for fiscal 2001. At the same time, we closed on a $2.0
million subordinated convertible debt financing and began to implement our
redirected business strategy. During May 2001, Henry Nelson, as the new Chief
Executive Officer and President, assembled a new management team and we
announced that we would seek strategic partnerships or alliances, obtain new
commercial and/or equity financing, or other business combinations. The new
management team revised our operating plan and introduced several cost reduction
programs. During June 2001, we entered into a subordinated convertible debt
facility of up to $700,000 as an interim financing solution.



                                       12




<PAGE>

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

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

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


<TABLE>
<CAPTION>

                                                   THREE MONTHS ENDED               NINE MONTHS ENDED
                                                      DECEMBER 31,                    DECEMBER 31,
                                                  2001            2000            2001             2000
                                                   %               %                %               %
Revenue
<S>                                          <C>             <C>             <C>              <C>
  Product                                              29              41              35               41
  Services                                             71              59              65               59
                                               -----------     -----------     ------------     -----------
    Total revenue                                     100             100             100              100
                                               -----------     -----------     ------------     -----------
Cost of revenue
  Product                                               2               9               2               10
  Services                                             20              25              20               31
                                               -----------     -----------     ------------     -----------
    Total cost of revenue                              22              34              22               41
                                               -----------     -----------     ------------     -----------
Gross profit                                           78              66              78               59
                                               -----------     -----------     ------------     -----------
Expenses
  Sales and marketing                                  24              25              23               33
  Product development                                  19              41              21               60
  General and administrative                           27              39              28               42
  Non-recurring expenses:
    Restructuring and other charges                     -               -              -               105
                                               -----------     -----------     ------------     -----------
    Total expenses                                     70             105              72              240
                                               -----------     -----------     ------------     -----------
Profit (loss) from operations                           8             (39)              6             (181)
Interest expense, net                                  (4)             (8)             (4)              (3)
                                               -----------     -----------     ------------     -----------
Net profit (loss)                                       4             (47)              2             (184)
                                               ===========     ===========     ============     ===========


</TABLE>


THIRD QUARTER OF FISCAL 2002 AS COMPARED TO THIRD QUARTER OF FISCAL 2001:

REVENUE

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

           Revenues for the Third Quarter of Fiscal 2002 totaled $2.0 million
and decreased by $711,000 (26%) compared to revenues of $2.7 million for the
Third Quarter of Fiscal 2001. The fiscal 2001 quarter included revenues of
$365,000 attributed to the Lognet subsidiary accounting for 51% of the decline
in revenue. On March 1, 2001, we sold the assets of Lognet to Paynet Electronic
Billing Ltd. ("Paynet"), a nonaffiliated privately owned company based in
Israel. The remaining decline was primarily due to a decline in product revenues
attributed to the change in general economic conditions in the current year.


                                       13



<PAGE>

           For the Third Quarter of Fiscal 2002 we received 23% and 10% of our
total revenues from two of our strategic sales partners. For the Third Quarter
of Fiscal 2001 we received 21% and 13% of our total revenues from these sales
partners. For Fiscal 2001, we received 14% and 18%, respectively, of our total
revenues from these sales partners. A decline in revenues from either of these
sales partners in future quarters could materially affect the revenues,
operating results and liquidity of the Company.

GROSS PROFIT AND COST OF REVENUE

           Gross profit for the Third Quarter of Fiscal 2002 was $1.5 million
and decreased $231,000 (13%) compared to gross profit of $1.8 million for the
prior year period. Gross profit increased $57,000 (4%) when compared to the
Third Quarter of Fiscal 2001, exclusive of $288,000 attributable to the
Lognet subsidiary. Gross margin improved from 66% for the Third Quarter of
Fiscal 2001, or 64% exclusive of the Lognet subsidiary, to 78% for the current
year period. The decline in gross profit is directly related to the decline in
revenue as previously noted. The improvement in gross margin was primarily due
to decreased reliance on thirty party products lowering the cost of sales, and
the Company's cost reduction efforts enacted in Fiscal 2002.

SALES AND MARKETING

           Sales and marketing expenses for the Third Quarter of Fiscal 2002
were $469,000, a decline of $199,000 (30%) from the prior year period expenses
of $668,000. This decrease reflects various cost reduction efforts enacted for
fiscal 2002 and lower expenses due to the decline in revenues.

PRODUCT DEVELOPMENT

           Product development expenses declined $722,000 (65%) from the Third
Quarter of Fiscal 2001 level of $1.1 million. The fiscal 2001 quarter included
product development costs of $236,000 attributed to the Lognet subsidiary, whose
assets were sold to Paynet in March 2001, accounting for 33% of the decline in
costs. The balance of the decline was primarily due to INSCI's concentration on
core product development efforts as part of the Company's redirected business
strategy, as well as the consolidation of all outsourced development efforts
including the termination of a product consulting and development agreement with
eRunway, Inc., an independent contractor, in December of 2000.

GENERAL AND ADMINISTRATIVE

           General and administrative expenses were $531,000 for the Third
Quarter of Fiscal 2002, a decline of $498,000 (48%) from the prior year period.
The fiscal 2001 quarter included general and administrative expenses of $104,000
attributed to the Lognet subsidiary, whose assets were sold to Paynet in March
2001, accounting for 21% of the decline in costs. The balance of the decline was
primarily due to the various cost reduction efforts enacted for Fiscal 2002, as
well as a lower provision for doubtful accounts and less reliance on
consultants.

INTEREST EXPENSE, NET

           Interest expense for the Third Quarter of Fiscal 2002 was $71,000, a
decline of $154,000 (68%) from the prior year period. The decline was due to a
$180,000 non-cash interest charge in the prior year period related to the
issuance of warrants for debt financing. This decline was partially offset by
the higher level of borrowings in the current fiscal quarter.

NINE MONTHS ENDED DECEMBER 31, 2001 AS COMPARED TO NINE MONTHS ENDED DECEMBER
31, 2000:

REVENUE

           Revenues for the nine months ended December 31, 2001 totaled $6.7
million and decreased by $1.4 million (17%) compared to revenues of $8.1 million
for the nine months ended December 31, 2000. The nine months ended December 31,
2000 included revenues of $613,000 attributed to the Lognet subsidiary
accounting for 44% of the decline in revenue. On March 1, 2001, the Company sold
the assets of Lognet to Paynet Electronic Billing Ltd. ("Paynet"), a


                                       14



<PAGE>


nonaffiliated privately owned company based in Israel. Product revenue was lower
in fiscal 2002 due to a de-emphasis on hardware related sales. Additionally, the
decline in product revenue was in part due to the change in general economic
conditions in the current year.

           For the nine months ended December 31, 2001 we received 23% and 11%
of our total revenues from two of our strategic sales partners. For the nine
months ended December 31, 2000 we received 15% and 17% of our total revenues
from these sales partners. For Fiscal 2001, we received 14% and 18%,
respectively, of our total revenues from these sales partners. These sales
partners accounted for 30% and 25%, respectively, of our accounts receivable at
the end of the Third Quarter of Fiscal 2002 and accounted for 26% and 21%,
respectively, of our accounts receivable at the end of the Third Quarter of
Fiscal 2001. A decline in revenues from either of these sales partners in future
quarters could materially affect the revenues, operating results and liquidity
of the Company.

GROSS PROFIT AND COST OF REVENUE

           Gross profit for the nine months ended December 31, 2001 was $5.2
million and increased $455,000 (10%) compared to gross profit of $4.8 million
for the prior year period. Gross margin improved from 59% for the nine months
ended December 31, 2000 to 78% for the current year period. The improvement in
gross margin was primarily due to the decline in low margin hardware related
sales and the elimination of costs associated with InfiniteSpace, our
business-to-business electronic statements presentment application service
provider (ASP) subsidiary, which was closed during the second quarter of fiscal
2001 and various cost reduction efforts enacted in fiscal 2002. The improvement
in gross margin can also be attributed to the elimination of several third party
products in connection with the Company's sales.

SALES AND MARKETING

           Sales and marketing expenses for the nine months ended December 31,
2001 were $1.6 million, a decline of $1.1 million (41%) from the prior year
period expenses of $2.7 million. The fiscal 2001 period included $790,000 of
costs attributed to the start-up of the selling organization and marketing
activities of InfiniteSpace, whose operations were terminated at the end of the
second quarter of fiscal 2001,accounting for 71% of the decline. The balance of
the decline is primarily due to the various cost reduction efforts enacted for
fiscal 2002.

PRODUCT DEVELOPMENT

           Product development expenses declined $3.5 million (72%) from the
nine months ended December 31, 2000 level of $4.9 million. The fiscal 2001
period included product development costs of $789,000 attributed to the
InfiniteSpace subsidiary and $382,000 attributed to the INSCI (UK) subsidiary,
both closed at the end of the second quarter of fiscal 2001, and $482,000
attributed to the Lognet subsidiary, whose assets were sold to Paynet in March
2001. These subsidiaries accounted for 47% of the decline in costs. Contributing
to the decline in development costs was the consolidation of all outsourced
development efforts including the termination of a product consulting agreement
with eRunway, Inc., an independent contractor, in December of 2000. The balance
of the decline was primarily due to INSCI's concentration on core product
development efforts as part of the Company's redirected business strategy and
various cost reduction efforts enacted in fiscal 2002

GENERAL AND ADMINISTRATIVE

           General and administrative expenses were $1.9 million for the nine
months ended December 31, 2001, a decline of $1.5 million (44%) from the prior
year period. The nine months ended December 31, 2000 included $762,000 of costs
attributed to the InfiniteSpace subsidiary, whose operations were terminated at
the end of the second quarter of fiscal 2001, and $246,000 attributed to the
Lognet subsidiary, whose assets were sold to Paynet in March 2001. The
elimination of costs attributed to these subsidiaries accounted for 68% of the
decline. The balance of the decline was primarily due to the various cost
reduction efforts enacted for Fiscal 2002.


                                       15


<PAGE>



RESTRUCTURING AND OTHER CHARGES

           As a result of the Company's strategic redirection in the Second
Quarter of Fiscal 2001, the operations of the InfiniteSpace.com, Corp., Internet
Broadcasting Company, Inc. and INSCI (UK) subsidiaries were ceased, operating
expenses were reduced and the investment in Lognet was written-down. These
changes and the costs of closing these subsidiaries, along with other costs
associated with the realignment of INSCI's strategy, were charged to the
operating results. The major components of these charges were a write-down of
$6.0 million for Lognet's goodwill, a $900,000 non-cash provision primarily
related to equipment of terminated operations, $800,000 related to severance
payments for approximately 20 terminated employees, $500,000 for lease
termination costs and approximately $300,000 of other expenses associated
primarily with the closure of InfiniteSpace.com and its data center.

INTEREST EXPENSE, NET

           Interest expense for the nine months ended December 31, 2001
increased $68,000 (31%) from the prior year period. The increase was primarily
due to higher average borrowings partially offset by a non-cash interest charge
of $180,000 in the prior year period related to the issuance of warrants for
debt financing.

LIQUIDITY AND CAPITAL RESOURCES

           At December 31, 2001, the Company had $241,000 of cash and working
capital deficit of $6.5 million in comparison to $460,000 of cash and working
capital deficit of $6.9 million at March 31, 2001. Accounts receivable were $1.4
million at December 31, 2001 and $1.5 million at March 31, 2001.

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

                                                 NINE MONTHS ENDED DECEMBER 31,

                                                          2001        2000
                                                          ----        ----
Cash provided by (used in)
  Operating activities                                   $(215)      $(4,678)
  Investing activities                                      10         2,402
  Financing activities                                     (14)        1,138
  Effect of exchange rate changes on cash                    -           (61)
                                                      ---------   -----------
    Increase(decrease) in cash and cash equivalents      $(219)     $ (1,199)
                                                              -
                                                      =========   ===========

Cash and cash equivalents at end of period               $  241     $    712
                                                      =========   ===========

           During June 2001, the Company entered into a demand subordinated
convertible debt facility of up to $700,000 with Selway. We received gross
proceeds of $250,000 from the financing on June 27, 2001. Through December 31,
2001, the Company has received additional proceeds totalling $170,000. INSCI can
draw on the remainder of the facility, at the discretion of Selway, and upon
attaining certain operating milestones. The convertible debt bears an annual
interest rate of 13 percent payable in cash or in additional debentures and is
convertible into Series B Convertible Redeemable Preferred Stock (the "Series B
Preferred") at a price of $10.00 per share. The convertible debt is secured by a
junior lien on all of INSCI's assets. Unless previously converted into shares of
Series B Preferred, principal and interest are payable at the earlier of June
15, 2002 or upon demand by Selway. The Series B Preferred has liquidation
preferences, which are pari passu with other pre-existing shares of Preferred
Stock.

           INSCI entered into a change in terms agreement ("Note Agreement") for
its guarantee of a $354,000 Promissory Note which was due on October 1, 2001 to
the Pennsylvania Business Bank ("Bank"). Under the original Promissory Note,
INSCI had guaranteed all of Lognet, Inc.'s obligations to the Bank. The amount
due is to be repaid in monthly principal payments of $10,000 plus interest
beginning on November 1, 2001, with the final payment due on October 1, 2002.
Interest is payable at prime plus 2% with a minimum rate of 9%. The Promissory
Note is secured by a subordinated lien on all of the assets of INSCI. In
addition, and as a part of the change in terms agreement, Selway has pledged a
$105,000 money market account as additional collateral for the Promissory Note.
Selway and its Chief Executive Officer, Yaron Eitan, have guaranteed payment of
the Promissory Note. Mr. Eitan, as Chairman of the Board of INSCI, is an
affiliate of the Company, and the transaction may be deemed an affiliated
transaction. Additionally, the Bank released two other individual guarantors of



                                       16



<PAGE>


the Promissory Note as a part of the change in terms agreement. The Note
Agreement contains a Confession of Judgment by both the Company and the
guarantors, in the event of default and an acceleration of payment of the Note
is demanded by the Bank. Furthermore, the Note also contains a default provision
in the event of a significant change in ownership of the Company. In
consideration of Selway's guarantee and pledge of the money market account,
INSCI has agreed to pay Selway an initial fee of $18,000 and a monthly fee of
$5,000 for each month that the guarantee is outstanding. Such amounts are
payable at the option of INSCI in either cash or debentures. As of December 31,
2001, INSCI issued $28,000 of Debentures to Selway to satisfy fees under this
arrangement. The Company incorporates, by reference, its prior 8-K filing with
respect to the acquisition of Lognet, Inc., as related to the payment obligation
to the Pennsylvania Business Bank.

           We have a deficiency in our financial statements in that we have $8.2
million in liabilities and $2.2 million in assets. This deficiency, unless
remedied, can result in us not being able to continue our business operations.
Our plan to continue our business involves our ability to negotiate either a
reduction or reductions in amounts outstanding to vendors or extension of
payment terms, combined with the termination of InfiniteSpace operations.
Despite the forgoing measures, there are no assurances that we will be able to
meet certain obligations. We have recently received several default notices on
certain equipment leases and payables, which combined are material. We are
actively negotiating to satisfy these claims.

           Our Board of Directors is actively pursuing potential merger,
partnering opportunities and/or asset sale. We expect that these efforts will
result in the introduction of other parties with interests and resources, which
may be compatible with that of INSCI. However, no assurance can be given that
INSCI will be successful in raising additional capital or entering into a
business alliance. Further, there can be no assurance, assuming that INSCI
successfully raises additional funds or enters into a business alliance, that it
will maintain profitable operations or achieve positive cash flow. Additionally,
if we are unable to obtain additional funding, we may be required to seek
protection under the Federal Bankruptcy Law. Our independent accountants issued
a qualified opinion for our fiscal year ended March 31, 2001 as there exists
substantial doubt about our ability to continue as a going concern.

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



                                       17



<PAGE>

PART II  OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

           The Company was a defendant in an action commenced on April 24, 2001
by EMI Strategic Marketing, Inc., ("EMI") in the Suffolk Superior Court, Index
No. 01-1710. The EMI claim was for the sum of $109,470.27 for services rendered
to the Company with respect to web site development. The Company has resolved
this claim for a structured settlement totaling $67,000.00 and is awaiting the
exchange of closing papers.

           The Company was a defendant in an action commenced on July 16, 2001
by Computer Enterprises, Inc. ("CEI") in the Court of Common Pleas of Allegheny
County Pennsylvania, Index No. GD-01-13668. The CEI claim was for the sum of
$33,600 plus interest and costs of suit including attorney's fees for computer
consulting services provided to the Company. The Company settled this claim on
December 28, 2001 for the sum of $21,000.

           The Company was a defendant in an action commenced on October 2, 2001
by Lynx, Inc. ("Lynx") in the Suffolk Superior Court, Docket No. 01-4289. The
Lynx claim was for the sum of $57,200 plus interest for services rendered to the
Company. The Company filed a defense against the claim on November 1, 2001. The
Company settled this claim for $25,000 and is awaiting the exchange of closing
papers.

ITEM 2.    CHANGE IN SECURITIES

           This item is not applicable.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

           This item is not applicable.

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

           On October 18, 2001, INSCI 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 and Mitchell Klein to serve as directors until the next annual
         meeting.
(2)      Appointment of Arthur Andersen LLP as INSCI's independent public
         accountants for fiscal 2001.


                                       18


<PAGE>



(3)      An amendment to the Articles of Incorporation to change the name of the
         Company to INSCI Corp.
(4)      To permit the ownership of more than 19.9% of the issued and
         outstanding shares of the Company upon the election of certain security
         holder(s) to exercise and / or convert certain outstanding convertible
         securities.

         Shareholders did not approve proposals to amend the Articles of
Incorporation to increase the number of authorized shares of common stock from
40,000,000 shares of common stock to 100,000,000 shares of common stock; and an
amendment to increase the authorized number of stock options under the Company's
1997 Equity Incentive Plan from 4,000,000 shares to 7,000,000 shares.

           On December 21, 2001, INSCI held a Special Meeting of Shareholders,
and the shareholders resolved the following:

(1)      To amend the Articles of Incorporation to increase the number of
         authorized shares of common stock from 40,000,000 shares to 185,000,000
         shares.
(2)      To increase the authorized number of stock options under the Company's
         1997 Equity Incentive Plan from 4,000,000 shares to 7,000,000 shares.

ITEM 5. OTHER INFORMATION

           This item is not applicable.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)        EXHIBITS.

                None

(B)        REPORTS ON FORM 8-K.

                A report on Form 8-K dated October 1, 2001 was filed on October
                9, 2001 regarding the automatic conversion of outstanding shares
                of Preferred Stock into shares of Common Stock.

                A report on Form 8-K dated December 21, 2001 was filed on
                December 27, 2001 regarding the results of the Special Meeting
                of Shareholders held on December 21, 2001.














                                    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 14, 2002             By: /S/ HENRY F. NELSON
                                         ----------------------------------
                                         Henry F. Nelson
                                         Chief Executive Officer, President
                                         and Chief Financial Officer








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