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

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                               -------------------
                                   FORM 10-QSB

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

  FOR THE QUARTER ENDED                                COMMISSION FILE NUMBER
      JUNE 30, 2002                                            0-12969

                         TOUCHSTONE SOFTWARE CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

             DELAWARE                                        95-3778226
  (STATE OR OTHER JURISDICTION                            (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                        IDENTIFICATION NO.)

1538 TURNPIKE ST., NORTH ANDOVER, MASSACHUSETTS              01845
  (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                 (ZIP CODE)


                                 (978) 686-6468
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)


                                      NONE
                     (FORMER NAME, FORMER ADDRESS AND FORMER
                   FISCAL YEAR, IF CHANGED SINCE LAST REPORT)

     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the 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 [ ]

       The number of shares of Common Stock of the Registrant outstanding as of
August 10, 2002 was 11,440,060 shares.

================================================================================
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


                                      INDEX



                                                                           PAGE
                                                                          NUMBER
                                                                          ------

PART I.  FINANCIAL INFORMATION


ITEM 1.  Financial Statements

         Consolidated Balance Sheet -- June 30, 2002......................   3

         Consolidated Income Statements -- Three Months Ended June 30,
          2002 and June 30, 2001 and Six Months Ended June 30, 2002 and
          June 30, 2001...................................................   4

         Consolidated Statements of Cash Flows -- Six Months Ended
          June 30, 2002 and June 30, 2001.................................   5

         Notes to Consolidated Financial Statements.......................  6-10

ITEM 2.  Management's Discussion and Analysis of Financial Condition and
          Results of Operations........................................... 11-16

PART II. OTHER INFORMATION

ITEM 1.   Legal Proceedings...............................................    17

ITEM 6.  Exhibits and Reports on Form 8-K.................................    17




                                       2

<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

                         PART I - FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS

                           CONSOLIDATED BALANCE SHEET
                                  JUNE 30, 2002
                                   (UNAUDITED)

<TABLE>
<CAPTION>
<S>                                                                                     <C>
ASSETS
Current assets:
     Cash and cash equivalents...........................................................$       30,907
     Investments, marketable securities..................................................       317,200
     Accounts receivable, net............................................................        40,058
     Inventories.........................................................................        28,824
     Prepaid expenses and other current assets...........................................         6,401
                                                                                         ---------------
                Total current assets.....................................................       423,390

Note receivable, related party...........................................................        96,797
Investments, other.......................................................................       397,000
Property, and equipment, net.............................................................        32,864
                                                                                         ---------------
                                                                                               $950,051
                                                                                         ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:

     Current maturities of long-term debt................................................        29,679
     Accounts payable....................................................................       296,906
     Accrued payroll and related expenses................................................        86,384
     Other accrued expenses..............................................................        38,465
                                                                                         ---------------
          Total current liabilities......................................................       451,434
                                                                                         ---------------

Long-term debt, net of current maturities................................................        26,405
                                                                                         ---------------
          Total liabilities..............................................................       477,839
                                                                                         ---------------

Shareholders' equity:
     Preferred stock, $.001 par value, 3,000,000 shares
        authorized, none issued or outstanding
     Common stock, $.001 par value, 20,000,000 shares
        authorized, issued and outstanding,
        11,440,060 2002..................................................................        11,440
     Accumulated other comprehensive loss................................................      (345,800)
     Additional paid-in capital..........................................................    20,979,684
     Deferred compensation...............................................................       (44,884)
     Accumulated deficit.................................................................   (20,128,228)
                                                                                         ---------------
          Total shareholders' equity.....................................................       472,212
                                                                                         ---------------
                                                                                         $      950,051
                                                                                         ===============

         The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       3
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


                         CONSOLIDATED INCOME STATEMENTS
<TABLE>
<CAPTION>

                                                                 THREE MONTHS ENDED                  SIX MONTHS ENDED
                                                                 ------------------                  ----------------
                                                             JUNE 30,          JUNE 30,          JUNE 30,         JUNE 30,
                                                               2002              2001              2002             2001
                                                           ------------      ------------      ------------     ------------
<S>                                                        <C>               <C>               <C>              <C>
(UNAUDITED)
Revenues:
    Product sales ....................................     $    407,479      $    376,920      $    914,776     $    882,871
    Royalty income ...................................           36,426            33,497            81,886           92,783
                                                           ------------      ------------      ------------     ------------
      Net revenues ...................................          443,905           410,417           996,662          975,654
    Cost of revenues .................................           67,409            36,418           125,808           80,392
                                                           ------------      ------------      ------------     ------------
      Gross profit ...................................          376,496           373,999           870,854          895,262
                                                           ------------      ------------      ------------     ------------
Operating expenses:
    Sales,marketing, general and administrative ......          261,473           333,562           584,835          893,144
    Research and development .........................          132,347           127,353           265,037          256,281
                                                           ------------      ------------      ------------     ------------

     Total Operating Expenses ........................          393,820           460,915           849,972        1,149,425
                                                           ------------      ------------      ------------     ------------

Income (Loss) from Operations ........................          (17,324)          (86,916)           20,982         (254,163)
Loss on investments, net .............................             --             (55,602)             --           (239,225)
Other income, net ....................................              655             3,386            26,237            6,762
                                                           ------------      ------------      ------------     ------------
Income (Loss) before provision for income taxes ......          (16,669)         (139,132)           47,219         (486,626)
Provision for income taxes ...........................            5,233              --               7,057            2,168
                                                           ------------      ------------      ------------     ------------
Net Income(Loss) .....................................     $    (21,902)     $   (139,132)     $     40,162     $   (488,794)
                                                           ============      ============      ============     ============

Basic earnings (loss) per share ......................     $       0.00      $      (0.01)     $       0.00     $      (0.04)
                                                           ============      ============      ============     ============

Basic weighted average shares outstanding ............       11,440,060        11,440,060        11,440,060       11,440,060

Diluted  earnings (loss) per share ...................     $       0.00      $      (0.01)     $       0.00     $      (0.04)

Diluted weighted average shares outstanding ..........       11,440,060        11,440,060        12,434,510       11,440,060
                                                           ============      ============      ============     ============

              The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                        4

<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                  SIX MONTHS ENDED
                                                                                  ----------------
                                                                               JUNE 30,      JUNE 30,
                                                                                 2002           2001
                                                                              ---------      ---------
<S>                                                                           <C>            <C>
Cash flows from operating activities:
    Net Income (Loss) ...................................................     $  40,162      $(488,794)
     Adjustments to reconcile net Income (loss) to net cash
             used in operating activities:
          Depreciation ..................................................        10,344         11,770
          Amortization of deferred compensation .........................           900         95,009
          Provision for (Benefit from) from doubtful accounts ...........         3,351        (13,731)
          Realized loss on investments ..................................          --          289,220
          Accounts receivable ...........................................       (27,963)        78,792
          Inventories ...................................................         3,878         (8,504)
          Prepaid expenses and other current assets .....................        (1,012)       (13,155)
          Accounts payable ..............................................        (9,922)       (14,903)
          Deferred revenue ..............................................          --          (76,613)
          Accrued liabilities ...........................................       (43,329)       (76,237)
                                                                              ---------      ---------
             Net cash used in operating activities ......................       (23,591)      (217,146)
                                                                              ---------      ---------

Cash flows from investing activities:

     Purchase and sale of investments, net ..............................          --          181,736
     Repayments on notes receivable, related party ......................        68,756           --
                                                                              ---------      ---------
             Net cash provided by investing activities ..................        68,756        181,736
                                                                              ---------      ---------

Cash flows from financing activities:

     Payment on long-term debt ..........................................       (14,258)       (44,643)
     Restricted cash released ...........................................          --          100,000
                                                                              ---------      ---------
             Net cash provided by (used in) financing activities ........       (14,258)        55,357
                                                                              ---------      ---------

Net increase in cash and cash equivalents ...............................        30,907         19,947
Cash and cash equivalents, beginning of period ..........................          --           12,890
                                                                              ---------      ---------
Cash and cash equivalents, end of period ................................     $  30,907      $  32,837
                                                                              ---------      ---------

Supplemental disclosure of cash flow information:
Cash paid during the period for:
             Interest ...................................................     $   2,686      $  16,598
                                                                              ---------      ---------
             Income taxes ...............................................     $   1,824          2,168
                                                                              ---------      ---------

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
                                       5
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS. TouchStone Software Corporation and subsidiaries
("TouchStone" or the "Company") markets, and supports a line of computer
problem-solving utility software and supporting products and engineering
services which simplify personal computer installation, support, and
maintenance. TouchStone operates from one location in the United States. The
Company markets its products, domestically and internationally, directly to
original equipment manufacturers and end users.

PRINCIPLES OF CONSOLIDATION, The 2002 consolidated financial statements of the
Company include the financial statements of the Company's four wholly-owned
subsidiaries; eSupport.com, Inc., TouchStone Investments, Inc., TSC Investments,
LLC, Unicore Software, Inc., (inactive). All inter-company transactions and
balances have been eliminated.

BASIS OF PRESENTATION. The accompanying unaudited financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission regarding interim financial reporting. Accordingly, they
do not include all of the information and footnotes in accordance with generally
accepted accounting principles for complete financial statements and should be
read in conjuction with the audited financial statements included in the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2001. In
the opinion of management, the accompanying unaudited financial statements
contain all adjustments necessary for fair presentation of the Company's
financial position, results of operations and cash flows at the dates and for
the periods presented.

The operating results for the period ended June 30, 2002 are not necessarily
indicative of the results to be expected for the full year.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. The Company has suffered recurring operating losses, has an
accumulated deficit of $20,128,228 at June 30, 2002, and is largely dependent on
its investment portfolio to fund future operating losses, and accordingly, is
subject to a number of risks. Principally among these risks are marketing of its
products and services, which are susceptible to competition from other
companies, obsolescence of its products and services and the volatility in the
value of the Company's investment portfolio on which it is dependent to fund its
short-term operating cash deficits. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern at
June 30, 2002. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

Management's ongoing reorganization plan provides for significant staff
reductions in non-core operating and support functions, limitations on corporate
travel and a realignment of senior management responsibilities; all aimed toward
reducing operating costs to levels commensurate with current revenues. The
Company has also renegotiated certain contracts and agreements in order to
improve its short-term cash flow. In order to meet its cash requirements over
the next twelve months, management expects to supplement cash flow benefits
expected from these initiatives, by liquidating its marketable securities
classified as available for sale, as necessary. Other additional sources of
financing, including additional private debt or equity capital, are being
explored, along with seeking merger candidates with whom the Company has
substantial synergies.

CASH AND CASH EQUIVALENTS. The Company considers temporary liquid investments
with an original maturity of three months or less to be cash equivalents.

INVESTMENTS. The Company accounts for marketable securities under Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115). SFAS 115 establishes the accounting and
reporting requirements for all debt securities and for investments in equity
securities that have readily determinable fair values. All marketable securities
must be classified as one of the following: held-to-

                                       6
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

maturity, available-for-sale, or trading. Under SFAS 115, marketable security
investments classified as available for sale are carried at fair value, with
unrealized holding gains and losses, reported as a separate component of
shareholders' equity. The Company accounts for held to maturity and
nonmarketable investments using the cost method. Realized gains and losses from
the sale of investments are determined on a specific identification basis.

ACCOUNTS RECEIVABLE. An allowance for doubtful accounts is provided for those
accounts receivable considered to be uncollectible, based upon historical
experience and management's evaluation of outstanding accounts receivable at the
end of the year. At June 30, 2002 the allowance for doubtful accounts was
$5,000.

INVENTORIES. Inventories are stated at the lower of first-in, first-out cost, or
market, and consist mainly of finished goods, media, and packaging supplies.

PROPERTY AND EQUIPMENT. Property and equipment is stated at cost and depreciated
using the straight-line method based on the estimated useful lives of the assets
(two to five years). Leasehold improvements are amortized over the shorter of
the useful life or the life of the related lease.

LONG-LIVED ASSETS. The Company evaluates long-lived assets under Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed of" (SFAS 121). This
statement requires that long-lived asset and certain identifiable intangibles
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying amount of
an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. In August 2001, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets" (SFAS 144). This statement supersedes SFAS 121. However, it retains the
fundamental provisions of Statement 121 for (a) recognition and measurement of
the impairment of long-lived assets to be held and used and (b) measurement of
long-lived assets to be disposed of by sale. Management has assessed the
implementation and determined that there is no significant impact on the
consolidated financial statements of the Company.

GOODWILL AND INTANGIBLES. Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" (SFAS 142) establishes new guidance on
how to account for goodwill and intangible assets after a business combination
is completed. Among other things, it requires that goodwill and certain other
intangible assets will no longer be amortized and will be tested for impairment
at least annually and written down only when impaired. This statement will apply
to existing goodwill and intangible assets, beginning with fiscal years starting
after December 15, 2001. Management has determined there will be no impact on
its results of operations or financial position resulting from the adoption of
SFAS 142 because the Company has not entered into any business combinations
since that time and the Company currently has not recorded any goodwill or
intangible assets.

REVENUE RECOGNITION. Product sales are recorded at the time products are
shipped. The Company incurs shipping, packaging and handling costs which are
recorded in costs of revenues.

RESEARCH AND DEVELOPMENT. Research and development expenses resulting from the
design, development, and testing of new software and software maintenance and
enhancement costs are expensed as incurred, until technological feasibility has
been established and costs are considered recoverable. Thereafter, certain costs
such as coding and testing would be capitalized in accordance with Statement of
Financial Accounting Standards No. 86, "Accounting for Costs of Computer
Software to be Sold, Leased or Otherwise Marketed" (SFAS 86), until the product
is available for sale. During the second quarter of 2002, no software has been
substantially completed concurrently with the establishment of technological
feasibility; and, accordingly, no costs have been capitalized.

                                       7
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ADVERTISING COSTS. The Company expenses advertising costs as incurred.
Advertising expense was approximately $0 and $4,000 for the quarters ended June
30, 2002 and 2001, respectively.

INCOME TAXES. The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), which
requires the recognition of deferred tax assets and liabilities at tax rates
expected to be in effect when these balances reverse. Future tax benefits
attributable to temporary differences are recognized to the extent that
realization of such benefits is more likely than not.

STOCK-BASED COMPENSATION. The Company accounts for stock-based employee
compensation arrangements using the intrinsic value method of accounting
prescribed in accordance with Accounting Principles Board ("APB") Opinion No.
25, "Accounting for Stock Issued to Employees". The Company provides proforma
disclosures of net income (loss) and income (loss) per share as required under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123). SFAS 123 encourages, but does not require companies to
recognize compensation expense for grants of stock, stock options, and other
equity instruments based on the fair value method of accounting. The Company
accounts for stock options granted to consultants, independent representatives
and other non-employees in accordance with SFAS No. 123 and EITF 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services. In March 2000, the
FASB issued FASB Interpretation No. 44, "Accounting for Certain Transactions
Involving Stock Compensation - an Interpretation of APB Opinion No. 25" ("FIN
44"). FIN 44 is generally effective for transactions occurring after July 1,
2000 but applies to certain transactions dating back to December 15, 1998. The
Company believes the adoption of FIN 44 did not have a material impact on the
Company's financial position or results of operation.

EARNINGS PER SHARE. Pursuant to Statement of Financial Accounting Standards No.
128, "Earnings Per Share" (SFAS 128), the Company provides dual presentation of
"Basic" and "Diluted" EPS, replacing "Primary" and "Fully diluted" EPS formerly
under Accounting Principals Board ("APB") Opinion No. 15. Basic EPS excludes
dilution from common stock equivalents and is computed by dividing income
available to common stockholders by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution from
common stock equivalents, similar to fully diluted EPS, but uses only the
average stock price during the period as part of the computation.

FAIR VALUE OF FINANCIAL INSTRUMENTS. The recorded amounts of financial
instruments, including cash equivalents, investments, accounts and notes
receivable, accounts payable, accrued liabilities and deferred revenues,
approximate their fair value because of the short maturity of these instruments.
The fair value of the Company's long-term debt approximates its carrying value.

USE OF ESTIMATES. The preparation of the Company's consolidated financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions. Such estimates and assumptions
affect the reported amounts of assets and liabilities and disclosure of
contingent liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the periods then ended. Actual results
could differ from management's estimates.

COMPREHENSIVE INCOME. In 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). This
statement establishes standards for the reporting and display of comprehensive
income and its components in the financial statements. Comprehensive income, as
defined, includes all changes in equity during a period from non-owner sources.
Examples of items to be included in comprehensive income, which are excluded
from net income, include foreign currency translation adjustment and unrealized
gains and losses on available-for-sale securities. For the three month period
ended June 30, 2002 total comprehensive income was 108,098 as compared to a loss
of (104,836) for the same period the prior year. For the six months period ended
June 30, 2002 the total comprehensive income was $167,562 as compared to a loss
of ($409,147) for the same period the prior year. The difference between net
income (loss) and comprehensive income (loss) is unrealized gains or (losses) on
marketable investments.

                                       8
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

1.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. In 2001, the
Company adopted Statement of Financial Accounting Standards No. 133, "Accounting
for Derivative Instruments and Hedging Activities" (SFAS 133). This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives will be reported in the statement of operations
or as a deferred item, depending on the use of the derivatives and whether they
qualify for hedge accounting. The key criterion for hedge accounting is that the
derivative must be highly effective in achieving offsetting changes in fair
value or cash flows of the hedged items during the term of the hedge. Management
has determined there will be no impact on its results of operations or financial
position resulting from the adoption of SFAS 133 because the Company currently
does not hold derivative instruments.

REVENUE RECOGNITION IN FINANCIAL STATEMENTS. In December 1999, the Securities
and Exchange Commission ("SEC") issued Staff Accounting Bulletin 101, "Revenue
Recognition in Financial Statements" ("SAB 101") which provides guidance related
to revenue recognition based on interpretations and practices followed by the
SEC. SAB 101A was released on March 24, 2000 and deferred the effective date to
no later than the second fiscal quarter beginning after December 15, 1999. In
June 2000, the SEC issued SAB 101B which delays the implementation date of SAB
101 until no later than the fourth fiscal quarter of fiscal years beginning
after December 15, 1999. SAB 101 requires companies to report any changes in
revenue recognition as a cumulative change in accounting principle at the time
of implementation in accordance with Accounting Principles Board Opinion No. 20,
"Accounting Changes". Management has accessed the implementation and determined
that there is no significant impact on the consolidated financial statements of
the Company.

RECENTLY ISSUED ACCOUNTING STANDARDS. In June 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 141,
"Business Combinations" (SFAS 141). SFAS 141 provides new guidance on the
accounting for a business combination at the date a business combination is
completed. Specifically, it requires use of the purchase method of accounting
for all business combinations initiated after June 30, 2001, thereby eliminating
use of the pooling-of-interest method.

2.       EARNINGS (LOSS) PER SHARE

The Company has adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," ("EPS") which replaces the presentation of "primary"
earnings per share with "basic" earnings per share and the presentation of
"fully diluted" earnings per share with "diluted" earnings per share. All
previously reported EPS amounts have been restated based on the provisions of
the new standard. Basic EPS amounts are based upon the weighted average number
of common shares outstanding. Diluted EPS amounts are based upon the weighted
average number of common and common equivalent shares outstanding. Common
equivalent shares include stock options using the treasury stock method. Common
equivalent shares are excluded from the calculation of diluted EPS in loss
years, as the impact is anti-dilutive. At June 30, 2002, the number of
outstanding stock options and warrants were 994,450. There was no difference
between basic and diluted EPS for each period presented. The number of shares
used in computing EPS is as follows:

<TABLE>
<CAPTION>
                                                                 FOR THE THREE MONTHS
                                                                     ENDED JUNE 30,

                                                                  2002          2001
                                                                  ----          ----
<S>                                                          <C>              <C>
Weighted average number of shares outstanding basic:          11,440,060       11,440,060

Weighted average number of shares outstanding diluted:        11,440,060       11,440,060
</TABLE>
                                       9
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

3.       NOTE RECEIVABLE - RELATED PARTY

         During 2000, TSC Investments, LLC entered into an agreement to advance
up to $500,000 to Metro Investments, LLC ("Metro"), to invest in internet-based
companies. Metro is owned 100% by Pierre Narath, the Company's Chairman and
Jason Raza, the Company's President and Chief Executive Officer. The advances
are supported by a 5-year promissory note. The terms of the note require
interest to accrue at the rate of 12% per annum payable monthly, beginning
January 2002. The note is secured by 100% of the investments held by Metro.
Proceeds from the sale of any of the underlying investments must be used to pay
outstanding principal and interest. All outstanding principal and interest is
due December 31, 2004.

         During 2001, the Board of Directors approved an amendment to the note.
In consideration of the contribution by Nr. Narath and Mr. Raza of their 20%
interest in TSC investments, LLC to TSC Investment Inc. and Metro's commitment
to accelerate repayment of the note, the Company agreed to reduce the rate of
interest from 12% to 8% per annum, effective November 1, 2001. A payment of
$20,000 was received during October 2001. During the six months ended June 30,
2002 aggregate payments of $68,756 including accrued interest have been made by
Mr. Narath and Mr. Raza.

         Total advances under this agreement amounted to $350,000 plus total
accrued interest of $39,553, of which $292,756 has been repaid through June 30,
2002.























                                       10
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

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

OVERVIEW

     TouchStone Software Corporation, Inc. and its consolidated subsidiaries,
("TouchStone" or "the Company") is a provider of system management software,
which includes basic input/output ("BIOS") software upgrades, personal computer
("PC") diagnostics for personal computers and embedded systems. System
management software is one of the fundamental layers in any microprocessor-based
system (including PCs) architecture and provides an essential interface between
the systems's operating software and hardware. Organized in 1982 as a California
corporation, the Company reincorporated in Delaware in January 1997. The
Company's executive offices are located at 1538 Turnpike Street, North Andover,
Massachusetts 01845, and its telephone number is (978) 686-6468.

     We are the world's oldest and largest provider of BIOS Upgrades with over
12 years of unparalleled excellence in the industry. Not only are we the oldest
and largest BIOS Upgrade Company, but we are also the exclusive authorized BIOS
upgrade company and support center for Phoenix Technologies, Inc. (NASDAQ PTEC)
AwardBIOS. For many years, we have enjoyed our relationships with the world's
leading Motherboard Manufacturers and our engineering team works closely with
all of these companies to ensure that we have the latest code to include with
our BIOS Upgrades. It is because of our experience, knowledge and expertise that
we believe that we can upgrade the BIOS on any PC and have long enjoyed the
reputation of being the source for BIOS Upgrades.

     In January 2000, the Company formed eSupport.com, Inc. (a New Hampshire
Corporation), a wholly-owned subsidiary, which currently conducts the day to day
operations. The Companys core product is the BIOS, which is the software
initially executed after the system is turned on, tests and initializes hardware
components, initiates the operating system and then provides advanced interface
functions. BIOS software upgrades allow end-users of desktop PCs to extend the
life of their systems and reduce the overall ownership cost of a PC. During the
past several years, eSupport has grown into a full-service engineering company
supplying not only BIOS software upgrades, but also PC diagnostics software and
NRE (non-recurring engineering) services to both end-users and OEM customers. As
the evolution of software and hardware has become more complex, the need for
compatibility has increased in importance. eSupport believes that its experience
and customer focus allow it to quickly identify solutions and market products
compatible with the array of operating systems, application programs, utilities
and hardware products available.

     eSupport's customers include primarily end-users, enterprises such as a
majority of Fortune 500 corporations, government agencies, major educational and
financial institutions, designers and manufacturers of motherboards, PC systems
and other microprocessor-based or embedded devices. eSupport markets and
licenses its products and services worldwide.

INDUSTRY OVERVIEW

During the last decade, the personal computer industry has grown rapidly -
fueled most recently by the Internet. The Company believes that the market will
continue to expand in the future as technological advances and increased
functionality, combined with lower pricing, will increasingly make personal
computers common for use in both homes and businesses. Future changes in the
operating systems that run personal computers may contain some of the
functionality of certain utility software of the kind marketed by the Company.
The software industry, including the utility market, is increasingly being
dominated by a few very large competitors. However, the Company believes that
the complexities created by the Internet, multimedia and connectivity utilizing
enhanced video, storage, animation, and audio capabilities will continue to
drive the demand for new, sophisticated, separately installed utility software
and BIOS upgrades.

                                       11
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


PRODUCTS AND SERVICES

Our revenue is derived from two principal sources:  software products and
                                                    engineering services.

eSupport.com currently offers the following products:

--------------------------------------------------------------------------------
PRODUCT TITLE         DESCRIPTION
--------------------------------------------------------------------------------

BIOS                  The BIOS is the control center of any PC or compatible.
UPGRADE SOLUTIONS     Without a properly functioning one, the operating system
                      will not run correctly, devices will not configure, and
                      the system will fail. The Company's BIOS upgrades
                      solutions (known as firmware), allow end-users to keep
                      their systems current by enabling the latest technology,
                      such as large drive support, increased RAM size, processor
                      upgrades, etc. Once the BIOS upgrade is installed the
                      operating system (Windows, Linux, etc) will then be able
                      to manage new technology add-ons.

CHECKIT PE(R)         7.0 CheckIt 7.0 Portable Edition is a modular PC testing
PORTABLE EDITION      and diagnostics tool expressly designed for computer
                      manufacturers, resellers and repair centers. Designed to
                      meet the requirements of demanding professional users, it
                      brings the power of a professional testing laboratory to
                      anyone who installs, checks, develops, refurbishes, or
                      repairs PC hardware. CheckIt 7.0 PE was developed for use
                      by PC manufacturers and after-market professionals - at
                      varying levels and with varying technical requirements.
                      TouchStone is licensed by Smith Micro Software, Inc. to
                      resell this product.

CARDWARE(R)6.0        CardWare enables PCs and other electronic devices to
                      recognize, install, configure and operate peripheral
                      devices that comply with PCMCIA standards. CardWare
                      provides a number of benefits over traditional PC Card
                      software, including the efficient use of system memory,
                      greater portability, ease of maintenance and a more
                      modular design. CardWare can be tailored to an OEM's needs
                      to work with the OEM's power management and plug and play
                      specifications. CardWare is also available in a single
                      user version. A software development kit is available for
                      designers who wish to use our tools to help design their
                      PC Card products. CardWare was designed to operate with
                      Windows NT4.0, DOS & OS/2 solutions. TouchStone is
                      licensed by APSoft, Inc to offer this product for resale.

ISA/PCI POSTCARD      The ISA and PCI Postcard is a plug-in diagnostic card to
                      aid MIS professionals and PC end-users alike to determine
                      the causes of their system failures. It requires no
                      operating system to run and works on any PC or compatible.
                      The ISA POSTcard can be plugged into any XT, AT, ISA or
                      EISA compatible expansion slot and the PCI POSTcard can be
                      plugged into and PCI expansion slot and in seconds
                      POSTcard is displaying test results, often pinpointing the
                      exact bad component. The POSTcard V3 user's manual lists
                      the BIOS POST codes of all major BIOS vendors.


SERVICES

eSupport.com currently offers the following services:

                                       12
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

--------------------------------------------------------------------------------
SERVICE               DESCRIPTION
--------------------------------------------------------------------------------

BIOS ENGINEERING      TouchStone is a full-service engineering company with
AND OEM SERVICES      software and hardware engineers that have extensive
                      experience in BIOS development, embedded designs, and all
                      aspects of the system management software design and
                      development. As an independent authorized distributor of
                      Award/Phoenix, TouchStone has access to the very latest
                      source code and development techniques.

RESULTS OF OPERATIONS

         The following is a preliminary discussion of the financial condition
and results of operations of the Company as of June 30, 2002 and June 30, 2001
and should be read in conjunction with the accompanying consolidated financial
statements and notes thereto and the Company's audited consolidated financial
statements and notes thereto for the year ended December 31, 2001, included in
the Company's Annual Report on Form 10-KSB and is qualified in its entirety by
reference thereto.

         The following table sets forth, for the periods indicated certain
consolidated statement of operations information as a percentage of the
Company's total revenues represented by each item. The Company's historical
results are not necessarily indicative of results in any future period.

<TABLE>
<CAPTION>
                                                         THREE        THREE       SIX         SIX
                                                         MONTHS       MONTHS      MONTHS      MONTHS
                                                         ENDED        ENDED       ENDED       ENDED
                                                        JUNE 30,     JUNE 30,    JUNE 30,    JUNE 30,
                                                          2002        2001        2002        2001
            <S>                                           <C>         <C>         <C>         <C>
             Revenues:
                Product sales                              92%         92%         92%         90%
                Royalty income                              8           8           8          10
             Total revenues                               100         100         100         100
             Cost of revenues                              15           9          13           8
             Gross profit                                  85          91          87          92
             Operating expenses:
                 Sales, marketing, general and
                   Administrative                          59          81          59          92
                 Research and development                  30          31          26          26
                                                      -------------------------------------------------
                               Total operating             89         112         85          118
             expenses
             Income (loss) from operations                 (4)        (21)          2         (26)
             Loss on investments, net                       -         (14)          -         (25)
             Other income, net                              -           1           3           1
             Income (loss) before provision for
             income taxes                                  (4)        (34)          5         (50)
             Provision for income taxes                     1           -           1           -
             Net income (loss)                             (5)%       (34)%        4%         (50)%
                                                      =================================================
</TABLE>

COMPARISON OF THREE MONTH PERIODS ENDED JUNE 30, 2002  AND 2001

         REVENUES. The Company's revenues consist of product sales, royalties
and engineering services revenues. Product revenues are recorded at the time
products are shipped. Royalty income is recognized upon receipt of a

                                       13
<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

royalty report from the licensor. Engineering services revenue generally
consists of amounts charged for customization of the software prior to delivery
and are generally recognized as the services are performed. Product revenues
increased $30,559 for the three month period ended June 30, 2002 as compared to
the same period a year ago. The increase in revenues is a result of management's
continued focus on the BIOS upgrade business. Royalty revenue increased by
approximately $3,000 or 9% as compared to a year ago. This increase is a result
of additional sales by the Company's customer who pay royalties for the use of
our technology. For the quarter ended June 30, 2002 the Company experienced an
overall increase in revenues of 8% as compared to the same period a year ago.

         COST OF REVENUES. Cost of revenues consists of the cost of materials,
freight expenses, royalties paid to other software development companies and
direct costs associated with engineering services revenues. Cost of revenues as
a percentage of revenue increased to 15% for the three month period ended June
30, 2002, as compared to 9% of revenues for the same period of the prior year,
in part from the smaller margin related to the sales of third party products
introduced on a test basis during the current quarter. The revenue generated
from these products for the quarter ended June 30, 2002 amounted to $15,161 with
a cost of goods sold of $11,912. The increase to a higher percentage of products
sold that were affected by an increase in packaging and shipping costs.

         SALES, MARKETING, GENERAL AND ADMINISTRATIVE. Sales, marketing, general
and administrative expenses consist primarily of sales salaries & commissions,
professional services and facilities costs. Sales, marketing, general and
administrative expenses decreased by approximately $72,000, or 22%, for the
three month period ended June 30, 2002, from the same period of the prior year
due primarily from a reduction in administrative and executive salaries, a
reduction in travel related costs, along with various cost cutting measures
related to professional fees and outside services such as co-location services
for the Company's data servers.

         RESEARCH AND DEVELOPMENT. Research and development expenses consist
primarily of engineering personnel and related expenses. Research and
development expenses increased by approximately $5,000 or 4%, for the three
month period ended June 30, 2002 from the same period of the prior year
primarily due to the addition of an engineer who had previously been working on
a consulting basis as needed.

         OTHER INCOME,(EXPENSE), NET. Other income, (expense) net consists of
interest income associated with the related party note and interest expense
associated with the settlement note.

LIQUIDITY AND CAPITAL RESOURCES

         During the period ended June 30, 2002, the Company used cash resources
of $23,000 for operating activities as compared to $217,000 during the same
period one year ago.

         The Company's cash balance at June 30, 2002 was $31,000 as compared to
$33,000 a year ago. Investments in marketable securities totaled $317,200 at
June 30, 2002, as compared to $295,300 a year ago. This increase is due to a
$0.22 per share increase in the fair-market value of the 260,000 share held in
PartsBase Inc., and by the sale of the remaining 27,800 shares of Smith Micro
stock during the the third quarter of 2001 with a corresponding value of $35,300
reported at June 30, 2001. These shares were received in connection with the
sale of the CheckIT product line to Smith Micro Software in 2000.

         Working capital decreased from approximately $89,000 at June 30, 2001
to a $28,000 deficit at June 30, 2002. During the quarter ended June 30, 2002
three payments were made on the debt related to the settlement agreement with a
former CEO, in the amount of $7,182. The remaining outstanding balance as of
June 30,2002 was $56,084 and is scheduled to be repaid through April 2004.

         Management's ongoing reorganization plan provides for significant staff
reductions in non-core operating and support functions, limitations on corporate
travel and a realignment of senior management responsibilities; all aimed toward
reducing operating costs to levels commensurate with current revenues. The
Company has also renegotiated certain contracts and agreements in order to
improve its near-term cash flow. As part of the Company's continued
reorganization plan, effective April 1, 2002, and concurrent with the expiration
of his employment
                                       14
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

agreement, the Company's CEO and President, Pierre Narath, has resigned his
position as President and Chief Executive Officer and will serve as Chairman of
the Board of Directors of the Company. Mr. Raza, the Company's Vice President
assumed the duties of President and Chief Executive Officer at that time.
Commencing April 1, 2002, Mr. Raza and Mr. Narath have agreed to annual base
salaries of approximately $150,000 and $70,000 per year, respectively and they
are each employees at will. Resulting in an overall reduction in annual
executive compensation of approximately $175,000.

         In order to meet its cash requirements over the next twelve months,
management expects to supplement cash flow benefits expected from these
initiatives, by liquidating its marketable securities classified as available
for sale, as necessary. Other additional sources of financing, including
additional private debt or equity capital are being explored, along with seeking
merger candidates with whom the Company has substantial synergies.

         The Company continues to operate with no material commitments for
capital expenditures and we anticipate that expenditures will continue to
decrease in the immediate future as we continue to cut costs during our efforts
to restructure current operating expenditure in line with our current revenue
stream.

                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         CERTAIN STATEMENTS CONTAINED IN THIS ANNUAL REPORT ON FORM 10-KSB,
INCLUDING INFORMATION WITH RESPECT TO FUTURE BUSINESS PLANS, CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES
ACT AND SECTION 21E OF THE SECURITIES EXCHANGE ACT. STATEMENTS CONTAINED HEREIN
THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING
STATEMENTS. WITHOUT LIMITING THE FOREGOING, THE WORDS "ANTICIPATES," "BELIEVES,"
"PLANS," "EXPECTS," AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY
FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE BASED ON MANAGEMENT'S CURRENT
EXPECTATIONS AND ARE SUBJECT TO A NUMBER OF FACTORS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS or outcomes to differ materially from those described or
implied in such forward-looking statements.

          o that we will continue to enter reseller and original equipment
            manufacturer relationships;
          o that we anticipate our gross margins may increase;
          o that we currently anticipate that our available cash resources will
            be sufficient to meet our anticipated needs for working capital and
            capital expenditures for at least the next year;

         We caution investors that there are a number of important factors that
could cause our results to differ materially from those indicated by such
forward-looking statements. These factors include those set forth below in the
"Factors that May Affect Future Results and Market Price of Stock" and elsewhere
throughout this report.

        FACTORS THAT MAY AFFECT FUTURE RESULTS AND MARKET PRICE OF STOCK

         We have incurred substantial losses and anticipate incurring continued
losses. Until this year the Company had suffered recurring operating losses, has
an accumulated deficit of $20,128,228 at June 30, 2002, and is largely dependent
on its investment portfolio to fund any future operating losses. If our revenue
grows more slowly than we currently anticipate or if our operating expenses
increase, our business, results of operations and financial condition will be
materially and adversely affected. These factors, among others, raise
substantial doubt about the Company's ability to continue as a going concern at
June 30, 2002.

         Our quarterly operating results are subject to significant
fluctuations, and you should not rely on them as and indication of our future
results.

         Our revenue and operating results may vary significantly from quarter
to quarter due to a number of factors, not all of which are in our control.
Future revenue is difficult to forecast and for the foreseeable future will be
influenced by the timing and amount of sales to new customers.

                                       15
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES

         Although we have reduced operating expenditures through various
methods, many of our continuing expenses are relatively fixed and are incurred
in part based on expectations of future revenue. We may be unable to adjust
spending quickly enough to offset any unexpected revenue shortfall. Accordingly,
any shortfall in revenue may cause significant variation in operating results in
any quarter.

         Because of these factors, you should not rely on quarter-to-quarter
comparisons or our results of operations as an indication of our future
performance. It is possible that, in future periods, our results of operations
may be below the expectations of public market analysts and investors. This
could cause the trading price of our common stock to decline.

         Competition could reduce our market share and harm our business.
Competitors may be able to develop products and services that are more
attractive to businesses than our products and services. If we cannot deliver
satisfactory support and maintenance services to our customers, our revenues may
be harmed. Our business may suffer as a result or our reduction in workforce.
Our business will not grow if we do not keep pace with the rapidly changing
technologies. We may need additional financing which could be difficult to
obtain. Our business may suffer if we cannot protect our intellectual property.

     The Company's Common Stock was traded on The NASDAQ National Market from
May 19, 1995, until July 9, 1999 under the symbol "TSSW." On July 9, 1999, the
NASDAQ Listing Qualification Panel (the "Panel") determined to delist the
Company's shares from the NASDAQ National Market and noted the Company did not
comply with the requirements for continued listing on the NASDAQ Small Cap
Market. The Panel based its decision primarily on its lack of confidence in the
Company's ability to achieve and maintain compliance with the minimum bid price
requirement of Rule 4450(a) (5). The Panel also cited its concern that the
Company would not maintain the level of net tangible assets required by
Marketplace Rule 4450(a) (3). The Company's shares now trade on the OTC Bulletin
Board.

     The price at which our common stock will trade has been and is likely to
continue to be highly volatile and may fluctuate substantially due to a number
of factors, many of which are beyond our control, including:

     o        actual or anticipated fluctuations in our results of operations
     o        our ability to raise additional capital if needed
     o        technological innovations by us or our competitors
     o        increased competition
     o        additions or departures of key personnel
     o        conditions and trends in our industry
     o        general market conditions


                                       16

<PAGE>
                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


                           PART II--OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

         The Company is currently unaware or subject to any legal proceedings
and claims, other than those which arise, in the ordinary course of its
business. Although occasional adverse decisions (or settlements) may occur, the
Company believes that the final disposition of such matters will not have a
material adverse effect on the financial position or results of operations of
the Company.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

       (b)  Reports on Form 8-K
            No reports on Form 8-K were filed by the Company during the quarter
            ended June 30, 2002.





























                                       17
<PAGE>

                TOUCHSTONE SOFTWARE CORPORATION AND SUBSIDIARIES


                                   SIGNATURES

     IN ACCORDANCE WITH THE REQUIREMENTS OF THE EXCHANGE ACT, THE REGISTRANT
CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED.

                                          TOUCHSTONE SOFTWARE CORPORATION
                                                    (Registrant)

     NAME                             TITLE                           DATE

/s/ Jason K. Raza       Chief Executive Officer and President   August 10, 2002
--------------------
   JASON K. RAZA































                                       18