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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549


                                    FORM 10-Q


(Mark One)

           |X| Quarterly Report Pursuant to Section 13 or 15(d) of the
                         Securities Exchange Act of 1934

                  For the quarterly period ended June 28, 2002

                                       OR

     |_| Transition report pursuant to Section 13 or 15(d) of the Securities
                              Exchange Act of 1934


                           Commission File No. 0-9919

                                    PSC INC.
             (Exact name of Registrant as Specified in Its Charter)

            New York                                             16-0969362
-------------------------------                             --------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                               Identification No.)


111 S.W. Fifth Avenue, Suite 4100, Portland, Oregon                     97204
---------------------------------------------------                   ----------
(Address of principal executive offices)                              (Zip Code)

                                  503-553-3920
                                  ------------
              (Registrant's telephone number, including area code)

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 12 months  preceding  (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   |_|

As of August 19, 2002, there were 12,834,467 shares of common stock outstanding.

<PAGE>
                            PSC INC. AND SUBSIDIARIES

                                      INDEX


PART I:  FINANCIAL INFORMATION

Item 1  Financial Statements                                         Page Number
                                                                     -----------
        Consolidated Balance Sheets as of
        December 31, 2001 and June 28, 2002 (Unaudited)....................3-4

        Consolidated  Statements of Operations and
        Accumulated Deficit for the six months ended:
        June 30, 2001(Unaudited) and June 28, 2002 (Unaudited) ..............5

        Consolidated Statements of Cash Flows for the six months ended:
        June 30, 2001 (Unaudited) and June 28, 2002 (Unaudited) .............6

        Notes to Consolidated Financial Statements (Unaudited) ...........7-13

Item 2  Management's Discussion and Analysis of
        Financial Condition and Results of Operations ...................14-17

Item 3  Quantitative and Qualitative Disclosures about Market Risk..........17

PART II:  OTHER INFORMATION

Item 1  Legal Proceedings ...............................................18-19

Item 2  Changes in Securities...............................................19

Item 3  Defaults upon Senior Securities.....................................19

Item 4  Submission of Matters to a Vote of Security Holders ................19

Item 5  Other Information   ................................................20

Item 6  Exhibits and Reports on Form 8-K....................................20

Item 7  Critical Accounting Policies and Estimates  ........................20

















                                       2

<PAGE>
PART I - FINANCIAL INFORMATION

Item 1:  Financial Statements
<TABLE>
<CAPTION>

                            PSC INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           (All amounts in thousands)


                                                                   December 31, 2001          June 28, 2002
                                                                   -----------------          -------------
                                                                                                (Unaudited)
<S>                                                                <C>                        <C>
ASSETS

Current Assets:
   Cash and cash equivalents                                                 $1,865                  $1,317
   Accounts receivable, net of allowance for doubtful
      accounts of $879 and $648, respectively                                33,850                  32,887
   Inventories, net                                                          17,885                  18,625
   Prepaid expenses and other                                                 3,195                   4,433
                                                                    ----------------        ----------------

         Total current assets                                                56,795                  57,262

Property, Plant and Equipment, net of
   accumulated depreciation of $20,707 and $22,462
   respectively                                                               8,997                   8,782

Goodwill, net of accumulated amortization of $43,214                         63,285                  63,285

Intangibles, net of accumulated amortization of $4,921 and $5,745             6,640                   8,236
                                                                    ----------------        ----------------

        Total assets                                                       $135,717                $137,565
                                                                    ================        ================
















See accompanying notes to the Consolidated Financial Statements.



                                       3
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           (All amounts in thousands)
                                   (Continued)


                                                                   December 31, 2001        June 28, 2002
                                                                   -----------------------
                                                                                             (Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)

Current Liabilities:
   Current portion of long-term debt                                       $119,349                $122,498
   Accounts payable                                                          17,325                  18,692
   Accrued expenses                                                          19,889                  18,999
   Accrued payroll and related employee benefits                              3,836                   3,422
                                                                    ----------------        ----------------

   Total current liabilities                                                160,399                 163,611

Long-Term Debt, less current maturities                                           -                       -

Other Long-Term Liabilities                                                   2,497                   2,729

Shareholders' Equity (Deficit):
   Series A convertible preferred shares, par value $.01;
     110 shares authorized, issued and outstanding
     ($11,000 aggregate liquidation value)                                        1                       1
   Series B preferred shares, par value $.01; 175
      authorized, no shares issued and outstanding                                -                       -
   Undesignated preferred shares, par value $.01;
      9,715 authorized, no shares issued and outstanding                          -                       -
   Common shares, par value $.01; 100,000 authorized
      12,834 and 12,834 shares issued and outstanding                           129                     129
   Additional paid-in capital                                                73,078                   73,07
   Accumulated deficit                                                      (95,606)                (97,904)
   Accumulated other comprehensive loss                                      (3,424)                 (2,722)
   Less treasury stock repurchased at cost, 180 shares                       (1,357)                 (1,357)
                                                                    ----------------        ----------------

        Total shareholders' equity (deficit)                                (27,179)                (28,775)
                                                                    ----------------        ----------------


Total liabilities and shareholders' equity (deficit)                       $135,717                $137,565
                                                                    ================        ================
</TABLE>







See accompanying notes to the Consolidated Financial Statements.



                                       4
<PAGE>
<TABLE>
<CAPTION>
                            PSC INC. AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
                (All amounts in thousands, except per share data)

                                                                  Three Months Ended                      Six Months Ended
                                                            --------------------------------      --------------------------------
                                                            June 30, 2001      June 28, 2002      June 30, 2001      June 28, 2002
                                                             (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)
<S>                                                            <C>                <C>               <C>                  <C>
Net Sales                                                      $50,453            $41,985           $100,927             $84,748

Cost of sales                                                   31,210             25,624             62,782              51,324
                                                            -----------       -----------         ----------          -----------
Gross profit                                                    19,243             16,361             38,145              33,424

Operating Expenses:
     Sales & marketing expense                                   7,729              8,405             15,525              16,091
     Engineering, research and development                       4,321              2,868              9,210               6,353
     General and administrative expense                          3,154              3,140              7,132               7,033
     Severance and other costs                                     169               (36)                682                   -
     Debt restructuring costs                                      500                255              2,336                 675
     Amortization of intangibles resulting from
     business acquisitions                                       2,758                  -              5,522                   -
                                                            -----------       -----------         ----------          -----------
Total Operating Expenses                                        18,631             14,632             40,407              30,152
                                                            -----------       -----------         ----------          -----------
Income (loss) from operations                                      612              1,729             (2,262)              3,272

Interest and Other (Income)/Expense:
     Interest expense, net                                       4,331              2,955              8,601               7,067
     (Gain) loss from asset sale                                 2,883                  -                309                (146)
     Other (income) expense                                        359               (29)               (281)                  -
                                                            -----------       -----------         ----------          -----------
                                                                 7,573              2,926              8,629               6,921

     Loss before income tax provision/(benefit)                (6,961)             (1,197)           (10,891)             (3,649)
     Income tax provision/(benefit)                                328               (146)               837              (1,351)
                                                            -----------       -----------         ----------          -----------
     Loss before cumulative effect of accounting               (7,289)             (1,051)           (11,728)             (2,298)
       change
     Cumulative effect of accounting change                        838                  -                838                   -
                                                            -----------       -----------         ----------          -----------
Net income/(loss)                                             $ (6,451)          $ (1,051)         $ (10,890)           $ (2,298)
                                                            ===========       ===========         ==========          ===========
Net income/(loss) per share before cumulative effect
     of accounting change:
Basic and diluted:                                            $  (0.59)            $(0.08)           $ (0.96)             $(0.18)

Net income/(loss) per share of cumulative effect of
     accounting change:
Basic and diluted:                                              $ 0.06                 -              $ 0.07                   -

Net income/(loss) per share after cumulative effect of
     accounting change:
Basic and diluted:                                            $ (.0.53)           $ (0.08)           $ (0.89)             $(0.18)

Weighted average number of common and common
     share equivalent shares outstanding:
Basic and diluted:                                              12,280             12,834             12,280              12,834

Accumulated Deficit:
     Accumulated deficit, beginning of period                $ (77,566)         $ (96,853)         $ (73,127)          $ (95,606)
     Net income/(loss)                                          (6,451)            (1,051)           (10,890)             (2,298)
                                                            -----------       -----------         ----------          -----------
Accumulated deficit, end of period                           $ (84,017)         $ (97,904)         $ (84,017)          $ (97,904)
                                                            ===========       ===========         ==========          ===========
</TABLE>
See accompanying notes to the Consolidated Financial Statements.

                                       5
<PAGE>
<TABLE>
<CAPTION>
                            PSC INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                           (All amounts in thousands)

                                                                                        Six months Ended
                                                                        -------------------------------------------------
                                                                             June 30, 2001            June 28, 2002
                                                                               (Unaudited)             (Unaudited)
<S>                                                                          <C>                      <C>
Cash Flows From Operating Activities:
   Net loss                                                                       $ (10,890)               $ (2,298)
   Adjustments to reconcile net loss to net cash provided by (used in)
    operating activities:
   Depreciation and amortization                                                      8,330                   3,923
   Change in fair value of fee option and warrants                                      380                       1
   Gain on dispositions of assets                                                      (281)                       -
   Cumulative effect of accounting change
                                                                                       (838)                       -
   (Increase)/decrease in assets:
      Accounts receivable, net                                                         (837)                    963
      Inventories                                                                       637                    (740)
      Prepaid expenses and other                                                      1,481                  (1,235)
   Increase/(decrease) in liabilities:
      Accounts payable                                                               (2,587)                  1,367
      Accrued expenses                                                                1,770                  (1,688)
      Accrued payroll and related employee benefits                                    (482)                   (418)
      Additions/(reductions) to other long-term liabilities, net                        175                   1,027
                                                                             ----------------        ----------------

      Net cash provided by / (used in) operating activities                          (3,142)                    902
                                                                             ----------------        ----------------

Cash Flows From Investing Activities:
   Capital expenditures, net                                                           (533)                 (1,648)
   Additions to intangible and other assets                                          (1,217)                 (2,278)
   Proceeds from sales of assets                                                      9,283                       -
                                                                             ----------------        ----------------

      Net cash provided by / (used in) investing activities                           7,533                  (3,926)
                                                                             ----------------        ----------------

Cash Flows From Financing Activities:
   Additions to long-term debt                                                            -                   1,775
   Payments of long-term debt                                                        (5,602)                      -
   Exercise of options and issuance of common shares                                     98                       -
                                                                             ----------------        ----------------
      Net cash provided by / (used in) financing activities                          (5,504)                  1,775
                                                                             ----------------        ----------------

Effect of exchange rate changes on cash and cash equivalents                         (1,379)                    701
                                                                             ----------------        ----------------

Net increase / (decrease) in cash and cash equivalents                               (2,492)                   (548)

Cash And Cash Equivalents:
      Beginning of period                                                              5,461                  1,865
                                                                             ----------------        ----------------
      End of period                                                                  $ 2,969                $ 1,317
                                                                             ================        ================

Supplemental Cash Flow Information:
Interest paid                                                                       $ 5,595                 $ 1,954
Income taxes paid                                                                        $4                     $22
</TABLE>

See accompanying notes to the Consolidated Financial Statements.

                                       6
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)

(1)   DESCRIPTION OF BUSINESS AND CURRENT EVENTS

     PSC  Inc.  (the  Company)  is  a  leading  provider  of  retail  automation
     solutions,  mobile and wireless  systems,  and  automated  data  collection
     products.  Its range of products includes wireless portable,  vehicle mount
     and fixed station data collection terminals, warehouse management software,
     self-checkout  systems and handheld and  fixed-position  bar code scanners.
     PSC products are used in supply chain  management  solutions in the retail,
     manufacturing,    warehousing,    distribution   and   logistics   markets.
     Approximately  49% of the sales are reported in the United  States,  33% in
     Europe and the remaining 18% occur in South  America,  Australia,  Asia and
     Japan.

     In November 2000, the Company announced a restructuring  plan to reduce its
     debt and to achieve future  profitability and growth.  These  restructuring
     plans  included  replacement  of  executive  management,  consolidation  of
     redundant  administrative  activities,  sale or  disposal  of  unprofitable
     operations and  streamlining of product lines and production  operations to
     reduce cost and increase profit contribution for products sold.

     In February  2001,  the Company sold its  verification  and imager  product
     lines for $3.8 million. The gain on the sale was $3.2 million,  recorded in
     other income/expense on the consolidated statement of operations.

     In May 2001,  the Company  sold its  Webster,  New York  facility  for $5.0
     million.  The transaction resulted in a gain of $0.1 million in 2001, after
     a write-down of the facility value in 2000 of $7.9 million.

     In July 2001, the Company sold its LazerData business for $6.4 million. The
     loss on the sale was $2.9 million recorded in other (income)/expense in the
     consolidated statement of operations.

     During 2001, 50% of all asset  disposition  proceeds were applied to reduce
     indebtedness to PSC's senior lenders.

     In July 2001, the Company  substantially  completed the process of hiring a
     new executive  management team and relocated its corporate  headquarters to
     Portland, Oregon.

     In September 2001, the Company completed its  restructuring  process with a
     further reduction in costs and expenses,  including  staffing costs.  Total
     severance  and  other   restructuring  costs  during  2001  and  2000  were
     approximately   $1.5   million  and  $4.9   million,   respectively.   Debt
     restructuring  costs for legal and consulting  totaled $3.6 million in 2001
     and $0.7  million for the first six months of 2002.  Total cost  reductions
     related to all  restructuring  activities,  including  sales of  businesses
     referred to above was  estimated to be  approximately  $40.0  million on an
     annualized basis.

     Also in September 2001, the Company initiated efforts to attract new equity
     capital to reduce and refinance  its  indebtedness  and provide  additional
     equity  resources to support  ongoing  operations.  The Company secured the
     services of an  investment  banking firm to assist in this effort.  At June
     28,  2002,  these  efforts  are  ongoing.  In  all  presently  contemplated
     recapitalization  transactions,  the  Company  anticipates  that the equity
     interests of all existing  shareholders will be extinguished.  However, the
     precise outcome of existing equity

                                       7
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)

     shareholder  interests  will be  dependent  upon further  negotiations  and
     discussions  with  prospective  private  equity  investors  and  cannot  be
     predicted with  assurance at this time. As with all business  transactions,
     it is not possible to predict whether any transaction will be consummated.

     Management's  cash  flow  projections  for the  Company  balances  the cash
     collections from revenue activities with the disbursement  requirements for
     suppliers,  capital  expenditures  and personnel  costs. The Company's cost
     reduction efforts have been focused on achieving a neutral or positive cash
     flow from operations. Successfully continuing to operate in this neutral to
     positive  cash flow  pattern is  dependent  upon the  Company's  ability to
     effectively  achieve its sales plan as well as its  continued  cost control
     performance.  Management  believes  that its revenue  and cost  performance
     objectives   are  achievable   and   sustainable   during  this  period  of
     recapitalization.  If the Company's  performance  deviates  negatively from
     this  objective,  management  intends to take all steps necessary to reduce
     cash costs to rebalance the Company's  operations to return to a neutral or
     positive cash flow performance.

     In March  2002,  the  Company  and its  lenders  reached  an  agreement  in
     principle to extend the  maturities  of the  Company's  existing  financing
     facilities  to August 1,  2002.  On August 1,  2002,  the  Company  and its
     lenders agreed to extend the maturities of the Company's existing financing
     facilities to September 1, 2002, and the Company  anticipates  that it will
     be able to obtain  additional  extensions  as  necessary.  The terms of the
     extended financing arrangements were substantially unchanged from the prior
     agreements.  The Company is required to achieve  certain  milestones in its
     recapitalization   process.   Management   believes  that  a  restructuring
     transaction  acceptable to the Company's lenders can be achieved,  although
     there can be no assurance that such a transaction will be accomplished.  In
     the event that the Company is unsuccessful in these restructuring  efforts,
     the  lenders  would be entitled to  exercise  their  respective  rights and
     remedies under the credit  facilities and applicable law, in which case the
     Company would not have sufficient  funds to repay its outstanding  debt and
     no assurance can be given that alternative sources of sufficient  financing
     would be available on acceptable terms, or on any terms at all.


(2)   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     The accompanying  consolidated  financial  statements have been prepared by
     the Company without audit,  or concurrent  review by outside  auditors,  as
     required  by the  reporting  provisions  of  the  Securities  and  Exchange
     Commission.  See Item 7, "Critical  Accounting Policies and Estimates",  on
     page 21.

     In the  opinion of  management,  these  financial  statements  include  all
     adjustments necessary to present fairly the Company's financial position as
     of June 28, 2002,  the results of  operations  for the three and six months
     ended June 30, 2001 and June 28, 2002 and its cash flows for the six months
     ended June 30, 2001 and June 28, 2002.  The results of  operations  for the
     three and six months ended June 28, 2002 are not necessarily  indicative of
     the results to be expected for the full year.

     Certain   information  and  disclosures   normally  included  in  financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or omitted.  The  accompanying  financial
     statements should be read in conjunction with the financial  statements and
     notes thereto included in the Company's  December 31, 2001 annual report on
     Form 10-K.

                                       8
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)

(3)   INVENTORIES

     Inventories  are stated at the lower of cost or market using the  first-in,
     first-out  method.  Inventory  costs  include  material,  direct  labor and
     overhead and consist of the following:

                                    December 31, 2001         June 28, 2002
                                    -----------------     -----------------
     Raw materials                         $14,586                $14,518
     Work-in-process                         3,522                  4,803
     Finished goods                          4,071                  3,329
                                       ------------           ------------
                                            22,179                 22,650
     Less inventory reserve                (4,294)                (4,025)
                                       ------------           ------------
                                           $17,885                $18,625
                                       ============           ============


(4)   LONG TERM DEBT

     Current maturities of long-term debt consists of the following:

                                       December 31, 2001     June 28, 2002
                                       -----------------     -------------
     Term loan, net of debt discount
        of $1,265 and $0                      $58,935             $60,106
     Senior revolving credit                   30,419              32,271
     Subordinated term loan, net of
     discount of $943 and $868                 29,057              29,183
     Subordinated promissory note                 938                 938
                                          ------------        ------------
     Long term debt, net                     $119,349            $122,498
                                          ============        ============

     The company has  continued  to negotiate  with its senior and  subordinated
     lenders to provide extensions to its credit  facilities.  The term loan and
     senior   revolving   credit   agreements   expire  on  September  1,  2002.
     Accordingly,  the  company has  classified  the entire term loan and senior
     revolving  credit  facility  as  current.   In  addition  all  subordinated
     indebtedness has been reclassified as current.  See Note 1, "Description of
     Business And Current Events".

(5)  ASSET SALES

     As part of the Company's overall  restructuring plans, the Company sold its
     verification  and  imager  product  lines  on  February  16,  2001 for $3.8
     million. The gain realized on the sale was approximately $3.2 million.

     On May 14, 2001,  the Company  completed the sale of its Webster,  New York
     facility  for  $5.0  million.  The  gain  realized  from  the sale was $0.1
     million. In November 2000, the Company announced the


                                       9
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)

     consolidation of its Webster,  New York headquarters with its operations in
     Eugene,  Oregon.  As  a  result,  the  Company  recorded  an  $8.6  million
     write-down in connection with the anticipated sale of the Webster, New York
     facility in accordance with Statement of Financial Accounting Standards No.
     121 (SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
     for  Long-Lived  Assets  to Be  Disposed  of".  SFAS No.  121  requires  an
     impairment  loss to be recognized  if the carrying  amount of an asset held
     for disposal  exceeds the fair value of the asset less the cost to sell the
     asset.  The loss  recognized  in 2000 was $7.9  million on the facility and
     related  leasehold  improvements  and $0.7  million on other  assets and is
     included in the consolidated statements of operations.

      On July 13, 2001, the Company  announced the completion of the sale of its
      LazerData  business  as part of its plan to divest  non-core  assets,  and
      recorded an estimated loss on disposition of that business of $2.9 million
      into the second quarter of 2001. Net assets written off in connection with
      the sale totaled $6.7 million.

      The  Company  was  required  to use 50% of the net cash  proceeds to repay
      amounts borrowed under its senior credit facilities.


(6)  SEVERANCE AND OTHER COSTS

      As of  December  31,  2001,  the  amount  of the  severance  accruals  was
      approximately  $0.3  million.  As of June  28,  2002,  the  amount  of the
      severance  accruals  was  approximately  $0.1  million,  which  relates to
      current contractual obligations.


(7)  SHAREHOLDERS' EQUITY

      Other  comprehensive  loss  reports  changes in equity  that  result  from
      transactions  and  economic  events other than  transactions  with owners.
      Other  comprehensive loss is the total of net loss and all other non-owner
      changes in equity.

                                                        Three Months Ended
                                              -------------    -------------
                                              June 30, 2001    June 28, 2002
     Net income/(loss)                              ($6,451)         ($1,051)
     Foreign currency translation adjustment           (249)             702
                                              -------------    -------------
     Comprehensive loss                             ($6,700)           ($379)
                                              =============    =============

                                                      Six Months Ended
                                              -------------    -------------
                                              June 30, 2001    June 28, 2002
     Net income/(loss)                             ($10,890)         ($2,298)
     Foreign currency translation adjustment         (1,379)           1,708
                                              -------------    -------------
     Comprehensive loss                            ($12,269)           ($590)
                                              =============    =============


                                       10
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)

     Changes in the status of options under the Company's  stock option plan are
summarized as follows:
<TABLE>
<CAPTION>
                                         January 1, 2001          Weighted            January 1, 2002           Weighted
                                                to                 Average                   to                 Average
                                          June 30, 2001             Price              June 28, 2002             Price
                                      ---------------------   ----------------     --------------------    ----------------
<S>                                   <C>                     <C>                  <C>                     <C>
     Options outstanding at
        beginning of period                  3,222                   $3.55                 3,521                 $2.64
     Options granted                            52                    1.41                   161                   .56
     Options exercised                           -                       -                     -                     -
     Options forfeited/canceled              (173)                    4.15                  (37)                  2.50
                                           --------                                      --------
     Options outstanding at
        end of period                        3,101                   $3.95                 3,645                  2.56
                                           ========                                      ========


     Number of options at end
        of period:
        Exercisable                          1,900                   $4.99                 2,314                 $3.23
        Available for grant                    263                                           514
</TABLE>

     During the six month period ended June 28, 2002,  30,000 forfeited  options
     were  cancelled  due to the  expiration  of the 1987 Stock  Option  Plan in
     December 1997. These options are not available for future grants.

(8)  NET LOSS PER COMMON AND COMMON EQUIVALENT SHARE

     Basic EPS was computed by dividing  reported  earnings  available to common
     shareholders  by weighted  average  common  shares  outstanding  during the
     period.  Diluted EPS was the same as basic EPS for the three and six months
     ended June 30, 2001 and June 28,  2002 as the affect of  options,  warrants
     and preferred shares would have been  antidilutive.  Options,  warrants and
     preferred  shares of 3,101, 975 and 180 common shares,  respectively,  were
     outstanding for the six months ended June 30, 2001.  Options,  warrants and
     preferred  shares to  purchase  3,647,  975 and 180 of common  shares  were
     outstanding for the six months ended June 28, 2002.
<TABLE>
<CAPTION>
                                                                 Three Months Ended
                           -----------------------------------------------------------------------------------------------
                                            June 30, 2001                                   June 28, 2002
                           -----------------  ----------------  -----------  --------------  ----------------  -----------
<S>                          <C>              <C>               <C>          <C>             <C>               <C>
                                                                      Per                                           Per
Basic and Diluted              Net loss           Shares             Share      Net loss           Shares          Share
EPS:                         (numerator)       (denominator)         Amount   (numerator)      (denominator)       Amount

Net loss available to
common                                          ===============     =======                    ===============
shareholders                   $ (6,451)             12,280         $(0.53)     $ (1,051)           12,834         $(0.08)
                               =========        ===============     =======     =========      ===============     =======
</TABLE>




                                       11
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                   Six Months Ended
                           -----------------------------------------------------------------------------------------------
                                            June 30, 2001                                   June 28, 2002
                           -----------------  ----------------  -----------  --------------  ----------------  -----------
<S>                          <C>              <C>               <C>          <C>             <C>               <C>
                                                                      Per                                           Per
Basic and Diluted              Net loss           Shares             Share      Net loss           Shares          Share
EPS:                         (numerator)       (denominator)         Amount   (numerator)      (denominator)       Amount
Net loss available to
common                       --------------                                     ----------
shareholders                   $ (10,890)          12,280          $ (0.89)     $ (2,298)              12,834      $(0.18)
                             ==============     ------------        -------     ----------     ---------------     --------
</TABLE>



     (9)  Derivatives

     The Company adopted  Statement of Financial  Accounting  Standards No. 133,
     "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133")
     as  amended  as of  January  1,  2001 and the  effect of  adoption  was not
     material to the Company's financial statements.

     Foreign Currency Exchange Rate Risk:

     The  Company's  exposure  to  foreign  currency  relates  primarily  to its
     international  subsidiaries.  Sales to certain countries are denominated in
     their local  currency.  The Company  enters into foreign  currency  forward
     exchange contracts to minimize the effect of foreign currency  fluctuations
     relating  to these  transactions  and  commitments  denominated  in foreign
     currencies.  The foreign exchange contracts generally have maturities of up
     to 60 days and require the Company to exchange foreign  currencies for U.S.
     dollars at maturity,  at rates agreed to at the inception of the contracts.
     The  foreign  exchange  contracts  have  not  been  designated  as  hedging
     instruments  and the gains and losses on forward  contracts are recorded in
     the consolidated statements of operations.

     Effective  January 1, 2002,  the  Company  discontinued  the use of foreign
     exchange forward contract for hedging purposes.  As of June 28, 2002, there
     were no foreign exchange forward contracts outstanding.

     Warrants:

     Effective  April 13, 2001, the Company  adopted  Emerging Issues Task Force
     Issue 00-19,  "Accounting for Derivative Financial  Instruments Indexed to,
     and Potentially  Settled in, a Company's Own Stock" ("EITF  00-19"),  which
     prescribes accounting treatment for freestanding contracts that are indexed
     to, and  potentially  settled in, a company's own stock. On April 13, 2001,
     the Company  entered into a  refinancing  modification  agreement  with its
     subordinated  lenders,  in which a portion of the consideration  involved a
     warrant  for 975 Common  Shares and is held by the  Company's  subordinated
     creditors. In March 2000, the strike price of this warrant was lowered from
     $8.00 to $5.25 and subsequently  lowered to $1.15 on April 13, 2001 as part
     of the  modification  agreement  reached on that date. The adoption of EITF
     00-19 resulted

                                       12
<PAGE>
                            PSC INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
            FOR THE SIX MONTHS ENDED JUNE 30, 2001 AND JUNE 28, 2002
                           (All amounts in thousands)
                                   (Unaudited)

     in a reclassification of $254 of additional paid-in capital to warrants,  a
     temporary equity item, at December 31, 2000. Immediately prior to the April
     13,  2001,  the  warrants  were  repriced  to fair value,  resulting  in an
     increase  in the book value of the  warrants of $108,  and a  corresponding
     decrease to cumulative effect of accounting  change.  Simultaneously,  EITF
     00-19  required an adjustment of the original value of the warrants of $600
     as well as the increase in their fair market value  determined  at the time
     of their first repricing of $600 less the amount previously reclassified of
     $254 for a total  adjustment  of $946 recorded as a reduction to additional
     paid-in capital and an increase to cumulative effect of accounting  change.
     The  warrant  is now  marked to market at its fair value at the end of each
     reporting period and the gain/loss is recorded in Other (income) / expense.

     In connection with the debt modification, the Company has agreed to pay the
     subordinated  lenders on a pro rata basis for fees up to a maximum  payment
     of $1.5 million based upon the average prevailing per share market price of
     the  Company's  Common Shares on the 15 trading days  immediately  prior to
     April 2, 2003.

     These  warrants  and  fee  option  are  accounted  for  under  SFAS  133 as
     derivative  instruments.   These  derivatives  do  not  qualify  for  hedge
     accounting,  in  accordance  with  SFAS  133,  because  they  relate to the
     Company's  stock price and not to the underlying  debt with which they were
     issued. A mark-to-market loss of $33 on both the warrants and fee option is
     recorded as Other (income) / expense in current earnings for the three- and
     six-month period ended June 28, 2002.

(10)  ADOPTION OF NEW ACCOUNTING PRONOUNCEMENT

      Goodwill,  which  represents the excess of cost over the fair value of the
      acquisition,  was previously amortized using the straight-line method over
      5-10 years.  Effective January 1, 2002, the Company stopped amortizing its
      goodwill in accordance  with Statement of Financial  Accounting  Standards
      No. 142,  "Goodwill and Other  Intangible  Assets" (SFAS 142). The Company
      has completed its initial  assessment of adopting SFAS 142, which requires
      the  the  identification  of  any  identifiable  intangibles  that  may be
      associated with the previously recognized goodwill. Based on the Company's
      assessment,   there  are  no  identifiable   intangibles  that  should  be
      separately identified from previously recognized goodwill.  The Company is
      in the process of the second  step,  testing for  impairment  based on the
      fair  value of the  goodwill.  The  Company  believes  that  the  value of
      goodwill has been impaired. Although the amount of impairment has not been
      determined,  the Company believes that the range of adjustment to goodwill
      will be $25-50  million.  The amounts  used in the  transitional  goodwill
      impairment  test  shall be  measured  as of the  beginning  of the year of
      initial  application.  The  Company is in the  process of  completing  its
      analysis and  anticipates  that it will record the impact of adopting SFAS
      142 as an accounting change no later than the end of the year.

(11) RECLASSIFICATION

         Certain amounts in prior years have been reclassified to conform to the
current year presentation.




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

Overview
     The company has undertaken steps to recapitalize  its operations  through a
     new equity contribution and restructuring of its indebtedness.  See Note 1,
     "Description of Business And Current Events".

General
-------

                                       13
<PAGE>
     The following  discussion and analysis  should be read in conjunction  with
     the Consolidated  Financial Statements and Notes to Consolidated  Financial
     Statements of the Company's December 31, 2001 annual report on Form 10-K.


Results of Operations:  Three Months ended June 30, 2001 and June  28, 2002

Net Sales.  Net sales during the three months ended June 28, 2002 decreased $8.5
million or 16.8%  compared  with the same period in 2001.  $1.3  million of this
decrease  related to the sale of business and product  lines in 2001,  for which
there was no revenue in 2002. The remaining  decrease in net sales is attributed
primarily to lower sales of handheld  scanners and scan engines of $3.4 million,
mobile and wireless products of $1.5 million, and other products and services of
$2.3 million.

Gross Profit. Gross profit during the three months ended June 28, 2002 decreased
$2.9 million or 15.0%  compared with the same period in 2001. As a percentage of
sales,  gross profit  percentage  increased  to 39.0% for the second  quarter of
2002, as compared to 38.1% in the first  quarter of 2001.  The increase in gross
profit percent was a result of the  streamlining of product lines and production
operations that reduced costs.

Sales and  Marketing.  Sales and  marketing  expenses for the three months ended
June 28, 2002 increased  $0.7 million  compared to the same period in 2001. As a
percentage of sales,  sales and marketing expense was 20.0% in 2002 versus 15.3%
in 2001.  The  percentage  increase is primarily  attributable  to the increased
investment in the direct sales  organization  to enhance contact with and expand
relationships with end user customers.

Engineering, Research and Development (ER&D). ER&D expenses for the three months
ended June 28,  2002  decreased  $1.5  million or 33.6 %,  compared  to the same
period in 2001. As a percentage of sales, ER&D was 6.8% in the second quarter of
2002,  versus 8.6% of net sales in the second  quarter of 2001.  The decrease in
ER&D is primarily attributable to cost reimbursement from an independent company
with which the Company is involved  in a joint  venture new product  development
project.

General and  Administrative.  General and administrative  expenses for the three
months  ended June 28,  2002 were  unchanged  as  compared to the same period in
2001.  Administrative  costs  decreased  by  approximately  $0.5 million in 2002
compared  to 2001,  offset by a similar  increase  in legal  costs  relating  to
certain litigation.

Debt  Restructuring  Costs. Debt  restructuring  costs for the second quarter of
2002  decreased  49.0% to $0.3  million  from $.5 million for the same period in
2001. The decrease is due to reduced  consulting  costs  necessary to manage the
debt restructuring process.

Amortization  of Goodwill.  Effective  January 1, 2002,  the Company  ceased the
amortization of goodwill,  in accordance with Statement of Financial  Accounting
Standards No. 142. See Note 10, "Adoption Of New Accounting Pronouncement".  The
amortization  expense for  goodwill  was $2.8 million for the three months ended
June 30, 2001.

Interest  Expense.  Interest  expense for the three  months  ended June 28, 2002
decreased $1.4 million or 31.8% as compared to the second quarter of 2001.  This
reduction resulted from lower interest rates and a reduction in loan origination
and   amendment   fees  related  to  the  company's   senior  and   subordinated
indebtedness.

Income Tax Provision/(Benefit).  The Company's effective tax rate was 12.2 % for
the three  months  ended June 28, 2002 versus  (4.7%) for the three months ended
June 30, 2001. A valuation allowance was recorded against the Company's deferred
tax assets  including the current  operating  losses in 2000. All tax expense or
benefit is recorded on a cash basis.  The  effective  tax rates in both 2002 and
2001 reflect the  cash-basis  income tax payments  made or tax refunds  received
during the period.


                                       14
<PAGE>
Results of Operations:  Six Months ended June 30, 2001 and June 28, 2002
------------------------------------------------------------------------

Net Sales.  Net sales during the six months ended June 28, 2002 decreased  $16.1
million or 16.0%  compared  with the same period in 2001.  $3.7  million of this
decrease  related to the sale of business and product  lines in 2001,  for which
there was no revenue in 2002. The remaining  decrease in net sales is attributed
primarily  to lower sales of handheld and scan  engines of $8.2  million,  lower
fixed  scanning  product  sales of $2.2  million  and lower  services  and other
miscellaneous  products  of $2.5  million.  Mobile and  wireless  product  sales
increased by $0.5 million.

Gross Profit.  Gross profit during the six months ended June 28, 2002  decreased
$4.7 million or 12.4%  compared with the same period in 2001. As a percentage of
sales, gross profit percentage  increased to 39.4% for the six months ended June
28, 2002, as compared to 37.8% in the same period in 2001. The increase in gross
profit was a result of the  streamlining of product lines and cost reductions in
manufacturing overhead.

Sales and Marketing.  Sales and marketing expenses for the six months ended June
28, 2002 increased to $0.6 million to $16.1 million  compared to the same period
in 2001. As a percentage of sales, sales and marketing expense was 20.0% in 2002
versus 18.3% in 2001. The percentage  increase is primarily  attributable to the
increased  investment in a direct sales organization to enhance contact with and
expand relationships with end user customers.

Engineering,  Research and Development  (ER&D). ER&D expenses for the six months
ended June 28,  2002  decreased  $2.9  million or 31.0 %,  compared  to the same
period in 2001. As a percentage of sales,  ER&D was 7.5% in the first six months
of 2002, versus 10.9% of net sales in the first six months of 2001. The decrease
in ER&D is primarily  attributable  to cost  reimbursement  from an  independent
company  with which the  Company is  involved  in a joint  venture  new  product
development  project,  and  cost  savings  efforts  brought  about  by  business
restructuring.

General and  Administrative.  General and  administrative  expenses  for the six
months ended June 28, 2002 decreased by $0.1 million to $7.0 million compared to
the same period in 2001.  As a percentage of sales,  general and  administrative
expense was 8.3% versus 7.1% in 2001. General and administrative costs decreased
as a result of the shutdown of the Webster,  New York  facility and reduction in
personnel  costs that was associated  with the  consolidation  of operations and
administration to Oregon.  These costs were offset by legal expenses  associated
with certain litigation, of approximately $0.7 million.

Severance  and Other  Costs.  During the first six months of 2001,  the  Company
recorded a pretax  charge of $0.7  million for  employee  severance  and benefit
costs  resulting  primarily  from the  consolidation  of the  Webster,  New York
operations  with its Eugene,  Oregon  personnel and  operations.  For the period
ended June 28, 2002, there was no severance expense.

Debt Restructuring  Costs. Debt restructuring  costs for the first six months of
2002  decreased  77.1% to $0.7  million from $2.3 million for the same period in
2001.  The decrease is due to reduced legal and  consulting  costs  necessary to
manage the restructuring process during 2002.

Amortization  of Goodwill.  Effective  January 1, 2002,  the Company  ceased the
amortization of goodwill,  in accordance with Statement of Financial  Accounting
Standards No. 142. See Note 10, "Adoption Of New Accounting Pronouncement".  The
amortization expense for goodwill was $5.5 million for the six months ended June
30, 2001.

Interest Expense.  Interest expense for the period ended June 28, 2002 decreased
17.8% to $7.1 million for the six months  ended June 28,  2002,  as compared the
same period in 2001.  This  reduction  resulted from lower  interest rates and a
reduction in loan origination and amendment fees related to the company's senior
and subordinated indebtedness.

                                       15
<PAGE>
Income Tax Provision/(Benefit).  The Company's effective tax rate was 37.1 % for
the six months  ended June 28, 2002 versus  (7.7%) for the six months ended June
30, 2001. The Company  recognized a $1.3 million tax receivable,  in the quarter
ended March 29, 2002  associated  with the expected  refund from a net operating
loss carryback to prior years. The refund was received in July 2002. A valuation
allowance was recorded  against the Company's  deferred tax assets including the
current  operating  losses in 2000.  All tax expense or benefit is recorded on a
cash basis. The effective tax rates in both 2002 and 2001 reflect the cash-basis
income tax payments made or tax refunds received during the period.


Liquidity and Capital Resources:
-------------------------------

Current  assets at June 28, 2002 were  relatively  unchanged  from  December 31,
2001.  Current  liabilities  increased  by  $3.2  million,  primarily  due to an
increase  in senior  indebtedness.  All  senior and  subordinated  debt has been
recorded as current liabilities.

Property,  plant and  equipment  expenditures  totaled  $1.6 million for the six
months ended June 28, 2002  compared  with $0.5 million for the six months ended
June 30, 2001. The 2002  expenditures are related to new product tooling for new
product introductions.

Additions to intangible  assets relates primarily to the development of software
for the Company's retail self-checkout  system, which is expected to be released
in 2002.  Intangible  additions for the six months ended June 28, 2002 were $2.3
million,  compared to additions of $1.2 million in the six months ended June 30,
2001.

In March 2002, the Company and its lenders  reached an agreement in principle to
extend the maturities of the Company's existing  financing  facilities to August
1, 2002. The extension  documents were signed and effective on April 3, 2002. On
August 1, 2002,  the Company and its lenders  agreed to extend the maturities of
the Company's existing financing facilities to September 1, 2002.

The terms of the financing  arrangements  with the Company's  senior lenders are
substantially   unchanged   from  the  previously   disclosed   April  13,  2001
modification agreement.  Among other provisions,  the commitment from the senior
lender for the working capital  facility is $34.0 million and the commitment for
fixed  financing  is $60.2  million.  The  interest  rate for the senior  credit
facilities  is prime + 3.50%.  The  Company is required to apply 50% of net cash
proceeds  from asset sales to repay  amounts  borrowed  under its senior  credit
facilities.  In addition,  the company is required to achieve certain milestones
in its recapitalization process.


In connection with the debt modification  agreements reached with its lenders on
April 13, 2001,  the Company  accrued $4.1  million for debt  modification  fees
payable and recorded a related discount on the debt. Debt discount was amortized
through April 1, 2002, the expiration date of the prior amendment.

At June 28, 2002,  liquidity  immediately  available to the Company consisted of
cash and cash  equivalents of $1.3 million.  The Company had a revolving  credit
facility totaling $34.0 million,  of which $32.3 million was outstanding at June
28, 2002. The Company believes that the liquidity  available for operations is a
limiting factor in its ability to finance normal operations.

The Company has  experienced  recurring  losses from  operations,  has undergone
repeated renegotiations with its lenders of senior and subordinated indebtedness
and has a  significant  working  capital  deficit.  All of the  Company's  debt,
totaling $122.5 million at June 28, 2002, is recorded as current.

These matters present the Company with a liquidity issue and raises  substantial
doubts about its ability to continue as a going concern.  Management's  plans in
regard to these  matters are discussed in Note 1,  "Description  Of Business And
Current  Events".  The  financial  statements  do not  include  any  adjustments
relating to the  recoverability  and


                                       16
<PAGE>
classification  of asset carrying  amounts or the amount and  classification  of
liabilities  that might  result,  should the  Company be unable to continue as a
going concern.

In the opinion of  management,  inflation  has not had a material  effect on the
operations of the Company.


Item 3:  Quantitative and Qualitative Disclosures about Market Risk
-------------------------------------------------------------------

There has been no  significant  change in market risk from that disclosed in the
Company's December 31, 2001 annual report on Form 10-K.


Cautionary   Statement  Pursuant  to  Safe  Harbor  Provisions  of  the  Private
--------------------------------------------------------------------------------
Securities Litigation Reform Act of 1995
----------------------------------------

     Certain statements  contained in this Management's  Discussion and Analysis
     may be  forward-looking  in  nature,  or  "forward-looking  statements"  as
     defined in the Private Securities Litigation Reform Act of 1995. Management
     cautions that these statements are estimates of future  performance and are
     highly  dependent  upon a variety of important  factors,  which could cause
     actual  results  to differ  materially  from the  estimate.  These  factors
     include the market  acceptance  of existing and new  products,  competitive
     product offerings and pricing pressures,  the successful  completion of the
     Company's recapitalization efforts,  successfully negotiating extensions to
     existing financing or the negotiation of new financing on acceptable terms,
     foreign  currency and interest rate  fluctuations,  fulfillment  of lending
     agreements and the disposition of legal issues.  Profits and available cash
     flows  also  will  be  affected  by  the   Company's   ability  to  control
     manufacturing and operating costs. Reference should be made to filings with
     the  Securities and Exchange  Commission for further  discussion of factors
     that could affect the Company's future results.
























                                       17
<PAGE>
PART II: OTHER INFORMATION

Item 1:  Legal Proceedings:
         -----------------

Symbol Technologies, Inc.

     In November,  2000, the Company  settled all then pending  litigation  with
     Symbol Technologies,  Inc.  ("Symbol").  The agreements resolved all claims
     between the parties,  settled all disputed  royalty  payments,  amended and
     clarified the Company's  existing license  agreement,  and included certain
     new patents.  ("Settlement Agreement").  Under the Settlement Agreement the
     parties also entered into product supply agreements for products that began
     shipping  in early  2001.  Under the terms of the  supply  agreements,  the
     Company agreed to purchase  hand-held  laser scanners and scan engines from
     Symbol and Symbol  agreed to purchase  fixed  position  retail PCS scanners
     from the Company.

     On June 21,  2002,  the  Company  gave  official  notice to Symbol that the
     Company  believed  Symbol had  breached  the  Settlement  Agreement  in two
     respects. A week later, Symbol brought suit against the Company in New York
     State Court in Suffolk  County.  The lawsuit  alleges,  among other things,
     that the Company failed to deliver new fixed scanner  products to Symbol on
     a timely  basis.  Symbol also  requested  injunctive  relief  requiring the
     Company to deliver certain  products to Symbol for  distribution  under the
     Settlement  Agreement.  The parties have submitted written arguments to the
     court for determination. A decision on the request for injunctive relief is
     expected within 60 days.

Lemelson

     The  declaratory  judgment  action  filed  by the  Company  and  six  other
     prominent leaders in the Automatic Identification and Data Capture industry
     ("Plaintiffs") on July 21, 1999 continues to move forward.

     In  March of  2000,  the  District  Court  had  dismissed  one  count  (the
     prosecution   laches  claim)   presented  by  Plaintiffs'  in  the  action.
     Plaintiffs'  filed an appeal of the  dismissal  of that count to the United
     States  Court of Appeals  for the Federal  Circuit  ("Circuit  Court").  On
     January 24, 2002, the Circuit Court reversed the District Court's decision,
     revitalizing Plaintiffs' ability to present the prosecution laches claim in
     the trial of the case. In June of 2002, the Lemelson Medical, Educational &
     Research Foundation,  Limited Partnership ("Lemelson") filed a Petition for
     Writ of Certiorari  to the Supreme Court of the United States  ("Petition")
     asking  the  Court  to  review  the  Circuit  Court's  decision  concerning
     prosecution laches.  Plaintiffs' will be filing an Opposition to Lemelson's
     Petition soon.

     Since the end of second quarter,  Plaintiffs have presented a number of new
     motions for summary judgment to the District Court.  These motions continue
     to make their way through the judicial process.  There have been no rulings
     on these motions to date.  The trial of this case has been  postponed  from
     August 2002 to November 2002. The Company, and as we understand,  the other
     plaintiffs, continue to be confident of prevailing in this case.

International Automated Systems

     International  Automated  Systems  (IAS)  filed a  lawsuit  in July,  1999,
     against Optimal  Robotics and the Company  alleging that the Optimal U-Scan
     self-checkout  device infringes  certain IAS patents.  The U-Scan device is
     the subject of an agreement between Optimal and the Company. The Company is
     indemnified  by Optimal  under the terms of the  agreement  and  Optimal is
     defending this action on behalf of the Company.




                                       18
<PAGE>
Metrologic Instruments, Inc.

     Metrologic  Instruments,  Inc. brought suit against the Company, in October
     1999 in the U.S.  District  Court for the District of New Jersey,  alleging
     infringement  of  seven  patents  belonging  to  Metrologic.   The  Company
     considers  all of  Metrologic's  patent  infringement  claims to be without
     merit  based  on  non-infringement  and/or  invalidity  of  the  Metrologic
     patents.  A Markman  hearing was held by the presiding judge on August 6-7,
     2002,  to address  technical  issues  related to the  patents.  Pending the
     outcome of the Markman  hearing,  any remaining  issues in the case will be
     set for trial in late fall of 2002.

Plesko Suit

     Mr. Plesko,  currently an employee of PSC, brought suit in July 2001 in the
     state  courts of New York  against  PSC and Symbol  Technologies,  alleging
     among other things, that PSC had failed to properly exploit technology that
     it earlier  purchased  from Mr.  Plesko's  company,  GAP/GEO  Technologies,
     resulting in a loss of royalty revenue.  PSC  subsequently  transferred the
     technology to Symbol as part of the  settlement  of claims  between PSC and
     Symbol.  The complaint  originally sought damages of $30.0 million from PSC
     and a greater amount from Symbol..  Symbol was  subsequently  successful on
     dismissing  the  actions  against it. PSC  considers  the  complaint  to be
     without merit and intends to vigorously  defend the case,. The Company also
     has  recently  brought a motion for summary  judgment  requesting  that the
     judge  determine  there are no issues  of fact and that the  Company  would
     prevail on the issues of law.  The hearing is  scheduled  for  September 7,
     2002.


Item 2:   Changes in Securities:
          ---------------------

Nasdaq Delisting

     On July 3, 2002 the  Company  was  notified  by Nasdaq  (the  Nasdaq  Stock
     Market,  Inc.),  of its failure to meet minimum  listing  requirements  for
     continued reporting on the Nasdaq Small Cap stock market exchange.

     On July 11, 2002, the Company responded to the notification,  requesting an
     Appeal Hearing,  which was subsequently scheduled for August 22, 2002. Upon
     further assessment by the Company,  it concluded that the Company's grounds
     for appeal would be  insufficient  to prevail at the Appeal  Hearing.  As a
     result,  on August 19, 2002, the Company withdrew its request for an Appeal
     Hearing.

     The Company  believes that Nasdaq will halt trading on the Company's  stock
     within several days of receipt of the Appeal Hearing withdrawal letter. The
     Company  believes  that it qualifies to be traded on the "Over The Counter"
     (OTC) Bulletin Board, once trading is halted on Nasdaq. The Company intends
     to  transition  to the OTC Bulletin  Board as quickly as possible,  at that
     time.


Item 3:   Defaults upon Senior Securities:
          -------------------------------

     None.


Item 4:   Submission of Matters of Shareholders to a Vote of Security Holders:
          -------------------------------------------------------------------
     None.


Item 5:   Other Information:
          -----------------

                                       19
<PAGE>
     None.


Item 6:   Exhibits and Reports on Form 8-K
          --------------------------------

          (a)    Exhibits:

                 99.1      Section 906 of the Sarbanes-Oxley Act of 2002

                 99.2      Section 906 of the Sarbanes-Oxley Act of 2002

          (b)    Reports on Form 8-K: None


Item 7:      Critical Accounting Policies and Estimates

     There has been no change in the Company's critical  accounting policies and
     estimates  from those  disclosed in the Company's  December 31, 2001 annual
     report on Form 10-K.

     The Company has  prepared  this 10-Q without  concurrent  review by outside
     auditors,  as prescribed  under the reporting  provisions of the Securities
     and Exchange  Commission  (SEC). On July 29, 2002, the Company notified the
     SEC on Form 8-K  that it had  terminated  its  auditing  relationship  with
     Arthur  Andersen.  The Company is in the process of  selecting  replacement
     auditors,  but that process has not yet been  completed.  Once  replacement
     auditors have been selected,  appropriate  notification on Form 8-K will be
     filed and the Company will arrange for the new auditors to perform a review
     of the quarterly  financial  statements  and  disclosures  reported in this
     10-Q.  An  amendment  to this  10-Q  will also be  filed,  to  confirm  the
     completion of the quarterly review process,  and adjustments,  if any, will
     be disclosed at that time.



























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<PAGE>

                                   SIGNATURES


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

                              PSC Inc.



DATE:    AUGUST 19, 2002      By:/s/EDWARD J. BOREY
                                  ------------------------------------------
                              Edward J. Borey
                              President, Chief Executive Officer and Director






DATE:    August 19, 2002      By:/s/PAUL M. BROWN
                                  ------------------------------------------
                              Paul M. Brown
                              Vice President and Chief Financial Officer
                              (Principal Financial Officer)

































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