UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

[X]   Quarterly Report pursuant to Section 13 or 15(d) of the Securities
      Exchange Act of 1934

      For the quarterly period ended March 31, 2001

[ ]   Transition Report pursuant to 13 or 15(d) of the Securities Exchange
      Act of 1934

      For the transition period from             to
                                     -----------    ------------------

      Commission File Number 0-26341

                                 PC-EPHONE, INC.
                                 ---------------
        (Exact name of Small Business Issuer as specified in its charter)

Nevada                                                       98-0347324
-------------------------------                        -----------------------
(State or other jurisdiction of                            (IRS Employer
incorporation)                                            Identification No.)

        #515- 3440 Wilshire Boulevard, Los Angeles, California, USA 90010
        -----------------------------------------------------------------
                    (Address of principal executive offices)
                    ----------------------------------------

                                  213-487-8000
                                  ------------
                           (Issuer's telephone number)
                           ---------------------------

Indicate by check mark whether the registrant (1) has files all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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. (X) Yes     ( ) No

There were 16,122,167 common shares outstanding of as of April 30, 2001.

Transitional Small Business Disclosure Format (check one):  Yes [ ]   No [X]


<PAGE>



                         PART I - FINANCIAL INFORMATION

Item 1.      Financial Statements

GENERAL

PC-EPhone, Inc.'s (the "Company's") un-audited financial statements for the
three months ended March 31, 2001 are included with this Form 10-QSB.  The
un-audited financial statements for the three months ended March 31, 2001
include:

    (a)  Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000;
    (b)  Consolidated Statements of Loss and Deficit - for the three month
         periods ended March 31, 2001 and March 31, 2000;
    (c)  Consolidated Statements of Cash Flows - for the three months ended
         March 31, 2001 and March 31, 2000;
    (d)  Consolidated Statements of Changes in Shareholders' Equity - for the
         three months ended March 31, 2001 and the year ended December 31,
         2000;
    (e)  Notes to Consolidated Financial Statements

The un-audited financial statements have been prepared in accordance with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B and, therefore,
do not include all information and footnotes necessary for a complete
presentation of financial position, results of operations, cash flows, and
stockholders' equity in conformity with generally accepted accounting
principles.  In the opinion of management, all adjustments considered necessary
for a fair presentation of the results of operations and financial position have
been included and all such adjustments are of a normal recurring nature.
Operating results for the three months ended March 31, 2001 are not necessarily
indicative of the results that can be expected for the year ending December 31,
2001.




<PAGE>

                                 PC-EPHONE, INC.
                       (formerly Newlands Oil & Gas Inc.)
                           CONSOLIDATED BALANCE SHEETS
                      March 31, 2001 and December 31, 2000
                                   (Unaudited)
                                    ---------


                              ASSETS                  March 31,     December 31,
                                                        2001            2000
                                                        ----            ----

Current

   Cash                                             $    119,458   $     81,780
   Accounts receivable                                     2,260           -
   Prepaid expenses and deposits - Note 4                  8,132         35,016
                                                    ------------   ------------
                                                         129,850        116,796

Loans receivable                                          31,000         20,000

Capital assets                                            24,575         23,884

Distribution rights - Note 3                           8,900,582      9,230,233
                                                    ------------   ------------
                                                    $  9,086,007   $  9,390,913
                                                    ============   ============

                                   LIABILITIES
                                   -----------

Current
   Accounts payable                                 $    143,325   $    157,591
   Note payable                                          123,058        120,000
   Advances payable                                      475,000           -
                                                    ------------   ------------

                                                         741,383        277,591
                                                    ------------   ------------

                              STOCKHOLDERS' EQUITY
                              --------------------

Capital stock - Note 4                                    16,122         16,122
Additional paid-in capital                            10,183,178     10,054,336
Deficit                                               (1,854,676)      (957,136)
                                                    ------------   ------------

                                                       8,344,624      9,113,322
                                                    ------------   ------------

                                                    $  9,086,007   $  9,390,913
                                                    ============   ============

Continuance of Operations - Note 1 (a)
Commitments - Notes 3 and 4
Subsequent Event - Note 4

APPROVED BY THE DIRECTORS:



/s/ Douglas Yee,             , Director  /s/ Terrence King,           , Director
-----------------------------            -----------------------------

                             SEE ACCOMPANYING NOTES

<PAGE>

                                 PC-EPHONE, INC.
                       (formerly Newlands Oil & Gas Inc.)
                   CONSOLIDATED STATEMENTS OF LOSS AND DEFICIT
            for the three month periods ended March 31, 2001 and 2000
                                   (Unaudited)
                                    ---------

                                                      March 31,     December 31,
                                                        2001            2000
                                                        ----            ----

General and Administrative Expenses
   Accounting and audit                             $     12,015   $      1,870
   Amortization of capital assets                          1,543           -
   Amortization of distribution rights                   329,651           -
   Consulting                                            187,718         21,000
   Filing                                                  4,975            400
   Legal                                                  73,682          1,064
   Marketing                                              31,302           -
   Office and telephone                                   17,216             19
   Product testing                                        12,458           -
   Rent                                                   11,356          1,605
   Transfer agent                                          2,611            253
   Travel                                                 84,171           -
                                                    ------------   ------------

                                                         768,698         26,211

Other
   Non-cash compensation charge                          128,842           -
                                                    ------------   ------------

Net loss for the period                                  897,540         26,211

Deficit, beginning of the period                         957,136        268,496
                                                    ------------   ------------

Deficit, end of the period                          $  1,854,676   $    294,707
                                                    ============   ============

Net loss per share                                  $       0.06   $      0.003
                                                    ============   ============

Weighted average number of shares outstanding         16,122,167     10,047,167
                                                    ============   ============



                             SEE ACCOMPANYING NOTES



<PAGE>
                                 PC-EPHONE, INC.
                       (formerly Newlands Oil & Gas Inc.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
            for the three month periods ended March 31, 2001 and 2000
                                   (Unaudited)
                                    ---------

                                                        2001            2000
                                                        ----            ----
Cash Flows from Operating Activities
   Net loss for the period                          $   (897,540)  $    (26,211)
   Add items not affecting cash
   Amortization of capital assets                          1,543           -
   Amortization of distribution rights                   329,651           -
   Non-cash compensation charge                          128,842           -
   Changes in non-cash working capital balances
    related to operations
     Accounts receivable                                  (2,260)         3,734
     Prepaid expenses and deposits                        26,884           -
     Loans receivable                                    (11,000)          -
     Accounts payable                                    (14,266)        19,276
     Note payable                                          3,058          7,500
     Advances payable                                    475,000           -
                                                    ------------   ------------
                                                          39,912          4,299
                                                    ------------   ------------

Cash Flows used in Investing Activity
   Acquisition of capital assets                          (2,234)          -
                                                    ------------   ------------

Net increase in cash during the period                    37,678          4,299

Cash, beginning of the period                             81,780          4,409
                                                    ------------   ------------

Cash, end of the period                             $    119,458   $      8,708
                                                    ============   ============


                             SEE ACCOMPANYING NOTES


<PAGE>

                                 PC-EPHONE, INC.
                       (formerly Newlands Oil & Gas Inc.)
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                 for the three month period ended March 31, 2001
                    and for the year ended December 31, 2000
                                   (Unaudited)
                                    ---------
<TABLE>
<CAPTION>
                                                                                     Additional
                                                              Common Shares            Paid-in
                                                           ---------------------
                                                               #        Par Value       Capital         Deficit         Total
                                                           --------     ---------       -------         -------         -----
<S>                                                      <C>          <C>            <C>             <C>           <C>
Balance, December 31, 1999                               10,047,167   $    10,047    $   140,661     $  (268,496)  $  (117,788)
Issued pursuant to debt settlement agreements - $0.10     2,500,000         2,500        247,500            -          250,000
Issued pursuant to acquisition of distribution
  rights - $2.70                                          3,500,000         3,500      9,446,500            -        9,450,000
Issued for cash pursuant to subscription
  agreements - $3.00                                         75,000            75        224,925            -          225,000
   - commission                                                -             -            (5,250)           -           (5,250)
Net loss for the year                                          -             -              -           (688,640)     (688,640)
                                                         ----------   -----------    -----------     -----------   -----------
Balance, December 31, 2000                               16,122,167        16,122     10,054,336        (957,136)    9,113,322
Non-cash compensation charge                                   -             -           128,842            -          128,842
Net loss for the period                                        -             -              -           (897,540)     (897,540)
                                                         ----------   -----------    -----------     -----------   -----------
Balance, March 31, 2001                                  16,122,167   $    16,122    $10,183,178     $(1,854,676)  $ 8,344,624
                                                         ==========   ===========    ===========     ===========   ===========
</TABLE>

                             SEE ACCOMPANYING NOTES

<PAGE>

                                 PC-EPHONE, INC.
                       (formerly Newlands Oil & Gas Inc.)
                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2001
                                   (Unaudited)
                                    ---------


Note 1   General
         -------
        (a) Continuance of Operations

            These consolidated financial statements have been prepared on a
            going concern basis.  The company has a working capital deficiency
            of $611,533 as at March 31, 2001 and has an accumulated deficit of
            $1,854,676 since incorporation.  Its ability to continue as a going
            concern is dependent upon its ability to generate profitable
            operations in the future and/or to obtain the necessary financing to
            meet its obligations and repay its liabilities arising from normal
            business operations when they come due.  The outcome of these
            matters cannot be predicted with any certainty at this time.  The
            company has historically satisfied its capital needs primarily by
            issuing equity securities and arranging loans.  Management plans to
            continue to provide for its capital needs during the year ending
            December 31, 2001 by the issuance of equity securities, the
            arranging of loans and the continued development of sales of the
            PC-EPhone.  These consolidated financial statements do not include
            any adjustments to the amounts and classifications of assets and
            liabilities that may be necessary should the company be unable to
            continue as a going concern.

        (b) Interim Statements

            While the information presented in the accompanying interim three
            months consolidated financial statements is unaudited, it includes
            all adjustments which are, in the opinion of management, necessary
            to present fairly the financial position, results of operations and
            cash flows for the interim period presented.  All adjustments are of
            a normal recurring nature.  It is suggested that these interim
            financial statements be read in conjunction with the company's
            December 31, 2000 annual audited consolidated financial statements.

Note 2   Summary of Significant Accounting Policies
         ------------------------------------------

         These consolidated financial statements have been prepared in
         accordance with accounting principles generally accepted in the United
         States of America.  Because a precise determination of many assets and
         liabilities is dependent upon future events, the preparation of
         financial statements for a period necessarily involves the use of
         estimates which have been made using careful judgement.  Actual results
         may differ from these estimates.

         The consolidated financial statements have, in management's opinion,
         been properly prepared within reasonable limits of materiality and
         within the framework of the significant accounting policies summarized
         below:

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 2
(Unaudited)
 ---------


Note 2   Summary of Significant Accounting Policies - (cont'd)
         ------------------------------------------

        (a) Principles of Consolidation

            These consolidated financial statements include the accounts of the
            company and its wholly owned subsidiaries, PC-EPhone, Ltd. and
            PC-EPhone Canada Enterprises Inc.  The company accounts for its
            acquisitions by the purchase method.  All intercompany transactions
            and balances have been eliminated on consolidation.

        (b) Capital Assets and Amortization
            -------------------------------

            Capital assets are recorded at cost.  The company provides for
            amortization using the straight- line method at the following annual
            rates:

                        Office furniture and equipment     5 years
                        Computer equipment                 4 years

            Website development costs are expensed as incurred.

        (c) Distribution Rights and Amortization
            ------------------------------------

            Distribution rights are recorded at the fair value of the non-cash
            consideration paid for these rights (Note 3).  The company provides
            for amortization on a straight-line basis over the term of the
            distribution agreement (86 months).  In accordance with Statement of
            Financial Accounting Standards No. 121, "Accounting for the
            Impairment of Long-lived Assets and for Long-lived Assets to be
            Disposed Of", the distribution rights will be reviewed for
            impairment on a continuous basis throughout the term of the
            distribution agreement whenever changes in circumstances indicate
            the carrying value of the asset may not be recoverable.  An
            impairment loss would be recognized in the period it is determined.

        (d) Foreign Currency Translation
            ----------------------------

            Foreign currency transactions are translated into U.S. dollars, the
            functional and reporting currency, by the use of the exchange rate
            in effect at the date of the transaction, in accordance with
            Statement of Financial Accounting Standards No. 52, "Foreign
            Currency Translation".  At each balance sheet date, recorded
            balances that are denominated in a currency other than US dollars
            are adjusted to reflect the current exchange rate.

        (e) Basic Loss per Share
            --------------------

            The company reports basic loss per share in accordance with
            Statement of Financial Accounting Standards No. 128, "Earnings Per
            Share".  Basic loss per share is computed using the weighted average
            number of shares outstanding during the periods.  Diluted loss per
            share has not been provided as it would be antidilutive.

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 3
(Unaudited)
 ---------

Note 2   Summary of Significant Accounting Policies - (cont'd)
         ------------------------------------------

        (f) Impairment of Long-lived Assets
            -------------------------------

            The company reports the impairment of long-lived assets and certain
            identifiable intangibles in accordance with Statement of Financial
            Accounting Standards No. 121, "Accounting for the Impairment of
            Long-lived Assets and for Long-lived Assets to be Disposed Of".
            Certain long-lived assets and identifiable intangibles held by the
            company are reviewed for impairment whenever assets or changes in
            circumstances indicate the carrying amount of an asset may not be
            recoverable.  Accordingly, an impairment loss is recognized in the
            period it is determined.

        (g) Income Taxes
            ------------

            The company uses the liability method of accounting for income taxes
            pursuant to Statement of Financial Accounting Standards, No. 109
            "Accounting for Income Taxes".

        (h) Fair Value of Financial Instruments
            -----------------------------------

            The carrying values of cash, accounts receivable, loan receivable,
            accounts payable, note payable, and advances payable approximate
            fair value because of the short maturity of those instruments.

        (i) Revenue Recognition
            -------------------

            Revenue from product sales is recognized when it is earned, the
            product has been shipped and collection is reasonably assured.

        (j) Stock-based Compensation
            ------------------------

            The company has accounted for stock-based compensation for non-
            employees and has provided the disclosures required under SFAS No.
            123, "Accounting for Stock-based Compensation".

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 4
(Unaudited)
 ---------

Note 3     Distribution Rights - Note 2 (c)
           -------------------

                                             Accumulated    Net Carrying Amount
                                   Cost     Amortization       2001     2000
                                   ----     ------------       ----     ----
Distribution rights            $9,450,000   $  549,418    $8,900,582  $9,230,233
                               ----------   ----------    ----------  ----------

       (a)(i)   By a distribution agreement dated November 6, 2000 and amended
                February 8, 2001 with Cyberbank Corp. ("Cyberbank"), a Korean
                Corporation, PC-EPhone Ltd. was granted the exclusive right to
                market, distribute and sell, within the United States and
                Canada, a wireless handheld device which performs internet,
                personal computer, cellular phone and organizer functions (the
                "PC-EPhone").  In addition, PC-EPhone Ltd. was granted the
                worldwide right on a non-exclusive basis.

                In consideration for these rights, the company, on behalf of PC-
                EPhone Ltd., issued 3,500,000 common shares to Cyberbank, valued
                at $2.70 per share for total non-cash consideration of
                $9,450,000 (Note 2 (c)).  As a condition of maintaining the
                rights, PC-EPhone Ltd. must purchase from Cyberbank a minimum of
                500,000 units annually upon Cyberbank receiving written approval
                for the product by the US Federal Communications Commission.

                The company granted Cyberbank share purchase warrants entitling
                Cyberbank the right to acquire 2,500,000 common shares at $3.20
                per share.  These warrants are exercisable during the period
                November 1, 2001 to December 31, 2001.  PC-EPhone Ltd. has
                agreed to issue two binding purchase orders to Cyberbank for a
                total of $25,300,000, to be paid with cash of $2,000,000 and
                letters of credit totalling $23,300,000.  The company's
                obligation to pay the $2,000,000 is due on May 21, 2001.

                The term of this agreement ends December 31, 2007 and will
                automatically renew from year to year.

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 5
(Unaudited)
 ---------

Note 3   Distribution Rights - Note 2 (c) - (cont'd)
         -------------------

          (ii)  By a warrant agreement dated November 6, 2000, Cyberbank granted
                the company warrants to purchase the number of common shares as
                determined below at $223.54 per share.  The warrants are
                exercisable during the period from November 1, 2001 to December
                31, 2001.

                The ultimate number of Cyberbank warrants to be issued to the
                company is to be determined based on the following:

                    If the Average Trading Price of the company's common shares
                    is greater than or equal to $6.00 per share, 35,789
                    Cyberbank warrants will be issued;

                    If the Average Trading Price of the company's common shares
                    is less than $6.00 per share, then the number of Cyberbank
                    warrants shall be determined as follows:

                    Number of Warrants = 35,789 Warrants X (Average Trading
                    Price/$6.00)

                The "Average Trading Price" of the company's common shares means
                the average trading price of the common stock of the company for
                the twenty trading days prior to November 1, 2001 determined
                based on the closing price on each trading day.

                These warrants are subject to approval by the directors of
                Cyberbank, such approval to be obtained no later than March 31,
                2001.

       (b) By a subdistributor agreement dated November 15, 2000 with FutureCom
           Global, Inc. ("FutureCom"), PC-EPhone Ltd. granted FutureCom the
           exclusive right to market, distribute and sell, within the United
           States and Canada, the PC-EPhone product.

           As a condition of maintaining these rights, FutureCom must purchase
           from PC-EPhone Ltd. a minimum of 250,000 units quarterly, once
           Cyberbank has received written approval for the product by the US
           Federal Communications Commission.

           FutureCom has also agreed to issue two binding purchase orders to PC-
           EPhone Ltd. for a total of $25,300,000 to be paid with cash of
           $2,000,000 and letters of credit totalling $23,300,000.

           The term of this agreement ends December 31, 2007 and will
           automatically renew from year to year.

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 6
(Unaudited)
 ---------

Note 3   Distribution Rights - Note 2 (c) - (cont'd)
         -------------------

       (c) On February 9, 2001 the company, Cyberbank and FutureCom entered into
           a tri-party agreement (the "Tri-Party Agreement") that clarified some
           of the terms of the contractual relationships among the three
           companies.  The Tri-Party Agreement calls for a purchase order
           supported by a letter of credit to be issued at least three (3)
           months prior to the shipment dates of PC-EPhone units to be
           ordered.  FutureCom is currently in negotiations to establish one or
           more letters of credit in order to fulfil its obligations under the
           subdistribution agreement and Tri-Party Agreement.  FutureCom was
           initially obligated to establish a letter of credit on February 28,
           2001, however no such letters of credit have been established to
           date.

Note 4   Capital Stock
         -------------

       (a) Authorized:

           50,000,000 common shares , $0.001 par value
           1,000,000 preferred shares, $0.01 par value

       (b) Warrants:

           At March 31, 2001, there were share purchase warrants outstanding
           entitling the holder thereof the right to purchase 2,500,000 common
           shares of the company at $3.20 per share.  These warrants are
           exercisable during the period November 1, 2001 to December 31, 2001.

       (c) Stock-based Compensation:

           Effective February 27, 2001, the company granted 225,000 stock
           options to consultants of the company to purchase common shares at
           $3.00 per share.  Options were not granted to anyone other than the
           aforementioned consultants.  The options granted had terms ranging
           from 9 to 23 months and vested throughout the terms of the option
           agreements.

<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 7
(Unaudited)
 ---------

Note 4   Capital Stock - (cont'd)
         -------------

       (c) Stock-based Compensation: - (cont'd)

           Presented below is a summary of the stock option activity during the
           period:

                                                                      Weighted
                                                        Number of     Average
                                                     Stock Options     Price
                                                     -------------     -----
                 Balance, December 31, 2000                   -             -
                 Granted                                   225,000        $3.00
                 Exercised                                    -             -
                                                         ---------      -------
                 Balance, March 31, 2001                   225,000        $3.00
                                                         =========      =======

           The number of stock options vested at March 31, 2001 is 37,500.

           Pursuant to APBO No. 25, a non-cash compensation charge associated
           with consultants' options has been recorded in the consolidated
           financial statements.  The total compensation charge determined
           based on the number of stock options expected to vest (75,000 stock
           options - see below) is $257,684.  As 37,500 stock options have
           actually vested at March 31, 2001, the company has expensed
           $128,842 as a non-cash compensation charge.  The remaining balance of
           the total compensation charge will be charged as a non-cash
           compensation expense in the period in which they vest.

           The fair value of the options granted was estimated on the date of
           the grant using the Black-Scholes option-pricing model with the
           following assumptions:


           Expected dividend yield                                     0.0%
           Expected volatility                                        49.0%
           Risk-free interest rate                                     4.5%
           Expected term in years                                      1-2


<PAGE>

PC-EPhone, Inc.
(formerly Newlands Oil & Gas Inc.)
Notes to the Consolidated Financial Statements
March 31, 2001 - Page 8
(Unaudited)
 ---------

Note 4   Capital Stock- (cont'd)
         -------------

       (c) Stock-based Compensation: - (cont'd)

           The following stock options were outstanding at March 31, 2001
           entitling the holders thereof the right to purchase one common share
           for each option held as follows:

                                   Number          Exercise     Expiry
                                 Of Options          Price       Date
                                 ----------          -----       ----
           Consultants              25,000           $3.00     November 30, 2001
           Consultants             200,000           $3.00     February 1, 2003
                                 ----------
                                   225,000
                                 ==========

           On May 2, 2001, the company cancelled 150,000 stock options
           outstanding at March 31, 2001 at $3.00 per share, which were to
           expire on February 1, 2003.

       (d) Private Placement Memorandum

           By a private placement memorandum dated March 1, 2001, the company
           has offered to issue up to 3,000,000 common shares of the company at
           $3.00 per share.  The company anticipates that a $0.21 per share
           commission will be paid on sales of shares.

<PAGE>

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

Results of Operation

During the quarter ended March 31, 2001, the Company did not generate any sales
revenue because the PC-EPhone product was progressing through an approval
process with the United States Federal Communications Commission (the "FCC").
The PC-EPhone could not be sold in the United States until such FCC approval had
been granted which limited the Company's ability to make sales.  After the first
quarter, on April 27, 2001, the FCC granted approval for the PC-EPhone (800 Mhz
CDMA).  Accordingly, production is expected to begin in the near future and
sales are expected to begin in the third quarter of this year.

General and administrative expenses increased by $742,487 in the three months
ending March 31, 2001 compared to the same period in 2000, which primarily
reflects an increase in:  (a) marketing and promotion expenses; (b) consulting
and management fees expenses; (c) amortization expense associated with the
distribution rights obtained from Cyberbank; and (d) non-cash expenses
associated with granting options to consultants at less than market value.
Since the Company did not initiate its new business until the latter part of
year 2000, the Company expected general and administrative expenses to increase
in 2001 compared to year 2000 to reflect an increase in active operations.

In the first quarter of 2001, the Company was represented at the Consumer
Electronics Show in Las Vegas, as well as the CEBIT trade show in Germany, both
of which were primary causes of the increase in marketing and promotion expenses
as well as the increase in travel expenses.  Consulting and management fees
expenses increased due to the additional efforts associated with attempts to
raise financing and efforts to develop the distribution network for the
PC-EPhone.  The amortization of the distribution rights is on a straight-line
basis over the term of the agreement.  In the first quarter of 2000, three of 86
months were amortized. In addition to a full year of management fees, expenses
are expected to increase in connection with increased advertising and increased
attendance by the Company at trade shows and events, as well as an increase in
corporate filings and legal fees.  During the quarter, the Company granted
225,000 options to certain consultants on certain terms and conditions which are
noted below.  Subsequent to March 31, 2001, a total of 150,000 of these options
were cancelled.  Because these options were granted at a value, which was below
market value at that time, the Company reported an expense of $128,842, based on
37,500 vested options.

The Company realized a net loss in the three months ended March 31, 2001 of
$897,540 or $0.06 per share, compared to a net loss of $26,211, or $0.003, in
the three months ended March 31, 2000.

Liquidity and Capital Resources

As of March 31, 2001, the Company had a working capital deficit of $611,533
compared to a deficit of $160,795 in the first quarter of 2000.  The Company has
been unable to secure any short-term bank financing to address the working
capital deficiency and does not expect to be able to secure such bank financing

<PAGE>

unless operations increase.  The Company has been financing its operations
primarily from related-party loans. Significant additional financing is required
before the end of 2001 in order to meet the Company's cash needs.

The Company, through PC-EPhone, Ltd., is obligated by the Distribution Agreement
to sell a minimum of 500,000 PC-EPhones during each 12-month period.  PC-EPhone
Ltd., has agreed to issue two binding purchase orders to Cyberbank for a total
of $25,300,000 to be paid with cash of $2,000,000 and letters of credit
totalling $23,300,000.  The first purchase order was completed in fiscal 2000.
On February 8, 2001 the Company executed a letter agreement with Cyberbank,
whereby Cyberbank deferred the second purchase until fifteen (15) business days
after Cyberbank forwards final, written confirmation of FCC approval to the
Company, which occurred on April 30, 2001.  The Company's obligation to pay the
$2,000,000 is due on May 21, 2001.

The Company will need to increase its liquidity and capital resources to
purchase inventory to fulfill orders and, therefore, will need to obtain
additional financing for that purpose.  If the Company is able in the future to
demonstrate its creditworthiness, it is anticipated that some financing of
inventory purchases will occur through the use of letters of credit, but there
is no guarantee that such financing can be obtained.

Subsequent to the end of the first quarter of 2001, Cyberbank Corp. was granted
FCC approval of the PC-EPhone, which enables PC-EPhone units to be sold in the
United States.  However, the PC-EPhones must also obtain carrier approval in
order for the product to be completely functional.   If carrier approvals are
not granted, the Company will not be able to effectively commence its sales
program, thus precluding development of any revenues.  The Company's ability to
continue as a going concern is dependent on its ability to raise capital,
arrange loans or continue development of sales of the PC-EPhone to sustain
operations.  These factors, particularly with respect to the Company's lack of
established source of revenue, raise substantial doubt that the Company will be
able to continue as a going concern.  The Company expects carrier approvals to
be forthcoming, however there can be no assurance in this regard.  The Company
has been advised by Cyberbank Corp. that an application has been made to
Industry Canada for approval of the PC-EPhone in Canada but this approval has
not been obtained yet.

Other

On February 9, 2001 the Company, Cyberbank and FutureCom Global Inc.
("FutureCom"), the exclusive subdistributor of the PC-EPhone in the United
States and Canada, entered into a tri-party agreement (the "Tri-Party
Agreement") that clarified some of the terms of the contractual relationships
among the three companies.  The Tri-Party Agreement calls for a purchase order
supported by a letter of credit to be issued at least three (3) months prior to
the shipment dates of PC-EPhone units to be ordered.  FutureCom is currently in
negotiations to establish one or more letters of credit in order to fulfil its
obligations under the subdistribution agreement and the Tri-Party Agreement,
however no such letters of credit have been established to date.

Effective February 27, 2001, the Company executed an option agreement with
Euromerica Capital Group Inc. ("Euromerica").  In consideration for Euromercia

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providing consulting services to the Company, Euromerica was granted an option
to purchase a total of 25,000 shares of Common Shares of the Company at $3.00
per share on or before November 30, 2001.  As of May 1, 2001, 12,500 of these
options were vested and exercisable.

Effective February 27, 2001, the Company executed an option agreement with
Alexander Wurm.  In consideration for Mr. Wurm providing consulting services to
the Company, Mr. Wurm was granted an option to purchase a total of 100,000
shares of the Company at $3.00 per share on or before February 1, 2003.  As of
May 2, 2001, the Company terminated the option agreement along with the 75,000
unvested options, leaving a balance of 25,000 options vested and exercisable.

Effective February 27, 2001, the Company executed an option agreement with
Marketing Services, a German company.  In consideration for Marketing Services
providing consulting services to the Company, Marketing Services was granted an
option to purchase a total of 100,000 shares of the Company at $3.00 per share
on or before February 1, 2003.  As of May 2, 2001, the Company terminated the
option agreement along with the 75,000 unvested options, leaving a balance of
25,000 options vested and exercisable.

The Company is conducting a financing, through a private placement memorandum
dated March 1, 2001, in which the Company is seeking to raise $9,000,000 through
the sale and issuance of 3,000,000 common shares as $3.00 per share. As of March
31, 2001, no subscriptions had been received and accepted by the Company.

Item 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is not materially exposed to foreign currency and interest rate
changes as it deals primarily in U.S. dollars and has very few loans
outstanding.  However, Cyberbank may be subject to foreign currency risks and
interest rate changes in connection with its dealings with its suppliers who may
be based in foreign countries.

The Company does not currently hedge the foreign currency exposure that results
from the translation of foreign subsidiary financial statements into U.S.
dollars in consolidation. The Company intends to assess the need to utilize
financial instruments to hedge foreign currency exposures on an ongoing basis.



                           PART II - OTHER INFORMATION

Item 1   LEGAL PROCEEDINGS.

None.


Item 2   CHANGES IN SECURITIES AND USE OF PROCEEDS.

On November 10, 2000 the Company received subscriptions for 75,000 shares of its
Common Shares from two accredited investors at a price of $3.00 per share for an

<PAGE>

aggregate purchase price of $225,000.  These shares were subsequently issued on
February 17, 2001.  With respect to such issuances, the Company relied upon the
exemption from registration provided by Rule 506 under Regulation D promulgated
under the Act.

As of March 31, 2001, the Company had a working capital deficit of $611,533
compared to a deficit of $160,795 in the first quarter of 2000.  The Company has
been unable to secure any short-term bank financing to address the working
capital deficiency and does not expect to be able to secure such bank financing
unless operations increase.  In the first quarter of 2001, the Company has been
financing its operations primarily from related-party loans. Significant
additional financing is required before the end of 2001 in order to meet the
Company's cash needs.

Item 3   DEFAULTS UPON SENIOR SECURITIES.

None.

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

None.

Item 5   OTHER INFORMATION.

None.

Item 6   EXHIBITS AND REPORTS ON FORM 8-K

10.1     (1) Letter Agreement dated February 8, 2001 between the Company and
             Cyberbank Corp. - incorporated by reference under the Company's
             Form 10-KSB-A filed with the Securities & Exchange Commission on
             April 17, 2001 as Exhibit 10.1.
10.2     (1) Tri-Party Agreement dated February 9, 2001 among the Company,
             Cyberbank Corp. and FutureCom Global, Inc. - incorporated by
             reference under the Company's Form 10-KSB-A filed with the
             Securities & Exchange Commission on April 17, 2001 as Exhibit 10.2.
11.1     A report on Form 8K was filed with the Securities & Exchange Commission
         on May 8, 2001.

(1)      Confidential Treatment Requested



<PAGE>

                                   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.

Date:  May 14, 2001

PC-EPHONE, INC.



By:  /s/ Douglas Yee

Douglas Yee
President, Treasurer & Director


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