|[X]   | QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE

SECURITIES EXCHANGE ACT OF 1934 
|----- | ------------------------------------------------------------------------------------
|      |                                                                                     
|      | For the quarterly period ended March 31, 2001                                       
|      |                                                                                     
|      | OR                                                                                  
|      |                                                                                     
|[   ] | TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE

SECURITIES EXCHANGE ACT OF 1934
|     

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|**Virginia**	(State or other jurisdiction of
incorporation or organization)                  |  | **54-1712558**	(I.R.S. Employer Identification
Number)
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------------
|                                                                                             |  |                                                       
|**8870 Rixlew Lane, Suite 201, Manassas, Virginia**	(Address of principal executive offices) |  | **20109-3795**	(ZIP Code)                             

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|PART I.  | FINANCIAL INFORMATION (unaudited)                                                     |   
|-------- | ------------------------------------------------------------------------------------- | --
|         |                                                                                       |   
|Item 1.  | Consolidated Condensed Financial Statements                                           | 1 
|         |                                                                                       |   
|         | Condensed Consolidated Balance Sheets                                                 | 1 
|         |                                                                                       |   
|         | Consolidated Condensed Statements of Income of Operations                             | 2 
|         |                                                                                       |   
|         | Consolidated Statements of Cash Flows                                                 | 3 
|         |                                                                                       |   
|         | Notes to Consolidated Condensed Financial Statements                                  | 4 
|         |                                                                                       |   
|Item 2.  | Management's Discussion and Analysis of Financial Condition and
Results of Operations | 6 
|         |                                                                                       |   
|         |                                                                                       |   
|PART II. | OTHER INFORMATION                                                                     | 9 
|         |                                                                                       |   
|         | SIGNATURES                                                                            | 10

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|                                                                                                                                                                                                 | March 31,2001 | December 31,2000
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------- | ----------------
|**ASSETS**                                                                                                                                                                                       |               |                 
|**Current assets:**                                                                                                                                                                              |               |                 
|Cash and cash equivalents                                                                                                                                                                        | $29,233       | $36,356         
|Accounts receivable, net of allowance for doubtful accounts of $6,016             and $5,155 respectively                                                                                        | 40,729        | 9,883           
|Inventory                                                                                                                                                                                        | 20,523        | 17,213          
|Other receivables                                                                                                                                                                                | 82,081        | 64,760          
|Prepaid expenses                                                                                                                                                                                 | 7,267         | 2,469           
|Total current assets                                                                                                                                                                             | 179,833       | 130,681         
|                                                                                                                                                                                                 |               |                 
|Property and equipment, net of accumulated depreciation of $72,546
      and $65,531 respectively                                                                                                | 137,095       | 141,882         
|                                                                                                                                                                                                 |               |                 
|**Non-current assets:**                                                                                                                                                                          |               |                 
|Note receivable                                                                                                                                                                                  | 71,000        | 71,000          
|Goodwill                                                                                                                                                                                         | 7,565         | 8,106           
|Security deposits                                                                                                                                                                                | 9,089         | 9,089           
|Total non-current assets                                                                                                                                                                         | 87,654        | 88,195          
|Total assets                                                                                                                                                                                     | $404,582      | $360,758        
|                                                                                                                                                                                                 |               |                 
|**LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)**                                                                                                                                               |               |                 
|**Current liabilities:**                                                                                                                                                                         |               |                 
|Notes payable - convertible debenture                                                                                                                                                            | $790,907      | $531,389        
|Notes payable - bank                                                                                                                                                                             | 50,000        | 50,000          
|Accounts payable                                                                                                                                                                                 | 651,516       | 491,926         
|Loans payable to officers -stockholders                                                                                                                                                          | 62,622        | 62,741          
|Accrued expense                                                                                                                                                                                  | 45,704        | 73,071          
|Total current liabilities                                                                                                                                                                        | 1,600,749     | 1,209,127       
|                                                                                                                                                                                                 |               |                 
|Minority interest                                                                                                                                                                                |               |                 
|Commitments:                                                                                                                                                                                     |               |                 
|**Stockholders' equity (deficit)**                                                                                                                                                               |               |                 
|Preferred stock, no par value, no liquidation value, 5,000,000 shares authorized,
      issued 1,000,000 shares 1997 class A convertible preferred stock                                         | 11,320        | 11,320          
|Common stock - no par value,150,000,000 and 150,000,000 shares authorized
      in 2001 and 2000 respectively, 53,936,220,and 39,348,486 shares
      outstanding in 2001 and 2000, respectively | 5,350,051     | 5,155,914       
|                                                                                                                                                                                                 |               |                 
|Cumulative currency translation adjustment                                                                                                                                                       | (9,310)       | (10,833)        
|Deficit                                                                                                                                                                                          | (6,548,228)   | (6,004,770)     
|Total stockholders' equity (deficit)                                                                                                                                                             | (1,196,167)   | (848,369)       
|Total liabilities and stockholders' equity                                                                                                                                                       | $404,582      | $360,758        

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|                                    | 2001       | 2000      
|----------------------------------- | ---------- | ----------
|                                    |            |           
|Sales                               | $202,821   | $57,988   
|Direct Cost of Goods Sold           | 176,902    | 55,961    
|Gross Profit                        | 25,919     | 2,027     
|                                    |            |           
|Operating Costs and Expenses:       |            |           
|                                    |            |           
|Research and Development            | 115,275    | 295,664   
|Depreciation & Amortization         | 6,755      | 4,593     
|Interest Expense                    | 11,898     | 35,777    
|Sales and Marketing                 | 50,341     | 21,368    
|General and Administrative          | 386,040    | 214,273   
|Total Operating Costs and Expenses  | 570,309    | 571,675   
|                                    |            |           
|Other Income                        | 932        | 1,152     
|                                    |            |           
|Net (loss)                          | $(543,458) | $(568,496)
|                                    |            |           
|Net  (loss) per common share        |            |           
|Basic                               | (0.01)     | (0.04)    
|Diluted                             | (0.01)     | (0.04)    
|                                    |            |           
|Weighted Average shares outstanding |            |           
|Basic                               | 45,447,957 | 14,067,227
|Diluted                             | 45,447,957 | 14,067,227

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|                                                                                            | 2001       | 2000      
|------------------------------------------------------------------------------------------- | ---------- | ----------
|Cash flows from operating activities:                                                       |            |           
|Net (loss)                                                                                  | $(543,458) | $(568,496)
|Adjustments to reconcile net (loss) to net cash (used in) provided by
operating activities: |            |           
|Depreciation                                                                                | 6,755      | 4,593     
|Provision for bad debts                                                                     | 861        | 4,272     
|Other non cash items                                                                        | 139,922    | 62,725    
|Increase (Decrease) in Cash from changes in:                                                |            |           
|Accounts receivable                                                                         | (31,707)   | 6,435     
|Other receivables                                                                           | (17,321)   | (9,814)   
|Inventory                                                                                   | (3,310)    | (4,083)   
|Other assets                                                                                | 0          | (138,120) 
|Security deposits                                                                           | 0          | (164)     
|Good will                                                                                   | 541        | 0         
|Prepaid expenses                                                                            | (4,798)    | (95,622)  
|Accounts payable                                                                            | 159,590    | (19,397)  
|Accrued expense                                                                             | (27,367)   | (103,369) 
|Loans payable to officers -stockholders                                                     | (119)      | 25,000    
|Net cash (used in) operating activities                                                     | (320,411)  | (836,040) 
|                                                                                            |            |           
|Cash flows from investing activities:                                                       |            |           
|                                                                                            |            |           
|Purchase of property and equipment                                                          | (1,968)    | (2,968)   
|Notes receivable                                                                            | 0          | 0         
|Net cash used in investing activities                                                       | (1,968)    | (2,968)   
|                                                                                            |            |           
|Cash flows from financing activities:                                                       |            |           
|                                                                                            |            |           
|Notes payable - convertible debenture                                                       | 259,518    | 0         
|Notes payable - bank                                                                        | 0          | 0         
|Proceeds from sale of common stock                                                          | 54,215     | 1,032,000 
|                                                                                            |            |           
|Net cash provided by financing activities                                                   | 313,733    | 1,032,000 
|                                                                                            |            |           
|Effect of exchange rates on cash                                                            | 1,523      | (12,640)  
|                                                                                            |            |           
|Net increase (decrease) in cash and cash equivalents                                        | (7,123)    | 180,352   
|                                                                                            |            |           
|Cash and cash equivalents at beginning of year                                              | 36,356     | 95,631    
|                                                                                            |            |           
|Cash and cash equivalents at end of period                                                  | $29,233    | $275,983  
|                                                                                            |            |           
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION                                            |            |           
|Cash paid for interest                                                                      | 2,380      | 1,727     

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|                                                   | 2001        | 2000    
|-------------------------------------------------- | ----------- | --------
|                                                   | Total       | % Change
|Cash, cash equivalents, and short-term investments | $29,233     | (89%)   
|Working capital                                    | (1,420,916) | (1,391%)
|Total assets                                       | $404,582    | (44%)   
|Stockholders' equity                               | (1,196,167) | (585%)  

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|                   |  | **PACEL CORP.**

Registrant                                                                                                          
|------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------
|Date: May 15, 2001 |  | /s/   David E. Calkins	

David E. Calkins,

Chairman of the Board, President and

Chief Executive Officer *(Duly Authorized Officer)*
|Date: May 15, 2001 |  | /s/   Lyndon C. Thompson 	

Lyndon C. Thompson,

Controller*(Principle Financial Officer)*                                           

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