U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

/ X /       QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
            EXCHANGE ACT OF 1934


            For the quarterly period ended August 31, 2000


/   /       TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

            For the transition period from __________ to _______________

            Commission file number:             1-13360



                     CORNERSTONE INTERNET SOLUTIONS COMPANY
        (Exact name of small business issuer as specified in its charter)


            DELAWARE                                        22-3272662
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)


                             584 Broadway, Suite 509
                    (Address of Principal Executive Offices)

                                 (212) 343-9143
                (Issuer's Telephone Number, Including Area Code)


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

YES / X /   NO  /  /

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

                                                     Number Outstanding
               Title of Class                        as of August  31, 2000
            --------------------                     ----------------------
            Common Stock, $.01 Par Value                   25,108,326

Transitional Small Business Disclosure Format: Yes / /      No /X/


                                       1

<PAGE>

                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

                                                                            Page
Item 1        Condensed Consolidated Financial Statements

              Condensed Consolidated Balance Sheets as of August 31, 2000
              and May 31, 2000                                              3

              Condensed Consolidated Statements of Operations for the
              three months ended August 31, 2000 and August 31, 1999        4

              Condensed Consolidated Statements of Cash Flows for the
              three months ended August 31, 2000 and August 31, 1999        5


              Notes to Condensed Consolidated Financial Statements          6

Item 2.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations                           9


PART II - OTHER INFORMATION

                                                                           Page

Item 1.       Legal Proceedings                                            11

Item 2.       Change in Securities and Use of Proceeds                     11

Item 3.       Defaults upon Senior Securities                              11

Item 4.       Submissions of Matters to a Vote by Security Holders         11

Item 5.       Other Information                                            11

Item 6.       Exhibits and Reports on Form 8-K                             11


SIGNATURES                                                                 12



                                       2
<PAGE>

CORNERSTONE INTERNET SOLUTIONS COMPANY and Subsidiaries
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>

                                                                      August 31,         May 31,
                                                                         2000             2000
                                                                     ------------    -------------
ASSETS                                                                (unaudited)
Current assets:
<S>                                                                  <C>             <C>
      Cash and cash equivalents                                      $  6,911,512    $ 12,222,443
       Investments, at fair value                                          99,620          75,568
      Accounts receivable, net of allowance for doubtful accounts
         of $15,000 as of August 31, 2000 and May 31, 2000                153,932          13,227
      Other receivables                                                      --             5,285
      Prepaid expenses and other current assets                            78,899          67,815
                                                                     ------------    ------------
         Total current assets                                           7,243,963      12,384,338

Net assets of discontinued operations                                        --           246,495
Property and equipment, net                                               824,804         609,923
Other non-current assets                                                1,644,314       1,366,883

                                                                     ------------    ------------
                                                                     $  9,713,081    $ 14,607,639
                                                                     ------------    ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                               $    231,253    $    297,561
      Accrued payroll and related expenses                                229,829         241,886
      Other accrued expenses                                              114,126          49,338
      Deferred revenue                                                    537,053         589,993
      Other current liabilities                                             1,352           1,352
                                                                     ------------    ------------
         Total current liabilities                                      1,113,613       1,180,130

Net liabilities of discontinued operations                                329,611            --

Minority interest                                                       5,044,362       6,479,923


Stockholders' equity:
    Preferred stock, $.01 par value,
            2,000,000 shares authorized;
           Class C, 20 shares issued and outstanding
           as of August 31, 2000 and May 31, 2000                            --              --
    Common stock, $.01 par value, 50,000,000 shares
           authorized and 25,108,326 shares issued and outstanding
           as of August 31, 2000 and May 31, 2000                         251,083         251,083
    Additional paid-in capital                                         49,509,382      49,534,442
    Accumulated other comprehensive income                                 99,620          75,568
    Deferred charges                                                     (244,228)       (293,872)
    Accumulated deficit                                               (46,390,362)    (42,619,635)
                                                                     ------------    ------------
          Total stockholders' equity                                    3,225,495       6,947,586
                                                                     ------------    ------------
                                                                     $  9,713,081    $ 14,607,639
                                                                     ------------    ------------
</TABLE>

    See notes to condensed consolidated financial statements


                                        3

<PAGE>

Cornerstone Internet Solutions Company and Subsidiaries
Condensed Consolidated Statements of Operations
(unaudited)
<TABLE>
<CAPTION>

                                                                                          Three months ended
                                                                                       August 31,      August 31,
                                                                                         2000            1999
                                                                                     ----------------------------

<S>                                                                                  <C>             <C>
Subscription revenues                                                                $    156,502    $       --
Software licensing and royalties revenue                                                  196,664            --
Implementation and consulting revenue                                                      69,039            --
                                                                                     ------------    ------------
       Total revenues                                                                     422,205            --


Cost of subscription revenue                                                              327,480            --
Cost of implementation and consulting revenue                                              38,489            --
Marketing, sales, and support (excludes stock option expense of $8,449                  2,267,239         105,459
    and $0, respectively)
General and administrative expenses  (excludes stock option expense of                    741,049         312,750
    $41,195 and $0, respectively)
Research and development                                                                  542,183          14,248
Stock option expense                                                                       49,644            --
                                                                                     ------------    ------------
       Total costs and expenses                                                         3,966,084         422,457

Operating loss                                                                         (3,543,879)       (432,456)

Other income:
      Interest income                                                                     148,417          17,055
      Other income, net                                                                      --             6,055
                                                                                     ------------    ------------

Loss from continuing operations before minority interest                               (3,395,462)       (409,347)

Minority interest in net loss of subsidiary, net                                        1,461,455        (221,929)
                                                                                     ------------    ------------

Loss from continuing operations                                                        (1,934,007)       (631,276)

Discontinued operations:
   Loss from operations of discontinued operations                                       (915,567)       (403,755)
   Estimated loss on disposal of discontinued operations                                 (921,153)           --
                                                                                     ------------    ------------
       Total loss from discontinued operations                                         (1,836,720)       (403,755)
                                                                                     ------------    ------------

Net loss                                                                               (3,770,727)     (1,035,031)

Preferred stock dividends and preferences                                                    --            (6,750)

Net loss attributable to common stockholders                                         $ (3,770,727)   $ (1,041,781)
                                                                                     ============    ============

Loss per share information:
Basic and diluted loss per share from continuing operations                          $       (.08)   $       (.05)
Basic and diluted loss per share from discontinued operations                        $       (.07)   $       (.03)
                                                                                     ------------    ------------
Basic and diluted net loss per share attributable to common stockholders             $       (.15)   $       (.08)

Weighted average shares of common stock used to compute loss per share                 25,108,326      13,448,252
information
</TABLE>

See notes to condensed consolidated financial statements

                                       4

<PAGE>

             Cornerstone Internet Solutions Company and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)
<TABLE>
<CAPTION>

                                                                                     Three Months Ended
                                                                               August 31,         August 31,
                                                                                 2000               1999
                                                                               -----------------------------

Cash flows from operating activities:
<S>                                                                           <C>             <C>
Net loss                                                                      $ (3,770,727)   $ (1,035,031)
Loss from discontinued operations                                                1,836,720         403,755

Loss from continuing operations                                                 (1,934,007)       (631,276)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                  81,336          32,728
     Stock option expense                                                           49,644            --
     Minority interest in net loss of subsidiary, net                           (1,461,455)        221,929
Changes in assets and liabilities:
     Accounts receivable                                                          (140,705)           --
     Other receivables                                                               5,285            --
     Prepaid expenses and other current assets                                     (11,084)         (8,325)
     Other assets                                                                  (41,431)           --
     Accounts payable                                                              (66,308)        (21,800)
     Accrued expenses                                                               52,731          (2,090)
     Deferred revenue                                                             (196,664)           --
                                                                                ------------  ------------
           Net cash used by continuing operations                               (3,662,658)       (408,834)
           Net cash used by discontinued operations                             (1,352,890)     (1,053,084)
                                                                                ------------  ------------

           Net cash used in operating activities                                (5,015,548)     (1,461,918)

Cash flows from investing activities:
     Purchases of property and equipment                                          (296,217)       (300,762)

Cash flows from financing activities:
     Proceeds from exercise of stock options                                          --             5,924
     Proceeds from exercise of subsidiary's stock options                              834            --
                                                                                ------------  ------------
            Net cash provided by financing activities                                  834           5,924
                                                                                ------------  ------------

            Net decrease in cash and cash equivalents                           (5,310,931)     (1,756,756)


Cash and cash equivalents:
      Beginning of period                                                       12,222,443       2,939,596
      End of period                                                           $  6,911,512    $  1,182,840
                                                                              ============    ============
</TABLE>

See notes to condensed consolidated financial statements.


                                       5

<PAGE>
                     CORNERSTONE INTERNET SOLUTIONS COMPANY
              Notes to Condensed Consolidated Financial Statements
                                   (Unaudited)

         General

1.       The accompanying  unaudited condensed consolidated financial statements
         have been prepared in accordance with the  instructions to Form 10-QSB,
         and in the opinion of management  contain all adjustments  necessary to
         present fairly the financial position of Cornerstone Internet Solutions
         Company (the "Company") and  subsidiaries as of August 31, 2000 and the
         results of its operations and its cash flows for the three months ended
         August 31,  2000 and 1999.  Certain  information  and note  disclosures
         normally included in financial  statements  prepared in accordance with
         generally  accepted  accounting   principles  have  been  omitted.  The
         condensed   consolidated   financial   statements  should  be  read  in
         conjunction with the Company's  consolidated  financial  statements and
         related  notes in the  Company's  Annual  Report on Form 10-KSB for the
         fiscal year ended May 31, 2000.  The results for the three months ended
         August 31,  2000 are not  necessarily  indicative  of the results to be
         obtained for the full year.

2.       Business and Liquidity

         The  Company  is  a  provider  of  comprehensive   business-to-business
         e-commerce  services  and  solutions.  The  Company's  address  is  584
         Broadway,  Suite 509, New York,  NY 10012 and its  Internet  address is
         www.crstone.com. The Company is headquartered in New York, New York.

         The  Company  owns  two   subsidiaries,   marchFIRST   Cornerstone  and
         B2Bgalaxy.com   ("B2B").   marchFIRST  Cornerstone  is  a  wholly-owned
         subsidiary of the Company,  and an independent  affiliate of marchFIRST
         Corporation,  the successor of USWEB Corporation ("USWeb").  MarchFIRST
         Cornerstone  is a full  service  Internet  consulting  firm that uses a
         combination of strategic planning,  technology,  and creative expertise
         to provide successful solutions in the B2B, B2C, knowledge  management,
         and enterprise integration domains. Pursuant to certain agreements with
         marchFIRST,  the  Company  is  a  member  of  marchFIRST's  network  of
         affiliates.  On September 25, 2000, the Company announced its intention
         to  discontinue  this segment of the  business,  as discussed in Note 4
         below.

         B2B  was  established  in  February  1999  to  leverage  the  Company's
         expertise in business consulting, Internet technology and e-commerce in
         the  creation  of  industry-specific   business-to-business  e-commerce
         portals.  The  portals  link  buyers and  sellers  through  competitive
         on-line bidding, with a focus on improving  profitability.  B2B targets
         industries  where small to medium size businesses and local or regional
         distribution  are dominant and where cost of goods sold is significant.
         The goal of each industry  portal is the enhancement of the earnings of
         its  members  through  cost  savings  on  essential   supplies  through
         competitive closed bidding.  In May 1999, B2B launched  FOODgalaxy.com,
         the  first  portal,  which was  designed  to lower the cost of food and
         supplies  for  restaurants  and other food  service  providers  through
         increased price  competition.  In March 2000, B2B agreed to license its
         e-commerce  solution to  PetAssure,  Inc. to create  VETgalaxy.com,  an
         online  marketplace  targeting the veterinary  service industry.  Under
         this agreement, B2B functions as an operational and support partner for
         the new company.

         The accompanying  condensed consolidated financial statements have been
         prepared  assuming that the Company will  continue as a going  concern.
         The  Company's  continuing  losses  from  operations  could  impact the
         Company's  ability to meet its  obligations  as they  become  due.  The
         accumulated  deficit as of August 31, 2000, was $46,390,362 and the net
         loss for the three months ended August 31, 2000,  was  $3,770,727.  The
         B2B segment  will  continue to incur  losses as it builds its  customer
         base and market share.

3.       Use of Estimates

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions   that  affect  the  reported  amount  of  assets  and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the financial  statements  and the reported  amount of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

                                       6
<PAGE>

4.       Discontinuance of the Internet Business Solutions Segment

         On September  25,  2000,  the Company  announced  its plan to close its
         Internet Business Solutions segment.  In accordance with such plan, the
         Company  immediately  reduced  the  workforce  of  the  unit  by 57% on
         September  25,  2000.  The Company  plans to dispose of the business by
         November 1, 2000 by selling the remaining assets of the segment.

         Fees for affiliation  rights were paid to marchFIRST.com  for the right
         to join the marchFIRST network and operate as an affiliate. The fee was
         being amortized over the 10-year life of the agreement with marchFIRST,
         but as a result of the  termination  of the agreement  with  marchFIRST
         stemming  from the  management  decision to  discontinue  the  Internet
         Business  Solutions  segment,  the  unamortized  balance of $159,722 on
         August 31,  2000,  has been written down to zero and is included in the
         estimated loss on disposal of discontinued operations.

         Management  of the  Company has  estimated  costs that it will incur as
         part  of the  discontinuance  and  ultimate  disposal  of the  Internet
         Business Solutions segment. The estimate primarily includes the cost of
         employees who will oversee the disposal of the assets,  severance costs
         for employees who have been terminated,  lease  cancellation  payments,
         and the estimated loss on the sale of the segment's  remaining  assets.
         These amounts have been  included in the estimated  loss on disposal of
         discontinued  operations  in the  accompanying  condensed  consolidated
         statement of operations.  The Company anticipates selling the remaining
         assets of the Internet Business  Solutions segment on November 1, 2000,
         for  approximately  $100,000.  Upon  completion  of the disposal of the
         segment, the Company's primary asset will be its investment in B2B. The
         Company will also provide executive management services to B2B and will
         continue to control the daily operations of that company.

5.       Convertible Preferred Stock Class C

         As of August 31, 2000,  there were 20 shares of Class C Preferred Stock
         outstanding,  which, as of such date, are convertible into an aggregate
         of 20,205  shares of Common  Stock.  Each share of Class C Preferred is
         convertible  into the whole  number of shares of common  stock equal to
         the  aggregate  stated  value  of the  Class C  Preferred  Stock  to be
         converted divided by the lesser of (i) $2.00 or (ii) 50% of the average
         closing price for the common stock for the last ten trading days in the
         fiscal quarter of the Company prior to such conversion. The Company has
         the option to redeem all,  or any  portion of on a pro rata basis,  the
         Class C Preferred at any time upon 30 days prior written  notice,  at a
         redemption price equal to 110% of the stated value.

         The conversion  rate of the Class C Preferred  (when  calculated on the
         basis of  dividing  the stated  value by $2.00 only) will be subject to
         adjustments  to  protect  against   dilution  in  the  event  of  stock
         dividends,  stock splits,  and certain other events.  In July 1999, 500
         shares of Class C  Preferred  were  converted  into  505,132  shares of
         common  stock.  The Class C Preferred  Stock paid  dividends of 12% per
         year of the stated  value of the Class C Preferred  Stock  through June
         30, 1999, payable in Common Stock. Dividends amounted to $6,750 for the
         three  months ended August 31,  1999.  In July 1999,  40,213  shares of
         common  stock  were  issued  in full  payment  of the  preferred  stock
         dividends.

6.       Subsidiary Transactions

         In fiscal 1999, B2B received from a third party $37,064 of fixed assets
         in exchange for 20.6% of its common shares outstanding,  which resulted
         in  an  increase  in  the  Company's  paid-in-capital  of  $27,369.  In
         addition,  on April 30,  1999,  B2B sold  2,400  shares of  convertible
         preferred stock ("Preferred Stock") for net proceeds of $2,122,957. The
         stated  value  of a share  of the  Preferred  Stock  is  $1,000.  B2B's
         Preferred Stock has a liquidation  preference equal to its stated value
         and, upon  liquidation the holders may exchange each share of Preferred
         Stock  for 400  shares  of the  Company's  Common  Stock in lieu of the
         liquidation preference. If such an exchange occurs, the Company has the
         option,  exercisable  until  September 30, 2000, to purchase any of the
         Preferred  Stock at 1.5 times the stated value of the Preferred  Stock.
         The  Preferred  Stock does not  provide  for  dividends  and has voting
         rights  equal to the number of shares of common  stock into which it is
         convertible.  If, by September  30, 2000 B2B had  consummated  a public
         offering  of equity in excess of $5  million,  each share of  Preferred
         Stock would have  automatically  converted  into 1,667  shares of B2B's
         Common Stock or converted based on 75% of the Common Share price in the
         financing,  whichever  would have resulted in a higher number of Common
         Shares. As B2B did not consummate such financing by September 30, 2000,
         the  holders of the  Preferred  Stock  must,  at their  option,  either
         convert each  Preferred  Share into 1,667  Common  Shares of B2B or 400
         Common  Shares of the  Company.  If the holder  elects  Company  Common
         Stock,  the Company  will have the option  prior to the  conversion  to
         purchase the Preferred Stock at 1.5 times stated value.


         Based on the market price of the Company's  Common Stock on the date of
         issuance,  B2B's Preferred Stock had a non-cash  beneficial  conversion
         feature of  $1,257,600.  Such portion of the proceeds was  allocated to
         additional  paid-in  capital  and will be

                                       7


<PAGE>

         recognized as an expense in minority  interest over the seventeen month
         period from the  issuance of B2B's  Preferred  Stock to  September  30,
         2000, the first date that conversion to the Company's  Common Stock can
         occur. The amortization  increases  minority  interest in the condensed
         consolidated  balance sheet and amounted to approximately  $222,000 for
         the three months ended August 31, 2000 and 1999, respectively.

         In February  2000,  B2B  consummated  a private  placement of 5,357,181
         shares of Common Stock,  resulting in net proceeds of  $14,975,213.  Of
         the net  proceeds,  $8,909,082  was  allocated  to  additional  paid-in
         capital, and $6,066,131 to minority interest. The Company recorded this
         transaction  in  its  subsidiary's  Common  Stock  as  an  increase  to
         additional paid-in capital, pursuant to its policy.

         As a result of the above transactions,  at August 31, 2000, the Company
         owned 48.7% of B2B's common stock or 38% of B2B,  after  reflecting the
         conversion  of B2B Preferred  Stock into B2B Common  Stock.  Due to the
         Company's  control of B2B's  daily  operations,  the results of B2B are
         consolidated  with those of the  Company and the  minority  interest is
         presented  in  the   accompanying   consolidated   balance  sheet.  The
         accompanying  condensed consolidated financial statements reflect 48.7%
         of B2B's net loss for the three months  ended August 31, 2000,  and the
         entire net loss of B2B for the three months ending August 31, 1999, due
         to the insignificance of the minority interest at that time.


7.       B2B Stock Options

         B2B has granted  options to outside  consultants and to employees where
         the exercise  price was less than the fair value of common stock at the
         grant date pursuant to its 1999  Incentive and Stock Option Plan.  Such
         options issued to consultants and to employees under the Plan in fiscal
         2000 totaled  215,500 and 210,000,  respectively.  The exercise  prices
         ranged  from $.60 to  $5.00,  and the total  cost was an  aggregate  of
         $544,534, which was recorded as a deferred charge and is being expensed
         over the shorter of the vesting period or the period of service.  Stock
         option  expense  related  to these  grants for the three  months  ended
         August 31, 2000 was $49,644.

8.       Subsequent Events

         A special meeting of the Company's  shareholders is currently scheduled
         for November 10, 2000, to consider two proposals. The first proposal is
         for a one for five reverse stock split on the  Company's  Common Stock.
         The second proposal is to change the Company's name to B2B Enterprises,
         Inc.

         On  September  30,  2000,  the holders of B2B  Preferred  Stock had the
         option to  convert  each B2B  Preferred  Share  into 400  shares of the
         Company's  Common Stock. If, by September 30, 2000, B2B had consummated
         a public  offering  of equity in excess of $5  million,  each  share of
         B2B's  Preferred  Stock would have  automatically  converted into 1,667
         shares of B2B's  Common Stock or based on 75% of the Common Share price
         in the financing,  whichever  would have resulted in a higher number of
         Common Shares.  As B2B did not  consummate  such financing by September
         30, 2000,  the holders of the  Preferred  Stock must,  at their option,
         either convert each Preferred  Share into 1,667 Common Shares of B2B or
         400 Common  Shares of the  Company.  None of the  holders  has  elected
         Company Common Stock. Therefore, the 2400 shares of B2B Preferred Stock
         convert into  4,000,800  shares of B2B Common  Stock.  This  conversion
         reduces the Company's ownership in B2B Common Stock to 38%.

9.       Segment Information

         The Company  adopted SFAS No. 131,  "Disclosures  about  Segments of an
         Enterprise and Related Information".  Accordingly, reportable operating
         segments are determined based on the Company's management approach. The
         management  approach,  as defined by SFAS No.  131, is based on the way
         that the chief operating  decision-maker  organizes the segments within
         an enterprise for making operating decisions and assessing performance.
         Due to the discontinued  operations of the Internet Business  Solutions
         segment,  the Company's only operating  segment is the B2B  marketplace
         segment.

10.      Comprehensive Income

         The amounts related to investments reported in comprehensive income for
         the three months ended August 31, 2000 are  comprised of a holding gain
         arising during the period, net of taxes, of $24,052.  The comprehensive
         loss for the three months ended August 31, 2000 was ($3,746,675).

                                       8

<PAGE>

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

The  discussion and analysis  should be read in  conjunction  with the Condensed
Consolidated  Financial Statements of Cornerstone Internet Solutions Company and
Subsidiaries  and  Notes  to the  Condensed  Consolidated  Financial  Statements
included elsewhere in this Form 10-QSB.

Results of Operations - Three Months Ended August 31, 2000 and 1999
Revenues
Subscription  revenues - Subscription revenues were $156,502 and $0 in the three
months  ended  August  31,  2000 and 1999,  respectively.  Subscription  revenue
represents monthly  subscriptions  from customers of B2B's FOODgalaxy  division.
Total  subscription  revenues  for the  fiscal  year  ended  May 31,  2000  were
$127,459.  Revenues are expected to continue to increase as FOODgalaxy continues
to grow nationwide.

Software  licensing  and  royalties  revenue - Software  licensing  and  royalty
revenue was  $196,664 and $0 in the three months ended August 31, 2000 and 1999,
respectively.  This revenue is the result of an agreement, which was the Company
entered in March 2000,  to license  software to a third party.  B2B received one
million shares of the licensee's common stock,  which had a fair market value of
approximately  $1,180,000.  Approximately  $590,000 of the  proceeds was used to
reduce the Company's capitalized software costs, and the remaining $590,000 will
be recorded as revenue  ratably  over the  maintenance  period,  pursuant to the
terms of the contract.

Implementation  and consulting  revenue - Implementation  and consulting revenue
represents  billings for  customization  of software for the licensee of the B2B
software,  and was $69,039 for the quarter  ended August 31, 2000.  There was no
implementation and consulting revenue in the quarter ended August 31, 1999.

Expenses
Cost of subscription revenue - Cost of subscription revenue was $327,480 and $0,
in the three months ended  August 31, 2000 and 1999,  respectively.  These costs
represent B2B's support  staffing for FOODgalaxy  customers,  as well as certain
costs related to the data processing operations for the FOODgalaxy  marketplace.
The Company expects that costs as a percentage of related revenues will decrease
as revenues continue to grow.

Cost of  implementation  and  consulting  revenue - Cost of  implementation  and
consulting  revenue was $38,489 and $0 in the three months ended August 31, 2000
and 1999,  respectively.  These  costs  reflect  the costs  associated  with the
software customization work for the licensee of the B2B software.

Marketing,  sales, and support expenses - Marketing, sales, and support expenses
were  $2,267,239  and  $105,459  for the three  months ended August 31, 2000 and
1999,  respectively.  The increase results from the creation of a national sales
force for B2B's FOODgalaxy division in the last half of fiscal 2000.

General and administrative  expenses - General and administrative  expenses were
$741,049  and  $312,750  in the three  months  ended  August 31,  2000 and 1999,
respectively.  The 137% increase is the result of the growth of B2B,  especially
in the  FOODgalaxy  division,  and consists of personnel  and overhead  costs to
support that growth.

Research and  development  expenses - Research  and  development  expenses  were
$542,183  and  $14,248  in the three  months  ended  August  31,  2000 and 1999,
respectively.  These  costs  are  related  to the  ongoing  enhancements  of the
technology for the Company's B2B Marketplace Segment.

Stock  option  expense - Stock  option  expense  was $49,644 and $0 in the three
months ended August 31, 2000 and 1999, respectively. This expense relates to B2B
stock  options,  and  reflects  agreements  with  providers  of certain  outside
services to accept  compensation in stock options,  as well as grants of options
to  employees,  where the  exercise  price  was less than the fair  value of the
common  stock at the grant  date.  The total  cost of these  non-cash  items was
computed  under the Black  Scholes  method to be an aggregate of $544,534 and is
being expensed over the shorter of the service period or the vesting period.

Other  income - Other  income was $148,417 and $23,110 in the three months ended
August 31, 2000 and 1999,  respectively.  Interest  income  comprises all of the
other income in the current quarter,  and $17,055 in the same quarter last year.
The increase is due to the Company's higher cash balances, primarily as a result
of the private placement of B2B common stock on February 29, 2000.

Income tax  benefit - No income tax benefit  was  recorded  in the three  months
ended  August 31,  2000 and 1999.  Using the  standards  set forth in  Financial
Accounting  Standard No. 109,  management cannot currently determine whether the
Company will  generate  taxable

                                       9


<PAGE>

income during the period that the Company's net operating loss  carryforward and
other deferred tax assets may be applied  towards the Company's  taxable income,
if any.  Accordingly,  the Company has established a valuation allowance against
its deferred tax asset.

Loss from  operations of  discontinued  operations - On September 25, 2000,  the
Company  announced  its  intention  to close  the  Internet  Business  Solutions
segment. The loss from operations of discontinued operations of $915,567 for the
period ended August 31, 2000,  represents  the net loss from the operating  unit
for the  three  months  ended  August  31,  2000.  The loss from  operations  of
discontinued  operations  of $403,755 for the three months ended August 31, 1999
represents the net loss of the Internet  Business  Solutions segment during that
period.

Estimated  loss on  disposal of  discontinued  operations  -  Estimated  loss on
disposal of discontinued operations of $921,153 for the quarter ended August 31,
2000, includes operating losses the Company anticipates incurring between August
31, 2000,  and the November 1, 2000  expected  disposal  date.  This estimate is
comprised  of costs  which are a direct  result  of the  Company's  decision  to
discontinue the Internet Business Solutions segment.

Liquidity and Capital Resources

The Company had cash and cash  equivalents  of  $6,911,512  and  $12,222,443  at
August 31, 2000 and May 31,  2000,  respectively.  The  decrease  of  $5,310,931
primarily  reflects the funding of operating  activities for the Company and its
subsidiaries and purchases of property and equipment.  Capital expenditures were
$296,217  and  $300,762  in the three  months  ended  August 31,  2000 and 1999,
respectively.   The  expenditures  in  both  periods  were  in  support  of  the
development of the B2B Marketplace Segment.

The  Company's  continuing  losses from  operations  could impact the  Company's
ability to meet its  obligations as they become due. The  independent  auditors'
report on the Company's  consolidated  financial  statements for the fiscal year
ended May 31, 2000  included an  explanatory  paragraph  regarding the Company's
ability to continue as a going concern.  As part of its business plan to enhance
liquidity,  the  Company has closed its  Internet  Business  Solutions  Services
segment.  The Company or B2B may seek to obtain additional funds for operations.
The Company and B2B currently have no agreements, commitments, or understandings
with respect to  additional  funding.  These funds may not be sufficient to meet
the Company or B2B's longer-term cash requirements for operations.  In addition,
there  can be no  assurance  that  the  Company  or B2B  will be able to  obtain
additional financing.  Management believes that based on funds on hand at August
31, 2000 and  anticipated  revenues,  operations  can continue at least  through
February 2001.


New Accounting Pronouncements
The Company will implement the  provisions of Statement of Financial  Accounting
Standards  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities", as amended by Statements of Financial Accounting Standards Nos. 137
and 138, in fiscal year 2002,  for which the Company is presently  assessing its
impact on the consolidated financial statements, if any.

FASB Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation"  ("FIN No. 44), provides guidance for applying APB Opinion No. 25,
"Accounting for Stock Issued to Employees".  With certain exceptions, FIN No. 44
applies  prospectively  to  new  awards,  exchanges  of  awards  in  a  business
combination,  modifications to outstanding  awards and changes in grantee status
on or after July 1, 2000.  The Company does not believe that the  implementation
of FIN No. 44 will have a significant effect on results of operations.

In December 1999,  the SEC issued Staff  Accounting  Bulletin No. 101,  "Revenue
Recognition in Financial  Statements" ("SAB No. 101"),  which summarizes certain
of the SEC staff's views in applying generally accepted accounting principles to
revenue  recognition in financial  statements.  The Company is required to adopt
the  accounting  provisions  of SAB No. 101 no later than the  Company's  fourth
quarter of fiscal 2001. The Company does not believe that the  implementation of
SAB No. 101 will have a significant effect on results of operations.

Forward looking statements
This Form 10-QSB contains certain forward-looking  statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the  safe  harbors   created   thereby.   Investors  are   cautioned   that  all
forward-looking  statements  involve risks and  uncertainty,  including  without
limitation,  the ability of the Company to develop its business,  the success of
its  B2Bgalaxy.com  subsidiary,  as well as the risk  factors  set  forth in the
Company's  Annual  Report on Form 10KSB for the fiscal year ended May 31,  2000.
Although   the   Company   believes   that  the   assumptions   underlying   the
forward-looking   statements  contained  herein  are  reasonable,   any  of  the
assumptions could be inaccurate,  and therefore,  there can be no assurance that
the  forward-looking  statements  included  in this Form 10-QSB will prove to be
accurate. In light of significant  uncertainties inherent in the forward-looking
statements  included  herein,  the inclusion of such  information

                                       10

<PAGE>

should not be regarded as a representation by the Company,  or any other person,
that the objectives and plans of the Company will be achieved.

Inflation
The past and expected future impact of inflation on the financial  statements is
not significant.

Item 1.     Legal Proceedings

None

Item 2.     Change in Securities and Use of Proceeds
None

Item 3.     Defaults upon Senior Securities

None

Item 4.     Submissions of Matters to a Vote of Security Holders

None

Item 5.     Other Information
On September  25,  2000,  the Company  announced  its plan to close its Internet
Business  Solutions   segment.   In  accordance  with  such  plan,  the  Company
immediately  reduced the workforce of the unit by 57% on September 25, 2000. The
Company  plans to dispose of the  business  by  November  1, 2000 by selling the
remaining assets of the segment.

Fees for affiliation  rights were paid to  marchFIRST.com  for the right to join
the marchFIRST network and operate as an affiliate.  The fee was being amortized
over the 10-year life of the agreement with  marchFIRST,  but as a result of the
termination  of the  agreement  with  marchFIRST  stemming  from the  management
decision to discontinue the Internet Business Solutions segment, the unamortized
balance of $159,722 on August 31,  2000,  has been  written  down to zero and is
included in the estimated loss on disposal of discontinued operations.

Management of the Company has estimated  costs that it will incur as part of the
discontinuance and ultimate disposal of the Internet Business Solutions segment.
The  estimate  primarily  includes  the cost of  employees  who will oversee the
disposal  of the  assets,  severance  costs for  employees,  lease  cancellation
payments,  and the estimated loss on the sale of the segment's remaining assets.
These  amounts  have  been  included  in  the  estimated  loss  on  disposal  of
discontinued  operations in the accompanying condensed consolidated statement of
operations. The Company anticipates selling the remaining assets of the Internet
Business Solutions segment on November 1, 2000, for approximately $100,000. Upon
completion of the disposal of the segment,  the Company's  primary asset will be
its  investment  in B2B.  The Company  will also  provide  executive  management
services  to B2B and will  continue  to  control  the daily  operations  of that
company.

Item 6.     Exhibits and Reports on Form 8-K
(a)         Exhibits
            Exhibit 27--Financial Data Schedule

(b)         Reports on Form 8-K
            None


                                       11

<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.

                                     CORNERSTONE INTERNET SOLUTIONS COMPANY
                                     -----------------
                                     (Registrant)


Date: October 16, 2000                /s/ Ken Gruber
                                      ------------------------------
                                      Ken Gruber
                                      Executive Vice President
                                      And Chief Financial and Accounting Officer





                                       12