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 February 28, 2001


/   /       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.)


                 500 Lanidex Plaza, Parsippany, New Jersey 07054
                    (Address of Principal Executive Offices)

                                 (973) 503-5600
                (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 April 10, 2001
            --------------------                        --------------------
            Common Stock, $.01 Par Value                    25,108,326

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


<PAGE>



                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

                                                                           Page
Item 1    Condensed Consolidated Financial Statements

          Condensed Consolidated Balance Sheets as of February 28, 2001
          and May 31, 2000                                                  3

          Condensed Consolidated Statements of Operations for the three months
          ended February 28, 2001 and February 29, 2000                     4


          Condensed Consolidated Statements of Operations for the
          nine months ended February 28, 2001 and February 29, 2000         5

          Condensed Consolidated Statements of Cash Flows for the nine
          months ended February 28, 2001 and February 29, 2000              6


          Notes to Condensed Consolidated Financial Statements              7

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations                                        10


PART II - OTHER INFORMATION

                                                                          Page
Item 1.   Legal Proceedings                                                12

Item 2.   Change in Securities and Use of Proceeds                         12

Item 3.   Defaults upon Senior Securities                                  12

Item 4.   Submissions of Matters to a Vote by Security Holders             12

Item 5.   Other Information                                                13

Item 6.   Exhibits and Reports on Form 8-K                                 13


SIGNATURES                                                                 14


                                       2

<PAGE>



CORNERSTONE INTERNET SOLUTIONS COMPANY
Condensed Consolidated Balance Sheets
(unaudited)
<TABLE>
<CAPTION>

                                                                                February 28,               May 31,
                                                                                    2001                    2000
                                                                             -------------------      ------------------
ASSETS                                                                                                   (restated)
Current assets:
<S>                                                                                   <C>                       <C>
      Cash and cash equivalents                                                       $ 9,844                   $94,712
       Investments, at fair value                                                           -                    75,568
       Advances to B2Bgalaxy.com                                                            -                 1,446,422
       Prepaid expenses and other current assets                                            -                    26,878
                                                                             -------------------      ------------------
         Total current assets                                                           9,844                 1,643,580

Net assets of discontinued operations                                                       -                   455,130
Investment in B2Bgalaxy.com                                                         1,327,372                 5,225,043
Other non-current assets                                                              310,557                   153,218
                                                                             -------------------      ------------------
                                                                                   $1,647,773                $7,476,971
                                                                             -------------------      ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                                               $ 42,807                   $54,763
      Accrued payroll and related expenses                                             37,320                   142,824
      Other accrued expenses                                                           46,575                    37,926
      Deferred revenue                                                                143,724                         -
      Advances from B2Bgalaxy.com                                                     123,481                         -
                                                                             -------------------      ------------------
         Total current liabilities                                                    393,907                   235,513

Net liabilities of discontinued operations                                             60,569                         -


Stockholders' equity:
    Preferred stock, $.01 par value,
            2,000,000 shares authorized;
           Class C, 20 shares issued and outstanding
           as of February 28, 2001 and May 31, 2000                                         -                        -
    Common stock, $.01 par value, 50,000,000 shares
           authorized and 25,108,326 shares issued and outstanding
           as of February 28, 2001 and May 31, 2000                                   251,083                  251,083
    Additional paid-in capital                                                     49,534,442               49,534,442
    Accumulated other comprehensive income                                                  -                   75,568
    Accumulated deficit                                                           (48,592,228)             (42,619,635)
                                                                             -------------------      ------------------
          Total stockholders' equity                                                1,193,297                7,241,458
                                                                             -------------------      ------------------
                                                                                   $1,647,773               $7,476,971
                                                                             -------------------      ------------------
</TABLE>

    See notes to condensed consolidated financial statements.

                                       3

<PAGE>



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

                                                                                          Three months ended
                                                                                      February 28,    February 29,
                                                                                              2001            2000
                                                                                    ---------------   ------------

<S>                                                                                  <C>             <C>
Subscription revenue                                                                 $       --      $     27,928
                                                                                     ------------    ------------
       Total revenues                                                                        --            27,928


Cost of subscription revenue                                                                 --           203,791
Marketing, sales, and support                                                                --           711,306
General and administrative expenses                                                        62,211         479,649
Research and development                                                                     --           228,774
                                                                                     ------------    ------------
       Total costs and expenses                                                            62,211       1,623,520

Operating loss                                                                            (62,211)     (1,595,592)

Other income (expense):
      Interest income                                                                        --            29,966
      Loss on sale of investments, net                                                       --           (59,080)
      Other income, net                                                                      --             1,367
      Share of loss in B2Bgalaxy.com                                                     (917,874)           --
                                                                                     ------------    ------------

Loss from continuing operations before minority interest                                 (980,085)     (1,623,339)

Minority interest in subsidiary, net                                                         --          (221,929)
                                                                                     ------------    ------------

Loss from continuing operations                                                          (980,085)     (1,845,268)

Loss from operations of discontinued operations                                              --        (1,445,274)
                                                                                     ------------    ------------

Net loss                                                                             $   (980,085)   $ (3,290,542)
                                                                                     ============    ============

Loss per share information:
Basic and diluted loss per share from continuing operations                          $       (.04)   $       (.08)
Basic and diluted loss per share from discontinued operations                                --              (.07)
                                                                                     ------------    ------------
Basic and diluted net loss per share attributable to common stockholders             $       (.04)   $       (.15)
                                                                                     ============    ============

Weighted average shares of common stock used to compute loss per share
information                                                                            25,108,326      22,613,423
</TABLE>

See notes to condensed consolidated financial statements.

                                       4

<PAGE>


Cornerstone Internet Solutions Company
Condensed Consolidated Statements of Operations
(unaudited)

<TABLE>
<CAPTION>

                                                                                 Nine months ended
                                                                            February 28,   February 29,
                                                                                   2001            2000
                                                                            ------------   ------------

<S>                                                                        <C>             <C>
Subscription revenues                                                      $       --      $     41,323
                                                                           ------------    ------------
       Total revenues                                                              --            41,323


Cost of subscription revenue                                                       --           421,404
Marketing, sales, and support                                                      --           843,210
General and administrative expenses                                             238,202       1,394,175
Research and development                                                           --           271,888
                                                                           ------------    ------------
       Total costs and expenses                                                 238,202       2,930,677

Operating loss                                                                 (238,202)     (2,889,354)

Other income (expense):
      Interest income                                                              --            53,941
      Gain on sale of investments, net                                             --           669,670
      Other expense, net                                                           --              (821)
      Share of loss in B2Bgalaxy.com                                         (3,897,671)           --
                                                                           ------------    ------------

Loss from continuing operations before minority interest                     (4,135,873)     (2,166,564)

Minority interest in subsidiary, net                                               --          (665,787)

                                                                           ------------    ------------

Loss from continuing operations                                              (4,135,873)     (2,832,351)

Discontinued operations:
   Loss from operations of discontinued operations                             (915,567)     (2,348,161)
   Loss on disposal of discontinued operations                                 (921,153)           --
                                                                           ------------    ------------
       Total loss from discontinued operations                               (1,836,720)     (2,348,161)
Net loss                                                                     (5,972,593)     (5,180,512)

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

                                                                           ------------    ------------
Net loss attributable to common stockholders                               $ (5,972,593)   $ (5,187,262)
                                                                           ============    ============

Loss per share information:
Basic and diluted loss per share from continuing operations                $      (0.17)   $      (0.17)
Basic and diluted loss per share from discontinued operations                     (0.07)          (0.14)
                                                                           ------------    ------------
Basic and diluted net loss per share attributable to common stockholders   $      (0.24)   $      (0.31)
                                                                           ============    ============

Weighted average shares of common stock used to compute loss per share
information                                                                  25,108,326      16,631,522
</TABLE>

See notes to condensed consolidated financial statements.

                                       5

<PAGE>



CORNERSTONE INTERNET SOLUTIONS COMPANY
 Condensed Consolidated Statement of Cash Flows
 (unaudited)

<TABLE>
<CAPTION>


                                                                                    Nine Months Ended
                                                                              February 28,     February 29,
                                                                                   2001                2000
                                                                              ------------     ------------
Cash flows from operating activities:
<S>                                                                           <C>             <C>
Net loss                                                                      $ (5,972,593)   $ (5,180,512)
Loss from discontinued operations                                                1,836,720       2,348,161
                                                                              ------------    ------------
Loss from continuing operations                                                 (4,135,873)     (2,832,351)
Adjustments to reconcile net loss to net cash used in operating activities:
     Depreciation and amortization                                                    --           188,587
     Share of loss in B2Bgalaxy.com                                              3,897,671            --
     Minority interest in net loss of subsidiary, net                                 --           665,787
     Non-cash consulting expense                                                      --           138,389
     Net gain on sale of investment                                                   --          (669,670)
Changes in assets and liabilities:
     Accounts receivable                                                              --          (114,271)
     Other receivables                                                                --           (25,920)
     Advances to B2Bgalaxy.com                                                   1,446,422            --
     Advances from B2Bgalaxy.com                                                   123,481            --
     Prepaid expenses and other current assets                                      26,878         (80,288)
     Other assets                                                                 (157,339)         60,499
     Accounts payable                                                              (11,956)        250,085
     Accrued expenses and accrued payroll and related expenses                     (96,855)        132,223
     Deferred revenue                                                              143,724            --
     Other                                                                            --            31,111
                                                                               ------------   ------------
           Net cash provided by (used in) continuing operations                  1,236,153      (2,255,819)
           Net cash used in discontinued operations                             (1,321,021)     (2,780,679)
                                                                               ------------   ------------

           Net cash used in operating activities                                   (84,868)     (5,036,498)

Cash flows from investing activities:
     Purchases of property and equipment                                              --          (895,908)
     Proceeds from sale of investments                                                --           728,750
                                                                               ------------   ------------
            Net cash used in investing activities                                     --          (167,158)
                                                                               ------------   ------------

Cash flows from financing activities:
     Net proceeds from sale of subsidiary's common stock                              --        14,040,112
     Proceeds from exercise of stock options                                          --         3,661,993
     Principal payments of long-term debt                                             --           (78,852)
                                                                               ------------   ------------
            Net cash provided by financing activities                                 --        17,623,253
                                                                               ------------   ------------
            Net (decrease) increase in cash and cash equivalents                   (84,868)     12,419,597
Cash and cash equivalents:
      Beginning of period                                                           94,712       2,939,596
                                                                               ------------   ------------
      End of period                                                           $      9,844    $ 15,359,193
                                                                               ===========    ============
</TABLE>

See notes to condensed consolidated financial statements.

                                       6

<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") as of February 28, 2001 and the results of its operations
      and its cash flows for the three and nine months  ended  February 28, 2001
      and  February  29,  2000,  respectively.   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 nine months  ended  February
      28, 2001 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 500 Lanidex Plaza, Third
      Floor,   Parsippany,   New  Jersey  07054  and  its  Internet  address  is
      www.crstone.com.

      The Company owns financial interests in two companies, Enteractive Network
      Solutions Inc. ("Enteractive") and B2Bgalaxy.com ("B2B"). Enteractive is a
      wholly-owned  subsidiary  of the  Company,  and  formerly  an  independent
      affiliate of marchFIRST  Corporation,  the successor of USWEB  Corporation
      ("USWeb"). Enteractive ceased operations on November 1, 2000 and ended its
      relationship  with MarchFIRST.  This is further described in Note 6 below.
      B2B is 37.8% owned by the Company and is accounted for as an equity method
      investment (See Note 4).

      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   public  marketplaces.   The
      marketplaces   link  buyers  and  sellers   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  marketplace  is the
      enhancement  of the  earnings  of its  members  through  cost  savings  on
      essential supplies.  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.  In
      July  2000,  Telefonica  B2B agreed to license  B2B's  software  to create
      e-commerce  marketplaces  for the  foodservice  industry in Latin America,
      Spain and Portugal. The relationship could be extended to other industries
      with similar purchasing needs and behaviors. In January 2001, B2B began to
      market  its  software  directly  to  small  and  medium-sized   businesses
      interested in developing  private  exchanges or creating  web-based public
      marketplaces.

      The accompanying  condensed  consolidated  financial  statements have been
      prepared  assuming that the Company will continue as a going concern.  The
      Company's continuing losses could impact the Company's ability to meet its
      obligations as they become due. The accumulated deficit as of February 28,
      2001 was  $48,592,228  and the net loss for the nine months ended February
      28, 2001 was  $5,972,593.  The  Company is  considering  various  business
      alternatives,  which may include  merger,  acquisition,  joint ventures or
      liquidation.  It is uncertain which, if any,  alternative the Company will
      pursue.

      The  Company's  ability to raise  capital  at this point is  significantly
      dependent  upon  the  valuation  of its  investment  in B2B.  The  Company
      currently has no agreements,  commitments,  or understandings with respect
      to additional funding.  Any funds raised may not be sufficient to meet the
      Company's  longer-term  cash  requirements.  In addition,  there can be no
      assurance  that the Company will be able to obtain  additional  financing.
      The  Company  should  be  able  to  continue  in  business  as long as its
      investment  in B2B  can be sold or  used  as  collateral.  Currently,  the
      Company's only source of cash is advances from B2B. In addition, there can
      be no  assurances  that B2B will be able to obtain  additional  funding to
      fund its own  operations  and the  operations  of the Company.  Management
      believes  that  based  on B2B  funds  on hand at  February  28,  2001  and
      anticipated  revenues,  B2B  operations can continue at least through July
      2001.

                                       7

<PAGE>

      On February  21,  2001,  the  Company  was  advised by the Nasdaq  Listing
      Qualifications  Panel ("the Panel") that the Company's  Common Stock would
      be delisted  from the Nasdaq  SmallCap  Market  because  the Panel  lacked
      confidence  that the  Company  could  sustain  compliance  with the Nasdaq
      SmallCap   Market  listing   requirements.   The  Company  is  awaiting  a
      determination  by the NASD as to whether the  Company's  Common  Stock can
      trade on the OTC  Bulletin  Board  System or  remain on the "Pink  Sheets"
      where it is currently  trading.  The Company's  Common Stock  continues to
      trade on the Boston Stock Exchange.  However,  the Company's  Common Stock
      could be  considered  a penny stock and be subject to various  regulations
      which could have an adverse  effect on the  trading  market for and market
      price of the Company's Common Stock.

3.    B2Bgalaxy.com 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. In accordance with the
      terms of the Preferred  Stock,  all of the  Preferred  Stock was converted
      into an aggregate of 4,000,800 shares of B2B Common Stock.

      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 was  recognized as an expense in minority
      interest through February 29, 2000.  Thereafter,  the amortization through
      September 30, 2000 increased the Company's share of loss in B2B.

      On February 29, 2000,  B2B  consummated  a private  placement of 5,357,181
      shares of Common Stock, resulting in net proceeds of $14,975,213.

      As a result of the above  transactions,  at February 28, 2001, the Company
      owned 37.8% of B2B's Common Stock.

4.    Use of Equity Method of Accounting for B2B

      The Company  reflected B2B as a consolidated  subsidiary in its previously
      filed financial  statements through August 31, 2000. However, as described
      in Note 3, on February  29,  2000,  B2B  completed a private  placement of
      common stock,  which reduced the  Company's  voting  interest in B2B below
      50%. As the Company no longer had a controlling financial interest in B2B,
      the Company  should have  presented the investment in B2B using the equity
      method of accounting as of and for periods after February 29, 2000. In the
      accompanying  financial  information,  the  investment  in  B2B  has  been
      reflected  using the equity method of  accounting  from February 29, 2000.
      The accompanying  condensed  consolidated balance sheet as of February 28,
      2001  reflects the  Company's  interest in B2B using the equity  method of
      accounting.  The  consolidated  balance  sheet as of May 31, 2000 has been
      adjusted to reflect the investment in B2B on an equity basis from February
      29, 2000 forward.  For the three months and nine months ended February 28,
      2001,  the Company has  recognized  its  proportionate  share of B2B's net
      losses  on the  equity  method,  based  on its  ownership  in B2B for each
      period, in other income (expense).  From June 1 to September 30, 2000, the
      Company's ownership of B2B was 48.7%. As described in Note 3, on September
      30,  2000,  4,000,800  shares  of  Common  Stock of B2B were  issued  upon
      conversion  of the B2B  Preferred  Stock.  This  transaction  reduced  the
      Company's  economic  ownership of B2B from 48.7% to 37.8%. From October 1,
      2000 to February 28, 2001,  the  Company's  ownership  was 37.8%.  For the
      three months and nine months ended  February 29, 2000,  the  operations of
      B2B are presented on a consolidated basis as previously reported.

      The  Company  plans to amend its  financial  statements  included  in Form
      10-KSB for the year ended May 31, 2000 and Form  10-QSB for the  quarterly
      periods ended February 29 and August 31, 2000 to reflect its investment in
      B2B using the equity  method of  accounting  from  February 29, 2000.  The
      Company  does not  anticipate  there will be any changes to the  Company's
      stockholders' equity, net loss or related per share amounts as a result of
      the  revisions to the  financial  statements to apply the equity method of
      accounting  for the Company's  investment in B2B. The Company's  auditors,
      KPMG  LLP,  have  not  completed  their  audit of the  adjustments  to the
      Company's financial statements as of and for the year ended May 31, 2000.

                                       8

<PAGE>


      Summarized  balance sheet data as of May 31, 2000 as  originally  reported
      and as restated is as follows:

      ($ in thousands)                     Originally Reported      As Restated
      ----------------                     -------------------      -----------

      Cash and cash equivalents                   12,222                 95
      Current assets                              13,111              1,644
      Total assets                                15,621              7,477

      Current and total liabilities                2,194                236
      Minority interest                            6,480                 -
      Stockholders' equity                         6,947              7,241

      Deferred  charges of $293,872  were  included in  stockholders'  equity as
      originally  reported  in error  and has  been  corrected  in the  restated
      amounts.

      Summarized  financial data for B2B as of and for the three months and nine
      months ended February 28, 2001 is as follows:

                                      Three months ended     Nine months ended
      ($ in thousands)                 February 28, 2001     February 28, 2001
      ---------------                  -----------------     -----------------
      Statement of operations data:
      Revenues                                370                   838
      Operating loss                        2,878                 8,847
      Net loss                              2,430                 8,590

      Balance sheet data:              February 28, 2001        May 31, 2000
                                       -----------------        ------------
      Cash and cash equivalents             1,284                12,127
      Total assets                          3,573                14,037
      Shareholders' equity                  2,980                11,411


5.    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.    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  closed and disposed of the business by November 1,
      2000 by selling the  remaining  assets of the segment.  As of February 28,
      2001, the Company had two full time  employees,  the Chairman of the Board
      and the Chief Financial  Officer,  who devote  substantially  all of their
      time to the B2B operations.  They perform  similar  functions as necessary
      for the  Company.  B2B  staff  perform  administrative  functions  for the
      Company. The costs of these services are borne by the Company. The Company
      is considering  various business  alternatives,  which may include merger,
      acquisition, joint ventures or liquidation. It is uncertain which, if any,
      alternative the Company will pursue.

      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  loss  on  disposal  of
      discontinued operations.

      Management of the Company  estimated  costs that it would incur as part of
      the  discontinuance  and  disposal  of  the  Internet  Business  Solutions
      segment.  At August 31, 2000,  the Company  recorded the estimated loss of
      discontinuing  this  operation  and disposing of the related  assets.  The
      estimate  consisted  primarily of severance  costs for  employees who have
      been terminated,

                                       9

<PAGE>

      lease  cancellation  payments,  and the estimated  loss on the sale of the
      segment's  remaining assets.  These amounts have been included in the loss
      on disposal  of  discontinued  operations  in the  accompanying  condensed
      consolidated  statement  of  operations.  There  were  no  changes  in the
      estimates made for the  discontinuance of the Internet Business  Solutions
      segment during the quarter ended February 28, 2001.

7.    Convertible Preferred Stock Class C

      As of February 28, 2001,  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.  Dividends amounted to
      $6,750 for the nine months ended  February 29, 2000. In July 1999,  40,213
      shares of common stock were issued in full payment of the preferred  stock
      dividends.

8.    Gain on sale of investments
      In the second quarter of fiscal 2000, the Company exercised USWeb warrants
      and sold the underlying USWeb stock,  resulting in a gain of $728,750.  In
      the third quarter of fiscal 2000, the Company recognized a loss of $59,080
      on an investment  in  NYDelivery,  a privately  held  internet-based  food
      delivery company.

9.    Non-Cash Consulting Expense
      On October 28, 1999,  options to purchase  400,000  shares of Common Stock
      were granted to consultants with an exercise price of $2.69 per share. The
      total cost  computed  under the Black  Scholes  method was an aggregate of
      $452,000,  which was recorded as a deferred  charge  expensed and over the
      six-month vesting period.  During the quarter ended February 29, 2000, the
      Company recorded approximately  $225,000 of stock compensation,  which has
      been included in loss from operations of discontinued operations.

      In the nine months ended  February 29, 2000,  options to purchase  165,500
      shares of B2B Common  Stock were  granted to certain  providers of outside
      services who agreed to accept compensation in stock options.  The exercise
      prices  range from $.60 to $2.00,  and the total cost  computed  under the
      Black Scholes method was an aggregate of $273,902, which was recorded as a
      deferred charge and expensed over the shorter of the vesting period or the
      period of service. During the quarter ended February 29, 2000, the Company
      recorded  approximately  $138,000  of stock  compensation,  which has been
      included in general and administrative expenses.

10.   Comprehensive Loss
      The  amounts  related  to  investments  reported  in net  loss  and  other
      comprehensive  loss  for the  nine  months  ended  February  28,  2001 are
      comprised of a holding loss arising  during the period,  net of taxes,  of
      $75,568.  The  comprehensive  loss for the  three  and nine  months  ended
      February  28,  2001  was  $980,085  and  $6,048,161,   respectively.   The
      comprehensive  loss for the three and nine months ended  February 29, 2000
      was $3,227,331 and $5,387,404, respectively.

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 Notes to the Condensed  Consolidated  Financial  Statements included
elsewhere in this Form 10-QSB.

Results of Operations
General
-------
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  closed and  disposed of the business by November 1, 2000 by selling the
remaining  assets of the segment.  As of February 28, 2001,  the Company had two
full time employees,  the Chairman of the Board and the Chief Financial Officer,
who devote  substantially all of their time to the B2B operations.  They perform
similar functions as necessary for the Company. B2B staff perform administrative
functions for the

                                       10
<PAGE>


Company.  The costs of these  services are borne by the Company.  The Company is
considering   various   business   alternatives,   which  may  include   merger,
acquisition,  joint  ventures or  liquidation.  It is uncertain  which,  if any,
alternative the Company will pursue.

As a result of  discontinuing  the  Internet  Business  Solutions  segment,  the
Company has no  operations.  It owns 37.8% of the common stock of  B2Bgalaxy.com
and through shareholder agreements votes 47.6% of B2Bgalaxy.com's common stock.

The Company  reflected B2B as a consolidated  subsidiary in its previously filed
financial  statements through August 31, 2000.  However, as described in Note 3,
on February 29, 2000, B2B completed a private  placement of common stock,  which
reduced the Company's voting interest in B2B below 50%. As the Company no longer
had a controlling  financial  interest in B2B, the Company should have presented
the  investment  in B2B using the  equity  method  of  accounting  as of and for
periods after February 29, 2000. In the accompanying financial information,  the
investment in B2B has been reflected  using the equity method of accounting from
February 29, 2000. The accompanying  condensed  consolidated balance sheet as of
February 28, 2001 reflects the Company's interest in B2B using the equity method
of  accounting.  The  consolidated  balance  sheet  as of May 31,  2000 has been
adjusted to reflect the  investment  in B2B on an equity basis from February 29,
2000  forward.  For the nine months ended  February  28,  2001,  the Company has
recognized  its  proportionate  share of B2B's net losses on the equity  method,
based on its ownership in B2B for each period, in other income  (expense).  From
June 1 to  September  30, 2000,  the  Company's  ownership of B2B was 48.7%.  As
described in Note 3, on September 30, 2000,  4,000,800 shares of Common Stock of
B2B were issued upon  conversion of the B2B Preferred  Stock.  This  transaction
reduced  the  Company's  economic  ownership  of B2B from  48.7% to 37.8%.  From
October 1, 2000 to February 28, 2001, the Company's ownership was 37.8%. For the
nine months ended  February 29, 2000,  the  operations of B2B are presented on a
consolidated basis as previously reported.

The Company plans to amend its financial  statements included in Form 10-KSB for
the year ended May 31,  2000 and Form  10-QSB for the  quarterly  periods  ended
February  29 and August  31,  2000 to reflect  its  investment  in B2B using the
equity  method of  accounting  from  February  29,  2000.  The Company  does not
anticipate there will be any changes to the Company's  stockholders' equity, net
loss or related per share  amounts as a result of the revisions to the financial
statements to apply the equity method of accounting for the Company's investment
in B2B. The Company's auditors,  KPMG LLP, have not completed their audit of the
adjustments to the Company's  financial  statements as of and for the year ended
May 31, 2000.

Three Months Ended February 28, 2001 and February 29, 2000
General and administrative  expenses - General and administrative  expenses were
$62,211 and $479,649 in the three months ended February 28, 2001and February 29,
2000,  respectively.  The prior year  expenses  reflect  those of B2B as well as
those of the Internet Business Solutions segment operations,  while current year
expenses reflect only those minimal expenses  required to maintain the Company's
corporate administrative functions.

Share of loss in B2Bgalaxy.com
The Company's  share of loss in B2B for the three months ended February 28, 2001
was $917,874.  From October 1, 2000,  the Company's  share of the loss fell from
48.7% to 37.8% as a result  of the  conversion  of B2B's  preferred  stock  into
4,000,800 shares of B2B common stock.

Discontinued operations
There  was no  loss  from  operations  of  the  discontinued  Internet  Business
Solutions  segment  during the three months ended  February 28, 2001. The losses
from operations of the discontinued  Internet Business Solutions segment for the
three months ended February 29, 2000, were $1,445,274.

Nine Months Ended February 28, 2001 and February 29, 2000
Gain on sale of investments
---------------------------
During  fiscal 2000,  the Company  exercised  USWeb  warrants and sold the USWeb
stock,  resulting in a gain of $728,750.  Also during  fiscal 2000,  the Company
recognized a loss of $59,080 on its investment in NYDelivery.

Share of loss in B2Bgalaxy.com
------------------------------
The Company's  share of loss in B2B for the nine months ended  February 28, 2001
was $3,897,671.  From October 1, 2000, the Company's share of the loss fell from
48.7% to 37.8% as a result  of the  conversion  of B2B's  preferred  stock  into
4,000,800 shares of B2B common stock.

Discontinued operations
-----------------------
The loss from operations of the discontinued Internet Business Solutions segment
for the nine months  ended  February 28, 2001 and February 29, 2000 was $915,567
and $2,348,161, respectively.

                                       11

<PAGE>

The estimated loss on disposal of the Internet Business Solutions segment of
$921,153 was recorded at August 31, 2000. There was no change in the estimate in
the three months ended February 28, 2001.


Liquidity and Capital Resources

The Company's ability to raise capital at this point is significantly  dependent
upon the  valuation  of its  investment  in B2B.  The Company  currently  has no
agreements,  commitments,  or understandings with respect to additional funding.
Any funds raised may not be sufficient to meet the  Company's  longer-term  cash
requirements.  In addition,  there can be no assurance  that the Company will be
able to obtain additional  financing.  The Company should be able to continue in
business  as  long as its  investment  in  B2Bgalaxy.com  can be sold or used as
collateral.  Currently,  the Company's only source of cash is advances from B2B.
In  addition,  there  can be no  assurances  that  B2B  will be  able to  obtain
additional funding to fund its own operations and the operations of the Company.
Management  believes  that based on B2B funds on hand at  February  28, 2001 and
anticipated revenues, B2B operations can continue at least through June 2001.

      On February  21,  2001,  the  Company  was  advised by the Nasdaq  Listing
      Qualifications  Panel ("the Panel") that the Company's  Common Stock would
      be delisted  from the Nasdaq  SmallCap  Market  because  the Panel  lacked
      confidence  that the  Company  could  sustain  compliance  with the Nasdaq
      SmallCap   Market  listing   requirements.   The  Company  is  awaiting  a
      determination  by the NASD as to whether the  Company's  Common  Stock can
      trade on the OTC  Bulletin  Board  System or  remain on the "Pink  Sheets"
      where it is currently  trading.  The Company's  Common Stock  continues to
      trade on the Boston Stock Exchange.  However,  the Company's  Common Stock
      could be  considered  a penny stock and be subject to various  regulations
      which could have an adverse  effect on the  trading  market for and market
      price of the Company's Common Stock.

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.

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  investment,  as well as the risk  factors  set  forth in the
Company's  Annual  Report on Form 10-KSB 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  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

                                       12

<PAGE>

Item 5.     Other Information

On  February  21,  2001,   the  Company  was  advised  by  the  Nasdaq   Listing
Qualifications  Panel ("the  Panel")  that the  Company's  Common Stock would be
delisted from the Nasdaq  SmallCap  Market  because the Panel lacked  confidence
that the  Company  could  sustain  compliance  with the Nasdaq  SmallCap  Market
listing requirements.  The Company is awaiting a determination by the NASD as to
whether the Company's  Common Stock will trade on the OTC Bulletin  Board System
or remain on the "Pink  Sheets"  where it is currently  trading.  The  Company's
Common  Stock  continues  to trade on the Boston Stock  Exchange.  However,  the
Company's  Common  Stock  could be  considered  a penny  stock and be subject to
various regulations which could have an adverse effect on the trading market for
and market price of the Company's Common Stock.

Item 6.     Exhibits and Reports on Form 8-K

            A Form 8-K was filed on January 31, 2001  relating to the  Company's
intention  to  amend  previously  filed  financial  statements  which  reflected
B2Bgalaxy.com  as a  consolidated  subsidiary.  The  Company  plans to amend its
financial  statements  included in its Form 10-KSB for the fiscal year ended May
31, 2000 and Form 10-QSB for the quarterly  periods ended February 29 and August
31, 2000 to reflect its  investment in B2B using the equity method of accounting
from  February  29,  2000.  The Company  does not  anticipate  there will be any
changes to the  Company's  stockholders'  equity,  net loss or related per share
amounts as a result of the  revisions to the  financial  statements to apply the
equity method of accounting for the Company's investment in B2B.

                                       13

<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)

                                /s/ Ken Gruber
Date: April 16, 2001            ------------------------------
                                Ken Gruber
                                Executive Vice President
                                And Chief Financial and Accounting Officer





                                       14