UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-KSB

[X]  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the fiscal year ended December 31, 1999 containing only financial statements
pursuant to Rule 15d-2

                                       OR

[ ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     Commission file number 000-29459

                                   PACEL CORP.
             (Exact Name of Registrant as Specified in its Charter)

                Virginia                                 54-1712558
     (State or other jurisdiction of                  (I.R.S. Employer
     incorporation or organization)                   Identification No.)

8870 Rixlew Lane, Suite 201, Manassas, Virginia           20109-3795
  (Address of principal executive offices)                (Zip Code)

Registrant's telephone number, including area code: (703) 257-4759

           Securities Registered Pursuant to Section 12(b) of the Act:

                                      None

           Securities Registered Pursuant to Section 12(g) of the Act:

                      Common Stock, no par value per share
                                (Title of Class)

     Indicate  by check mark  whether the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934 during the  preceding  twelve  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 [ ] NO [X]

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

     As of May 9, 2000, there were issued and outstanding  18,220,876  shares of
the  Registrant's  Common Stock.  The aggregate market value of the voting stock
held by non-affiliates  of the Registrant,  computed by reference to the average
of the closing bid and asked prices of such stock on the OTC Electronic Bulletin
Board as of May 9, 2000, was approximately $5,648,472 million.


                       DOCUMENTS INCORPORATED BY REFERENCE

None.




<PAGE>

     This  Report  is being  filed  pursuant  to Rule  15d-2  of the  Securities
Exchange  Act of 1934  as  amended.  Pursuant  to such  rule,  the  Registration
Statement of the  Registrant  filed under the  Securities  Act of 1933, SEC File
Number,  333-91611  did  not  contain  certified  financial  statements  for the
Registrant's  last  full  fiscal  year.  Therefore,  contained  herein  are  the
certified financial statements of the Registrant.


<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


         To The Board of Directors
         Pacel Corp.

     We have audited the accompanying consolidated balance sheets of Pacel Corp.
and  subsidiaries as of December 31, 1999 and 1998 and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present fairly, in all material respects,  the financial position of Pacel Corp.
and  subsidiaries  as of December  31,  1999 and 1998,  and the results of their
operations  and their cash flows for the years  then  ended in  conformity  with
generally accepted accounting principles.




                                            Peter C. Cosmas Co., CPAs


New York, New York
April 27, 2000



<PAGE>


                          PACEL CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                               ASSETS
                                                                          December 31,
                                                                  ----------------------------
                                                                    1999               1998
                                                                    ----               ----
<S>                                                              <C>               <C>
Current assets:
   Cash and cash equivalents                                      $   95,631        $   28,857
   Accounts receivable, net of allowance for doubtful
    accounts of $2,336 and $13,851 respectively                       41,577             5,034
   Inventory                                                          13,680                 -
   Other receivables                                                       -            60,350
   Prepaid expenses                                                   11,867            15,000
                                                                  ----------        ----------
      Total current assets                                           162,755           109,241

Property and equipment, net                                           48,880            57,913

Non-current assets:
     Note receivable                                                  71,000            74,000
     Good Will net                                                    10,270                 -
     Other assets                                                          -             1,100
     Security deposits                                                 7,985             5,483
                                                                  ----------       -----------
        Total non-current assets                                      89,255            80,583
                                                                  ----------       -----------
      Total assets                                                $  300,890       $   247,737
                                                                  ==========       ===========


        LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
   Notes payable                                                  $   50,000       $    35,000
   Accounts payable                                                  291,812            66,954
   Loans payable Officers-Stockholders                                14,000           133,000
   Accured Expenses                                                  211,921           157,880
                                                                  ----------       -----------
      Total current liabilities                                      567,733           392,834
                                                                  ----------       -----------
Minority interest                                                          -                 -
Commitments:

Stockholders' equity (deficit)
   Preferred stock, no par value,
     no liquidation value, 5,000,000 shares
     authorized, issued 1,000,000 shares
     1997 class A convertible preferred stock                         11,320            11,320
   Common stock - no par value,
     40,000,000 shares authorized  1999 and 1998,
     13,990,313 and 5,834,325  shares outstanding in 1999
      and 1998 respectively                                        2,394,129           959,191
   Cumulative currency translation adjustment                         (4,807)                -
   Deficit                                                        (2,667,485)       (1,115,608)
                                                                  ----------       -----------
   Total stockholders' equity (deficit)                             (266,843)         (145,097)
                                                                  ----------       -----------

   Total liabilities and stockholders' (deficit)                  $  300,890       $   247,737
                                                                  ==========       ===========

</TABLE>
          See accompanying notes to consolidated financial statements.

<PAGE>

                          PACEL CORP. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31,
                        --------------------------------

<TABLE>
<CAPTION>

                                                                    1999               1998
                                                                    ----               ----
<S>                                                             <C>               <C>

 Net Sales                                                       $   102,464       $    52,447
                                                                 -----------       -----------



Operating costs and expenses:

      Research and development                                       918,366           641,752
      Depreciation                                                    17,636            10,336
      Interest expense                                               176,091             5,860
      Selling, general and administrative                            542,248           208,057
                                                                 -----------       -----------

     Total operating costs and expenses                            1,654,341           866,005
                                                                 -----------       -----------

           Net (loss)                                            $(1,551,877)      $  (813,558)
                                                                 ===========       ===========




Net  (loss) per common share
     Basic                                                             (0.19)            (0.17)
     Diluted                                                           (0.19)            (0.17)


Weighted Average shares outstanding
     Basic                                                         8,014,285         4,877,247
     Diluted                                                       8,014,285         4,877,247


</TABLE>


          See accompanying notes to consolidated financial statements.



<PAGE>


<TABLE>
<CAPTION>

                         PACEL CORP. AND SUBSIDIARIES
                            STATEMENTS OF CASH FLOWS
                        FOR THE YEARS ENDED DECEMBER 31,


                                                                        1999               1998
                                                                        ----               ----
<S>                                                                <C>                <C>
Cash flows from operating activities:
   Net (loss)                                                       $(1,551,877)       $  (813,558)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
   Depreciation                                                          17,636             10,336
   Provision for bad debts                                                2,336             13,851
   Other non cash items                                                 325,171             56,694
Increase (Decrease) in Cash from changes in:
    Accounts receivable                                                (25,028)              4,346
    Inventory                                                          (13,680)                976
    Other receivables                                                    60,350            (55,850)
    Prepaid expenses                                                      3,133            (15,000)
    Good will                                                           (10,270)                 -
    Other assets                                                          1,100                  -
    Security deposits                                                    (2,502)            (5,483)
    Accounts payable                                                    224,858             57,479
    Accrued expenses                                                     54,041            157,880
    Loans payable Officers-Stockholders                                (119,000)           133,000
                                                                   ------------        -----------
      Net cash (used in) operating activities                        (1,033,732)          (455,329)

Cash flows from investing activities:
    Note receivable                                                           -            (74,000)
    Purchase of property and equipment                                   (9,025)           (52,000)
    Proceeds from Principal payment received on note                      3,000                  -
                                                                   ------------        -----------

       Net cash used in investing activities                             (6,025)          (126,000)
                                                                   ------------        -----------

Cash flows from financing activities:
   Notes payable                                                         15,000             35,000
   Proceeds from sale of common stock                                 1,086,724            541,026
                                                                   ------------        -----------

   Net cash provided by financing activities                          1,101,724            576,026
                                                                   ------------        -----------
   Effect of exchange rate on cash                                        4,807                  -
                                                                   ------------        -----------

Net increase in cash and cash equivalents                                66,774             (5,303)


Cash and cash equivalents at beginning of year                           28,857             34,160
                                                                   ------------        -----------
Cash and cash equivalents at end of year                           $     95,631        $    28,857
                                                                   ============        ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION

     Cash paid for interest                                               1,727              5,860


</TABLE>

          See accompanying notes to consolidated financial statements.


<PAGE>

<TABLE>
<CAPTION>


                         PACEL CORP. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE TWO YEARS ENDED DECEMBER 31, 1999

                                                                                                                            Total
                                          Preferred Stock           Common Stock             Retained        Currency   Stockholders
                                       --------------------     ----------------------       Earnings      Translation     Equity
                                         Shares     Amount        Shares      Amount         (Deficit)      Adjustment    (Deficit)
                                         ------     ------        ------      ------         ---------     -----------  ------------
<S>                                   <C>          <C>         <C>         <C>           <C>               <C>           <C>
Balance December 31, 1997              1,000,000    $11,320     4,706,300   $  361,470    $  (302,050)     $            $    70,740

Issuance of common stock
and warrants net of expenses                                      725,612      541,027                                      541,027

Issuance of common stock
for professional services                                         402,413       56,694                                       56,694

Net loss                                                                                     (813,558)                     (813,558)
                                      ----------------------------------------------------------------------------------------------
Balance, December 31, 1998             1,000,000     11,320     5,834,325      959,191     (1,115,608)                     (145,097)

Issuance of common stock and
warrants net of expenses                                        7,307,975    1,164,169                                    1,164,169

Issuance of common stock for
professional services                                                          848,013        170,769                       170,769


Grant of common stock options
exercisable below market on
date of grant                                                           -      100,000                                      100,000

Effect of currency translation                                                                              (4,807)          (4,807)

Net loss                                                                                   (1,551,877)                   (1,551,877)
                                      ----------------------------------------------------------------------------------------------
Balance, December 31, 1999             1,000,000    $11,320    13,990,313   $2,394,129    $(2,667,485)     $(4,807)     $  (266,843)
                                      ==============================================================================================

</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998
                           --------------------------

1)   Summary of Significant Accounting Policies

     a)   Nature of the business

     Pacel Corp. (the "Company") was  incorporated on May 3, 1994 under the laws
of the State of Virginia.  The Company was formed for the purpose of  developing
and  marketing  its own computer  software  programs.  To date,  the Company has
developed  and is  marketing  several  versions  of its  interactive  electronic
procedure  software  to be used with  Microsoft  Windows  under the name  Visual
Writer (the "Visual Writer System").

     The Company has completed  research and development and testing  activities
on the Visual  Writer  system and has funded  the  development  of the  software
through  management  contributions  of  money,  time  and  materials,   investor
financing  and limited sales of software.  It has hired  personnel and developed
consulting relationships.


     b)   Principles of consolidation

     The consolidated  financial  statements include the accounts of the Company
and all of its subsidiaries in which a controlling  interest is maintained.  All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.  For those  consolidated  subsidiaries where Company ownership is
less than 100%,  the  minority  stockholders'  interest  are shown as a minority
interest.  Investments  in  affiliates  over which the Company  has  significant
influence but not a controlling interest are carried on the equity basis.


     c)   Cash and cash equivalents.

     Cash equivalents  consist of liquid  investments,  with a maturity of three
months or less at the time of  purchase.  Cash  equivalents  are stated at cost,
which approximate market value.

     d)   Inventories:

     Inventories are stated at the lower of cost or market,  which  approximates
actual cost, using the first in, first out method.



<PAGE>





                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998



     e)   Property and Equipment:

     Property and equipment are stated at cost.  Depreciation  is computed using
the  straight-line  method based upon the  estimated  useful lives of the assets
ranging from five to seven years.  Maintenance  and repairs are charged  against
income and betterments are capitalized.

     f)   Reclassification

     Certain  prior year  amounts have been  reclassified  to conform to current
year's presentation.


     g)   Revenue recognition:

     Revenue is  recognized  when  earned.  The  Company's  revenue  recognition
polices  are  in  compliance  with  American   Institute  of  Certified   Public
Accountants  Statement of Position 97-2. Software Revenue  Recognition.  Revenue
from products licensed to original equipment  manufacturers is recorded when the
manufacturers  ship licensed  products while revenue from  organization  license
programs are recorded  when the software has been  delivered and the customer is
invoiced.  Revenue from packaged  product sales to distributors and resellers is
recorded when related products are shipped. Maintenance and subscription revenue
is  recognized  ratably  over  the  contract  period.  Revenue  attributable  to
significant  support  is based on the  price  charged  or  derived  value of the
undelivered elements and is recognized ratably on a straight-line basis over the
producer's life cycle. Costs related to insignificant obligations, which include
telephone support for certain products, are accrued. Provisions are recorded for
returns and bad debts.


     h)   Research and Development Expenses:

     Costs  incurred in the product  development  of new  software  products are
expensed as incurred until  technological  feasibility has been established.  To
date, the establishment of technological  feasibility of the Company's  products
and general release  substantially  coincide.  As a result,  the Company has not
capitalized any software development costs.

<PAGE>






                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


     i)   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  amounts of assets and  liabilities  and
disclosures of contingent assets and liabilities as of the date of the financial
statements and the reported  amounts of income and expenses during the reporting
period.  Operating results in the future could vary from the amount derived from
management's estimates and assumptions.


     j)   Impact of Recently Issued Accounting Standards:

     In  March  1998,  the  Accounting   Standards  Executive  committee  issued
Statement  of  Position  98-1,  Accounting  for the Costs of  Computer  Software
Developed or Obtained for Internal Use ("SOP 98-1"0. SOP 98-1 requires all costs
related to the  development  of internal use software  other than those incurred
during the  application  development  stage to be  expensed as  incurred.  Costs
incurred during the application development stage are required to be capitalized
and amortized over the estimated useful lif of the software. The Company adopted
SOP 98-1 on January 3, 1999 and there was no significant impact on the Company's
financial position or operating results.

     In April 1998,  the  American  Institute of  Certified  Public  Accountants
issued Statement of Position 98-5, Reporting on the Costs of Start-Up Activities
("SOP 98-5").  SOP 98-5 requires costs of start-up  activities and  organization
costs be expensed as incurred.  The Company  adopted SOP 98-5 on January 3, 1999
and there was no  significant  impact on the  Company's  financial  position  or
operating results.

     In December 1999, the  Securities  and Exchange  Commission  staff released
Staff Accounting Bulletin No. 101, Revenue  Recognition in Financial  Statements
("SAB No. 101"),  which provided  guidance on the recognition,  presentation and
disclosure  of revenue in financial  statements.  SAB No. 101 did not impact the
Company's revenue recognition policy.


<PAGE>



                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

     In June 1998,  the FASB  issued  SFAS No. 133,  Accounting  for  Derivative
Instruments and Hedging  Activities  ("SFAS No. 133")> SFAS No. 133 is effective
for fiscal years  beginning  after June 15, 2000. SFAS No. 133 requires that all
derivative  instruments  be recorded  on the balance  sheet at their fair value.
Changes in the fair value of  derivatives  are  recorded  each period in current
earnings or other  comprehensive  income.  The Company  does not expect that the
adoption of SFAS No. 133 will have a material impact on its financial statements
because the Company does not currently hold any derivative instruments.

     k)   Impairment of Long-Lived Assets

     Effective  January 1, 1996, the Company  adopted SFAS NO. 121,  "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of," SFAS No. 121  required  the  Company to review  the  recoverability  of the
carrying  amounts  of its  long-lived  assets  whenever  events  or  changes  in
circumstances  indicate  that the  carrying  amount  of the  asset  might not be
recoverable.

     In the  event  that  facts and  circumstances  indicate  that the  carrying
amounts of long-lived  assets may be impaired,  an evaluation of  recoverability
would  be  performed.  If  an  evaluation  is  required,  the  estimated  future
undiscounted  cash flows  associated  with the asset  would be  compared  to the
asset's  carrying amount to determine if a write-down to fair value is required.
Fair value may be determined  by reference to discounted  future cash flows over
the  remaining  useful life of the related  asset.  Such adoption did not have a
material effect on the Company's financial position or results of operations.


     l)   Foreign Currency Translation

     The financial statements of the Company's foreign subsidiaries are measured
using the local currency as the functional  currency.  Assets and liabilities of
these  subsidiaries  are  translated  at exchange  rates as of the balance sheet
date.  Revenues  and  expenses are  translated  at average  rates of exchange in
effect during the year. The resulting  cumulative  translation  adjustments  are
included in the consolidated and combined  statements of operations and were not
material for any periods presented herein.

<PAGE>


                         PACEL CORP. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1999 AND 1998



     m)   Segment Information

     SFAS No. 131,  "Disclosures  about  Segments of an  Enterprise  and Related
Information"  establishes  standards for reporting  information  about operating
segments in financial  statements.  Operating segments are defined as components
of an enterprise about which separate financial information is available that is
evaluated  regularly by the chief  operating  decision  maker, or chief decision
making  group,   in  deciding  how  to  allocate   resources  and  in  assessing
performance. The Company operates in one segment.

     n)   Fair Value Disclosures:

     The  carrying  amounts  reported  in the  balance  sheets for cash and cash
equivalents,  accounts  receivable,  inventories,  accounts  payable and accrued
expenses, approximate fair value because of the immediate or short-term maturity
of these financial instruments.

     o)   Stock Options:

     The  Company  accounts  for  its  stock  options  in  accordance  with  the
provisions of Accounting  Principles Board (APB) Opinion No. 25,  Accounting for
Stock Issued to Employees,  and related  interpretations.  As such, compensation
expense would be recorded on the date of grant only if the current  market price
of the  underlying  stock exceeded the exercise  price.  On January 1, 1996, the
Company adopted the disclosure requirements of Statement of Financial Accounting
Standards  (SFAS) No.  123,  Accountin  for  Stock-based  Compensation.  Had the
Company  determined  compensation cost based on fair value at the grant date for
stock options under SFAS No. 123 the effect would have been immaterial.

2)   Business Combinations

     On October 22,  1999 Pacel  Corp.  acquired  all of the  outstanding  stock
29,055  shares of Fairfax  Communications  Limited for $30,000,  which  included
$57,774 of assumed debt. The  acquisition  was accounted for as a purchase under
Accounting  Principles Board Opinion No. 16 (APB no. 16). In accordance with APB
No. 16, the Company  allocated the purchase price based on the fair value of the
assets acquired and liabilities assumed. Good will resulting for the purchase of
$10,811 was recognized and wil be amortized  over a five-year  period.  $541 was
charged to amortization expense in 1999.

<PAGE>

                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


     In July 1999,  the  Company  formed an eighty-  percent  owned  subsidiary,
E-Business  Store.Com  Inc. for the purpose of expanding its internet  business.
The 20%  minority  interest is owned  equally by David and F. Kay  Calkins.  The
subsidiary  operated at a loss,  the minority's 20% share of the loss of $40,630
is not  reflected in the  statement of  operations.  E-Business  has no net book
value so there is no value  reflected  on the  consolidated  balance  sheet  for
minority interest.

3)   Property and Equipment:

     Property and equipment consist of the following:


                                                        December 31,
                                               ------------------------------
                                                  1999               1998
                                                  ----               -----

         Office Equipment                      $  86,709          $  77,684

         Less accumulated depreciation            37,829             19,771
                                               ---------           --------

                                               $  48,880           $ 57,913
                                               ---------           --------



4) Notes Receivable

     The company extended a long term note to CTM Automated Systems, Inc. in the
amount of $75,000 at an interest  rate of 5.25%  payable  monthly with a balloon
payment October,  2002. The loan is collateralized by 1,000 shares of CTM stock.
The  balance of the loan was  $71,000  and  $74,000  at  December  31,  1999 and
December 31, 1998 respectively.

5) Short-Term Debt

     Short-term  debt consists of notes payable of $50,000 and $35,000  December
31,  1999 and 1998  respectively.  The notes bear an  interest  rate of 11%.  In
conjunction with the notes the Company issued Common Stock purchase  warrants to
the lenders in consideration for execution of the financing agreements.

<PAGE>


                         PACEL CORP. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1999 AND 1998


     Under  the  terms of the  warrant  agreements,  the  exercise  price of the
warrants  and the number of shares  purchasable  with each  warrant are adjusted
when  converted.  On the  conversion  date,  the exercise  price of the warrants
ranges from  20%-50% of the average  market price of the stock for the five days
prior to conversion. This discount from market amounted to $175,000 and $0.00 in
1999 and 1998 respectively, and was charged to interest expense.

6) Income Taxes

     The Company  provides for the tax effects of  transactions  reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences  between the basis of assets and
liabilities for financial and income tax reporting.  The deferred tax assets and
liabilities,  if any,  represent  the future tax  return  consequences  of those
differences,  which will  either be taxable  or  deductible  when the assets and
liabilities  are  recovered or settled.  As of December  31, 1999 and 1998,  the
Company  had  no  material  current  tax  liability,  deferred  tax  assets,  or
liabilities  respectively.  The Company has available a net operating loss carry
forward of approximately  $2,6 million for tax purposes to offset future taxable
income. The net operating loss carryforwards expire in 2011-2018.


7) Earnings (Loss) Per Share:

     In  February  1997,  the  Financial   Accounting   Standards  Board  issued
Statements of Financial  Accounting  Standards  ("SFAS") No. 128.  "Earnings Per
Share"  applicable  for  financial  statements  issued for periods  ending after
December 15, 1997. As required the Company  adopted  "SFAS" No. 128 for the year
ended  December  31,  1997 and  restated  all prior  period  earnings  per share
figures.  The Company has presented basic earnings per share. Basic earnings per
share exclude potential  dilution and is calculated by dividing income available
to common  stockholders  by the weighted  average number of  outstanding  common
shares. Diluted earnings per share incorporates the potential dilutions from all
potentially  dilutive  securities  that would have  reduced  earnings per share.
Since the potential  issuance of  additional  shares would reduce loss per share
they are considered anti-dilutive and are excluded from the calculation.

     The weighted average number of shares used to compute basic earnings (loss)
per  share  was   8,014,285   and  4,877,247  at  December  31,  1999  and  1998
respectively.

<PAGE>

                         PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1999 AND 1998


8) Commitments and Contingencies:

     a)   Operating Leases

                   2000                             $298,634
                   2001                              164,508
                   2002                              146,743
                   2003                              135,185
                   2004                              139,240
                                                    --------
        Total minimum lease payments                $884,310
                                                    ========

     Rent  expense  for  December  31,  1999 and 1998 was  $60,321  and  $14,400
respectively.


9) Stockholders' Equity:

     a)   Preferred Stock:

     The Company's  Amended  Certificate of Incorporation  authorizes  5,000,000
shares of no par, no  liquidating  value  preferred  stock,  of which  1,000,000
shares have been designated the 1997 Class A Convertible  Preferred  Stock.  The
number of shares of the 1997 Class A shall be limited to 1,000,000. The Board of
Directors of the Company has the authority to establish and designate any shares
of stock in series or classes  and to fix any  variations  in the  designations,
relative  rights,  preferences  and  limitations  between  series  as  it  deems
appropriate, by a majority vote.

     The shares of the 1997 Class A  Convertible  Preferred  Stock shall have no
liquidation  value,  and shall be entitled  to receive,  out of any funds of the
Company at the time legally  available for the  declaration of dividends,  a per
share  participating  dividend  equivalent  to that  declared  and or paid  with
respect to a share of Common Stock.

     At any time after June 30, 2000, the Company, at the option of the Board of
Directors,  may redeem the whole of or part of,  the 1997,  Class A  Convertible
Preferred  Stock by paying in cash $ .001 per  share and in  addition  an amount
equal to all unpaid dividends.

<PAGE>

                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


     The 1997 Class A Convertible  Preferred Stock shall not have voting rights,
and are  convertible  at anytime  into an equal number of shares of Common Stock
provided the Company  achieves the following  gross  revenues in the years ended
December 31, 1997, 1998 and 1999:  250,000 shares upon attainment of $ 1,000,000
in annual  revenues,  an  additional  250,000  shares upon the  attainment  of $
2,000,000 in annual revenues,  an additional 250,000 shares upon attainment of $
3,000,000  in  annual  revenues,  and an  additional  250,000  shares  upon  the
attainment  of $  4,000,000  in annual  revenues.  The 1997 Class A  Convertible
Preferred Stock has expired. No shares were issued.

     b)   Common Stock:

     The authorized common stock of the Company consists of 40,000,000 shares at
December  31,  1999 and 1998  without  par value.  In April of 1998 the  Company
effected  a forward  recapitalization  of the  number of shares of common  stock
outstanding  in a ratio of 4 to 1 restating the number of shares of common stock
outstanding  from  4,410,000 to  18,825,200  shares of common stock  without par
value.  In May,  1997 the  Company  effected a forward  recapitalization  of the
number of shares of common stock outstanding in a ratio of 30,000 to 1 restating
the number of shares of common  stock  outstanding  from 147  shares,  $1.00 par
value per share to  4,410,000  shares of common  stock  without  par  value.  In
October 1999, the Company  effected a one-for-four  reverse split  restating the
number of common  shares as of December 31, 1998 from  23,337,298  to 5,834,325.
All references to average number of shares outstanding and prices per share have
been restated retroactively to reflect the split.

10) Related Party Transactions:

     a)   Issuance of Common Stock:

     The Company  sold and  aggregate  of 100 shares to David and F. Kay Calkins
for  $2,000.  These  shares  were  split in May 1997 in a ratio of  30,000  to 1
restating the number of common shares owned by David and F. Kay Calkins from 100
to 3,000,000 after adjustments for splits and reverse splits.

     b)   Officers Loans:

     The Company borrowed an aggregate of $11,320 from David and F. Kay Calkins.
The loan was payable on demand with  interest at 9%. As of March 31, 1997,  they
each received  500,000 shares of Class "A" Preferred Stock in  consideration  of
the cancellation of the indebtedness of $11,320.


<PAGE>

                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998


     The Company  recorded a liability to David and F. Kay Calkins in the amount
of $14,000 and $119,000 at December 31, 1999 and December 31, 1998 respectively,
for accrued payroll. On September 30, 1999 the Company issued an Option to David
and F. Kay Calkins to purchase  625,000 shares of common stock at $.16 per share
in lieu of $50,000 of  compensation  owed. The market price of the shares at the
grant date was $.32. As a result,  additional  compensation expense was recorded
in the amount of $100,000 on September 30, 1999.

     c)   Employment Agreements:

     In 1999 the Company  entered into  employment  agreements with David and F.
Kay Calkins.  At base  salaries of $125,000 and $110,000 per year  respectively,
and are eligible for  retroactive  increases  based on earnings per share of the
Company.

11) Business and Credit Concentrations:

     The amount  reported in the financial  statements for cash,  trade accounts
receivable  and  investments   approximates  fair  market  value.   Because  the
difference  between  cost and the  lower of cost or  market  is  immaterial,  no
adjustment has been recognized and investments are recorded at cost.

     Financial  instruments that potentially  subject the company to credit risk
consist principally of trade receivables. Collateral is generally not required.

12) Comprehensive Income

     At  December  31,  1999 and 1998 net income and  comprehensive  income were
substantially the same.

13) Stock Option Plan:

     a.   Nonstatutory Stock Option Plan

     In May 1997, the Company adopted the Fiscal 1997 Nonstatutory  Stock Option
Plan (the "Plan").  1,000,000  Common Shares were reserved  under the Plan.  The
Plan is administered by the Board of Directors. 500,000 options have been issued
under the Plan exercisable at $1.25 for a period of three years. An aggregate of
300,000 of those options were issued to F. Kay and David Calkins.

<PAGE>



                          PACEL CORP. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 1999 AND 1998

     Stock  options  under  the  Plan may be  granted  to  employees,  officers,
directors,  consultants  of the  Company  or any other  parties  who have made a
significant  contribution  to the  business  and  success  of the  Company.  The
exercise  price  under  the  Plan may be  more,  equal to or less  than the then
current market price of the Common Shares as deemed to be appropriate.

     25,000  stock  options  were issued at a market price of $.20 per share and
vest immediately.

     b.   Key Employee Stock Option Plan

     In June,  1998 the Company  adopted the Key  Employees  Stock  Option Plan.
250,000  shares were reserved under the Plan.  The Plan is  administered  by the
Board of  Directors.  Options are granted at market  price the date of the grant
and vest 20% per year.  Options  for 125,000  shares have been issued  under the
plan, with an exercisable price between $.20 and $.32 per share, and a five year
vesting period. Options for 10,000 shares have vested.

14) Subsequent Events

     On  February  11,  2000  the  Company  completed  an SB-2  filing  to raise
$3,000,000. To date the Company has received over $1,000,000 net of expenses and
has a commitment for the balance.

     On  February  14,  2000 the  board of  directors  granted  David and F. Kay
Calkins each options purchase  1,399,031 shares of the Company's common stock at
an exercise price of $.21.

<PAGE>



                                   SIGNATURES

     Pursuant to the  requirements  of Section 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       PACEL CORP.


                                       By: /s/ David E. Calkins
                                          -----------------------------
                                          David E. Calkins
                                          Chairman of the Board, President and
                                          Chief Executive Officer
                                          (Duly Authorized Representative)

     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report has been signed below by the following  persons in the  capacities and on
the dates indicated.



/s/ David E. Calkins                           /s/ F. Kay Calkins
-------------------------------------          ---------------------------------
David E. Calkins                               F. Kay Calkins
Chairman of the Board, President               Director, Secretary and Treasurer
 and Chief Executive Officer
(Principal Executive, Accounting
 and Financial Officer)

Date:  May 11, 2000                            Date: May 11, 2000


/s/ Keith P. Hicks                             /s/ James D. Willett, Ph.D.
-------------------------------------          ---------------------------------
Keith P. Hicks                                 James D. Willett, Ph.D.
Director                                       Director

Date:  May 11, 2000                            Date: May 11, 2000


/s/ Thomas Southerly
-------------------------------------
Thomas Southerly
Director


Date:  May 11, 2000