U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                AMENDMENT NO. 2
                                       TO
                                   FORM 10-KSB


(Mark One)
[X]       ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934

                    For Fiscal Year Ended: December 31, 2000

                                       OR

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

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

         Commission file number                  000-26751
                               ------------------------------------------------

                               CyPost Corporation
         ---------------------------------------------------------------
            (Exact name of small business issuer as specified in its
                                    charter)

            Delaware                                        98-0178674
------------------------------------               -----------------------------
  (State or other jurisdiction                            (IRS Employer
of incorporation or organization)                       Identification No.)

    900-1281 West Georgia St.
    Vancouver, British Columbia, Canada                        V6E 3J7
--------------------------------------------------------------------------
    (Address of principal executive offices)                (Zip Code)

Issuer's telephone number                   (604) 904-4422
                         -------------------------------------------------------

Securities registered under Section 12(b) of the Act:          NONE
                                                     ---------------------------

Securities registered under Section 12(g) of the Act:  Common Stock, par value
                                                          $.001 per share
                                                     ---------------------------

         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 [ ]


<PAGE>
         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation SB is not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. [ ]




         State issuer's revenues for its most recent fiscal year:  $4,595,823

         State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked prices of such common
equity, as of a specified date within the past 60 days. (See definition of
affiliate in Rule 12b-2 of the Exchange Act.) $7,046,037 as of April 2, 2001.

         Note: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by non-affiliates on the basis of reasonable
assumptions, if the assumptions are stated.

      ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS

         Indicate by check mark whether the issuer has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act
after the distribution of securities under a plan confirmed by a court. Yes [ ]
No [ ]

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

         State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 21,562,025 as of April 2,
2001.

                       DOCUMENTS INCORPORATED BY REFERENCE

         If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act").
The listed documents should be clearly described for identification purposes
(e.g., annual report to security holders for fiscal year ended December 24,
1990).

         No documents are incorporated by reference into this Annual Report on
Form 10-KSB.

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


<PAGE>

                      PART II, Item 7 Financial Statements

                      CYPOST CORPORATION AND SUBSIDIARIES
                          INDEX TO FINANCIAL STATEMENTS


Independent Auditors' Report                                                F-1

Consolidated Balance Sheets as of December 31, 2000 and 1999                F-2

Consolidated Statements of Operations for the years ended
December 31, 2000 and 1999                                                  F-3

Consolidated Statements of Stockholder's Equity for the years ended
December 31, 2000 and 1999                                                  F-4

Consolidated Statements of Cash Flows for the years ended
December 31, 2000 and 1999                                                  F-5

Notes to the Consolidated Financial Statements                              F-6
Independent Auditors' Report                                               F-21

Consolidated Balance Sheets as of December 31, 1999 and 1998               F-22

Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998                                                 F-23

Consolidated Statements of Cash Flows for the years ended
December 31, 1999 and 1998                                                 F-24

Consolidated Statements of Stockholder's Equity for the years ended
December 31, 1999 and 1998                                                 F-25

Notes to the Consolidated Financial Statements                             F-26



<PAGE>
                          INDEPENDENT AUDITORS' REPORT


To the Board of Directors and Stockholders of
CyPost Corporation and Subsidiaries


We  have  audited  the  accompanying  consolidated  balance  sheet  of  CyPost
Corporation  and  Subsidiaries  as  of  December  31,  2000  and  the  related
consolidated  statements of operations, stockholders' equity, and cash flows for
the  year  then  ended.  These  consolidated  financial  statements  are  the
responsibility  of the Company's management. Our responsibility is to express an
opinion  on  these  consolidated  financial  statements  based on our audit. The
consolidated  financial  statements of CyPost Corporation and Subsidiaries as of
December  31,  1999, were audited by other auditors whose report dated March 23,
2000,  included an explanatory paragraph that raised substantial doubt about the
Company's  ability  to  continue  as  a  going  concern.

We  conducted  our audit in accordance with auditing standard generally accepted
in  the  United  States  of  America.  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  audit  provides  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 CyPost Corporation
and  Subsidiaries as of December 31, 2000, and the results of its operations and
cash  flows  for  the  year  then ended in conformity with accounting principles
generally  accepted  in  the  United  States  of  America.

The  accompanying  consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated  financial  statements,  the  Company has incurred operating losses
since  its  inception  and requires additional financing to continue operations.
These conditions raise substantial doubt about the Company's ability to continue
as  a going concern. Management's plans in regard to these matters are described
in  Note 1. The consolidated financial statements do not include any adjustments
relating  to  the recoverability and classification of asset carrying amounts or
the  amount and classification of liabilities that may result should the Company
be  unable  to  continue  as  a  going  concern.


                                   GOOD SWARTZ BROWN & BERNS LLP.

Los Angeles, California
April 6, 2001


<PAGE>
<TABLE>
<CAPTION>
                           CYPOST CORPORATION AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                              DECEMBER 31, 2000 AND 1999
                                    (U.S. DOLLARS)


                                                               2000           1999
                                                           -------------  ------------
<S>                                                        <C>            <C>
ASSETS

CURRENT ASSETS
     CASH                                                  $    250,631   $   415,779
     ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR
        DOUBTFUL ACCOUNTS                                       173,207       233,188
     INSURANCE PROCEEDS RECEIVABLE                               58,488             -
     PREPAIDS AND DEPOSITS                                      250,534       173,319
                                                           -------------  ------------
     TOTAL CURRENT ASSETS                                       732,860       822,286

PROPERTY AND EQUIPMENT, NET OF ACCUMULATED
     DEPRECIATION                                               751,020       599,582
GOODWILL AND OTHER INTANGIBLES, NET OF
     ACCUMULATED AMORTIZATION                                 3,193,015     5,036,785
OTHER ASSETS                                                      5,371        69,389
SOFTWARE DEVELOPMENT, NET OF ACCUMULATED AMORTIZATION                 -       139,535
                                                           -------------  ------------
                                                           $  4,682,266   $ 6,667,577
                                                           =============  ============

LIABILITIES AND SHAREHOLDERS EQUITY

CURRENT LIABILITIES
     ACCOUNTS PAYABLE & ACCRUED LIABILITIES                   1,026,666       983,237
     LOANS                                                    2,110,000       875,000
     DEFERRED REVENUE                                           640,483       626,143
     PURCHASE OF INTERNET ARENA                                       -       240,000
                                                           -------------  ------------
     TOTAL CURRENT LIABILITIES                                3,777,149     2,724,380
                                                           -------------  ------------

COMMITMENTS AND CONTINGENCIES (NOTE 11)

STOCKHOLDERS' EQUITY
     SHARE CAPITAL
        AUTHORIZED
            5,000,000 PREFERRED STOCK WITH A PAR VALUE OF $.001
            30,000,000 COMMON STOCK WITH A PAR VAUE OF $.001

        ISSUED AND OUTSTANDING
            PREFERRED STOCK - NONE                                    -             -
            COMMON STOCK 21,556,993 - 2000, 20,246,480 - 1999    21,557        20,246
     PAID-IN CAPITAL                                         14,047,544     8,814,002
     ACCUMULATED DEFICIT                                    (13,197,006)   (4,908,127)
     CURRENCY TRANSLATION ADJUSTMENT                             33,022        17,076
                                                           -------------  ------------
     TOTAL STOCKHOLDERS' EQUITY                                 905,117     3,943,197
                                                           -------------  ------------

                                                           $  4,682,266   $ 6,667,577
                                                           =============  ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.


                                                                             F-2
<PAGE>
<TABLE>
<CAPTION>
                      CYPOST CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                                 (U.S. DOLLARS)

                                                    2000          1999
                                                ------------  ------------
<S>                                             <C>           <C>
REVENUE                                         $ 4,595,823   $ 1,020,541

DIRECT COSTS                                      2,138,456       563,118
                                                ------------  ------------

                                                  2,457,367       457,423
                                                ------------  ------------
EXPENSES
  SELLING, GENERAL AND ADMINISTRATIVE             3,599,690     1,999,151
  AMORTIZATION AND DEPRECIATION                   2,859,519       588,538

                                                ------------  ------------
                                                  6,459,209     2,587,689
                                                ------------  ------------

LOSS BEFORE OTHER INCOME (EXPENSE)               (4,001,842)   (2,130,266)
                                                ------------  ------------

OTHER INCOME (EXPENSE)

  NET RECOVERY FROM FIRE INSURANCE                  228,966             -

  GAIN ON SALE OF INVESTMENT OF CYPOST KK            36,202             -

  LOSS ON ABANDONMENT OF PLAYA OPERATIONS        (2,201,253)            -

  IMPAIRMENT LOSS OF LONG LIVED ASSETS             (128,726)            -

  INTEREST EXPENSE                               (2,113,570)   (2,221,322)

                                                ------------  ------------
  TOTAL OTHER INCOME (EXPENSE)                   (4,178,381)   (2,221,322)
                                                ------------  ------------

MINORITY INTEREST                                  (108,656)            -

                                                ------------  ------------
NET LOSS                                        $(8,288,879)  $(4,351,588)
                                                ============  ============

LOSS PER SHARE BASIC & DILUTED                  $     (0.39)  $     (0.28)
                                                ============  ============

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING    21,182,796    15,816,232
                                                ============  ============
</TABLE>

  The accompanying notes are an integral part of these consolidated statements.


                                                                             F-3
<PAGE>
<TABLE>
<CAPTION>
                                               CYPOST CORPORATION AND SUBSIDIARIES
                                         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                         FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                                                         (U.S. DOLLARS)

                                                                           ADDITIONAL                 CUMMULATIVE
                                                         COMMON STOCK       PAID-IN                   TRANSLATION
                                                       NUMBER    AMOUNT     CAPITAL       DEFICIT      ADJUSTMENT      TOTAL
                                                     ----------  -------  -----------  -------------  ------------  ------------
<S>                                                  <C>         <C>      <C>          <C>            <C>           <C>
BALANCE, DECEMBER 31, 1998                           13,264,500  $13,264  $   624,416  $   (556,539)  $    33,966   $   115,107
   Issued for acquisition of Intouch.Internet, Inc.       9,855       10       28,515                                    28,525
   Issued for acquisition of NetRover Inc. and

       NetRover Office Inc.                             219,000      219      679,324                                   679,543

   Issued for acquisition of Connect Northwest          147,985      148      659,852                                   660,000
   Issued for acquisition of Internet Arena              20,140       20       59,980                                    60,000

   Issued for loan conversion                         4,500,000    4,500    3,995,500                                 4,000,000

   Issued for exercise of warrants                    2,085,000    2,085      553,915                                   556,000

   Beneficial conversion feature on loans                                   2,212,500                                 2,212,500

   Cummulative translation adjustment                                                                     (16,890)      (16,890)

   Net loss                                                                              (4,351,588)                 (4,351,588)
                                                     ----------  -------  -----------  -------------  ------------  ------------
BALANCE, DECEMBER 31, 1999                           20,246,480   20,246    8,814,002    (4,908,127)       17,076     3,943,197

   Issued for acquisition of Internet Arena              80,558       81      239,919                                   240,000

   Issued for acquisition of Playa Corporation          785,455      785    2,699,215                                 2,700,000
   Issued for services/debt                              26,500       27       92,723                                    92,750

   Issued for services                                  369,500      370      212,196                                   212,566
   Issued for services                                   48,500       48       26,989                                    27,037

   Beneficial conversion feature on loans                                   1,962,500                                 1,962,500
   Cummulative translation adjustment                                                                      15,946        15,946

   Net loss                                                                              (8,288,879)                 (8,288,879)
                                                     ---------------------------------------------------------------------------
BALANCE, DECEMBER 30, 2000                           21,556,993  $21,557  $14,047,544  $(13,197,006)  $    33,022   $   905,117
                                                     ===========================================================================
</TABLE>


                                                                             F-4
<PAGE>

<TABLE>
<CAPTION>
                            CYPOST CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                     FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                                     (U.S. DOLLARS)


                                                                 2000          1999
                                                             ------------  ------------
<S>                                                          <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  NET LOSS                                                   $(8,288,879)  $(4,351,588)
  Adjustments to reconcile net loss to cash used by
      operating activities:
    Amortization and depreciation                              2,859,519       588,538
    Interest expense                                           1,962,500     2,212,500
    Net recovery from fire insurance                            (228,966)            -
    Gain on sale of investment on CyPost KK                      (36,202)            -
    Minority interest                                            108,656
    Loss on abandonment of Playa operations                    2,201,253             -
    Impairment loss of long-live assets                          128,726             -
    Casualty loss on equipment                                     7,901             -
    Fair value of stock issued for services                      332,353             -
    Currency translation adjustments on loss on abandonment       60,501             -
    Translation adjustments                                       15,946             -
  Changes in assets and liabilities
    Accounts receivable                                           59,981       (90,017)
    Insurance receivable                                         (58,488)            -
    Prepaid and deposit                                          (77,215)     (109,550)
    Other assets                                                  64,018       (15,972)
    Accounts payable and accrued liabilities                     (35,160)      645,204
    Deferred revenue                                              14,340       149,921
                                                             ------------  ------------
NET CASH USED BY OPERATING ACTIVITIES                           (909,216)     (970,964)
                                                             ------------  ------------
CASH FLOWS FROM INVESTING ACTIVITIES
  Acquisition of business                                       (592,454)   (3,612,066)
  Purchase of property and equipment                            (338,602)     (270,100)
  Investment in software development                             (87,431)     (209,303)
  Proceeds from sale of investment in CyPost KK                  220,000             -
  Gross proceeds received from insurance company                 306,344             -
  Payment of insurance related claims                            (77,378)            -
                                                             ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES                           (569,521)   (4,091,469)
                                                             ------------  ------------
CASH FLOWS FROM FINANCING ACTIVITIES
  Loan proceeds                                                1,413,589     4,875,000
  Loan repayment                                                (100,000)            -
  Exercise of warrants                                                 -       556,000
                                                             ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES                      1,313,589     5,431,000
                                                             ------------  ------------
NET INCREASE IN CASH                                            (165,148)      368,567
CASH, BEGINNING OF YEAR                                          415,779        47,212
                                                             ------------  ------------
CASH, END OF YEAR                                            $   250,631   $   415,779
                                                             ============  ============

NON-CASH TRANSACTIONS
  Common Stock issued for services and acquisitions          $ 3,272,353   $ 1,428,068
  Common Stock issued for debt conversion                              -   $ 4,000,000

OTHER CASH INFORMATION
   Interest paid                                             $    29,059   $         -
</TABLE>

  The accompanying notes are an integral part of these consolidated statements



                                                                             F-5
<PAGE>
                       CYPOST CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 2000 AND 1999
                                 (U.S. Dollars)


1.   NATURE OF OPERATIONS AND GOING CONCERN

     CyPost Corporation ("CyPost") was incorporated on September 5, 1997 under
the laws of the State of Delaware and its principal executive offices are
located in Vancouver, Canada. CyPost is engaged in the business of providing
Internet connection services for business and personal use. Previously the
Company was also involved in developing certain software products using
encryption components to enhance user security and convenience for communication
across digital networks, and in securing local data storage equipment, which
activities the Company no longer currently pursues. The Company emerged from the
development stage in 1999 and commenced revenue generating activities. The term
"Company" refers to CyPost and its consolidated subsidiaries.

     The accompanying consolidated financial statements have been prepared on
the basis of accounting principles applicable to a "going concern", which assume
that the Company will continue in operation for at least one year and will be
able to realize its assets and discharge its liabilities in the normal course of
operations.

     Several conditions and events cast doubt about the Company's ability to
continue as a  "going concern".  The Company has incurred net losses of
approximately $13.2 million for the period from inception September 5, 1997 to
December 31, 2000, has a working capital deficiency at December 31, 2000 of
approximately $3 million, and requires additional financing for its business
operations.

     The Company's future capital requirements will depend on numerous factors
including, but not limited to, whether the Company wishes to recommence software
development activities, and market penetration of and profitable operations from
its Internet connection services.  The Company does not believe that bank
borrowings are available under present circumstances, and there can be no
assurance that any financing could be obtained from other sources. Even if
funding were available, it might be available only on terms which would not be
favorable to the Company or which management would not find acceptable.
Meanwhile, the management is working on attaining cost and efficiency synergies
by consolidating the operations of the businesses acquired.

     These financial statements do not reflect adjustments that would be
necessary if the Company was unable to continue as a "going concern".  While
management believes that the actions already taken or planned, as described
above, will mitigate the adverse conditions and events which raise doubt about
the validity of the "going concern" assumption used in preparing these financial
statements, there can be no assurance that these actions will be successful.

     If the Company were unable to continue as a  "going concern", then
substantial adjustments would be necessary to the carrying values of assets, the


<PAGE>
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.


2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     CONSOLIDATION

     The consolidated financial statements include the accounts of CyPost
Corporation and its subsidiaries.  The principal subsidiaries, all of which,
except CyPost KK for a certain period of time during 2000, are wholly owned,
include ePost Innovations Inc., NetRover Inc., NetRover Office Inc., Hermes Net
Solutions Inc., and Intouch.Internet Inc. All significant inter-company
transactions and balances have been eliminated in consolidation.


     FOREIGN CURRENCY TRANSLATION

     The functional currency of the Company is U.S. dollars. Balance sheet
accounts of international self-sustaining subsidiaries, principally Canadian,
are translated at the current exchange rate as of the balance sheet date. Income
statement items are translated at average exchange rates during the period. The
resulting translation adjustment is recorded as a separate component of
stockholders' equity. Dollar values in this consolidated financial statements
are expressed in U.S. Dollars, unless indicated otherwise. On December 31, 2000
one Canadian Dollar (Cdn) was exchangeable for .66720 U.S. Dollars.

     USE OF ESTIMATES

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

     FAIR VALUE OF FINANCIAL INSTRUMENTS

     The Company has, where practicable, estimated the fair value of financial
instruments based on quoted market prices or valuation techniques such as
present value of estimated future cash flows.  These fair value amounts may be
significantly affected by the assumptions used, including the discount rate and
estimates of cash flow.  Accordingly, the estimates are not necessarily
indicative of the amounts that could be realized in a current market exchange.
Where these estimates approximate carrying value, no separate disclosure of fair
value is shown.

     PROPERTY AND EQUIPMENT

     Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight-line
method over a period of five years.  Maintenance and repairs are charged against
operations and betterments are capitalized.


<PAGE>
     EARNINGS (LOSS) PER SHARE

     Earnings (loss) per share have been computed in accordance with SFAS 128.
Basic earnings (loss) per share is computed by dividing net income (loss)
attributable to common shareholders by the weighted average number of common
shares outstanding during the respective periods.  Diluted earnings (loss) per
share is computed similarly, but also gives effect to the impact that
convertible securities, such as warrants, if dilutive, would have on net
earnings (loss) and average common shares outstanding if converted at the
beginning of the year. The effect of potential common shares such as warrants
would be antidilutive in each of the periods presented in these financial
statements, and accordingly, are not presented.


     REVENUE RECOGNITION AND DEFERRED REVENUE

     The Company's primary source of revenue is earned from Internet connection
services. For contracts which exceed one month, revenue is recognized on a
straight-line basis over the term of the contract as services are provided.
Revenues applicable to future periods are classified as deferred revenue.

     DIRECT COSTS

     Direct costs consist of telecommunications charges in respect to providing
Internet connection services to customers. These costs are expensed as incurred.


     SOFTWARE DEVELOPMENT COSTS

     SFAS No. 86, "Accounting for the Costs of Computer Software to Be Sold,
Leased, or Otherwise Marketed", and Statement of Position 98-1 (SOP 98-1),
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use", provide guidance over accounting for computer software developed
or obtained for internal use including the requirement to capitalize specified
costs and amortization of such costs. The capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which the Company has defined as the completion of beta testing of a working
product. The establishment of technological feasibility and the ongoing
assessment of the recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but not limited
to, anticipated future gross product revenue, estimated economic life and
changes in software and hardware technology. Software developments costs are
amortized on the straight-line method over the estimated economic life of the
product of three years.

     As at December 31, 1999, the Company capitalized $209,303 of software
development costs and amortized $69,768 of these costs. During 2000, the Company
capitalized $87,431 of software development costs and amortized $98,240 of these
costs. At the end of 2000, the management of the Company assessed the
recoverability of the Company's software products assets and determined that
this asset was impaired. Therefore, the Company has written off the net book
value of this asset in the amount of $128,726.


<PAGE>
     GOODWILL AND OTHER INTANGIBLE ASSETS

     Intangible assets consist primarily of customer lists and goodwill related
to acquisitions accounted for under the purchase method of accounting.
Amortization of these purchased intangibles is provided on the straight-line
basis over the respective useful lives of the intangible assets which is
estimated to be three years.


     IMPAIRMENT OF LONG-LIVE ASSETS

     Long-live assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. An
impairment loss is recognized when the aggregate of estimated future cash
inflows less estimated future cash outflows, to be generated by an asset are
less than the asset's carrying value. Future cash inflows include an estimate of
the proceeds from eventual disposition. For purposes of this comparison,
estimated future cash flows are determined without reference to their discounted
present value. If the sum of undiscounted estimated future cash inflows is equal
to or greater than the asset's carrying value, impairment does not exist. If,
however, expected future cash inflows are less than carrying value, a loss on
impairment should be recorded. Such a loss is measured as the excess of the
asset's carrying value over its fair value. Fair value of an asset is the amount
at which an asset could be bought or sold in a current transaction between a
willing buyer and seller other than in a forced or liquidation sale. The Company
measures an impairment loss by comparing the fair value of the asset to its
carrying amount. Fair value of an asset is calculated as the present value of
expected future cash flows.

     INCOME TAXES

     The Company computes income taxes using the asset and liability method,
under which deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the Company's assets
and liabilities.  Deferred tax assets and liabilities are measured using
currently enacted tax rates that are expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled.  A valuation allowance is established when necessary to reduce deferred
tax assets to the amounts expected to be realized.

     ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     SFAS No.  133,  "Accounting for Derivative Instruments and Hedging
Activities", requires the recognition of all derivatives as either assets or
liabilities and the measurement of those instruments at fair value.  SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of SFAS No.  133", issued in August 1999, postpones for one
year the mandatory effective date for adoption of SFAS No.  133 to January 1,
2001.

     The Company does not currently engage in derivative trading or hedging
activities; hence, SFAS No.  133 and SFAS No.  137 will not have a material
impact on its financial position or results of operations.

     STOCK-BASED COMPENSATION

     SFAS No.  123,  "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for stock-based employee


<PAGE>
compensation under a fair value based method.  Alternatively, stock-based
employee compensation can be accounted for under APB No.  25, "Accounting for
Stock Issued to Employees", under which no compensation is recorded.

     The Company has not granted any stock-based compensation for any of the
periods presented in these financial statements.

     PENSIONS AND OTHER POSTRETIREMENT BENEFITS

     SFAS No.  132,  "Employers' Disclosures about Pensions and Other
Postretirement Benefits, an amendment of FASB Statements No.  87, 88 and 106",
revises employers' disclosures about pension and other postretirement benefit
plans.  It does not change the measurement or recognition of those plans.  It
standardizes the disclosure requirements for pension and other postretirement
benefits to the extent practicable, requires additional information on changes
in benefit obligations and fair values of plan assets that will facilitate
financial analysis, and eliminates certain disclosures that are no longer
considered useful.

     The Company does not offer any pension or other postretirement benefits.

     RECENT ACCOUNTING PRONOUNCEMENTS

     In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin  (SAB) No.  101,  "Revenue Recognition in Financial
Statements", to provide guidance on the recognition, presentation and disclosure
of revenues in financial statements.  The Company believes its revenue
recognition practices are in conformity with the guidelines prescribed in SAB
No.  101.

3.   ACQUISITIONS

     During 2000 and 1999, the Company completed a number of business and asset
acquisitions.  These acquisitions are accounted for using the purchase method,
and accordingly, these consolidated financial statements include the results of
operations from the date of acquisition of each respective business.

     HERMES NET SOLUTIONS, INC. AND INTOUCH.INTERNET, INC.

     On June 30, 1999, the Company acquired all of the shares of Hermes Net
Solutions, Inc. (Hermes) for approximately $528,000. Also on June 30, 1999, the
Company purchased all the issued and outstanding shares of Intouch.Internet,
Inc. (Intouch) for a purchase price of approximately $293,000. The consideration
for the purchase included cash of approximately $265,000 and the issuance of
9,855 shares of the Company's Common Stock valued at approximately $28,000. Both
Hermes and Intouch are based in Vancouver, British Columbia, Canada.

     In both acquisitions, the goodwill of approximately $759,000 will be
amortized on a straight-line basis over its estimated useful life of three
years.


     NETROVER INC. AND NETROVER OFFICE INC.

     On October 4, 1999, the Company acquired all of the shares of NetRover Inc.
and NetRover Office Inc. for approximately $2,000,000. The consideration for the


<PAGE>
purchase included cash of approximately $1,335,000 and 219,000 shares of the
Company's Common Stock valued at approximately $665,000. NetRover Inc. and
NetRover Office Inc. are based in Toronto, Canada.

     The purchase included goodwill and other intangibles of approximately
$2,900,000 which will be amortized on a straight-line basis over its estimated
useful life of three years.

     CONNECT NORTHWEST

     On October 27, 1999, the Company purchased certain assets and assumed
certain liabilities of Connect Northwest for a purchase price of $1,400,000.
The purchase price consisted of a cash payment to the sellers of $670,000, the
issuance to the sellers of 147,985 shares of the Company's Common Stock valued
at $660,000, and the payment of Connect Northwest liabilities in the aggregate
amount of $70,000. Connect Northwest is based in Washington State, United States
and operates as a DBA of CyPost. The purchase included goodwill and other
intangibles of $1,300,000 which will be amortized on a straight-line basis over
its estimated useful life of three years.


     INTERNET ARENA

     On November 9, 1999, the Company purchased certain assets and liabilities
of the business of Internet Arena for $600,000. The consideration for the
purchase included cash of $300,000 and 100,698 shares of the Company's Common
Stock for a value of $300,000.  As of December 31, 1999, 20,140 shares of common
stock were issued and the remaining 80,558 were issued subsequent to year-end.
Internet Arena is based in Oregon, United States.

     The purchase included goodwill and other intangibles of approximately
$536,000 which will be amortized on a straight-line basis over its estimated
useful life of three years.


     PLAYA CORPORATION

     On February 23, 2000, the Company purchased all the shares of Playa
Corporation (a Japan company) for $3,000,000. The consideration paid by the
Company consisted of cash in the amount of $300,000 and 785,455 shares of the
Company's common stock valued at $2,700,000.  Due to a clerical error
subsequently discovered, the number of shares originally calculated to be
issued, and actually issued to the seller, was incorrectly determined to be
771,426.  Therefore, in January 2001, the Company issued an additional 14,029
shares of its common stock to the seller to account for the difference.  For
purposes of financial statement presentation, all 785,455 shares of the
Company's common stock were deemed issued as of February 23, 2000.

     The acquisition has been accounted for by the purchase method of
accounting.  The purchase included goodwill and other intangibles of $3,665,778
which will be amortized on a straight-line basis over its estimated useful life
of three years. Due to a number of factors, including without limitation, weak
performance by Playa, the difficulties of operating one small Japanese company
following the sale by the Company of CyPost KK, a former subsidiary of the
Company, and the Company's own liquidity needs, in the fourth quarter 2000, the


<PAGE>
Company's management decided to abandon the business of Playa.  In connection
therewith, the Company has written off the assets of Playa in the net amount of
$2,201,253 which is reflected as "Loss on abandonment of Playa operations",
consisting of approximately $3,067,065 in actual assets, including the goodwill
and approximately $865,812 of liabilities owed by Playa to various parties for
which the Company does not believe it is liable. These consolidated financial
statements include the results of operations of Playa for the period from
February 24, 2000 to September 30, 2000.


     CYPOST KK

     On March 17, 2000, the Company purchased 400 shares of CyPost KK,
representing 100% of the then issued and outstanding shares, for $188,870
(20,000,000 Yen), and transferred 180 of such shares, or 45% of the then issued
and outstanding shares, to certain members of the management of CyPost KK in
consideration of their future effort to raise additional capital for CyPost KK.

     On May 5, 2000, the Company purchased an additional 400 shares of CyPost KK
from CyPost KK for $184,915 (20,000,000 Yen). The Company funded this purchase
$106,326 (11,500,000 Yen) from its own funds (with respect to 230 shares) and
$78,589 (8,500,000 Yen) in the form of a loan from these certain members of
CyPost KK management to the Company (with respect to the remaining 170 shares).
Of the 400 shares purchased by the Company on such date, the Company transferred
180 shares to these individuals in consideration of their future effort to raise
additional capital for CyPost KK. The transferred shares have been valued at the
Company's cost. As a result of acquiring a net additional 220 shares of CyPost
KK, the Company maintained its 55% ownership in CyPost KK.

     On May 22, 2000, Access Media International, a company which is not
affiliated with the Company, purchased 200 shares of CyPost KK from CyPost KK
for 10,000,000 Yen, resulting in a reduction of the Company's interest in Cypost
KK to 44%.

     All 360 shares of CyPost KK stock which were transferred by the Company to
these individuals were specifically intended to compensate them solely with
respect to equity financing activities and were contingent upon their ability to
raise additional equity financing in Japan for CyPost KK. Because these
individuals were not able to raise such additional financing, no portion of the
360 shares were earned.

     In part because these individuals were ultimately not able to arrange such
financing, the Company decided to sell its entire interest in CyPost KK.  On
July 12, 2000, the Company sold all 630 shares it then owned in CyPost KK to
Access Media International for $220,000, resulting in a gain of $36,202.

     In connection with the sale by the Company of its entire interest in CyPost
KK to Access Media International, on July 3, 2000 these certain members of
CyPost KK management (i) returned to the Company 190 shares of the CyPost KK
stock that the Company had previously transferred to them, consisting of the 180
shares transferred to them by the Company in March 2000 and 10 shares
transferred to them by the Company in May 2000; (ii) canceled the $78,589 loans
made by them to the Company in May 2000 to purchase 170 of the shares; and (iii)
retained those 170 shares purchased by the Company, for which the purchase price
was $78,589.

     Despite the fact that there was a brief period of time during which the
Company owned less than a majority of the voting shares of CyPost KK (May 22,
2000 through July 3, 2000), the Company owned a majority interest for most of


<PAGE>
the period from formation of CyPost KK through June 30, 2000 and therefore had
the ability to control its operations.  The Company has reflected the amounts of
revenue, cost of revenue and expenses on a consolidated basis for the entire
period of ownership.  Had the Company reflected the amounts of revenue, cost of
revenue and expenses on a consolidated basis for the period from April 1, 2000
through May 22, 2000 and an equity method for the period from May 22, 2000
through June 30, 2000, the impact on the consolidated financial statements would
not have been material.

     During its period of ownership of CyPost KK, the Company loaned CyPost KK
$64,764 and CyPost KK paid certain expenses on behalf of the Company in the
amount of $25,542, leaving a balance of $39,222 owed by CyPost KK to the Company
at the time of sale. In connection with the sale by the Company of all of its
interest in CyPost KK, the Company canceled the net outstanding balance of
$39,222 in loans made by the Company to CyPost KK and CyPost KK canceled $39,222
in loans made by CyPost KK to Playa Corporation ("Playa"). At September 30,
2000, there was a balance of $168,062 owed by Playa to CyPost KK. This loan
bears interest at 5.5% per annum and is payable in 60 monthly installments
beginning January 15, 2001. This loan balance has been written off in connection
with the abandonment of Playa's business. See "Acquisition of Playa".

4.   PROPERTY  AND  EQUIPMENT

     Property and equipment consist of the following:

                                         2000         1999
                                     ------------  -----------

     Office furniture                $   194,436   $  153,434
     Leasehold improvement                14,360       15,704
     Computer hardware and software    1,144,234      839,267
                                     ------------  -----------
                                       1,353,030    1,008,405
     Less accumulated depreciation      (602,010)    (408,823)
                                     ------------  -----------
                                     $   751,020   $  599,582
                                     ============  ===========

The depreciation expense charged to the operations for the years ended December
31, 2000 and 1999 were $179,263 and $60,012, respectively.

5.   GOODWILL  AND  OTHER  INTANGIBLES

     Goodwill and other intangibles consist of the following:

                                         2000         1999
                                     ------------  -----------
     Customer lists                  $ 3,663,000   $3,663,000
     Goodwill                          1,832,543    1,832,543
                                     ------------  -----------
                                       5,495,543    5,495,543
     Less accumulated amortization    (2,302,528)    (458,758)
                                     ------------  -----------
                                     $ 3,193,015   $5,036,785
                                     ============  ===========

The amortization expense charged to the operations for the years ended December
31, 2000 and 1999 were $2,582,016 and $458,758, respectively.


<PAGE>
6.   LOANS

     Loans as of December 31, 2000 and 1999 consist of:

                                         2000         1999
                                     ------------  -----------
     Blue Heron Venture Fund, Ltd.   $ 2,085,000   $  875,000
     Pacific Gate Capital                 25,000            -
                                     ------------  -----------
                                     $ 2,110,000   $  875,000
                                     ============  ===========

     Loans from Blue Heron Venture Fund, Ltd are pursuant to two promissory note
agreements ($2,000,000 and $10,000,000 loan facilities). The loans are
unsecured, bear interest at 8% per annum, and the principal and accrued interest
are due on demand. The lender has the option to withdraw its offer to lend at
any time and to convert the loans into shares of common stock of the Company. If
the lender elects to convert the outstanding principal amount of the loans of
$2,085,000 as of December 31, 2000 into shares of common stock of the Company,
the lender would be entitled to an aggregate of 2,780,000 shares of common
stock.

     At the commitment date of each of the promissory notes, the conversion
price was less than the fair value of the common stock, hence a beneficial
conversion feature is attributable to these convertible notes. The amount of
this beneficial conversion feature is $1,962,500 and has been recorded as
interest expense and additional paid-in-capital for the year ended December 31,
2000.

     Under the terms of the loan agreements, if the lender converts its debt to
equity, it will waive its right to be paid interest on the loans. As of December
31, 2000 and 1999, the Company has accrued interest of $158,583 and $36,572,
respectively.

     During 1999, $4,000,000 of loans were settled by the issuance of 4,500,000
shares of common stock valued at $4,000,000.

     The loan from Pacific Gate Capital is unsecured, bears interest at 8% per
annum, and the principal and accrued interest are due on demand.


7.    SHARE CAPITAL

      AUTHORIZED STOCK

      The Company is authorized to issue:

      (a) 30,000,000 shares of common stock at a par value of  $0.001 per
            share.

      (b) 5,000,000 shares of preferred stock at a par value of $.001 per
            share.

     The Board of Directors of the Company has the authority, without further
action by the holders of the outstanding shares of common stock, to issue shares
of preferred stock from time to time in one or more classes or series, to fix


<PAGE>
the number of shares constituting any class or series and the stated value, if
different from the par value, and to fix the terms of any such series or class,
including dividend rights, dividend rates, conversion or exchange rights, voting
rights, rights and terms of redemption (including sinking fund  provisions), the
redemption price and the liquidation  preference of such class or series. The
designations, rights and preferences of any shares of preferred stock would be
set forth in a Certificate of Designation which would be filed with the
Secretary of State of the State of Delaware.

     STOCK SPLIT

     On September 24, 1999, the Company effected a 3-for-2 stock split of its
shares of common stock.  All share, per share, unit, and warrant amounts in the
accompanying consolidated financial statements have been adjusted retroactively
to give effect to this stock split.

     COMMON STOCK SUBSCRIBED

     As at December 31, 1999, the Company was obligated to issue 80,558 shares
of common stock valued at $2.98 per share as consideration for the purchase of
the assets of Internet Arena. These shares were issued in 2000.


     ISSUANCE OF SHARES

     On March 2, 2000, the Company issued 26,500 shares of its commons stock in
an aggregate amount of $92,750 at the closing price of $3.50 per share on
February 29, 2000, to Kaplan, Gottbetter and Levenson, as payment of services
accrued at December 31, 1999 and through February 29, 2000.

     On March 13, 2000, the Company issued 80,558 shares of its common stock at
the closing price of $2.98 on July 12, 1999 (as adjusted for a 3-for-2 stock
split), the date of signing the Letter of Intent, to the owners of Internet
Arena, Inc., as payment for the balance due in the amount of $240,000 in
connection with the Company's acquisition of that entity.

     On June 8, 2000, the Company issued 785,455 shares of its common stock to
the selling stockholders of Playa as partial payment of the purchase price
$3,000,000 in connection with the Company's acquisition of that company. See
Note 3.

     On August 1, 2000, the Company issued an aggregate 129,500 shares of its
common stock in an aggregate amount of $76,897 to seven employees at the closing
price of $0.5938 per share on July 17, 2000 in consideration for their providing
certain services to the Company from June 16, 2000 through July 15, 2000.
Subsequently 10,000 of these shares will be canceled. For purposes of financial
statement presentation, those shares were deemed canceled as of October 1, 2000.

     On August 1, 2000, the Company issued 75,000 shares of its common stock in
an aggregate amount of $133,605 to each of the Company's three directors at the
closing price of $0.5938 on July 17, 2000 in consideration for their providing
certain services to the Company from June 16 through July 15, 2000.

     On August 17, 2000, the Company issued an aggregate 43,500 shares of its
common stock in an aggregate amount of $25,787 to six people at the closing


<PAGE>
price of $0.5938 per share on July 25, 2000 in consideration for their providing
consulting work to the Company from April 1, 2000 through June 30, 2000.

     On October 1, 2000, the Company accrued the issuance of an aggregate 27,500
shares of its common stock in an aggregate amount of $8,800 to three employees
and one consultant at the closing price of $0.32 per share in consideration for
their providing certain services to the Company. Subsequently in the first
quarter 2001, 25,000 of these shares were issued and 2,500 share will be issued
in the second quarter 2001. For purposes of financial statement presentation,
all shares were deemed issued as of October 1, 2000.

     On December 29, 2000, the Company accrued the issuance of 2,500 shares of
its common stock in an aggregate amount of $450 to a consultant at the closing
price of $0.18 per share in consideration for his providing certain services to
the Company. As of December 31, 2000, these shares have not been issued, however
for purposes of financial statement presentation, all shares were deemed issued
as of December 29, 2000.


8.   INCOME TAXES

     At December 31, 2000 and 1999, the Company has net operating loss carry
forwards for income tax purposes of approximately $9,000,000 and $2,800,000,
respectively which are available to offset future taxable income. The Company's
utilization of these carryforwards may be restricted due to changes in ownership
of subsidiaries during the year. The components of the deferred tax asset as of
December 31, 2000 and 1999 are as follows:

                                         2000          1999
                                     -------------  ------------
Net operating loss carryforwards     $  4,050,000   $ 1,260,000
Less: valuation allowance             ( 4,050,000)   (1,260,000)
                                     -------------  ------------
                                     $          -   $         -
                                     =============  ============

9.   NET PROCEEDS FROM FIRE LOSS

     On January 31, 2000, the Company suffered a fire loss at its Etobicoke
(suburban Toronto), Ontario facility. The loss was completely covered by
insurance. During the fiscal year ended December 31, 2000, the Company received
net proceeds from fire insurance in the amount of $228,966.

10.  RELATED  PARTY  TRANSACTIONS

     The Company has obtained most of its financing through Blue Heron Venture
Fund Ltd. ("Blue Heron"), a corporation in which Kelly Shane Montalban may be
deemed to have an "indirect pecuniary" interest as a result of his status as
fund manager for Blue Heron. Blue Heron and Mr. Montalban are principal
stockholders of the Company. Blue Heron may be deemed to be an affiliate of
Pacific Gate, another of the Company's lenders, in which Mr. Montalban is the
sole stockholder, sole director and sole officer. Blue Heron loans are unsecured
and are convertible into Common Stock at the lender's option, in which case Blue


<PAGE>
Heron would waive its right to be paid interest.  The balance of these loans as
of December 31, 2000 and 1999 are $2,085,000 and $875,000, respectively. See
Note 6.

     During the fiscal year ended December 31, 2000, the Company borrowed an
aggregate $125,000 from Pacific Gate Capital Ltd. ("Pacific Gate"), of which
amount $25,000 was outstanding on December 31, 2000. These loans bear interest
at 8% per annum and are payable on demand.

     As of December 31, 2000, the Company advanced $30,615 to one of the
executive officer. This advance bears no interest and no term.


11.  COMMITMENTS AND CONTIGENCIES

     LEGAL PROCEEDINGS

     Canada Post Litigation
     ----------------------

     On June 11, 1999, Canada Post Corporation filed a Statement of Claim in the
Federal Court of Canada (Court File No. T-1022-99) in which it sought injunctive
and unspecified monetary relief for the allegedly "improper" use by the
Company's subsidiary, ePost Innovations, of certain marks and names which
contain the component "post".  On October 18, 1999, ePost Innovations filed its
Defense and Counterclaim.  In a motion heard November 24, 1999, Canada Post
Corporation challenged certain parts of the Counterclaim and the Federal Court
reserved judgment.  There has been no pre-trial discovery and no trial date has
been set.

     On May 25, 1999, ePost Innovations filed a statement of Claim in the
British Columbia Court (Court File No. C992649) seeking a declaration that the
public notice of Canada Post Corporation's adoption and use of CYBERPOSTE and
CYBERPOST on November 18, 1998 and December 9, 1998 respectively, did not affect
the Company's use of CYPOST and ePost Innovations as trademarks and trade-names
prior to said dates. ePost Innovations sought summary judgment for such a
declaration and on September 14, 1999, the BC Court rejected summary judgment on
the basis that no right of the Company was being infringed and that a trial of
the issues was more appropriate. The rejection is pending appeal. There has been
no pre-trial discovery (except to the extent that some was done as part of the
summary judgment application) and no trial date has been set.

     Canada Post seeks relief in the form of preventing ePost Innovations from
using trademarks, trade names or brand names and does not seek monetary damages.
Accordingly, the Company does not believe that this litigation will have a
material impact on its future results of operations, financial condition and
liquidity.

     ePost Innovations and Canada Post have commenced settlement discussions to
resolve the litigation. However, due to the inherent uncertainties of
litigation, the Company cannot predict whether the parties will reach a
definitive settlement and, if they do, whether the terms of any settlement will
be favorable to the Company.


<PAGE>
Berry Litigation
----------------

     On March 31, 2000, the Company commenced suit in the Supreme Court of
British Columbia, Action #S001822, Vancouver Registry against Tia Berry (the
"Tia Action"), the wife of Steven Berry ("Berry"), the former President and
Chief Executive Officer of the Company. In the Tia Action, the Company claims
$42,516 (CDN) from Tia Berry on account of monies paid to her by the Company
which she was not entitled to receive. Tia Berry has filed a Statement of
Defense in the Tia Action in which she alleges that the payments which she
received from the Company were to reimburse her for business expenses which she
had charged to her credit cards on behalf of Berry. The Tia Action has not yet
been set for trial.

     On April 4, 2000, Berry commenced an action in the Supreme Court of the
State of New York, County of New York (Index No. 601448/2000), against the
Company and Continental Stock Transfer Company ("Continental"), (the "New York
Action"). In the New York Action, Berry claimed damages for alleged conversion,
fraud, breach of contract and breach of fiduciary duty all arising from the
alleged wrongful Stop Transfer Order which the Company placed relating to 75,000
shares of the Company's Common Stock registered in Berry's name and the
Company's cancellation of a further 600,000 shares (the "Contingent Shares").
The complaint in the New York Action claims damages in excess of $3,000,000 with
the precise amount to be determined at trial.

     Berry received the 600,000 Contingent Shares upon condition that he would
remain in the Company's employ as Chief Executive Officer for at least two
years. Berry commenced his employment with the Company on January 4, 1999, and
resigned his employment with the Company on January 17, 2000. Following Berry's
resignation, the Company attempted to have a Stop Transfer Order issued with
respect to the 75,000 shares registered in Berry's name and cancel the 600,000
Contingent Shares. The Stop Transfer Order was not effective and Berry
subsequently sold the 75,000 shares.

     On May 19, 2000 CyPost and ePost Innovations commenced suit in the Supreme
Court of British Columbia, Action #S002798, Vancouver Registry, against Berry
and his wife, Tia Berry (the "BC Action"). In the BC Action, the Company seeks
an order directing Berry to return the 600,000 Contingent Shares to the Company
for cancellation or an order entitling the Company to cancel the same on the
basis that Berry did not fulfill the employment conditions which were the
condition precedent to his becoming the beneficial owner of the Contingent
Shares.

     In the BC Action, the Company also claims at least Cdn$800,000 from Berry
on account of breach of fiduciary duty, negligence, breach of statutory duties
and breach of contract arising from Berry's failure to properly carry out his
employment responsibilities. In the BC Action, the Company also claims
Cdn$34,013 from Berry and Tia Berry on account of conspiracy to defraud and
injure the Company and ePost Innovations by causing certain personal expenses to
be paid by the Company rather than by Berry and Tia Berry personally. The
Company also claims punitive and exemplary damages from Berry and Tia Berry in
the BC Action.

     On May 25, 2000, the Company moved in the New York Action for an order
dismissing the action against the Company for lack of jurisdiction or, in the
alternative, on the basis of forum non conveniens. On September 5, 2000, the
court dismissed the New York Action on forum non conveniens grounds, subject to
the Company making certain stipulations in the New York Action. Those
stipulations have been made and the appeal period in the New York Action has
expired without Berry or any other party appealing the September 5, 2000 order.


<PAGE>
     The issues raised by Berry and the Company in the New York Action will be
litigated in the BC Action together with the further issues raised by the
Company in the BC Action. The Company feels that Berry's claims in the New York
Action were without merit and that the Company will be successful in obtaining
an order declaring that Berry's 600,000 Contingent Shares be cancelled and
further entitling the Company to substantial damages. The Company will
vigorously pursue its position in all respects.

     On December 21, 2000, Berry and Tia Berry commenced suit in the Supreme
Court of British Columbia, Action #S006790, Vancouver Registry, against CyPost,
ePost Innovations, Kelly Shane Montalban, J. Thomas W. Johnston, Carl Whitehead
and Robert Sendoh (the "Berry Action"). Statements of Defense have been filed on
behalf of the Company and the other defendants.

     The Plaintiffs in the Berry Action allege that the Tia Action, the BC
Action, and the action by Kelly Shane Montalban (Supreme Court of British
Columbia, Action #S002147, Vancouver Registry), against Berry for specific
performance of an option agreement (the "Montalban Action"), collectively,
amount to an abuse of process, malicious prosecution, unlawful interference with
the Plaintiffs' economic rights, or were commenced pursuant to a civil
conspiracy to injure the Plaintiffs.

     In the Berry Action, the Plaintiffs seek a declaration that Berry is
entitled to the 600,000 Contingent Shares and claim unspecified damages which
are estimated at Cdn$2,000,000 based on the Statement of Claim. They also claim
punitive or aggravated damages and costs. The Company believes that the
allegations in the Berry Action are without merit and they will be vigorously
defended.

     It is expected that the Tia Action, the BC Action and the Berry Action will
be consolidated for the purposes of trial due to the fact that there are
numerous issues of fact and law which are common to all of these actions. The
Company believes that trial will likely take place in the fall of 2002.

     A loss by the Company of the claim for monetary damages would have a
material adverse effect on the Company's future results of operations, financial
condition and liquidity; however, the Company does not expect to lose this
action and believes additionally that it would be able to negotiate reasonable
payment terms should it lose this suit.

     The Company is also subject to routine litigation from time to time in the
operations of its business. None of such routine litigation is material to the
Company, its assets or results of operations.

     Due to the inherent uncertainties of litigation, the Company cannot predict
the outcome of any litigation to which it is a party.


     LEASE COMMITMENTS

     The Company leases office space and equipment, and its lease payments in
the next five years are as follows:

     2001                                     $     285,000
     2002                                           202,000
     2003                                           151,000
     2004                                            92,000
     2005                                            40,000
                                               ------------
                                               $    770,000
                                               ============


<PAGE>
     The Company entered into agreements with several companies that provides
network infrastructure for some of the Company's Internet Services Provider
services. The minimum payments in the next three years are as follows:

     2001                                      $    929,000
     2002                                           109,000
     2003                                            23,000
                                               ------------
                                               $  1,061,000
                                               ============

     EMPLOYMENT AGREEMENT

     The Company has an employment agreement with Robert Adams.  The employment
agreement provides for Mr. Adams' employment by the Company as its "Operations
Manager of Canadian ISP Division", at an annual salary of Cdn $70,000. The
employment agreement has an initial term of three years commencing on October 5,
1999 and ending on October 4, 2002. The employment agreement will automatically
renew for successive terms, on a year to year basis, unless notice of
non-renewal is given by either the Company or Mr. Adams at least 90 days prior
to the expiration of the then applicable term of the contact.  Bonuses may be
awarded to Mr. Adams based on his annual review, which takes place each January.
In addition, Mr. Adams is eligible for increases in his base salary, in the
discretion of the Company, on the anniversary date of each year of the
employment agreement.


<PAGE>

                  REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of
CyPost Corporation:

We have audited the accompanying consolidated balance sheet of CYPOST
CORPORATION (a Delaware corporation) as of December 31, 1999 and the related
consolidated statements of operations, cash flows and shareholders' equity for
the year 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 audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States.

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 audit provides a reasonable basis for our opinion.

In  our  opinion,  the financial statements referred to above present fairly, in
all  material  respects,  the  financial  position  of  CyPost Corporation as of
December  31,  1999 and the results of its operations and its cash flows for the
year  then  ended in accordance with accounting principles generally accepted in
the  United  States.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As described in Note 1, the
Company has incurred operating losses since its inception and requires
additional financing to continue operations. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regard to these matters are described in Note 1. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that may result should the Company be unable to
continue as a going concern.

The consolidated financial statements of CyPost Corporation as of December 31,
1998 and for the periods ended December 31, 1998 and 1997 were audited by
another auditor whose report dated March 12, 1999 expressed an unqualified
opinion with an explanatory going concern paragraph on those statements.

                                   Arthur Andersen LLP.

Vancouver, British Columbia
March 23, 2000.


                                                                            F-21
<PAGE>
                               CYPOST CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1999 AND 1998
                                 (U.S. Dollars)

                                                            1999         1998
                                                        ------------  ----------
ASSETS
CURRENT ASSETS
  CASH . . . . . . . . . . . . . . . . . . . . . . . .  $    415,779   $  47,212
  ACCOUNTS RECEIVABLE, NET OF ALLOWANCE FOR
  DOUBTFUL ACCOUNTS OF $34,000 (1998- $NIL). . . . . .       233,188          --
  PREPAIDS AND DEPOSITS. . . . . . . . . . . . . . . .       173,319      27,998
                                                        ------------  ----------
                                                             822,286      75,210
PROPERTY AND EQUIPMENT, NET. . . . . . . . . . . . . .       599,582      22,330
GOODWILL AND OTHER INTANGIBLES, NET OF
  AMORTIZATION OF $458,758 (1998- $NIL). . . . . . . .     5,036,785          --
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . .        69,389      28,657
SOFTWARE DEVELOPMENT, NET OF AMORTIZATION OF $69,768  .      139,535          --
                                                        ------------  ----------
                                                        $  6,667,577   $ 126,197

  LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
  ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . .  $    849,300   $  11,090
  ACCRUED LIABILITIES. . . . . . . . . . . . . . . . .       133,937          --
  LOANS. . . . . . . . . . . . . . . . . . . . . . . .       875,000          --
  DEFERRED REVENUE . . . . . . . . . . . . . . . . . .       626,143          --
  PURCHASE OF INTERNET ARENA . . . . . . . . . . . . .       240,000          --
                                                        ------------  ----------
                                                           2,724,380      11,090
                                                        ------------  ----------
SHAREHOLDERS' EQUITY

  SHARE CAPITAL
    AUTHORIZED

      5,000,000 PREFERRED STOCK WITH A PAR VALUE OF $.001
      30,000,000 COMMON STOCK WITH A PAR VALUE OF $.001

    ISSUED AND OUTSTANDING
      NIL PREFERRED STOCK

      20,246,480 COMMON STOCK (1998- 13,264,500) . . .        20,246      13,264
  PAID-IN CAPITAL. . . . . . . . . . . . . . . . . . .     8,814,002     624,416
  DEFICIT. . . . . . . . . . . . . . . . . . . . . . .    (4,908,127)  (556,539)
  CURRENCY TRANSLATION ADJUSTMENT. . . . . . . . . . .        17,076      33,966
                                                        ------------  ----------
                                                           3,943,197     115,107
                                                        ------------  ----------
                                                        $  6,667,577   $ 126,197
                                                        ============  ==========

Approved by the Directors:

 ............../s/ Carl Whitehead......................................  Director
 ............../s/ Robert Sendoh.......................................  Director

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                                                            F-22
<PAGE>
<TABLE>
<CAPTION>
                               CYPOST CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (U.S. Dollars)

                                                                        Period From
                                                                        September 5,
                                          YEAR ENDED     Year Ended       1997 to
                                          DECEMBER 31,   December 31,   December 31,
                                             1999            1998          1997
                                        --------------  --------------  -----------
<S>                                     <C>             <C>             <C>

REVENUE. . . . . . . . . . . . . . . .  $   1,020,541   $          --   $       --
DIRECT COSTS . . . . . . . . . . . . .        563,118              --           --
                                        --------------  --------------  -----------
                                              457,423              --           --
                                        --------------  --------------  -----------

EXPENSES

   SELLING, GENERAL AND ADMINISTRATIVE      1,999,151         383,046           --
   AMORTIZATION AND DEPRECIATION . . .        588,538           6,233           --
   DEVELOPMENT . . . . . . . . . . . .             --         150,382       16,878
                                        --------------  --------------  -----------
                                            2,587,689         539,661       16,878
                                        --------------  --------------  -----------
                                           (2,130,266)       (539,661)     (16,878)
INTEREST EXPENSE . . . . . . . . . . .      2,221,322              --           --
                                        --------------  --------------  -----------
NET LOSS . . . . . . . . . . . . . . .  $  (4,351,588)  $    (539,661)  $  (16,878)
                                        ==============  ==============  ===========


LOSS PER SHARE, BASIC AND DILUTED. . .  $       (0.28)  $       (0.08)  $    (0.01)
                                        ==============  ==============  ===========

WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING. . . . . . . . .     15,816,232       7,033,479    3,345,283
                                        ==============  ==============  ===========
</TABLE>

         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                                                            F-23
<PAGE>
<TABLE>
<CAPTION>
                                      CYPOST CORPORATION
                             CONSOLIDATED STATEMENTS OF CASH FLOWS
                                        (U.S. Dollars)


                                                                               Period From
                                                                               September 5,
                                                YEAR ENDED      Year Ended       1997 to
                                               DECEMBER 31,    December 31,    December 31,
                                                   1999            1998            1997
                                              --------------  --------------  --------------
<S>                                           <C>             <C>             <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES

      NET LOSS . . . . . . . . . . . . . . .  $  (4,351,588)  $    (539,661)  $     (16,878)
      Add items not affecting cash
         AMORTIZATION AND DEPRECIATION . . .        588,538           6,233              --
         INTEREST EXPENSE. . . . . . . . . .      2,212,500              --              --
         NON-CASH EXPENSES . . . . . . . . .             --         207,500              --
                                              --------------  --------------  --------------
                                                 (1,550,550)       (325,928)        (16,878)
      Changes in non-cash operating
         accounts
             ACCOUNTS RECEIVABLE . . . . . .        (90,017)             --              --
             PREPAIDS AND DEPOSITS . . . . .       (109,550)        (27,998)             --
             OTHER ASSETS. . . . . . . . . .        (15,972)         58,523              --
             ACCOUNTS PAYABLE. . . . . . . .        583,787           9,125           1,965
             ACCRUED LIABILITIES . . . . . .         61,417              --              --
             DEFERRED REVENUE. . . . . . . .        149,921              --              --
                                              --------------  --------------  --------------
Net cash provided by (used in)
operating activities                               (970,964)       (286,278)        (14,913)
                                              --------------  --------------  --------------

CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisitions of businesses, less cash
         THEREIN OF $115,953 . . . . . . . .     (3,612,066)             --              --
      PROPERTY AND EQUIPMENT, NET. . . . . .       (270,100)        (27,711)           (852)
      SOFTWARE DEVELOPMENT                         (209,303)
                                              --------------  --------------  --------------
Net cash used in investing
activities                                       (4,091,469)        (27,711)           (852)
                                              --------------  --------------  --------------

CASH FLOWS FROM FINANCING ACTIVITIES
      LOAN . . . . . . . . . . . . . . . . .      4,875,000              --              --
      SALE OF COMMON STOCK . . . . . . . . .        556,000         323,000          20,000
                                              --------------  --------------  --------------
Net cash provided by financing
Activities                                        5,431,000         323,000          20,000
Exchange rate changes on Cash in
Foreign currency                                         --          33,966              --
                                              --------------  --------------  --------------

NET INCREASE IN CASH . . . . . . . . . . . .        368,567          42,977           4,235
CASH, BEGINNING OF PERIOD. . . . . . . . . .         47,212           4,235              --
                                              --------------  --------------  --------------
CASH, END OF PERIOD. . . . . . . . . . . . .  $     415,779   $      47,212   $       4,235
                                              ==============  ==============  ==============

CASH PAID DURING THE PERIOD FOR
   INTEREST. . . . . . . . . . . . . . . . .  $          --   $          --   $          --
   INCOME TAXES. . . . . . . . . . . . . . .             --              --              --
</TABLE>

         The  accompanying  notes  are an  integral  part of these  consolidated
financial statements.


                                                                            F-24
<PAGE>
<TABLE>
<CAPTION>
                                           CYPOST CORPORATION
                            CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                             (U.S. Dollars)


                                                                         Additional                     Currency
                                                       COMMON STOCK       Paid-in                      Translation
                                                     NUMBER    AMOUNT     CAPITAL        DEFICIT       Adjustment       TOTAL
                                                   ----------  -------  ------------  --------------  -------------  ------------
<S>                                                <C>         <C>      <C>           <C>             <C>            <C>
Incorporation date, September 5, 1997
    Issued for acquisition of
       ePost Innovations, Inc . . . . . . . . . .   3,000,000  $ 3,000  $    (1,000)  $          --                  $     2,000
    ISSUED ON SALE OF UNITS . . . . . . . . . . .     600,000      600       19,400              --                       20,000
    Net loss                                                                                (16,878)                     (16,878)
                                                   ----------  -------  ------------  --------------  -------------  ------------
Balance, December 31, 1997. . . . . . . . . . . .   3,600,000    3,600       18,400              --             --         5,122
    Issued on sale of units . . . . . . . . . . .   2,400,000    2,400       77,600              --             --        80,000
    Issued for cash . . . . . . . . . . . . . . .      57,000       57       18,943              --             --        19,000
    Issued for legal services . . . . . . . . . .      22,500       22        7,478              --             --         7,500
    Issued for acquisition of
      Communication Exchange Management, Inc. . .   6,270,000    6,270       (2,090)             --             --         4,180
    Issued for exercise of warrants . . . . . . .     915,000      915      243,085              --             --       244,000
    Offering expenses . . . . . . . . . . . . . .          --       --      (20,000)             --             --       (20,000)
    Share transfer for services                            --       --      281,000              --             --       281,000
    NET LOSS. . . . . . . . . . . . . . . . . . .          --       --           --        (539,661)            --      (539,661)
    Currency translation adjustment                        --       --           --                         33,966        33,966
                                                   ----------  -------  ------------  --------------  -------------  ------------
Balance, December 31, 1998. . . . . . . . . . . .  13,264,500   13,264      624,416        (556,539)        33,966       115,107
    Issued for acquisition of Intouch.Internet Inc.     9,855       10       28,515              --             --        28,525
    Issued for acquisition of NetRover Inc.
      and NetRover Office Inc . . . . . . . . . .     219,000      219      679,324              --             --       679,543
    Issued for acquisition of Connect Northwest .     147,985      148      659,852              --             --       660,000
    Issued for acquisition of Internet Arena. . .      20,140       20       59,980              --             --        60,000
    Issued for loan conversion. . . . . . . . . .   4,500,000    4,500    3,995,500              --             --     4,000,000
    Issued for exercise of warrants . . . . . . .   2,085,000    2,085      553,915              --             --       556,000
    Beneficial conversion feature on loans. . . .          --       --    2,212,500              --             --     2,212,500
    NET LOSS. . . . . . . . . . . . . . . . . . .          --       --           --      (4,351,588)            --    (4,351,588)
    Currency translation adjustment                                              --              --        (16,890)      (16,890)
                                                   ----------  -------  ------------  --------------  -------------  ------------
BALANCE, DECEMBER 31, 1999. . . . . . . . . . . .  20,246,480  $20,246  $ 8,814,002   $  (4,908,127)  $     17,076   $ 3,943,197
                                                   ==========  =======  ============  ==============  =============  ============

         The  accompanying  notes  are an  integral  part of these  consolidated financial statements.
</TABLE>


                                                                            F-25
<PAGE>
                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

1.   NATURE OF OPERATIONS AND GOING CONCERN

     CyPost  Corporation  was  formed on September 5, 1997 under the laws of the
State  of  Delaware and its head office is located in Vancouver, Canada.  CyPost
Corporation  and  its  subsidiaries  (the  "Company")  generate  revenues  from
value-added  protected  internet  connection  services,  web-site  hosting,
advertising  sales,  promotional  opportunities,  and  sales  of  privacy  and
protection  products.  The  Company's  activities  also  include determining the
feasibility  of     encryption  software products, beginning initial programming
and  product  development,  conducting  market research, and undertaking various
private  placement offerings.  The Company emerged from the development stage in
1999  and  commenced  revenue  generating  activities.

     The  accompanying  consolidated  financial statements have been prepared on
the basis of accounting principles applicable to a "going concern", which assume
that  the  Company  will continue in operation for at least one year and will be
able to realize its assets and discharge its liabilities in the normal course of
operations.

     Several  conditions  and  events  cast doubt about the Company's ability to
continue  as  a  "going  concern".  The  Company  has incurred net losses before
interest  expense  of  approximately  $2.7 million for the period from inception
September  5,  1997  to December 31, 1999, has a working capital deficiency, and
requires  additional  financing for its business operations.  As of December 31,
1999,  the  Company  has  $11.1  million of funding available which can be drawn
against  a  promissory note agreement with a lender; however, the lender has the
option,  at  any  time,  to  withdraw  its  offer  to  lend  this  amount.

     The  Company's  future capital requirements will depend on numerous factors
including,  but  not  limited  to, continued progress in developing its software
products,  and  market  penetration  and profitable operations from its internet
connection services.  The Company is actively pursuing alternative financing and
has  had  discussions  with  various third parties, although no firm commitments
have  been  obtained.  Management  is  also  pursuing  acquisitions  of  other
businesses  with  existing  positive  cash  flows.  In  addition,  management is
working  on  attaining  cost  and  efficiency  synergies  by  consolidating  the
operations  of  the  businesses  acquired.

     These  financial  statements  do  not  reflect  adjustments  that  would be
necessary  if  the  Company were unable to continue as a "going concern".  While
management  believes  that  the  actions  already taken or planned, as described
above,  will  mitigate the adverse conditions and events which raise doubt about
the validity of the "going concern" assumption used in preparing these financial
statements,  there  can  be  no assurance that these actions will be successful.

     If  the  Company  were  unable  to  continue  as  a  "going  concern", then
substantial adjustments would be necessary to the carrying values of assets, the
reported amounts of its liabilities, the reported revenues and expenses, and the
balance  sheet  classifications  used.


                                                                            F-26
<PAGE>
2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

     CONSOLIDATION

     The  consolidated  financial  statements  include  the  accounts  of CyPost
Corporation  and its subsidiaries.  The principal subsidiaries, all of which are
wholly  owned,  include  ePost  Innovations Inc., NetRover Inc., NetRover Office
Inc.,  Hermes  Net  Solutions  Inc.  and  Intouch.Internet  Inc.

     FOREIGN  CURRENCY  TRANSLATION

     The  functional  currency  of  the Company is U.S.  dollars.  Balance sheet
accounts  of  international  self-sustaining subsidiaries, principally Canadian,
are  translated  at  the  current  exchange  rate  as of the balance sheet date.
Income  statement  items  are  translated  at  average exchange rates during the
period.  The  resulting  translation  adjustment  is  recorded  as  a  separate
component  of  shareholders'  equity.

     USE  OF  ESTIMATES

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

     FINANCIAL  INSTRUMENTS

     The  Company  has, where practicable, estimated the fair value of financial
instruments  based  on  quoted  market  prices  or  valuation techniques such as
present  value  of estimated future cash flows.  These fair value amounts may be
significantly  affected by the assumptions used, including the discount rate and
estimates  of  cash  flow.  Accordingly,  the  estimates  are  not  necessarily
indicative  of  the amounts that could be realized in a current market exchange.
Where these estimates approximate carrying value, no separate disclosure of fair
value  is  shown.

     PROPERTY  AND  EQUIPMENT

     Property  and  equipment  are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight-line
method over a period of five years.  Maintenance and repairs are charged against
operations  and  betterments  are  capitalized.

     EARNINGS  (LOSS)  PER  SHARE

     Earnings  (loss)  per  share has been computed in accordance with SFAS 128.
Basic  earnings  (loss)  per  share  is  computed  by dividing net income (loss)
attributable  to  common  shareholders  by the weighted average number of common
shares  outstanding  during the respective periods.  Diluted earnings (loss) per
share  is  computed  similarly,  but  also  gives  effect  to  the  impact  that
convertible  securities,  such  as  warrants,  if  dilutive,  would  have on net
earnings  (loss)  and  average  common  shares  outstanding  if converted at the
beginning  of the year.  The effects of potential common shares such as warrants
would  be  antidilutive  in  each  of  the  periods presented in these financial
statements.

     At  December  31,  1999, there are no warrants outstanding (1998-2,085,000)


                                                                            F-27
<PAGE>
2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

     REVENUE  RECOGNITION  AND  DEFERRED  REVENUE

     The  Company's primary source of revenue is earned from internet connection
services.  For  contracts  which  exceed  one  month, revenue is recognized on a
straight-line  basis  over  the  term  of the contract as services are provided.
Revenues  applicable  to  future  periods  are  classified  as deferred revenue.

     DIRECT  COSTS

     Direct  costs consist of telecommunications charges in respect of providing
internet  connection  services  to  customers.  These  costs  are  expensed  as
incurred.

     SELLING  AND  MARKETING  COSTS

     Selling  and  marketing costs are expensed as incurred and totaled $342,888
and  $0  for  the  years  ended December 31, 1999 and 1998, respectively.  These
costs  are  reported  under  selling, general and administrative expenses on the
statement  of  operations.

     SOFTWARE  DEVELOPMENT  COSTS

     Under  SFAS  No.  86,  "Accounting for the Costs of Computer Software to Be
Sold,  Leased,  or  Otherwise  Marketed", capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which  the  Company  has  defined as the completion of beta testing of a working
product.  The  establishment  of  technological  feasibility  and  the  ongoing
assessment of the recoverability of these costs require considerable judgment by
management  with respect to certain external factors, including, but not limited
to,  anticipated  future  gross  product  revenue,  estimated  economic life and
changes  in  software  and  hardware  technology.  Software  developments  costs
amortized  on  the  straightline  method over the estimated economic life of the
product  of  three  years.

     As  at  December  31,  1999,  the  company capitalized $209,303 of software
development  costs  and  amortized  $69,768  of  these  costs.


     GOODWILL  AND  OTHER  INTANGIBLE  ASSETS

     Intangible  assets consist primarily of customer lists and goodwill related
to  acquisitions  accounted  for  under  the  purchase  method  of  accounting.
Amortization  of  these  purchased  intangibles is provided on the straight-line
basis  over  the  respective  useful  lives  of  the  intangible assets which is
estimated  to  be  three  years.

     The  Company  identifies and records impairment losses on intangible assets
when  events and circumstances indicate that such assets might be impaired.  The
Company  considers  factors  such  as  significant  changes in the regulatory or
business  climate  and  projected  future  cash  flows.  Impairment  losses  are
measured  as  the  amount  by which the carrying amount of the asset exceeds the
fair  value  of  the  asset.

     INCOME  TAXES

     The  Company  computes  income  taxes using the asset and liability method,
under  which  deferred  income  taxes are provided for the temporary differences
between  the financial reporting basis and the tax basis of the Company's assets
and  liabilities.  Deferred  tax  assets  and  liabilities  are  measured  using
currently  enacted tax rates that are expected to apply to taxable income in the
years  in  which  those  temporary  differences  are expected to be recovered or
settled.  A valuation allowance is established when necessary to reduce deferred
tax  assets  to  the  amounts  expected  to  be  realized.


                                                                            F-28
<PAGE>
2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

     RECLASSIFICATIONS

     Certain reclassifications have been made to conform prior years' figures to
the  current  year  presentation.

     ACCOUNTING  FOR  DERIVATIVE  INSTRUMENTS  AND  HEDGING  ACTIVITIES

     SFAS  No.  133,  "Accounting  for  Derivative  Instruments  and  Hedging
Activities",  requires  the  recognition  of all derivatives as either assets or
liabilities  and  the  measurement of those instruments at fair value.  SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the  Effective  Date of SFAS No.  133", issued in August 1999, postpones for one
year  the  mandatory  effective date for adoption of SFAS No.  133 to January 1,
2001.

     The  Company  does  not  currently  engage in derivative trading or hedging
activities;  hence,  SFAS  No.  133  and  SFAS No.  137 will not have a material
impact  on  its  financial  position  or  results  of  operations.

     STOCK-BASED  COMPENSATION

     SFAS  No.  123,  "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for stock-based employee
compensation  under  a  fair  value  based  method.  Alternatively,  stock-based
employee  compensation  can  be accounted for under APB No.  25, "Accounting for
Stock  Issued  to  Employees",  under  which  no  compensation  is  recorded.

     The  Company  has  not  granted any stock-based compensation for any of the
periods  presented  in  these  financial  statements.

     PENSIONS  AND  OTHER  POSTRETIREMENT  BENEFITS

     SFAS  No.  132,  "Employers'  Disclosures  about  Pensions  and  Other
Postretirement  Benefits,  an amendment of FASB Statements No.  87, 88 and 106",
revises  employers'  disclosures  about pension and other postretirement benefit
plans.  It  does  not  change the measurement or recognition of those plans.  It
standardizes  the  disclosure  requirements for pension and other postretirement
benefits  to  the extent practicable, requires additional information on changes
in  benefit  obligations  and  fair  values  of plan assets that will facilitate
financial  analysis,  and  eliminates  certain  disclosures  that  are no longer
considered  useful.

     The  Company  does  not offer any pension or other postretirement benefits.

     RECENT  ACCOUNTING  PRONOUNCEMENTS

     In  March  1998,  the  American  Institute  of Certified Public Accountants
issued  Statement  of  Position  98-1  (SOP  98-1), "Accounting for the Costs of
Computer  Software  Developed  or  Obtained  for  Internal  Use".  SOP  98-1  is
effective  for financial statements for years beginning after December 15, 1998.
SOP  98-1  provides  guidance over accounting for computer software developed or
obtained  for  internal  use  including  the requirement to capitalize specified
costs  and  amortization of such costs.  The implementation of SOP 98-1 does not
have  a  material  impact  on  the  Company's  financial  position or results of
operations,  as  the  Company  has  not incurred any costs for computer software
developed  or  obtained  for  internal  use.


                                                                            F-29
<PAGE>
2.   SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

     In  April  1998,  the  American  Institute  of Certified Public Accountants
issued  Statement  of  Position  98-5  (SOP  98-5),  "Reporting  on the Costs of
Start-Up  Activities".  SOP  98-5, which is effective for fiscal years beginning
after  December  15,  1998,  provides  guidance  on  the  financial reporting of
start-up costs and organization costs.  It requires costs of start-up activities
and  organization  costs  to be expensed as incurred.  The implementation of SOP
98-5  does  not  have  a  material impact on the Company's financial position or
results  of  operations.

     In  December  1999,  the  Securities and Exchange Commission released Staff
Accounting  Bulletin  (SAB)  No.  101,  "Revenue  Recognition  in  Financial
Statements", to provide guidance on the recognition, presentation and disclosure
of  revenues  in  financial  statements.  The  Company  believes  its  revenue
recognition  practices  are  in conformity with the guidelines prescribed in SAB
No.  101.

3.  ACQUISITIONS

     During  1999,  the  Company  completed  a  number  of  business  and  asset
acquisitions.  These  acquisitions  are accounted for using the purchase method,
and  accordingly, these consolidated financial statements include the results of
operations  from  the  date  of  acquisition  of  each  respective  business.

     NETROVER  INC.  AND  NETROVER  OFFICE  INC.

     On October 4, 1999, the Company acquired all of the shares of NetRover Inc.
and  NetRover  Office  Inc.  for  Cdn.  $4  million  (U.S.  $2.7  million).  The
consideration  for  the  purchase  included  cash  of Cdn.  $3 million (U.S.  $2
million)  and  219,000  shares  of  common  stock  for  Cdn.  $1  million  (U.S.
$$700,000).  NetRover  Inc.  and  NetRover  Office  Inc.  are  based  in
Toronto,
Canada.

     The  purchase included goodwill and other intangibles of Cdn.  $4.2 million
(U.S.  $2.9  million)  which will be amortized on a straight-line basis over its
estimated  useful  life  of  three  years.

     HERMES  NET  SOLUTIONS  INC.

     Under  SFAS  No.  86,  "Accounting for the Costs of Computer Software to Be
Sold,  Leased,  or  Otherwise  Marketed", capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which  the  Company  has  defined as the completion of beta testing of a working
product.  The  establishment  of  technological  feasibility  and  the  ongoing
assessment of the recoverability of these costs require considerable judgment by
management  with respect to certain external factors, including, but not limited
to,  anticipated  future  gross  product  revenue,  estimated  economic life and
changes  in  software  and  hardware  technology.  Software  developments  costs
amortized  on  the  straightline  method over the estimated economic life of the
product  of  three  years.

     As  at  December  31,  1999,  the  company capitalized $209,303 of software
development  costs  and  amortized  $69,768  of  these  costs.


                                                                            F-30
<PAGE>
3.   ACQUISITIONS  (CONTINUED)

     INTERNET  ARENA

     On  November  9, 1999, the Company purchased certain assets and liabilities
of  the  business  of  Internet  Arena  for $600,000.  The consideration for the
purchase included cash of $242,000, amount payable of $58,000 and 100,698 shares
of common stock for a value of $300,000.  As of December 31, 1999, 20,140 shares
of  common  stock were issued and the remaining 80,558 were issued subsequent to
year  end.  Internet  Arena  is  based  in  Oregon,  United  States.

     The purchase included goodwill and other intangibles of $536,000 which will
be  amortized  on  a straight-line basis over its estimated useful life of three
years.

     CONNECT  NORTHWEST

     On  October  27, 1999, the Company purchased certain assets and liabilities
of  the  business  of Connect Northwest for $1.4 million.  The consideration for
the  purchase  included  cash of $670,000, amount payable of $70,000 and 147,985
shares  of  common stock for a value of $660,000.  Connect Northwest is based in
Washington  State,  United  States.  The  purchase  included  goodwill and other
intangibles  of  $1.3  million  which will be amortized on a straight-line basis
over  its  estimated  useful  life  of  three  years.

     During 1998 and 1997, the Company completed two business acquisitions which
are  described  below.


     ePost  INNOVATIONS,  INC.

     On  September  17,  1997,  the  Company  acquired  ePOST  Innovations,
Inc.("ePost"),  a  wholly-owned  subsidiary  of  Mushroom  Innovations,  Inc.
("Mushroom").  The  Company  and Mushroom have officers and directors in common.

     The  Company  issued  3,000,000  shares  of  common  stock  to  Mushroom in
consideration for all of the issued and outstanding shares of ePost.  The shares
of common stock were valued at $.001 per share for an aggregate consideration of
$2,000.  The  Company  acquired  all  the  rights, title and interest to all the
assets  owned  by  ePost, and those assets consisted of proprietary knowledge of
various  computer  software  products  under  development  by  ePost.

     Under  SFAS  No.  86,  "Accounting for the Costs of Computer Software to Be
Sold,  Leased,  or  Otherwise  Marketed", capitalization of software development
costs begins upon the establishment of technological feasibility of the product,
which  the  Company  has  defined as the completion of beta testing of a working
product.  The  establishment  of  technological  feasibility  and  the  ongoing
assessment of the recoverability of these costs require considerable judgment by
management  with respect to certain external factors, including, but not limited
to,  anticipated  future  gross  product  revenue,  estimated  economic life and
changes  in  software  and  hardware  technology.  Software  developments  costs
amortized  on  the  straightline  method over the estimated economic life of the
product  of  three  years.

     As  at  December  31,  1999,  the  company capitalized $209,303 of software
development  costs  and  amortized  $69,768  of  these  costs.

     b)  Ownership Interests of CyPost

          Prior  to the acquisition of ePost, CyPost did not have any issued and
outstanding  shares.  The acquisition of ePost involved CyPost issuing 3,000,000
of  its  shares  to  Mushroom; in turn, Mushroom distributed these shares to its
shareholders  in  the  following  proportion:


Robert Sendoh             1,530,000 shares      51% interest
Carl Whitehead              900,000 shares      30% interest
William Kaleta              300,000 shares      10% interest
Chiyoko Asanumu             270,000 shares       9% interest
Total                     3,000,000 shares     100% interest


     Robert  Sendoh  at  the  time  of acquisition was President and Director of
Epost  and  Chairman  and  of  CyPost  Corporation,  Carl  Whitehead  was
Secretary/Treasurer and Director in Epost Innovations and President and Director
in  CyPost  Corporation  and  William  Kaleta  was  Chief  Technical Officer and
Director in EPost Innovations and Chief Technical Officer in CyPost Corporation.


Note:  Robert Sendoh gifted 9% of his shares to  Chiyoko  Asanuma,  his  sister.
      The  Company  acquired  all  the  rights,  title  and  interest to all the
assets  previously  owned  by  ePOST.  Those  assets  consisted  of  proprietary
knowledge  of  various  computer  software  products  under development by ePost
Canada.


                                                                            F-31
<PAGE>
     COMMUNICATION  EXCHANGE  MANAGEMENT,  INC.

     On  October  29,  1998,  the  Company  acquired  Communication  Exchange
Management,  Inc.  ("CEM"),  a  subsidiary  of  Mushroom.  The  Company  issued
6,270,000 post - split shares of common stock valued at $4,180 for consideration
of  all  of  the  issued and  outstanding  stock  of  CEM.  The Company acquired
all the rights, title  and  interest  to  all  the  assets  owned  by  CEM which
consisted of proprietary knowledge of various computer software products under
development by CEM.

     The  acquisition  of CEM involved CyPost issuing 6,270,000 of its shares to
Mushroom;  in turn, Mushroom distributed these shares to its shareholders in the
following  proportion:




ROBERT SENDOH      720,000 SHARES   11% INTEREST
CARL WHITEHEAD   1,350,000 SHARES   22% INTEREST
WILLIAM KALETA   1,950,000 SHARES   31% INTEREST
KELLY MONTALBAN  2,250,000 SHARES   36% INTEREST
                 ----------------  -------------
                 6,270,000 SHARES  100% INTEREST



     The acquisition has been accounted for under the purchase method.
Operating  results  of CEM prior  to  the  date  of  acquisition  were not
significant.


4.   PROPERTY  AND  EQUIPMENT

     Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                                                   1999         1998
                                                                -----------  -----------
<S>                                                             <C>          <C>
      OFFICE AND COMPUTER EQUIPMENT                             $1,008,405   $   28,563
         LESS- ACCUMULATED DEPRECIATION                           (408,823)      (6,233)
                                                                -----------  -----------

                                                                $  599,582   $   22,330
                                                                ===========  ===========
5.    GOODWILL AND OTHER INTANGIBLES

      Goodwill and other intangibles consist of the following:

                                                                   1999         1998
                                                                -----------  -----------

      CUSTOMER LISTS                                            $3,663,000   $        -
      GOODWILL                                                   1,832,543            -
                                                                -----------  -----------

                                                                 5,495,543            -
         LESS- ACCUMULATED AMORTIZATION                           (458,758)           -
                                                                -----------  -----------

                                                                $5,036,785   $        -
                                                                ===========  ===========
</TABLE>

6.    LOANS

      During 1999, the Company  borrowed  $4,875,000  pursuant to two promissory
note  agreements.  The  loans are unsecured,  bear interest at 8% per annum, and
the  principal and accrued  interest are due on demand.  The lender may elect to
convert  the  loans  into  shares  of  common  stock  of the Company as follows:

                              SHARES
PRINCIPAL           PRE-SPLIT        POST-SPLIT

$  1,000,000        1,000,000         1,500,000

   3,000,000        2,000,000         3,000,000

     875,000          437,500           656,250


     At the commitment dates of the promissory notes, the conversion prices were
less  than  the  fair  values of the common stock, hence a beneficial conversion
feature  is  attached  to these convertible notes. The amount of this beneficial
conversion  feature  is $2,212,500 and has been recorded as interest expense and
additional  paid-in-capital  for  the  year  ended  December  31,  1999.


                                                                            F-32
<PAGE>
6.    LOANS  (CONTINUED)

      During  1999,  $4,000,000  of loans were settled by the issuance of common
stock  valued  at  $4,000,000.  At  December  31,  1999,  the  loans  balance is
$875,000.  Subsequent  to  year  end,  the  Company  borrowed  an  additional
$625,000  against  the  promissory  note.

      The fair values of the loans at December 31, 1999 are not  practicable  to
estimate  because  of  the  conversion  features  associated  with  the  loans;
accordingly,  it  is  not  possible  to  estimate  the  present  value  of  the
future  cash  flows  with  any  reasonable  degree  of  precision.

      Subsequent  to  year  end,  the  lender  has  offered  to  lend a  further
$10,000,000  to  the  Company  under  similar  terms  except  that the loans are
convertible to  3,750,000 shares of common stock at a conversion  price of $2.67
per  share.  The lender has the option to withdraw  its offer to lend any amount
of  the  $10,000,000  at  any  time.  (see Note 12)


7.    SHARE CAPITAL

      AUTHORIZED STOCK

      The Company is authorized to issue:

      (a)   30,000,000  shares  of common  stock at a par  value of  $0.001  per
            share.

      (b)   5,000,000  shares  of  preferred  stock at a par  value of $.001 per
            share.  The Board of  Directors  of the Company  has the  authority,
            without further action by the holders of the  outstanding  shares of
            common stock,  to issue shares of preferred  stock from time to time
            in one or more  classes  or  series,  to fix the  number  of  shares
            constituting  any class or series and the stated value, if different
            from the par  value,  and to fix the  terms of any  such  series  or
            class,  including  dividend  rights,  dividend rates,  conversion or
            exchange  rights,  voting  rights,  rights  and terms of  redemption
            (including  sinking fund  provisions),  the redemption price and the
            liquidation  preference of such class or series.  The  designations,
            rights and preferences of any shares of preferred stock would be set
            forth in a Certificate of Designation  which would be filed with the
            Secretary of State of the State of Delaware.

      SHARE SPLIT

     On  September 24, 1999, the Company effected a three-for-two subdivision of
its  shares of common stock.  All share, per share, unit, and warrant amounts in
the  accompanying  financial statements have been adjusted retroactively to give
effect  to  this  subdivision.

     COMMON  STOCK  SUBSCRIBED

     As at December 31, 1999, the Company is obligated to issue 80,558 shares of
common  stock valued at $2.98 per share as consideration for the purchase of the
assets of Internet Arena and this obligation has been reported as a liability of
$240,000 on the balance sheet.  These shares were issued subsequent to year end.


                                                                            F-33
<PAGE>
7.   SHARE CAPITAL (CONTINUED)

     SALE OF UNITS AND WARRANTS

     In  1997,  the  Company  offered  for  sale  to  persons  who  qualified as
"accredited  investors"  as  defined  under  Regulation  D  promulgated  by  the
Securities and Exchange Commission 3,000,000 units at $0.05 per unit.  Each unit
consists  of one share of the Company's common stock and one warrant to purchase
one  share  of  common  stock  at  $0.27  per  share.

     In  1997,  the  Company  sold  600,000 units for aggregate consideration of
$20,000.  In  1998, the Company sold an additional 2,400,000 units for aggregate
consideration  of  $80,000  less  offering  expenses  of  $20,000.

     During  1998, the Company issued 915,000 shares of common stock through the
exercise  of  915,000  warrants  for aggregate consideration of $244,000.  As of
December  31,  1998,  2,085,000  warrants were outstanding.  These warrants were
exercised  for  2,085,000 shares of common stock during 1999 and at December 31,
1999,  there  are  no  warrants  outstanding.

     PRIVATE  PLACEMENT

     Pursuant  to  a private placement pursuant to Rule 504 of Regulation D, the
Company  offered  on  March 26, 1998, 57,000 shares of common stock at $0.33 per
share.  As  of  On  May  5, 1998, the Company sold an aggregate 57,000 shares of
common  stock  for  an  aggregate consideration of $19,000.  On May 5, 1998, the
Company  sold 22,500 shares of common stock pursuant to Rule 504 of Regulation D
to Kaplan Gottbetter and Levenson, LLP in consideration for $7,500 in legal fees
valued  at  $0.33  per  share.

8.   INCOME  TAXES

     In  accordance  with  SFAS 109, "Accounting for Income Taxes", income taxes
are  accounted  for under the liability method.  Under this method, deferred tax
assets and liabilities are determined based on differences between the financial
statement  reporting  and  the  tax bases of the assets and liabilities, and are
measured  at  the  enacted tax rates that will be in effect when the differences
are  expected to reverse.  Such differences principally arise from the timing of
income  and  expense  recognition  for  accounting  and  tax  purposes.

     The  application  of  SFAS  109  does  not  have any material effect on the
assets,  liabilities,  or  operations  for  the  periods  presented  in  these
consolidated  financial  statements.  Deferred  tax  assets  arising  from  the
Company's net operating loss carryforwards have been fully offset by a valuation
allowance.


                                                                            F-34
<PAGE>
8.   INCOME  TAXES  (CONTINUED)

     At  December 31, 1999, the Company has net operating loss carryforwards for
income  tax  purposes  of approximately $2,800,000 which are available to offset
future  taxable income.  The Company's utilization of these carryforwards may be
restricted  due  to  changes  in ownership of subsidiaries during the year.  The
components  of  the  deferred  tax asset as of December 31, 1999 and 1998 are as
follows:

                                           1999      1998
                                        ----------  ---------

      NET OPERATING LOSS CARRYFORWARDS  $1,260,000  $  82,000
         LESS- VALUATION ALLOWANCE       1,260,000     82,000
                                        ----------  ---------

                                        $        -  $       -
                                        ==========  =========

9.     COMMITMENTS AND CONTIGENCIES

       Litigation

       Subsequent to year end, the former president of the Company filed various
       Legal  claims  against  the  Company  and the Company's transfer agent in
       respect of the ownership of 600,000 shares of common stock of the Company
       awarded to him.  The claims do not include any dollar amounts.

       The Company believes  that  the  claims  are without merit and intends to
       contest them vigorously. As a result, no amounts have been accrued in the
       financial statements  in  respect to these claims, and the outcome of the
       claims is not determinable.


Lease  Commitments

     The  Company  leases  office space and equipment, and its lease payments in
the next  five  years  and  thereafter  are  as  follows:

      2000                                                   $    1,236,000
      2001                                                        1,091,000
      2002                                                          293,000
      2003                                                          122,000
      2004                                                          109,000
      THEREAFTER                                                     55,000
                                                              -------------
                                                             $    2,906,000
                                                             ==============



10.   PRO FORMA DISCLOSURES ON BUSINESS COMBINATIONS (UNAUDITED)

     As  described  in  Note 3, the Company completed various business and asset
acquisitions  during  1999  and  has  entered  into  another acquisition in 2000
described  in  Note  12.  The  following  presents unaudited pro forma financial
information  as  though each of the transactions occurred on January 1, 1999 and
1998.  This pro forma financial information include adjustments giving effect to
goodwill  amortizations associated with the acquisitions and interest expense on
debt  incurred  to  finance  the  acquisitions.



      PRO FORMA  CONDENSED  STATEMENT OF OPERATIONS  FOR THE YEAR ENDED DECEMBER
      31, 1999 (UNAUDITED)

<TABLE>
<CAPTION>
                                                             INTERNET  CONNECT              PRO FORMA
(US DOLLARS)         CYPOST     HERMES   NTOUCH   NETROVER    ARENA   NORTHWEST   PLAYA    ADJUSTMENTS    TOTAL
<S>                <C>          <C>     <C>       <C>        <C>      <C>        <C>       <C>          <C>
REVENUE             1,020,000   87,000  189,000   1,402,000  466,000     63,000   452,000            0  4,279,000

NET INCOME (LOSS)  (4,352,000)       0   (7,000)     90,000  (45,000)      ,000  (259,000   (3,420,000  7,986,000)

LOSS PER SHARE          (0.48)
</TABLE>

      PRO FORMA  CONDENSED  STATEMENT OF OPERATIONS  FOR THE YEAR ENDED DECEMBER
      31, 1998 (UNAUDITED)

<TABLE>
<CAPTION>
                                                             INTERNET  CONNECT              PRO FORMA
(US DOLLARS)         CYPOST     HERMES   NTOUCH   NETROVER    ARENA   NORTHWEST   PLAYA    ADJUSTMENTS    TOTAL
<S>                <C>          <C>     <C>       <C>        <C>      <C>        <C>       <C>          <C>
REVENUE                   0    196,000  404,000   1,775,000   342,000    536,000   306,000            0     3,559,000

NET INCOME (LOSS)  (540,000)         0  (16,000)    (23,000) (221,000)   (29,000) (182,000)  (3,420,000)   (4,431,000)

LOSS PER SHARE                                                                                                  (0.53)
</TABLE>

11.   NON-CASH INVESTING AND FINANCING ACTIVITIES

      Loans of $4 million  were  converted  into  shares of common  stock of the
Company.

12.   SUBSEQUENT EVENT

      ACQUISITION OF PLAYA CORPORATION


                                                                            F-35
<PAGE>
     On  February  23,  2000,  the  Company  completed  the acquisition of Playa
Corporation  (a  Japan  company),  developer  of  Yabumi  instant  messaging and
e-greeting  card  services.  The  acquisition  totals  $3  million, comprised of
$300,000  in  cash  and  $2.7  million  in the Company's shares of common stock.

     LETTER OF FINANCE

     On  April 27, 2000 the lender Blue Heron Venture Fund renegotiated with the
Company  two of the commitment letters that were available as of that date. (see
Note  6)  With  the  renegotiation,  the  March  17, 1999 and July 12, 1999 debt
financing  commitment  letters  were  amended  to  reflect a conversion price of
$0.75.  Below  the  table  indicates  the  discount  to  market  on  the amended
commitment letters. The change in these conversion terms were made subsequent to
December  31, 1999; hence no changes have been made to interest expense in these
financial  statements  in  respect  of  the  loans with Blue Heron Venture Fund.

     The  loans  balance  of  $875,000 at December 31, 1999 was issued under the
$2,000,000  commitment  above. The beneficial conversion terms was $122,500. The
beneficial  conversion  feature  on  the  loans  calculated  under  the  amended
conversion  terms  is $875,000. The Company will record an additional beneficial
conversion feature of $752,500 as interest expense in the first quarter of 2000.

     The  $625,000  loans  borrowed  by  the Company subsequent to year-end will
result  in  a  beneficial  conversion feature of $625,000 which the Company will
record  as  interest  expense  in  the  first  quarter  of  2000.


                                                                            F-36
<PAGE>
<TABLE>
<CAPTION>
COMMITMENT DATE  AMOUNT OF COMMITMENT   SHARE CONVERSION  CLOSING SHARE PRICE   CONVERSION PRICE   DISCOUNT TO MARKET
---------------  ---------------------  ----------------  --------------------  -----------------  -------------------
<S>              <C>                    <C>               <C>                   <C>                <C>

April 27, 2000   $           2,000,000         2,666,666  $               1.50  $            0.75                  50%
---------------  ---------------------  ----------------  --------------------  -----------------  -------------------
April 27, 2000   $          10,000,000        13,333,333  $               1.50  $            0.75                  50%
---------------  ---------------------  ----------------  --------------------  -----------------  -------------------
</TABLE>


                                                                            F-37
<PAGE>
                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this Amendment to Annual Report on Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized.



DATE:  November 15, 2001                 CYPOST CORPORATION




                                       By:/s/ Sandra Warren
                                          -----------------------------------
                                          Sandra Warren
                                          President
                                          Secretary and Treasurer


     In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of registrant and in the capacities indicated
and on the dates indicated.

Name                          Title                                  Date
----                          -----                                  ----

/s/  J. Thomas W. Johnston    Chairman of the Board            November 15, 2001
--------------------------    and Director
J. Thomas W. Johnston

/s/  Sandra Warren            President,                       November 15, 2001
------------------            Secretary, Treasurer, Director
Sandra Warren                 Principal Executive,
                              Financial and Accounting Officer

/s/  Robert Sendoh            Director                         November 15, 2001
------------------
Robert Sendoh


                                                                            F-38
<PAGE>