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

                                   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 [ ]

         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. [ ]


<PAGE>

         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]


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<PAGE>

                               CYPOST CORPORATION

                          ANNUAL REPORT ON FORM 10-KSB
                      For the Year Ended December 31, 2000

Item Number     Caption                                                    Page
------------    -------                                                    ----
PART I

1.           Description of Business.....................................     4

2.           Description of Property.....................................    26

3.           Legal Proceedings...........................................    28

4.           Submission of Matters to a Vote of Security Holders.........    31

PART II

5.           Market for Common Equity and Related Stockholder
             Matters.....................................................    31

6.           Management's Discussion and Analysis of Financial
             Condition and Results of Operations.........................    33

7.           Financial Statements........................................    40

8.           Changes in and Disagreements With Accountants on
             Accounting and Financial Disclosure.........................    41

PART III

9.           Directors, Executive Officers, Promoters and Control
             Persons; Compliance with Section 16(a) of the Exchange
             Act.........................................................    42

10.          Executive Compensation......................................    44

11.          Security Ownership of Certain Beneficial Owners and
             Management..................................................    45

12.          Certain Relationships and Related Transactions..............    46

PART IV

13.          Exhibits and Reports on Form 8-K............................    48

SIGNATURES...............................................................    54

CONSOLIDATED FINANCIAL STATEMENTS........................................   F-1


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<PAGE>

         Certain statements contained in this Annual Report on Form 10-KSB that
are not related to historical results, including, without limitation, statements
regarding the issuer's business strategy and objectives, future financial
position and expectations about future operations, are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and involve risks and uncertainties. Although the Company
believes that the assumptions on which these forward-looking statements are
based are reasonable, there can be no assurance that such assumptions will prove
to be accurate and actual results could differ materially from those discussed
in the forward-looking statements. Factors that could cause or contribute to
such differences include, but are not limited to, regulatory policies,
competition from other similar businesses, and market and general economic
factors. All forward-looking statements contained in this Annual Report on Form
10-KSB are qualified in their entirety by this statement.

                                     PART I

Item 1.  Description of Business

         General

         CyPost Corporation ("CyPost") is engaged in the business of providing
Internet connection and related services (the "ISP Services") for business and
personal use. See "ISP Business" below. 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 (the "Software Products"), which
activities the Company no longer pursues. See "Software Products Business"
below. As used in this Annual Report on Form 10-KSB, the term "Company" refers
to CyPost and its consolidated subsidiaries.

         CyPost was incorporated on September 5, 1997, under the laws of the
State of Delaware. The original name of CyPost was "ePost Corporation", which
name was changed shortly after incorporation to CyPost Corporation.

         The Company was a development stage company until the first quarter of
1999, when it began to offer the first of its Navaho brand Software Products and
broaden its strategic focus through the acquisition of six Internet service
providers (collectively, "ISPs" or individually, an "ISP"). Currently, providing
ISP Services is the focus of the Company's business. The Company derives
virtually all of its revenues from its ISP Services. No single customer accounts
for a significant portion of the Company's revenue. The Company's business
operations are presently conducted in Canada and the United States. Dollar
values in this Report are expressed in U.S. Dollars, unless indicated otherwise.
On December 31, 2000, one Canadian Dollar ("CDN") was worth $.6672 U.S. Dollars.


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<PAGE>

         The Company's principal executive offices are located at 900-1281 West
Georgia Street Vancouver, British Columbia, V6E 3J7, Canada. The Company's
telephone number is (604) 904-4422, and its website is www.cypost.com.

         ISP Business

                  Overview

         The Company offers a full range of consumer Internet access services
and a broad selection of business services, both of which are offered nationwide
in Canada and regionally in the Pacific Northwest. The Company's services are
tailored to the specific demands of both its business and residential customers
and include connectivity, server co-locations, e-mail (list servers for
corporate e-mailing), hosting other parties' websites ("Web hosting"),
high-speed Internet access and other value-added services, including customer
care available 24 hours a day, seven days a week, 365 days a year. Over time,
these functions may be expanded to include additional privacy and protection
solutions such as managed anti-virus, firewall, secure connections from personal
computers to corporate networks (Virtual Private Network ("VPN")), intrusion
detection and filtering services.

         The Company's ISP business focuses on a niche market of small to
medium-sized businesses and residential customers, rather than larger
businesses. The Company believes that it provides critically important high
levels of customer service, end-to-end secure communication services and
solutions, managed networking, Web hosting and other technical support issues
that are key concerns for this market.

         Through a vendor agreement with UUNet Canada, Inc. ("UUNet"), the
Company provides Internet access services to approximately 100 communities in
Canada, in which approximately 95% of the Canadian population resides. The
Company also serves customers in the Seattle, Washington and Portland, Oregon
areas. The Company is seeking an agreement in the U.S. similar to the one it has
with UUNet, in order to expand its geographic service area in the U.S. The
Company is also looking to replace some of the telecommunications suppliers it
is using for its operations in the Pacific Northwest in order to better serve
the existing customers base in the Pacific Northwest and to offer these
customers roaming features throughout the U.S. As of December 31, 2000, the
Company had approximately 20,000 business and residential ISP customers.

         At present, most of the revenue from ISP Services can be attributed to
connectivity, although the Company's network of ISP Services is moving towards
focusing on Web hosting and server co-location, anticipating a strong hold over
connectivity by the larger ISPs in a few years' time. The Company believes that
many large and medium size businesses have already established a Web presence on
the Internet, but that many small companies have yet to make this move. As a
result, the Company intends to focus its marketing efforts on this segment of
the business community by offering services at a competitive price point, and by
providing tools that will enable customers to build a Web presence with minimal
cost or expertise.



                                       5
<PAGE>

         While the Internet is growing at an exponential rate, the managed
security service market is currently in its infancy. The Company plans to offer
certain managed security services including anti-virus detection systems,
setting up and monitoring firewalls, developing VPNs and providing intrusion
detection services. According to a June 2000 Aberdeen Group report, Gems and
Minefields Final Report: Managed Security Services Volume I, the market
opportunity for managed security services, is estimated to meet or exceed $1
billion by 2002. The Company plans to introduce anti-virus detection services
during 2001. The Company will continue to explore additional opportunities to
expand into the managed security service market in order to provide greater
value-added services to its ISP customers. The Company will require third-party
financing in order to expand into the managed security service market. There can
be no guaranty that such financing will be available or, if it is available,
that it will be on terms acceptable to the Company. See "Risk Factors -
Significant Capital Investment" below, and Part II, Item 6, "Management's
Discussion and Analysis of Financial Condition and Results of Operations".

         The Company's ISP business began in mid-1999 with the acquisition of
the first two of six ISP providers acquired by the Company. See "Recent
Acquisitions" below. The CyPost Network of Service Providers consists of (i) the
following wholly-owned subsidiaries: NetRover Inc. ("NetRover") and NetRover
Office Inc. ("NetRover Office"), both of which are located in Toronto; and
Hermes Net Solutions Inc. ("Hermes") and Intouch Internet Inc. ("Intouch"), both
of which are located in Vancouver, and (ii) the following DBAs: Connect
Northwest Internet Services ("CNW") in Mount Vernon and Seattle, Washington; and
Internet Arena ("Internet Arena") in Portland, Oregon. See "CyPost Network of
Service Providers" below. Despite the fact that each of the Company's ISP
businesses operates under its own trade name, most of the customer care, network
operations and administration functions have now been centralized. See
"Consolidation of ISP Operations" below. This has given the Company's ISP
businesses the ability to enjoy the benefits of promoting themselves as regional
providers, while obtaining the economic benefits of centralized network
operations, technical support and administration.

              Industry Background

                   Growth of the Internet and Electronic Commerce

         The Internet is a collection of computer networks that links millions
of public and private computers to form the largest computer network in the
world, the Worldwide Web (the "Web"). It has become an important global
communications medium, enabling millions of people to obtain and share
information and conduct business electronically, and is a critical tool for
information and communications for many users. The Internet has grown rapidly in
recent years, both in the number of Web users and websites. Many factors are
driving the growth in the number of Web users and websites, including the large
and growing number of personal computers, advances in the performance and speed
of personal computers and modems, easier access to the Internet and the
increasing importance of the Internet for communications, information and
commerce. For many businesses, the Internet has created a



                                       6
<PAGE>

new communications and sales channel enabling large numbers of geographically
dispersed organizations and consumers to be reached quickly and
cost-effectively.

                   Evolution of the Internet Services Market

         Today, the Internet services market consists primarily of Internet
access. Access services include dial-up and high-speed Digital Subscribe Lines
("DSL") access for individuals and small businesses and high-speed dedicated
access primarily for larger organizations. The rapid development and growth of
the Internet have resulted in a highly fragmented industry, consisting of more
than 5,000 ISPs in the U.S. and Canada, most of which operate as small, local
businesses. The Internet services industry is expected to undergo substantial
consolidation, especially among mid-sized ISPs, over the next few years.

         ISPs vary widely in geographic coverage, customer focus and the nature
and quality of services provided to subscribers. Few ISPs offer nationwide
coverage, have a brand name with nationwide recognition or can grow
significantly without additional investment in infrastructure. ISPs may
concentrate on specific types of customers that differ from the target markets
of other ISPs. Services offered by ISPs can range from simple dial-up access to
highly organized, personalized access coupled with value-added services. The
Company believes that consumers generally focus on speed and reliability of
access, ease of use, customer service and price, as they evaluate ISPs. In
addition, the Company believes many business customers want all their
Internet-based requirements, such as Internet access, Web hosting and electronic
commerce applications, met by a single provider.

         Internet operations, including Web hosting and electronic commerce, are
increasingly becoming critical to businesses. However, many businesses lack the
resources and expertise to develop, maintain and enhance, on a cost-effective
basis, successful Internet operations. As a result, businesses increasingly use
outside companies to enhance website reliability and performance, provide
continuous operation of their Internet-based functions and reduce operating
expenses. By outsourcing these services, companies can focus on their business
rather than using their resources to support Internet operations.

         There is increasing demand for ISPs to offer electronic commerce or Web
hosting services that businesses can establish quickly and easily. An increasing
number of ISPs supplement their basic Internet access services with a variety of
commercial services that facilitate electronic commerce, such as Web hosting,
co-location and other value-added services. These services expand an ISP's
potential revenue sources from basic monthly access fees to other fees such as
set-up and maintenance charges. In addition, some larger and more sophisticated
ISPs market other Internet-based services, such as paging, long-distance and
cellular telephone services, to both consumers and business customers.

              The Company's ISP Solutions

         The Company offers a full range of consumer Internet access services
and a broad selection of business services, both of which are offered nationwide
in Canada and regionally



                                       7
<PAGE>

in the Pacific Northwest, at competitive prices. The Company believes that its
services provide customers with the following benefits:

         Fast and Reliable Quality Service. The Company's systems and network
infrastructure are designed to provide consumer and business customers with fast
and reliable quality service through its state-of-the-art equipment, its network
operations center that is monitored on a 24 hours a day, seven days a week basis
by its engineers and third-party network providers. In addition, the Company
offers bilingual customer support in English and French, for its French-speaking
customers, and additional online customer support at www.helptek.net.

         Cost-Effective Access. The Company offers high quality Internet
connectivity and enhanced business services at price points that are generally
lower than those charged by other ISPs with Canadian national coverage. The
Company offers pre-bundled access services packages under monthly or prepaid
plans.

         Nationwide Canadian Network Coverage. Through a vendor agreement with
UUNet, the Company provides Internet access services to approximately 100
communities in Canada, in which approximately 95% of the Canadian population
resides. See "Dependence on Key Suppliers" below. The Company has additional
telecommunications agreements with other vendors in Canada and the Pacific
Northwest.

              Summary of ISP Services Offered

                   Narrowband Access

         The Company offers a range of narrowband (low-speed) access including
dial-up, and dedicated Integration Services Digital Network ("ISDN") services,
to both residential and business customers. These services are offered in
various competitively priced plans designed to meet the needs of customers. The
price plans for all Internet services vary and are subject to change.

         The price plans for the Company's narrowband Internet service vary
depending on the region and are subject to change. The Company offers a variety
of plans which include a fixed number of hours to unlimited plans.

         o        Fixed hourly plans start at $10.00 and unlimited dial-up plans
                  range from $14.00 to $24.00 per month.

         The Company's principal price plan for dedicated ISDN for corporate
customers is currently as follows:

         o        $199 per month for dedicated ISDN (64 kilobytes) or $330 for
                  dedicated ISDN (128 kilobytes), plus a one time setup fee of
                  $100



                                       8
<PAGE>

                   Broadband Access

         Broadband access consists of high-speed, high-capacity access services
such as DSL. Many of the Company's customers have upgraded from the dial-up
service, and the Company continues to expand its broadband service so that all
dial-up customers will have the option to upgrade to a broadband service rather
than use a competing ISP elsewhere. These services are currently available
through CNW, Internet Arena and Hermes. NetRover intends to offer a similar
service in the coming months.

         The Company's principal price plan for dedicated high-speed DSL service
for residential customers is currently as follows:

         o        $25 per month for dedicated DSL (1.5 Mbps) with one e-mail
                  account, 20 megabytes of storage space, and 5 gigabytes of
                  transfer

         The Company's principal price plan for dedicated high-speed Asymmetric
Digital Subscribe Line ("ADSL") service for corporate customers is currently as
follows:

         o        $66 per month plus a one time setup fee of $44, for dedicated
                  ADSL (1.5 Mbps) with 10 e-mail accounts, 20 Megabytes of
                  storage space, and 5 Gigabytes of transfer

         o        $99 per month plus a one time setup fee of $56, for dedicated
                  ADSL (2.5 Mbps) with 25 e-mail accounts, 20 Megabytes of
                  storage space, and 10 Gigabytes of transfer

         o        $130 per month plus a one time setup fee of $70, for dedicated
                  ADSL (4.0 Mbps) with 50 e-mail accounts, 20 Megabytes of
                  storage space, and 15 Gigabytes of transfer

                   E-Mail

         The Company offers a range of basic and enhanced e-mail services to
individuals and businesses. Often, the decision is made to outsource services to
a provider in order to avoid the financial cost, time and expertise requirements
of maintaining e-mail services internally. While the geographic coverage of the
Company's e-mail services customer base is worldwide, the Company targets
prospective customers in Canada and the U.S.

                   Customer Security

         The Company offers password protected access to all of its customers.
The Company also offers some e-mail filtering services to limit computer viruses
from being delivered to mailboxes. In addition, the Company employs monitoring
mechanisms to block e-mail from companies that are known to generate junk
e-mail, commonly known as "spam".



                                       9
<PAGE>

                   Web Hosting

         The Company offers a range of basic and enhanced Web hosting services
to individuals and businesses wishing to place their own website on the
Internet. Often the decision is made to outsource services to a provider in
order to avoid the financial cost, time and expertise requirements of
self-hosting the website and obtaining enhanced services internally. While the
geographic coverage of the market for Web hosting services is worldwide, the
Company targets prospective customers in Canada and the U.S.

         Web hosting can be differentiated into shared or dedicated hosting,
both of which the Company offers. Shared hosting involves multiple customers who
have their websites hosted on a shared computer server. Dedicated server hosting
is available to customers that prefer not to host their websites on a shared
server. Dedicated servers provide significantly more server and network
resources than those available from a shared server and give customers the
ability to run complex, high volume or high bandwidth websites and applications.
The Company offers a number of dedicated server options at various prices
depending upon the specific hardware configuration, level of service and data
transfer rates required by the customer. The Company hosts customer websites and
indirectly provides access to the Internet through its Network of Service
Providers.

         The Company's principal price plans for Web hosting are currently as
follows:

         o        WebHost Classic $6.95 per month includes 5 megabytes of
                  storage space, website statistics and personalized e-mail

         o        WebHost Bronze $19.95 per month includes 10 megabytes of
                  storage space, 1000 megabytes of data transfer, detailed
                  website statistics and personalized e-mails

         o        WebHost Silver $29.95 per month includes 20 megabytes of
                  storage space, 1500 megabytes of data transfer, detailed
                  website statistics and personalized e-mails

         o        WebHost Gold $34.95 per month includes 40 megabytes of storage
                  space, 2000 megabytes of data transfer, detailed website
                  statistics and personalized e-mails

                   Server Co-Location

         The Company provides server co-location services, whereby a customer
gains access to the Company's Internet support and maintenance services,
high-speed Internet connections, security systems and appropriate physical
environment for the server (e.g., static free, air-conditioned environments).

         The Company's pricing policy for this service varies and is largely
dependent on the customer's individual requirements.



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<PAGE>

                   Customer Care

         A critical factor in selecting an ISP is quality and availability of
technical support and customer care. With increasing complexity of today's
technology, an effective ISP must offer customers a clearly defined means of
reporting and resolving unexpected problems.

         The Company is committed to customer service and support demonstrated
by its outstanding customer service record, 24 hours a day, seven days a week,
365 days a year coverage, and local service and support. The Company's Network
Operations Centers and technical support staff offer customers individualized
support for their business-critical Internet solutions and provide network
monitoring 24 hours a day, seven days a week, 365 days a year, in both English
and French, for the Company's French-speaking customers, and additional online
customer support at www.helptek.net.

         The Company's Customer Care Center is the communications hub of the
Company's network. The Customer Care Center is comprised of monitoring
engineers, call analysts, Internet systems engineers, key senior technical
agents and billing services staff.

         The Company has established detailed protocols to effectively assess
and route customer communications, service or trouble requests and event
notification or alerts. In this way, the Company can ensure that its clients are
operating at peak performance at all hours of the day and night.

                   Network Operations Centers

         The Company has two network operation centers, located in Etobicoke
(suburban Toronto), Ontario and Seattle, Washington. These operation centers
monitor network traffic, quality of services and security issues, as well as the
performance of the equipment located at each of its physical locations, to
ensure reliable service. The operation centers are monitored on a 24 hours a
day, seven days a week, 365 days a year basis, and maintain responsibility for
communications between their internal departments (customer care) as well as
with external providers of services.

                   High-Quality Data Centers

         The Company operates all of its core servers from four Internet Data
Centers. With locations in both Canada and the U.S., these data centers provide
the physical environment necessary to keep servers up and running 24 hours a
day, seven days a week, 365 days a year.

         The Toronto data center includes HVAC temperature systems with separate
cooling zones, physical security features, including state of the art smoke
detection and fire suppression systems, motion sensors and 24 hours a day, seven
days a week and 365 days secure access, as well as video camera surveillance.
This facility delivers high levels of reliability through redundant sub-systems
such as on-site power with multiple backup generators.



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         During 2001, the Company expects to upgrade its other data centers to
provide more current HVAC temperature systems, physical security features,
including state of the art smoke detection systems, motion sensors and 24 hours
a day, seven days a week, 365 days a year secure access. These data centers will
also have on-site backup power. The Company believes that it will be able to
fund this upgrade internally.

                   Global Backbone, High Performance Network Architecture

         The Company invests significant resources in developing a scalable
network infrastructure. The Company's strategy is to outsource the process of
building a scalable national or regional dial-up network. This eliminates the
need for the Company to purchase equipment, negotiate leases throughout Canada
and the U.S. to house the equipment, and provide Internet connectivity to all
these locations. By outsourcing its network and dial-up infrastructure, the
Company also has the ability to offer its services in areas where network costs
would be prohibitive. Because it is not committed to leasing or building its own
network, the Company can take advantage of the market opportunities that develop
due to technological advances or regulatory changes. In addition, in some cases
the Company has negotiated agreements with its telecommunication suppliers that
are priced on a per customer basis, including its principal telecommunications
agreement with UUNet. As a result, the Company is only billed for the clients
that actually use these services. In such cases, the Company's telecommunication
costs only increase if the customer base increases. Conversely, if the customer
base decreases, the Company's telecommunications costs decrease. Thus, the
Company does not need to build its own network and work to fill any spare
capacity that may exist. The Company has entered into agreements with
telecommunications network suppliers for network capacity. These agreements are
for fixed terms from one to five years.

         The Company plans to modify its network over time to enhance its
performance, provide access demanded by the market and allow it to serve a
larger subscriber base. The Company's goal is to minimize both network costs and
exposure to technological obsolescence of equipment.

         Wherever feasible, the Company makes its network fault tolerant with
redundant equipment. Such actions include standby equipment to handle additional
capacity if a server has to be replaced for reasons such as malfunction of a
hard drive or software. The redundancy allows for operations to continue as
efficiently as possible, while the failure can be isolated to a particular piece
of equipment. In most cases, the availability of redundancy of equipment or
excess capacity allows for the alternative processing of data until the
defective equipment or software can be replaced or repaired. These measures,
along with continuous monitoring, are designed to minimize network downtime and
provide early identification of potential sources of failure. The Company is
developing internal procedures to isolate single points of failure within its
network and servers. Beginning in the second half of 2001, the Company intends
to implement some of these procedures. The Company believes that it will require
third-party financing to acquire the additional equipment required to further
enhance the reliability of its network. There can be no guarantee that such
financing will be available



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<PAGE>

or, if available, it will be available on terms acceptable to the Company. See
"Risk Factors - Significant Capital Investment" below.

                   Dependence on Key Suppliers

         On June 30, 1999, the Company entered into an agreement with UUNet,
which provides network infrastructure for some of the Company's ISP Services
operations. The term of the agreement is two years, commencing on February 1,
2000. The Company has an option to extend the agreement for one additional year
on the same terms and conditions. Pricing under the UUNet agreement is $9.50
(CDN) per active customer per month, with the Company providing a minimum
commitment of 10,000 customers. The Company currently exceeds this minimum.

                   Marketing

         The Company is actively seeking to market broadly its ISP Services and
has taken a number of steps in that direction, including the use of a variety of
print and communications media. The Company intends to use its own marketing
staff rather than outsourcing its marketing effort.

                   Consolidation of ISP Services Operations

         During 2000, the Company began streamlining and consolidating its ISP
Services operations to enhance efficiency and reduce operating expenses. The
Company has embarked on a program to centralize ISP Services to the greatest
extent possible, as follows:

         o        Customer Support. During the second half of 2000, the Company
                  began consolidating all aspects of customer support (including
                  end user technical issues) into the Chatham, Ontario facility.
                  In early 2001, customer support for Oregon ISP Services
                  customers were consolidated into the Chatham facility and by
                  mid-2001 it is expected that customer support for all of the
                  Company's ISP Services customers will be handled by the
                  Chatham facility.

         o        Billing and Collections. During the second half of 2000, the
                  Chatham facility took over billing and collections for British
                  Columbia customers, in addition to continuing billing and
                  collections for all other Canadian customers. It is
                  anticipated that by mid-2001, billing and collections for the
                  rest of the Company's ISP Services customers will be
                  consolidated into the Chatham facility.

         o        Network Operations. During 2000, the Company reduced four
                  maintenance and repair teams to two regionally-based teams. A
                  team based in Toronto provides primary monitoring and repair
                  of all servers and routers covering all Canadian ISP Services
                  customers and provides overflow assistance to the Pacific
                  Northwest, while a Seattle team provides primary monitoring
                  and repair of all



                                       13
<PAGE>

                  servers and routers covering all of the Pacific Northwest ISP
                  Services customers and provides overflow assistance to Canada.

         The Company is also consolidating Web hosting and dedicated services
into Toronto, a process which began in late-2000 and is expected to be completed
by late-2001. Other ISP Services such as e-mail and user authentication (i.e.,
customer security) will continue to be handled from regional data centers.
Beginning in early 2001, all new Web hosting customers, wherever located, will
be hosted from Toronto. The Company is also considering implementing other
consolidated services to achieve greater efficiency and cost savings.

         As part of Management's ongoing review and consolidation of the
Company's operations, nine of 14 employees in the Vancouver office were
terminated or resigned during 2000. The Company did not incur significant costs
and does not expect to incur significant costs in the future in connection with
these terminations.

                   Network of Service Providers

         The Company's Network of Service Providers consists of the following
entities:

         NetRover/NetRover Office. NetRover, based in Toronto, Etobicoke
(suburban Toronto) and Chatham, Ontario, is the largest of the Company's ISP
Services entities, currently serving approximately 14,000 residential and small
business customers throughout Canada. NetRover offers inexpensive packages
focusing on Web hosting and dial-up connections, as well as some server
co-location. NetRover Office provides similar services for the Company's
business clientele. NetRover currently offers dial-up service with the network
infrastructure provided through UUNet at a monthly cost of $9.50 (CDN) per user,
and has dial-up availability across Canada. With this national reach, the
Company intends to use the NetRover trade name for expansion. The Chatham
facility is the backbone of the Company's customer support and billing
functions.

         Hermes. Based in Vancouver, British Columbia, Hermes serves
approximately 800 business customers in British Columbia. Hermes offers a range
of services including connectivity (including ADSL), server co-location, Web
hosting and e-mail services.

         Intouch. Based in Vancouver, British Columbia, Intouch serves
approximately 2000 residential and small office/home office customers in British
Columbia. Intouch has a "community" feel, and is primarily focused on dial-up
connectivity, basic Web hosting, high-speed DSL and e-mail services.

         Internet Arena. Based in Portland, Oregon, Internet Arena serves
approximately 1500 primarily residential and small office/home office customers
in Oregon. Internet Arena offers a similar range of services to Intouch.

         CNW. Based in Mt. Vernon and Seattle, Washington, CNW serves
approximately 1800 business and residential customers in Washington. More
focused on custom work,



                                       14
<PAGE>

CNW's experience includes ethical hacking and other security monitoring. CNW
also offers dial-up, DSL connectivity and Web hosting for its customers.

         Software Products Business

         Following the acquisition of two software companies in 1997 and 1998,
the Company developed its Navaho-brand encryption Software Products (the "Navaho
Software Products") during 1999. See "Recent Acquisitions" below.

         The Company had nominal sales of its Navaho Software Products in 1999
and 2000 and no longer actively pursues the development or marketing of its
Software Products. However, the Navaho Software Products are still available for
download and purchase through several online websites, including the Company's
website, www.cypost.com. The cost incurred by the Company for research and
development was $209,303 in 1999 and $87,431 in 2000.

         At the end of 2000, Management assessed the recoverability of the
Company's Software Products assets and determined that these assets were
impaired. Therefore, the Company has written off the net book value of these
assets in the amount of $128,726. Any future effort to recommence development of
the Company's Software Products will require substantial additional third-party
financing. There are no plans at present to recommence development of the
Company's Software Products and there are no agreements to provide the necessary
funding for such effort. There can be no assurance that any such agreements will
be reached or, if they are reached, whether they will be on terms acceptable to
the Company or will result in successful development of the Software Products.
See "Risk Factors - Significant Capital Investment" below; Part II, Item 6,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"; and "Note 2 to Notes to Consolidated Financial Statements -
Software Development Costs".

         The Company previously developed the following Navaho Software
Products:

          Navaho Lock (Version 2.x)
          Navaho Lock with Voice (paid & promotional)
          Navaho Viewer
          Navaho ZipSafe

         Navaho Lock (Version 2.x) was the first generation of the Company's
Navaho Software Products. Navaho Lock was superseded by Navaho Lock with Voice.
Early versions of the Navaho Lock software enabled consumers to send and receive
secure e-mail and attachments such as documents, spreadsheets, digital sound
files and business presentation files. Later versions of the Navaho Lock program
are more intuitive and simpler to operate than prior versions. Navaho Lock's
unique combination of features include built-in file compression for faster
transmission times, a user-friendly graphical user interface ("GUI") and the
Company's "drag-and-drop" feature that enables users to encrypt and compress
files simply by dragging and dropping them into an encryption field. The product
also allows users to select the strength of privacy protection, according to
their needs, by simply specifying 40-, 56-, 112-, 128- or 3DES 168-bit
encryption algorithms.



                                       15
<PAGE>

         Both Navaho Lock and Navaho Lock with Voice utilize private key, or
symmetric key, encryption. This is conventionally regarded as superior to public
key encryption. In comparison, the largest-selling competing software relies on
an "asymmetric" method of encryption commonly known as "public/private key". In
a public/private key approach, a publicly available algorithm is used in
combination with two corresponding private keys that generally must be issued by
a third party. Not only is public key encryption significantly slower than
symmetrical encryption (approximately 1,000 times slower than symmetrical
encryption), but the approach also exposes users to the additional costs and
risks involved in relying on a third party to verify the identity of the sender.

         The Company also developed the Navaho ZipSafe program. Navaho ZipSafe
is file-security software, designed to ensure the privacy of data on laptops and
home computers. Utilizing the same advanced encryption and compression
technology used in Navaho Lock and offering comparable ease-of-use features
(including a user-friendly GUI and similar "drag-and-drop" methodology), Navaho
ZipSafe has the ability to encrypt and then condense files by as much as 70% in
a matter of seconds. The product enables users to secure all computer files,
folders and directories on a local hard drive.

         Recent Acquisitions

                   Software Products-Related Acquisitions

         On September 15, 1997, the Company acquired all of the issued and
outstanding stock of ePost Innovations, Inc., a British Columbia corporation
("ePost Innovations"), from Mushroom Innovations, Inc., a British Columbia
corporation ("MII"), for the purpose of acquiring certain intellectual property
of ePost Innovations to be used in the development of the Company's Software
Products. Under the terms of the ePost Innovations transaction, the Company
acquired all the issued and outstanding stock of ePost Innovations from MII and,
in return, issued 3,000,000 shares of the Company's common stock, par value
$.001 per share ("Common Stock"), to MII.

         On October 29, 1998, the Company acquired all of the issued and
outstanding stock of Communication Exchange Management Inc., a British Columbia
corporation ("CEM"), from the stockholders of MII who were, at the time, also
stockholders of the Company. MII stockholders received 6,270,000 shares of the
Company's Common Stock in the CEM acquisition. The Company acquired CEM for its
encryption technology and software codes in connection with the development of
the Company's Navaho Software Products.

                   ISP-Related Acquisitions

         Effective June 30, 1999, the Company purchased all the issued and
outstanding stock of Hermes, for total cash consideration of approximately
$528,000. Also effective June 30, 1999, the Company purchased all the issued and
outstanding stock of Intouch, for approximately $293,000. The consideration for
this purchase consisted of cash in the amount of approximately $265,000 and the
issuance of 9,855 shares of the Company's Common Stock valued at approximately
$28,000.



                                       16
<PAGE>

         On October 4, 1999, the Company purchased all the issued and
outstanding stock of NetRover and NetRover Office for approximately $2,000,000.
The purchase price consisted of a cash payment of approximately $1,335,000, and
the issuance of 219,000 shares of the Company's Common Stock valued at
approximately $665,000.

         On October 27, 1999, the Company purchased certain assets and assumed
certain liabilities of CNW 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 CNW liabilities in the aggregate amount of $70,000. CNW
operates as a DBA of CyPost.

         On November 9, 1999, the Company purchased the assets of Internet Arena
for a purchase price of $600,000. The purchase price consisted of cash payments
of $300,000 and the issuance of 100,698 shares of the Company's Common Stock
valued at $300,000. Internet Arena operates as a DBA of CyPost.

                   Playa Corporation

         On February 23, 2000, the Company acquired all the shares of Playa
Corporation ("Playa"), a Japan-based provider of electronic instant messaging
services, for $3,000,000. The consideration for the acquisition of Playa
consisted of $300,000 in cash and 785,455 shares of the Company's Common Stock
having a value of $2,700,000. See "CyPost KK" below.

         During the second half of 2000, as part of Management's ongoing review
of the Company's operations, it re-evaluated the role that Playa fills for the
Company as a whole. Management took into consideration 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 Japan company ("CyPost KK"), a former subsidiary of the Company, and the
Company's own liquidity needs. See "CyPost KK" below.

         During the third quarter of 2000, Management of the Company decided not
to fund Playa any longer and to require Playa to be able to provide for its
funding needs from its own operations or locally in Japan. Playa had been
generating operating losses since its acquisition by the Company. Also during
the third quarter of 2000, Playa and CyPost KK (which was no longer a subsidiary
of the Company) entered into negotiations regarding an outsourcing agreement
pursuant to which Playa would provide programming services to CyPost KK. Playa
was largely dependent upon this agreement in order to satisfy the Company's
requirement that Playa provide for its funding needs from its own operations.
The agreement also was expected to have a significant impact on the Company's
ability to pay certain trade payable on a current basis.

         During the fourth quarter of 2000, Management of the Company decided
that Playa would not enter into the outsourcing agreement between Playa and
CyPost KK because the terms were not favorable to Playa. Additionally, a
significant number of Playa's employees left Playa and one of Playa's two
offices was closed. As a result, the Company abandoned



                                       17
<PAGE>

Playa's business and has written off Playa's assets in the amount of $2,201,253,
consisting of approximately $3,067,065 in actual assets, including goodwill, and
approximately $865,812 of liabilities owed by Playa to various parties for which
the Company does not believe it is liable. See Part II, Item 6, "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Note 3 to Notes to Consolidated Financial Statements - Acquisition of Playa
Corporation".

                   CyPost KK

         Following the acquisition of Playa, the Company decided to establish
CyPost KK as a new company to serve as the management company for Playa and to
pursue other possible acquisitions in Asia. In connection with the Company
causing CyPost KK to be formed, 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 with the dollar equivalent of 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. 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 ("AMI"), 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 certain members of CyPost KK management 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 AMI
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 AMI, 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,



                                       18
<PAGE>

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.

         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. At September 30, 2000, the last date for
which financial statements for Playa were available, there was a balance of
$168,062 owed by Playa to CyPost KK. This loan balance has been written off in
connection with the abandonment of Playa's business. See Part II, Item 6,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Note 3 to Notes to Consolidated Financial Statements -
Acquisition of Playa Corporation".

         Competition

         The market for providing Internet access services is extremely
competitive and highly fragmented. As there are no significant barriers to
entry, the Company expects that competition will continue to intensify. Many of
the Company's ISP competitors in connectivity, wholesale services and
value-added services include large companies that have substantially greater
market presence, financial, technical, marketing and other resources than the
Company.

         The Company competes directly or indirectly with the following types of
companies:

         o        established online services, such as Bell Sympatico, Sprint
                  Canada and Look Communication in Canada

         o        America Online, the Microsoft Network, Earthlink and Prodigy
                  in the US

         o        local, regional and national ISPs

         o        national telecommunications companies, such as AT&T and
                  Verizon

         o        regional Bell operating companies

         o        online cable services in Canada and the U.S.

         The Company believes that the primary competitive factors determining
success as an ISP are:

         o        a reputation for reliability and high-quality service



                                       19
<PAGE>

         o        effective customer support

         o        access speed

         o        pricing

         o        scope of geographic coverage

         The Company believes that it competes favorably based on these factors,
particularly due to:

         o        its emphasis on providing fast and reliable, high quality
                  services and superior customer service and support

         o        its policy of pricing services at prices lower than or
                  competitive to those of other national ISPs

         o        its policy to focus on second- and third-tier markets where
                  competition from larger ISPs is reduced

         o        its goal to establish a niche market in response to the
                  growing concerns for privacy and protection, rather than
                  establishing itself as a competitor of the large ISPs,
                  including telecommunication and cable companies

         Competition in the future is likely to increase and the Company
believes this will happen as diversified telecommunications and media companies
acquire ISPs, and as ISPs consolidate into larger, more competitive entities.

         Moreover, competitors may bundle security services and products with
Internet connectivity services, potentially placing the Company at a significant
competitive disadvantage. In addition, competitors may charge less than the
Company does for Internet services, forcing the Company to reduce and/or
preventing the Company from raising its fees. In such event, future revenue
growth and earnings could suffer. The Company will attempt to compete against
such companies by offering various value-added services, such as managed
security services from partners to its ISP customers. While other larger ISPs
offer some security solutions (many are offering client-end filtering as an
example), the Company is reviewing the entire spectrum of services available
in-house or through partnerships, to ensure that the Company has a thorough
selection of security options to utilize and offer its customers.

         Government Regulation

         Internet access and online services are not subject to direct
regulation in Canada and the U.S. However, changes in the laws and regulations
relating to the telecommunications and media industry could impact the Company's
business. For example, the U.S. Federal Communications Commission could begin to
regulate the Internet and online services industry.



                                       20
<PAGE>

The Company is unable to predict the impact such regulation in either Canada or
the U.S. would have on the Company's business, financial condition and results
of operations.

         In addition, from time to time, legislative and regulatory proposals
from various international bodies and foreign and domestic governments in the
areas of telecommunications regulation, particularly related to the
infrastructures on which the Internet rests, access charges, encryption
standards and related export controls, content regulation, consumer protection,
advertising, intellectual property, privacy, electronic commerce, and taxation,
tariff and other trade barriers, among others, have been adopted or are under
consideration. The Company is unable to predict which, if any, of the proposals
under consideration may be adopted and, with respect to proposals that have been
or will be adopted, whether they will have a beneficial or an adverse effect on
the Company's business, financial condition and results of operations.
Similarly, the Company is unable to predict the effect on the Company from the
potential future application of various domestic and foreign laws governing
content, export restrictions, privacy, consumer protection, export controls on
encryption technology, tariffs and other trade barriers, intellectual property
and taxes.

         Proprietary Rights

         The Company has registered the NetRover trade name in Canada, but has
not registered that name in the U.S. since, until recently, NetRover ISP
Services have been offered exclusively in Canada. The Company has applied for
registration in the U.S. of the CyPost trade name. The Company has not
registered the Hermes or Intouch trade names in either Canada or the U.S. While
the Company believes trade name identification is important to the Company's ISP
Services business, the Company does not believe that any one trade name is
essential to the success of the Company's operations.

         The Company has not registered the Navaho brand name and is unlikely to
do so. If the Company pursues Software Products development again in the future,
it is likely to do so under a different brand name.

         Employees

         At December 31, 2000, the Company had 45 employees, of whom
approximately 11 were considered to be either temporary or part-time employees.
None of the Company's employees was subject to collective bargaining agreements
at year-end.

         Risk Factors

         In addition to other information in our Annual Report on Form 10-KSB,
you should consider the following important factors in evaluating the Company
and its business. These factors may have a significant impact on our business,
financial condition or results of operations.



                                       21
<PAGE>

                   Early-Stage Company

         We were incorporated on September 5, 1997. From 1997 through the first
quarter of 1999, we focused on developing our Software Products business.
Thereafter, we focused on our ISP Services business as we began to acquire our
ISP operating businesses. It is the ISP Services business on which we focus
presently. Our limited operating history makes an evaluation of our business and
prospects very difficult, and our business strategy and mix is still evolving.
Our ability to generate significant revenue and operate profitably is unproven
and uncertain. You must consider our business and prospects in light of the
risks and difficulties we encounter as an early stage company in the new and
rapidly evolving market of the Internet, and the rapidly changing environment of
software development. These risks and difficulties include, but are not limited
to:

         o        a complex and unproven business system

         o        lack of sufficient customers, orders, net sales or cash flow

         o        difficulties in managing rapid growth in personnel and
                  operations

         o        high capital expenditures associated with our business systems
                  and technologies

         o        lack of widespread acceptance of the Internet as a means of
                  gathering and exchanging information and purchasing products

         We cannot be certain that our business strategy will be successful or
that we will successfully address these risks. Our failure to address any of the
risks described above could have a material adverse effect on our business,
financial condition and results of operations.

                   Overall Industry Risks

         Our business and prospects must be considered in light of the risks,
expenses and difficulties encountered by companies in the new and rapidly
evolving market for dial-up, ISDN, DSL connectivity services, server
co-location, Web hosting and e-mail services. To address these risks, we must
market our services and build our trade names effectively, provide scalable,
reliable and cost-effective services, continue to grow our infrastructure to
accommodate additional customers and increased use of our network bandwidth,
expand our channels of distribution, continue to respond to competitive
developments and retain and motivate qualified personnel.

                   Dependence Upon the Internet and Internet Infrastructure
Development

         Our success depends largely upon continued growth in the use of the
Internet and increased demand for our ISP Services. Critical issues concerning
the commercial use of the Internet, including security, reliability, cost, ease
of access, quality of service and necessary increases in bandwidth availability,
remain unresolved and are likely to affect the development of the market for our
services. The adoption of the Internet for information retrieval and exchange,
commerce and communications, particularly by those enterprises that have
historically relied upon alternative means of information gathering, commerce
and



                                       22
<PAGE>

communications, generally will require the acceptance of a new medium of
conducting business and exchanging information. Demand and market acceptance of
the Internet are subject to a high level of uncertainty and depend upon a number
of factors, including growth in consumer access to and acceptance of new
interactive technologies, the development of technologies that facilitate
interactive communication between organizations and targeted audiences and
increases in the speed of user access. If the Internet, as a commercial or
business medium, fails to develop further or develops more slowly than expected,
our business, financial condition and results of operations could be materially
adversely affected.

                   Intense Competition From More Traditional ISPs

         The Internet and e-commerce market is extremely competitive. Our
competition is comprised of local, regional, national and international
companies. Many of our existing and potential competitors are larger and have
substantially greater resources than we do. We expect this competition in the
Internet and e-commerce markets to intensify as our competitors offer more
competitive services. The number and nature of competitors and the amount of
competition we will experience will vary by market area. The principal
competitive factors that affect our business are breadth of product selection,
quality, service, price and customer loyalty. If we fail to effectively compete
in any one of these areas, we may lose existing and potential customers, which
would have a material adverse effect on our business, financial condition and
results of operations.

                   Complex Business System, and Operational Difficulties

         Our business systems and technologies are based on the complex
integration of numerous software and hardware subsystems that utilize advanced
algorithms to manage the entire process from the receipt and processing of
orders and services at our customer service and administration centers. We have,
from time to time, experienced operational "bugs" in our systems and
technologies which have resulted in order and service errors and interruptions.
Operational difficulties may arise from one or more factors including
electro-mechanical equipment failures, computer server or system failures,
network outages, software performance problems or power failures. We expect
operational difficulties to continue to occur from time to time, and it is
possible that our operations could be adversely affected. Computer viruses,
electronic break-ins or other similar disruptive problems could also adversely
affect our website. In addition, fires, floods, earthquakes, power losses,
telecommunications failures, break-ins and similar events could damage our
systems or cause them to fail completely. For instance, a fire on January 31,
2000, at our Etobicoke (suburban Toronto), Ontario facility caused service
interruption for 36 hours. The efficient operation of our business systems is
critical to consumer acceptance of our services. If we are unable to meet
customer demand or service expectations as a result of operational issues, we
may be unable to develop sustainable, customer relationships, which could have a
material adverse effect on our business, financial condition and results of
operations.



                                       23
<PAGE>

                   Dependence on Telecommunication Providers

         Our success also depends upon the capacity, scalability, reliability
and security of our network infrastructure, including the telecommunications
capacity leased from UUNet and other telecommunications network suppliers. We
depend on such companies to maintain the operational integrity of their own
telecommunications networks. Therefore, our operating results depend, in part,
upon the pricing and availability of telecommunications network capacity from a
limited number of providers in a consolidated market. A material increase in
pricing or decrease in telecommunications capacity available to us could have a
material adverse effect on our business, financial condition and results of
operations.

                   Significant Capital Investment

         We require substantial amounts of working capital to further build,
equip and market certain aspects of our ISP Services in the markets in which we
seek to operate. Our competitors have developed or may develop equipment and
systems that are more highly automated or less capital-intensive than ours. This
could enable them to commence operations in a particular geographic market
before we are able to do so, which could harm our competitive position. In
addition, because of the substantial capital costs associated with the
development of our ISP business, we may be unable to achieve profitability or
reduce our operating losses if we do not process sufficient order volumes or
significantly expand our customer base.

         As the total number of our ISP customers increases, and their usage of
bandwidth increases, we will need to make additional investments in our
infrastructure to maintain adequate service, the availability of which may be
limited or the cost of which may be significant. Additional network capacity may
not be available from third-party suppliers as we need it, and, as a result, our
ISP network may not be able to achieve or maintain a sufficiently high capacity
of service, especially if the usage of our subscribers increases. Our failure to
achieve or maintain high-capacity data transmission could significantly reduce
consumer demand for our services and have a material adverse effect on our
business, results of operations and financial condition. To accommodate a higher
degree of scalability from the present infrastructure, we may have to increase
spending on capital assets, such as upgrading and partially replacing existing
capital assets and increasing bandwidth.

         At present, we lack the capital to pursue our Software Products
business. Any continued development of Software Products would require
significant amounts of capital from third parties. We do not have any agreements
for that funding and we cannot say if that funding will be available in the
future.

         The rate at which our capital is utilized is affected by the pace of
our expansion. Since our inception, we have experienced negative cash flow from
operations. In the past, we have funded our operating losses and capital
expenditures borrowings of debt and convertible debt from private sources. We
continue to evaluate alternative means of financing to meet our needs on terms
that are attractive to us. We currently anticipate that our available funds will
be sufficient to meet our anticipated needs for working capital and capital
expenditures with respect to our existing ISP Services business for at least the
next 12 months. We must either



                                       24
<PAGE>

raise additional funds to support aspects of our business for 2001 or we will be
forced to curtail certain aspects of our business operations, particularly in
terms of the growth of and further enhancements to our ISP Services business, or
recommencing research and development of Software Products. We cannot be certain
that additional financing will be available to us on favorable terms when
required, or at all. If we are unable to obtain sufficient additional capital
when needed, we could be forced to alter our business strategy, delay or abandon
some of our expansion plans or sell assets. Any of these events could have a
material adverse effect on our business, financial condition and results of
operations. In addition, if we raise additional funds through the issuance of
equity, equity-linked or debt securities, those securities may have rights,
preferences or privileges senior to those of the rights of our Common Stock and
our stockholders may also experience dilution.



                                       25
<PAGE>

                   The Loss of the Services of One or More of Our Key Personnel,
         or our Failure to Attract, Integrate New Hires and Retain Other Highly
         Qualified Personnel in the Future Could Harm our Business

         The loss of the services of one or more of our key personnel could harm
our business. We depend on the continued services and performance of our senior
management and other key personnel, particularly Robert Adams, the President,
Chief Operating Officer, Secretary, Treasurer and a director of our Company. Our
future success also depends upon the continued service of our executive officers
and other key personnel. The competition for talented employees is intense and
our ability to attract and retain key employees is a function of a number of
factors, some of which are beyond our control, such as the value of other
opportunities perceived to be available elsewhere. Other than Mr. Adams, none of
our executive officers or key employees is bound by an employment agreement and
our relationships with these other officers and key employees are at will.

Item 2.  Description of Property

         The Company entered into a lease with Mansa Holdings Ltd. for office
space located at 900-1281 West Georgia Street, Vancouver, British Columbia,
comprising approximately 6,500 square feet of space. This space serves as the
Company's principal executive offices. The term of the lease is for 60 months
and terminates on June 1, 2005. The current monthly rent under this lease is
$5,472 (CDN). The property taxes and operating expenses are currently estimated
at $6,373 (CDN) per month. The lease contains escalation clauses throughout the
term. For the period between June 1, 2001 and May 31, 2003, the monthly rent
under this lease will be $6,018.83 (CDN) per month. For the period between June
1, 2003 and May 31, 2005, the monthly rent under this lease will be $6,566.00
(CDN) per month. In the Company's effort to streamline its operations, the
Company has entered into an exclusive agreement with a real estate broker to
sublease a portion of the space. To date, the Company has not received an offer
to sublease this space.

         On November 1, 1997, NetRover entered into a net lease with Bell Canada
for office space located at 40 Centre Street, Chatham, Ontario, comprising
approximately 1,494 square feet of space. The term of the lease was for 36
months and terminated on November 30, 2000. The monthly net rent throughout the
term of the lease was $684.91 (CDN). The property taxes and operation expenses
were $942.32 (CDN) per month. This lease was not renewed and the Company
obtained different space in Chatham, Ontario, as described in the next
paragraph.

         On November 2, 2000, NetRover entered into an assignment of a lease
between H.V.M. Holdings Inc., as landlord, and Garden Green Realty Inc., as
tenant, for NetRover's office premises located at 405 Riverview Drive, Chatham,
Ontario, comprising approximately 2,100 square feet of space. The term of the
lease is for 60 months and terminates on May 31, 2003. The current monthly rent
under this lease is $1,331 (CDN). The property taxes and operating expenses are
currently estimated at $1,880 (CDN) per month. The lease contains escalation
clauses throughout the term. For the period between May 31, 2001 and May 31,


                                       26
<PAGE>

2002, the monthly rent under this lease will be $1,420.00 (CDN) per month. For
the period between May 31, 2002 and May 31, 2003, the monthly rent under this
lease will be $1,508.75 (CDN).

         On July 1, 1995, NetRover entered into a net lease with The Imperial
Life Assurance Company of Canada for office space located at 93 Skyway Avenue,
Suite 105, Etobicoke, Ontario, comprising approximately 1,777 square feet of
space. The term of the lease is for 60 months and terminated on June 30, 2000.
The monthly rent under this lease was $1,332.75 (CDN) per month. The property
taxes and operating expenses were $1,457.15 (CDN) per month. On June 13, 2000,
NetRover amended this lease with The Imperial Life Assurance Company of Canada.
The term of the amended lease is for 36 months and terminates on July 31, 2003.
The monthly rent throughout the term of the lease is $1,435 (CDN). The property
taxes and operation expenses are currently estimated at $1,413 (CDN) per month.

         On January 28, 2000, the Company entered into a gross lease with 890
West Pender Ltd. for office space located at 890 West Pender Street, Vancouver,
British Columbia, comprising approximately 650 square feet of space. The term of
the lease is for 12 months and terminated on January 31, 2001. The monthly gross
rent throughout the term of the lease was $775 (CDN) per month. On January 4,
2001, the Company entered into a Lease Amendment Agreement with 890 West Pender
Ltd. for the same premises. The term of the amended lease is for 12 months and
terminates on January 31, 2002. The monthly gross rent throughout the term of
the lease is $1,086 (CDN) per month.

         The Company has assumed a lease from the former owners of Intouch, for
an office located at 3448 Cambie Street, Vancouver, British Columbia, comprising
approximately 825 square feet of space. The term of the lease is for 36 months
and terminates on December 31, 2001. The monthly rent due for the remainder of
the lease term is $1,581 (CDN) per month. The property taxes and operating
expenses are currently estimated at $906 (CDN) per month. At the present time,
this space is unoccupied and the Company does not intend to renew this lease.

         The Company has entered into an Assignment of a Lease with American
Property Management for two offices located at 1016 and 1008 SW Taylor Street,
Portland, Oregon, comprising approximately 1,902 and 457 square feet of space,
respectively. The term of this lease is for 36 months and terminates on January
31, 2002. The aggregate monthly rent is $2,801 per month. The additional
expenses are currently estimated at $284.03 consisting of an Internet access fee
of $231.53 per month and water usage in the amount of $52.50 per month.

         The Company entered into an Amendment and Novation Agreement dated
October 27, 1999, with Timothy B. White Properties and CNW for office space
located at 117 North First Street, Mount Vernon, Washington, comprising
approximately 2,471 square feet of space. The term of the lease is for 64 months
and terminates on August 31, 2003. The current net rent under the lease is
$3,000 per month. In addition, the Company is responsible for 87% of the
electrical bill which is currently estimated at $450 per month. The lease
contains escalation clauses throughout the term. For the period September 1,
2001 and August 31, 2002, the



                                       27
<PAGE>

monthly rent under this lease will be $3,200.00 per month. For the period
between September 1, 2002 and August 31, 2003, the monthly rent under this lease
will be $3,400.00 per month. The Company has one five-year option on this office
space.

         The Company entered into an Assignment of Lease and Acceptance dated
October 26, 1999, with Sixth and Virginia Properties and Connect Northwest LLC
for office located at 2001 Sixth Avenue, Suite 705, Seattle, Washington,
comprising approximately 210 square feet of space. The term of the lease ends
June 30, 2001. The monthly rent is $1,299 per month. The Company intends to
renew its lease for a minimum of one year. The Company has contacted the
landlord for this space, and the landlord has indicated that it is willing to
renew the lease for a period of three years based on current market values. The
Company anticipates receiving an offer to renew this lease.

Item 3.  Legal Proceedings

         Canada Post Litigation

         On June 11, 1999, Canada Post Corporation ("Canada Post")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'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.


                                       28
<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 $800,000 (CDN) 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
$34,013 (CDN) 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.



                                       29
<PAGE>

         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.

         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 $2,000,000 (CDN) 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.

         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.



                                       30
<PAGE>

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

         None.

                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

         The authorized capital stock of the Company consists of 35,000,000
shares, of which 30,000,000 shares are designated as Common Stock and 5,000,000
shares are designated as Preferred Stock, par value $.001 per share. On
September 24, 1999, the Company effected a 3-for-2 split of its shares of Common
Stock. All share amounts stated in this Report have been adjusted retroactively
to give effect to this stock split.

         The Company's Common Stock was first listed on the Over the Counter
Bulletin Board ("OTCBB") on September 24, 1998, under the symbol "POST". Prior
to that time, there was no market for the Company's Common Stock.

         On April 17, 2000, the Company's Common Stock was removed from trading
on the OTCBB, because of its failure to remain current in its Securities and
Exchange Commission ("SEC") reporting obligations as required by NASD Rule 6530.
Thereafter, the Company's Common Stock was quoted in the "Pink Sheets", pending
the Company's compliance with Exchange Act reporting requirements and the OTCBB
listing requirements. On March 27, 2001, the Company's Common Stock re-commenced
trading on the OTCBB, where it currently trades under the symbol "POST".

         The table below sets forth, for the periods indicated, the high and low
bid prices of the Common Stock, for the period January 1, 1999 through December
31, 2000, as reported by the "Pink Sheets" Library Research Department.


                                    2000                         1999
                            --------------------       -------------------------
                            High Bid    Low Bid        High Bid       Low Bid

 1st Quarter...........      $4.281      $3.00          $  2.438       $1.20

 2nd Quarter...........      $3.063      $0.75          $  4.50        $2.50

 3rd Quarter...........      $0.80       $0.30          $ 12.50        $4.438

 4th Quarter...........      $0.70       $0.18          $  9.406       $8.625


         These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission and may not represent actual transactions.



                                       31
<PAGE>

         There were approximately 101 record holders of the Company's Common
Stock as of April 2, 2001.

         The Company has never declared or paid any cash dividends and does not
intend to pay cash dividends in the foreseeable future on the shares of Common
Stock. Cash dividends, if any, that may be paid in the future to holders of
Common Stock will be payable when, as and if declared by the Board of Directors
of the Company, based upon the Board's assessment of the financial condition of
the Company, its earnings, need for funds, capital requirements, and other
factors, including any applicable laws. The Company is not a party to any
agreement restricting the payment of dividends.

         Recent Sales of Unregistered Stock

         On March 2, 2000, the Company issued 26,500 shares of its Common Stock
to Kaplan Gottbetter & Levenson, LLP ("KGL"), its prior counsel, as payment for
legal services. These shares were issued pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act for transactions by
an issuer not involving a public offering. The 26,500 shares were subsequently
registered by the Company with the SEC on behalf of KGL, as selling stockholder.

         On March 13, 2000, the Company issued 80,558 shares of its Common Stock
to the owners of Internet Arena, as payment for the balance due in accordance to
the Company's acquisition of that entity. These shares were issued pursuant to
the exemption from registration contained in Section 4(2) of the Securities Act
for transactions by an issuer not involving a public offering.

         On June 8, 2000, the Company issued 771,426 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. Due to
the discovery of a clerical error in the share conversion price of the terms of
the transaction, an additional 14,029 shares of the Company's Common Stock were
issued to the selling stockholders of Playa on January 23, 2001. These shares
were issued pursuant to the exemption from registration contained in Section
4(2) of the Securities Act for transactions by an issuer not involving a public
offering or Regulation S promulgated thereunder for transactions by an issuer
outside the U.S.

         On August 1, 2000, the Company issued an aggregate 129,500 shares of
its Common Stock to seven employees in consideration for their providing certain
services to the Company from June 16, 2000 through July 15, 2000. These shares
were issued pursuant to the exemption from registration contained in Section
4(2) of the Securities Act for transactions by an issuer not involving a public
offering or Regulation S promulgated thereunder for transactions by an issuer
outside the U.S.

         On August 1, 2000, the Company also issued 75,000 shares of its Common
Stock to each of the Company's three directors in consideration for their
providing certain services to the Company from June 16, 2000 through July 15,
2000. These shares were issued pursuant to the exemption from registration
contained in Section 4(2) of the Securities Act for



                                       32
<PAGE>

transactions by an issuer not involving a public offering or Regulation S
promulgated thereunder for transactions by an issuer outside the U.S.

         On August 17, 2000, the Company issued an aggregate 43,500 shares of
its Common Stock to six people for their providing consulting work to the
Company from April 1, 2000 through June 30, 2000. These shares were issued
pursuant to the exemption from registration contained in Section 4(2) of the
Securities Act for transactions by an issuer not involving a public offering or
Regulation S promulgated thereunder for transactions by an issuer outside the
U.S.

         On January 23, 2001, the Company issued an aggregate 25,000 of its
Common Stock to three employees in consideration for their providing certain
services to the Company from September 1, 2000 through September 30, 2000. These
shares were issued pursuant to the exemption from registration contained in
Section 4(2) of the Securities Act for transactions by an issuer not involving a
public offering or Regulation S promulgated thereunder for transactions by an
issuer outside the U.S.

Item 6.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations

         The following discussion and analysis is provided to increase the
understanding of, and should be read in conjunction with, the Consolidated
Financial Statements of the Company and Notes thereto included elsewhere in this
Report. Historical results and percentage relationships among any amounts in
these financial statements are not necessarily indicative of trends in operating
results for any future period. The statements which are not historical facts
contained in this Report, including this Management's Discussion and Analysis of
Financial Condition and Results of Operations, and Notes to the Consolidated
Financial Statements, constitute "forward-looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements are
based on currently available operating, financial and competitive information,
and are subject to various risks and uncertainties. Future events and the
Company's actual results may differ materially from the results reflected in
these forward-looking statements. Factors that might cause such a difference
include, but are not limited to, dependence on existing and future key strategic
and strategic end-user customers, limited ability to establish new strategic
relationships, ability to sustain and manage growth, variability of operating
results, the Company's expansion and development of new service lines, marketing
and other business development initiatives, the commencement of new engagements,
competition in the industry, general economic conditions, dependence on key
personnel, the ability to attract, hire and retain personnel who possess the
technical skills and experience necessary to meet the service requirements of
its clients, the potential liability with respect to actions taken by its
existing and past employees, risks associated with international sales, and
other risks described herein and in the Company's other SEC filings.



                                       33
<PAGE>

         Overview

         The Company is engaged in the business of providing ISP Services for
business and personal use. Previously, the Company was also involved in
developing certain Software Products, which activities the Company no longer
pursues.

         The Company was a development stage company until the first quarter of
1999, when it began to offer the first of its Navaho brand Software Products and
broaden its strategic focus through the acquisition of six ISPs. Currently,
providing ISP Services is the focus of the Company's business. The Company's
business operations are presently conducted in Canada and the United States.

         The Company derives virtually all of its revenues from its ISP
Services. At present, most of the revenue from ISP Services can be attributed to
connectivity, although the Company's network of ISP Services is moving towards
focusing on Web hosting and server co-location, anticipating a strong hold over
connectivity by the larger ISPs in a few years' time.

         During 2000, the Company began streamlining and consolidating its ISP
Services operations to enhance efficiency and reduce operating expenses. The
Company has embarked on a program to centralize ISP Services to the greatest
extent possible, as follows:

o        Customer Support. During the second half of 2000, the Company began
         consolidating all aspects of customer support (including end user
         technical issues) into the Chatham, Ontario facility. In early 2001,
         customer support for Oregon ISP Services customers were consolidated
         into the Chatham facility and by mid-2001 it is expected that customer
         support for all of the Company's ISP Services customers will be handled
         by the Chatham facility.

o        Billing and Collections. During the second half of 2000, the Chatham
         facility took over billing and collections for British Columbia
         customers, in addition to continuing billing and collections for all
         other Canadian customers. It is anticipated that by mid-2001, billing
         and collections for the rest of the Company's ISP Services customers
         will be consolidated into the Chatham facility.

o        Network Operations. During 2000, the Company reduced four maintenance
         and repair teams to two regionally-based teams. A team based in Toronto
         provides primary monitoring and repair of all servers and routers
         covering all Canadian ISP Services customers and provides overflow
         assistance to the Pacific Northwest, while a Seattle team provides
         primary monitoring and repair of all servers and routers covering all
         of the Pacific Northwest ISP Services customers and provides overflow
         assistance to Canada.

         The Company is also consolidating Web hosting and dedicated services
into Toronto, a process which began in late-2000 and is expected to be completed
by late-2001. Other ISP



                                       34
<PAGE>

Services such as e-mail and user authentication (i.e., customer security) will
continue to be handled from regional data centers. Beginning in early 2001, all
new Web hosting customers, wherever located, will be hosted from Toronto. The
Company is also considering implementing other consolidated services to achieve
greater efficiency and cost savings.

         As part of Management's ongoing review and consolidation of the
Company's operations, nine of 14 employees in the Vancouver office were
terminated or resigned during 2000. The Company did not incur significant costs
and does not expect to incur significant costs in the future in connection with
these terminations.

         During the second half of 2000, as part of Management's ongoing review
of the Company's operations, it re-evaluated the role that Playa fills for the
Company as a whole. Management took into consideration 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.

         During the third quarter of 2000, Management of the Company decided not
to fund Playa any longer and to require Playa to be able to provide for its
funding needs from its own operations or locally in Japan. Playa had been
generating operating losses since its acquisition by the Company. Also during
the third quarter of 2000, Playa and CyPost KK (which was no longer a subsidiary
of the Company) entered into negotiations regarding an outsourcing agreement
pursuant to which Playa would provide programming services to CyPost KK. Playa
was largely dependent upon this agreement in order to satisfy the Company's
requirement that Playa provide for its funding needs from its own operations.
The agreement also was expected to have a significant impact on the Company's
ability to pay certain trade payable on a current basis.

         During the fourth quarter of 2000, Management of the Company decided
that Playa would not enter into the outsourcing agreement between Playa and
CyPost KK because the terms were not favorable to Playa. Additionally, a
significant number of Playa's employees left Playa and one of Playa's two
offices was closed. As a result, the Company abandoned Playa's business and has
written off Playa's assets in the amount of $2,201,253, consisting of
approximately $3,067,065 in actual assets, including goodwill, and approximately
$865,812 of liabilities owed by Playa to various parties for which the Company
does not believe it is liable. See Part I, Item 1, "Description of Business -
Recent Acquisitions" and "Note 3 to Notes to Consolidated Financial Statements -
Acquisition of Playa Corporation".

         At the end of 2000, Management assessed the recoverability of the
Company's Software Products assets and determined that these assets were
impaired. Therefore, the Company has written off the net book value of these
assets in the amount of $128,726. Any future effort to recommence development of
the Company's Software Products will require substantial additional third-party
financing. There are no plans at present to recommence development of the
Company's Software Products and there are no agreements to provide the necessary
funding for such effort. There can be no assurance that any such agreements will
be



                                       35
<PAGE>

         reached or, if they are reached, whether they will be on terms
acceptable to the Company or will result in successful development of the
Software Products. See Part I, Item 1, "Description of Business - Software
Products Business" and "Description of Business - Risk Factors - Significant
Capital Investment", and "Note 2 to Notes to Consolidated Financial Statements -
Software Development Costs".

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

         Results of Operations for the Year Ended December 31, 2000 Compared to
the Year Ended December 31, 1999

         When comparing the Company's results of operations for the fiscal year
ended December 31, 2000, with the results of operations for the fiscal year
ended December 31, 1999, the following factors should be kept in mind:

         o        Meaningful comparison of results between fiscal 2000 and
                  fiscal 1999 are difficult to make due to the inherent
                  dissimilarity of the operations of the Company in fiscal 2000
                  compared to fiscal 1999;

         o        Results of operations for the fiscal year ended December 31,
                  1999 do not reflect a full year of operations since the
                  Company's first acquisition of an ISP business occurred in
                  June 1999 and its most significant ISP acquisition, NetRover
                  and NetRover Office, occurred in October 1999, meaning that
                  ISP-related revenue was not generated during all of fiscal
                  1999, whereas there was a full year of ISP-related business
                  operations during 2000;

         o        Results of operations for the fiscal year ended December 31,
                  2000 appear to show significant growth in both revenue and
                  expenses over the fiscal year December 31, 1999; however, this
                  is a result of a full year of operations in 2000 from the six
                  acquired ISP businesses. No conclusion can be drawn regarding
                  the future rate of growth of either revenues or expenses based
                  on the rate of growth of revenue and expenses in fiscal 2000
                  compared to fiscal 1999; and

         o        There is no guarantee that the Company will acquire any
                  additional ISP businesses or will increase its ISP Services
                  business as a result of internal growth. The Company does not
                  have adequate resources at present to significantly grow its
                  ISP Services business. See "Liquidity and Capital Resources"
                  below.

         Due to these factors, and others, the results of operations for the
fiscal year ended December 31, 2000 may not be an accurate reflection of future
performance or future rates of growth of either revenue or expenses, or both.



                                       36
<PAGE>

         Substantially all of the Company's revenue was earned from ISP Services
during the fiscal year ended December 31, 2000. The Company generated net
revenue of $4,595,823 during fiscal 2000, compared to $1,020,541 during fiscal
1999. This increase is primarily attributable to the fact that the Company's
first acquisition of an ISP business occurred in June 1999 and its most
significant ISP acquisition, NetRover and NetRover Office, occurred in October
1999, meaning that ISP-related revenue was not generated during all of fiscal
1999, whereas there was a full year of ISP-related business operations during
2000.

         Direct costs, which consist primarily of telecommunications charges
associated with providing Internet connection services to customers, were
$2,138,456 during fiscal 2000, compared to $563,118 during fiscal 1999. This
increase is primarily attributable to the fact that the Company's first
acquisition of an ISP business occurred in mid-1999 and its most significant ISP
acquisition, NetRover and NetRover Office, occurred in October 1999, meaning
that ISP-related costs were not incurred during all of fiscal 1999, whereas
there was a full year of ISP-related business operations during 2000.

         Selling, general and administrative expenses were $3,546,654 during
fiscal 2000, compared to $1,999,151 during fiscal 1999. The increase in such
expenses during fiscal 2000 is primarily a result of the Company's having a full
year of ISP-related business operations during 2000.

         Amortization and depreciation was $2,912,555 during fiscal 2000,
compared to $588,538 during fiscal 1999. The increase in such expenses during
fiscal 2000 is primarily due to the fact that amortization of goodwill was for
half a year during 1999 compared to a full year during 2000.

         The Company had interest expense in the amount of $2,113,570 during
fiscal 2000, compared to $2,221,322 during fiscal 1999. The amount expensed in
fiscal 2000 consists of (i) a beneficial conversion feature in the amount of
$1,962,500 attributable to renegotiation of the conversion feature of loans made
to the Company by Blue Heron Venture Fund Ltd. ("Blue Heron"), which loans are
unsecured, bear interest at 8% per annum and are payable on demand and (ii)
interest expense in the amount of $151,070 attributable to interest for Blue
Heron and Pacific Gate Capital Corporation ("Pacific Gate"), another of the
Company's lenders.  See "Liquidity and Capital Resources" below.

         The Company had a net loss of $8,288,879, or $.39 per share, for the
fiscal year ended December 31, 2000, compared to a net loss of $4,351,588, or
$.28 per share, for the fiscal year ended December 31, 1999. This increase in
loss is primarily a result of increased loss from operations in fiscal 2000
compared to fiscal 1999, augmented by the write off of certain assets, and
partially offset by net proceeds from fire insurance and gain on sale of CyPost
KK. During the quarter ended December 31, 2000, the Company abandoned Playa's
business, resulting in a loss of $2,201,253, and wrote off its impaired Software
Products assets in the amount of $128,726. During fiscal 2000, the Company
recognized gain on the sale of CyPost KK in the amount of $36,202 and received
net proceeds from fire insurance in the aggregate amount of $228,966, in
connection with a fire suffered at the Etobicoke (suburban Toronto), Ontario
facility in January 2000.



                                       37
<PAGE>

         Liquidity and Capital Resources

         The accompanying financial statements have been prepared on a going
concern basis, which assumes 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 business. The Company incurred a net loss
for the year ended December 31, 2000 of $8,288,879, compared to a net loss for
the year ended December 31, 1999 of $4,351,588. For the year ended December 31,
2000, the Company had a working capital deficit of $3,044,289, which is
primarily due to the Company's use of current assets to acquire its ISP and
Software Products businesses, and professional fees. These factors indicate that
the Company's continuation as a going concern is dependent upon its ability to
obtain adequate financing.

         The Company has obtained most of its financing through Blue Heron. The
loans were made under agreements pursuant to which the Company could borrow up
to $16,000,000 in unsecured loans from Blue Heron. The loans are evidenced by
the Company's Convertible Demand Notes (the "Blue Heron Demand Notes"). The Blue
Heron Demand Notes bear interest at 8% per annum, are payable on demand and are
convertible into shares of the Company's Common Stock at the lender's option, in
which case Blue Heron would waive its right to be paid interest under the Blue
Heron Demand Notes. During 1999, $4,000,000 of outstanding loans were converted
into 4,500,000 shares of the Company's Common Stock. On August 16, 1999,
$1,000,000 aggregate principal amount of Blue Heron Demand Notes were converted
into 1,500,000 shares of Common Stock, at a conversion price of $0.67 per share.
On November 24, 1999, an aggregate additional principal amount of $3,000,000 of
Blue Heron Demand Notes were converted into an additional 3,000,000 shares of
Common Stock, at a conversion price of $1.00 per share.

         On April 27, 2000, the Company renegotiated the conversion share price
of its remaining $2,000,000 and $10,000,000 loan facilities with Blue Heron. The
conversion feature with respect to the loan facility in the amount of $2,000,000
was reduced from $1.33 per share to $.75 per share, and the conversion feature
with respect to the loan facility in the amount of $10,000,000 was reduced from
$2.67 per share to $.75 per share.

         During the fiscal year ended December 31, 2000, the Company borrowed an
additional $1,210,000 from Blue Heron, resulting in an aggregate outstanding
principal amount of the loans of $2,085,000 as of December 31, 2000. If the Blue
Heron Demand Notes in such aggregate principal amount were converted, Blue Heron
would be entitled to an additional 2,780,000 shares of the Company's Common
Stock.

         Blue Heron is free to withdraw this credit facility at any time, and
since these loans are payable on demand, the Company's ability to continue
operations is dependent upon the willingness of Blue Heron to forbear from
demanding payment. The Company believes that Blue Heron will continue to forbear
payment of the loans for the immediately foreseeable future, but it is under no
obligation to do so. Should Blue Heron demand payment, the Company would be
required to obtain financing from other sources to satisfy its obligations or
would be in default under the loans. The Company does not believe that bank
borrowings are



                                       38
<PAGE>

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.

         On April 11, 2001, the Company received a letter from Blue Heron,
stating its willingness to renegotiate the terms of the Blue Heron loans from
demand loans to term loans. The actual terms of any such renegotiation are
subject to agreement between the Company and Blue Heron, and no assurance can be
given that the parties will reach agreement on the new terms of the loans. Kelly
Shane Montalban, a principal stockholder of the Company, may be deemed to have
an indirect pecuniary interest in Blue Heron as a result of his status as fund
manager for Blue Heron. Blue Heron is also a principal stockholder 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. See Part III, Item 11, "Security Ownership of Certain
Beneficial Owners and Management" and Part III, Item 12, "Certain Relationships
and Related Transactions".

         During the fiscal year ended December 31, 2000, the Company borrowed an
aggregate $125,000 from 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. Since these loans are payable on demand, the Company's ability to
continue operations is dependent upon the willingness of Pacific Gate to forbear
from demanding payment. The Company believes that Pacific Gate will continue to
forbear payment of the loans for the immediately foreseeable future, but it is
under no obligation to do so. Should Pacific Gate demand payment, the Company
would be required to obtain financing from other sources to satisfy its
obligations or would be in default under the loans. 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.

         On April 11, 2001, the Company received a letter from Pacific Gate,
stating its willingness to renegotiate the terms of the Pacific Gate loans from
demand loans to terms loans. The actual terms of any such renegotiation are
subject to agreement between the Company and Pacific Gate, and no assurance can
be given that the parties will reach agreement on the new terms of the loans.
Pacific Gate is an affiliate of Kelly Shane Montalban, a principal stockholder
of the Company, who is also the sole stockholder, sole director and sole officer
of Pacific Gate; and may be deemed to be an affiliate of Blue Heron through
Kelly Shane Montalban, who is fund manager for Blue Heron. See Part III, Item
11, "Security Ownership of Certain Beneficial Owners and Management" and Part
III, Item 12, "Certain Relationships and Related Transactions".

         In connection with the acquisition of Playa, the Company assumed
certain loans payable by Playa. As of September 30, 2000, the last date for
which financial statements for Playa were available, the aggregate outstanding
principal amount of the loans was $608,392. This



                                       39
<PAGE>

loan balance has been written off in connection with the abandonment of Playa's
business. See Part I, Item I, "Description of Business - Recent Acquisitions"
and "Note 3 to Notes to Consolidated Financial Statements - Acquisition of Playa
Corporation".

         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. At September 30, 2000, the last date for
which financial statements for Playa were available, there was a balance of
$168,062 owed by Playa to CyPost KK. This loan balance has been written off in
connection with the abandonment of Playa's business. See "Part I, Item 1,
"Description of Business - Recent Acquisitions - Playa Corporation" and "Note 3
to Notes to Consolidated Financial Statements - Acquisition of Playa
Corporation".

         The Company's cash position on December 31, 2000 decreased to $250,631,
compared to $415,779 on December 31, 1999, primarily attributable to the
acquisition of Playa and CyPost KK.

         The Company's net cash used in operating activities totaled $627,214
during the fiscal year ended December 31, 2000, compared to $970,964 during the
fiscal year ended December 31, 1999.

         The Company's net cash used in investing activities totaled $851,523
during the fiscal year ended December 31, 2000, compared to $4,091,469 during
the fiscal year ended December 31, 1999.

         Capitalized software development costs during the fiscal year ended
December 31, 2000 totaled $87,431. The Company has written off its Software
Products assets. See Part I, Item 1, "Description of Business - Software
Products Business" and "Note 2 to Notes to Consolidated Financial Statements -
Software Development Costs".

         The Company's financing activities during the fiscal year ended
December 31, 2000 consisted of $1,413,589 of gross loan proceeds provided by
Blue Heron, CyPost KK management and Pacific Gate, compared to $5,431,000 during
the year ended December 31, 1999, consisting of $4,875,000 of loans provided by
Blue Heron and $556,000 provided through the exercise of warrants by certain
individuals to purchase an aggregate 2,085,000 shares of the Company's Common
Stock .

Item 7.  Financial Statements

         The Consolidated Financial Statements of the Company are submitted as a
separate section of this Annual Report on Form 10-KSB commencing on Page F-1
immediately following Part IV of this Annual Report on Form 10-KSB.



                                       40
<PAGE>

Item 8.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure

         On October 24, 2000, the Board of the Company decided not to re-engage
the services of Arthur Andersen LLP as the Company's auditors, and to engage
Hollander, Lumer & Co. LLP ("HLC") as the Company's independent auditors,
effectively immediately.

         The report of Arthur Andersen LLP on the consolidated financial
statements of the Company and subsidiaries for the year ended December 31, 1999
did not contain an adverse opinion or disclaimer of opinion, nor was the report
qualified or modified as to audit scope or accounting principles. However, the
accountant's report on the Company's consolidated financial statements for the
year ended December 31, 1999 was modified as to an uncertainty with an
explanatory paragraph with respect to the Company's ability to continue as a
going concern.

         There were no disagreements with Arthur Andersen LLP as of the date of
their report and through to period ended October 24, 2000, whether or not
resolved, on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which, if not resolved to
Arthur Andersen LLP's satisfaction, would have caused such firm reference to the
subject matter of the disagreement(s) in connection with their report.

         The Company provided Arthur Andersen LLP a copy of a Current Report on
Form 8-K dated October 31, 2000 and Form 8-K/A dated November 21, 2000, and
requested Arthur Andersen LLP to furnish a letter addressed to the SEC stating
whether it agrees with the statements made by the Company therein and, if not,
stating the respects in which it does not agree. Arthur Andersen LLP furnished
said letter without qualification.

         As a result of merger, the accounting firm of Good Swartz Brown & Berns
LLP succeeded to the business and clientele of HLC effective March 28, 2001. The
Company has filed a Current Report on Form 8-K with respect to this matter.



                                       41
<PAGE>

                                    Part III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

         The following table sets forth certain information concerning the
directors and executive officers of the Company:

        Name            Age    All Positions with the Company

Robert Sendoh            50    Chairman of the Board and Former Chief Executive
                               Officer

Robert Adams             40    President, Chief Operating Officer, Secretary,
                               Treasurer and Director

Tami Allan               34    Vice President of North American Operations

J. Thomas W. Johnston    59    Director

Carl Whitehead           31    Former President, Secretary, Treasurer and
                               Director

Steven M. Berry          40    Former President, Chief Executive Officer, Chief
                               Operating Officer and Director

         Robert Sendoh has served as Chairman of the Board since the Company's
inception on September 5, 1997. On January 17, 2000, Mr. Sendoh succeeded Steven
M. Berry as Chief Executive Officer and resigned from that position on August
31, 2000. After receiving his B.A. in Economics from Meiji University in Tokyo
in 1973, Mr. Sendoh founded KKG Incorporated, a project planning and development
company, located in Tokyo, Japan. KKG Incorporated was responsible for the
planning and construction of major shopping centers, golf courses and
residential complexes around the world. Mr. Sendoh founded the Windvalley
Sailing School, which operated from February 1994 to December 1998. He is
currently an Instructor/Director, and Evaluator with the International Sail and
Power Association, a non-profit organization. Since June 1990, Mr. Sendoh has
acted as a director of Generator Distribution Company Ltd., formerly known as of
EFFE Sportswear USA Inc., an international manufacturer of snowboarding apparel.

         Robert Adams became a director of the Company on July 25, 2000. Mr.
Adams was also appointed President, Chief Operating Officer, Secretary and
Treasurer of the Company on that date. On March 24, 1995, Mr. Adams co-founded
NetRover and NetRover Office. From the inception of NetRover until its
acquisition by the Company in October 1999, Mr. Adams was responsible for the
day-to-day management of NetRover's customer dial-up network infrastructure. Mr.
Adams evaluated new products and services that could be offered to



                                       42
<PAGE>

NetRover's customer base. Mr. Adams was also responsible for all aspects of
financing NetRover. See Part III, Item 12, "Certain Relationships and Related
Transactions".

         Tami Allan was appointed Vice President of North American Operations
for the Company on July 25, 2000. She is responsible for streamlining the
operational procedures of the Company. Prior to her involvement with the
Company, Tami Allan, along with Robert Adams, co-founded NetRover and NetRover
Office on March 24, 1995. From the inception of NetRover until its acquisition
by the Company in October 1999, Tami Allan was responsible for NetRover's and
NetRover Office's marketing, customer support and billing. Ms. Allan has over 15
years experience in the computer industry and has been involved in computer
sales, marketing, accounting and billing, and various aspects of computer
company operations. See Part III, Item 12, "Certain Relationships and Related
Transactions".

         J. Thomas W. Johnston joined the Company's Board of Directors on
January 17, 2000. Mr. Johnston is, and has been, a licensed pilot for Canadian
Airlines, now Air Canada, for more than 35 years, and has served as an airline
captain for the past 29 years.

         Carl Whitehead served as a director of the Company and its Secretary
and Treasurer from September 17, 1997 through July 25, 2000. In addition, Mr.
Whitehead served as President of the Company from January 1, 1998 through
January 4, 1999, and again from April 3, 2000 through July 25, 2000. Mr.
Whitehead resigned from all positions with the Company on July 25, 2000. Since
June 1997, Mr. Whitehead has also been Vice President Secretary, Treasurer and a
director of MII. Mr. Whitehead was also the founder and owner of Futuresite
Productions, a computer service company which supplies maintains, and services
personal and business computers in British Columbia, Canada.

         Steven M. Berry served as President, Chief Executive Officer and Chief
Operating Officer of the Company from January 4, 1999 through January 17, 2000.
Mr. Berry served as a director of the Company from March 1, 1999 to January 17,
2000. Mr. Berry resigned from all positions with the Company on January 17,
2000. See Part I, Item 3, "Legal Proceedings".

         The present term of each director expires at the next Annual Meeting of
Stockholders of the Company. Executive officers are elected at the Annual
Meeting of the Board of Directors held immediately following the Annual Meeting
of Stockholders and serve at the pleasure of the Board of Directors.

         Compliance with Section 16(a) of the Exchange Act

         Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who beneficially own more than 10% of a
registered class of the Company's equity securities, to file reports of
beneficial ownership and changes in beneficial ownership of the Company's
securities with the SEC. Directors, executive officers and beneficial owners of
more than 10% of the Company's Common Stock are required by SEC regulations to
furnish the Company with copies of all Section 16(a) forms that they file. Based
solely on review of the copies of such forms furnished to the Company, or
written representations that no reports on Form 5 were required, the Company
believes that for the



                                       43
<PAGE>

period from January 1, 2000 through December 31, 2000, all directors, executive
officers and greater than 10% beneficial owners complied with all Section 16(a)
filing requirements applicable to them, except that Robert Sendoh was late in
filing one Form 4; Robert Adams was late in filing Form 3; Carl Whitehead was
late in filing one Form 4; J. Thomas W. Johnston was late in filing Form 3 and
one Form 4; Tami Allan was late in filing Form 3; and Kelly Shane Montalban was
late in filing seven Forms 4. The Company does not believe that Blue Heron has
filed a Form 3 or any Forms 4.

Item 10. Executive Compensation

         Cash Compensation

         The following table sets forth compensation paid or awarded to the
Chief Executive Officer and all executive officers of the Company whose
compensation exceeded $100,000 for all services rendered to the Company during
the last two fiscal years:

                           SUMMARY COMPENSATION TABLE
--------------------------------------------------------------------------------


                                                                  Long Term
                                     Annual     Compensation     Compensation

                                                                Restricted Stock
Name and Principal Position           Year         Salary           Awards

Robert Sendoh(1),                     1999        $ 82,795              -
     Chairman of the Board and        2000        $ 44,115           75,000(2)
     Chief Executive Officer

Steven M. Berry(3),                   1999        $120,000          600,000(4)
     Chief Executive Officer,         2000        $  5,207              -
     Chief Operating Officer and
     President

Robert Adams(5),                      1999        $ 11,676              -
     President and Chief              2000        $ 46,704              -
     Operating Officer

  ---------

(1)  Mr. Sendoh was Chief Executive Officer of the Company from January 17, 2000
     through August 31, 2000.

(2)  On August 1, 2000, Mr. Sendoh received 75,000 shares of the Company's
     Common Stock, valued at $.5938 per share, for his service as a director of
     the Company from June 16, 2000 through July 15, 2000. See Part II, Item 5,
     "Market for Common Equity and Related Stockholder Matters".

(footnotes continued on next page)



                                       44
<PAGE>

(3)  Mr. Berry became Chief Executive Officer of the Company on January 4, 1999,
     and served in that capacity until his resignation on January 17, 2000.

(4)  These are the Contingent Shares which are partially the subject of
     litigation between the Company and Mr. Berry. See Part I, Item 3, "Legal
     Proceedings".

(5)  The Company has not had a Chief Executive Officer since August 31, 2000.
     Mr. Adams has served as President and Chief Operating Officer of the
     Company since July 25, 2000.


         Consulting and Employment Agreements

         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 $70,000
(CDN). 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.

Item 11. Security Ownership of Certain Beneficial Owners and Management

         The following table sets forth certain information with respect to all
persons, or groups of persons, known by the Company to own beneficially more
than five percent of the Common Stock of the Company, and as to the beneficial
ownership thereof of the directors and executive officers of the Company,
individually and as a group, all as at April 2, 2001:

Name and Address of                           Shares                 Percentage
 Beneficial Owner                        Beneficially Owned           Ownership


Blue Heron Venture Fund Ltd.(1)               4,410,400                 20.5%
Citco Fund Services (Bahamas) Ltd.
Bahamas Financial Center
3rd Floor, Shirley & Charlotte Streets
Nassau, Bahamas

-------------
(1)      In addition, Blue Heron has the right to convert the outstanding
         principal amount of the Blue Heron Demand Notes into shares of the
         Company's Common Stock. If the Blue Heron Demand Notes in the aggregate
         outstanding principal amount of $2,085,000 as of December 31, 2000 were
         converted, Blue Heron would be entitled to an additional 2,780,000
         shares of the Company's Common Stock, which amount is not included in
         the above table. Kelly Shane Montalban, a principal stockholder of the
         Company, is the fund manager of Blue Heron.


                                       45
<PAGE>

Kelly Shane Montalban(2)                      6,527,357                 30.3%
P.O. Box 700, Lions Bay
Vancouver, British Columbia  V0N 2E0
Canada

Robert Sendoh                                   355,000                  1.7%
900-1281 West Georgia Street
Vancouver, British Columbia  V6E 3J7
Canada

Robert Adams                                    146,730                  *
93 Skyway Avenue, Suite 106
Toronto, Ontario  M9W 6N6
Canada

Tami Allan                                       72,270                  *
405 Riverview Drive
Chatham, Ontario  N7M 5J5
Canada

J. Thomas W. Johnston                            81,000                  *
900-1281 West Georgia Street
Vancouver, British Columbia  V6E 3J7
Canada

All Directors  and Executive                    655,000                  3.0%
Officers as a Group (4
Persons)

------------
*    Less than 1%

(2)  Consists of 2,063,757 shares held directly by Mr. Montalban, 4,410,400
     shares held by Blue Heron, 24,000 shares held by Pacific Gate and 29,200
     shares held by Beverly Montalban, Mr. Montalban's wife. Mr. Montalban, the
     fund manager of Blue Heron, the Company's principal lender, may be deemed
     to be the beneficial owner of the shares held by Blue Heron. Mr. Montalban
     is the sole stockholder, sole director and sole officer of Pacific Gate,
     another of the Company's lenders.

Item 12. Certain Relationships and Related Transactions

         The Company has obtained most of its financing through Blue Heron, a
corporation in which Kelly Shane Montalban, a principal stockholder of the
Company, may be deemed to have an indirect pecuniary interest as a result of his
status as fund manager for Blue Heron. Blue Heron is also a principal
stockholder 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


                                       46
<PAGE>

sole stockholder, sole director and sole officer. See Part II, Item 6,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Part III, Item 11, "Security Ownership of Certain Beneficial
Owners and Management".

         The loans were made under agreements pursuant to which the Company
could borrow up to $16,000,000 in unsecured loans from Blue Heron. The loans are
evidenced by the Blue Heron Demand Notes. The Blue Heron Demand Notes bear
interest at 8% per annum, are payable on demand and are convertible into shares
of the Company's Common Stock at the lender's option, in which case Blue Heron
would waive its right to be paid interest under the Blue Heron Demand Notes.
During 1999, $4,000,000 of outstanding loans were converted into 4,500,000
shares of the Company's Common Stock. On August 16, 1999, $1,000,000 aggregate
principal amount of Blue Heron Demand Notes were converted into 1,500,000 shares
of Common Stock, at a conversion price of $0.67 per share. On November 24, 1999,
an aggregate additional principal amount of $3,000,000 of Blue Heron Demand
Notes were converted into an additional 3,000,000 shares of Common Stock, at a
conversion price of $1.00 per share.

         On April 27, 2000, the Company renegotiated the conversion share price
of its remaining $2,000,000 and $10,000,000 loan facilities with Blue Heron. The
conversion feature with respect to the loan facility in the amount of $2,000,000
was reduced from $1.33 per share to $.75 per share, and the conversion feature
with respect to the loan facility in the amount of $10,000,000 was reduced from
$2.67 per share to $.75 per share.

         During the fiscal year ended December 31, 2000, the Company borrowed an
additional $1,210,000 from Blue Heron, resulting in an aggregate outstanding
principal amount of the loans of $2,085,000 as of December 31, 2000. If the Blue
Heron Demand Notes in such amount were converted, Blue Heron would be entitled
to an additional 2,780,000 shares of the Company's Common Stock.

         Blue Heron is free to withdraw this credit facility at any time, and
since these loans are payable on demand, the Company's ability to continue
operations is dependent upon the willingness of Blue Heron to forbear from
demanding payment. The Company believes that Blue Heron will continue to forbear
payment of the loans for the immediately foreseeable future, but it is under no
obligation to do so. On April 11, 2001, the Company received a letter from Blue
Heron, stating its willingness to renegotiate the terms of the Blue Heron loans
from demand loans to term loans. The actual terms of any such renegotiation are
subject to agreement between the Company and Blue Heron, and no assurance can be
given that the parties will reach agreement on the new terms of the loans. See
Part II, Item 6, "Management's Discussion and Analysis of Financial Condition
and Results of Operations".

         During the fiscal year ended December 31, 2000, the Company borrowed an
aggregate $125,000 from 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. Since these loans are payable on demand, the Company's ability to
continue operations is dependent upon the willingness of Pacific Gate to forbear
from demanding payment. The Company believes



                                       47
<PAGE>

that Pacific Gate will continue to forbear payment of the loans for the
immediately foreseeable future, but it is under no obligation to do so. On April
11, 2001, the Company received a letter from Pacific Gate, stating its
willingness to renegotiate the terms of the Pacific Gate loans from demand loans
to terms loans. The actual terms of any such renegotiation are subject to
agreement between the Company and Pacific Gate, and no assurance can be given
that the parties will reach agreement on the new terms of the loans. See Part
II, Item 6, "Management's Discussion and Analysis of Financial Condition and
Results of Operations".

         On October 4, 1999, the Company purchased all the issued and
outstanding stock of NetRover and NetRover Office for approximately $2,000,000.
The purchase price consisted of a cash payment of approximately $1,335,000 and
the issuance of 219,000 shares of the Company's Common Stock valued at
approximately $665,000. Robert Adams, the President, Chief Operating Officer,
Secretary, Treasurer and a director of the Company, and Tami Allan, the Vice
President of North American Operations of the Company, received $1,177,007 (CDN)
and 146,730 shares of the Company's Common Stock, and $611,316,000 (CDN) and
72,270 shares of the Common Stock, respectively, in connection with the
acquisition.

Item 13. Exhibits and Reports on Form 8-K

     (a)  List of documents filed as part of this Report

1.   FINANCIAL STATEMENTS INCLUDED IN ITEM 7:

     Independent Auditors' Report.......................................  F-1
     Consolidated Balance Sheets as of December 31, 2000................  F-2
     Consolidated Statements of Operations for the years ended
      December 31, 2000 and 1999........................................  F-3
     Consolidated Statements of Stockholders' 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 Consolidated Financial Statements.........................  F-6

2.   EXHIBITS:

     The following exhibits listed are filed as part of this Report:

      Exhibit
         No.          Description

         2.1      Acquisition Agreement dated as of September 17, 1997 between
                  CyPost Corporation and ePost Innovations, Inc. regarding the
                  acquisition of ePost Innovations, Inc. (1)

         2.2      Share Purchase Agreement dated as of October 29,1998 between
                  CyPost Corporation and Mushroom Innovations, Inc., regarding
                  the acquisition of Communication Exchange Management Inc. (1)

                                       48
<PAGE>

         2.3      Share Purchase Agreement dated as of June 30, 1999 by and
                  between CyPost Corporation and Stephen S.W. Choi, Eve Long and
                  Jason Xu, regarding the acquisition of Hermes Net Solutions
                  Inc. (6)

         2.4      Share Purchase Agreement dated as of June 30, 1999 between
                  CyPost Corporation and Coyotenet Inc. regarding the
                  acquisition of InTouch Internet Inc. (6)

         2.5      Share Purchase Agreement dated as of July 23, 1999 by and
                  between CyPost Corporation, Robert Adams, Beata Adams and Tami
                  Allan, regarding the acquisition of NetRover Inc. and NetRover
                  Office Inc. (2)

         2.6      Acquisition Agreement dated October 26, 1999, by and between
                  CyPost Corporation, Connect Northwest Internet Services,
                  L.L.C., Alexander G. Free, James P. Fick, Madeline C.
                  O'Donnell, Ira Jay Graham, Robert M. Free, Paul M. Maughan,
                  James P. Eberhardt, Judith L. Fick, Charles A. Fick, Jr.,
                  Susan Free and Karen Maughan, regarding the acquisition of
                  Connect Northwest Internet Services, L.L.C. (7)

         2.7      Asset Purchase Agreement dated November 9, 1999 by and between
                  CyPost Corporation, Internet Arena, Inc., David Neff, Jerrold
                  Lively, John B. Anderson, Clarence and Neva Neff Living Trust,
                  Stephen Dentel, Mike Stupak, Heidi Stupak and Matt Campbell,
                  regarding the acquisition of Internet Arena, Inc. (7)

         2.8      Purchase Agreement dated as of January 26, 2000, between
                  CyPost Corporation, Playa Corporation and Hirofumi Watanabe
                  regarding the acquisition of Playa Corporation (7)

        *2.9      Share Purchase Agreement dated July 10, 2000 by and between
                  CyPost Corporation and Access Media International, Inc.
                  regarding the purchase of shares in CyPost KK.


                                       49
<PAGE>
      Exhibit
         No.          Description

         3.1      Certificate of Incorporation of CyPost Corporation (1)

         3.2      Certificate of Amendment to Certificate of Incorporation of
                  CyPost Corporation (1)

         3.3      Amended and Restated Certificate of Incorporation of CyPost
                  Corporation (6)

         3.4      Bylaws of CyPost Corporation (1)

         4.1      Modified Retainer Agreement dated March 2, 2000, between
                  CyPost Corporation and Kaplan Gottbetter & Levenson (5)


        *4.2      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Robert Sendoh dated June 30, 2000, together with
                  related Transfer of Shares Letter Agreement dated June 30,
                  2000

        *4.3      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Yoshisuke Ishiuchi dated June 30, 2000, together
                  with related Transfer of Shares Letter Agreement dated June
                  30, 2000

        *4.4      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Hirofumi Watanabe dated June 30, 2000, together
                  with related Transfer of Shares Letter Agreement dated June
                  30, 2000

        *4.5      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Ibuki Tsuchiya dated June 30, 2000, together with
                  related Transfer of Shares Letter Agreement dated June 30,
                  2000

        *4.6      Transfer of Shares Letter Agreement regarding CyPost KK
                  executed by Jiro Miyamoto dated June 30, 2000 related to
                  cancellation of indebtedness between CyPost KK and CyPost
                  Corporation

        *4.7      Promissory Notes executed by CyPost Corporation dated January
                  19, 2000; January 26, 2000; January 27, 2000; February 11,
                  2000; February 25, 2000; February 28, 2000; March 7, 2000;
                  March 20, 2000; April 13, 2000; May 1, 2000; and November 3,
                  2000, in favor of Blue Heron Venture Fund, Ltd.

        *4.8      Promissory Notes executed by CyPost Corporation dated May 12,
                  2000; June 23, 2000; July 10, 2000; August 25, 2000; and
                  September 11, 2000, in favor of Pacific Gate Capital
                  Corporation

                                       50
<PAGE>

       *10.1      Lease Renewal and Modification Agreement dated September 4,
                  1998 by and between Sze &Yee Investments Ltd. and Overdale
                  Investments Ltd., and 469506 B.C. Ltd., DBA Intouch Cordless
                  Communications, and Glenn Duncan Ninow and Susan Siu Jing
                  Ninow regarding 3448 Cambie Street, Vancouver, British
                  Columbia, Canada

       *10.2      Lease Amendment and Novation Agreement dated October 27, 1998
                  by and among Timothy B. White Properties, Connect Northwest,
                  LLC and CyPost Corporation, and related Assignment of Lease
                  and Acceptance

        10.3      Lease (Indenture) Agreement dated March 14, 2000 by and
                  between Mansa Holdings Ltd. and CyPost Corporation regarding
                  space at 1281 West Georgia Street, Vancouver, British
                  Columbia, Canada (6)

       *10.4      Lease Amendment and Renewal Agreement dated June 13, 2000 by
                  and between The Imperial Life Assurance Company of Canada and
                  NetRover, Inc. regarding 93 Skyway Avenue, Etobicoke, Ontario,
                  Canada

      **10.5      Lease Assignment Agreement dated November 2, 2000 by and among
                  H.V.M. Holdings Inc., Garden Green Realty Inc. and NetRover
                  Inc. regarding 405 Review Drive, Chatham, Ontario, Canada

      **10.6      Lease Amendment Agreement dated January 4, 2001 by and between
                  890 West Pender Ltd. and CyPost Corporation regarding space at
                  890 West Pender Street, Vancouver, British Columbia, Canada

       *10.7      Assignment of Building Internet Access Agreement dated
                  November 9, 1999 by and between American Property Management
                  Corporation, as agent for and on behalf of Weston Holding
                  Company, L.L.C., Internet Arena, Inc. and CyPost Corporation
                  regarding providing Internet access at 1020 S.W. Taylor
                  Street, Portland, Oregon

       *10.8      Lease for Internet Equipment dated April 19, 2000 by and
                  between Internet Finance+Equipment, a division of LINC Capital
                  Inc., and CyPost Corporation DBA Connect Northwest and
                  Internet Arena

       *10.9      Lease Agreement dated May 1, 2000 by and between Telcom
                  Leasing Canada and ePost Innovations Inc. regarding
                  installation of Norstar voicemail system, Northern
                  Applications Module 4 Port and Training

                                       51
<PAGE>
      Exhibit
         No.          Description

       *10.10     Master Lease Agreement dated May 3, 2000 by and between Heller
                  Financial Canada, Ltd., and NetRover, Inc., regarding Internet
                  network equipment, together with related Subordination
                  Agreement and related equipment schedules

       *10.11     UUNet Agreement (Provider Quotation) dated June 30, 1999
                  between NetRover Inc. and UUNet Canada Inc., and related
                  addendum

        10.12     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated February 9, 1999, regarding debt financing
                  for CyPost Corporation (4)

        10.13     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated March 17, 2000, regarding debt financing for
                  CyPost Corporation (4)

        10.14     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated July 12, 2000, regarding debt financing for
                  CyPost Corporation (4)

        10.15     Preferred Supplier Agreement dated March 15, 1999 by and
                  between CyPost Corporation and the Canadian Bar Association,
                  British Columbia Branch (6)

       *10.16     Employment Agreement dated October 5, 1999 between Robert
                  Adams and CyPost Corporation

      **10.17     Assignment of Lease dated November 9, 1999 between American
                  Property Management Corporation, as agent for Weston Holdings
                  Company, L.L.C., David J. Neff, individually, and CyPost
                  Corporation

       *21        List of Subsidiaries

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

*        Filed herewith
**       To be filed by amendment

(1)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, filed with the SEC
         on July 19, 1999.

(2)      Filed as an exhibit to the Company's Current Report on Form 8-K, filed
         with the SEC on October 12, 1999.


                                       52
<PAGE>

(3)      Filed as an exhibit to the Company's Current Report on Form 8-K, filed
         with the SEC on October 19, 1999.

(4)      Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB,
         filed with the SEC on December 9, 1999.

(5)      Filed as an exhibit to the Company's Registration Statement on Form
         S-8, filed with the SEC on March 8, 2000.

(6)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, Amendment 1, filed
         with the SEC on March 9, 2000.

(7)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, Amendment 3, filed
         with the SEC on April 17, 2000.

(8)      Filed as an exhibit to the Company's Current Report on Form 8-K,
         Amendment 2, filed with the SEC on July 24, 2000.

(9)      Filed as an exhibit to the Company's Current Report on Form 8-K,
         Amendment 3, filed with the SEC on August 28, 2000.


     (b)  Reports on Form 8-K

         On October 31, 2000, the Company filed a Current Report on Form 8-K
with the SEC, and on November 22, 2000, the Company filed Amendment No. 1
thereto, with the SEC, with respect to the retention of new independent
auditors.


                                       53

<PAGE>

                                   SIGNATURES

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



DATE:  April 16, 2001                 CYPOST CORPORATION




                                       By:/s/ Robert Adams
                                          -----------------------------------
                                          Robert Adams
                                          President, Chief Operating Officer,
                                          Secretary and Treasurer
                                          (Principal Financial Officer)

     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/  Robert Sendoh            Chairman of the Board             April 16, 2001
------------------            and Director
Robert Sendoh

/s/  Robert Adams             President, Chief Operating        April 16, 2001
-----------------             Officer, Secretary, Treasurer
Robert Adams                  and Director

/s/  J. Thomas W. Johnston    Director                          April 16, 2001
--------------------------
J. Thomas W. Johnston



                                       54

<PAGE>

                       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 Stockholders' 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  Consolidated Financial Statements                             F-6








<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


                                       F-1


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

<CAPTION>
                                                             2000            1999
                                                         ------------    ------------
ASSETS

CURRENT ASSETS
<S>                                                      <C>             <C>
        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 STOCKHOLDERS' 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>
                       CYPOST CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
                                 (U.S. Dollars)


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


REVENUE                                            $  4,595,823    $  1,020,541

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

                                                      2,457,367         457,423
                                                   ------------    ------------
EXPENSES
         SELLING, GENERAL AND ADMINISTRATIVE          3,546,654       1,999,151
         AMORTIZATION AND DEPRECIATION                2,912,555         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 IN CYPOST KK         36,202            --

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

         WRITE-OFF OF SOFTWARE DEVELOPMENT COSTS       (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
                                                   ============    ============



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




                                       F-3

<PAGE>

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


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

                               F-4


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

                                                                           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                               2,912,555        588,538
             Interest expense                                            1,962,500      2,212,500
             Net recovery from fire insurance                             (228,966)          --
             Gain on sale of investment in CyPost KK                       (36,202)          --
             Minority interest                                             108,656           --
             Loss on abandonment of Playa operations                     2,201,253           --
             Write-off of software development costs                       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                                     (627,214)      (970,964)
                                                                       -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES
       Acquisition of business                                            (592,454)    (3,612,066)
       Purchase of property and equipment                                 (391,638)      (270,100)
       Investment in software development                                  (87,431)      (209,303)
       Proceeds from sale of investment in CyPost KK                       220,000           --
                                                                       -----------    -----------
NET CASH USED IN INVESTING ACTIVITIES                                     (851,523)    (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 (DECREASE) IN CASH                                           (165,148)       368,567
CASH, BEGINNING OF YEAR                                                    415,779         47,212
                                                                       -----------    -----------
CASH, END OF YEAR                                                      $   250,631    $   415,779
                                                                       ===========    ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES
       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
reported amounts of its liabilities, the reported revenues and expenses, and the
balance sheet classifications used.

                                       F-6


<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,
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 three to five years. Maintenance and repairs are charged
against operations and betterments are capitalized.



                                       F-7

<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

     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.

     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.


                                       F-8

<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.


                                       F-9

<PAGE>

     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.

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.



                                      F-10

<PAGE>

     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
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 and operates as a DBA of
CyPost.

     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.


                                      F-11

<PAGE>

     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
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.



                                      F-12

<PAGE>

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
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 March 17, 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, the last date for which financial statements for Playa were available,
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 $232,299 and $60,012, respectively.





                                      F-13

<PAGE>

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.


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.


                                      F-14

<PAGE>

     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
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.

                                      F-15

<PAGE>

     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
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)
                                         -----------       -----------
                                         $        -        $       -
                                         ===========       ===========


                                      F-16
<PAGE>

9.   NET RECOVERY 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 recovery 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
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


                                      F-17

<PAGE>

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.


     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


                                      F-18
<PAGE>

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.

     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.

                                      F-19

<PAGE>

     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
                                           ========

     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.



                                      F-20

<PAGE>

                                  EXHIBIT INDEX

      Exhibit
         No.          Description

         2.1      Acquisition Agreement dated as of September 17, 1997 between
                  CyPost Corporation and ePost Innovations, Inc. regarding the
                  acquisition of ePost Innovations, Inc. (1)

         2.2      Share Purchase Agreement dated as of October 29,1998 between
                  CyPost Corporation and Mushroom Innovations, Inc., regarding
                  the acquisition of Communication Exchange Management Inc. (1)

         2.3      Share Purchase Agreement dated as of June 30, 1999 by and
                  between CyPost Corporation and Stephen S.W. Choi, Eve Long and
                  Jason Xu, regarding the acquisition of Hermes Net Solutions
                  Inc. (6)

         2.4      Share Purchase Agreement dated as of June 30, 1999 between
                  CyPost Corporation and Coyotenet Inc. regarding the
                  acquisition of InTouch Internet Inc. (6)

         2.5      Share Purchase Agreement dated as of July 23, 1999 by and
                  between CyPost Corporation, Robert Adams, Beata Adams and Tami
                  Allan, regarding the acquisition of NetRover Inc. and NetRover
                  Office Inc. (2)

         2.6      Acquisition Agreement dated October 26, 1999, by and between
                  CyPost Corporation, Connect Northwest Internet Services,
                  L.L.C., Alexander G. Free, James P. Fick, Madeline C.
                  O'Donnell, Ira Jay Graham, Robert M. Free, Paul M. Maughan,
                  James P. Eberhardt, Judith L. Fick, Charles A. Fick, Jr.,
                  Susan Free and Karen Maughan, regarding the acquisition of
                  Connect Northwest Internet Services, L.L.C. (7)

         2.7      Asset Purchase Agreement dated November 9, 1999 by and between
                  CyPost Corporation, Internet Arena, Inc., David Neff, Jerrold
                  Lively, John B. Anderson, Clarence and Neva Neff Living Trust,
                  Stephen Dentel, Mike Stupak, Heidi Stupak and Matt Campbell,
                  regarding the acquisition of Internet Arena, Inc. (7)

         2.8      Purchase Agreement dated as of January 26, 2000, between
                  CyPost Corporation, Playa Corporation and Hirofumi Watanabe
                  regarding the acquisition of Playa Corporation (7)

        *2.9      Share Purchase Agreement dated July 10, 2000 by and between
                  CyPost Corporation and Access Media International, Inc.
                  regarding the purchase of shares in CyPost KK.


<PAGE>
      Exhibit
         No.          Description

         3.1      Certificate of Incorporation of CyPost Corporation (1)

         3.2      Certificate of Amendment to Certificate of Incorporation of
                  CyPost Corporation (1)

         3.3      Amended and Restated Certificate of Incorporation of CyPost
                  Corporation (6)

         3.4      Bylaws of CyPost Corporation (1)

         4.1      Modified Retainer Agreement dated March 2, 2000, between
                  CyPost Corporation and Kaplan Gottbetter & Levenson (5)


        *4.2      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Robert Sendoh dated June 30, 2000, together with
                  related Transfer of Shares Letter Agreement dated June 30,
                  2000

        *4.3      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Yoshisuke Ishiuchi dated June 30, 2000, together
                  with related Transfer of Shares Letter Agreement dated June
                  30, 2000

        *4.4      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Hirofumi Watanabe dated June 30, 2000, together
                  with related Transfer of Shares Letter Agreement dated June
                  30, 2000

        *4.5      Cancellation of Loan Letter Agreement regarding CyPost KK
                  executed by Ibuki Tsuchiya dated June 30, 2000, together with
                  related Transfer of Shares Letter Agreement dated June 30,
                  2000

        *4.6      Transfer of Shares Letter Agreement regarding CyPost KK
                  executed by Jiro Miyamoto dated June 30, 2000 related to
                  cancellation of indebtedness between CyPost KK and CyPost
                  Corporation

        *4.7      Promissory Notes executed by CyPost Corporation dated January
                  19, 2000; January 26, 2000; January 27, 2000; February 11,
                  2000; February 25, 2000; February 28, 2000; March 7, 2000;
                  March 20, 2000; April 13, 2000; May 1, 2000; and November 3,
                  2000, in favor of Blue Heron Venture Fund, Ltd.

        *4.8      Promissory Notes executed by CyPost Corporation dated May 12,
                  2000; June 23, 2000; July 10, 2000; August 25, 2000; and
                  September 11, 2000, in favor of Pacific Gate Capital
                  Corporation


<PAGE>

       *10.1      Lease Renewal and Modification Agreement dated September 4,
                  1998 by and between Sze &Yee Investments Ltd. and Overdale
                  Investments Ltd., and 469506 B.C. Ltd., DBA Intouch Cordless
                  Communications, and Glenn Duncan Ninow and Susan Siu Jing
                  Ninow regarding 3448 Cambie Street, Vancouver, British
                  Columbia, Canada

       *10.2      Lease Amendment and Novation Agreement dated October 27, 1998
                  by and among Timothy B. White Properties, Connect Northwest,
                  LLC and CyPost Corporation, and related Assignment of Lease
                  and Acceptance

        10.3      Lease (Indenture) Agreement dated March 14, 2000 by and
                  between Mansa Holdings Ltd. and CyPost Corporation regarding
                  space at 1281 West Georgia Street, Vancouver, British
                  Columbia, Canada (6)

       *10.4      Lease Amendment and Renewal Agreement dated June 13, 2000 by
                  and between The Imperial Life Assurance Company of Canada and
                  NetRover, Inc. regarding 93 Skyway Avenue, Etobicoke, Ontario,
                  Canada

      **10.5      Lease Assignment Agreement dated November 2, 2000 by and among
                  H.V.M. Holdings Inc., Garden Green Realty Inc. and NetRover
                  Inc. regarding 405 Review Drive, Chatham, Ontario, Canada

      **10.6      Lease Amendment Agreement dated January 4, 2001 by and between
                  890 West Pender Ltd. and CyPost Corporation regarding space at
                  890 West Pender Street, Vancouver, British Columbia, Canada

       *10.7      Assignment of Building Internet Access Agreement dated
                  November 9, 1999 by and between American Property Management
                  Corporation, as agent for and on behalf of Weston Holding
                  Company, L.L.C., Internet Arena, Inc. and CyPost Corporation
                  regarding providing Internet access at 1020 S.W. Taylor
                  Street, Portland, Oregon

       *10.8      Lease for Internet Equipment dated April 19, 2000 by and
                  between Internet Finance+Equipment, a division of LINC Capital
                  Inc., and CyPost Corporation DBA Connect Northwest and
                  Internet Arena

       *10.9      Lease Agreement dated May 1, 2000 by and between Telcom
                  Leasing Canada and ePost Innovations Inc. regarding
                  installation of Norstar voicemail system, Northern
                  Applications Module 4 Port and Training


<PAGE>
      Exhibit
         No.          Description

       *10.10     Master Lease Agreement dated May 3, 2000 by and between Heller
                  Financial Canada, Ltd., and NetRover, Inc., regarding Internet
                  network equipment, together with related Subordination
                  Agreement and related equipment schedules

       *10.11     UUNet Agreement (Provider Quotation) dated June 30, 1999
                  between NetRover Inc. and UUNet Canada Inc., and related
                  addendum

        10.12     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated February 9, 1999, regarding debt financing
                  for CyPost Corporation (4)

        10.13     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated March 17, 2000, regarding debt financing for
                  CyPost Corporation (4)

        10.14     Letter agreement from Blue Heron Venture Fund, Ltd. to CyPost
                  Corporation dated July 12, 2000, regarding debt financing for
                  CyPost Corporation (4)

        10.15     Preferred Supplier Agreement dated March 15, 1999 by and
                  between CyPost Corporation and the Canadian Bar Association,
                  British Columbia Branch (6)

       *10.16     Employment Agreement dated October 5, 1999 between Robert
                  Adams and CyPost Corporation

      **10.17     Assignment of Lease dated November 9, 1999 between American
                  Property Management Corporation, as agent for Weston Holdings
                  Company, L.L.C., David J. Neff, individually, and CyPost
                  Corporation

       *21        List of Subsidiaries

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

*        Filed herewith
**       To be filed by amendment

(1)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, filed with the SEC
         on July 19, 1999.

(2)      Filed as an exhibit to the Company's Current Report on Form 8-K, filed
         with the SEC on October 12, 1999.


<PAGE>

(3)      Filed as an exhibit to the Company's Current Report on Form 8-K, filed
         with the SEC on October 19, 1999.

(4)      Filed as an exhibit to the Company's Quarterly Report on Form 10-QSB,
         filed with the SEC on December 9, 1999.

(5)      Filed as an exhibit to the Company's Registration Statement on Form
         S-8, filed with the SEC on March 8, 2000.

(6)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, Amendment 1, filed
         with the SEC on March 9, 2000.

(7)      Filed as an exhibit to the Company's General Form for Registration of
         Securities of Small Business Issuers on Form 10-SB, Amendment 3, filed
         with the SEC on April 17, 2000.

(8)      Filed as an exhibit to the Company's Current Report on Form 8-K,
         Amendment 2, filed with the SEC on July 24, 2000.

(9)      Filed as an exhibit to the Company's Current Report on Form 8-K,
         Amendment 3, filed with the SEC on August 28, 2000.