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, 1999

                                       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                              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
$.0001 per share

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      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 disclosure of delinquent filers in response to Item 405 of
Regulation S-B 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. [ ]

      Aggregate market value of voting and non-voting common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity as of January 31, 2000. $ 26,470,070

      State issuer's revenues for its most recent fiscal year. $ 1,020,347
                                                               -----------

Transitional Small Business Disclosure Format (check one):
Yes |_|; No |X|

                       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"): NONE,
however certain exhibits hereto are incorporated by reference to the Form 10-SB
and amendment thereto previously filed by the Registrant with the Commission.

<PAGE>

Item Number and Caption  Page
-----------------------  ----

PART I

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

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

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

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

PART II

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

     6.  Management's Discussion and Analysis or Plan of Operations........

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

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

PART III

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

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

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

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

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

<PAGE>

Item 1. Description of Business.

      (a) Business Development.

      CyPost Corporation (hereinafter referred to as the "Registrant", the
"Issuer", or as "CyPost"), a Delaware corporation, was formed on September 5,
1997 under the name "E Post Corporation" to operate as the parent company of two
wholly-owned, sister subsidiaries: ePost Innovations, Inc., a corporation
organized under the laws of British Columbia, Canada ("ePost Canada") and CyPost
USA, Inc., a Delaware corporation formed on September 5, 1997 by the Company
("CyPost USA"). Shortly after its formation, ePost Corporation changed its name
to "CyPost Corporation" to minimize potential trademark difficulties with third
parties. ePost Canada was formed on March 27, 1997 and was acquired by the
Issuer on September 15, 1997 (the "Acquisition"). Prior to the Acquisition,
ePost Canada was a wholly owned subsidiary of Mushroom Innovations, Inc. a
corporation organized under the laws of British Columbia ("MII"). Under the
terms of the Acquisition, the Issuer acquired from MII all of the issued and
outstanding shares of ePost Canada, as well as all intellectual property rights
then owned by ePost Canada, in exchange for 2,000,000 shares of CyPost's Common
Stock. On October 29, 1998, CyPost acquired all of the issued and outstanding
capital stock of Communication Exchange Management Inc., a British Columbia
corporation, from MII in exchange for 4,180,000 CyPost shares. Communication
Exchange Management Inc. remains a wholly owned subsidiary of CyPost. Unless
otherwise stated herein, all dollar amounts refer to U.S. Dollars ("USD$")--not
Canadian Dollars ("CDN$). Through various acquisitions, CyPost conducts its
business through the subsidiaries listed on Exhibit 21.

      (b) Business of the Issuer.

      The Issuer is a holding company, the principal assets of which consist of
the capital stock of CyPost USA, the capital stock of ePost Canada and the
capital stock of the other subsidiaries listed on Exhibit 21. To date, the
Issuer, through its operating subsidiaries, has been largely involved in two
separate, but complementary businesses, i.e.(i)the development and sale of
software products using email encryption to enhance user

<PAGE>

security and convenience ("Software Products"), and (ii) providing internet
connection services to subscribers. (Unless otherwise qualified herein, the term
"Company" shall be used to refer to the business operations of the Registrant
and its consolidated subsidiaries.) The Company is currently selling six
versions of its "Navaho" software encryption programs which are more
specifically described below. The Company is developing or partnering with a
number of companies to provide products and services to its Internet Service
provider customers through an Application server model which promotes server
level distribution of products rather than end user solutions. On February 23,
2000, the Company completed the acquisition of Playa Corporation developers of
the "Yabumi" instant messaging and e-greeting card service. The "Yabumi"
community of users numbers approximately 85,000 and is located in Japan.

      Markets for Software Products.

      The Company has developed the Navaho family of software products for the
following markets:

            1) Personal Use--consumers who have little or no technical knowledge
of computers and computer programs but who wish to keep electronic
correspondence private.

            2) Professional Use--professional business users such as attorneys,
accountants, medical doctors, as well those who need secure communication
capability while traveling

            3) Small Businesses--companies between 10-50 employees with a small,
or no Information Services department and who operate out of a single location

            4) Enterprise--large businesses with more than 50 employees and who
use corporate intranets including LAN's and WAN's, Extranets, and government
institutions

Products

      The Company currently offers six (6) different security encryption
software products each of which bear the name "Navaho". (See discussion of these
under "Status of any publicly announced new product or service").

Distribution Method of Software Products and ISP Service.

      The CyPost family of Software Products are delivered both digitally over
the Internet and through distributors who sell shrink-wrapped versions. CyPost's

<PAGE>

website, www.cyost.com, offers a full description of its products and the chance
for viewers to make a "cyber-purchase " of its software. In addition, consumers
are able to purchase products directly from popular online retail sites such as
www.beyond.com, www.egghead.com, www.cdw.com, and www.futureshop.com to name a
few. CyPost has entered into a distribution agreement with Digital River, Inc.,
a company that provides proprietary software delivery technology to more than
2000 software publishers and online retailers. The Company has also negotiated
with several distribution competitors of Digital River, Inc. who offer similar
capabilities including ReleaseNow.com, NetSales, Inc. and ShopNow.com. The
Company estimates that its Navaho products are currently available at more than
1000 secure websites.

      CyPost's acquisition strategy includes the acquisition of Internet Service
providers with a target of acquiring an additional 50,000-100,000 subscribers to
add to its approximately 20,000 existing subscribers. This network of service
provider subscribers become a direct marketing and distribution channel for
CyPost. The Company plans to market the Navaho family of products including
Navaho Express (a promotional version of Navaho Lock with Voice) to the client
base in early 2000. CyPost will also distribute a line of privacy and protection
solutions through industry partnerships such as content management solutions and
anti-virus protection.

      Further to the ISP distribution network, the Company plans to secure a
relationship with a major advertising firm to work as representatives of the
aforementioned Navaho Express, the promotional version of the Navaho products.
This relationship will leverage the advertising firm's client base and their
need for one to one marketing tools.

Status of any publicly announced new product or service.

      Navaho Lock: Navaho Lock software enables consumers to send and receive
secure email and attachments such as documents, spreadsheets, digital sound
files, and business presentation. The program is intuitive, simple to operate,
and exceptionally fast. The product's unique combination of features include:
full integration with all major e-mail programs; built-in file compression for
faster transmission times; a user-friendly GUI (Graphical User Interface); and
CyPost's exclusive "drag-and-drop" feature that enables users to encrypt and
compress files simply by dragging and dropping them into an encryption field.
Users can select the strength of privacy protection according to their needs, by
simply specifying 40-, 56-, 112-, 128-, or 3DES 168-bit encryption algorithms.

      Navaho Lock is available for purchase at www.cypost.com and over 1000

<PAGE>

secure distribution sites on the Internet. This product has received favorable
product reviews from PC Magazine, Portable Computing, Secure Computing Magazine,
CNN Interactive, and PC World Online.

      Navaho Lock version 2.4 uses private key, or symmetric key, encryption.
Many regard this 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 notoriously slow (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.

      Navaho Lock with Voice: Currently in the final stages of beta testing,
Navaho Lock with Voice software is the successor to Navaho Lock v2.4.
Incorporating all the features of CyPost's original product, Navaho Lock with
Voice allows the user to send and receive compressed and encrypted document
packages, as well as private voice messages, over the Internet. It is expected
to be released in the 1st quarter of 2000.

Summary of new features include:

      o     Ability to send and receive encrypted Voice E-mail

      o     Addition of a shredder for securely deleting data from the hard disk

      o     A new and improved streamlined user interface for greater ease of
            use

      o     Numerous changes to increase user productivity and maximize usage

            Navaho Viewer: Navaho Viewer provides an alternative for those
      consumers not wanting to purchase the full working copy of Navaho Lock,
      but who require the ability to read encrypted files sent to them by
      friends or colleagues. Navaho Viewer is available for download free at
      CyPost's web site and numerous web sites on the Internet.

            Navaho ZipSafe: The third product in CyPost's Navaho family of
      security and encryption software, Navaho ZipSafe, was released in March
      1999. The file-security software, designed to ensure the privacy of data
      on laptops and home PCS, is an extension of CyPost's Navaho product line.

<PAGE>

      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), ZipSafe has
      the ability to encrypt and then condense files by as much as 70% in a
      matter of seconds. This product enables users to secure all computer
      files, folders, and directories on a local hard drive such as that found
      on a laptop computer. Navaho ZipSafe is available on a free thirty (30)
      day trial basis.

            Navaho Express: The promotional version of the single user Navaho
      product, Navaho Express offers a unique one to one marketing opportunity
      for any business concerned about their clients' privacy and protection.
      This product integrates the functionality of Navaho Lock with Voice and a
      promotional HTML window allowing the sponsor company to communicate offers
      and promotions directly to their client base.

      Competition-Encryption Software

            CyPost's Navaho line of privacy and protection solutions face
      competition from a number of rival products. The largest and most
      noteworthy competitors are: Network Associates Inc., InvisiMail
      International Ltd., and OpenSoft Corporation. The following table compares
      these products to Navaho Lock, version 2.4. Based on Navaho Lock's
      superior functionality and easy-to-use features (including its file
      compression capability, "drag-and-drop" routine, and user-friendly
      interface), CyPost believes that Navaho Lock is well positioned to compete
      successfully in the marketplace.

      Competitive Comparisons

                            Product Comparison Table

<TABLE>
<CAPTION>

  FEATURE        NAVAHO LOCK 2.4   PGP 6.5           RPK INVISIMAIL Deluxe
MAILSECURE 2.4
<S>              <C>               <C>              <C>                 <C>
   Company       CyPost Corp.      Network          InvisiMail          Baltimore
                                   Associates       Intl.               Technologies

   Price         $39.95            $39.95           $49.95              $49.95

   Key
</TABLE>

<PAGE>

<TABLE>
<S>              <C>               <C>              <C>                 <C>

   Strength      40/168 bit        1024-4906 bit    607-1279 bit        128/2048 bit
                 secret key        public key       public key          public key

   Target
   user          Single, Multi     Single, Multi    Single, Multi       Single

   Exportable
   outside U.S.  Y                 Y                N                   N

   Encryption
   Method        Symmetric         Asymmetric       Asymmetric          Asymmetric

   File
   Compression   Y                 N                Y                   N

   Drag & Drop
   Encryption    Y                 Y                N                   N

   Evaluation
   Version
   Available     Y                 Y                Y                   Y

   Attachment

   Feature       Y                 Y                Y                   Y
</TABLE>

           Key Lengths With Similar Resistance to Brute-Force Attacks

     Symmetric Key Length     Public Key Length

        56 bits                     384 bits
        64 bits                     512 bits
        80 bits                     768 bits
       112 bits                     1792 bits
       128 bits                     2304 bits
       168 bits                     3840+ bits

                       Comparison of Competitor Companies

<PAGE>

            Network Associates Inc. (Nasdaq: NETA), a public company
      headquartered in Santa Clara, California is the world's largest
      independent network security and management software company, and the
      tenth largest independent software company with more than 30 million users
      worldwide, $612 million in revenue in fiscal 1997, and over 1,500
      employees worldwide.

            Network Associates has the largest market share of email encryption
      software. Its PGP Personal Privacy software program is the most well known
      email encryption software program currently on the market. PGP Personal
      Privacy's unique selling proposition is they use the strongest encryption
      available in the United States using PGP's strong public/private key
      technology with at least 128 bit keys. It was voted as the easiest email
      encryption program to use in the September 1998 issue of PC World
      Magazine. PGP Personal Privacy ($39.95) is available for purchase at the
      Network Associates web site as well as most Internet shareware download
      sites.

      Notable differences between PGP Personal Privacy and Navaho Lock with
      Voiceare encrypted voice email, document shredding, a Drop area which
      allows for one-step drag and drop file encryption, built in file
      compression, and use of symmetric key encryption which is faster and less
      cumbersome to set up than public/private key.

      Baltimore Technologies (London Stock Exchange: BLM), a public company
      headquartered in Dublin, Ireland develops and markets security products
      and services for a wide range of e-commerce and enterprise applications.
      Its products include Public Key Infrastructure (PKI) systems,
      cryptographic toolkits, security applications and hardware cryptographic
      devices.

      The company was formed in December 1998 by the merger of two companies,
      Baltimore Technologies and Zergo Holdings plc. BALTIMORE now employs over
      500 people across over twenty global locations, and reported Unaudited pro
      forma group revenues for the 12 months to 31 December 1998 of $30 million

      Baltimore's email encryption software, named MailSecure is an S/MIME
      plugin for Microsoft email clients, Lotus Notes and Eudora. Unlike Navaho
      Lock, MailSecure is based on public key infrastructure technology.

      InvisiMail International Ltd., founded in 1997, specializes in secure
      Internet commerce and communications solutions for a wide range of

<PAGE>

      applications. Developed using RPK Security, Inc.'s core technology, the
      RPK Encryptonite Engine(tm), the InvisiMail range of products supports
      secure message-based applications including Client Services, E-Commerce,
      and EDI.

      InvisiMail International Ltd., email encryption program called InvisiMail
      Deluxe automatically encrypts and decrypts e-mail using 607- 1279bit
      public/private key encryption and signs files using DSA Digital File
      Signing. The program was selected in the September 1999 issue of PC
      Magazine as the Editors Choice for email encryption.

      Based on Navaho Lock with Voice's superior functionality and easy-to-use
      features (including encrypted voice email, document shredding, file
      compression capability, one-step "drag-and-drop" encryption, and
      user-friendly interface), CyPost believes that Navaho Lock with Voice is
      well positioned to compete successfully in the marketplace.

      Market - ISP Division

            CyPost Network of Service Providers: Through ISP acquisitions,
      CyPost has established approximately 20,000 subscribers to date. The
      Company hopes to acquire a target of 50,000 to 100,000 ISP customers. Its
      goal is not to establish itself as a competitor of the large service
      providers, including telecommunication and cable companies, but rather to
      establish a niche market in response to the growing concerns for privacy
      and protection. The CyPost network offers a range of services including
      web hosting, connectivity, custom programming, roaming services, web
      design and e-commerce solutions. These services will be extended to
      include privacy and protection solutions such as the previously mentioned
      content management and anti-virus solutions as well as a number of other
      testing and solution consulting services for network security issues, such
      as testing the integrity of client networks. The company has negotiated an
      arrangement with UUNet Canada to provide connectivity across the country
      and plans to enter into a similar arrangement in the U.S. These agreements
      allow the CyPost Network of Service Providers to offer subscribers the
      convenience that larger Service Providers can offer while maintaining
      focus on excellent customer service and solutions to protect their privacy
      rather than merely providing points of connectivity.

      Competition - ISP Division

<PAGE>

            The CyPost Network of Service providers operates in the extremely
      competitive Internet services market. The fragmented U.S. consumer ISP
      market has been dominated to date by approximately seven companies.
      According to a July 1999 report by Cahners In-Stat Group however, the
      market share of the dominant players in the U.S. consumer ISP market is
      being threatened by new business models. The report cites despite the
      enormous marketing dollars allocated to advertising, AOL's market share
      slipped 2.8% between the final quarter of 1997 and the first quarter of
      1999, while MSN saw its marketshare drop by more than half during the same
      period.

            Moreover, the report notes that during 1998 the combined subscriber
      base for non-traditional service providers grew 137 percent, compared to
      only 37 percent growth among traditional ISPs (including AOL, MSN,
      Mindspring, Earthlink, Prodigy, and Flashnet).

            The Company fully anticipates over the next several years
      consolidation within the ISP market leading to two or three well-known,
      large national ISP's. It is not CyPost's intent to compete head to head
      with these large ISP's but to compete in the growing security niche
      markets by providing value-added privacy and protection solutions in
      addition to providing connectivity to business and individuals.

            Our competitors include many large companies that have substantially
      greater market presence, financial, technical, marketing and other
      resources than we have. The Company competes directly or indirectly with
      the following types of companies:

            -     established online services, such as America Online, the
                  Microsoft Network, Earthlink and Prodigy;

            -     local, regional and national ISPs;

            -     national telecommunications companies, such as AT&T and GTE;

            -     regional Bell operating companies; and

            -     online cable services.

            Competition in the future is likely to increase and we believe this
      will happen as diversified telecommunications and media companies acquire
      ISPs, and as ISPs consolidate into larger, more competitive entities.
      Competitors may bundle other services and products with Internet

<PAGE>

      connectivity services, potentially placing the CyPost Network of Service
      providers at a significant competitive disadvantage. In addition,
      competitors may charge less than we do for Internet services, forcing us
      to reduce and/or prevent us from raising our fees. Subsequently future
      revenue growth and earnings may suffer.

      Government Regulation

            The Company believes that the design features of the Navaho products
      are unique in connecting to existing Crypto Service Providers and using
      them without itself containing any direct encryption coding. Because of
      this feature, the Navaho products fall outside of government regulations
      such as the munition or export laws that previously restricted other forms
      of software encryption programs. The term "crypto service provider" is
      short for "cryptographic service provider" and refers to the computer
      language by which cryptographic standards and algorithms are implemented
      or used. Different "crypto service providers " use different programming
      assumptions and data formatting protocols. Thus one software encryption
      program may work well one type of crypto service provider but not
      necessarily work well with another type. The result is that it is
      difficult to design encryption software that will be readily compatible
      with the widely varying crypto service provider formats/protocols which
      are in use today in today's digital communication environment. In
      contrast, CyPost's "Navaho" family of Software Products is readily
      compatible with a broad range of provider formats/protocols.

      Dependence on Key Customers

      The Company derives the bulk of its revenues from its ISP operations and
as such enjoys the benefit of a broadly diversified customer base of
approximately 115,000 located throughout the Canadian and Pacific Northwest and
in Japan.

      With respect to its direct software sales which comprise a small
percentage of its business, approximately 1.5 % of its 1999 revenues, the
Company has derived a significant portion of its software sales revenues from
its Preferred Provider Contract with the Canadian Bar Association, British
Columbia branch. Under this Agreement reached in March 1999, the Bar Association
will license 250 copies of Navaho Lock and Navaho ZipSafe. In addition, clients
of these bar members will be able, for a fee, to license their own versions of
these programs.

            The Company is actively seeking to broadly market its products and
      has taken a number of steps to actively market its products including use
      of a variety of print and communications media to build consumer awareness
      such as direct mailings, featured appearances of Company personnel on

<PAGE>

      various television and radio shows broadcast in the U.S. and Canada
      (Caspar Weinberger's World Business Review, Dave Chalk's Computer Show;
      Dotto's Cafe, CKNW radio and CKWX radio), and features in selected
      magazines (Security Magazine, PC Magazine Online, Portable Computing, PC
      Magazine OnLine, Portable Computing , Computer Paper, and Canadian Bar).
      The Company has hired a director of marketing and anticipates hiring a
      director of sales in the near future.

      Research and Development

            The Company has abandoned its former development of the CyPost
      Terminal, a type of communications software designed to operate on a
      remote terminal network. Since December 1998, the Company has focused its
      research and development efforts on refinements and/or improvements to its
      Software Products. The Company has introduced six (6) versions of its
      "Navaho" encryption software during 1999. It is currently developing
      English and other language versions of the "Yabumi" Instant Messaging
      software which it acquired when it bought Playa Corporation in February of
      2000. Any monies expended on research and development will be absorbed
      directly by the Company and cannot be "passed through" to customers in the
      form of any "cost plus" type of contract.

      The 1999 Acquisitions and the Company's Broadened Strategic Focus

            The Company has acquired five (5) internet service providers during
      1999.

            Acquisition of Hermes Net Solutions, Inc. and Intouch Internet Inc.:
      Effective June 30, 1999, the Company purchased all the issued and
      outstanding shares of Hermes Net Solutions, Inc. for a purchase price of
      $510,204 USD. The consideration for this purchase consisted of cash of
      $435,374 USD and an assumption of a deferred cash payment of $74,830 USD.
      Also effective June 30, 1999, the Company purchased all the issued and
      outstanding shares of Intouch.Internet Inc. for a purchase price of
      $304,081 USD. The consideration for this purchase consisted of cash of
      $275,510 USD and the issuance of 6,570 pre-split, or 9,855 post-split,
      common shares valued at $28,571 USD. Both acquisitions have been accounted
      for by the purchase method of

      accounting. In both acquisitions, the net assets acquired consisted
      primarily of goodwill and customer lists which will be amortized over
      three years on the

<PAGE>

      straight line basis.

            Acquisition of NetRover Inc. and NetRover Office Inc.: On October 4,
      1999, the Company purchased all the issued and outstanding shares of
      NetRover Inc. and NetRover Office Inc. for a purchase price of $2,717,826
      USD. The purchase price of $2,717,826 USD was satisfied by a cash payment
      of $2,000,000 USD, the issue of 219,000 post-split common shares, and an
      assumption of a deferred cash payment of $68,027 USD which, subject to
      certain adjustments, is due on December 4, 1999. These purchases have been
      accounted for under the purchase method of accounting.

            Acquisition of Connect Northwest Internet Services, LLC and Internet
      Arena, Inc.: On October 24, 1999, the Company purchased the assets of the
      business of Connect Northwest for a net purchase price of $1,320,000 USD.
      The purchase price was satisfied by a cash payment of $660,000 USD and the
      issuance of 147,985 of the Company's common shares. On November 9, 1999,
      the Company purchased the assets of the business of Internet Arena for a
      purchase price of $600,000 USD. The purchase price was satisfied by a cash
      payment of $172,500 USD, the issuance of 100,698 of the Company's
      post-split common shares, and a deferred cash payment of $57,500 USD due
      in January, 2000. These purchases have been accounted for under the
      purchase method of accounting.

            ISP's provide several complementary features to CyPost's business
      strategy. CyPost gains the advantage of an existing client base who, it is
      hoped, will become significant purchasers of encryption products while the
      ISP gains the ability to work hand-in-hand with an encryption services
      provider. Also, much of an ISP's business is service-based and it is hoped
      will provide predictable cash flows. CyPost has undertaken negotiations to
      license software which will protect against virus transmission at the ISP
      level and is developing programs to regulate content and provide "Family
      Safe Surfing"at the Server level.

            The Recent Acquisition of Playa Corporation and the Company's
      Expansion into Japan

<PAGE>

            CyPost is also actively seeking further opportunities to ally with
      ISP's and other cyber-businesses both within North America and abroad. On
      February 22, 2000, the Company concluded the purchase of Playa
      Corporation, the developers of YABUMI instant messaging and e-greeting
      technologies. YABUMI is based in Japan and with its 95,000 current users
      offers a promising opportunity for both community-building as well as
      rolling out an integrated and private solution for instant messaging using
      the existing messaging technology as the base. The purchase price was
      $3,000,000 with $300,000 being paid in cash with the balance to be paid in
      shares.

      The Yabumi website at Yabumi.com currently generates over 500,000 visitors
per month and offers several "value added" communications services. Yabumi
"Instant Messaging" Software allows users to instantly receive ecommunications
by way of a desktop notification. This allows message recipients to bypass the
need for frequent checking of email mailboxes and permits "real time messaging".
The Yabumi software to do this, Yabumi v.2.1, is available via a free download
and can be downloaded in approximately 2 minutes or less by a user using a 56K
modem. In keeping with CyPost's design philosophy, the software is easy to
install and its user interface is extremely "user friendly". In addition to its
ease of use, the program also features real time chat line capabilities and will
easily allow attachment of files and URL's. The number of Yabumi users has grown
by approximately 25% during the last 3 months of 1999 and CyPost anticipates
that an additional 100,000 Japanese users may be added by the end of 2000.
Yabumi is particularly popular among young Japanese woman who are a
demographically important group for marketing purposes. The Company has recently
introduced a MacIntosh-compatible version of its "Instant Messaging Software" as
well as a "Business to Business" version designed for use in a networked
computing environment.

      CyPost believes that the Yabumi software can be readily "localized" for
use in English- language and other cultural settings. The task of translating
and making the software compatible with existing CyPost technolgicy. has already
begun and will use both internal and outsourced software development personnel.
CyPost anticipates that English-language versions of the Yabumi technology will
be developed during the first six months of 2000 and will be available for
product introduction during the second half of 2000.

      Item 2. Description of Property.

      The Company entered into a net lease with respect to its new office
premises located at 900-1281 West Georgia St.,Vancouver, British Columbia (the
"Premises") for approximately 6500 square feet of office space. The term of the
lease is for 60 months and ends on June 1, 2005. The monthly rent under this
lease is $12,171 CDN$ or approximately $7,911 USD. The Company believes that it
could secure comparable office space in the event that it needed to do so.

<PAGE>

      Item 3. Legal Proceedings.

      On June 11, 1999, Canada Post Corporation filed a Statement of Claim in
the Federal Court of Canada in which it sought injunctive and unspecified
monetary relief for the allegedly "improper use by the Company of certain marks
and names which contain the component "post". On October 18, 1999, the Company
filed its Defence 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, the Company filed a statement of Claim in the BC Court
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 as
trade-marks and trade-names prior to said dates. The Company 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.

      Item 14: Submission of Matters to a Vote of Security Holders.

      There were no matters submitted during the fourth quarter of fiscal 1999
to a vote of security holders, through the solicitation of proxies or otherwise.

                                     PART II

       Item 5. Market Price for Common Equity
               and Related Shareholder Matters.

      1. (a) The Issuer's Common Stock is listed on the National Association of
      Securities Dealers, Inc. Electronic Bulletin Board under the trading
      symbol of "POST". The Common Stock became listed on September 21, 1998.
      Prior to that time, there had been no trading in the Issuer's Common
      Stock. Pending the resolutions of comments previously received in the
      ordinary course from the SEC when it filed its Form 10-SB Registration
      Statement, the OTC "Bulletin Board" has placed an "E" symbol on the
      Company's stock. The Company has filed an Amendment No. 1 to its Form
      10-SB with the SEC. The Company, its attorneys and accountants have
      submitted their responses to these SEC comments and are awaiting
      processing of them by the SEC. The Company is required to resolve these
      comments with the SEC before April 14, 2000 in order to retain its OTC
      Bulletin Board eligibility. Should these comments not be resolved by such
      time, the Company's Common Stock will be removed from the OTC and will be
      traded in the "pink sheets" which is generally regarded as a less liquid
      trading forum. The Company will be able to reapply for listing on the OTC
      as soon as it resolved all comments with the SEC.

            Accordingly, the high and low bid prices for the Issuer's Common
      Stock for each quarter since its date of listing, as reported by National
      Quotation Bureau, LLC, are as follows:

               QUARTER              HIGH BID PRICE     LOW BID PRICE
               -------              --------------     -------------

          1999 Q4 (10/01-12/31)        $6.50               $3.00

          1999 Q3 (7/1-9/30)           $8.25               $3.00

<PAGE>

          1999 Q2 (4/1 -6/30)          $3.00               $1.78

          1999 Q1 (01/01 - 03/31)      $1.78               $0.83

          1998 Q4 (10/01- 12/31)       $0.89               $0.05

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

      (b) The approximate number of record holders of the Issuer's Common Stock
according to its transfer agent is 74. Included in this number are shares held
by Cede & Co., the nominee for Depository Trust Company, a stock clearing house
for financial institutions. The Issuer has not contacted stock brokerage firms
shown on the Issuer's stock transfer records to determine the number of
beneficial holders whose stock is held in "street name", or the name of the
brokerage house with which a shareholder's account is maintained.

            (c) The Issuer has not paid any cash dividends on its Common Stock,
      nor does it intend to do so in the foreseeable future. Under the General
      Corporation Law of the State of Delaware, the Issuer may only pay
      dividends out of capital and surplus, or out of certain delineated
      retained earnings, all as defined in the General Corporation Law. There
      can be no assurance that the Issuer will have such funds legally available
      for the payment of dividends in the event that the Issuer should decide to
      do so.

            (d) On June 30, 1999, the Company issued 6,570 pre-split, or 9,855
      post-split shares of its common stock to the former owners of
      InTouch.Internet, Inc. as partial payment for the Company's acquisition of
      that company. These shares were issued under the Section 4(2) exemption
      for transactions by an issuer not involving a public offering under the
      Securities Act.

            On August 13, 1999, the Company issued 1,000,000 pre-split, or
      1,500,000 post-split, shares of its common stock to Blue Heron Venture
      Fund Ltd ("Blue Heron") pursuant to Regulation S under the Securities Act.
      No underwriting commissions, fees, or discounts were paid in connection
      therewith.

            On September 29, 1999, the Company agreed to issue 219,000 post
      split shares of its common stock to the former owners of NetRover, Inc.
      The shares issued in the Net Rover transaction were disclosed in the 8-K
      Report filed by the

<PAGE>

      Company on October 2, 1999. The shares issued in the Net Rover acquisition
      were issued pursuant to the Section 4(2) Securities Act statutory
      exemption for transactions by an issuer not involving a public offering.

            On October 26, 1999, the Company issued 147,985 shares of its common
      stock to the former owners of Connect Northwest Internet Services LLC as
      partial payment for the Company's acquisition of that entity. These shares
      were issued under the Section 4(2) Securities Act exemption for
      transactions by an issuer not involving a public offering.

            On November 4, 1999 the Company issued 3,000,000 shares of its
      common stock to Blue Heron in consideration of which Blue Heron cancelled
      indebtedness owing from the Company in the aggregate principal amount of
      $3,000,000 together with accrued interest. These shares were issued
      directly to Blue Heron pursuant to Regulation S under the Securities Act
      and no underwriting commissions, fees or discounts were paid in connection
      therewith.

            On November 9, 1999, the Company issued 20,140 shares of its common
      stock to the former owners of Internet Arena, Inc. as partial payment for
      the Company's acquisition of that entity. These shares were issued under
      the Section 4(2) Securities Act exemption for transactions by an issuer
      not involving a public offering.

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

            The statements contained in this Report on Form 10-SB that are not
      historical facts are forward-looking statements (as such term is defined
      in the Private Securities Litigation Reform Act of 1995) that involve
      risks and uncertainties. Such forward-looking statements may be identified
      by, among other things, the use of forward-looking terminology such as
      "believes," "expects," "may," "will," "should" or "anticipates" or the
      negative thereof or other variations thereon or comparable terminology, or
      by discussions of strategy that involve risks and uncertainties. From time
      to time, the Company or its representatives have made or may make
      forward-looking statements, orally or in writing. Such forward-looking
      statements may be included in various filings made by the Company with the
      Securities and Exchange Commission (the "SEC"), or press releases or oral
      statements made by or with the approval of an authorized executive officer
      of the Company. These forward-looking statements, such as statements
      regarding anticipated future revenues, capital expenditures, Year 2000

<PAGE>

      compliance and other statements regarding matters that are not historical
      facts, involve predictions. The Company's actual results, performance or
      achievements could differ materially from the results expressed in, or
      implied by, these forward-looking statements.

      General: End of development stage activities and commencement of business
      operations

            Cypost produces and markets computer privacy protection technologies
      and provides Internet conductivity to business and residential customers.
      From the Company's inception date until approximately mid-March of 1999,
      the Company was considered a development stage enterprise. Since that
      time, the Company has (i) publicly marketed six (6) software encryption
      products under its "Navaho" trademark, (ii) acquired five U.S. and
      Canadian Internet service providers during the year ending December 31,
      1999, and (iii) acquired Playa Corporation, the developers of "Yabumi"
      Japanese-language instant messaging and greeting card services, with an
      existing customer base of 95,000 customers.

The Company's results of operations for the year ending December 31, 1999 should
be viewed with considerable caution due to the following factors:

      1) Results of operations for the year ending December 31, 1999 do not
reflect a full year's worth of operating performance but rather nine (9) months
of operations as the Company only commenced substantial business operations in
the second quarter of 1999.

      2) The Company completed five (5) acquisitions of ISP's and most of its
revenues are based on these. The future growth rate of the present customer base
cannot be predicted with certainty and it is not certain that the Company will
be able to continue its strategy of expansion by acquisition.

      3) Inherent in any acquisitions are costs which arise from integration of
operations into the Company's existing business operations. Many of these may be
viewed as one-time, non- recurring charges which are not likely to be repeated
in future performance periods.

Due to these factors, the 1999 results of operations discussed below may not be
an accurate indication of future performance. In addition, comparison of results
for the year ended December 31, 1999 with those for the year ended December 31,
1998 are difficult to make due to the basic dissimilarity between a developing
stage company and a company that has commenced substantial business operations.

      Results of operations for the year ended December 31, 1999 and for the
year ended December 31, 1998.

<PAGE>

      The Company commenced substantial business operations during the second
quarter of 1999 and its revenues are attributed to operations during that time
frame. These revenues are attributable virtually entirely to the operations of
the various Internet service providers which the Company acquired during the
year ending December 31, 1999. The Company generated revenues of $1,020,347
for the year ended December 31, 1999. It had no revenues for the prior year when
the Company was entirely a development stage company.

      Direct costs of $563,118 representing 55% of revenues were incurred for
the year ended December 31, 1999 resulting in a gross margin of $457,229 (45%)
for the year. Net loss before interest expense of $2,278,623 for the year
reflect primarily the effect of a small revenue base which was insufficient to
cover administrative expenses, salaries and benefits and development expenses.
The Company hopes to achieve profitable operations through a combination of
adding additional ISPs through acquisition and through the addition of value
added services in its ISPs, as well as the realization of operating economies as
its various acquired businesses are integrated into the Company.

      Liquidity and capital resources

      The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $4,491,123 for the year ending December 31, 1999 versus $428,773 for the year
ending December 31, 1998. Although expense items included non-cash charges of
$2,731,270 (amortization and depreciation charges of $518,770 and interest
expenses of $2,212,500), the Company has not generated positive cash flow from
operations. These factors indicate that the Company's continuation as a going
concern is dependent upon its ability to obtain adequate financing.

      Although the Company's cash position at December 31, 1999 had improved to
$415,779, as compared to $47,212 at December 31, 1998, the improvement in cash
position can be attributed to loans made to the Company by Blue Heron Venture
Fund, Ltd. These loans were made under agreements with that lender under which
the Company may draw up to $16 million in unsecured loans. These loans bear
interest at 8% per annum and are payable on demand. The outstanding portion of
these loans are convertible into Common Stock of the Company at prices ranging,
at present, from $1.00 to $2.50 per share. The lender is free to withdraw this
line of credit at any time, and since the loans are payable on demand the
Company's ability to continue operations is dependent upon the willingness of
its lender to forebear from demanding payment. The Company believes that its
lender will continue to refrain from demanding payment for the

<PAGE>

      immediately foreseeable future, but it is under no obligation to do so.
      Should the Company's lender demand payment the Company would be required
      to seek financing from other sources. It does not believe that bank
      borrowing would be available to it under present circumstances, and there
      can be no assurance that the necessary financing could be obtained from
      other sources. Even if the necessary funding were available, it might be
      available only on terms which management would not find acceptable.

      Item 7. Financial Statements.

      Registrant's Consolidated Financial Statements as of December 31, 1999 and
for the year ending December 31, 1999, and the independent auditor's report of
Arthur Andersen LLP, independent public accountant, with respect thereto, appear
in pages F1 -F16 of this Report on Form 10-KSB.

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

            None. As disclosed in the 8-K filed on October 19, 1999, CyPost has
      engaged Arthur Andersen LLP to act as its auditor.

                                    Part III

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

            Directors of the Company serve for a term of one year or until their
      successors are elected. Officers are appointed by, and serve at the
      pleasure of, the Board. Profiles of the current Directors and Executive
      Officers of the Issuer are set forth below:

      Robert Sendoh, 47, Director and Chief Executive Officer

            Mr.Sendoh acted as a Director throughout 1999 and in January, 2000
      succeeded to the position of Chief Executive Officer formerly occupied by
      Steven Berry. Bob has successfully conceived and operated three separate
      companies and brings a wealth of business knowledge and financial
      understanding to the Company. After receiving his B.A. in Economics from
      Meiji University in Tokyo in 1973, he founded KKG Incorporated, a project
      planning and development firm, also 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.

<PAGE>

      Dissatisfied with the lack of spreadsheet and product management software
      for businesses, Bob developed his own, as well as implementing a highly
      efficient security and communication system to maintain and expand the
      reputation of his company. After moving to Vancouver, Canada in 1991, Bob
      started his own sailing school, Windvalley Sailing School, which now has
      franchises located in Singapore and Japan. He is currently an
      Instructor/Director, and Evaluator with the International Sail and Power
      Association, a non-profit organization.

            Rounding out his business expertise, Bob is also a co-owner of EPPE
      Sportswear, which manufactures and markets their high quality snowboarding
      apparel internationally.

      Carl Whitehead, 28, Director and Head of Strategic Acquisitions and
      Partnerships

            During the period 1996-99, Carl was a corporate officer and director
      in Mushroom Innovations, Inc. and ePost Innovations, Inc., two
      technology-oriented companies the latter of which was acquired by CyPost.
      Between 1993-97 he was the founder and owner of Futuresite Productions, a
      computer service company which supplies, maintains, and services, home and
      business computers in the lower mainland. Specializing in the Windows95
      environment and TCP/IP protocols he naturally embraced this opportunity to
      develop CyPost into a competitive leader in the software industry. Carl
      has completed secondary business courses in accounting and finance.

      James T. Johnston, 59, Director.

            Mr. Johnston joined our Board in order to fill the vacancy created
      by the resignation of Steve Berry. Mr. Johnston is, and has been, a
      licensed pilot for Canadian Airlines for 34 years and an airline Captain
      for 28 years. Mr. Johnston has been active in representing the airline
      pilot's union in a number of capacities and has been involved in several
      high-level contract negotiations.

            Steven M. Berry, 40, acted as Director, Chief Executive Officer and
      President during 1999. Mr. Berry resigned from all positions, including
      directorships, held with CyPost and its subsidiaries on January 17, 2000
      citing personal reasons for his departure.

      Item 10. Executive Compensation.

            Steven M. Berry became Chief Executive Officer and Chief Operating

<PAGE>

      Office in January of 1999 and received an annual salary of $120,000. Mr.
      Berry had previously rendered consulting services to the Company prior to
      his formal installation as Chief Executive Officer and President. In
      connection with his agreement to become Chief Executive Officer, Mr. Berry
      was awarded 400,000 pre-split, or 600,000 post-split shares. Prior to that
      time, Carl Whitehead exercised primary executive responsibilities. Neither
      Mr. Whitehead nor any other executive officer received cash compensation
      in excess of $100,000 for the years 1997 and 1998. For the year ending
      December 31, 1998, Mr. Whitehead received cash compensation and expense
      reimbursement of $10,000.

            Mr. Robert Sendoh currently serves without pay as Chief Executive
      Officer of the CyPost. In addition, all directors currently serve without
      pay.

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

      (a)  Security Ownership of Certain Beneficial Owners.

            The following information relates to those persons known to the
      Issuer to be the beneficial owner of more than five percent (5%) of the
      Common Stock, par value $.001 per share, the only class of voting
      securities of the Issuer outstanding.

<TABLE>
<CAPTION>
                               Name and                 Amount and
   Title of                      Address of               Nature of                       Percentage
     Class                       Beneficial Owner          Beneficial Ownership              of Class*
<S>                           <C>                         <C>                                    <C>
   Common Stock, par value    Kelly Shane Montalban       6,062,550 Million shares               29.9%
   $0.001 per share           P.O Box 700,                direct and indirect beneficial
                              British Columbia VON 2EO    ownership
</TABLE>

      * Based on 20,246,692 shares issued and outstanding. Mr. Montalban's
      holdings indicated above include shares owned by Blue Heron Venture Fund
      Ltd. and Pacific Gate Capital Fund, the beneficial ownership of which is
      attributed to Mr. Montalban.

      ----------

<PAGE>

            The Company has not contacted stock brokerage firms holding shares
      of the Company's Common Stock in "street name" to determine whether there
      are additional substantial shareholders of the Company. 4,311,432 shares
      or 21.29% of the Common Stock outstanding is held in the name of Cede &
      Co., a nominee for Depository Trust Company, a stock clearing house
      servicing financial institutions.

      (b)   Security Ownership of Management.

            The number of shares of Common Stock of the Issuer owned by the
      Directors and Executive Officers of the Issuer is as follows:

<TABLE>
<CAPTION>
                               Name and                 Amount and
   Title of                      Address of               Nature of                       Percentage
     Class                       Beneficial Owner          Beneficial Ownership              of Class*
<S>                           <C>                         <C>                                    <C>
   Common stock, par value    Carl Whitehead                327,000 shares                       1.62%
   $0.001 per share           20 Oceanview Road             direct ownership
                              Vancouver, British
                              Columbia VON 2EO

    Common stock, par value   Robert Sendoh                 330,000 shares                       1.63%
    $0.001 per share          990 Beach Avenue, #304        direct ownership
                              Vancouver, British
                              Columbia V6Z 2N9

                  All Officers and Directors (2 persons):               657,000 shares                     3.24%
</TABLE>

      ----------

      * Based on 20,246,692 shares issued and outstanding. Forward-Looking
        Statements

      Item 12. Certain Relationships and Related Transactions.

<PAGE>

            On September 17, 1997, CyPost purchased all of the shares of ePost
      Canada Inc., a corporation organized, controlled, and operated by Mr.
      Whitehead. At the time of the negotiation and the actual purchase of these
      shares, Mr. Whitehead was not affiliated with CyPost and was neither an
      officer, director, nor a shareholder of CyPost. As a result of that
      transaction, Mr. Whitehead became a substantial shareholder in CyPost, and
      subsequent to that transaction became an officer and a Director of CyPost.

            On September 18, 1998, CyPost acquired, through a stock purchase,
      Communications Exchange Management, Inc., a corporation indirectly
      controlled by Mr. Whitehead. At the time of this transaction, Mr.
      Whitehead was an officer, Director and large shareholder of CyPost. The
      transaction was approved by a majority of CyPost's Directors. The Company
      issued 4,180,000 shares of common stock valued at $0.04 per share for an
      aggregate consideration of $4,180 in asset cost and has charged operations
      with an additional $167,200 as compensation expense. The Company acquired
      all the issued stock of Communications Exchange Management and its assets
      consisting of source code written for data encryption software, personal
      information management and electronic mail functionality along with the
      intellectual property rights to a number of other projects.

            CyPost has secured financing through its issuance of certain 8 %
      Demand Notes payable to Blue Heron Venture Capital Fund Ltd. ("Blue
      Heron"), a corporation in which Kelly Shane Montalban is deemed to have an
      "indirect pecuniary" interest as a result of Mr. Montalban's status as
      investment adviser for Blue Heron. The Demand Notes are unsecured and are
      convertible into common stock at such terms as may be agreed upon by the
      holder and the obligor. Between May and June of 1999, at a time when
      CyPost had virtually no operating revenues, it obtained $1 Million in
      financing through issuance of these Demand Notes. These Demand Notes were
      later converted into common shares with $ 1 Million of principal and
      associated accrued interest being converted at a price of $1 per share.
      Between July and November of 1999, the Company executed various further
      demand notes with similar terms and in November 1999, an aggregate
      principal amount of $3 Million together with associated accrued interest
      was converted at a price of $1 per share. Each borrowing and the execution
      of the associated Demand Note was approved by a disinterested majority of
      Directors.

      In connection with its February 2000 acquisition of Playa Corporation,
CyPost borrowed an additional $300,000 from Blue Heron, the terms of which are
substantially similar to those described above.

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

<PAGE>

      (a)  Exhibit No.          Description
           -----------          -----------

             2                  Certificate of Incorporation of Registrant*


             2.1                Certificate of Amendment to Certificate of
                                Incorporation of Registrant *

             2.2                Amended and Restated Certificate of
                                Incorporation *

             2.3                ByLaws *

             6.1                Preferred Supplier Agreement with Canadian
                                Bar Association **

             6.2                Lease re: CyPost headquarters (W. Georgia St.)
                                (Omitted - will be supplied on request)

             8.1                Acquisition Agreement dated as of
                                September 17, 1997 between the Issuer and

                                ePost Canada *

             8.2                Share Purchase Agreement dated as of
                                October 29,1998 between the Issuer and
                                Mushroom Innovations, Inc.*

             8.3                Share Purchase Agreement dated as of June
                                30, 1999 regarding acquisition of Hermes
                                Net Solutions Inc. shares *

             8.4                Share Purchase Agreement dated as of June
                                30, 1999 regarding acquisition of
                                InTouch.Internet Inc. shares *

             21                 List of Subsidiaries

             23                 Consent of Arthur Andersen LLP, Certified
                                Public Accountants

             27                 Financial Statement Schedule

      *Incorporated by reference from the Registration Statement on Form 10-SB
filed with the Commission on July 19, 1999.

      **Incorporated by reference from Amendment No. 1 to the Registration
Statement on Form

<PAGE>

10-SB filed with the Commission on March 9, 2000.

      (b)   The Registrant filed the following 8-K Reports during the last
            quarter of 1999:

            1. October 12, 1999 re: acquisition of Net Rover Inc. and Net Rover
               Office Inc.

(Item 2)

            2. October 19, 1999 re: change in Registrant's Certifying Accountant

(Item 4)

            3. November 12, 1999 re: acquisition of Connect Northwest Services
               LLC assets

(Item 2)

                                   SIGNATURES

            In accordance with Section 12 of the Securities Exchange Act of
      1934, the registrant caused this registration statement to be signed on
      its behalf by the undersigned, thereunto duly authorized.

                                             CYPOST CORPORATION


      Date: March 31, 2000                   By: /s/
                                             ----------------------------
                                             Robert Sendoh
                                             Chief Executive Officer

<PAGE>

CyPost Corporation

Consolidated Financial Statements
December 31, 1999

Together with Auditors' Report

<PAGE>

================================================================================
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
================================================================================

To the Shareholders of
CyPost Corporation:

We have audited the accompanying consolidated balance sheet of CYPOST
CORPORATION (a Delaware corporation) as of December 31, 1999 and the related
consolidated statements of operations, cash flows and shareholders' equity for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.

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

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

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

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

Vancouver, British Columbia
March 23, 2000.

<PAGE>

                               CYPOST CORPORATION
                           CONSOLIDATED BALANCE SHEETS
                            DECEMBER 31,1999 AND 1998
                                 (U.S. Dollars)

<TABLE>
<CAPTION>
                                                                      1999                 1998
                                                                  -----------          -----------
<S>                                                               <C>                  <C>
                                     ASSETS

CURRENT ASSETS
  Cash                                                            $   415,779          $    47,212
  Accounts receivable, net of allowance for
    doubtful accounts of $34,000 (1998-$Nil)                          233,188                   --
  Prepaids and deposits                                               173,319               27,998
  Other assets                                                         69,389               28,657
                                                                  -----------          -----------
                                                                      891,675              103,867

PROPERTY AND EQUIPMENT, net                                           599,582               22,330
GOODWILL AND OTHER INTANGIBLES, net of
  amortization of $458,758 (1998-$Nil)                              5,036,785                   --
                                                                  -----------          -----------

                                                                  $ 6,528,042          $   126,197
                                                                  -----------          -----------

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
   Accounts payable                                               $   849,300          $    11,090
   Accrued liabilities                                                133,937
   Loans                                                              875,000
   Deferred revenue                                                   626,143
                                                                  -----------          -----------
                                                                    2,484,380               11,090
                                                                  -----------          -----------

SHAREHOLDERS' EQUITY
   Share capital
      Authorized
         5,000,000 preferred stock with a par value of $.001
         30,000,000 common stock with a par value of $.O01
      Issued and outstanding
         Nil preferred stock
         20,327,038 common stock (1998- 13,264,500)                    20,327               13,264
   Paid-in capital                                                  8,960,121              530,616
   Deficit                                                         (4,919,896)            (428,773)
   Currency translation adjustment                                    (16,890)                  --
                                                                  -----------          -----------
                                                                    4,043,662              115,107
                                                                  -----------          -----------
                                                                  $ 6,258,042          $   126,197
                                                                  -----------          -----------
</TABLE>

Approved by the Directors:


_______________________________ Director


_______________________________ Director


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

<PAGE>

                               CYPOST CORPORATION
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                 (U.S. Dollars)

<TABLE>
<CAPTION>
                                                                                         Period From
                                                                                         September 5,
                                                   Year Ended         Year Ended           1997 to
                                                   December 31,       December 31,       December 31,
                                                       1999               1998                1997
                                                   ------------       ------------       ------------
<S>                                                <C>                <C>                <C>
REVENUE                                            $  1,020,347       $         --       $         --
DIRECT COSTS                                            563,118                 --                 --
                                                   ------------       ------------       ------------
                                                        457,229                 --                 --
                                                   ------------       ------------       ------------
EXPENSES
   Selling, general and administrative                2,007,779            422,540                 --
   Amortization and depreciation                        518,770              6,233                 --
   Development                                          209,303                 --                 --
                                                   ------------       ------------       ------------
                                                      2,735,852            428,773                 --
                                                   ------------       ------------       ------------
                                                     (2,278,623)          (428,773)                --

INTEREST EXPENSE                                      2,212,500                 --                 --
                                                   ------------       ------------       ------------
NET LOSS                                           $ (4,491,123)      $   (428,773)      $         --
                                                   ------------       ------------       ------------

LOSS PER SHARE, basic and diluted                  $      (0.28)      $      (0.06)      $         --
                                                   ------------       ------------       ------------
WEIGHTED AVERAGE NUMBER OF
   SHARES OUTSTANDING                                15,823,957          7,720,603            961,644
                                                   ============       ============       ============
</TABLE>

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

<PAGE>

                               CYPOST CORPORATION
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (U.S. Dollars)

<TABLE>
<CAPTION>
                                                                                                     Period From
                                                                                                     September 5,
                                                                Year Ended        Year Ended           1997 to
                                                                December 31,      December 31,       December 31,
                                                                   1999              1998                1997
                                                               -----------        -----------        -----------
<S>                                                            <C>                <C>                <C>
CASH FLOWS FROM OPERATING
   ACTIVITIES
      Net loss                                                 $(4,491,123)       $  (428,773)       $        --
      Add items not affecting cash
         Amortization and depreciation                             518,770              6,233                 --
         Interest expense                                        2,212,500                 --                 --
         Compensation expense                                           --            189,200                 --
                                                               -----------        -----------        -----------
                                                                (1,759,853)          (233,340)                --

      Changes in non-cash operating
         accounts
            Accounts receivable                                    (90,017)                --                 --
            Prepaids and deposits                                 (109,550)           (27,998)                --
            Other assets                                           (15,972)           (24,477)                --
            Accounts payable                                       583,787              9,125              1,965
            Accrued liabilities                                     61,417                 --                 --
            Deferred revenue                                       149,921                 --                 --
                                                               -----------        -----------        -----------
                                                                (1,180,267)          (276,690)             1,965
                                                               -----------        -----------        -----------

CASH FLOWS FROM INVESTING
   ACTIVITIES
      Acquisitions of businesses, less cash
         therein of $115,953                                    (3,612,066)                --                 --
    Property and equipment purchases                              (270,100)           (10,833)           (17,730)
                                                               -----------        -----------        -----------
                                                                (3,882,166)           (10,833)           (17,730)
                                                               -----------        -----------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Loan                                                       4,875,000                 --                 --
      Sale of common stock                                         556,000            330,500             20,000
                                                               -----------        -----------        -----------
                                                                 5,431,000            330,500             20,000
                                                               -----------        -----------        -----------

INCREASE IN CASH                                                   368,567             42,977              4,235
CASH, beginning of period                                           47,212              4,235                 --
                                                               -----------        -----------        -----------
CASH, end of period                                            $   415,779        $    47,212        $     4,235
                                                               -----------        -----------        -----------
CASH PAID DURING THE PERIOD FOR
   Interest                                                    $        --        $        --        $        --
   Income taxes                                                         --                 --                 --
</TABLE>

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

<PAGE>

                               CYPOST CORPORATION
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                                 (U.S. Dollars)

<TABLE>
<CAPTION>
                                                                     Common Stock         Additional
                                                               ------------------------     Paid-in
                                                                 Number       Amount        Capital        Deficit         Total
                                                              -----------   -----------   -----------    -----------    -----------
<S>                                                             <C>         <C>           <C>            <C>            <C>
Incorporation date, September 5, 1997
    Issued for acquisition of ePOST Innovations, Inc.           3,000,000   $     3,000   $    (1,000)   $        --    $     2,000
    Issued on sale of units                                       600,000           600        19,400             --         20,000
                                                              -----------   -----------   -----------    -----------    -----------
Balance, December 31, 1997                                      3,600,000         3,600        18,400             --         22,000
    Issued on sale of units                                     2,400,000         2,400        77,600             --         80,000
    Issued for cash                                                57,000            57        18,943             --         19,000
    Issued for legal services                                      22,500            22         7,478             --          7,500
    Issued for acquisition of Communication
      Exchange Management, Inc.                                 6,270,000         6,270       165,110             --        171,380
    Issued for exercise of warrants                               915,000           915       243,085             --        244,000
    Net loss                                                           --            --            --       (428,773)      (428,773)
                                                              -----------   -----------   -----------    -----------    -----------
Balance, December 31, 1998                                     13,264,500        13,264       530,616       (428,773)       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
    Subscribed for acquisition of Internet Arena                   80,558            81       239,919             --        240,000
    Net loss                                                           --            --     2,212,500     (4,491,123)    (2,278,623)
                                                              -----------   -----------   -----------    -----------    -----------
Balance, December 31, 1999                                     20,327,038   $    20,327   $ 8,960,121    $(4,919,896)   $ 4,060,552
                                                              ===========   ===========   ===========    ===========    ===========
</TABLE>

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

1.    NATURE OF OPERATIONS AND GOING CONCERN

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

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

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

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

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

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      Consolidation

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

      Foreign Currency Translation

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

      Use of Estimates

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

      Financial Instruments

      The Company has, where appropriate, estimated the fair value of financial
      instruments. These fair value amounts may be significantly affected by the
      assumptions used, including the discount rate and estimates of cash flow.
      Accordingly, the estimates are not necessarily indicative of the amounts
      that could be realized in a current market exchange. Where these estimates
      approximate carrying value, no separate disclosure of fair value is shown.

      Property and Equipment

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

      Earnings (Loss) per Share

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

      The number of shares used in calculating basic and diluted earnings (loss)
      per share is 15,823,957 for 1999 (1998- 7,720,603).

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Revenue Recognition and Deferred Revenue

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

      Selling and Marketing Costs

      Selling and marketing costs are expensed as incurred.

      Software Development Costs

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

      Goodwill and Other Intangible Assets

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

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

      Income Taxes

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

      Reclassifications

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      Accounting for Derivative Instruments and Hedging Activities

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

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

      Stock-Based Compensation

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

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

      Pensions and Other Postretirement Benefits

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

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

      Recent Accounting Pronouncements

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

3.    ACQUISITIONS

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

      NetRover Inc. and NetRover Office Inc.

      On October 4, 1999, the Company acquired all of the shares of NetRover
      Inc. and NetRover Office Inc. for Cdn. $4 million (U.S. $2.7 million). The
      consideration for the purchase included cash of Cdn. $3 million (U.S. $2
      million) and 219,000 shares of common stock for Cdn. $1 million (U.S.
      $680,000). NetRover Inc. and NetRover Office Inc. are based in Toronto,
      Canada.

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

      Hermes Net Solutions Inc.

      On June 30, 1999, the Company acquired all of the shares of Hermes Net
      Solutions Inc. for cash consideration of Cdn. $777,000 (U.S. $528,000).
      Hermes Net Solutions Inc. is based in Vancouver, Canada.

      The purchase included goodwill and other intangibles of Cdn. $644,000
      (U.S. $437,000) which will be amortized on a straight-line basis over its
      estimated useful life of three years.

      InTouch.Internet Inc.

      On June 30, 1999, the Company acquired all of the shares of
      InTouch.Internet Inc. for Cdn. $428,000 (U.S. $293,000). The consideration
      for the purchase included cash of Cdn. $386,000 (U.S. $265,000) and 9,855
      shares of common stock for a value of $42,000 (U.S. $28,000).
      InTouch.Internet Inc. is based in Vancouver, Canada.

      The purchase included goodwill and other intangibles of Cdn. $470,000
      (U.S. $322,000) which will be amortized on a straight-line basis over its
      estimated useful life of three years.

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

3.    ACQUISITIONS (Continued)

      Internet Arena

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

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

      Connect Northwest

      On October 27, 1999, the Company purchased certain assets and liabilities
      of the business of Connect Northwest for $1.4 million. The consideration
      for the purchase included cash of $670,000, amount payable of $70,000 and
      147,985 shares of common stock for a value of $660,000. Connect Northwest
      is based in Washington State, United States.

      The purchase included goodwill and other intangibles of $1.3 million which
      will be amortized on a straight-line basis over its estimated useful life
      of three years.

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

      ePOST Innovations, Inc.

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

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

      The transaction has been accounted for as a related party transfer and is
      accounted for using historic costs with the recording of the net assets
      acquired at their historical book value.

      Communication Exchange Management, Inc.

      On September 18, 1998, the Company acquired Communication Exchange
      Management, Inc. ("CEM"), a subsidiary of Mushroom. The Company issued
      6,270,000 shares of common stock valued at $0.027 per share for
      consideration of $171,380 for all of the issued and outstanding stock of
      CEM. $167,200 of the purchase price was designated as compensation.

      The transaction has been accounted for as a related party transfer and is
      accounted for using historic costs with the recording of the net assets
      acquired at their historical book value.

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

4.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:

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

      Office and computer equipment           $   1,008,405     $      28,563
         Less- Accumulated depreciation            (408,823)           (6,233)
                                              -------------     --------------

                                              $     599,582     $      22,330
                                              =============     =============

5.    GOODWILL AND OTHER INTANGIBLES

      Goodwill and other intangibles consist of the following:

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

      Customer lists                          $   3,663,000     $          --
      Goodwill                                    1,832,543                --
                                              -------------     -------------

                                                  5,495,543                --
         Less- Accumulated amortization            (458,758)               --
                                              -------------     -------------

                                              $   5,036,785     $          --
                                              =============     =============

6.    LOANS

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

                                               Shares
                                    -----------------------------
                   Principal         Pre-Split         Post-Split
                 -------------      -----------       -----------
                 $   1,000,000        1,000,000         1,500,000
                     3,000,000        2,000,000         3,000,000
                       875,000          437,500           656,250

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

6.    LOANS (Continued)

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

      Subsequent to year end, the lender has offered to lend a further
      $10,000,000 to the Company under similar terms except that the loans are
      convertible to 4,000,000 shares of common stock at a conversion price of
      $2.50 per share. The lender has the option to withdraw its offer to lend
      any amount of the $10,000,000 at any time.

7.    SHARE CAPITAL

      Authorized Stock

      The Company is authorized to issue:

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

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

      Share Split

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

      Common Stock Subscribed

      As at December 31, 1999, the Company is obligated to issue 80,558 shares
      of common stock as consideration for the purchase of the assets of
      Internet Arena. Share capital and paid-in capital include $81 and
      $239,919, respectively, in respect of these common stock.

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

7.    SHARE CAPITAL (Continued)

      Sale of Units and Warrants

      In 1997, the Company offered for sale to persons who qualified as
      "accredited investors" as defined under Regulation D promulgated by the
      Securities and Exchange Commission 2,000,000 units at $0.05 per unit. Each
      unit consists of one share of the Company's common stock and one warrant
      to purchase one share of common stock at $0.27 per share.

      In 1997, the Company sold 400,000 units for aggregate consideration of
      $20,000. In 1998, the Company sold an additional 1,600,000 units for
      aggregate consideration of $80,000 less offering expenses of $20,000.

      During 1998, the Company issued 915,000 shares of common stock through the
      exercise of 610,000 warrants for aggregate consideration of $244,000. As
      of December 31, 1998, 1,390,000 warrants were outstanding. These warrants
      were exercised for 2,085,000 shares of common stock during 1999 and at
      December 31, 1999, there are no warrants outstanding.

      Private Placement

      Pursuant to a private placement pursuant to Rule 504 of Regulation D, the
      Company offered on March 26, 1998, 57,000 shares of common stock at $0.33
      per share. As of April 30, 1998, the Company sold an aggregate 57,000
      shares of common stock for an aggregate consideration of $19,000. On April
      30, 1998, the Company sold 22,500 shares of common stock pursuant to Rule
      504 of Regulation D to Kaplan Gottbetter and Levenson, LLP in
      consideration for $7,500 in legal fees valued at $0.33 per share.

8.    INCOME TAXES

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

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

<PAGE>

                               CYPOST CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1999
                                 (U.S. Dollars)

8.    INCOME TAXES (Continued)

      At December 31, 1999, the Company has net operating loss carryforwards for
      income tax purposes of approximately $600,000 which are available to
      offset future taxable income. The Company's utilization of these
      carryforwards may be restricted due to changes in ownership of
      subsidiaries during the year. The components of the deferred tax asset as
      of December 31, 1999 and 1998 are as follows:

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

      Net operating loss carryforwards          $     270,000     $      82,000
         Less- Valuation allowance                    270,000            82,000
                                                -------------     -------------

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

9.    COMMITMENTS

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

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

<PAGE>

                               CYPOST CORPORATION
                         NOTES TO FINANCIAL STATEMENTS
                               DECEMBER 31, 1999
                                 (U.S. Dollars)

10.   PRO FORMA DISCLOSURES ON BUSINESS COMBINATIONS (UNAUDITED)

      As described in Note 3, the Company completed various business and asset
      acquisitions during 1999. The following presents unaudited pro forma
      financial information as though each of the transactions occurred on
      January 1, 1999. Unaudited pro forma statement of operations in respect of
      the businesses acquired in 1999 for the year ended December 31, 1998 are
      not materially different from the amounts reported below.

      Pro Forma Condensed Statement of Operations for the Year Ended December
      31, 1999

<TABLE>
<CAPTION>
                                                         CyPost           Hermes            InTouch         NetRover
                                                     -------------     -------------    -------------     ------------
<S>                                                  <C>               <C>              <C>               <C>
      Revenue                                        $      13,000     $     428,000    $     322,000     $   1,812,000

      Net income (loss)                                 (4,050,000)           24,000           35,000           138,000

                                                                         Internet           Connect
                                                                           Arena           Northwest          Total
                                                                       -------------    -------------     -------------

      Revenue                                                          $     537,000    $     653,000     $   3,765,000

      Net income (loss)                                                      (53,000)         (90,000)       (3,996,000)

      Loss per share                                                                                              (0.25)
</TABLE>

11.   NON-CASH INVESTING AND FINANCING ACTIVITIES

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

12.   SUBSEQUENT EVENT

      Acquisition of Playa Corporation

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