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

                                   FORM 10-QSB

(Mark One)

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

                 For the quarterly period ended: March 31, 2001

                                       OR

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

     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 of incorporation          (IRS Employer
or organization)                                       Identification Number)

     900-1281 West Georgia St., Vancouver, British Columbia, Canada      V6E 3J7
-------------------------------------------------------------------------------
     (Address of Principal Executive Offices)                         (Zip Code)

                                 (604) 904-4422
--------------------------------------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

     Not Applicable
--------------------------------------------------------------------------------
(Former Name, Former Address and Former Fiscal Year, if Changed Since Last
Report)

     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 [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

     Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

         The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and pursuant to the rules and regulations of the Securities
and Exchange Commission ("Commission"). While these statements reflect all
normal recurring adjustments which are, in the opinion of management, necessary
for fair presentation of the results of the interim period, they do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and footnotes thereto, which are included in the Annual
Report on Form 10-KSB, as amended, of CyPost Corporation (the "Company"), for
the fiscal year ended December 31, 2000, previously filed with the Commission.

         The Company's business operations are presently conducted in Canada and
the United States. Dollar values in this Report are expressed in U.S. Dollars,
unless indicated otherwise. On March 31, 2001, one Canadian Dollar ("CDN") was
worth $.6342 U.S. Dollars.

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


                                       2
<PAGE>
<TABLE>
                                     CYPOST CORPORATION AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                    MARCH 31, 2001 AND DECEMBER 31, 2000
                                               (U.S. Dollars)
<CAPTION>
                                                                                  2001              2000
                                                                              -----------       -----------
                                                                              (Unaudited)        (Audited)
ASSETS

CURRENT ASSETS
<S>                                                                           <C>               <C>
     CASH                                                                     $   185,811       $   250,631
     ACCOUNTS RECEIVABLE, NET OF ALLOWANCE                                        297,031           173,207
     INSURANCE PROCEEDS RECEIVABLE                                                 38,984            58,488
     PREPAIDS AND DEPOSITS                                                        145,453           250,534
                                                                              -----------       -----------
                                                                                  667,279           732,860

PROPERTY AND EQUIPMENT, NET                                                       712,054           751,020

 GOODWILL AND OTHER INTANGIBLES, NET OF                                         2,735,052         3,193,015
      ACCUMULATED AMORTIZATION
 OTHER ASSETS                                                                       4,079             5,371
                                                                              -----------       -----------

                                                                              $ 4,118,464       $ 4,682,266
                                                                              ===========       ===========
 LIABILITIES AND SHAREHOLDERS EQUITY

 CURRENT LIABILITIES
      ACCOUNTS PAYABLE & ACCRUED LIABILITIES                                  $ 1,057,543       $ 1,026,666
      LOANS                                                                     2,110,000         2,110,000
      DEFERRED REVENUE                                                            626,746           640,483
                                                                              -----------       -----------
      TOTAL CURRENT LIABILITIES                                                 3,794,289         3,777,149
                                                                              -----------       -----------
 COMMITMENTS AND CONTINGENCIES

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

           ISSUED AND OUTSTANDING
             PREFERRED STOCK - NONE                                                     0                 0
             COMMON STOCK 21,559,493 - 2001, 21,556,993 - 2000                     21,560            21,557
      PAID-IN CAPITAL                                                          14,048,816        14,047,544
      ACCUMULATED DEFICIT                                                     (13,744,989)      (13,197,006)
      CURRENCY TRANSLATION ADJUSTMENT                                              (1,212)           33,022
                                                                              -----------       -----------
      TOTAL STOCKHOLDERS' EQUITY                                                  324,175           905,117
                                                                              -----------       -----------
                                                                              $ 4,118,464       $ 4,682,266
                                                                              ===========       ===========

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

                                       3
<PAGE>
<TABLE>
                                     CYPOST CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF OPERATIONS
                             FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                               (U.S. Dollars)
<CAPTION>

                                                                                 2001               2000
                                                                              -----------       -----------
<S>                                                                           <C>               <C>
REVENUE                                                                        $1,063,823       $ 1,039,560

DIRECT COSTS                                                                     (428,671)         (620,381)

                                                                                  635,152           419,179
                                                                              -----------       -----------
EXPENSES
          SELLING, GENERAL AND ADMINISTRATIVE                                     622,952         1,007,783
          AMORTIZATION AND DEPRECIATION                                           518,857           659,092
                                                                              -----------       -----------
                                                                                1,141,809         1,666,875
                                                                              -----------       -----------

LOSS BEFORE OTHER INCOME (EXPENSE)                                               (506,657)       (1,247,696)
                                                                              -----------       -----------
OTHER INCOME (EXPENSE)

NET PROCEEDS FROM FIRE INSURANCE                                                        0           107,271

INTEREST EXPENSE                                                                  (41,326)         (179,284)

MINORITY INTEREST                                                                       0            15,956
                                                                              -----------       -----------
NET LOSS                                                                      $  (547,983)      $(1,303,753)
                                                                              -----------       -----------


LOSS PER SHARE BASIC & DILUTED                                                $     (0.03)      $     (0.06)
                                                                              ===========       ===========

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING                                  21,559,521        20,646,690
                                                                              ===========       ===========


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


                                        4
<PAGE>
<TABLE>
                                     CYPOST CORPORATION AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                             FOR THE THREE MONTHS ENDED MARCH 31, 2001 AND 2000
                                               (U.S. Dollars)
<CAPTION>

                                                                                 2001               2000
                                                                              -----------       -----------

CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                           <C>               <C>
      NET LOSS                                                                $  (547,983)      $(1,303,753)
      Adjustments to reconcile net loss to cash used by
          operating activities:
             Amortization and depreciation                                        518,857           659,092
             Interest expense                                                      41,326           179,284
             Fair value of stock issued for services                                1,275                 -
             Net recovery from fire insurance                                           -          (107,271)
                                                                              -----------       -----------
                                                                                   13,475          (572,648)
      Changes in non-cash operating accounts                                      (56,367)          167,449
                                                                              -----------       -----------

NET CASH USED BY OPERATING ACTIVITIES                                             (42,892)         (405,199)
                                                                              -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES
      Acquisition of business                                                           -          (300,000)
      Purchase of property and equipment                                          (21,928)         (231,088)
      Investment in software development                                                -           (67,488)
                                                                              -----------       -----------

NET CASH USED IN INVESTING ACTIVITIES                                             (21,928)         (598,576)
                                                                              -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES
      Loan proceeds                                                                     -         1,025,000
                                                                              -----------       -----------

NET CASH PROVIDED BY FINANCING ACTIVITIES                                               -         1,025,000
                                                                              -----------       -----------

NET INCREASE IN CASH                                                              (64,820)           21,225

CASH, BEGINNING OF PERIOD                                                         250,631           415,779
                                                                              -----------       -----------

CASH, END OF PERIOD                                                           $   185,811       $   437,004
                                                                              ===========       ===========


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



                                       5
<PAGE>
<TABLE>
                                     CYPOST CORPORATION AND SUBSIDIARIES
                                CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                                  FOR THE THREE MONTHS ENDED MARCH 31, 2001
                                               (U.S. Dollars)
<CAPTION>

                                                              Additional                   Cummulative
                                           Common Stock         Paid-in                    Translation
                                         Number      Amount     Capital       Deficit       Adjustment      Total
                                       -----------  -------   -----------   -------------  ------------   ---------
<S>                                    <C>           <C>       <C>          <C>               <C>          <C>
BALANCE, JANUARY 1, 2001               21,556,993   $21,557   $14,047,544   $(13,197,006)    $ 33,022     $ 905,117
   Issued for services                      2,500         3         1,272                                     1,275
   Cummulative translation adjustment                                                         (34,234)      (34,234)
   Net loss                                                                     (547,983)                  (547,983)
BALANCE, MARCH 31, 2001                21,559,493   $21,560   $14,048,816   $(13,744,989)    $ (1,212)    $ 324,175






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

</TABLE>

                                        6
<PAGE>
                               CYPOST CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2001
                                   (UNAUDITED)

                                 (U.S. Dollars)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

   GOING CONCERN

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

         Several conditions and events cast doubt about the Company's ability to
   continue as a going concern. The Company has incurred net losses of
   approximately $13.7 million for the period from inception September 5, 1997
   to March 31, 2001, has a working capital deficit of approximately $3.1
   million at March 31, 2001, and requires additional financing for its business
   operations.

         The Company is streamlining operations and consolidating its ISP's to
   enhance efficiency and reduce operating expenses. As a result of the
   foregoing efforts, the operations of Intouch Internet Inc. and NetRover
   Office Inc. have been fully consolidated into the Company's wholly-owned
   subsidiary, NetRover Inc.

         These consolidated 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
   doubts 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 and the reported revenues and
   expenses.

   INTERIM FINANCIAL STATEMENTS

         The interim consolidated financial statements presented have been
   prepared by the Company without audit and, in the opinion of the management,
   reflect all adjustments of a normal recurring nature necessary for a fair
   statement of (a) the consolidated results of operations for the three months
   ended March 31, 2001 and 2000, (b) the consolidated financial position at
   March 31, 2001, (c) the consolidated statement of stockholders' equity for
   the three months ended March 31, 2001 and (d) the consolidated cash flows for
   the three months ended March 31, 2001 and 2000. Interim results are not
   necessarily indicative of results for a full year.

         The consolidated balance sheet presented as of December 31, 2000 has
   been derived from the consolidated financial statements that have been
   audited by the Company's independent auditors. The consolidated financial
   statements and notes are condensed as permitted by Form 10-QSB and do not
   contain certain information included in the annual financial statements and
   notes of the Company. The consolidated financial statements and notes
   included herein should be read in conjunction with the financial statements
   and notes included in the Company's Annual Report on Form 10-KSB.

   CONSOLIDATION

         The consolidated financial statements include the accounts of CyPost
   Corporation and its subsidiaries. In 2000, the subsidiaries include CyPost
   KK, Playa Corporation, ePost Innovations Inc., NetRover Inc., NetRover Office
   Inc., Hermes Net Solutions Inc., and Intouch.Internet Inc. All of the
   subsidiaries, except CyPost KK, are wholly owned. Later in 2000, the Company
   sold its investment in CyPost KK and abandoned its investment in Playa
   Corporation. Connect Northwest and Internet Arena are DBA of CyPost
   Corporation. All significant inter-company transactions and balances have
   been eliminated in consolidation.

                                       7
<PAGE>
2. SHARE CAPITAL

         On March 31, 2001, the Company reflected the issuance of 2,500 shares
   of its common stock in an aggregate amount of $1,275 to one consultant at the
   closing price of $0.51 per share in consideration for his providing certain
   services to the Company. As of March 31, 2001, these shares have not been
   issued, however for purposes of financial statement presentation, all shares
   were deemed issued as of March 31, 2001.

         On January 10, 2001, the Company issued an option to purchase 1,000,000
   shares of the Company's common stock to Robert Adams, President, Chief
   Operating Officer, Secretary and Treasurer of the Company, and an option to
   purchase 125,000 shares of the Company's common stock to Tami Allan, Vice
   President of North American Operations of the Company. The exercise price of
   each option is $.10 per share and vests over time.

3. COMMITMENTS AND CONTIGENCIES

            Canada Post Litigation

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

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

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

            By order of the Federal Court dated January 25, 2001, ePost
   Innovations was required to appoint new counsel in this matter, failing which
   Canada Post would be permitted to move to strike ePost Innovations' Statement
   of Defense and Counterclaim. On April 6, 2001, the Federal Court ruled on
   Canada Post's November 24, 1999 motion, whereby it was ordered that certain
   portions of ePost Innovations' Statement of Defense and Counterclaim be
   stricken, and that by a Supplemental Order of the Federal Court dated April
   9th, 2001, Canada Post be required to file its Reply and Defense to
   Counterclaim by April 25, 2001. Canada Post has filed a motion to extend the
   time for filing its Reply and Defense to Counterclaim, which is scheduled to
   be heard by the Federal Court on May 14, 2001. ePost Innovations does not
   intend to oppose the motion. Canada Post's motion to extend time includes a
   motion to strike ePost Innovations' Defense and Counterclaim for failure to
   appoint new counsel. Canada Post is prepared to withdraw this aspect of its
   motion if ePost Innovations appoints new counsel by May 11, 2001. ePost
   Innovations did not appoint new counsel by such date.

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

                                       8
<PAGE>
            Berry Litigation

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

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

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

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

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

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

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

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

                                       9
<PAGE>

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

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

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

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

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

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


                                       10
<PAGE>

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

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


                                       11
<PAGE>
Overview

         The Company is engaged in the business of providing Internet service
provider ("ISP") services ("ISP Services") for business and personal use.
Previously, the Company was also involved in developing certain software
products, which activities the Company no longer pursues.

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

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

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

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

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

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

         The Company is also consolidating Web hosting and dedicated services
into Toronto, a process which began in late-2000 and is expected to be completed
by late-2001. Other ISP Services such as e-mail and user authentication (i.e.,
customer security) will continue to be


                                       12
<PAGE>

handled from regional data centers. Beginning in early 2001, all new Web hosting
customers, wherever located, are being hosted from Toronto. As a result of the
foregoing efforts, the operations of Intouch Internet Inc. and NetRover Office
Inc. have been fully consolidated into the Company's wholly-owned subsidiary,
NetRover Inc. ("NetRover"). The Company is also considering implementing other
consolidated services to achieve greater efficiency and cost savings.

Results of Operations for the Three Months Ended March 31, 2001 Compared to the
Three Months Ended March 31, 2000

         Substantially all of the Company's revenue was earned from its ISP
operations during the three months ended March 31, 2001. These revenues are
attributable virtually entirely to the operations of the Company's ISP
businesses (Hermes Net Solutions, Inc. and NetRover, and the Connect Northwest
Internet Services and Internet Arena DBAs) which the Company acquired beginning
late in the second quarter of 1999. The Company generated net sales of
$1,063,823 for the three months ended March 31, 2001 compared to $1,039,560 for
the three months ended March 31, 2000, indicating relative stability in revenue
derived from ISP services.

         Direct costs, which consist primarily of telecommunications charges in
respect of providing Internet connection services to customers, of $428,671,
were incurred for the three months ended March 31, 2001, compared to $620,381
for the three months ended March 31, 2000. The decrease in the above noted
expenses for the three months ended March 31, 2001 compared to the three months
ended March 31, 2000 results primarily from receiving service level agreement
credits from certain telecommunication providers.

         Selling, general and administrative expenses were $622,952 for the
three months ended March 31, 2001 compared to $1,007,783 for the three months
ended March 31, 2000. The decrease in the above noted expenses for the three
months ended March 31, 2001 compared to the three months ended March 31, 2000
results primarily from a reduction in salaries and benefits, the abandonment of
Playa Corporation and consolidation of the operation of the Company's ISP
businesses.

         The Company incurred interest expense of $41,326 for the three months
ended March 31, 2001, compared to $179,284 for the three months ended March 31,
2000, which amount included $35,784 of interest expense for the three months
ended March 31, 2000 in respect of promissory notes issued by the Company in
favor of Blue Heron Venture Fund, Ltd. (the "Blue Heron Demand Notes"), the
Company's principal creditor. These notes are unsecured, bear interest at 8% per
annum and are payable on demand. The decrease in interest expense is primarily
the result of the fact that because the Company did not borrow any additional
funds during the three months ended March 31, 2001, it did not incur any
beneficial conversion feature for such period, partially offset by an increase
in interest incurred with respect to the outstanding balance of the Blue Heron
Demand Notes. See "Liquidity and Capital Resources" below.


                                       13
<PAGE>

         The Company had a net loss of $547,983, or $.03 per share, for the
three months ended March 31, 2001, compared to a net loss of $1,303,753, or $.06
per share, for the three months ended March 31, 2000. The decrease in net loss
for the three months ended March 31, 2001 was primarily a result of significant
decreases in direct costs; selling, general and administrative expenses;
amortization and depreciation of the assets acquired in the fiscal year 1999;
and interest expense.

Liquidity and Capital Resources

         The accompanying financial statements have been prepared on a going
concern basis, which assumes that the Company will continue in operation for at
least one year and will be able to realize its assets and discharge its
liabilities in the normal course of business. The Company incurred a net loss
for the three months ended March 31, 2001 of $547,983, compared to a net loss
for the three months ended March 31, 2000 of $1,303,753. As of March 31, 2001,
the Company had a working capital deficit of $3,127,010, which is primarily due
to the Company's use of current assets to acquire its ISP and Software Products
businesses, and professional fees. These factors indicate that the Company's
continuation as a going concern is dependent upon its ability to obtain adequate
financing.

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

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

         During the fiscal year ended December 31, 2000, the Company borrowed an
additional $1,210,000 from Blue Heron. The Company did not borrow any additional
funds during the three months ended March 31, 2001. As of March 31, 2001, the
aggregate outstanding principal amount of the loans was $2,085,000. If the Blue
Heron Demand Notes in such aggregate principal amount were converted, Blue Heron
would be entitled to an additional 2,780,000 shares of the Company's Common
Stock.


                                       14
<PAGE>

         Blue Heron is free to withdraw this credit facility at any time, and
since these loans are payable on demand, the Company's ability to continue
operations is dependent upon the willingness of Blue Heron to forbear from
demanding payment. The Company believes that Blue Heron will continue to forbear
payment of the loans for the immediately foreseeable future, but it is under no
obligation to do so. Should Blue Heron demand payment, the Company would be
required to obtain financing from other sources to satisfy its obligations or
would be in default under the loans. The Company does not believe that bank
borrowings are available under present circumstances, and there can be no
assurance that any financing could be obtained from other sources. Even if
funding were available, it might be available only on terms which would not be
favorable to the Company or which Management would not find acceptable.

         On April 11, 2001, the Company received a letter from Blue Heron,
stating its willingness to renegotiate the terms of the Blue Heron loans from
demand loans to term loans. No negotiations have commenced as of the date of
filing this Report and no assurance can be given that negotiations will be
undertaken. The actual terms of any such renegotiation are subject to agreement
between the Company and Blue Heron, and no assurance can be given that the
parties will reach agreement on the new terms of the loans. Kelly Shane
Montalban, a principal stockholder of the Company, may be deemed to have an
indirect pecuniary interest in Blue Heron as a result of his status as fund
manager for Blue Heron. Blue Heron is also a principal stockholder of the
Company. Blue Heron may be deemed to be an affiliate of Pacific Gate, another of
the Company's lenders, in which Mr. Montalban is the sole stockholder, sole
director and sole officer.

         During the fiscal year ended December 31, 2000, the Company borrowed an
aggregate $125,000 from Pacific Gate, of which amount $25,000 was outstanding on
March 31, 2001. These loans bear interest at 8% per annum and are payable on
demand. Since these loans are payable on demand, the Company's ability to
continue operations is dependent upon the willingness of Pacific Gate to forbear
from demanding payment. The Company believes that Pacific Gate will continue to
forbear payment of the loans for the immediately foreseeable future, but it is
under no obligation to do so. Should Pacific Gate demand payment, the Company
would be required to obtain financing from other sources to satisfy its
obligations or would be in default under the loans. The Company does not believe
that bank borrowings are available under present circumstances, and there can be
no assurance that any financing could be obtained from other sources. Even if
funding were available, it might be available only on terms which would not be
favorable to the Company or which management would not find acceptable.

         On April 11, 2001, the Company received a letter from Pacific Gate,
stating its willingness to renegotiate the terms of the Pacific Gate loans from
demand loans to terms loans. No negotiations have commenced as of the date of
filing this Report and no assurance can be given that negotiations will be
undertaken. The actual terms of any such renegotiation are subject to agreement
between the Company and Pacific Gate, and no assurance can be given that the
parties will reach agreement on the new terms of the loans. Pacific Gate is an
affiliate of Kelly Shane Montalban, a principal stockholder of the Company, who
is also the sole stockholder, sole director and sole officer of


                                       15
<PAGE>

Pacific Gate; and may be deemed to be an affiliate of Blue Heron through Kelly
Shane Montalban, who is fund manager for Blue Heron.

         The Company's cash position during the three months ended March 31,
2001 was $185,811, compared to $250,631 on December 31, 2000. This decrease is
primarily due to the Company's not borrowing additional funds during the three
months ended March 31, 2001.

         The Company's net cash used in operating activities totaled $42,892
during the three months ended March 31, 2001, compared to $405,199 during the
three months ended March 31, 2000. This decrease is primarily due to
streamlining and consolidating of the Company's ISP Services operations, and
termination and resignation of employees in the Vancouver office during 2000.

         The Company's net cash used in investing activities totaled $21,928
during the three months ended March 31, 2001, compared to $598,576 during the
three months ended March 31, 2000. This decrease is primarily due to the
Company's not acquiring any new businesses and making significantly fewer
purchases of property and equipment during the three months ended March 31,
2001.

         The Company did not have any proceeds from financing activities during
the three months ended March 31, 2001, compared to $1,025,000 of such proceeds
during the three months ended March 31, 2000.

                           PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

Canada Post Litigation

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

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


                                       16
<PAGE>

pre-trial discovery (except to the extent that some was done as part of the
summary judgment application) and no trial date has been set.

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

         By order of the Federal Court dated January 25, 2001, ePost Innovations
was required to appoint new counsel in this matter, failing which Canada Post
would be permitted to move to strike ePost Innovations' Statement of Defense and
Counterclaim. On April 6, 2001, the Federal Court ruled on Canada Post's
November 24, 1999 motion, whereby it was ordered that certain portions of ePost
Innovations' Statement of Defense and Counterclaim be stricken, and that by a
Supplemental Order of the Federal Court dated April 9th, 2001, Canada Post be
required to file its Reply and Defense to Counterclaim by April 25, 2001. Canada
Post has filed a motion to extend the time for filing its Reply and Defense to
Counterclaim, which is scheduled to be heard by the Federal Court on May 14,
2001. ePost Innovations does not intend to oppose the motion. Canada Post's
motion to extend time includes a motion to strike ePost Innovations' Defense and
Counterclaim for failure to appoint new counsel. Canada Post is prepared to
withdraw this aspect of its motion if ePost Innovations appoints new counsel by
May 11, 2001. ePost Innovations did not appoint new counsel by such date.

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

Item 2.  Changes in Securities

         On January 10, 2001, the Company issued an option to purchase 1,000,000
shares of the Company's common stock to Robert Adams, President, Chief Operating
Officer, Secretary and Treasurer of the Company, and an option to purchase
125,000 shares of the Company's common stock to Tami Allan, Vice President of
North American Operations of the Company. The exercise price of each option is
$.10 per share and vests over time. The options were issued pursuant to the
exemption from registration contained in Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act"), for transactions by an issuer not
involving a public offering or Regulation S promulgated thereunder for
transactions by an issuer outside the United States.

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


                                       17
<PAGE>

         On June 8, 2000, the Company issued 771,426 shares of its Common Stock
to the selling stockholders of Playa Corporation ("Playa") as partial payment of
the purchase price $3,000,000 in connection with the Company's acquisition of
that company. Due to the discovery of a clerical error in the share conversion
price of the terms of the transaction, an additional 14,029 shares of the
Company's Common Stock were issued to the selling stockholders of Playa on
January 23, 2001. These shares were issued pursuant to the exemption from
registration contained in Section 4(2) of the Securities Act for transactions by
an issuer not involving a public offering or Regulation S promulgated thereunder
for transactions by an issuer outside the United States.

Item 6.  Exhibits and Reports on Form 8-K

         (a)   Exhibits

         10.1  Capacity Agreement dated January 4, 2001 between Verizon
               Northwest Inc. and CyPost Corporation for the State of Washington

         10.2  Stock Option Agreement dated as of January 12, 2001 between the
               Company and Robert Adams

         10.3  Stock Option Agreement dated as of January 12, 2001 between the
               Company and Tami Allan

         (b)   Reports on Form 8-K

                  None.


                                       18
<PAGE>

                                    SIGNATURE

         In accordance with the requirements of the Exchange Act, the registrant
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                       "Registrant"

                                       CYPOST CORPORATION


DATE:  May 15, 2001                    By:  /s/ Robert Adams
                                           --------------------
                                           Robert Adams
                                           President and Treasurer
                                           (Principal Financial Officer)



                                       19