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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

(Mark one)

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

For the quarterly period ended June 30, 2001

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

For the transition period from ___________________ to ___________________

Commission file number 0-27417

E-STAMP CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 76-0518563
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)

2051 Stierlin Court
Mountain View, California, 94043
(Address of principal executive office and zip code)

(650) 919-7500
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
filing requirements for the past 90 days.

YES [X] NO [ ]

As of July 31, 2001, 37,915,194 shares of the Registrant's common stock
were outstanding.

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E-STAMP CORPORATION

FORM 10-Q
June 30, 2001

INDEX

PAGE
----
PART I -- FINANCIAL INFORMATION

Item 1. Financial Statements:

a. Condensed Consolidated Balance Sheets as of June 30, 2001
(Unaudited) and December 31, 2000.............................. 3

b. Condensed Consolidated Statements of Operations for the three
months and six months ended June 30, 2001 and 2000 (Unaudited). 4

c. Condensed Consolidated Statements of Cash Flows for the six
months ended June 30, 2001 and 2000 (Unaudited)................ 5

d. Notes to Condensed Consolidated Financial Statements (Unaudited) 6

Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.......................................... 12

Risk Factors................................................... 15

Item 3. Qualitative and Quantitative Disclosure About Market Risk.......... 17

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings.................................................. 17

Item 2. Changes In Securities and Use of Proceeds.......................... 18

Item 6. Exhibits and Reports on Form 8-K................................... 18

Signature...................................................... 19

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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements

E-STAMP CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)

June 30, Dec. 31,
2001 2000
--------- ---------
(Unaudited) *

ASSETS
Current assets:
Cash and cash equivalents ....................... $ 17,065 $ 25,233
Restricted cash ................................. -- 3,750
Accounts receivable, trade ...................... 205 369
Other receivables ............................... 578 847
Note receivable -- Learn2.com ................... 2,037 --
Prepaid expenses and other current assets ....... 298 1,274
--------- ---------
Total current assets .......................... 20,183 31,473

Property and equipment, net ........................ 1,191 5,493
Goodwill and other intangible assets, net .......... -- 4,741
Prepaid merger costs ............................... 1,177 --
Deposits and other assets .......................... 1,200 1,200
--------- ---------
Total assets .................................. $ 23,751 $ 42,907
========= =========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................ $ 1,185 $ 3,529
Accrued liabilities ............................. 2,731 2,140
Accrued restructuring costs ..................... 363 5,933
Deferred revenue ................................ -- 328
--------- ---------
Total current liabilities ..................... 4,279 11,930

Commitments and contingencies

Stockholders' equity:
Common stock .................................... 38 38
Additional paid-in capital ...................... 222,973 224,878
Notes receivable from employees and officers .... (540) (664)
Deferred stock compensation ..................... (1,126) (4,622)
Accumulated deficit ............................. (201,873) (188,653)
--------- ---------
Total stockholders' equity .................... 19,472 30,977
--------- ---------
Total liabilities and stockholders' equity .... $ 23,751 $ 42,907
========= =========

* The condensed balance sheet at December 31, 2000 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.

See accompanying notes.

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E-STAMP CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)

Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------

Continuing operations:
General corporate expenses ... $ (2,371) $ (2,203) $ (4,194) $ (4,252)
Interest income .............. 31 1,195 509 2,632
Interest expense ............. (45) (34) (66) (66)
-------- -------- -------- --------
Loss from continuing operations (2,385) (1,042) (3,751) (1,686)
-------- -------- -------- --------

Discontinued operations:
Income (loss) from
discontinued operations ..... 903 (27,096) (11,584) (56,140)
Gain on disposal of
discontinued operations ..... 2,115 -- 2,115 --
-------- -------- -------- --------
3,018 (27,096) (9,469) (56,140)
-------- -------- -------- --------
Net income (loss) .............. $ 633 $(28,138) $(13,220) $(57,826)
======== ======== ======== ========

Basic and diluted income (loss)
per common share:
Continuing operations ........ $ (0.06) $ (0.03) $ (0.10) $ (0.04)
Discontinued operations ...... 0.08 (0.73) (0.25) (1.54)
-------- -------- -------- --------
Net income (loss) ............ $ 0.02 $ (0.76) $ (0.35) $ (1.58)
======== ======== ======== ========

Shares used in computing basic
and diluted income (loss) per
common share ................. 37,680 36,914 37,609 36,500
======== ======== ======== ========

See accompanying notes.

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E-STAMP CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)

Six Months Ended
June 30,
----------------------
2001 2000
--------- ---------

Operating activities:
Net loss ............................................... $ (13,220) $ (57,826)
Adjustments to reconcile net loss to net cash used in
operations:
Depreciation and amortization ....................... 1,180 1,101
Loss on disposal of assets .......................... 85 --
Amortization of deferred stock compensation ......... 1,618 6,082
Impairment of long-lived assets ..................... 7,852 --
Amortization of deferred distribution costs ......... -- 1,900
Write off in-process research & development .......... -- 1,677
Stock-based compensation ............................ 44 --
Forgiveness of note receivable ...................... 56
Changes in operating assets and liabilities:
Accounts receivable ............................... 164 (1,402)
Other receivable .................................. 269 --
Prepaid marketing expense ......................... -- 1,672
Prepaid expenses and other current assets ......... 976 3,152
Inventory ......................................... -- (667)
Accounts payable .................................. (2,344) 173
Accrued liabilities ............................... 591 180
Accrued restructuring ............................. (5,570) --
Deferred revenue .................................. (328) (263)
--------- ---------
Net cash used in operating activities .................. (8,627) (44,221)
--------- ---------
Investing activities:
Advances to Learn2.com ................................. (2,037) --
Prepaid merger costs ................................... (1,177) --
Decrease in restricted cash ............................ 3,750 --
Net cash used in acquisitions .......................... -- (2,412)
Purchase of property and equipment ..................... (74) (4,883)
Increase in deposits and other assets .................. -- (2,664)
--------- ---------
Net cash provided by (used in) investing activities .... 462 (9,959)
--------- ---------
Financing activities:
Repayments of lease obligations ........................ -- (15)
Repayments of notes payable ............................ -- (95)
Collections on notes receivable from stockholders ...... -- 292
Proceeds from issuance of common stock, net of
repurchases ......................................... (3) 334
--------- ---------
Net cash provided by (used in) financing activities .... (3) 516
--------- ---------
Net decrease in cash and cash equivalents .............. (8,168) (53,664)
Cash and cash equivalents at beginning of period ....... 25,233 118,689
--------- ---------
Cash and cash equivalents at end of period ............. $ 17,065 $ 65,025
========= =========

Supplemental cash flow information
Cash paid for interest ............................... $ -- $ --
========= =========
Non-cash investing and financing activities:

Common stock issued and options assumed in acquisition . $ -- $ 5,871
========= =========
Deferred stock compensation ............................ $ (1,878) $ (684)
========= =========
Common stock repurchased from employees upon termination
by forgiveness of notes receivable .................. $ 68 $ --
========= =========

See accompanying notes.

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E-STAMP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Background and Basis of Presentation

E-Stamp Corporation, a Delaware corporation, was formed on August 23, 1996. The
Company originally provided an Internet postage service that enabled users to
purchase, download and print Internet postage directly from their personal
computers without the need to maintain a persistent Internet connection.

In May 2000, the Company acquired two companies, Infinity Logistics Corporation
("Infinity Logistics") and Automated Logistics Corp. ("Automated Logistics"),
providers of transportation management and warehouse management products and
services that allowed enterprise customers to review carrier rates and shipping
options, select a carrier, print shipping labels, track shipments and create
shipping reports.

In July 2000, the Company restructured its organization to focus on the
development, marketing and sales of its transportation management business and
reduce its emphasis on the Internet postage business. In November 2000, the
Company further restructured its organization and announced that it would
phase-out its Internet postage service by the end of 2000.

On April 19, 2001, the Company entered into a merger agreement with Learn2.com,
Inc., a provider of e-learning products and services. Pursuant to the merger
agreement, Learn2 will merge with the Company, with the Company remaining as the
surviving corporation. The merger is subject to certain conditions set forth in
the merger agreement, including a minimum net cash requirement, as defined in
the merger agreement, at the closing date and the approval of the stockholders
of the Company and Learn2. The Company also announced that it would discontinue
its existing transportation management business prior to completion of the
merger. Accordingly, the Company's condensed financial statements and notes
included herein reflect its businesses as discontinued operations in accordance
with Accounting Principles Board Opinion No. 30. The results of discontinued
operations do not include any interest income, interest expense or allocation of
corporate expenses. In the event that the merger is completed, the Company
intends to conduct the e-learning solutions business of Learn2.

The accompanying condensed financial statements have been prepared assuming that
the Company will continue as a going concern. The Company has incurred
significant net losses and negative cash flows from operations since its
inception. At June 30, 2001, the Company had an accumulated deficit of $201.9
million. There can be no assurance that the Company will be able to close the
merger, and the discontinuance of the Company's remaining operations raises
substantial doubt about the Company's ability to continue as a going concern in
the event that the merger with Learn2.com is not completed.

The condensed financial statements of the Company as of and for the three month
and six month periods ended June 30, 2001 and 2000 included herein are
unaudited, but include all adjustments, including adjustments for the impairment
of long-lived assets of $2.1 million in the three months ended June 30, 2001 and
$7.9 million in the six months ended June 30, 2001, that the management of the
Company believes necessary for a fair presentation of the financial position as
of the reported dates and the results of operations for the respective periods
presented. Interim financial results are not necessarily indicative of results
for a full year. The condensed financial statements should be read in
conjunction with the audited financial statements and related notes for the year
ended December 31, 2000 included in the Company's Form 10-K/A-2 for the year
ended December 31, 2000.

Other Comprehensive Loss

Comprehensive loss includes all changes in stockholders' equity during a period,
except those resulting from investments by owners and distributions to owners.
Other comprehensive loss comprises unrealized gains and losses on cash
equivalents, which

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have been immaterial to date. As a result, comprehensive loss approximates net
loss for all periods presented.

Income (loss) Per Share

Income (loss) per share has been computed in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings Per Share" ("FAS 128"), which
requires disclosure of basic and diluted earnings per share. Basic earnings per
share excludes any dilutive effects of options, shares subject to repurchase,
warrants, and convertible securities. The Company's potentially dilutive
securities were antidilutive and therefore were not included in the computation
of weighted-average shares used in computing diluted income (loss) per share.
Therefore, the Company's basic and diluted income (loss) per share are the same.

The following table presents the calculation of basic and diluted income (loss)
per share (in thousands, except per share amounts):

Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------

Loss from continuing
operations ............................. $ (2,385) $ (1,042) $ (3,751) $ (1,686)
Gain (loss) from discontinued operations .. 3,018 (27,096) (9,469) (56,140)
-------- -------- -------- --------
Net income (loss) ......................... $ 633 $(28,138) $(13,220) $(57,826)
======== ======== ======== ========

Weighted average shares of
common stock outstanding ............... 37,921 39,546 37,937 39,332
Less: Weighted average shares
subject to repurchase .................. (241) (2,632) (328) (2,832)
-------- -------- -------- --------

Shares used in computing
basic and diluted loss per
share .................................. 37,680 36,914 37,609 36,500
======== ======== ======== ========

Income (loss) per share, basic and diluted:
Continuing operations .................. $ (0.06) $ (0.03) $ (0.10) $ (0.04)
Discontinued operations ................ 0.08 (0.73) (0.25) (1.54)
-------- -------- -------- --------
Net income (loss) ...................... $ 0.02 $ (0.76) $ (0.35) $ (1.58)
======== ======== ======== ========

Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes
methods of accounting for business combinations entered into after June 30,
2001. SFAS No. 142 establishes methods of accounting for goodwill and other
intangible assets arising from a business combination. SFAS No. 142 also
establishes methods of amortizing goodwill and other intangible assets and
evaluating these assets for impairment. SFAS No. 142 is effective for fiscal
years beginning after December 15, 2001. The Company expects that its pending
merger with Learn2.com, Inc. will result in negative goodwill, which will be
allocated on a pro rata basis to reduce the fair values of the non-current
assets acquired, including other identifiable intangible assets. Therefore, the
Company does not expect that these pronouncements will have a significant effect
on its results of operations or financial position or on its accounting for its
pending merger with Learn2.

2. Pending Merger

On April 19, 2001, the Company entered into a merger agreement with Learn2.com,
Inc., a provider of e-learning solutions. Pursuant to the merger agreement, the
Company and Learn2 will merge, with the Company remaining as the surviving
corporation. The merger is subject to certain conditions set forth in the merger
agreement, including a minimum net cash requirement, as defined in the merger
agreement, at the closing date and the approval of the stockholders of the
Company and Learn2. The merger agreement provides that if either the Company or
Learn2

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terminates the merger agreement as a result of the other company (i) failing to
obtain the required vote of its stockholders or (ii) withdrawing or altering its
approval or recommendation of the merger agreement, then a termination fee of
$500,000 will be due and payable to the other party. In connection with the
merger, the Company also announced that it would discontinue its remaining
transportation management solutions business prior to the completion of the
merger.

On April 25, 2001, Learn2 issued to the Company a convertible promissory note in
exchange for $2,000,000. The promissory note is convertible into 2,000 shares of
Learn2 Series E preferred stock. The purchase and sale of the promissory note
was a material term of the merger agreement between the Company and Learn2.

3. Discontinued Operations

On April 19, 2001, the Company entered into a merger agreement under which it
will merge with Learn2.com, an e-learning services provider. The Company also
announced it would discontinue its existing transportation management business
prior to the completion of the merger. Historically, the Company operated under
a single reportable segment consisting of two product lines, Internet postage
and transportation management products and services. The Company's condensed
financial statements and notes included herein reflect its businesses as
discontinued operations in accordance with Accounting Principles Board Opinion
No. 30. The results of discontinued operations do not include any interest
income, interest expense or allocation of general corporate expenses.

Summary operating results of discontinued operations are as follows:

Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2001 2000 2001 2000
-------- -------- -------- --------
(In thousands)

Net revenues ................... $ -- $ 1,632 $ 317 $ 3,122
Impairment of long-lived assets -- -- (5,709) --
Write off of in-process
research and development .... -- (1,677) -- (1,677)
Reversal of restructuring
reserves ................... 839 -- 839 --
Reversal of excess allowance
for doubtful accounts ....... 132 -- 132 --
Other operating expenses, net .. (68) (27,051) (7,163) (57,585)
-------- -------- -------- --------
Income (loss) from discontinued
operations .................. $ 903 $(27,096) $(11,584) $(56,140)
======== ======== ======== ========

For the three and six months ended June 30, 2001, income (loss) from
discontinued operations reflects the operating expenses related to the
transportation management business through the measurement date of April 17,
2001.

In April 2001, the Company sold all of its patent and patent applications and
certain trademarks and domain names related to its Internet postage business to
Stamps.com, Inc. for cash proceeds of $7.5 million. In May 2001, the Company
sold its DigitalShipper and e-Receive products, maintenance and support
contracts and trademarks related to these products to Data Track Technologies of
California, Inc. for cash proceeds of $55,000 and a promissory note of $110,000.
The Company recorded income totaling approximately $7.7 million related to these
transactions. Costs and expenses related to the disposal of the Company's
operations consisted of $2.4 million related to shutdown costs, $2.1 million
related to the impairment of assets and $1.1 million related to other reserves
and accruals, primarily an accrual for lease termination costs. The resulting
gain on the disposal of discontinued operations was $2.1 million.

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The assets and liabilities of discontinued operations, which are included in the
corresponding line item on the balance sheet, are as follows:

June 30, Dec. 31,
2001 2001
-------- --------
(In thousands)

Accounts receivable -- trade ............ $ 205 $ 369
Other receivables ....................... 514 430
Prepaid expenses and other
current assets ........................ -- 300
Property and equipment, net ............. -- 4,514
Goodwill and other intangible assets, net
-- 4,741
Other assets ............................ 960 960
-------- --------

1,679 11,314
Deferred revenue ........................ -- (328)
-------- --------

Net assets of discontinued operations ... $ 1,679 $ 10,986
======== ========

4. Impairment of Long-Lived Assets

During the three months ended March 31, 2001, Company management identified
indicators of possible impairment of long-lived assets, principally goodwill and
other intangible assets initially recorded in connection with the Company's
acquisition of Infinity Logistics and Automated Logistics. These indicators
included deterioration in the business climate for technology companies,
significant declines in the market values of companies operating in the
technology sector and recent changes in the Company's operating results and cash
flow projections for the transportation management solutions business.

Company management reviewed the projected operations and cash flows for the
transportation management solutions business and compared projected undiscounted
cash flows to the carrying amount of goodwill and other intangible assets. Based
on the result of this review, management determined that these assets were
impaired and had a fair value of zero. Accordingly, an impairment write-down was
recorded during the three months ended March 31, 2001, consisting of $2.7
million of goodwill and $1.6 million of other intangible assets. These amounts
are included in loss from discontinued operations for the six months ended June
30, 2001.

In addition, as a result of a significant decrease in the Company's employee
headcount during the three months ended March 31, 2001, Company management
performed an inventory of computers, office furniture and other equipment held
for disposal as of March 31, 2001. A write-down of $1.4 million was recorded
during the three months ended March 31, 2001 to reduce the carrying amount of
property and equipment held for disposal to its estimated fair value less cost
to sell. This amount is included in loss from discontinued operations for the
six months ended June 30, 2001.

During the three months ended June 30, 2001, management performed a further
review of its property and equipment as a result of its decision in April 2001
to discontinue its transportation management business. Based on this review, an
additional write-down of $2.1 million was recorded during the three months ended
June 30, 2001 to reduce the carrying value of property and equipment held for
disposal to its estimated fair value less costs of disposal. This amount is
included in gain on disposal of discontinued operations.

5. Restructuring Costs

During 2000, the Company undertook two corporate restructurings and recorded
restructuring charges totaling $20.3 million. In July 2000, the Company
restructured its organization to focus on the development, marketing and sales
of its transportation management solutions and reduce emphasis on its Internet
postage business. In November 2000, the Company restructured the organization to
phase out its Internet postage business. In connection with these
restructurings, the Company terminated 52 employees, of which all had left the
Company by April 30, 2001. The

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windup of the Internet postage business was substantially completed by April 30,
2001.

The following table sets forth the activity in accrued restructuring costs
during the six months ended June 30, 2001.

BALANCE BALANCE
DECEMBER 31, AMOUNTS JUNE 30,
2000 CASH PAID REVERSED 2001
------------ --------- -------- --------
(In thousands)

Employee termination costs $ 824 $ (797) $ -- $ 27
Contract terminations .... 2,687 (2,189) (162) 336
Operations shut-down ..... 1,805 (1,408) (397) --
Reserve for sales returns 617 (337) (280) --
------- ------- ------- -------
Total .................... $ 5,933 $(4,731) $ (839) $ 363
======= ======= ======= =======

Amounts reversed are included in loss from discontinued operations in the three
and six months ended June 30, 2001.

In February 2001, the Company announced a further reduction in force and the
elimination of 45 employees and contractors from its workforce. In connection
with this action, the Company incurred severance expense of $392,000, which the
Company paid during the six months ended June 30, 2001. This expense is included
in loss from discontinued operations for the six months ended June 30, 2001.

6. Stockholders' Equity

Stock Subject to Rescission

Shares issued under the Company's 1996 Employee Plan, 1996 Director Plan and
1999 Stock Plan (the "Plans") prior to October 14, 1999 may not have qualified
for exemption from registration or qualification under federal and state
securities laws and therefore may be subject to rescission.

On February 2, 2000, the Company filed a rescission offer for 5,682,341 shares
of common stock pursuant to a registration statement filed under the Securities
Act of 1933, as amended, covering shares of common stock issued under the Plans.
The Company currently intends to file a request to withdraw the registration
statement. Because the Act does not provide that a rescission offer will
terminate a purchaser's right to rescind a sale of stock and a significant
portion of the shares have been resold for a price in excess of the original
purchase price paid by the optionees, the Company does not intend to extend the
rescission offer to the optionees. Management believes that the Company does not
have a contingent liability resulting from the issuance of stock to these
optionees that would materially and adversely impact the results of operations
or financial position of the Company.

Shares subject to rescission have been included in stockholders' equity in the
accompanying balance sheets.

7. Related Party Transaction

In June 2001, the Board of Directors of the Company approved the forgiveness of
certain loans to officers in the aggregate amount of $367,000, together with a
tax gross-up on the forgiveness.

8. Contingencies

Pitney Bowes Litigation

On June 18, 2001, E-Stamp entered into an agreement with Pitney Bowes, Inc. to
settle all litigation between the companies. The litigation, which included
patent infringement claims by Pitney Bowes and antitrust counterclaims by
E-Stamp, was

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resolved without admission of liability. Under the settlement agreement, each
party released and covenanted not to sue the other in connection with past
activities, E-Stamp agreed to an injunction against the infringement of any
patents asserted by Pitney Bowes in the litigation and E-Stamp paid $2 million
to Pitney Bowes. In connection with the settlement, E-Stamp recovered insurance
proceeds of approximately $1.8 million. The net expense of approximately
$200,000 related to the settlement is included in gain on disposal of
discontinued operations for the three and six months ended June 30, 2001.

Consumer Class Action Suit

On March 16, 2001, a prior customer of E-Stamp, Mr. Joseph Pavel, filed a
purported consumer class action suit against the Company in the Supreme Court of
the State of New York, County of Kings. The suit alleges that the Company
breached its contracts with the plaintiff and other customers. The plaintiff
seeks unspecified damages and disgorgement of monies received in connection with
the sale of Internet postage products. By agreement of the parties, the
plaintiff dismissed the New York action and refiled in Santa Clara County on or
about May 24, 2001. The Company filed its answer to the complaint on June 18,
2001. The Company is currently investigating the claims against it and intends
to vigorously defend this action. Pendency of these legal proceedings can be
expected to result in expenses to the Company and the diversion of management
time and other resources.

Francotyp-Postalia Litigation

On April 9, 2001, the Company filed a complaint for declaratory relief against
Francotyp-Postalia, AG & Co. in the U.S. District Court for the Northern
District of California seeking a declaratory judgment for a dispute arising
under a letter agreement regarding certain marketing and promotional
arrangements and Francotyp-Postalia's purchase in July 1998 of E-Stamp's Series
B preferred stock for $3 million. On April 26, 2001, Francotyp-Postalia filed a
complaint against the Company in the Chancery Court of the State of Delaware,
New Castle County regarding the dispute seeking rescission of the original
purchase of the preferred stock. On May 21, 2001, the Company filed a motion to
remove Francotyp-Postalia's action to the United States District Court in
Delaware. The Company is continuing to investigate the claims against it.

9. Subsequent Events

On August 2, 2001, the Company's common stock was delisted from the Nasdaq
National Market and began trading on the OTC Bulletin Board.

On August 3, 2001, Sales and Marketing Technologies, Inc. filed suit against the
Company and certain of its officers in the Superior Court of California, San
Mateo County, California, alleging breach of contract, fraud and unfair
competition in connection with a consulting agreement between the plaintiff and
the Company. The plaintiff seeks unspecified general and compensatory damages,
treble damages and equitable remedies. The Company is investigating the claims
against it and intends to vigorously defend this action.

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

This report on Form 10-Q contains forward-looking statements, including, but not
limited to, those specifically identified as such, that involve risks and
uncertainties. The statements contained in this report on Form 10-Q that are not
purely historical are forward-looking statements, including without limitation
statements regarding our expectations, beliefs, intentions or strategies
regarding the future. All forward-looking statements included in this report on
Form 10-Q are based on information available to us on the date hereof, and we
assume no obligation to update any such forward-looking statements. Our actual
results could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors, including, but not limited to,
those set forth in the "Risk Factors" contained in this management's discussion
and analysis of financial condition and results of operations and elsewhere in
this report on Form 10-Q.

Overview

We originally provided an Internet postage service that enabled users to
purchase, download and print Internet postage directly from their personal
computers without the need to maintain a persistent Internet connection. In May
2000, we acquired two companies, Infinity Logistics Corporation and Automated
Logistics Corp. These companies offered transportation management and warehouse
management products and services that allowed enterprise customers to review
carrier rates and shipping options, select a carrier, print shipping labels,
track shipments and create shipping reports.

During 2000, we undertook two corporate restructurings. In July 2000, we
restructured our organization to focus on the development, marketing and sales
of our transportation management products and services and reduce our emphasis
on our Internet postage business. In November 2000, we restructured the
organization to phase out our Internet postage business. We incurred charges of
approximately $20.3 million related to these restructurings.

On April 19, 2001, we entered into a merger agreement with Learn2.com, Inc., a
provider of e-learning products and services. Pursuant to the merger agreement,
Learn2 will merge with E-Stamp, with E-Stamp remaining as the surviving
corporation. The merger is subject to certain conditions set forth in the merger
agreement, including a minimum net cash requirement, as defined in the merger
agreement, at the closing date and the approval of the stockholders of E-Stamp
and Learn2. We also have discontinued our remaining transportation management
business. Therefore, our condensed financial statements and notes included
herein reflect our businesses as discontinued operations in accordance with
Accounting Principles Board Opinion No. 30. The results of discontinued
operations do not include any interest income, interest expense or allocation of
corporate expenses. In the event that the merger is completed, we intend to
conduct the e-learning solutions business of Learn2.

Results of Operations

Three Months Ended June 30, 2001 Compared to Three Months Ended June 30, 2000

Continuing Operations

General corporate expenses. General corporate expenses consist of general and
administrative overhead expenses, including expenses associated with the general
responsibilities of a public company, and exclude those costs associated with
our transportation management and Internet postage businesses. These expenses
include salaries and related costs for certain administrative functions,
professional services, including legal and accounting services, insurance and an
allocation of facilities costs. The increase in these expenses in the three
months ended June 30, 2001 compared to the three months ended June 30, 2000 was
primarily due to higher compensation costs resulting from the payment of
retention and other bonuses and the forgiveness of loans to two officers. This
increase was substantially offset by lower amortization of deferred stock
compensation, which is recorded using the graded vesting method.

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Interest income, net. Interest income, net, consists primarily of earnings on
our cash and cash equivalents, net of interest expense. Interest income, net,
was expense of $14,000 for the quarter ended June 30, 2001, compared to income
of $1.2 million for the quarter ended June 30, 2000. The decrease in interest
income, net, was due to decreased interest earned as a result of lower average
cash balances resulting from our continued use of cash to fund our operations.

Discontinued operations

Gain (loss) from discontinued operations. For the three months ended June 30,
2001, gain from discontinued operations reflects the operating expenses related
to our transportation management solutions business through the measurement date
of April 17, 2001 offset by the reversal of excess restructuring reserves and
the reversal of an excess allowance for doubtful accounts recorded during the
period. There were no revenues recorded during this period. For the three months
ended June 30, 2000, loss from discontinued operations reflects the operating
expenses related to our Internet postage and transportation management
businesses net of revenues of $1.6 million.

Gain on disposal of discontinued operations. In April 2001, we sold all of our
patent and patent applications and certain trademarks and domain names related
to our Internet postage business to Stamps.com, Inc. for cash proceeds of $7.5
million. In June 2001, we sold our maintenance contracts and trademarks related
to our DigitalShipper and e-Receive products to Data Track Technologies of
California, Inc. for cash proceeds of $55,000 and a promissory note of $110,000.
We recorded gains totaling approximately $7.7 million related to these
transactions.

These gains were partially offset by costs of discontinuing the transportation
management business, including costs related to shutting down the business's
operations after the April 17, 2001 measurement date, charges for fixed asset
impairment and an accrual for lease termination costs.

Six Months Ended June 30, 2001 Compared to Six Months Ended June 30, 2000

Continuing operations

General corporate expenses. General corporate expenses decreased in the six
months ended June 30, 2001 compared to the six months ended June 30, 2000
primarily due to lower amortization of deferred stock compensation, which is
recorded using the graded vesting method. This decrease was substantially offset
by higher compensation costs resulting from the payment of retention and other
bonuses and the forgiveness of loans to two officers, as well as higher
professional services costs, including legal and accounting services.

Interest income, net. Interest income, net, consists primarily of earnings on
our cash and cash equivalents, net of interest expense. Interest income, net,
was $0.4 million for the six months ended June 30, 2001, compared to $2.6
million for the six months ended June 30, 2000. The decrease in interest income,
net, was due to decreased interest earned as a result of lower average cash
balances resulting from our continued use of cash to fund our operations.

Discontinued operations

Loss from discontinued operations. For the six months ended June 30, 2001, loss
from discontinued operations reflects the operating expenses related to our
transportation management business through the measurement date of April 17,
2001, net of revenues from that business of $0.3 million. For the six months
ended June 30, 2000, loss from discontinued operations reflects the operating
expenses related to our Internet postage and transportation management
businesses net of revenues of $3.1 million. Operating expenses for the six
months ended June 30, 2001 were significantly reduced from operating expenses
for the six months ended June 30, 2000 primarily due to reduced headcount
resulting from our restructuring efforts in 2000. In addition, we significantly
reduced our advertising and promotional activities in the first half of 2001
compared to the first half of 2000. Amortization of deferred stock compensation,
which is recorded using the graded vesting method, decreased by $3.2 million in
the six months ended June 30, 2001 from the six months ended June 30, 2000.

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These decreases in operating expenses were partially offset by charges totaling
$4.7 million related to the amortization and write off of goodwill and other
intangible assets related to our transportation management solutions business.
During the first quarter of 2001 we identified possible indicators of impairment
of these assets and determined that these assets had a fair value of zero. In
addition, we wrote off property and equipment held for disposal as a result of
reduced employee headcount totaling $1.4 million.

In addition, for the six months ended June 30, 2001, loss from discontinued
operations was partially offset by the reversal of excess restructuring accruals
related to Internet postage refunds and to certain contract terminations. We
also reversed an excess allowance for doubtful accounts. These reversals totaled
$1.0 million.

Gain on disposal of discontinued operations. In April 2001, we sold all of our
patent and patent applications and certain trademarks and domain names related
to our Internet postage business to Stamps.com, Inc. for cash proceeds of $7.5
million. In June 2001, we sold our maintenance contracts and trademarks related
to our DigitalShipper and e-Receive products to Data Track Technologies of
California, Inc. for cash proceeds of $55,000 and a promissory note of $110,000.
We recorded income totaling approximately $7.7 million related to these
transactions.

This income was partially offset by costs of discontinuing the transportation
management business, including costs related to shutting down the business's
operations after the April 17, 2001 measurement date, charges for fixed asset
impairment and an accrual for lease termination costs.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily through private and
public sales of equity securities. We have received net proceeds of
approximately $72.9 million in private placements of our equity securities and
net proceeds of $125.4 million from the initial public offering of our common
stock. As of June 30, 2001, we had cash and cash equivalents totaling $17.1
million.

Net cash used in operating activities totaled $8.6 million for the six months
ended June 30, 2001 and $44.2 million for the six months ended June 30, 2000.
Cash used in operating activities for the periods presented resulted primarily
from net operating losses during those periods partially offset by non-cash
charges.

Net cash provided by investing activities totaled $0.5 million for the six
months ended June 30, 2001 and net cash used in investing activities totaled
$10.0 million for the six months ended June 30, 2000. For the six months ended
June 30, 2001, cash was provided from a decrease in restricted cash offset by an
advance to Learn2 and amounts expended related to our pending merger with
Learn2. For the six months ended June 30, 2000, cash was used to acquire
Infinity and Automated Logistics and to purchase property and equipment.

The accompanying financial statements have been prepared assuming that we will
continue as a going concern. We have incurred significant net losses and
negative cash flows from operations since our inception. At June 30, 2001, we
had an accumulated deficit of $201.9 million. There can be no assurance that we
will be able to close the merger. Our discontinuance of our remaining operations
raises substantial doubt about our ability to continue as a going concern if we
are unable to complete our merger with Learn2.

Recent Accounting Pronouncements

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goodwill, which will be allocated on a pro rata basis to reduce the fair values
of the non-current assets acquired, including other identifiable intangible
assets. Therefore, we do not expect that these pronouncements will have a
significant effect on our results of operations or financial position or on our
accounting for our pending merger with Learn2.

RISK FACTORS

If the conditions to the merger with Learn2 are not met or waived, the merger
may not occur.

Specified conditions must be satisfied or waived to complete the merger with
Learn2. The conditions relating to stockholder approval, the absence of laws,
regulations or orders preventing the merger, and the effectiveness of the
registration statement must be satisfied prior to the completion of the merger
and may not be waived by us or Learn2. We cannot assure you that each of these
conditions will be satisfied. The other conditions relating to the accuracy of
each company's representations, compliance with covenants, the absence of a
material adverse effect on either company and our minimum net cash may be waived
by agreement of us and Learn 2. If the conditions are not satisfied or waived,
as applicable, the merger will not occur or will be delayed, and the intended
benefits of the merger may not occur. In particular, if we do not satisfy the
minimum net cash requirement of $13 million, as determined in accordance with
the merger agreement, Learn2 is not required to close. If the merger is not
completed, we will have no ongoing operations and no revenues to support us as a
going concern.

We may not be able to implement successfully a new restructuring plan if the
merger does not occur.

Based on the fact that we discontinued our transportation management business,
we will be unable to generate revenues going forward as a standalone entity.
Upon consummation of the merger, we intend to continue and grow Learn2's
business as a means of generating revenue. If the merger is not completed, we
may not be able to implement successfully a new restructuring plan capable of
generating sufficient revenues to support us as a going concern.

Failure to complete the proposed merger could adversely affect our stock price
and future business and operations.

The merger is subject to the approval of E-Stamp's and Learn2's stockholders and
specified closing conditions. In the event that the merger is not successfully
completed, we may be subject to a number of material risks, including the
following:

- - the price of our common stock may decline to the extent that the current
market price for its common stock reflects a market assumption that the
proposed merger will be completed; and

- - we must pay costs related to the proposed merger, such as legal,
accounting, and financial advisory fees, even if the merger is not
completed.

In addition, in the event that the merger is not completed, our board of
directors may not be able to secure a similar strategic transaction to provide
us with a continuing business.

The merger will result in substantial costs whether or not completed.

The merger will result in significant costs to us. Transaction costs are
estimated at approximately $5.0 million, of which E-Stamp will incur a
substantial portion. These costs are expected to consist primarily of fees for
investment bankers, attorneys, accountants, filing fees and financial printers.
A substantial amount of these costs will be incurred whether or not the merger
is completed.

Our securities have been delisted from the Nasdaq National Market.

Our securities were delisted from the Nasdaq National Market on August 2, 2001.
The delisting may impact adversely the liquidity of our securities, not only in
the

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number of shares that can be bought or sold, but also through delays in timing
of transactions and reductions in potential security analyst and media coverage.
This may reduce the demand for our common stock and the trading price of our
securities. The delisting will greatly impair our ability to raise additional
working capital.

Our common stock currently trades on the OTC Bulletin Board and is subject to
regulation as a "penny stock." The SEC has adopted regulations that generally
define "penny stock" to be any equity security that has a market price or
exercise price of less than $5.00 per share, subject to certain exceptions,
including listing on the Nasdaq National Market or the Nasdaq Small Cap Market.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the SEC relating to the penny stock market. The
broker-dealer is also subject to additional sales practice requirements.
Consequently, the penny stock rules may restrict the ability of broker-dealers
to sell our securities and may affect the ability of holders to sell these
securities in the secondary market and the price at which such holders can sell
any such securities.

If we were to reapply to list our securities on Nasdaq, we might reapply for
listing on The Nasdaq Small Cap Market rather than The Nasdaq National Market.
Compared to securities listed on The Nasdaq National Market, securities listed
on The Nasdaq Small Cap Market are not quoted in regional newspapers, are less
likely to receive analyst coverage and are less likely to be invested in by
institutional investors. In addition, securities traded on The Nasdaq Small Cap
Market are not exempt from state securities laws.

We have a history of losses and an accumulated deficit; we may continue to
experience losses.

For the year ended December 31, 2000, we incurred a net loss of $112.8 million
and for the six months ended June 30, 2001, we incurred a net loss of $13.2
million. At June 30, 2001, we had an accumulated deficit of approximately $201.9
million. Learn2 has also incurred substantial losses to date. We expect to
continue to incur losses for the foreseeable future. In addition, in connection
with the acquisition of Learn2, we will incur significant accounting charges.
These losses will be substantial, and we may not ever become profitable.

We may incur additional liabilities and expenses in connection with the phase
out of our business.

We have discontinued our business of providing transportation management
software products. We may incur additional liabilities and expenses in
connection with the discontinuation of our transportation management business,
including liabilities and expenses arising from the termination of existing
contracts and other commitments, that could have a material adverse effect upon
our financial condition and results of operations.

Costs and expenses directly related to the discontinuance of our DigitalShipper
business include charges associated with the write-down of fixed assets, rent
and other facilities-related expenses, costs associated with terminating
contractual arrangements, employee termination costs and legal, accounting can
consulting fees. At June 30, 2001, we accrued an estimate of the remaining costs
and expenses related to the discontinuance of our DigitalShipper business. We
expect that the proceeds derived from the sale of our assets, including our
intellectual property, will exceed the costs of discontinuing our operations.
While we believe that we have a reasonable basis for estimating these costs,
there can be no assurance that additional costs in excess of those accrued will
not be incurred.

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A prior customer, Mr. Joseph Pavel, filed a purported consumer class action suit
against us alleging that we breached our contract with the plaintiff and other
customers. The plaintiff seeks unspecified damages and disgorgement of monies
received in connection with the sale of our Internet postage products. Sales and
Marketing Technologies, Inc. also has filed a complaint against us alleging
breach of contract, fraud and unfair competition in connection with a consulting
agreement with the plaintiff. The plaintiff seeks unspecified general and
compensatory damages, treble damages and equitable remedies. In addition,
Francotyp-Postalia, AG & Co. has filed a complaint against us alleging that we
breached a letter agreement regarding marketing and promotional arrangements.
Francotyp-Postalia is seeking the rescission of its original purchase in July
1998 of Series B preferred stock of E-Stamp for $3,000,000. Pendency of these
litigation matters can be expected to result in expenses to us and the diversion
of management time and other resources, the extent of which cannot be quantified
with any reasonable accuracy given the early stage of these litigation matters.
If these parties are successful in their claims against us, we may be liable for
significant damages.

ITEM 3. Qualitative and Quantitative Disclosure about Market Risk

Disclosures About Market Risk

The following discusses our exposure to market risk related to changes in
interest rates, equity prices and foreign currency exchange rates. This
discussion contains forward-looking statements that are subject to risks and
uncertainties. Actual results could differ materially as a result of a number of
factors, including those set forth under the caption "Risk Factors."

Interest Rate Risk

As of June 30, 2001, we had cash and cash equivalents of approximately $17.1
million invested in short term investments. Due to the short-term nature of
these investments and our investment policies and procedures, we have determined
that the risk associated with interest rate fluctuations related to these
financial instruments does not pose a material risk to us.

As of June 30, 2001, we did not have any outstanding short or long-term debt.
Increases in interest rates could, however, increase the interest expense
associated with our future borrowings, if any. We do not hedge against interest
rate increases.

Equity Price Risk

As of June 30, 2001, we did not hold any equity investments.

Foreign Currency Exchange Rate Risk

We do not believe we have any significant direct foreign currency exchange rate
risk. We do not hedge against foreign currency exchange rate changes.

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

Pitney Bowes Litigation

On June 18, 2001, we entered into an agreement with Pitney Bowes, Inc. to settle
all litigation between the companies. The litigation, which included patent
infringement claims by Pitney Bowes and antitrust counterclaims by E-Stamp, was
resolved without admission of liability. Under the settlement agreement, each
party released and covenanted not to sue the other in connection with past
activities, we agreed to an injunction against the infringement of any patents
asserted by Pitney Bowes in the litigation and we paid $2 million to Pitney
Bowes. In connection with the settlement, we recovered insurance proceeds of
approximately $1.8 million.

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Consumer Class Action Suit

On March 16, 2001, a prior customer of E-Stamp, Mr. Joseph Pavel, filed a
purported consumer class action suit against us in the Supreme Court of the
State of New York, County of Kings. The suit alleges that we breached our
contracts with the plaintiff and other customers. The plaintiff seeks
unspecified damages and disgorgement of monies received in connection with the
sale of Internet postage products. By agreement of the parties, the plaintiff
dismissed the New York action and refiled in Santa Clara County on or about May
24, 2001. We filed our answer to the complaint on June 18, 2001. We are
currently investigating the claims against us and intend to vigorously defend
this action. Pendency of these legal proceedings can be expected to result in
expenses to us and the diversion of management time and other resources.

Francotyp-Postalia Litigation

On April 9, 2001, we filed a complaint for declaratory relief against
Francotyp-Postalia, AG & Co. in the U.S. District Court for the Northern
District of California seeking a declaratory judgment for a dispute arising
under a letter agreement regarding certain marketing and promotional
arrangements and Francotyp-Postalia's purchase in July 1998 of our Series B
preferred stock for $3 million. On April 26, 2001, Francotyp-Postalia filed a
complaint against us in the Chancery Court of the State of Delaware, New Castle
County regarding the dispute seeking rescission of the original purchase if the
preferred stock. On May 21, 2001, we filed a motion to remove
Francotyp-Postalia's action to the United States District Court in Delaware. We
are continuing to investigate the claims against us.

Sales and Marketing Technologies Litigation

On August 3, 2001, Sales and Marketing Technologies, Inc. filed suit against
E-Stamp and certain of its officers in the Superior Court of California, San
Mateo County, California, alleging breach of contract, fraud and unfair
competition in connection with a consulting agreement between the plaintiff and
us. The plaintiff seeks unspecified general and compensatory damages, treble
damages and equitable remedies. We are investigating the claims against us and
intend to vigorously defend this action.

Item 2. Changes In Securities and use of Proceeds

From October 8, 1999, the effective date of the Registration Statement, to June
30, 2001, the ending date of the reporting period, the approximate amount of the
net offering proceeds used were $120.0 million for general business operations
including funding of operating losses generated in the six months ended June 30,
2001.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

None.

(b) Reports on Form 8-K

A report on Form 8-K was filed by the Company on May 9, 2001, related to the
announcement that the Company's would merger with Learn2.com, Inc. This report
contains the Company's audited financial statements as of December 31, 1999 and
2000 and for each of the three years in the period ended December 31, 2000.

A report on Form 8-K was filed by the Company on May 14, 2001, related to the
sale of assets to Stamps.com.

A report on Form 8-K was filed by the Company on August 3, 2001, related to the
Company's financial results for the quarter ended June 30, 2001 and the
delisting of the Company's securities from The Nasdaq National Market.

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

Dated: August 14, 2001

/s/ Edward F. Malysz
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Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)