<PAGE>

                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934
               For the quarterly period ended September 30, 2001
                                       OR
             [ ] 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: 1-6081

                             COMFORCE Corporation
            (Exact name of registrant as specified in its charter)

              Delaware                                    36-2262248
   -------------------------------             --------------------------------
   (State or other jurisdiction of             (IRS Employer Identification No.)
    incorporation or organization)

          415 Crossways Park Drive, P.O. Box 9006, Woodbury, New York  11797
--------------------------------------------------------------------------------
(Address of principal executive offices)                            (Zip Code)

Registrant's telephone number, including area code:       (516) 437-3300
                                                   -----------------------------


                                Not Applicable
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report

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 such filing
requirements for the past 90 days.
                                 Yes  X           No
                                     ---             ---

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

         Class                               Outstanding at November 8, 2001
----------------------------                 ----------------------------------
Common stock, $.01 par value                 16,659,170 shares

                                       1
<PAGE>

                             COMFORCE Corporation

                                     INDEX

                                                                       Page
                                                                       Number
                                                                       ------

PART I  FINANCIAL INFORMATION........................................     3

Item 1. Financial Statements.........................................     3

        Consolidated Balance Sheets at September 30, 2001(unaudited)
          and December 31, 2000......................................     3

        Consolidated Statements of Operations for the three and nine
          months ended September 30, 2001 and September 30, 2000
          (unaudited)................................................     4

        Consolidated Statements of Cash Flows for the nine months
          ended September 30, 2001 and September 30, 2000
          (unaudited)................................................     5

        Notes to Unaudited Consolidated Financial Statements.........     6

Item 2. Management's Discussion and Analysis of Financial Condition
          and Results of Operations..................................    11

Item 3. Quantitative and Qualitative Disclosure about Market Risk....    18

PART II OTHER INFORMATION............................................    18

Item 1. Legal Proceedings............................................    18

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

Item 3. Defaults Upon Senior Securities (not applicable).............    19

Item 4. Submission of Matters to a Vote of Security Holders
          (not applicable)...........................................    19

Item 5. Other Information (not applicable)...........................    19

Item 6. Exhibits and Reports on Form 8-K.............................    19

SIGNATURES...........................................................    20

                                       2
<PAGE>

                         PART I - FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS

                     COMFORCE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
               (in thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                                              September 30,      December 31,
                                                                                  2001               2000
                                                                             ---------------     -----------
<S>                                                                            <C>                <C>
ASSETS:                                                                         (unaudited)

Current assets:
  Cash and cash equivalents                                                         $  5,494        $  4,940
  Accounts receivable, net                                                            55,588          69,675
  Funding and service fees receivable, net                                            40,621          49,392
  Prepaid expenses and other current assets                                            4,420           3,467
  Deferred income taxes, net                                                           1,076           1,076
                                                                             ---------------     -----------
       Total current assets                                                          107,199         128,550

Deferred income taxes, net                                                               404             404
Property and equipment, net                                                           12,283          12,050
Intangible assets, net                                                               135,351         137,655
Deferred financing costs, net                                                          3,375           4,755
                                                                             ---------------     -----------
       Total assets                                                                 $258,612        $283,414
                                                                             ===============     ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:

Current liabilities:
  Accounts payable                                                                  $  2,129        $  5,373
  Accrued expenses                                                                    40,019          34,235
                                                                             ---------------     -----------
       Total current liabilities                                                      42,148          39,608

Long-term debt                                                                       161,339         197,421
Other liabilities                                                                        273              11
                                                                             ---------------     -----------
       Total liabilities                                                             203,760         237,040
                                                                             ---------------     -----------


Commitments and contingencies
Stockholders' equity:
  Common stock, $.01 par value; 100,000,000 shares authorized; 16,659,168
   shares and 16,659,027 shares issued and outstanding at September 30, 2001
   and December 31, 2000, respectively                                                   167             167
  Additional paid-in capital                                                          49,581          49,149
  Accumulated earnings (deficit) since January 1, 1996                                 5,104          (2,942)
                                                                             ---------------     -----------
       Total stockholders' equity                                                     54,852          46,374
                                                                             ---------------     -----------
       Total liabilities and stockholders' equity                                   $258,612        $283,414
                                                                             ===============     ===========
</TABLE>

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

                                       3
<PAGE>

                     COMFORCE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands except per share amounts)
                                  (unaudited)
<TABLE>
<CAPTION>
                                                 Three months ended               Nine months ended
                                            September 30,     September 30,   September 30,   September 30,
                                                2001              2000            2001            2000
                                          --------------      ------------      ---------     -----------
<S>                                       <C>                 <C>               <C>           <C>

Revenue:
   Net sales of service                         $107,508          $120,441       $343,067        $345,004
Costs and expenses:
   Cost of services                               86,337            94,778        271,454         273,867
   Selling, general and administrative
        expenses                                  15,103            16,867         49,598          48,193
   Depreciation and amortization                   2,021             1,858          5,894           5,494
                                          --------------      ------------      ---------     -----------
        Total costs and expenses                 103,461           113,503        326,946         327,554
                                          --------------      ------------      ---------     -----------
Operating income                                   4,047             6,938         16,121          17,450
                                          --------------      ------------      ---------     -----------

Other income (expense):
  Interest expense                                (4,900)           (5,897)       (15,722)        (17,380)
  Restricted covenant release                        ---             1,000            ---           1,000
  Other income, net                                   11               205             40             239
                                          --------------      ------------      ---------     -----------
                                                  (4,889)           (4,692)       (15,682)        (16,141)
                                          --------------      ------------      ---------     -----------
Income (loss) before income tax and
     extraordinary gain                             (842)            2,246            439           1,309
Provision for income taxes                           136             1,717          1,656           2,261
                                          --------------      ------------      ---------     -----------
      Income (loss) before extraordinary
           gain                                     (978)              529         (1,217)           (952)
Gain on early debt extinguishment,
     net of taxes (1)                              5,406             2,660          9,263           2,660
                                          --------------      ------------      ---------     -----------
      Net income                                $  4,428          $  3,189       $  8,046        $  1,708
                                          --------------      ------------      ---------     -----------

Basic income (loss) per common share:
  Income (loss) before extraordinary gain       $  (0.06)         $   0.03       $  (0.07)       $  (0.06)
  Extraordinary gain                                0.33              0.16           0.55            0.16
                                          --------------      ------------      ---------     -----------
  Net income                                    $   0.27          $   0.19       $   0.48        $   0.10
                                          ==============      ============      =========     ===========

Diluted income (loss) per common share:
  Income (loss) before extraordinary gain       $  (0.06)         $   0.03       $  (0.07)       $  (0.06)
  Extraordinary gain                                0.33              0.16           0.55            0.16
                                          --------------      ------------      ---------     -----------
  Net income                                    $   0.27          $   0.19       $   0.48        $   0.10
                                          ==============      ============      =========     ===========
Weighted average common shares
 outstanding, basic                               16,659            16,431         16,659          16,429
                                          ==============      ============      =========     ===========
Weighted average common shares
 outstanding, diluted                             16,659            16,453         16,659          16,429
                                          ==============      ============      =========     ===========
</TABLE>

(1) Net of taxes of $3.9 million and $2.0 million for the three month periods
ended September 30, 2001 and 2000, respectively, and for the nine month periods
ended September 30, 2001 and 2000 taxes of $6.6 million and $2.0 million,
respectively, were included.

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

                                       4
<PAGE>

                     COMFORCE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (in thousands)
                                  (unaudited)


<TABLE>
<CAPTION>
                                                                                              Nine months ended
                                                                                  September 30,               September 30,
                                                                                       2001                        2000
                                                                                  -------------               -------------
<S>                                                                               <C>                         <C>
Cash flows from operating activities:
  Net income                                                                           $  8,046                    $  1,708
  Adjustments to reconcile net income
         to net cash provided by (used in) operating activities:
      Depreciation and amortization                                                       5,894                       5,494
      Amortization of deferred financing fees                                               592                         623
      Allowance for doubtful accounts                                                       197                          (5)
      Issuance of notes in lieu of interest                                               1,923                       2,008
      Gain on repurchase of Senior Notes                                                 (2,238)                     (2,660)
      Gain on repurchase of PIK Debentures                                               (7,025)                         --
   Changes in assets and liabilities, net of effects of
         acquisitions of businesses:
      Accounts receivable and funding service fees receivable                            22,661                     (24,342)
      Prepaid expenses and other current assets                                            (953)                     (1,334)
      Accounts payable and accrued expenses                                              (2,149)                      9,467
                                                                                  -------------               -------------
Net cash provided by (used in) operating activities                                      26,948                      (9,041)
                                                                                  -------------               -------------


Cash flows from investing activities:
  Purchases of property and equipment                                                    (2,900)                     (2,372)
  Payments of contingent consideration                                                     (773)                     (2,374)
  (Increase) in deferred costs and other assets                                            (250)                        (50)
  Acquisition of Gerri G, net of cash acquired                                               --                        (780)
                                                                                  -------------               -------------
Net cash used in investing activities                                                    (3,923)                     (5,576)
                                                                                  -------------               -------------


Cash flows from financing activities:
  Reduction of capital lease obligations                                                    (60)                       (163)
  Net borrowings under line of credit agreements                                         (9,805)                     18,921
  Repurchase of Senior Notes and PIK Debentures                                         (11,336)                     (5,080)
  Debt financing costs                                                                     (270)                         --
  Cash consideration paid in exchange of convertible debt                                (1,000)                         --
  Proceeds from issuance of equity securities                                                --                          39
                                                                                  -------------               -------------
Net cash provided by (used in) financing activities                                     (22,471)                     13,717
                                                                                  -------------               -------------


Net increase (decrease) in cash and cash equivalents                                        554                        (900)
  Cash and cash equivalents at beginning of period                                        4,940                       7,818
                                                                                  -------------               -------------
  Cash and cash equivalents at end of period                                           $  5,494                    $  6,918
                                                                                  =============               =============


Supplemental disclosures:
  Cash paid for:
   Interest                                                                            $  8,976                    $  9,892
   Income taxes                                                                           5,591                       1,439
Supplemental schedule of significant non-cash financing activities:
   Issuance of 8% Subordinated Convertible Note in exchange
     for 15% PIK Debentures                                                            $  8,000                          --

</TABLE>

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

                                       5
<PAGE>

                     COMFORCE CORPORATION AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1.  GENERAL

     The accompanying unaudited interim consolidated financial statements of
COMFORCE Corporation ("COMFORCE") and its subsidiaries, including COMFORCE
Operating, Inc. ("COI") (collectively, the "Company") have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in annual financial
statements have been condensed or omitted pursuant to those rules and
regulations.  In the opinion of management, all adjustments, consisting of
normal recurring adjustments considered necessary for a fair presentation, have
been included.  Although management believes that the disclosures made are
adequate to ensure that the information presented is not misleading, it is
suggested that these financial statements be read in conjunction with the
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 2000.  The results for the
three and nine months ended September 30, 2001 are not necessarily indicative of
the results of operations for the entire year.

2.  ACQUISITION

     On February 7, 2000, the Company purchased, through its Uniforce Staffing
Services, Inc. subsidiary, all of the issued and outstanding stock of Gerri G.,
Inc. for total consideration of $800,000 in cash.  In addition, the Company
agreed to contingent payments under which it would pay a minimum of $200,000 and
a maximum of $600,000 in cash over a two-year period, provided certain
contingencies are satisfied.  Gerri G. is in the business of providing staffing
and permanent placement services.

3.    DEBT

     Long-term debt at September 30, 2001 and December 31, 2000 consisted of (in
thousands):

<TABLE>
                                                                    September 30,              December 31,
                                                                        2001                       2000
                                                                    -----------                -----------
<S>                                                                  <C>                       <C>
12% Senior Notes, due 2007                                             $ 87,000                  $ 100,000
15% Senior Secured PIK Debentures,
 due 2009                                                                 9,655                     30,932
8% Subordinated Convertible Note, due 2009                                8,000                        ---
Revolving line of credit, due December 14, 2003,
 with interest payable monthly at LIBOR plus
 2.50%.  At September 30, 2001, the weighted
 average rate was 6.2%                                                   56,684                     66,489
                                                                    -----------                -----------
         Total long-term debt                                          $161,339                  $ 197,421
                                                                    ===========                ===========
</TABLE>

     During the first nine months of fiscal 2001, the Company repurchased $13.0
million principal amount of its Senior Notes due 2007 (the "Senior Notes") for a
cash purchase price of $8.9 million.  In addition, during this period, the
Company repurchased $5.2 million principal amount of its 15% Senior Secured PIK
Debentures due 2009 (the "PIK Debentures") for a cash purchase price of $2.5
million (including accrued and unpaid interest of $340,000).  The Company also
retired an additional $18.0 million principal amount of its PIK Debentures
through the exchange for $8.0 million principal amount of its 8% Subordinated
Convertible Note due December 2, 2009 (the "Convertible Note") (including
accrued and unpaid interest of $860,000) and payment of cash consideration of
$1.0 million.  The Convertible Note bears interest at the rate of 8% per annum,
payable semi-annually on June 1 and December 1 in each year.  Through December
1, 2003, interest on the Convertible Note may, at the election of the Company,
be paid-in-kind through its issuance of additional Convertible Notes.  The
Convertible Note is convertible into the Company's common stock based on a price
of $1.70 per share of common stock, provided that if such conversion would
result in a change of control occurring under the terms of the Company's
indentures, the Convertible Note will be convertible into shares of non-voting
preferred stock having a nominal liquidation preference (but no other
preferences), which in turn will be

                                       6
<PAGE>

convertible into common stock at the holder's option at any time so long as the
conversion would not result in a change of control. See Note 10 and "Debt
Restructuring" under Part I, Item 2 of this Report. The extraordinary gain
realized by these transactions was $9.3 million, which includes the reduction of
$1.1 million of deferred financing costs associated with the repurchases, net of
tax expense of $6.6 million.

     The debt service costs associated with the PIK Debentures may be satisfied
through issuance of new notes. For the nine months ended September 30, 2001, the
Company issued $1,923,000 principal amount of additional PIK Debentures in lieu
of interest.

4.  CHANGE IN FISCAL YEAR

     On March 22, 2001, the Company's Board of Directors adopted a resolution to
change the Company's fiscal year, which was previously a calendar year.
Beginning in 2001, the fiscal year will consist of the 52 or 53 weeks ending on
the last Sunday in December.  Accordingly, the Company's current fiscal year
will end on Sunday, December 30, 2001.

5.  EARNINGS PER SHARE

     Basic income (loss) per common share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during each period.  Diluted income (loss) per share is computed assuming the
conversion of stock options and warrants with a market value greater than the
exercise price to the extent such conversion assumption is dilutive. The
following represents a reconciliation of the numerators and denominators for
basic and diluted income (loss) per share for the three and nine month periods
ended September 30, 2001 and September 30, 2000 (in thousands):

<TABLE>
<CAPTION>
                                         Three months ended                 Nine months ended
                                 September 30,        September 30,    September 30,    September 30,
                                     2001                 2000             2001             2000
                                 -------------        -------------    -------------    ------------
<S>                              <C>                  <C>              <C>               <C>

 Numerator:
     Income (loss) before
      extraordinary gain               $  (978)             $   529        $(1,217)          $  (952)
     Gain on early debt
      extinguishment, net
      of taxes                           5,406                2,660          9,263             2,660
                                 -------------        -------------    -----------       -----------
      Net income                       $ 4,428              $ 3,189        $ 8,046           $ 1,708
                                 =============        =============    ===========       ===========


 Denominator:
     Weighted-average
      shares                            16,659               16,431         16,659            16,429

 Effect of dilutive
  securities:
     Warrants and Employee
      stock options                        ---                   22            ---               ---
                                 -------------        -------------    -----------       -----------


 Denominator for diluted
  income (loss) per
        share - adjusted
        weighted average
        shares and assumed
        conversions                     16,659               16,453         16,659            16,429
                                 =============        =============    ===========       ===========
</TABLE>

     Outstanding options and warrants to purchase shares of common stock,
representing approximately 3.2 million shares of common stock, were not included
in the computations of diluted net income (loss) per share for the three and
nine months ended September 30, 2001 because their effect would be anti-
dilutive.

6.  STOCK OPTIONS

     During the first nine months of 2001, the Company granted options to
purchase an aggregate of 60,000 shares of the Company's common stock at an
exercise price of $1.50 per share, which was equal to or greater than the fair
market value on the date of grant. All of these options were granted to six
officers and directors of the Company. These options, which were granted under
the Company's Long-Term Stock Investment Plan, will vest on the first
anniversary date of grant.

                                       7
<PAGE>

7.  SETTLEMENT OF LITIGATION

     On November 30, 2000, immediately prior to a scheduled jury trial, the
Company settled its long-standing litigation with two former executives of the
Company, Austin Iodice and Anthony Giglio.  In accordance with the terms of the
settlement, the Company paid to the plaintiffs $325,000 on January 2, 2001 and
$300,000 on May 1, 2001 and issued options to them to purchase 555,628 shares of
common stock in the aggregate at an exercise price of $0.6625 per share on
January 2, 2001.

8.  INDUSTRY SEGMENT INFORMATION

     The Company has determined that its reportable segments can be
distinguished principally by the types of services offered to the Company's
clients.

     Prior to filing its Annual Report on Form 10-K for the year ended December
31, 2000, the Company reported its results through two operating segments --
Staff Augmentation and Financial Services.  Principally as a result of the
development by the Company's PrO Unlimited(R) subsidiary of a business offering
web-enabled solutions for the procurement, tracking and engagement of contingent
labor, the Company began reporting its results through three operating segments
-- Staff Augmentation, Human Capital Management Services and Financial Services.

     Revenues and profits in the Staff Augmentation segment are generated by
providing supplemental staffing to client companies, generally on a time-and-
materials basis.  In the IT field, the Company provides highly skilled
programmers, help desk personnel, systems consultants and analysts, software
engineers and project managers for a wide range of technical assignments,
including client server, mainframe, desktop services, help desk and
Internet/Intranet.   In the telecom sector, the Company provides skilled telecom
personnel to plan, design, engineer, install and maintain wireless and wireline
telecommunications systems, including cellular, PCS, microwave, radio, satellite
and other networks.   In addition, the Company provides a broad range of other
staffing services to its customers in the Staff Augmentation segment, including
laboratory support (through the Company's Labforce(R) division), medical office
support, professional, scientific, clerical and call center staffing.

     Revenues and profits in the Human Capital Management segment are generated
through consulting and payrolling services to its clients.  Through its PrO
Unlimited subsidiary, the Company provides end-to-end web-enabled solutions for
the effective procurement, tracking and engagement of contingent or non-employee
labor.  The contingent labor force consists of independent contractors,
temporary workers, consultants, returning retirees and freelancers.

     Revenues and profits in the Financial Services segment are generated
through contracts for payrolling, funding and outsourcing services to its
clients.  In this segment, the Company processes payrolls, prepares reports,
pays payroll taxes and prepares and files tax returns for the contingent
personnel employed by independent staffing firms.  The Company also purchases
the accounts receivable of independent staffing firms and receives payments
directly from these firms' clients.

     The accounting policies of the segments are the same as those described in
Note 2 to the consolidated financial statements of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.  The
Company evaluates the performance of its segments and allocates resources to
them based on operating contribution, which represents segment revenues less
direct costs of operations, excluding the allocation of corporate general and
administrative expenses.  Assets of the operating segments reflect primarily net
accounts receivable associated with segment activities; all other assets are
included as corporate assets.  The Company does not track expenditures for long-
lived assets on a segment basis.

     The table below presents information on the revenues and operating
contribution for each segment for the three and nine months ended September 30,
2001 and September 30, 2000, and items which reconcile segment operating
contribution to the Company's reported pre-tax income (loss) (in thousands).

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                                 Three months ended                                 Nine months ended
                                     September 30,              September 30,           September 30,              September 30,
                                          2001                      2000                     2001                       2000
                                  ---------------------      -------------------     --------------------     ---------------------
<S>                                 <C>                        <C>                     <C>                      <C>
Net sales of services:
  Staff Augmentation                           $ 73,628                 $ 83,589                 $238,777                  $240,377
  Human Capital
       Management Services                       31,112                   33,803                   95,046                    95,918
  Financial Services                              2,768                    3,049                    9,244                     8,709
                                  ---------------------      -------------------     --------------------     ---------------------
                                               $107,508                 $120,441                 $343,067                  $345,004
                                  =====================      ===================     ====================     =====================


Operating contribution:
  Staff Augmentation                           $  7,055                 $  9,463                 $ 25,580                  $ 24,907
  Human Capital
       Management Services                          716                    1,048                    1,919                     3,929
  Financial Services                              2,134                    2,317                    7,202                     6,641
                                  ---------------------      -------------------     --------------------     ---------------------
                                                  9,905                   12,828                   34,701                    35,477
                                  ---------------------      -------------------     --------------------     ---------------------

Consolidated expenses:
  Other income/expense, net                       4,889                    4,692                   15,682                    16,141
  Depreciation and
       amortization                               2,021                    1,858                    5,894                     5,494
  Corporate general and
       administrative expenses                    3,837                    4,032                   12,686                    12,533
                                  ---------------------      -------------------     --------------------     ---------------------
                                                 10,747                   10,582                   34,262                    34,168
                                  ---------------------      -------------------     --------------------     ---------------------
Income (loss) before income
     tax and extraordinary gain                $   (842)                $  2,246                 $    439                  $  1,309
                                  =====================      ===================     ====================     =====================

<CAPTION>
                                                                                        At September 30,         At December 31,
                                                                                              2001                     2000
                                                                                     --------------------     ---------------------
<S>                                                                                  <C>                      <C>
Total assets:
  Staff Augmentation                                                                             $ 40,364                  $ 51,849
  Human Capital
       Management Services                                                                         15,224                    17,826
  Financial Services                                                                               40,621                    49,392
  Corporate                                                                                       162,403                   164,347
                                                                                     --------------------     ---------------------
                                                                                                 $258,612                  $283,414
                                                                                     ====================     =====================
</TABLE>

9.    ACCOUNTING AND DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

     On January 1, 2001, the Company adopted Statement of Accounting Standards
("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities." However, since the Company does not have any derivatives and does
not engage in hedging activities, the adoption of SFAS No. 133 had no impact on
the Company's consolidated financial statements.

10.  RELATED PARTY TRANSACTION

     On September 21, 2001, the Company completed the exchange of $18.0 million
principal amount of PIK Debentures for the Company's Convertible Note in the
principal amount of $8.0 million, plus $1.0 million in cash.  The Convertible
Note was issued to a limited partnership in which John Fanning, the Company's
Chairman and Chief Executive Officer, holds the principal economic interest.
Rosemary Maniscalco, a director of the Company, is the

                                       9
<PAGE>

general partner of this limited partnership and, by virtue of this role, is
deemed to be a beneficial owner of the Convertible Note. See Note 3 for a
description of the terms of the Convertible Note.

11.  NEW ACCOUNTING STANDARDS

     In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001.  Statement 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement 142.
Statement 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

     The Company is required to adopt the provisions of Statement 141
immediately, and to adopt Statement 142 effective January 1, 2002. Furthermore,
any goodwill and any intangible asset determined to have an indefinite useful
life that acquired in a purchase business combination completed after June 30,
2001 will not be amortized, but will continue to be evaluated for impairment in
accordance with the appropriate pre-Statement 142 accounting literature.
Goodwill and intangible assets acquired in business combinations completed
before June 30, 2001 will continue to be amortized prior to the adoption of
Statement 142.

     Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

     In connection with the transitional goodwill impairment evaluation,
Statement 142 will require the Company to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this the Company must identify its reporting units and determine the
carrying value of each reporting unit by assigning the assets and liabilities,
including the existing goodwill and intangible assets, to those reporting units
as of the date of adoption. The Company will then have up to nine months from
the date of adoption to determine the fair value of each reporting unit and
compare it to the reporting unit's carrying amount. To the extent a reporting
unit's carrying amount exceeds its fair value, an indication exists that the
reporting unit's goodwill may be impaired and the Company must perform the
second step of the transitional impairment test. In the second step, the Company
must compare the implied fair value of the reporting unit's goodwill, determined
by allocating the reporting unit's fair value to all of its assets (recognized
and unrecognized) and liabilities in a manner similar to a purchase price
allocation in accordance with Statement 141, to its carrying amount, both of
which would be measured as of the date of adoption. This second step is required
to be completed as soon as possible, but no later than the end of the year of
adoption. Any transitional impairment loss will be recognized as the cumulative
effect of a change in accounting principle in the Company's statement of
operations.

     As of the date of adoption, the Company expects to have unamortized
goodwill and identifiable intangible assets in the amount of $134.9 million,
which will be subject to the transition provisions of Statements 141 and 142.
Amortization expense related to goodwill was $4.1 million and $3.1 million for
the year ended December 31, 2000 and the nine months ended September 30, 2001,
respectively. Because of the extensive effort needed to comply with adopting
Statements 141 and 142, it is not practicable to reasonably estimate the impact
of adopting these Statements on the Company's financial statements at the date
of this report, including whether any transitional impairment losses will be
required to be recognized as the cumulative effect of a change in accounting
principle.

                                       10
<PAGE>

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143 is
effective for fiscal years beginning after June 15, 2002, and establishes an
accounting standard requiring the recording of the fair value of liabilities
associated with the retirement of long-lived assets in the period in which they
are incurred.  The Company does not expect the adoption of SFAS 143 to have a
significant effect on its results of operations or its financial position.

  In October 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
of Long-Lived Assets, which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets. This statement supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, while retaining the fundamental recognition and
measurement provisions of that statement. SFAS No. 144 requires that a long-
lived asset to be abandoned, exchanged for a similar productive asset or
distributed to owners in a spinoff to be considered held and used until it is
disposed of. However, SFAS No. 144 requires that management consider revising
the depreciable life of such long-lived asset. With respect to long-lived assets
to be disposed of by sale, SFAS No. 144 retains the provisions of SFAS No. 121
and, therefore, requires that discontinued operations no longer be measured on a
net realizable value basis and that future operating losses associated with such
discontinued operations no longer be recognized before they occur. SFAS No. 144
is effective for all fiscal quarters of fiscal years beginning after December
15, 2001, and will thus be adopted by the Company on January 1, 2002. The
Company has not determined the effect, if any, that the adoption of SFAS No. 144
will have on the Company's consolidated financial statements.



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The discussion set forth below supplements the information found in the
unaudited consolidated financial statements and related notes of COMFORCE
Corporation ("COMFORCE") and its subsidiaries, including COMFORCE Operating,
Inc. ("COI") (collectively, the "Company").

Overview

     Staffing personnel placed by the Company are employees of the Company. The
Company is responsible for employee related expenses for its employees,
including workers' compensation, unemployment compensation insurance, Medicare
and Social Security taxes and general payroll expenses. The Company offers
health, dental, disability and life insurance to its billable employees.
Staffing and consulting companies, including the Company, typically pay their
billable employees for their services before receiving payment from their
customers, often resulting in significant outstanding receivables. To the extent
the Company increases revenues through acquisitions and/or internal growth,
these receivables will grow and there will be greater requirements for borrowing
availability under its credit facility to fund current operations.

     Prior to filing its Annual Report on Form 10-K for the year ended December
31, 2000, the Company reported its results through two operating segments --
Staff Augmentation and Financial Services.  Principally as a result of the
development by the Company's PrO Unlimited subsidiary of a business offering
web-enabled solutions for the procurement, tracking and engagement of contingent
labor, the Company began reporting its results through three operating segments
-- Staff Augmentation, Human Capital Management Services and Financial Services.
The Staff Augmentation segment provides information technology (IT), telecom and
other staffing services.  The Human Capital Management Services segment provides
contingent workforce management services.  The Financial Services segment
provides payroll, funding and outsourcing services to independent consulting and
staffing companies.

Debt Restructuring

     As part of its strategy to reduce its higher interest rate debt and improve
its balance sheet, on February 28, 2001, the Company completed the repurchase of
$11.0 million principal amount of its Senior Notes due 2007 (the "Senior Notes")
for $7.5 million and on March 5, 2001, the Company completed the repurchase of
an additional $2.0 million of Senior Notes for $1.4 million, the repurchase
prices of which were paid from lower interest rate borrowings under the
Company's revolving credit facility agented by IBJ Whitehall Business Credit
Corporation (the "IBJ Credit Facility").

                                       11
<PAGE>

Prior thereto, during the third quarter of 2000, the Company repurchased $10.0
million principal amount of the Senior Notes for a purchase price of $5.1
million, the repurchase price of which was paid from lower interest rate
borrowings under the now retired Heller Credit Facility.

     In addition, on March 5, 2001, the Company entered into an amendment of the
IBJ Credit Facility to permit borrowings thereunder to repurchase the Company's
15% Senior Secured PIK Debentures due 2009 (the "PIK Debentures") under certain
circumstances.  As amended, the IBJ Credit Facility permits the use of up to
$16.5 million in loan proceeds to pay the aggregate repurchase prices of Senior
Notes and PIK Debentures and costs associated therewith (including related tax
expenses), not more than $9.0 million of which may be used to pay the repurchase
price of PIK Debentures and such associated costs.

     On March 6, 2001, the Company completed the repurchase of $5.2 million
principal amount of PIK Debentures for $2.5 million using lower interest rate
borrowings under the IBJ Credit Facility.

     On September 21, 2001, the Company completed the exchange of $18.0 million
principal amount of PIK Debentures (including accrued and unpaid interest of
$860,000) for the Company's 8% Subordinated Convertible Note due December 2,
2009 in the principal amount of $8.0 million (the "Convertible Note"), plus $1.0
million in cash.  Interest on the PIK Debentures accrues at the rate of 15% per
annum and, through December 1, 2002, may, at the election of the Company, be
paid-in-kind through its issuance of additional PIK Debentures.  The Convertible
Note bears interest at the rate of 8% per annum, payable semi-annually on June 1
and December 1 in each year.  Through December 1, 2003, interest on the
Convertible Note may, at the election of the Company, be paid-in-kind through
its issuance of additional Convertible Notes.  The Convertible Note is
convertible into the Company's common stock based on a price of $1.70 per share
of common stock, provided that if such conversion would result in a change of
control occurring under the terms of the indentures governing the PIK Debentures
or the Senior Notes, the Convertible Note will be convertible into shares of
non-voting preferred stock having a nominal liquidation preference (but no other
preferences), which in turn will be convertible into common stock at the
holder's option at any time so long as the conversion would not result in a
change of control.

     The holder of the $18.0 million PIK Debentures that were exchanged for the
$8.0 million Convertible Note is a limited partnership in which John Fanning,
the Company's Chairman and Chief Executive Officer, holds the principal economic
interest.  Rosemary Maniscalco, a director of the Company, is the general
partner of this limited partnership and, by virtue of this role, is deemed to be
a beneficial owner of the Convertible Note.  The Company obtained the opinion of
an independent investment banking firm of nationally recognized standing that
this exchange transaction was fair to the Company from a financial point of
view. Prior to the exchange, the Company received the consent to eliminate
certain of the covenants in the indenture governing the PIK Debenture.

Results of Operations

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

     Net sales of services for the three months ended September 30, 2001 were
$107.5 million, a decrease of  10.7% from net sales of services for the three
months ended September 30, 2000 of $120.4 million.  The decrease in net sales of
services is attributable principally to a sharp decline in the telecom industry
resulting in lower sales to telecom customers in the Staff Augmentation
division.  Sales to staffing services customers also contributed to lower sales
in the Staff Augmentation division, partially offset by an increase in net sales
of services to information technology customers. Due to the continuing effects
of the soft economy, revenues were down in the Human Capital Management Services
segment and service revenues declined in the Financial Services segment as well.

     Cost of services for the three months ended September 30, 2001 was 80.3% of
net sales of services as compared to cost of services of 78.7% for the three
months ended September 30, 2000.  The cost of services increased as a percentage
of net sales for the third quarter of 2001 as compared to the third quarter of
2000 primarily as a result of lower total company sales, in particular, lower
sales and gross margin percentage to telecom customers discussed above, as well
as decreases in permanent placement fees.

                                       12
<PAGE>

     Selling, general and administrative expenses as a percentage of net sales
of services were 14.1% for the three months ended September 30, 2001, compared
to 14.0% for the three months ended September 30, 2000.  Due to the lower sales
discussed above, management undertook initiatives to reduce selling, general and
administrative costs for the quarter.  These costs were further reduced by lower
commissions as a result of the decrease in sales discussed above.

     Operating income for the three months ended September 30, 2001 was $4.0
million as compared to operating income of $6.9 million for the three months
ended September 30, 2000.  This 41.7% decrease in operating income for the third
quarter of 2001 resulted principally from the decrease in sales and gross margin
discussed above, and an increase in depreciation and amortization, partially
offset by lower selling, general administrative expenses.

     The Company's interest expense for the three months ended September 30,
2001 and September 30, 2000 is attributable to the interest on the Company's
credit facility with Heller Financial, Inc. (the "Heller Credit Facility"),
which was terminated in December 2000, the IBJ Credit Facility, which was
entered into in December 2000, the Senior Notes and the PIK Debentures.  The IBJ
Credit Facility was entered into to repay the Heller Credit Facility and provide
the Company additional borrowing availability.  The Heller Credit Facility as
well as the financings evidenced by the Senior Notes and PIK Debentures were
incurred in 1997, principally in connection with the funding of business
acquisitions.

     During the first quarter of 2001, the Company repurchased $13.0 million
principal amount of Senior Notes for $8.9 million and $5.2 million principal
amount of PIK Debentures for $2.5 million (including accrued and unpaid interest
of $340,000), the repurchase prices of which were paid from lower interest rate
borrowings under the IBJ Credit Facility.  On September 21, 2001, the Company
completed the exchange of $18.0 million principal amount of PIK Debentures
(including accrued and unpaid interest of $860,000) for its Convertible Note
(bearing interest at the per annum rate of 8%), plus $1.0 million in cash. The
extraordinary gain realized by the Company as a result of these transactions was
$9.3 million, which includes the reduction of $1.1 million of deferred financing
costs associated with the repurchases, net of tax expense of $6.6 million. See
"Financial Condition, Liquidity and Capital Resources" in this Item 2.

     The interest expense was lower for the three months ended September 30,
2001 as compared to the three months ended September 30, 2000 due to lower
market interest rates and borrowings under the IBJ Credit Facility as well as
the reduction of Senior Notes and PIK Debentures through the repurchases
described above.

     The income tax provision for the three months ended September 30, 2001 was
$136,000 on a loss of $842,000 before taxes and extraordinary gain associated
with the retirement of the PIK Debentures through the exchange described above.
The income tax provision for the three months ended September 30, 2000 was $1.7
million on income before taxes of $2.2 million. The Company provides for income
taxes, based upon the estimated effective tax rate (on a year to date basis).
The difference between the federal statutory income tax rate and the Company's
effective tax rate relates primarily to the nondeductibility of amortization
expense associated with certain intangible assets, the nondeductibility of a
portion of the interest expense associated with the PIK Debentures and state
income taxes.

     Nine months Ended September 30, 2001 Compared to Nine months Ended
September 30, 2000

     Net sales of services for the nine months ended September 30, 2001 were
$343.1 million, a decrease of 0.6% from net sales of services for the nine
months ended September 30, 2000 of $345.0 million.  The decrease in net sales of
services is attributable principally to a sharp decline in the telecom industry
resulting in lower sales to telecom customers in the Staff Augmentation
division.  Sales to staffing services customers also contributed to lower sales
in the Staff Augmentation division, partially offset by an increase in net sales
of services to information technology customers and to the Financial Services
segment. Also due to the continuing effects of the soft economy, revenues were
lower to the Human Capital Management Services segment.

     Cost of services for the nine months ended September 30, 2001 was 79.1% of
net sales of services as compared to cost of services of 79.4% for the nine
months ended September 30, 2000.  The cost of services decreased as a percentage
of net sales for the first nine months of 2001 as compared to the first nine
months of 2000 as a result of the continued focus on higher margin niche
products, partially offset by lower sales (and gross margin percentages on
sales) to telecom customers and a decrease in permanent placement fees.

                                       13
<PAGE>

     Selling, general and administrative expenses as a percentage of net sales
of services were 14.5% for the nine months ended September 30, 2001, compared to
14.0% for the nine months ended September 30, 2000.  This increase resulted
principally from higher payroll and recruiting costs with respect to non-
billable staff and investments to expand the infrastructure for the Company's
Human Capital Management Services segment during the first half of 2001, offset
partially by initiatives made by management during the third quarter to reduce
costs.

     Operating income for the nine months ended September 30, 2001 was $16.1
million as compared to operating income of $17.5 million for the nine months
ended September 30, 2000.  This 7.6% decrease in operating income for the nine
months ended September 30, 2001 resulted principally from a decrease in sales,
particularly in the telecom sector, higher selling, general and administrative
expenses and an increase in depreciation and amortization.

     The Company's interest expense for the nine months ended September 30, 2001
and September 30, 2000 is attributable to the interest on the Heller Credit
Facility, which was terminated in December 2000, the IBJ Credit Facility, which
was entered into in December 2000, the Senior Notes and the PIK Debentures.  The
IBJ Credit Facility was entered into to repay the Heller Credit Facility and
provide the Company additional borrowing availability.  The Heller Credit
Facility as well as the financings evidenced by the Senior Notes and PIK
Debentures were incurred in 1997, principally in connection with the funding of
business acquisitions.

     During the first quarter of 2001, the Company repurchased $13.0 million
principal amount of Senior Notes for $8.9 million and $5.2 million principal
amount of PIK Debentures for $2.5 million (including accrued and unpaid interest
of $340,000), the repurchase prices of which were paid from lower interest rate
borrowings under the IBJ Credit Facility.  On September 21, 2001, the Company
completed the exchange of $18.0 million principal amount of PIK Debentures
(including accrued and unpaid interest of $860,000) for its Convertible Note
(bearing interest at the per annum rate of 8%), plus $1.0 million in cash. The
extraordinary gain realized by Company during the nine months ended September
30, 2001 as a result of the repurchases and the exchange was $9.3 million, which
includes the reduction of $1.1 million of deferred financing costs associated
with these transactions, net of tax expense of $6.6 million. See "Financial
Condition, Liquidity and Capital Resources" in this Item 2.

     The interest expense was lower for the nine months ended September 30, 2001
as compared to the nine months ended September 30, 2000 due to lower market
interest rates and borrowings under the IBJ Credit Facility as well as the
reduction of Senior Notes and PIK Debentures through the repurchases and the
exchange described above.

     The income tax provision for the nine months ended September 30, 2001 was
$1.7 million on income of $439,000 before taxes and extraordinary gain
associated with the retirement of the Senior Notes and PIK Debentures through
the repurchases and exchange described above.  The income tax provision for the
nine months ended September 30, 2000 was $2.3 million on income before taxes of
$1.3 million. The Company provides for income taxes, based upon the estimated
effective tax rate (on a year to date basis).  The difference between the
federal statutory income tax rate and the Company's effective tax rate relates
primarily to the nondeductibility of amortization expense associated with
certain intangible assets, the nondeductibility of a portion of the interest
expense associated with the PIK Debentures and state income taxes.

Financial Condition, Liquidity and Capital Resources

     The Company pays its billable employees weekly for their services, and
remits certain statutory payroll and related taxes as well as other fringe
benefits.  Invoices are generated to reflect these costs plus the Company's
markup.  These bills are typically paid within 45 days.  Increases in the
Company's net sales of services, resulting from expansion of existing offices or
establishment of new offices, will require additional cash resources.

     Management of the Company believes that cash flow from operations and funds
anticipated to be available under the IBJ Credit Facility will be sufficient to
service the Company's indebtedness and to meet anticipated working capital
requirements for the foreseeable future.

     During the nine months ended September 30, 2001, the Company's primary
sources of funds to meet working

                                       14
<PAGE>

capital needs were from borrowings under the IBJ Credit Facility. Cash and cash
equivalents increased $554,000 during the nine months ended September 30, 2001.
Cash flows provided by operating activities of $26.9 million exceeded cash flows
used in financing activities of $22.5 million and cash flows used in investing
activities of $3.9 million.

     As of September 30, 2001, the Company had outstanding $56.7 million
principal amount under the IBJ Credit Facility bearing interest at a weighted
average rate of 6.2% per annum.  In addition, as of September 30, 2001, the
Company had outstanding $9.7 million principal amount of PIK Debentures bearing
interest at a rate of 15% per annum, $87.0 million principal amount of Senior
Notes bearing interest at a rate of 12% per annum and $8.0 million principal
amount of Convertible Notes bearing interest at the rate of 8% per annum.  As
more fully described below, the debt service costs associated with the PIK
Debentures and the Convertible Notes may be satisfied through the issuance of
new PIK Debentures or Convertible Notes, respectively.  To date, the Company has
chosen to issue new PIK Debentures to pay these costs.

     In December 2000, the Company entered into the IBJ Credit Facility to
provide greater borrowing availability.  The maximum availability of $100.0
million was increased to $110.0 million in January 2001 when additional lending
institutions requested to join the loan syndicate.  The IBJ Credit Facility was
further amended in March 2001 to permit the Company to use certain borrowed
funds to repurchase PIK Debentures (in addition to Senior Notes, the repurchase
of which was previously permitted).

     The Company has adopted a strategy to reduce its higher interest rate debt
and improve its balance sheet by retiring Senior Notes and PIK Debentures
through public market and privately negotiated transactions and exchanging PIK
Debentures for the new Convertible Note with a substantially lower interest
rate.   In the first quarter of 2001, the Company repurchased $13.0 million
principal amount of Senior Notes for $8.9 million and $5.2 million principal
amount of PIK Debentures for $2.5 million, the repurchase prices of which were
paid from lower interest rate borrowings under the IBJ Credit Facility.  In the
third quarter of 2001, the Company completed the exchange of $18.0 million
principal amount of PIK Debentures (bearing interest at the rate of 15% per
annum) for its new $8 million Convertible Note (bearing interest at the rate of
8% per annum), plus $1.0 million in cash.

     The IBJ Credit Facility permits the use of up to $16.5 million in loan
proceeds to pay the aggregate repurchase prices of Senior Notes and PIK
Debentures and costs associated therewith (including related tax expenses), not
more than $9.0 million of which may be used to pay the repurchase price of PIK
Debentures and such associated costs.  In the case of each repurchase and the
exchange, the Company has incurred tax liabilities for the forgiveness of
indebtedness as a result of its retirement of Senior Notes and PIK Debentures
for consideration that is less than par.  Management believes that the remaining
availability under the IBJ Credit Facility is sufficient to service the
Company's indebtedness and to meet anticipated working capital requirements in
the foreseeable future.

     Substantially all of the consolidated net assets of the Company are assets
of COI and all of the net income that has been generated by Company through
September 30, 2001 is net income attributable to the operations of COI.
Accordingly, except for permitted distributions, these assets and net income are
restricted as to their use by COMFORCE.   The indenture governing the Senior
Notes imposes restrictions on COI making specified payments, which are referred
to as "restricted payments," including making distributions or paying dividends
(referred to as upstreaming funds) to COMFORCE.  Under the indenture, COI is not
permitted to make cash distributions to COMFORCE other than (1) to upstream $2.0
million annually ($1.25 million annually prior to 2000) to pay public company
expenses, (2) to upstream up to $10.0 million to pay income tax related to
deemed forgiveness of PIK Debentures to facilitate the purchase or exchange by
COMFORCE of PIK Debentures at less than par, (3) under certain circumstances in
connection with a disposition of assets, to upstream proceeds therefrom to repay
the PIK Debentures, and (4) to upstream funds to the extent COI meets the
restricted payments test under the indenture.

     Through December 1, 2002, interest under the PIK Debentures is payable, at
the option of COMFORCE, in cash or in kind through the issuance of additional
PIK Debentures.  In addition, through December 1, 2003, interest under the
Convertible Notes is payable, at the option of COMFORCE, in cash or in kind
through the issuance of additional Convertible Notes.  To date, COMFORCE has
paid all interest under the PIK Debentures in kind.  Beginning with the interest
payment due June 1, 2003, COMFORCE will be required to pay interest on the PIK
Debentures in cash.  Beginning with the interest payment due June 1, 2004,
COMFORCE will be required to pay interest on the Convertible

                                       15
<PAGE>

Notes in cash. Its ability to pay cash interest in each case will be dependent
on the ability of COI to upstream funds for this purpose under the restricted
payments test. In addition, COMFORCE's ability to repay the PIK Debentures at
their maturity on December 1, 2009 or the Convertible Note at its maturity on
December 2, 2009, or on any earlier required repayment or repurchase date, will
also be dependent on the ability of COI to upstream funds for such purposes
under the restricted payments test, unless COMFORCE separately obtains a loan or
sells its capital stock or other securities to provide funds for such purposes.

     As of September 30, 2001, approximately $135.4 million, or 52.3%, of the
Company's total assets were intangible assets. These intangible assets
substantially represent amounts attributable to goodwill recorded in connection
with the Company's acquisitions.  Intangible assets are amortized over a 5 to 40
year period, resulting in an annual non-cash charge of approximately $4.5
million. Effective January 1, 2002, the Company will cease recording goodwill
amortization amounting to approximately $4.2 million, as described below under
"--New Accounting Standards."

     The Company is obligated under various agreements to make earn-out payments
to the sellers of companies acquired by the Company and to sellers of franchised
businesses repurchased by the Company, subject to the sellers meeting specified
contractual requirements.  The maximum amount of the remaining potential earn-
out payments is approximately $525,000 in cash payable through December 31,
2002.  The Company cannot currently estimate whether it will be obligated to pay
the maximum amount; however, the Company anticipates that the cash generated by
the operations of the acquired companies or franchised businesses will provide
all or a substantial part of the capital required to fund the cash portion of
the earn-out payments.

New Accounting Standards

     In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 141 requires
that the purchase method of accounting be used for all business combinations
initiated after June 30, 2001 as well as all purchase method business
combinations completed after June 30, 2001. Statement 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill, noting that any
purchase price allocable to an assembled workforce may not be accounted for
separately. Statement 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement 142.
Statement 142 will also require that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

     The Company is required to adopt the provisions of Statement 141
immediately, and to adopt Statement 142 effective January 1, 2002. Furthermore,
any goodwill and any intangible asset determined to have an indefinite useful
life that are acquired in a purchase business combination completed after June
30, 2001 will not be amortized, but will continue to be evaluated for impairment
in accordance with the appropriate pre-Statement 142 accounting literature.
Goodwill and intangible assets acquired in business combinations completed
before June 30, 2001 will continue to be amortized prior to the adoption of
Statement 142.

     Statement 141 will require upon adoption of Statement 142, that the Company
evaluate its existing intangible assets and goodwill that were acquired in a
prior purchase business combination, and to make any necessary reclassifications
in order to conform with the new criteria in Statement 141 for recognition apart
from goodwill. Upon adoption of Statement 142, the Company will be required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after adoption. In addition,
to the extent an intangible asset is identified as having an indefinite useful
life, the Company will be required to test the intangible asset for impairment
in accordance with the provisions of Statement 142 within the first interim
period. Any impairment loss will be measured as of the date of adoption and
recognized as the cumulative effect of a change in accounting principle in the
first interim period.

     In connection with the transitional goodwill impairment evaluation,
Statement 142 will require the Company to perform an assessment of whether there
is an indication that goodwill is impaired as of the date of adoption. To
accomplish this the Company must identify its reporting units and determine the
carrying value of each reporting unit by

                                       16
<PAGE>

assigning the assets and liabilities, including the existing goodwill and
intangible assets, to those reporting units as of the date of adoption. The
Company will then have up to nine months from the date of adoption to determine
the fair value of each reporting unit and compare it to the reporting unit's
carrying amount. To the extent a reporting unit's carrying amount exceeds its
fair value, an indication exists that the reporting unit's goodwill may be
impaired and the Company must perform the second step of the transitional
impairment test. In the second step, the Company must compare the implied fair
value of the reporting unit's goodwill, determined by allocating the reporting
unit's fair value to all of its assets (recognized and unrecognized) and
liabilities in a manner similar to a purchase price allocation in accordance
with Statement 141, to its carrying amount, both of which would be measured as
of the date of adoption. This second step is required to be completed as soon as
possible, but no later than the end of the year of adoption. Any transitional
impairment loss will be recognized as the cumulative effect of a change in
accounting principle in the Company's statement of operations.

     As of the date of adoption, the Company expects to have unamortized
goodwill and identifiable intangible assets in the amount of $134.9 million,
which will be subject to the transition provisions of Statements 141 and 142.
Amortization expense related to goodwill was $4.1 million for the year ended
December 31, 2000 and $3.1 million for the nine months ended September 30, 2001.
Because of the extensive effort needed to comply with adopting Statements 141
and 142, it is not practicable to reasonably estimate the impact of adopting
these Statements on the Company's financial statements at the date of this
report, including whether any transitional impairment losses will be required to
be recognized as the cumulative effect of a change in accounting principle.

     In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 143, Accounting for Asset Retirement Obligations ("SFAS 143"). SFAS 143 is
effective for fiscal years beginning after June 15, 2002, and establishes an
accounting standard requiring the recording of the fair value of liabilities
associated with the retirement of long-lived assets in the period in which they
are incurred. The Company is in the process of determining the future impact
that the adoption of FAS 143 may have on its earnings and financial position.

     In October 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment of Long-Lived Assets, which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This statement
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, while retaining the fundamental
recognition and measurement provisions of that statement. SFAS No. 144 requires
that a long-lived asset to be abandoned, exchanged for a similar productive
asset or distributed to owners in a spinoff to be considered held and used until
it is disposed of. However, SFAS No. 144 requires that management consider
revising the depreciable life of such long-lived asset. With respect to long-
lived assets to be disposed of by sale, SFAS No. 144 retains the provisions of
SFAS No. 121 and, therefore, requires that discontinued operations no longer be
measured on a net realizable value basis and that future operating losses
associated with such discontinued operations no longer be recognized before they
occur. SFAS No. 144 is effective for all fiscal quarters of fiscal years
beginning after December 15, 2001, and will thus be adopted by the Company on
January 1, 2002. The Company has not determined the effect, if any, that the
adoption of SFAS No. 144 will have on the Company's consolidated financial
statements.

Seasonality

     The Company's quarterly operating results are affected primarily by the
number of billing days in the quarter and the seasonality of its customers'
businesses.  Demand for engineer-related, IT and telecom staffing services has
historically been lower during the second half of the fourth quarter through the
following first quarter, and, generally, shows gradual improvement until the
second half of the fourth quarter. The Company believes that the effects of
seasonality will be less severe in the future if sales of its niche, human
capital management and financial service products continue to increase as a
percentage of the Company's consolidated net sales of services.

Forward Looking Statements

     Various statements made in this Report concerning the manner in which the
Company intends to conduct its future operations, and potential trends that may
impact future results of operations, are forward looking statements.  The
Company may be unable to realize its plans and objectives due to various
important factors, including, but not limited to, adverse general economic
conditions (particularly since the events of September 11, 2001); recent
upheavals in the

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<PAGE>

telecommunications industry; heightened competition for customers as well as for
contingent personnel which could potentially require the Company to reduce its
current fee scales without being able to reduce the personnel costs of its
billable employees; due to the Company's significant leverage, its greater
vulnerability to economic downturns and its potentially diminished ability to
obtain additional financing for capital expenditures or for other purposes; if
the Company is unable to sustain the cash flow necessary to support the
retention of goodwill on its balance sheet (an analysis of which is required to
be conducted annually), it could be required to writedown the impaired assets,
which could have a material adverse impact on its financial condition and
results of operations; or, if COI does not generate sufficient consolidated net
income or have other funds available to upstream to COMFORCE under the
restricted payments test of the Senior Notes indenture in order for it to pay
cash interest on the PIK Debentures (which is required beginning June 1, 2003)
or the Convertible Note (which is required beginning June 1, 2004) or to repay
the PIK Debentures or the Convertible Note at their maturity in December 2009,
or on any earlier required repayment or repurchase date, then, unless COMFORCE
obtains a loan or sells its capital stock or other securities to provide funds
for this purpose, the Company will default under the indentures governing the
PIK Debentures and the Senior Notes and under the IBJ Credit Facility.
Additional important factors that could cause the Company to be unable to
realize its plans and objectives are described under "Risk Factors" in the
Registration Statement on Form S-3 of the Company filed with the Securities and
Exchange Commission on December 21, 2000 (Registration No. 333-52356). The
disclosure under "Risk Factors" in the Registration Statement may be accessed
through the Web site maintained by the Securities and Exchange Commission at
"www.sec.gov." In addition, the Company will provide, without charge, a copy of
such "Risk Factors" disclosure to each stockholder of the Company who requests
such information. Requests for copies should be directed to the attention of
Linda Annicelli, Vice President of Administration at COMFORCE Corporation, 415
Crossways Park Drive, P.O. Box 9006, Woodbury, New York 11797,
telephone 516-437-3300.

ITEM 3.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by Item 3 has been disclosed in Item 7A of the
Company's Annual Report on Form 10-K for the year ended December 31, 2000.
There has been no material change in the disclosure regarding market risk.


                          PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

  Since the date of the filing of the Company's Annual Report on Form 10-K for
the year ended December 31, 2000, there have been no material new legal
proceedings involving the Company or any material developments to the
proceedings described in such 10-K.

Item 2.  Changes in Securities and Use of Proceeds.

     On September 21, 2001, the Company completed the exchange of $18.0 million
principal amount of PIK Debentures for the Company's Convertible Note in the
principal amount of $8.0 million, plus $1.0 million in cash.  The Convertible
Note is convertible into the Company's common stock based on a price of $1.70
per share of common stock, provided that if such conversion would result in a
change of control occurring under the terms of the indentures governing the PIK
Debentures or the Senior Notes, the Convertible Note will be convertible into
shares of non-voting preferred stock having a nominal liquidation preference
(but no other preferences), which in turn will be convertible into common stock
at the holder's option at any time so long as the conversion would not result in
a change of control.

     The Convertible Note was issued to a limited partnership in which John
Fanning, the Company's Chairman and Chief Executive Officer, holds the principal
economic interest.  Rosemary Maniscalco, a director of the Company, is the
general partner of this limited partnership and, by virtue of this role, is
deemed to be a beneficial owner of the Convertible Note.  RBC Dominion
Securities Corporation served as the placement agent in connection with the
exchange.  The Convertible Note was issued in reliance on the exemption afforded
by Section 4(2) of the Securities Act of 1933 and the regulations thereunder.

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<PAGE>

Item 3.  Defaults Upon Senior Securities.

  Not applicable.

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

  Not applicable.

Item 5.  Other Information.

  Not applicable.

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

  (a)  Exhibits.

       10.1  Form of the Company's 8% Subordinated Convertible Note due
             December 2, 2009.


  (b)  Reports on Form 8-K.

       None.

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<PAGE>

                                 SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.


COMFORCE Corporation

By:   /s/ Harry Maccarrone
     --------------------------------------------
     Harry Maccarrone, Executive Vice President
     and Chief Financial Officer


Date: November 9, 2001

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