UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-K

[X]  Annual Report  Pursuant to Section 13 or 15(d) of the  Securities  Exchange
     Act of 1934 for the fiscal year ended January 2, 2000.

[ ]  Transition  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
     Exchange Act of 1934

Commission File Number:  0-26094

                           SOS STAFFING SERVICES, INC.
                           ---------------------------
             (Exact name of Registrant as specified in its charter)

         Utah                                                     87-0295503
         ----                                                     ----------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)

1415 South Main Street, Salt Lake City, Utah                        84115
--------------------------------------------                        -----
 (Address of principal executive offices)                        (Zip Code)

       Registrant's telephone number, including area code: (801) 484-4400

           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common stock, $0.01 par value
                                (Title of class)

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 by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K.                                                 [X]

The  aggregate  market value of the Common Stock held by  non-affiliates  of the
Registrant,  on March 6, 2000,  based upon the closing sales price of the Common
Stock of $5.13 per share on that  date,  as  reported  on the  NASDAQ/NMS  Stock
Market,  was  approximately  $26,236,913.  Shares of Common  Stock  held by each
officer and director  and by each person who owns 5% or more of the  outstanding
Common  Stock  have  been  excluded  in that  such  persons  may be deemed to be
affiliates.  This  determination  of  affiliate  status  is  not  necessarily  a
conclusive determination for other purposes.

As of March 6, 2000,  Registrant  had  outstanding  12,691,398  shares of Common
Stock.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the  Registrant's  Annual Report to Shareholders for the fiscal year
ended January 2, 2000 are incorporated by reference into Parts II and IV of this
Report. Portions of the Proxy Statement for the Registrant's 2000 Annual Meeting
of  Shareholders  to be held May 17, 2000 are  incorporated by reference in Part
III of this Report.


<PAGE>


2

                                     PART I

         This Annual  Report on Form 10-K  contains  forward-looking  statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities  Act") and Section 21E of the  Securities  Exchange Act of 1934,  as
amended (the "Exchange Act"), that involve risks and  uncertainties.  The reader
is cautioned that the actual results of SOS Staffing Services,  Inc. will differ
(and may differ  materially) from the results discussed in such  forward-looking
statements.  Factors that could cause or contribute to such differences  include
those factors  discussed  herein under "Factors That May Affect Future  Results"
and elsewhere in this Report generally.

ITEM 1.  BUSINESS

Development of Business

         SOS  Staffing  Services,  Inc.  ("SOS" or the  "Company")  is a leading
provider of staffing and consulting services in the Western United States. As of
January 2, 2000, SOS operated a network of 150 offices located in 18 states. The
Company provides a broad range of commercial staffing and information technology
("IT")  services.   Commercial   staffing  services  include  light  industrial,
clerical,  industrial,  technical, specialty and other professional services. IT
services  consist of  staffing,  consulting  and  outsourcing  services  such as
systems  design,  programming,  network and systems  management  and  e-business
solutions.

         The Company's  commercial staffing offices are supported by centralized
functions at corporate headquarters that include marketing, recruiting, training
and retention,  workers'  compensation,  insurance  services,  accounts payable,
purchasing,  credit, legal and other administrative support services. Generally,
each staffing office has access to the Company's central management  information
system and its  proprietary  software  that  provides  information  on  customer
requirements,  available applicants,  staffing employees on assignment and other
information which facilitates efficient response to customer job orders.

         The  Company  has   consolidated   its  IT  staffing,   consulting  and
outsourcing operations into Inteliant Corporation ("Inteliant"),  a wholly-owned
subsidiary of the Company,  and has developed a support  system  tailored to the
specific  needs of IT customers.  Inteliant has  responsibility  for  accounting
(including accounts payable,  accounts receivable,  and purchasing),  marketing,
recruiting,  and training.  Other  functions such as workers'  compensation  and
other insurance services and legal review have been centralized at the Company's
corporate headquarters.

Segment Financial Information

         The Company's  operations are grouped into two  identifiable  operating
segments:  commercial  staffing and IT. The commercial staffing segment provides
staffing solutions to companies by furnishing  temporary  clerical,  industrial,
light-industrial,   engineering,  and  professional  services.  The  IT  segment
provides  consulting  services  (including resource planning and implementation,
e-commerce,  internet  technology  and  management  consulting),  staffing,  and
outsourcing  (including  help desk and data  center  operations)  in  IT-related
fields.  Financial  information  concerning the Company is included in Item 8 in
Part II of this report.

Description of Business by Segment

Commercial Staffing

         Principal services and markets:  Historically, the Company's commercial
staffing  segment  customers  have  consisted  primarily  of small  to  mid-size
companies. Sales to these businesses are developed either locally or regionally.
Generally,  the commercial staffing segment provides light industrial,  clerical
and industrial services through SOS Staffing Services,  Skill Staff,  Industrial
Specialists,  TOPS  Staffing  and  Century  Personnel  offices.  The  commercial
staffing segment also offers other specialized services provided by offices such
as SOS Technical Services (engineers, chemists, geologists, designers, drafters,
illustrators,  artists,  writers and other  technical  personnel),  AccountStaff
(accountants,   bookkeepers,   auditors,  data  entry  personnel  and  financial
analysts),  PAMS (medical  administrative  services),  SOS Collections  Services


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(collection services and project billing for medical facilities),  Devon & Devon
and Truex  (high-end  administrative  staffing  and  permanent  placement),  CGS
Personnel   (mining   and  mineral   exploration   engineers,   geologists   and
hydrologists)   and  Mortgage  Staffing  (loan  servicing  and  loan  production
professionals).

         The Company's  commercial  staffing services also include  professional
employer services such as payrolling,  outsourcing,  on-site and  administrative
professional services:

-    Payrolling  typically  involves  the  transfer of a  customer's  short-term
     seasonal or special use employees to the Company's payroll for a designated
     period.

-    Outsourcing  represents a growing  trend among  businesses to contract with
     third parties to provide a particular  function or business  department for
     an agreed price over a designated period.

-    On-site  services involve locating a regular SOS employee at the customer's
     place of  business  to manage  the  customer's  entire  temporary  staffing
     requirements.

-    Administrative  professional  services offer SOS customers  skills testing,
     drug testing and risk management services.

     o   Skills   testing   available  to  SOS  customers   include   cognitive,
         personality and psychological evaluations.

     o   Drug tests are confirmed through an independent certified laboratory.

     o   Risk  management   services  include  on-site  safety   inspection  and
         consulting services.

         The Company also provides  professional  employer organization services
through the Company's ServCom Staff Management,  Inc.  subsidiary,  on a limited
basis, which offers to SOS customers the benefits of employee leasing.

         In the  commercial  staffing  segment,  SOS has  focused on opening hub
offices  in  key  metropolitan   areas  followed  by  establishing   offices  in
surrounding  markets.  This  decentralized  office  management  strategy locates
multiple  offices  in  close  proximity  to  customers  and  temporary  staffing
employees.  The Company  believes  this  strategy has allowed it to rapidly gain
market share with low entry costs. Once a hub office has been  established,  the
Company  focuses on  leveraging  hub  office  resources  to market  and  deliver
services to surrounding smaller markets and to cross-sell IT and other specialty
staffing  services.  In  these  markets  the  Company  has  frequently  achieved
significant  penetration and has often become the dominant  provider of staffing
services.

         In order to develop a wider market  presence,  the Company  initiated a
national  marketing team whereby large multi-state  companies are targeted.  The
contacts  for  these  national   accounts  are   centralized  at  the  Company's
headquarters in Salt Lake City, Utah. The accounts are serviced by local offices
in markets in which the Company has an established  presence and  subcontractors
where the Company has not established an office.

         The Company provides  commercial staffing services through a network of
131 offices located in 15 states.  The Company  currently  operates at least one
office  in every  market  in the  mountain  states  (Arizona,  Colorado,  Idaho,
Montana, New Mexico, Nevada, Utah, and Wyoming) with a population base in excess
of 100,000  people.  In larger  markets,  the Company  generally  provides light
industrial and clerical  personnel through SOS Staffing Services offices,  while
service-specific  specialty  offices  provide  specialty  services.  In  smaller
markets,  SOS offices offer a broader  variety of commercial  staffing  services
including specialty  services.  The Company also has commercial staffing offices
in California, Hawaii, Kansas, Missouri, Oregon, Texas, and Washington.

         Management believes the Company has substantial opportunities to expand
its office network and the range of services it offers to its  customers.  Since
completing its initial public offering in June 1995, the Company has added a net
total of 89 offices to its commercial  staffing  segment through internal growth
and  acquisitions.   The  Company  intends,   for  the  foreseeable  future,  to
concentrate on strengthening its office network by focusing on internal growth.


                                       3
<PAGE>


         Seasonality:  The segment's business follows the seasonal trends of its
customers' business. Historically, the segment has experienced lower revenues in
the first  quarter  with  revenues  accelerating  during  the  second  and third
quarters  and then  starting  to slow again  during the  fourth  quarter  due to
seasonal trends of its customers.

         Trademarks:  The Company uses a variety of  trademarks  and trade names
which are generally  descriptive  of the temporary  staffing  services  offered,
including SOS Staffing Services(R),  Century Personnel,  Centech, Devon & Devon,
Skill Staff, AccountStaff,  TSI, Industrial Specialists, SOS Technical Services,
ServCom,  PAMS Employment  Services,  SOS Collections,  CGS Personnel,  Mortgage
Staffing,  TOPS Staffing  Services(R),  and Truex. The Company has registered or
reserved the majority of these names in the appropriate states.

         Customers:  Historically,  commercial staffing customers have consisted
primarily  of small to mid-size  customers.  Management  believes  there  remain
significant  opportunities to deliver profitable commercial staffing services to
small and mid-size  customers.  However, as the Company expands its network into
larger markets and develops its national sales network,  the Company anticipates
that it will provide commercial staffing services to larger customers.

         No  customer  accounted  for more than ten  percent  of the  commercial
staffing  segment's net service  revenues  during fiscal 1999, and the segment's
top ten customers accounted for less than eight percent of the segment's service
revenues during the same period.

         Competition:  The Company's  competitors consist of national,  regional
and local companies operating offices throughout the nation, making the industry
highly  competitive and highly  fragmented,  with limited barriers to entry. The
Company  faces  intense   competition  from  large  national  and  international
companies with substantially greater financial and marketing resources,  as well
as strong local and regional staffing companies.

         The Company competes for qualified temporary staffing employees and for
customers who require the services of such employees.  The principal competitive
factors in attracting and retaining qualified staffing employees are competitive
salaries and benefits,  quality and frequency of assignments and  responsiveness
to employee  needs.  The Company  believes that many persons who seek  temporary
employment  are also seeking  regular  employment and that the  availability  of
temporary  staffing  assignments,  which may lead to regular  employment,  is an
important factor in its ability to attract qualified staffing employees.

         The principal  competitive  factors in obtaining customers are a strong
sales and marketing program,  having qualified staffing employees to assign in a
timely  manner,  matching of customer  requirements  with  available  resources,
competitive  pricing and satisfactory work production.  The Company believes its
strong  emphasis on providing  service and value to its  customers and employees
are important competitive advantage.

Information Technology

     Principal services and markets: The Company's IT services consist of a full
suite of IT consulting, e-business, communications, and staffing services, which
are marketed to Fortune 1000, mid-tier,  and early stage companies.  The various
practices  with in the  Company's  IT segment  are  complimentary  to each other
allowing the Company to provide multiple services to clients.

-    e-business  services  are  focused  on  providing   integrated   e-commerce
     solutions,  and typically  include  requirements  analysis,  best practices
     application,  commerce product evaluation,  integration and implementation.
     The company is able to deliver  services that enable a complete  e-business
     strategy,   including   specific   knowledge  and  skills  with  e-commerce
     transaction   products,   integration   with   supply   chain   components,
     architecture, platform and infrastructure, customer relationship management
     ("CRM"), web site design, and complete test and validation.

-    The CRM practice  concentrates on the management,  implementation,  upgrade
     and support of front office customer relationship solutions integrated with
     internet and back office systems.  This practice is marketed both as a part
     of the Company's  e-business  suite, as well as on a standalone  basis. The
     Company's CRM practice delivers strategic  consulting and also draws on the
     Company's experience  implementing  customer interaction tools such as call
     centers,  interactive voice response systems,  voice/data convergence,  and
     computer telephony integration.


                                       4
<PAGE>


-    Communications  services  deliver  complete  operational  support  services
     design,   implementation,   and  integration   services,   including  order
     management and converged billing, to major wireless and wire-line carriers,
     competitive local exchange connections,  and internet service providers. In
     addition   to   specialized    communications   services,   the   Company's
     communications  practice  bundles  services and skills from a number of the
     Company's other practices, including technology and e-business services for
     delivery to communications clients.

-    Technology  solutions  provide both  operational and technical  engineering
     solutions for IT-system related issues.  These solutions include design and
     implementation   of  architectures  and  frameworks  for  creating  managed
     operating  environments,  services  for  server  and  database  design  and
     implementation,  and process design utilizing  "best-practice" processes to
     assist   companies  in  properly   structuring  and  supporting   their  IT
     organizations and processes.

-    Outsourcing  services are provided to customers  who turn over to Inteliant
     the management  and staffing of specific IT functions,  including help desk
     services and operation and administration of client information systems.

-    Staffing services include computer programming, system design, analysis and
     administration,   network  and  systems   management   and   software   and
     documentation  development.  IT  staffing  services  are  similar  in  many
     respects to commercial  staffing services;  however,  IT services generally
     require increased  specialization and technical skill, carry  significantly
     higher  hourly  bill and pay rates and  involve  substantially  longer  job
     assignments.

         The  Company  provides IT services  to  companies  throughout  the U.S.
through its network of 19 offices  located  throughout the Western United States
and  Massachusetts.  The Company's IT consulting and staffing offices  generally
serve larger geographic areas than the commercial staffing offices,  principally
due to the increased  specialization  associated with IT services. The Company's
strategy of  integrating  and expanding its existing IT staffing and  consulting
office  network  will  include  efforts to  position  IT  offices  in  strategic
locations throughout the United States, rather than the "hub and spoke" approach
used by the Company to expand its network of commercial staffing offices.

         Seasonality:  This segment does not experience the level of seasonality
associated with the Company's commercial segment.

         Customers: The Company's IT segment pursues customers who are generally
larger than many of the Company's  commercial  staffing  customers.  Many of the
Company's  IT  customers  are Fortune 1000  companies,  government  agencies and
educational  institutions.  The Company focuses on smaller specialty projects at
these larger  businesses or as support in larger projects.  The Company believes
that it has developed  competitive  advantages  in serving  mid-sized and larger
businesses  and projects by tailoring its  operations  to meet  customer  needs,
including  the  establishment  of strong  customer  relationships  through local
marketing efforts, quality service and community involvement.

         No customer  accounted  for more than ten percent of the  Company's  IT
segment's service revenues. However,  approximately 19% of the Company's service
revenues  generated in the IT segment  during fiscal 1999 were obtained from two
national  customers  within  the  telecommunications  industry,  and the top ten
customers in that  segment  accounted  for  approximately  36% of total  segment
revenues.  Management believes, however, that these customers do not represent a
substantial  credit or  business  risk and feel that the  segment  has  adequate
diversification and resources to be protected in the event of the loss of any of
these customers.

         Competition:  The Company's  competitors consist of national,  regional
and local companies operating offices throughout the nation, making the industry
highly  competitive and highly  fragmented,  with limited barriers to entry. The
Company  faces  intense   competition  from  large  national  and  international
companies  with  substantially  greater  financial and marketing  resources than
those of the Company, as well as strong local and regional staffing companies.


                                       5
<PAGE>


         The Company  competes for qualified  staffing and consulting  employees
and for  customers  who require the services of such  employees.  The  principal
competitive factors in attracting and retaining qualified staffing employees are
competitive  salaries and  benefits,  quality and frequency of  assignments  and
responsiveness  to  employee  needs.  The  principal   competitive   factors  in
attracting and retaining qualified  consultants are salary,  benefits,  training
and career development.

         The principal  competitive  factors in obtaining customers are a strong
sales and marketing program,  having qualified staffing and consulting employees
to assign in a timely manner,  matching of customer  requirements with available
resources,  competitive  pricing and satisfactory  work production.  The Company
believes its strong emphasis on providing service and value to its customers and
employees are important competitive advantages.

Staff Employees

         At  January  2,  2000,  the  Company  had  approximately   1,400  staff
employees,  of which,  approximately 590 were billable  consultants or technical
personnel.  The Company's training  department provides general and job specific
training to all staff employees,  including continuing training with experienced
counterparts.  None of the Company's  staff  employees are covered by collective
bargaining  agreements.  The Company  considers its relationship  with its staff
employees to be good.

Sales and Marketing

         SOS generally  markets its  commercial  staffing  services  through its
network of offices whose managers,  supported by the Company's  marketing staff,
make personal sales visits to all accounts and prospects. The Company emphasizes
long-term   personal   relationships  with  its  customers  and  develops  these
relationships   through  regular  contact,   periodic   assessment  of  customer
requirements and consistent  monitoring of employee  performance.  New customers
are  obtained  through  customer  referrals,   telemarketing,   cold  calls  and
advertising  in a variety of local and  regional  media,  including  television,
radio, direct mail, Yellow Pages, newspapers,  magazines and trade publications.
The  Company  is also a sponsor  of job fairs and  other  community  events.  In
addition,  the  Company  is  increasingly  using the  Internet  to  support  its
marketing efforts;  clients can research the Company and order staffing services
on-line.

         The Company's IT sales and marketing efforts may include the activities
described  above,  but are  generally  more  focused to address IT staffing  and
consulting needs which are typical of specific customers.  Many of the Company's
existing and prospective IT customers routinely outsource IT functions,  such as
programming, help desk and data-center monitoring. The Company's IT staffing and
consulting  personnel  seek to identify IT  requirements  of its  customers  and
promote IT services designed to meet those requirements. In addition to personal
sales visits,  targeted mailings and telephone  solicitations,  the Company's IT
personnel  actively  promote  the  Company's   services  through   cross-selling
complementary  IT services to existing  customers and  participating in industry
trade associations.

Recruiting

         The Company believes a key element of its growth and  profitability has
been its  ability to recruit  and retain  qualified  staffing  personnel.  In an
effort to attract commercial staffing personnel,  the Company employs recruiters
who regularly  visit schools and  professional  associations  and present career
development programs to various organizations.  In addition, the Company obtains
applicants  from  referrals by its staffing  employees and from  advertising  on
radio,  television,  in the Yellow  Pages and  through  other print  media.  The
Company actively utilizes the Internet to recruit professional, IT and technical
staffing, and other employees. Each applicant for a commercial staffing position
is interviewed with emphasis on past work experience,  personal  characteristics
and  individual  skills.  The Company  utilizes the  Dictionary of  Occupational
Titles,  published by the Department of Labor,  to evaluate and assign  staffing
employees. The Company maintains  software-training  programs at its offices for
applicants and employees.

         The Company's  efforts to recruit IT staffing and consulting  personnel
frequently  include  some or all of the  recruiting  activities  employed by the
Company's  commercial  staffing  offices,  but  typically  rely more  heavily on
identifying potential employees who possess specialized  education,  training or



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work experience.  The Company follows a rigorous screening and interview process
before referring qualified  candidates to customers for on-site interviews.  The
Company's  IT  recruiting  efforts also rely  heavily  upon  industry  contacts,
personal networks and referrals from existing and former IT personnel.

         To promote  loyalty and  retention  among its staffing  employees,  the
Company  provides them with certain  employee  benefits,  including  access to a
Section 401(k)  defined  contribution  plan,  cafeteria  plan,  vacation pay and
health  insurance  programs.  In addition,  the Company has the ability to issue
paychecks to commercial staffing employees on a daily basis for work performed.

Risk Management

         SOS is responsible for all employee-related  expenses for its staff and
temporary employees  including workers'  compensation,  unemployment  insurance,
social security taxes, state and local taxes and other general payroll expenses.
The Company has implemented a deductible workers'  compensation  program through
ACE USA (formerly  CIGNA  Property and Casualty) with a loss cap of $300,000 per
occurrence,  and an aggregate cap of approximately $11.0 million, adjusted based
on actual  payroll.  Employees  in  Washington,  Wyoming,  and North  Dakota are
insured through those states'  insurance funds because private  insurance is not
permitted in those states.  The Company  employs a full-time  professional  risk
manager and staff who work closely with the insurance carrier to manage claims.

         The Company  has also  developed  workers'  compensation  loss  control
programs that seek to limit claims  through  employee  training and avoidance of
high-risk job assignments such as roofing or logging. Except where prohibited by
law, all  employees  are required to agree in advance to drug testing  following
any work-related accident and all major accidents are investigated. The Company,
in cooperation with its insurer,  monitors all claims and regularly  reviews the
claims with an emphasis on early closure.

Information Systems

         The Company's central  management  information system is linked to most
of the Company's commercial staffing offices. The centralized system is designed
to support Company-wide operations such as payroll, billing,  accounting,  sales
and  management  reports.  The Company  has some  operations,  obtained  through
acquisition, that have their own centralized systems in place. Systems have been
implemented to automate the reporting of these entities to the Company.

         The Company has recently  upgraded the  commercial  staffing  segment's
financial  systems  with  plans to  upgrade  additional  information  processing
functions.  The new system  provides  for  greater  flexibility  in back  office
functions while  interfacing well with the front office operations at the branch
level. All files are backed up routinely and stored off-site. Critical files are
backed up on a daily  basis.  The  present  system has  capacity  to service the
Company's  anticipated growth without significant  capital  expenditures for the
foreseeable future

         The Company has developed a central  management  information system for
use by the  Company's IT offices.  All of the Company's 19 IT offices are linked
to a central management  information system. The Company anticipates that its IT
system will be connected to the  Company's  existing  system for certain  common
functions;  however,  the IT system is designed  to  accommodate  the  different
business cycles and processes associated with the IT industry.

Factors that May Affect Future Results

         The statements  contained in this Report that are not purely historical
are  "forward-looking  statements"  within the  meaning  of  Section  27A of the
Securities  Act  and  Section  21E  of the  Exchange  Act.  All  forward-looking
statements involve various risks and uncertainties.  Forward-looking  statements
contained in this Report include statements regarding the Company's  acquisition
plans  and  opportunities,  existing  and  proposed  service  offerings,  market
opportunities, expectations, goals, revenues, financial performance, strategies,
intentions  for the  future  and any other  statements  to the  effect  that the
Company or its management "believes", "expects", "anticipates", "plans" or other
similar expressions.  Such forward-looking statements are included under Item 1.
"Business",  Item 2.  "Properties",  Item 3.  "Legal  Proceedings"  and  Item 7.
"Management's  Discussion  and  Analysis of Financial  Condition  and Results of
Operations." All forward-looking  statements included in this Report are made as
of the date  hereof,  based on  information  available to the Company as of such
date,  and the  Company  assumes no  obligation  to update  any  forward-looking



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statements.  It is  important to note that such  statements  may not prove to be
accurate,  and that the Company's  actual results and future events could differ
materially from those  anticipated in such statements.  Many factors could cause
actual results to differ materially from the Company's expectations,  including,
without limitation, the factors identified below.

         The Company's  future results will be impacted by, among other factors,
the  Company's  ability to implement  its growth  strategy,  which,  in turn, is
dependent  upon a number of  factors,  including  the  availability  of  working
capital to support such  growth,  plans to  integrate  and expand the  Company's
offering of IT services,  the Company's  ability to integrate the  operations of
acquired businesses,  management's ability and resources to implement the growth
strategy,  the Company's  ability to attract and retain skilled employees needed
to implement  the  Company's  business  plan and meet  customer  needs,  and the
successful hiring, training and retention of qualified field management.  Future
results will also be affected by other factors  associated with the operation of
the  Company's  business,  including  the  Company's  response to  existing  and
emerging competition, demand for the Company's services, effects associated with
the recent  transition  within the Company's  senior  management,  the Company's
ability  to  maintain  profit  margins  in the face of  pricing  pressures,  the
Company's efforts to develop and maintain  customer and employee  relationships,
economic   fluctuations,   employee-related   risks   and   expenses,   and  the
unanticipated results of pending or future litigation.

         All subsequent written and oral forward-looking statements attributable
to the Company or persons acting on its behalf are expressly  qualified in their
entirety by this section and other  factors  included  elsewhere in this Report.
You also  should  consult  other  factors  identified  from  time to time in the
Company's periodic reports to the Securities and Exchange Commission.

ITEM 2.  PROPERTIES
         ----------

         As of  January 2, 2000,  the  Company  provided  services  through  150
offices in 18 states.  These offices  typically consist of 1,200 to 5,000 square
feet and are  generally  leased by the Company for terms of three to five years.
Offices in larger or smaller  markets may vary in size from the typical  office.
The Company does not expect that  maintaining or finding suitable lease space at
reasonable  rates in its  markets  or in areas  where the  Company  contemplates
expansion will be difficult.

         The Company's executive and administrative  offices are located in Salt
Lake City, Utah. The premises  consist of  approximately  15,600 square feet and
are leased  from a related  party for a term ending on March 31,  2005,  with an
option to renew for 10 additional  years (see "Certain  Relationship and Related
Transactions"). The Company believes that the terms of the lease are at least as
favorable as could be obtained from any unrelated third party.

ITEM 3.  LEGAL PROCEEDINGS
         -----------------

         In the ordinary  course of its  business,  the Company is  periodically
threatened  with or named as a defendant in various  lawsuits or  administrative
proceedings.  The  Company  maintains  insurance  in such  amounts and with such
coverage and  deductibles  as management  believes to be reasonable and prudent.
The principal risks covered by insurance include workers' compensation, personal
injury, bodily injury,  property damage, errors and omissions,  fidelity losses,
employer practices liability and general liability.

         In September 1999, Interliant,  Inc. ("Plaintiff")  commenced an action
in the United States District Court for the Southern District of Texas,  Houston
Division,  against  the  Company  and its  wholly  owned  subsidiary,  Inteliant
Corporation.  The lawsuit alleges, among other things, that the Company's use of
the "Inteliant" mark infringes upon Plaintiff's mark,  "Interliant." In addition
to  the  federal  trademark   infringement  claims,   Plaintiff  alleges  unfair
competition  based  on the  Company's  use of the  Inteliant  mark,  common  law
infringement and dilution. In the Complaint,  Plaintiff has made a demand for an
unspecified  amount of damages,  as well as for an  injunction  prohibiting  the
Company's use of the Inteliant  mark.  Based on  information  from its trademark



                                       8
<PAGE>

counsel,  the  Company  believes  that it has valid  substantive  and  equitable
defenses to the  lawsuit,  including  that the  Inteliant  mark is  phonetically
dissimilar to  Interliant,  the use of the Inteliant mark does not infringe upon
Plaintiff's  mark,  and its use is not  confusing or likely to cause  confusion.
Notwithstanding  the Company's belief, the outcome of any litigation,  including
this action,  is not certain.  If Plaintiff  were to prevail in the action,  the
Company would be required to stop the use of the Inteliant  mark and to possibly
pay damages.  The Company does not believe that the cost of changing the mark or
the amount of any damages would have a material  adverse impact on the Company's
financial condition or results of operations.

         There  is no  other  pending  litigation  that  the  Company  currently
anticipates  will have a  material  adverse  effect on the  Company's  financial
condition or results of operations.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         ---------------------------------------------------

         No matters  were  submitted  to a vote of security  holders  during the
fourth quarter of the 52 weeks ended January 2, 2000.




                                       9
<PAGE>




                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
         ---------------------------------------------------------------------

         The  information  required by this Item is incorporated by reference to
page F-41 of the Company's 1999 Annual Report to Shareholders.

ITEM 6.  SELECTED FINANCIAL DATA
         -----------------------

         The  information  required by this Item is incorporated by reference to
page F-1 of the Company's 1999 Annual Report to Shareholders.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         -----------------------------------------------------------------------
         OF OPERATIONS
         -------------

         The  information  required by this item is incorporated by reference to
pages F-9 through F-16 of the Company's 1999 Annual Report to Shareholders.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
         ----------------------------------------------------------

         The Company is exposed to interest  rate changes  primarily in relation
to its 1998  Amended  Credit  Facility  and its 1998 Senior Debt  Placement.  At
January 2, 2000,  the Company's  outstanding  borrowings on the Credit  Facility
were $20.0 million,  while  outstanding  borrowings on the Senior Debt Placement
were $35.0 million.  The Company's interest rate risk management objective is to
limit the impact of  interest  rate  changes on  earnings  and cash flows and to
lower its overall borrowing costs. To achieve this objective the Company borrows
against its credit  facility at variable  interest rates.  The Company's  senior
debt  placement  bears  interest at a fixed  interest rate. For fixed rate debt,
interest rate changes  generally  affect the fair value of the debt, but not the
earnings or cash flows of the Company. Changes in the fair market value of fixed
rate debt generally will not have a significant impact on the Company unless the
Company is required to refinance  such debt. At January 2, 2000,  the fair value
of the Company's long-term debt is estimated by discounting  expected cash flows
at a bank's prime rate. At January 2, 2000 the carrying  amount of $35.0 million
is reflected in the consolidated balance sheets. The estimated fair value of the
unsecured notes,  using a discount rate of 8.5% over the expected  maturities of
the obligations, is approximately $32.6 million.

         .

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
         ------------------------------------------

         The  information  required by this item is incorporated by reference to
pages F-17 through F-36 of the Company's 1999 Annual Report to Shareholders.

ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         -----------------------------------------------------------------------
         FINANCIAL DISCLOSURE
         --------------------

         None




                                       10
<PAGE>


Financial Highlights.........................................................F-1
Shareholder Letter...........................................................F-2
The Company..................................................................F-4
Management's Discussion and Analysis
     of Financial Condition and Results of Operations........................F-9
Consolidated Financial Statement and Notes..................................F-17
Report of Independent Public Accountants....................................F-38


<PAGE>


Financial Highlights
(in thousands, except per share data)
<TABLE>
<CAPTION>

                                                            Fiscal Year (52/53 Weeks) Ended
                                             1999         1998(3)        1997          1996         1995(1)
                                         -----------------------------------------------------------------------
<S>                                      <C>           <C>           <C>           <C>           <C>
Statement of Income Data:
Service revenues                         $    371,054  $    330,327  $    209,251  $    136,163  $     87,533
Gross profit                                   85,804        75,939        46,711        27,574        18,180
Income from operations                         12,564        16,777        12,350         6,707         4,321
Net income(1)                                   5,351         9,858         7,526         4,030         2,940
Earnings per share
    Basic                                $       0.42  $       0.78  $       0.78  $       0.59  $       0.54
    Diluted                                      0.42          0.77          0.77          0.59          0.43
Weighted average common shares
    Basic                                      12,691        12,675         9,654         6,780         4,985
    Diluted(2)                                 12,699        12,810         9,780         6,838         6,229

Balance Sheet Data:

Working capital                          $     37,969  $     26,989  $     42,791  $     17,012  $      9,645
Total assets                                  200,624       182,909       118,290        47,293        19,327
Total debt                                     55,687        39,925             -             -         1,450
Shareholders' equity                          120,086       114,606       104,336        36,834        14,668
</TABLE>

(1)  The Company  completed its initial public offering ("IPO") in July 1995 and
     in connection therewith terminated its S Corporation  election.  Net income
     for fiscal  1995 has been  adjusted  to reflect a pro forma  provision  for
     income taxes.

(2)  Prior to the completion of its IPO, the Company  distributed  approximately
     $8.0 million of its accounts receivable to its S Corporation  shareholders.
     The weighted  average common shares  outstanding  for diluted  earnings per
     share for 1995  reflects the  issuance of  1,230,769  shares at an offering
     price of $6.50 per share.

(3)  In accordance with Industry practice,  the Company reclassed  approximately
     $1,257,000  in  commissions  related to permanent  placement  revenues as a
     component of direct cost of services rather than as selling,  general,  and
     administrative expenses.




                                       F-1
<PAGE>




Dear Shareholder:

1999 was a year of strengthening  our human capital.  It was a year of advancing
our market position; a year of developing many aspects of SOS Staffing Services.
The goal was simple--to ensure that we provide better people for better jobs.

In the last year, we made several  investments  in our people and our technology
in order to deliver quality service to our customers.  Notably, we developed our
internal  staff by refining our training  programs  and  incorporating  ART (the
philosophy of  "attracting,  retaining  and  training").  We also  developed LCI
(Learner  Controlled  Instruction) and  certification  programs to help ensure a
well-trained staff.

Three  key  executives  joined  the  management  team in 1999:  Tom  Sansom,  as
President of the Commercial Division;  Brad Stewart, as Executive Vice President
and Chief Financial Officer; and John Schaffer, who was promoted to President of
Inteliant.

Tom has 35 years of experience with national firms in the staffing industry.  He
joined  SOS in  December  of 1999.  Recently,  he was  named to the SOS board of
directors.  Tom is an experienced leader who has made great contributions in the
industry. We are delighted to welcome him to the SOS board of directors and know
that he will be a valuable asset as we continue to execute our strategic plans.

Brad  Stewart,  Executive  Vice  President  and Chief  Financial  Officer,  also
recently joined the SOS team. He is a Certified Public  Accountant (CPA) and has
more  than 15  years of  broad  experience,  including  eight  years  in  public
accounting with Arthur Andersen and several years in executive  leadership roles
with both Marker International and The Murdock Group.

In March  of 1999,  John  Schaffer  was  appointed  President  of the  Company's
Inteliant  subsidiary.  Schaffer  joined SOS Staffing  Services in 1997 with the
Company's acquisition of JesCo Technical Services, Inc. (Kirkland, Wash.), which
he founded in 1992.  John has nearly 15 years'  experience in IT management  and
consulting, including technology enablement,  operations audit, financial system
implementation, release management, and customer service and support.

With an experienced management team at the helm, we are primed for growth.




                                       F-2
<PAGE>




SOS recently formed a strategic alliance with BioLynx.Com(R), a company based in
San Antonio,  Texas,  providing  Internet access to employee time and attendance
tracking.   Their  innovative  HandPunch(TM)  solution  is  based  on  biometric
technology (the statistical study of biological data).  Research  indicates that
clients using the  BioLynx.Com(R)  service could  potentially  save  substantial
payroll dollars by eliminating  inaccurate time reporting and data entry errors,
and by automating  the link to current  payroll  systems.  The system will allow
users to access time and attendance data over the Internet.

Customer  satisfaction  continues to be a focal point for SOS.  During 1999, SOS
provided  approximately  100,000  employees  to more than  15,000  clients in 28
states  (primarily in the western U.S.).  Several of our largest  customers have
used the  Company's  service  for more than 20 years.  We strive to provide  our
lifetime customers with value-added  services.  We listen to and act on feedback
from our clients,  as evidenced by increasingly  positive rankings on our annual
customer surveys.

SOS made investments in technology in 1999,  concentrating on system-integration
and enterprise-wide  time and billing solutions for Inteliant.  We also enhanced
the "apply on-line" and "order  on-line"  features of our Internet web site. Web
recruiting continues to enable SOS to fill unique and specialized positions.

Service  revenues  for the 52 weeks ended  January 2, 2000 were  $371.1  million
compared to $330.3  million for the 53 weeks ended  January 3, 1999, an increase
of 12.4%.  Net income for fiscal 1999 was $5.4 million  compared to $9.9 million
for fiscal 1998, a decrease of 45.5%. Diluted earnings per common share amounted
to $0.42 for the 52 weeks ended January 2, 2000 and $0.77 for the 53 weeks ended
January 3, 1999.

The increase in service revenues for 1999 was attributable to internal growth in
the Company's  comparable offices and acquired  businesses.  The decrease in net
income was a result of higher operating  expenses related to acquired  companies
with higher  operating  cost  structures  than the  remainder  of the  Company's
operations.  In addition,  the Company recognized increased amortization expense
from certain earnout programs associated with the Company's acquisitions.

All in all, 1999 has been a year of focusing on our people,  our  services,  our
customers and our technology.  We are confident that these  investments are well
chosen and will result in a stronger company going forward.

I want to  acknowledge  the  interest  and support of our  investors.  We remain
enthusiastic  about the  future of SOS,  and we pledge  our best  efforts to our
mutual success.

Sincerely,

/s/JoAnn W. Wagner
------------------
JoAnn W. Wagner
Chairman of the Board,
President and
Chief Executive Officer





                                       F-3
<PAGE>




Our  success has always been linked to  recognizing  what we do  best--and  then
finding ways to do it even better.  In 1999 we improved  upon our  strengths and
reinforced  SOS  Staffing   Services'  growing   reputation  as  a  provider  of
innovative,  quality staffing services. We are confident these changes will help
us continue expanding our services and growing our company.

Inteliant Corporation

Our information technology subsidiary, Inteliant Corporation, made major strides
in 1999 to integrate its operations into five targeted  high-growth regions with
strategic lines of business.

Inteliant  initiated its e-commerce and customer  relationship  management (CRM)
practice  areas to  complement  its  traditional  strengths  in  technology  and
Internet  solutions.  As a  result,  Inteliant  has  evolved  to become a unique
national provider of IT consulting services for Fortune 1000, mid-tier and early
stage customers.

Inteliant  continues  to  expand  its  communications  industry  expertise  with
existing  clients and its new  involvement  in the  Competitive  Local  Exchange
Carriers  (CLEC) space.  Inteliant will leverage its already strong  position in
the  communications  industry to upsell several of its new practices,  including
e-commerce and CRM.




                                       F-4
<PAGE>




Inteliant  is now  poised to  execute a  full-service  IT  consulting  plan that
includes  increased brand  identity,  additional  markets and enhanced  employee
opportunity--enabling  it to attract and retain highly skilled  consultants  and
staff members.

SOS TEAM

SOS has developed  recruiting into an ART:  Attracting,  Retaining and Training.
Because the quality of our staff  directly  affects the quality of our services,
we go to great  lengths to ensure our people are properly  trained and effective
in their  positions.Our  new Learner  Controlled  Instruction (LCI) training and
certification  program,  resulting  from months of extensive  development by the
Company,  is highly  effective in its ability to teach and test employees on our
operational procedures and methods.  Within three days of being hired, new staff
employees begin a step-by-step LCI  certification  process that includes ongoing
updates on our best practices.

Since LCI is self-paced,  it results in effective learning with less supervisory
effort and cost. Coupled with the Rembrandt(R) personality profile, LCI helps us
accurately  determine a new  employee's  potential for success within the unique
SOS service  model.  Our customers  receive the ultimate  benefit in responsive,
efficient staffing.

SOS ASSOCIATES

We provide qualified individuals to our customers.  Our slogan,  "Better People,
Better Jobs,"  communicates  our commitment to thoroughly  screen our employees,
guarantee their performance and provide them with valuable career opportunities.

We use  SkillCheck(R)  to evaluate  applicants on their  software,  clerical and
professional skills. We can also create customized tests and training to satisfy
a customer's specific need. The result is more accurate  placement,  which saves
SOS and its  customers  time  and  money--and  enhances  customer  and  employee
satisfaction.




                                       F-5
<PAGE>




SOS CUSTOMERS

Customer  satisfaction,  a key  component  of any  company's  success,  improved
considerably  for SOS in 1999.  Nearly  90  percent  of the  commercial-staffing
customers  surveyed  rated  SOS  "good"  or  "excellent"   compared  with  their
expectations.

Several of our largest  customers have been with SOS for more than 20 years. The
loyalty of these businesses is evidence of our quality service.

SOS-BIOLYNX.COM(R) PARTNERSHIP

SOS now has the ability to help  businesses  save a substantial  amount of their
payroll costs through the  BioLynx.Com(R)  time-tracking  system.  Our exclusive
agreement with BioLynx.Com, a company based in San Antonio, Texas, positions SOS
as a progressive,  full-service human resource partner--rather than just another
vendor.

Through BioLynx.Com's  Internet-based  tracking services, SOS can give customers
on-demand,   global  access  to  employee  time  and  attendance  records.  This
technology  amounts to a much more convenient,  efficient tool for businesses to
manage their human resource capital.




                                       F-6
<PAGE>




SOS INTERNET RECRUITING
-----------------------
Our use of new technology places SOS at the forefront of the Internet recruiting
explosion. As we continue to embrace the World Wide Web as a recruiting tool, we
are increasingly able to provide our customers with timely delivery of qualified
people.

The SOS web site,  which  features  online  application  capability,  is quickly
becoming a  high-profile  recruiting  tool that  benefits  online  job  seekers,
employers  and the Company.  Each month  sosstaffing.com  receives up to 400,000
hits and 1,200 resumes online.  These figures  continue to rise as we maintain a
targeted  Internet  advertising  banner  campaign  with U S West(R)  and sustain
top-level registration with the Web's most popular search engines.




                                       F-7
<PAGE>

(GRAPHIC OMITTED)

ALASKA
Juneau

ARIZONA
Kingman
Phoenix (4)
Prescott
Sierra Vista
Tempe
Tucson (4)
Yuma

CALIFORNIA
Carlsbad
Cupertino
Escondido
Irvine
Lake Forest
Newport Beach
Palo Alto
Pleasanton
San Diego (3)
San Francisco (2)
San Jose
Sunnyvale (2)
Tustin
Venice

COLORADO
Aspen
Aurora
Carbondale
Colorado Springs (3)
Cortez
Craig
Delta
Denver (7)
Durango
Eagle-Vail
Frisco
Ft. Collins
Grand Junction (3)
Greeley
Longmont
Montrose
Northglenn
Pueblo
Rifle
Steamboat Springs


HAWAII
Aiea
Honolulu

IDAHO
Boise
Burley
Idaho Falls
Pocatello
Twin Falls

KANSAS
Kansas City
Lawrence
Olathe
Overland Park (2)
Prairie Village
Topeka

MASSACHUSETTS
Quincy

MISSOURI
Independence (2)
Joplin
Kansas City (3)
Lee's Summit
Liberty

                                       F-8
<PAGE>

MONTANA
Billings
Great Falls

NEVADA
Carson City
Elko
Las Vegas (4)
Reno (2)
Sparks

NEW MEXICO
Albuquerque (2)
Clovis
Farmington
Roswell

NORTH DAKOTA
Bismarck

OREGON
Portland (2)

TEXAS
Abilene
Amarillo
Dallas (3)
Fort Worth
Irving
Lubbock
Midland
San Antonio

UTAH
American Fork
Bountiful
Cedar City
Layton
Logan
Murray
Ogden (3)
Orem (2)
Price
Provo
Richfield
Salt Lake City (8)
Spanish Fork
St. George
Vernal
West Jordan
West Valley City (2)

WASHINGTON
Kirkland
Renton
Spokane
Vancouver

WYOMING
Cheyenne
Evanston
Rock Springs




                                       F-8A
<PAGE>



                      Management's Discussion and Analysis
                of Financial Condition and Results of Operations




                                       F-9
<PAGE>




Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations

The following  discussion  should be read in conjunction  with the  consolidated
financial statements of SOS Staffing Services, Inc. ("SOS" or the "Company") and
notes thereto  appearing  elsewhere in this report.  The  Company's  fiscal year
consists of a 52 or 53-week period ending on the Sunday closest to December 31.

General:   The  Company  provides  a  full  range  of  commercial  staffing  and
information  technology  ("IT") services through a network of offices located in
18  states.  Generally,  the  Company  has  entered  key  metropolitan  areas by
initially  acquiring  or opening a central  or "hub"  office,  and  subsequently
developing  additional offices in smaller surrounding  markets. As offices reach
certain  thresholds,  the Company often divides them into one or more additional
offices resulting in greater efficiency, profitability and market penetration.

Since the completion of the Company's  initial public offering (the "IPO"),  the
Company's network of offices has increased,  through acquisitions and new office
openings,  from 42 to 150,  as of  January  2,  2000.  The  purchase  prices  of
acquisitions  have  ranged  from  approximately  $15,000  to  $15,000,000,  plus
contingent  earnouts;  while  capital  costs of new office  openings,  excluding
working capital requirements,  have typically ranged from $10,000 to $50,000. To
date,  most  of  the  Company's   internally  developed  offices  have  achieved
profitability  within 6 to 12 months,  while offices resulting from the division
of existing larger offices are usually profitable from inception.

Contingent  earnout  agreements  are  often  negotiated  as a  component  of the
purchase price of new acquisitions. An earnout arrangement may be necessary when
the  Company  believes  future  consideration  may more  accurately  reflect the
appropriate  value for the  acquired  business  and  enhance the  likelihood  of
successfully  integrating  the  acquired  company  into  SOS,  or to  align  the
interests of the Company and the sellers.

Business  Segments:  The Company's  operations are grouped into two identifiable
operating segments:  commercial staffing and IT. The commercial staffing segment
provides  staffing  solutions  to companies by  furnishing  temporary  clerical,
industrial,  light-industrial,  engineering,  and professional  services. The IT
segment  provides  e-business   solutions   (including   customer   relationship
management,  enterprise resource planning, and Internet technology),  technology
solutions, outsourcing, management consulting services and staffing.

Results  of  Operations:  The  following  table  sets  forth,  for  the  periods
indicated,  the percentage  relationship to service  revenues of selected income
statement  items  for the  Company  on a  consolidated  basis  and by  operating
segment:

                                       Fiscal Year (52/53 Weeks) Ended
                                         --------------------------
Consolidated                                1999     1998     1997
------------                             --------------------------
Service revenues                           100.0%   100.0%   100.0%
Direct cost of services                     76.9     77.0     77.7
                                         --------------------------
Gross profit                                23.1     23.0
                                         --------------------------
Operating expenses:
   Selling, general and administrative      18.2     16.3     15.7
     expenses                                1.5      1.2      0.7
   Intangibles amortization
   Organization realignments              --          0.4   --
                                         --------------------------
     Total operating expenses               19.7     17.9     16.4
                                         --------------------------
Income from operations                       3.4%     5.1%     5.9%
                                         --------------------------


                                      F-10
<PAGE>



                                       Fiscal Year (52/53 Weeks) Ended
                                       -------------------------------
Commercial Staffing Segment                 1999     1998     1997
---------------------------                -----    -----    -----
Service revenues                           100.0%   100.0%   100.0%
Direct cost of services                     79.0     79.4     79.3
                                           -----    -----    -----
Gross profit                                21.0     20.6     20.7
                                           -----    -----    -----
Operating expenses:
   Selling, general and administrative
     expenses                               16.1     15.1     13.9
   Intangibles amortization                  1.0      0.7      0.4
                                           -----    -----    -----
     Total operating expenses               17.1     15.8     14.3
                                           -----    -----    -----
Income from operations                       3.9%     4.8%     6.4%
                                           -----    -----    -----


IT Segment

Service revenues                           100.0%   100.0%   100.0%
Direct cost of services                     71.3     69.1     68.5
                                           -----    -----    -----
Gross profit                                28.7     30.9     31.5
                                           -----    -----    -----
Operating expenses:
   Selling, general and administrative
     expenses                               20.9     16.9     18.9
   Intangibles amortization                  2.9      2.7      2.5
   Organization realignments                 --       1.0      --
                                           -----    -----    -----
     Total operating expenses               23.8     20.6     21.4
                                           -----    -----    -----
Income from operations                       4.9%    10.3%    10.1%
                                           -----    -----    -----

Fiscal 1999 Compared to Fiscal 1998
-----------------------------------

Consolidated

Service  Revenues:  Service revenues for the fifty-two week period ended January
2, 2000 were $371.1 million, an increase of $40.8 million, or 12.4%, compared to
service revenues of $330.3 million for the fifty-three week period ended January
3, 1999. Of the $40.8 million increase,  $20.6 million was attributable to newly
acquired  businesses while $20.2 million was from internal growth (including new
offices offset by office closures).

The commercial staffing segment  contributed  approximately 73% of total service
revenues for fiscal 1999,  compared to 76% of total service  revenues for fiscal
1998. The IT segment contributed  approximately 27% of total service revenues in
fiscal 1999 compared to 24% in fiscal 1998. This increase reflects  management's
emphasis on the development of solutions based practices.

Gross Profit: In accordance with industry  practice,  during the fifty-two weeks
ended  January 2, 2000,  the Company made the  decision to classify  commissions
related  to  permanent  placement  revenues  as a  component  of direct  cost of
services rather than as selling, general and administrative expenses. The amount
reclassified  for  the  fifty-three  week  period  ended  January  3,  1999  was
approximately $1.3 million.

Gross profit for the  fifty-two  weeks ended  January 2, 2000 was $85.8  million
compared to $75.9  million for the  fifty-three  weeks ended January 3, 1999, an
increase of $9.9 million or 13.0%.  Gross profit  margin was 23.1%,  compared to
23.0% for the same comparative period.

Operating  Expenses:  Total  operating  expenses,  as a percentage  of revenues,
increased to 19.7% for the fifty-two  weeks ended January 2, 2000 from 17.9% for
the  fifty-three  weeks ended  January 3, 1999.  The change was due primarily to
operating  expenses  of acquired  companies  which have  higher  operating  cost
structures   than  the   remainder  of  the  Company's   operations,   increased
amortization  expense from  acquisitions  and  earnouts,  and an increase in the
Company's credit losses during the year.



                                      F-11
<PAGE>


Income from  Operations:  Income from operations  decreased  approximately  $4.2
million,  or 25.0%,  to $12.6 million for the  fifty-two  weeks ended January 2,
2000 from  $16.8  million  for the  fifty-three  weeks  ended  January  3, 1999.
Operating  margin was 3.4% for the fiscal year ended January 2, 2000 compared to
5.1% for the fiscal year ended January 3, 1999. The decrease in operating margin
was due primarily to the increase in operating expenses.

Income Taxes: The effective combined federal and state income tax rate was 37.7%
for the  fifty-two  weeks  ended  January  2,  2000  compared  to 37.0%  for the
fifty-three  weeks ended January 3, 1999.  The increase in the combined tax rate
was due  primarily  to an increase in  non-deductible  amortization  relating to
certain acquisitions and increased operations in states that assess higher state
tax rates.  This  increase  was  partially  offset by an  increase in income tax
credits earned through specific  government-sponsored  hiring incentives.  These
government-sponsored programs are expected to continue to moderate the Company's
future  effective  tax rate to the extent  these  programs  or similar  programs
remain in effect.

Commercial Staffing Segment

Service Revenues: Substantially all of the commercial staffing segment's service
revenues  are based on the time worked by its  temporary  staffing  employees on
customer  assignments and from permanent  placement of personnel with customers.
Service revenues  generated from temporary  assignments are recognized as income
at the time service is provided, while service revenues generated from permanent
placement  services are  recognized  at the time the  customer  agrees to hire a
candidate supplied by the Company.  Service revenues for the commercial staffing
segment increased by $20.7 million, or 8.2%, to $273.6 million for the fifty-two
weeks  ended  January 2, 2000,  compared to $252.9  million for the  fifty-three
weeks ended January 3, 1999. Of the $20.7 million increase,  approximately  $2.3
million  was  contributed  by new  offices  (offset by office  closures);  $10.2
million  was  attributable  to  offices  acquired  that do not  have  operations
included  in the prior year;  and $8.2  million was  attributable  to  increased
revenues from comparable offices.

Gross Profit: The Company defines gross profit as service revenues less the cost
of providing services, which includes wages and permanent placement commissions,
employer  payroll taxes (FICA,  unemployment  and other general  payroll taxes),
workers'   compensation  costs  related  to  staffing  employees  and  permanent
placement  counselors and other temporary payroll benefits.  Gross profit margin
for the fifty-two week period ended January 2, 2000 was 21.0%, compared to 20.6%
for the fifty-three week period ended January 3, 1999.

Operating  Expenses:  Operating  expenses  include,  among other  things,  staff
employee  compensation,  rent,  recruitment and retention of temporary  staffing
employees, costs associated with opening new offices, depreciation,  intangibles
amortization and advertising.

Total operating  expenses as a percentage of service revenues were 17.1% for the
fifty-two week period ended January 2, 2000 and 15.8% for the  fifty-three  week
period ended January 3, 1999.

Operating  expenses,  excluding  intangibles  amortization,  as a percentage  of
service  revenues for the fifty-two week period ended January 2, 2000 were 16.1%
compared to 15.1% for the  fifty-three  week period ended  January 3, 1999.  The
increase was  attributable  primarily to the  operations of acquired  businesses
with higher  operating  cost  structures  than the  remainder  of the  Company's
operations,  an increase in credit losses  experienced  during the year,  and an
increase in depreciation,  primarily  related to implementation of the Company's
new financial system software and related systems.

Intangible  amortization  increased 44.4% to $2.6 million for the fifty-two week
period ended January 2, 2000, from $1.8 million for the fifty-three  week period
ended  January 3,  1999.  Intangible  amortization  as a  percentage  of service
revenues  was  1.0%  and 0.7% for the  same  comparable  reporting  period.  The
increase is due  primarily  to increased  earnouts  paid in fiscal 1999 and full
year amortization of entities acquired in fiscal 1998.


                                      F-12
<PAGE>


Income from  Operations:  Income from  operations  for the fifty-two week period
ended January 2, 2000 was $10.8 million,  a decrease of $1.4 million,  or 11.5%,
from $12.2  million  for the  fifty-three  week  period  ended  January 3, 1999.
Operating  margin was 3.9%,  compared to 4.8% for the same comparable  reporting
period.  The  decrease  in  operating  margin was due  largely to  increases  in
selling, general and administrative expenses and intangibles amortization.

IT Segment

Service Revenues:  As with the commercial  staffing segment,  IT segment service
revenues are  generally  based on the time worked by  consulting  and  temporary
staffing  and  consulting  employees on customer  assignments,  or when staff is
placed on a  permanent  basis with the  customer.  Service  revenues,  including
inter-company revenues, increased $21.9 million, or 27.9%, to $100.5 million for
the  fifty-two  week period ended  January 2, 2000,  from $78.6  million for the
fifty-three  week period  ended  January 3, 1999.  The change was due in part to
internal  growth  (the  development  of  new  offices  and  contributions   from
comparable offices offset by office closures), which accounted for approximately
$12.0 million,  while  approximately  $9.9 million was  attributable  to offices
acquired that do not have operations included in the prior year.

Gross Profit: The Company defines gross profit as service revenues less the cost
of providing services.  Such costs include wages,  employer payroll taxes (FICA,
unemployment  and other general  payroll  taxes),  workers'  compensation  costs
related to consulting and temporary staffing and consulting employees, and other
payroll  benefits;   costs  related  to  outside   consultants  and  independent
contractors  utilized by the Company; and other direct costs associated with any
consulting engagement. Gross profit margin for the fifty-two weeks ended January
2, 2000 was 28.7% compared to 30.9% for the  fifty-three  weeks ended January 3,
1999.  The decrease in gross profit  margin was due  primarily to a reduction in
higher-margin  consulting engagements as customers began to closeout Y2K-related
projects and postpone new projects until after January 1, 2000, coupled with the
retention and additional hiring of key employees in strategic business lines.

Operating  Expenses:  Total operating  expenses as a percentage of revenues were
23.8% for the  fifty-two  week  period  ended  January 2, 2000 and 20.6% for the
fifty-three  week period ended January 3, 1999.  Operating  expenses,  excluding
intangibles  amortization  and  organization  realignments,  as a percentage  of
service  revenues for the fifty-two week period ended January 2, 2000 were 20.9%
compared to 16.9% for the  fifty-three  week period ended  January 3, 1999.  The
increase  reflects the  acquisition  of  companies  with higher  operating  cost
structures,  an  increase in credit  losses,  as well as  additional  management
changes and costs related to relocating the Company's Inteliant subsidiary.

Intangible  amortization increased to $2.9 million for the fifty-two weeks ended
January 2, 2000 from $2.1  million for the  fifty-three  weeks ended  January 3,
1999. Intangible  amortization as a percentage of revenues was 2.9% and 2.7% for
the same  comparable  reporting  periods.  The  increase  was due  primarily  to
increased  earnouts paid in fiscal 1999 and full year  amortization  of entities
acquired in fiscal 1998.

Income from Operations: Income from operations for fiscal 1999 was $4.9 million,
a  decrease  of $3.0  million,  or 38.0%,  from  $7.9  million  in fiscal  1998.
Operating  margin  for  fiscal  1999 was 4.9%,  compared  to 10.3% in 1998.  The
decrease  in  income  from  operations  is a  factor  of  reduced  gross  margin
percentage coupled with increased operating expenses.

Fiscal 1998 Compared to Fiscal 1997
-----------------------------------

Consolidated

Service  Revenues:  Service  revenues  for fiscal 1998 were $330.3  million,  an
increase of $121.0 million, or 57.8%,  compared to revenues of $209.3 million in



                                      F-13
<PAGE>

fiscal 1997. Of the $121.0  million  increase,  approximately  $99.2 million was
attributable  to newly  acquired  businesses,  $18.6  million was from  internal
growth (including new offices offset by office closures), and an additional $3.2
million was realized due to fiscal 1998 containing 53 weeks compared to 52 weeks
for fiscal 1997.

The commercial staffing segment  contributed  approximately 76% of total service
revenues for fiscal 1998,  compared to 85% of total service  revenues for fiscal
1997. The IT segment contributed  approximately 24% of total service revenues in
fiscal 1998 compared to 15% in fiscal 1997. This reflects  management's emphasis
on acquisitions of IT-related enterprises.

Gross Profit:  Gross profit for fiscal 1998 was $75.9 million  compared to $46.7
million for fiscal  1997,  an increase of $29.2  million or 62.5%.  Gross profit
margin for fiscal 1998 was 23.0%,  compared to 22.3% in fiscal 1997,  reflecting
the increased mix of higher-margin IT business.

Operating  Expenses:  Total  operating  expenses,  as a percentage  of revenues,
increased to 17.9% for fiscal 1998 from 16.4% in fiscal  1997.  The increase was
due principally to organization realignment costs of approximately $1.4 million,
an increase in  intangibles  amortization,  and  acquisitions  of companies that
operate in regions with higher staffing and facility costs.

Of the $1.4 million in organization realignment costs, $0.5 million was incurred
in establishing  and launching the Company's  Inteliant  tradename,  and another
$0.3 million was incurred by streamlining  management in the IT segment.  In the
commercial staffing segment, $0.1 million was incurred in realignment costs, and
$0.5 million was incurred as a result of corporate management changes.

Income from  Operations:  Income from operations  increased  approximately  $4.4
million,  or 35.5%, to $16.8 million in fiscal 1998 compared to $12.4 million in
fiscal 1997.  Operating margin, as a percentage of revenues,  was 5.1% in fiscal
1998 compared to 5.9% in fiscal 1997.  The decrease in operating  margin was due
primarily to the increase in operating expenses.

Income Taxes: The Company's effective combined federal and state income tax rate
was 37.0% in fiscal 1998  compared to 40.4% in fiscal 1997.  The decrease in the
combined  tax rate was due  primarily  to  income  tax  credits  earned  through
specific  government-sponsored hiring incentives. These programs are expected to
continue to decrease the  Company's  future  effective  tax rate,  to the extent
these programs or similar  programs remain in effect.  The reduction  offered by
tax credits was partially offset by an increase in  non-deductible  amortization
relating to certain acquisitions and increased operations in states which assess
higher state tax rates.

Commercial Staffing Segment

Service Revenues: Service revenues for the commercial staffing segment increased
by $75.3  million,  or 42.4%,  to $252.9  million for fiscal  1998,  compared to
$177.6  million for fiscal 1997.  Of the $75.3 million  increase,  approximately
$3.0  million  was  attributable  to the  additional  week in the  fiscal  year;
approximately $1.4 million was contributed by new offices;  approximately  $58.2
million  was  attributable  to  offices  acquired  during  1997  and  1998;  and
approximately   $12.7  million  was  attributable  to  increased  revenues  from
comparable offices.

Gross Profit: The Company defines gross profit as service revenues less the cost
of providing  services,  which includes wages of temporary  staffing  employees,
employer payroll taxes (FICA,  unemployment and other general payroll costs) and
workers'  compensation  costs.  Gross  profit  margin for fiscal 1998 was 20.6%,
compared to 20.7% in fiscal 1997.

Operating  Expenses:  Operating  expenses  include,  among other  things,  staff
compensation,  rent,  recruitment and retention of temporary staffing employees,
costs  associated  with  opening new  offices,  depreciation,  amortization  and
advertising.

Operating  expenses,  excluding  organization  realignment costs and intangibles
amortization,  as a  percentage  of service  revenues  for fiscal year 1998 were



                                      F-14
<PAGE>

15.1%  compared to 13.9% for fiscal 1997. The increase was  attributable  to the
operations of acquired businesses with higher operating cost structures than the
remainder of the Company's operations,  an increase in credit losses experienced
during the year, and an increase in depreciation.

Intangible  amortization increased to $1.8 million from $0.7 million, or 157.1%,
for fiscal 1998 compared to fiscal 1997. Intangible amortization as a percentage
of  service  revenues  was  0.7%  and 0.4% for  fiscal  1998  and  fiscal  1997,
respectively.  The increase was due to increased  acquisitions  and earnouts for
1998 and 1997.

During fiscal 1998, in an effort to  streamline  the reporting  process from the
different regions, a level of management was eliminated.  Costs of approximately
$0.1 million were incurred in this  organization  realignment.  Management feels
that the new organization will allow the commercial  staffing segment to respond
to issues and events with greater efficiency.

Total  operating  expenses as a percentage  of service  revenues  were 15.8% and
14.3% for fiscal 1998 and fiscal 1997, respectively.

Income  from  Operations:  Income  from  operations  for  fiscal  1998 was $12.2
million,  an increase of $0.8  million,  or 7.0%,  from $11.4  million in fiscal
1997.  Operating margin for fiscal 1998 was 4.8%,  compared to 6.4% in 1997. The
decrease in operating margin was due largely to an increase in selling,  general
and administrative expenses and intangibles amortization.

IT Segment

Service Revenues: Service revenues,  including inter-company revenues, increased
$46.9  million,  or 147.9%,  to $78.6 million in fiscal 1998,  compared to $31.7
million in fiscal 1997. The change was primarily  attributable  to  acquisitions
that accounted for approximately $41.0 million. Internal growth (the development
of  new  offices  and  contributions  from  comparable  offices)  accounted  for
approximately  $5.7 million;  and an additional $0.2 million was recognized as a
result of the fiscal year  containing 53 weeks compared to 52 weeks in the prior
fiscal year.

Gross Profit: The Company defines gross profit as service revenues less the cost
of providing  services.  Such costs  include  wages of staffing  and  consulting
employees, outside consultants and independent contractors hired by the Company,
employer  payroll taxes (FICA,  unemployment  and other general  payroll costs),
workers'  compensation  costs,  and  other  direct  costs  associated  with  any
consulting  engagement.  Gross  profit for  fiscal  1998 was $23.9  million,  an
increase of $13.9  million,  or 139%,  compared to $10.0 million in fiscal 1997.
Gross profit margin for fiscal 1998 was 30.9% compared to 31.5% in fiscal 1997.

Operating Expenses:  Operating expenses,  excluding intangibles amortization and
organization  realignments,  as a percentage of service revenues for fiscal 1998
and  fiscal  1997 were 16.9% and 18.9%,  respectively.  Intangible  amortization
increased  to $2.1  million for fiscal 1998  compared to $0.8 million for fiscal
1997. Intangible  amortization as a percentage of revenues was 2.7% and 2.5% for
the same  comparable  reporting  periods.  The  increase  was due  primarily  to
increased acquisitions and earnouts for 1998.

Organization  realignment costs of $0.8 million,  or 1.0% of revenues,  resulted
from personnel  changes and costs  associated  with realigning and launching the
Inteliant identity for the IT segment.

Total  operating  expenses as a percentage  of revenues were 20.6% and 21.4% for
fiscal 1998 and fiscal 1997, respectively.

Income from Operations: Income from operations for fiscal 1998 was $7.9 million,
an  increase  of $4.7  million,  or 146.9%,  from $3.2  million in fiscal  1997.
Operating margin for fiscal 1998 was 10.3%, compared to 10.1% in fiscal 1997.



                                      F-15
<PAGE>


Liquidity and Capital Resources
-------------------------------

For the  fiscal  year  ended  January  2, 2000 net cash  provided  by  operating
activities was $12.9 million, compared to $9.9 million for the fiscal year ended
January 3, 1999.  The change in operating  cash flow was primarily a result of a
net increase of $4.8 million in certain  working  capital  components  including
accounts receivable, workers' compensation and other accrued liabilities, offset
by a decrease of $1.8 million in net income  adjusted by non-cash  items such as
depreciation and amortization.

The Company's investing activities for the fifty-two weeks ended January 2, 2000
used $31.4 million,  compared to $64.4 million for the  fifty-three  weeks ended
January 3, 1999.  For the  fifty-two  weeks ended  January 2, 2000 the Company's
investing  activities used  approximately  $4.3 million to purchase property and
equipment  compared to $4.4 million for the  fifty-three  weeks ended January 3,
1999; and approximately  $28.6 million for acquisition costs and earnouts during
the  fifty-two  weeks ended  January 2, 2000  compared to $60.0  million for the
fifty-three  weeks ended  January 3, 1999. In September  1999,  the Company sold
certain fixed assets for $1.5 million in a sale-leaseback transaction. The lease
is being  treated  as an  operating  lease  and the gain of  approximately  $0.1
million is being amortized over the five-year term of the lease.

The Company's  financing  activities  provided net proceeds of $15.7 million for
the fifty-two weeks ended January 2, 2000, primarily from borrowings against the
Company's  revolving  credit  facility,   compared  to  $39.3  million  for  the
fifty-three  weeks ended January 3, 1999. The unsecured credit facility provides
for maximum  borrowings of $40 million.  The agreement,  which provides for both
short-term and long-term borrowings, expires in July 2001. Short-term borrowings
bear  interest  at a bank's  prime rate (8.5% at  January  2,  2000).  Long-term
borrowings bear interest at LIBOR plus an "applicable  margin"  (currently 2.0%)
dependent  on  certain  financial  ratios  (average  rate of 8.17% at January 2,
2000).  As of January 2, 2000,  $12.9 million was  available  for  borrowings or
additional letters of credit.

Management  believes  that the present  credit  facilities,  together  with cash
reserves and cash flow from operations, will be sufficient to fund the Company's
operations  and capital  expenditure  requirements  for at least the next twelve
months.  However,  if the Company were to expand its  operations  significantly,
especially through acquisitions,  additional capital may be required.  There can
be no assurance  that the Company will be able to obtain  additional  capital at
acceptable rates.

Seasonality
-----------

The Company's  business follows the seasonal trends of its customers'  business.
Historically,  the commercial staffing segment has experienced lower revenues in
the first  quarter  with  revenues  accelerating  during  the  second  and third
quarters  and then  starting  to slow again  during the fourth  quarter.  The IT
segment does not experience the same level of  seasonality  associated  with the
commercial staffing segment.

Impact of Inflation
-------------------

The  Company  believes  that over the past three years  inflation  has not had a
significant impact on the Company's results of operations.




                                      F-16
<PAGE>



                   Consolidated Financial Statements and Notes




                                      F-17
<PAGE>




                           SOS STAFFING SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                    As of January 2, 2000 and January 3, 1999

                                     ASSETS
                                 (in thousands)
                                                 January 2,   January 3,
                                                   2000          1999
                                                 ---------    ---------
CURRENT ASSETS

      Cash and cash equivalents                  $   2,577    $   5,315
      Accounts receivable, less allowances
          of $1,606 and $762, respectively          50,070       44,627
      Current portion of workers' compensation
          deposit                                      600          462
      Prepaid expenses and other                       973        1,054
      Deferred income tax asset                      3,666        1,849
      Income tax receivable                            676          571
                                                 ---------    ---------
          Total current assets                      58,562       53,878
                                                 ---------    ---------

PROPERTY AND EQUIPMENT, at cost

      Computer equipment                             6,806        5,977
      Office equipment                               4,520        2,917
      Leasehold improvements and other               1,967        1,553
                                                 ---------    ---------
                                                    13,293       10,447
      Less: accumulated depreciation and
          amortization                              (5,454)      (3,103)
                                                 ---------    ---------
          Total property and equipment, net          7,839        7,344
                                                 ---------    ---------

OTHER ASSETS

      Workers' compensation deposit, less
          current portion                              106          106
      Intangible assets, less accumulated
          amortization of $10,959 and $5,872,
          respectively                             131,995      119,709
      Deposits and other assets                      2,122        1,872
                                                 ---------    ---------
          Total other assets                       134,223      121,687
                                                 ---------    ---------

          Total assets                           $ 200,624    $ 182,909
                                                 =========    =========


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


                                      F-18
<PAGE>




                           SOS STAFFING SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                    As of January 2, 2000 and January 3, 1999

                      LIABILITIES AND SHAREHOLDERS' EQUITY
                      (in thousands, except per share data)

                                                          January 2, January 3,
                                                               2000        1999
                                                            --------   --------
CURRENT LIABILITIES

      Accounts payable                                      $  2,521   $  3,350
      Accrued payroll costs                                    7,213      6,805
      Current portion of workers' compensation reserve         4,223      2,358
      Accrued liabilities                                      5,912      2,163
      Current portion of notes payable                           414        313
      Accrued acquisition costs and earnouts                     310     11,900
                                                            --------   --------
          Total current liabilities                           20,593     26,889

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

LONG-TERM LIABILITIES

      Notes payable, less current portion                     55,273     39,612
      Workers' compensation reserve, less current portion        973        478
      Deferred income tax liability                            2,923        927
      Deferred compensation liabilities                          776        397
                                                            --------   --------
          Total long-term liabilities                         59,945     41,414
                                                            --------   --------

COMMITMENTS AND CONTINGENCIES
      (Notes 3 and 5)

SHAREHOLDERS' EQUITY

      Common stock $0.01 par value 20,000 shares
          authorized 12,692 and 12,689 shares issued
          and outstanding, respectively                          127        127
      Additional paid-in capital                              91,693     91,564
      Retained earnings                                       28,266     22,915
                                                            --------   --------
          Total shareholders' equity                         120,086    114,606
                                                            --------   --------

          Total liabilities and shareholders' equity        $200,624   $182,909
                                                            ========   ========

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



                                      F-19
<PAGE>




                           SOS STAFFING SERVICES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
For the Fiscal Years Ended January 2,2000, January 3, 1999 and December 28, 1997

                      (in thousands, except per share data)

<TABLE>
<CAPTION>

                                                      Fiscal Year (52/53 Weeks)
                                                 1999         1998          1997
                                              ---------    ---------    ---------
<S>                                           <C>          <C>          <C>
SERVICE REVENUES                              $ 371,054    $ 330,327    $ 209,251
DIRECT COST OF SERVICES                         285,250      254,388      162,540
                                              ---------    ---------    ---------
        Gross Profit                             85,804       75,939       46,711
                                              ---------    ---------    ---------

OPERATING EXPENSES:

        Selling, general and administrative      67,758       53,821       32,868
        Organization realignments                  --          1,395         --
        Intangibles and amortization              5,482        3,946        1,493
                                              ---------    ---------    ---------
             Total operating expenses            73,240       59,162       34,361
                                              ---------    ---------    ---------
INCOME FROM OPERATIONS                           12,564       16,777       12,350
                                              ---------    ---------    ---------

OTHER INCOME (EXPENSE):

        Interest expense                         (4,104)      (1,660)        (368)
        Interest income                             129          229          498
        Other, net                                   (5)         299          145
                                              ---------    ---------    ---------
             Total, net                           3,980        1,132          275
                                              ---------    ---------    ---------

INCOME BEFORE PROVISION FOR
        INCOME TAXES

PROVISION FOR INCOME TAXES                       (3,233)      (5,787)      (5,099)
                                              ---------    ---------    ---------

NET INCOME                                    $   5,351    $   9,858    $   7,526
                                              =========    =========    =========

NET INCOME PER COMMON SHARE:

        Basic                                 $    0.42    $    0.78    $    0.78
        Diluted                                    0.42         0.77         0.77

WEIGHTED AVERAGE COMMON SHARES:

        Basic                                    12,691       12,675        9,654
        Diluted                                  12,699       12,810        9,780
</TABLE>

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




                                      F-20
<PAGE>




                           SOS STAFFING SERVICES, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                           For the Fiscal Years Ended
             January 2, 2000, January 3, 1999 and December 28, 1997

                                 (in thousands)
<TABLE>
<CAPTION>



                                                         Additional
                                         Common Stock      Paid-in    Retained
                                       Shares    Amount    Capital    Earnings     Total
                                       ------   --------   --------   --------   --------
<S>                                    <C>      <C>        <C>        <C>        <C>
BALANCE, December 29, 1996              8,706   $     87   $ 31,216   $  5,531   $ 36,834
      Exercise of stock options            17          1        143       --          144
      Sale of common stock, net         3,930         39     59,793       --       59,832
      Net income                         --         --         --        7,526      7,526
                                       ------   --------   --------   --------   --------
BALANCE, December 28, 1997             12,653        127     91,152     13,057    104,336
      Exercise of stock options            36       --          412       --          412
      Net income                         --         --         --        9,858      9,858
                                       ------   --------   --------   --------   --------
BALANCE, January 3, 1999               12,689        127     91,564     22,915    114,606
      Exercise of stock options             2       --           22       --           22
      Tax benefit of disqualifying
         dispositions of stock           --         --          107       --          107
      Net income                         --         --         --        5,351      5,351
                                       ------   --------   --------   --------   --------
BALANCE, January 2, 2000               12,691   $    127   $ 91,693   $ 28,266   $120,086
                                       ======   ========   ========   ========   ========
</TABLE>


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



                                      F-21
<PAGE>






                           SOS STAFFING SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

               For the Fiscal Years Ended January 2, 2000, January
                         3, 1999 and December 28, 1997

                                 (in thousands)
<TABLE>
<CAPTION>

                                                         Fiscal Year (52/53 Weeks)
                                                       1999       1998         1997
                                                    --------    --------    --------
<S>                                                 <C>         <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                          $  5,351    $  9,858    $  7,526
Adjustments to reconcile net income
    to net cash provided by operating activities:
   Depreciation and amortization                       8,094       5,360       2,157
   Deferred income taxes                                 179         123        (596)
   Loss on disposition of assets                          19          50          27
   Changes in operating assets and liabilities:
     Accounts receivable, net                         (5,720)     (8,864)    (12,449)
     Workers' compensation deposit                      (138)         14         135
     Prepaid expenses and other                           81        (228)       (289)
     Amounts due from related parties                   --          --           (18)
     Deposits and other assets                           (18)       (789)       (312)
     Accounts payable                                   (829)      2,378         371
     Accrued payroll costs                               409       3,239       1,456
     Workers' compensation reserve                     2,360        (238)      1,196
     Accrued liabilities                               3,255         484        (625)
     Income taxes payable/receivable                    (105)     (1,518)        480
                                                    --------    --------    --------
      Net cash provided by (used in)                  12,938       9,869        (941)
      operating activities
                                                    --------    --------    --------

CASH FLOWS FROM INVESTING ACTIVITIES:

Cash paid for acquisitions of businesses                 (32)    (41,080)    (38,575)
Purchases of property and equipment                   (4,346)     (4,431)     (1,830)
Payments on acquisition earnouts                     (28,611)    (18,903)     (3,955)
Proceeds from sale of property and equipment           1,598          60           3
                                                    --------    --------    --------
      Net cash used in investing activities          (31,391)    (64,354)    (44,357)
                                                    --------    --------    --------
</TABLE>
      The accompanying notes to consolidated finanfcial statements are an
                integral part of these consolidated statements.


                                      F-22
<PAGE>




                           SOS STAFFING SERVICES, INC.
                CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                      For the Fiscal Years Ended January 2,
                   2000, January 3, 1999 and December 28, 1997

                                 (in thousands)
<TABLE>
<CAPTION>



                                                       Fiscal Year (52/53 Weeks)
                                                     1999        1998         1997
                                                   --------    --------    --------
<S>                                                <C>         <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net        $   --      $   --      $ 59,832
Proceeds from exercise of employee stock options        129         412         144
Proceeds from long-term borrowings                   22,000      62,000      13,000
Payments on long-term borrowings                     (6,414)    (23,075)    (13,000)
                                                   --------    --------    --------
      Net cash provided by financing activities      15,715      39,337      59,976
                                                   --------    --------    --------
NET INCREASE (DECREASE) IN CASH
   AND CASH EQUIVALENTS                              (2,738)    (15,148)     14,678

CASH AND CASH EQUIVALENTS AT
   BEGINNING OF PERIOD                                5,315      20,463       5,785
                                                   --------    --------    --------
CASH AND CASH EQUIVALENTS AT
   END OF PERIOD                                   $  2,577    $  5,315    $ 20,463
                                                   ========    ========    ========


SUPPLEMENTAL  CASH FLOW INFORMATION:
  Cash paid during the period for:
    Interest                                       $  3,908    $  1,223    $    226
    Income taxes                                      3,332       7,322       5,169
</TABLE>


SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES:

The  following   table  sets  forth   information   relating  to  the  Company's
acquisitions of certain businesses (see Note 3):
<TABLE>
<CAPTION>

                                                                          Fiscal Year (52/53 Weeks)
                                                           --------------------------------------------------------
                                                               1999               1998                 1997
                                                           --------------   ------------------   ------------------
<S>                                                          <C>               <C>                   <C>
Fair value of assets acquired                                $        32       $    45,247           $   40,443
Liabilities assumed                                                   --             1,016                  880
Notes payable issued in connection with acquisition                   --             2,935                  798
Accrued acquisition costs and earnouts                                --            11,900                3,413
</TABLE>

During fiscal year 1997,  amounts  receivables from TSI, totaling  approximately
$0.6 million, were offset against the acquisition note payable (see Note 10).

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


                                      F-23
<PAGE>




                   Notes to Consolidated Financial Statements

1.   Nature of Operations

SOS Staffing  Services,  Inc. ("SOS" or the "Company") is a leading  provider of
staffing and consulting services in the Western United States and Massachusetts.
As of January  2, 2000,  SOS  operated  a network of 150  offices  located in 18
states.  The  Company  provides  a  broad  range  of  commercial   staffing  and
information  technology  ("IT") services.  Commercial  staffing services include
light  industrial,   clerical,  industrial,  technical  and  other  professional
services.  IT  services  consist of  e-business  solutions  (including  customer
relationship management, enterprise resource planning, and internet technology),
technology  solutions,  outsourcing,  communications,  and staffing  services in
IT-related fields.

2.   Summary of Significant Accounting Policies

Fiscal Year - The Company's  fiscal year ends on the Sunday  closest to December
31, which  results in a 52- or 53-week  year.  Fiscal year ended January 2, 2000
("fiscal  1999"),  and fiscal year ended December 28, 1997 ("fiscal  1997") each
contained 52 weeks.  Fiscal year ended January 3, 1999 ("fiscal 1998") contained
53 weeks.

Principles of Consolidation - The consolidated  financial statements include the
accounts of SOS  Staffing  Services,  Inc.  and its wholly  owned  subsidiaries,
ServCom Staff Management,  Inc. ("ServCom"),  SOS Collection Services,  Inc. and
Inteliant Corporation  ("Inteliant").  All significant intercompany transactions
have been eliminated in consolidation.

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

Revenue Recognition - Service revenues generated from temporary  assignments and
consulting engagements are recognized as income at the time service is provided,
while  service  revenues   generated  from  permanent   placement  services  are
recognized at the time the customer  agrees to hire a candidate  supplied by the
Company.

Cash and Cash Equivalents - The Company considers highly liquid investments with
an original  maturity of three  months or less to be cash and cash  equivalents.
Cash and cash  equivalents  consist of various  money  market  accounts  and are
recorded at cost, which approximates market value.

Property  and  Equipment  - Property  and  equipment  are stated at cost and are
depreciated  using the  straight-line  method over their estimated useful lives.
Leasehold  improvements are amortized over the terms of the respective leases or
the  estimated   economic  lives  of  the  assets  whichever  is  shorter.   The
depreciation and amortization periods are as follows:

                     Computer equipment                          2 - 7 years
                     Office equipment                            3 - 7 years
                     Leasehold improvements and other            5 - 17 years

Upon  retirement or other  disposition of property and  equipment,  the cost and
related accumulated depreciation and amortization are removed from the accounts.
The  resulting  gain  or  loss  is  reflected  in  income.  Major  renewals  and
improvements  are  capitalized  while minor  expenditures  for  maintenance  and
repairs are charged to expense as incurred.



                                      F-24
<PAGE>


Workers'  Compensation  - For  fiscal  1999 and  1998,  the  Company  maintained
workers'  compensation  insurance with ACE USA ("ACE")  (formerly CIGNA Property
and  Casualty)  for claims in excess of a loss cap of $300,000  and $250,000 per
incident,  respectively.  Under the terms of the ACE  agreement,  the Company is
required  to fund into a deposit  account an amount for  payment of claims.  The
fund is  replenished  monthly  based on actual  payments  made by ACE during the
previous  month.  Some  states do not  permit  private  insurance  for  workers'
compensation;  where this is the case,  the  Company  is covered by  appropriate
state insurance funds.

The Company has established  reserve amounts based upon information  provided by
the insurance  companies as to the status of claims plus development factors for
incurred  but  not  yet  reported  claims  and  anticipated  future  changes  in
underlying case reserves.  Such reserve amounts are only estimates and there can
be no assurance that the Company's future workers' compensation obligations will
not exceed the amount of its  reserves.  However,  management  believes that the
difference  between the amounts  recorded for its  estimated  liability  and the
costs of  settling  the actual  claims  will not be  material  to the results of
operations.

                                                 1999         1998
                                              ---------    ---------
             Goodwill                         $ 138,473    $ 121,529
             Non-compete agreements               2,984        2,996
             Other intangible assets              1,497        1,056
                                              ---------    ---------
)            Total                              142,954      125,581
             Less: accumulated amortization     (10,959)      (5,872
                                              ---------    ---------
                                              $ 131,995    $ 119,709
                                              ---------    ---------


Intangible  Assets - Intangible  assets  consist of the following  amounts as of
January 2, 2000 and January 3, 1999 (in thousands):

Goodwill is amortized using the straight-line method over 30 years;  non-compete
agreements and other  intangible  assets are generally being amortized using the
straight-line method over three to six years.

Accounting  for the  Impairment of Long-Lived  Assets -The Company  accounts for
impairment  of  long-lived  assets in  accordance  with  Statement  of Financial
Accounting  Standards  ("SFAS")  No.  121,  "Accounting  for the  Impairment  of
Long-Lived  Assets and for  Long-Lived  Assets to be Disposed  of." SFAS No. 121
requires that long-lived assets,  including goodwill, be reviewed for impairment
whenever events or changes in circumstances  indicate that the book value of the
asset may not be recoverable. The Company evaluates, at each balance sheet date,
whether events or circumstances have occurred that indicate possible impairment.
In  accordance  with SFAS No. 121,  the  Company  uses an estimate of the future
undiscounted  net cash flows of the  related  asset over the  remaining  life in
measuring whether the assets are recoverable.

 Income Taxes - The Company recognizes deferred income tax assets or liabilities
for expected future tax  consequences of events that have been recognized in the
financial  statements  or tax returns.  Under this method,  deferred  income tax
assets or  liabilities  are  determined  based upon the  difference  between the
financial and income tax basis of assets and liabilities using enacted tax rates
expected to apply when differences are expected to be settled or realized.

Net Income Per Common  Stock - Basic net income per common share  ("Basic  EPS")
excludes dilution and is computed by dividing net income by the weighted-average
number of common  shares  outstanding  during the year.  Diluted  net income per
common share ("Diluted EPS") reflects the potential dilution that could occur if
stock options or other common stock equivalents were exercised or converted into
common  stock.  The  computation  of  Diluted  EPS does not assume  exercise  or
conversion of securities  that would have an  antidilutive  effect on net income
per common share.



                                      F-25
<PAGE>


Following is a  reconciliation  of the numerator and denominator of Basic EPS to
the  numerator  and  denominator  of  Diluted  EPS for all years  presented  (in
thousands, except per share amounts):

                             Net Income        Shares        Per-Share
                            (Numerator)    (Denominator)       Amount
                               ------          ------          ------
Fiscal 1999
   Basic EPS                   $5,351          12,691          $ 0.42
     Effect of stock options     --                 8
                               ------          ------          ------
   Diluted EPS                 $5,351          12,699          $ 0.42
                               ======          ======          ======
Fiscal 1998
   Basic EPS                   $9,858          12,675          $ 0.78
     Effect of stock options     --               135
                               ------          ------          ------
   Diluted EPS                 $9,858          12,810          $ 0.77
                               ======          ======          ======
Fiscal 1997
   Basic EPS                   $7,526           9,654          $ 0.78
     Effect of stock options     --               126
                               ------          ------          ------
   Diluted EPS                 $7,526           9,780          $ 0.77
                               ======          ======          ======


At the end of fiscal  1999,  1998 and 1997,  there were  outstanding  options to
purchase  931,000,  375,000 and 284,000,  shares of common stock,  respectively,
that were not  included in the  computation  of Diluted EPS because the options'
exercise prices were greater than the average market price of the common shares.

Concentrations  of  Credit  Risk  - The  Company's  financial  instruments  that
potentially  subject  the  Company  to  concentrations  of credit  risk  consist
principally of cash and trade receivables. In the normal course of business, the
Company  provides  credit  terms to its  customers.  The  Company  believes  its
portfolio  of accounts  receivable  is well  diversified,  and as a result,  its
concentrations of credit risks are minimal.  The Company performs ongoing credit
evaluations of its customers and maintains  allowances for possible losses,  but
typically does not require collateral.

Fair  Value of  Financial  Instruments  - The  Company's  financial  instruments
consist primarily of cash and cash equivalents and debt obligations. As a result
of changes in certain bank's prime interest  rates,  the Company  estimates that
the fair value of its unsecured debt  obligations has decreased.  The fair value
of the Company's long-term debt is estimated by discounting  expected cash flows
at a bank's prime rate. At January 2, 2000 the carrying  amount of $35.0 million
is reflected in the consolidated balance sheets. The estimated fair value of the
unsecured notes,  using a discount rate of 8.5% over the expected  maturities of
the obligations, is approximately $32.6 million.

Reclassifications - Certain  reclassifications have been made to the fiscal 1998
consolidated financial statements to conform to the current year's presentation.
In accordance with industry practice,  the Company made the decision to classify
commissions  related to  permanent  placement  revenues as a component of direct
cost of services rather than as selling,  general and  administrative  expenses.
The amount  reclassified  for the fifty-three  week period ended January 3, 1999
was approximately $1,257,000.

3.   Acquisitions

All of the  Company's  acquisitions  have been  accounted for using the purchase
method,  and the excess of the purchase  price over the estimated  fair value of


                                      F-26
<PAGE>


the acquired assets less liabilities  assumed has been allocated to goodwill and
other intangible assets. Certain acquisitions have contingent earnout components
of the purchase  price that are typically  based on achieving  some  pre-defined
performance  level. The Company's maximum potential earnout liability at January
2, 2000 was  approximately  $17.0 million.  Earnout amounts accrued increase the
amount of goodwill  related to the  acquisition.  The  following is a summary of
acquisitions during fiscal 1999, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>

                                                                                        Max. Earnout         Amount
                                                                                        Remaining As      Allocated to
                                                       Date Acquired   Purchase Price     of 1/2/00     Intangible Assets
                                                       --------------- --------------- ---------------- -----------------
<S>                                                    <C>              <C>                <C>              <C>
1999 Acquisitions:                                     Various          $       32         $        --      $        32
                                                                       --------------- ---------------- -----------------
1998 Acquisitions:
   Mortgage Staffing, Inc.                             January          $    3,754         $        --      $     3,714
   Hutton, Graber, & Assoc, Inc.                       January               1,803                  --            1,770
   Computer Professional Resources, Inc.               February              4,720                 286            4,218
   TOPS Staffing Services, Inc.                        March                 6,143                  --            5,944
   Aquas, Inc.                                         May                   9,590               5,152            9,570
   Abacab Software, Inc.                               May                   7,642               7,341            7,018
   NeoSoft, Inc.                                       July                 10,966               3,828           10,439
   Sterling Truex, Inc.                                September             7,514                  --            7,283
   Devon & Devon Personnel Services, Inc.              September             4,208                  --            3,763
   Others                                              Various               2,697                 357            2,683
                                                                       --------------- ---------------- -----------------
                                                                        $   59,037         $    16,964       $    56,402
                                                                       --------------- ---------------- -----------------
1997 Acquisitions:
   Computer Group, Inc.                                January          $    2,747         $        --      $     2,647
   Bedford Consultants, Inc.                           July                  5,028                  --            4,409
   Telecom Project Assistance, Inc.                    July                  5,386                  --            5,292
   Execusoft, Inc.                                     August                7,805                  --            7,747
   JesCo Technical Services, Inc.                      October              11,853                  --           11,818
   Century Personnel, Inc.                             October              24,863                  --           24,761
   Others                                              Various               6,113                  --            5,170
                                                                       --------------- ---------------- -----------------
                                                                         $  63,795         $        --       $   61,844
                                                                       --------------- ---------------- -----------------
</TABLE>


Pro  Forma  Acquisition   Information:   The  unaudited  pro  forma  acquisition
information  for fiscal 1998  presents the results of  operations as if the 1998
acquisitions had occurred at the beginning of fiscal 1998.  Acquisitions made in
fiscal 1999 are immaterial and do not have a significant  impact on the proforma
results. The results of operations give effect to certain adjustments, including
amortization of intangible  assets,  interest  expense on acquisition  debt, the
reduction in expenses for the difference between compensation of employees prior
to the  acquisition and their  compensation  following the  acquisition,  income
taxes and the additional common shares deemed to be outstanding as the result of
the  Company's  public  offerings.  The pro forma results have been prepared for
comparative purposes only and do not purport to be indicative of what would have
occurred  had the  acquisitions  been made at the  beginning  of fiscal  1998 as
described above or of the results that may occur in the future.


                                      F-27
<PAGE>


                   Unaudited Pro Forma Results of Operations
                   -----------------------------------------
                      (in thousands, except per share data)
                      -------------------------------------

                                                    1998
                                               ----------------
           Service Revenues                          $ 348,388
           Income from operations                       20,118
           Net income                                   11,288
           Diluted EPS                                    0.88

4.   Credit Facilities

The Company has an unsecured  revolving  credit facility with certain banks that
provides for maximum  borrowings  of $40 million.  The credit  agreement,  which
provides for both  short-term  and long-term  borrowings,  expires in July 2001.
Short-term  borrowings  bear interest at a bank's prime rate (8.5% at January 2,
2000).  Long-term  borrowings bear interest at LIBOR plus an applicable  margin,
ranging from 1.0% to 2.0%,  dependent on certain financial  ratios;  the current
applicable  margin is 2.0%. The agreement  contains an annual  commitment fee of
three-eighths of one percent on any unused portion, payable quarterly.

At  January 2, 2000,  the  Company  had $20.0  million in  long-term  borrowings
outstanding ($11.0 million at 8.17% and $9.0 million at 8.18%). The Company also
had letters of credit of $7.1 million  outstanding  for purposes of securing its
workers'  compensation premium obligation.  The aggregate amount of such letters
of credit reduces the borrowing  availability on the line of credit.  At January
2, 2000,  $12.9 million was available  for  borrowings or additional  letters of
credit.

The  Company  also  has  outstanding  $35  million  of  senior  unsecured  notes
consisting of two pieces.  The first piece consists of senior unsecured notes in
the  aggregate  amount of $30  million  with a final  ten-year  maturity  and an
average  maturity  of seven  years at a 6.95%  coupon  rate.  The  second  piece
consists of senior  unsecured notes in the aggregate amount of $5 million with a
coupon rate of 6.72% due in a single payment in 2003.

The Company's  unsecured revolving credit facility and its senior unsecured note
agreement contain certain  restrictive  covenants including certain debt ratios,
maintenance  of a  minimum  net worth and  restrictions  on the sale of  capital
assets. As of January 2, 2000, the Company was in compliance with the covenants.

In connection with the terms and conditions of an acquisition,  the Company also
has a promissory note payable with a balance of approximately $0.7 million.  The
note bears  interest at an annual rate of 8%. The principal  amount of the note,
together  with  interest,  is due and  payable in equal  quarterly  installments
through  September 2001. The note is subject to set-off for any  indemnification
claims the Company may have against the payee.

The maturities on outstanding long-term debt are as follows (in thousands):

                Fiscal Year Ending

                   2000                         $     414
                   2001                            20,274
                   2002                             4,286
                   2003                             9,286
                   2004                             4,286
                   Beyond                          17,141
                                                ---------
                                                $  55,687
                                                =========



                                      F-28
<PAGE>


5.   Commitments and Contingencies

Noncancelable  Operating  Leases - The Company  leases office  facilities  under
noncancelable operating leases. Management expects that, in the normal course of
business,  leases that expire will be renewed or replaced by other  leases.  The
Company leases certain of these  facilities from various related  parties.  (See
Note 9.)

Future  minimum lease  payments  under  non-cancelable  operating  leases are as
follows (in thousands):

             Fiscal Year Ending

                2000                         $  4,091
                2001                            3,311
                2002                            2,472
                2003                            1,282
                2004                              364
                Beyond                             20
                                             --------
                                             $ 11,540
                                             ========

Facility  rental  expense for fiscal 1999,  1998 and 1997 totaled  approximately
$4,691,000, $4,120,000, and $2,154,000, respectively.

During fiscal 1999, the Company sold certain computer hardware and software with
a net book value of approximately  $1.5 million for approximately  $1.6 million.
The Company  agreed to lease back such computer  hardware and software  under an
operating  lease  agreement.  The terms of the agreement  require annual minimum
lease payments of approximately  $358,000 payable in monthly  installments.  The
resulting gain on the sale of approximately $0.1 million is being amortized over
the lease term of five years.

Legal Matters - In the ordinary course of business,  the Company is periodically
threatened  with or named as a defendant in various  lawsuits or  administrative
actions.  The Company maintains insurance in such amounts and with such coverage
and  deductibles as management  believes to be reasonable and prudent;  however,
there can be no  assurance  that such  insurance  will be  adequate to cover all
risks to which the  Company  may be  exposed.  The  principal  risks  covered by
insurance  include  workers'  compensation,   personal  injury,  bodily  injury,
property damage,  employer practices liability,  errors and omissions,  fidelity
losses and general liability.

In September 1999,  Interliant,  Inc.  ("Plaintiff")  commenced an action in the
United  States  District  Court for the  Southern  District  of  Texas,  Houston
Division,  against  the  Company  and its  wholly  owned  subsidiary,  Inteliant
Corporation.  The lawsuit alleges, among other things, that the Company's use of
the "Inteliant" mark infringes upon Plaintiff's mark,  "Interliant." In addition
to  the  federal  trademark   infringement  claims,   Plaintiff  alleges  unfair
competition  based  on the  Company's  use of the  Inteliant  mark,  common  law
infringement and dilution. In the Complaint,  Plaintiff has made a demand for an
unspecified  amount of damages,  as well as for an  injunction  prohibiting  the
Company's use of the Inteliant  mark.  Based on  information  from its trademark
counsel,  the  Company  believes  that it has valid  substantive  and  equitable
defenses to the  lawsuit,  including  that the  Inteliant  mark is  phonetically
dissimilar to  Interliant,  the use of the Inteliant mark does not infringe upon
Plaintiff's  mark,  and its use is not  confusing or likely to cause  confusion.
Notwithstanding  the Company's belief, the outcome of any litigation,  including
this action,  is not certain.  If Plaintiff  were to prevail in the action,  the
Company would be required to stop the use of the Inteliant  mark and to possibly
pay damages.  The Company does not believe that the cost of changing the mark or
the amount of any damages would have a material  adverse impact on the Company's
financial condition or results of operations.


                                      F-29
<PAGE>


There is no other pending or threatened  litigation  that the Company  currently
anticipates  will have a  material  adverse  effect on the  Company's  financial
condition or results of operations.

6.   Income Taxes

The components of the provision for income taxes for fiscal 1999,  1998 and 1997
are as follows (in thousands):
<TABLE>
<CAPTION>

                                                        1999              1998             1997
                                                   ---------------- ----------------- ----------------
<S>                                                    <C>              <C>                <C>
     Current provision -
        Federal                                        $   2,508        $   4,881         $   4,797
        State                                                546              783               899
                                                   ---------------- ----------------- ----------------
                                                       $   3,054        $   5,664         $   5,696
                                                   ---------------- ----------------- ----------------
     Deferred provision (benefit) -
        Federal                                              150              103              (503)
        State                                                 29               20               (94)
                                                   ---------------- ----------------- ----------------
                                                             179              123              (597)
                                                   ---------------- ----------------- ----------------
     Total provision for income taxes                  $   3,233        $   5,787          $  5,099
                                                   ---------------- ----------------- ----------------
</TABLE>

The following is a reconciliation  between the statutory federal income tax rate
and the  Company's  effective  income tax rate which is derived by dividing  the
provision  for income  taxes by income  before  provision  for income  taxes for
fiscal 1999, 1998 and 1997:
<TABLE>
<CAPTION>

                                                            1999             1998              1997
                                                      ----------------- ---------------- -----------------
<S>                                                            <C>               <C>              <C>
     Statutory federal income tax rate                         34.1%             34.4%            34.3%
     State income taxes net of federal benefit                  4.3               4.3              3.9
     Government sponsored hiring incentives                    (9.9)             (4.1)             --
     Non-deductible intangible amortization                    10.1               4.9              4.1
     Other                                                     (0.9)             (2.5)            (1.9)
                                                      ----------------- ---------------- -----------------
                                                               37.7%             37.0%            40.4%
                                                      ================= ================ =================
</TABLE>


The components of the deferred  income tax assets and  liabilities at January 2,
2000 and January 3, 1999 are as follows (in thousands):

                                                   1999      1998
                                                 -------    -------
            Deferred income tax assets -
               Workers' compensation reserves    $ 2,037    $ 1,112
               Allowance for doubtful accounts       630        325
               Accrued liabilities                   998        527
               Other                                 448        134
                                                 -------    -------
                                                   4,113      2,098
                                                 -------    -------
            Deferred income tax liabilities -
               Depreciation and amortization      (3,253)    (1,063)
               Cash to accrual adjustments            --        (44)
               Other                                (117)       (69)
                                                 -------    -------
                                                  (3,370)    (1,176)
                                                 -------    -------
            Net deferred income tax asset        $   743    $   922
                                                 =======    =======





                                      F-30
<PAGE>





                                             1999       1998
                                            -------    -------
           Balance sheet classification -
              Current asset                 $ 3,666    $ 1,849
              Long-term liability            (2,923)      (927)
                                            -------    -------
                                            $   743    $   922
                                            -------    -------


7.   Stock Based Compensation

As of  January  2,  2000,  the  Company  had a stock  incentive  plan,  which is
described below. The Company applies Accounting Principles Board ("APB") Opinion
No. 25 and related  interpretations  in  accounting  for its plan under which no
compensation  cost has been recognized.  Had  compensation  cost been determined
consistent with SFAS No. 123,  "Accounting for  Stock-Based  Compensation,"  the
Company's net income and earnings per share for fiscal 1999, 1998 and 1997 would
approximate the pro forma amounts below (in thousands, except per share data):

                            1999              1998             1997
                     ---------------- ----------------- ----------------
     Net income -
       As reported     $       5,351    $       9,858     $       7,526
       Pro forma               3,893            7,849             6,081
     Diluted EPS -
       As reported     $        0.42    $        0.77     $        0.77
       Pro forma                0.32             0.62              0.62


Stock Price Assumptions - The fair value of each option grant has been estimated
on the  grant  date  using  the  Black-Scholes  option-pricing  model  with  the
following  assumptions  used for  grants  in  fiscal  1999,  1998 and  1997,  in
calculating  compensation  cost:  expected  stock price  volatility  of 63 % for
fiscal  1999,  64 % for  fiscal  1998,  and 56 % for  fiscal  1997;  an  average
risk-free  interest rate of 6.4 % for fiscal 1999, 5.3 % for fiscal 1998 and 6.2
% for fiscal 1997;  and an expected life of five years for director  options and
seven years for employee options for fiscal 1999, 1998 and 1997.

Stock  Incentive  Plan - The Company  established  a stock  incentive  plan (the
"Plan")  which  allows for the  issuance of a maximum of 1.8  million  shares of
common stock to officers,  directors,  consultants and other key employees.  The
Plan  allows  for  the  grant  of  incentive  or  nonqualified  options,   stock
appreciation  rights,  restricted  shares of common  stock or stock units and is
administered by the compensation  committee of the Company's board of directors.
Incentive options and nonqualified  options are granted at not less than 100% of
the fair market value of the  underlying  common stock on the date of grant.  At
January 2, 2000 the Plan had approximately 377,000 options available to grant.

The Company's board of directors  determines the number, type of award and terms
and conditions,  including any vesting  conditions.  For fiscal 1999,  1998, and
1997 only  incentive and  nonqualified  options had been granted under the Plan.
Generally,  employee  stock options  partially  vest at the date of grant and on
each of the next  four or five  anniversary  dates  thereafter.  The  Plan  also
provides for an annual grant to non-employee  directors of 1,000 options,  which
are  immediately  exercisable  on the date of grant.  Stock  options  granted to
employees  expire  no later  than ten  years  from the date of grant  and  stock
options  granted to  directors  expire no later than five years from the date of
grant.




                                      F-31
<PAGE>




A summary of the stock option  activity is as follows (in thousands,  except per
share data):
<TABLE>
<CAPTION>

                                                                                         Weighted
                                                                                          Average
                                                                                      Exercise Price
                                                       Employees      Directors          Per Share
                                                   ---------------- ----------------- ----------------
<S>                                                <C>              <C>               <C>
    Outstanding at December 29, 1996                         249                43         $    8.68
       Granted                                                270                14             16.95
       Exercised                                              (17)                -              8.41
       Forfeited                                               (5)                -              9.69
                                                   ---------------- ----------------- ----------------
     Outstanding at December 28, 1997                         497                57             12.92
       Granted                                                681                60             12.57
       Exercised                                              (36)                              11.59
       Forfeited                                             (116)               (9)            17.06
                                                   ---------------- ----------------- ----------------
     Outstanding at January 3, 1999                         1,026               108             12.29
       Granted                                                434                24              5.40
       Exercised                                               (3)                               7.82
       Forfeited                                             (224)               (4)            12.60
                                                   ---------------- ----------------- ----------------
     Outstanding at January 2, 2000                         1,233               128             10.08
                                                   ---------------- ----------------- ----------------
     Exercisable at January 2, 2000                           445               135         $   10.93
                                                   ================ ================= ================
</TABLE>


The weighted average fair value of options granted was $3.67,  $7.53, and $10.73
for grants made during fiscal 1999, 1998 and 1997,  respectively.  The following
is  additional  information  with  respect  to  the  stock  options  (shares  in
thousands):
<TABLE>
<CAPTION>

                                             Weighted-
                                              Average

                       Outstanding as        Remaining       Weighted-Average     Exercisable At     Weighted-Average
Exercise Price Range    of January 2,       Contractual       Exercise Price          January         Exercise Price
                            2000            Yearly Life                               2, 2000
--------------------- ------------------ ------------------ -------------------- ------------------ --------------------
<S>                   <C>                <C>                <C>                  <C>                <C>
     $4.37  - $10.54          922                8.7              $ 6.29                 356               $ 6.80
    10.55  -   16.72          132                6.3               14.59                  83                14.33
    16.73  -   22.88          307                8.0               19.51                 141                19.33
                      ------------------ ------------------ -------------------- ------------------ --------------------
                            1,361                8.3             $ 10.08                 580               $ 10.93
                      ================== ================== ==================== ================== ====================
</TABLE>

8.   Employee Benefit Plans

The Company has a 401(k) defined  contribution plan. Employee  contributions may
be  invested  in  several  alternatives.  Company  contributions  to  the  plan,
including matching contributions,  may be made at the discretion of the Company.
The Company's contributions to the plan were approximately  $440,000,  $348,000,
and $60,000 for fiscal 1999, 1998 and 1997, respectively.

The Company also has a deferred  compensation  plan for certain key officers and
employees that provide the opportunity to defer a portion of their compensation.
Amounts  deferred are held in a Rabbi  Trust,  which  invests in various  mutual
funds as  directed  by the  participants.  The trust  assets are  recorded  as a
long-term  other asset on the  accompanying  consolidated  balance sheet because
such  amounts  are subject to the claim of  creditors.  The  Company's  deferred



                                      F-32
<PAGE>

compensation  liability  represents  amounts  deferred by participants  plus any
earnings on the trust assets.  For the fifty-two weeks ended January 2, 2000 and
the fifty-three weeks ended January 3, 1999, deferred  compensation  liabilities
were approximately $776,000 and $397,000, respectively.

During fiscal 1999 the Company  adopted an Employee  Stock Purchase Plan whereby
employees  may  designate  a portion of their  salaries  to be used to  purchase
shares of the Company.  Employees purchase shares at the average market price of
all shares bought for all employees  participating  during a designated  period.
All shares are purchased through an independent  broker off the open market. The
Company pays all brokerage and transactional fees related to the purchase.

9.   Related Party Transactions

In December 1997, the Company  purchased certain assets and substantially all of
the business of TSI of Utah, Inc. ("TSIU"),  a company that provides  industrial
temporary  staffing  services  and was  incorporated  by an adult son of certain
significant shareholders of the Company, for approximately  $1,285,000; of which
$600,000 was paid in cash with the remaining  $685,000 in a note payable.  As of
the date of acquisition  the Company had receivables of  approximately  $625,000
due from TSIU that were used to reduce the note  payable to TSIU.  The excess of
the  initial  purchase  price  over the  estimated  fair  value of the  acquired
tangible  assets was  approximately  $1,270,000,  of which  $1,190,000  has been
allocated  to goodwill  and  approximately  $80,000 has been  allocated to other
intangible assets.

The Company  leases its corporate  office  building  from the adult  children of
certain significant shareholders of the Company under a ten-year lease agreement
with an option to renew for ten additional  years.  Rental expense during fiscal
1999, 1998 and 1997 amounted to approximately  $103,000,  $87,000,  and $86,000,
respectively.  Future minimum lease payments  related to this lease will average
approximately  $103,000 each fiscal year. The Company believes that the terms of
the lease are at least as favorable  as the terms that could have been  obtained
from an unaffiliated third party in a similar transaction.

During  fiscal  1999,  two  of  the  adult   children  of  certain   significant
shareholders leased employees from ServCom.  ServCom generated revenues totaling
approximately  $437,000  related to leasing  employees to the companies owned by
these adult children.  During fiscal 1998,  ServCom generated  revenues totaling
approximately  $270,500  related to leasing  employees to the companies owned by
these adult  children.  Outstanding  receivables  at January 3, 1999  related to
these agreements  totaled  approximately  $38,000.The  Company believes that the
terms  of this  relationship  are  similar  to those  that  would be given to an
unaffiliated third party in a similar agreement.

During fiscal 1999 the Company  contributed  approximately  $297,000 in cash and
other assets to a joint venture with a former employee whereby the Company would
own 49% of the newly-formed venture,  Bency & Associates LLC. The carrying value
of the venture at January 2, 2000 was approximately  $264,000. The joint venture
is being  accounted  for using the equity method of  accounting.  As part of the
agreement  the  Company  agreed  to  provide  a  credit   facility  of  $500,000
terminating  December 31, 2000. The agreement  provides for interest at a bank's
prime rate less 1% (7.5% at January 2, 2000) on the first $100,000 for the first
six months,  with the rate increasing to a bank's prime rate (8.5% at January 2,
2000) for any  amount  over  $100,000  or after six  months.  At January 2, 2000
borrowings under this credit facility were approximately $225,000,  reflected in
other  assets on the  balance  sheet.  Interest  earned for the  52-weeks  ended
January 2, 2000 was approximately $2,000.

10.  Subsequent Events

Subsequent  to the balance  sheet  date,  the  Company  approved a plan  whereby
Inteliant Corporation would be re-domesticated from New Mexico to Delaware.  The



                                      F-33
<PAGE>

re-domestication was effectuated through a merger of Inteliant Corporation - New
Mexico and a newly  formed  wholly owned  subsidiary,  Inteliant  Corporation  -
Delaware  ("Inteliant").  Inteliant's  articles of  incorporation  authorize the
issuance of 50,000,000 shares common stock $.001 par value and 10,000,000 shares
preferred stock $.01 par value.  Currently 30,000,000 shares of common stock are
issued and outstanding and held entirely by the Company.

Additionally,  the Company, as the sole shareholder of Inteliant,  also approved
the Inteliant Corporation 2000 Stock Option Plan (the "Plan") for the benefit of
its employees,  officers and directors.  The Plan,  administered  by Inteliant's
board of  directors,  allows for the grant of  options to  purchase a maximum of
10,000,000  shares of Inteliant's  common stock. It is the intent of the Company
to use the Plan to  attract  and  retain  skilled  IT  professionals  needed  to
implement the Company's business plan. The number of options to be granted,  the
vesting  schedule  of  such  grants  and  other  conditions  of  each  grant  is
established by Inteliant's board of directors.  The grants will be issued at the
fair market value.

11.  Segment Reporting

The Company  accounts for segment  operations  in accordance  with  Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise  and  Related  Information."  Pursuant  to SFAS No. 131 an  operating
segment is defined as "a component of an enterprise: 1) that engages in business
activities  from which it may earn  revenues  and incur  expenses,  2) for which
discrete financial  information is available,  and 3) that is regularly reviewed
by the  enterprise's  chief  operating  decision maker to make  decisions  about
allocation of resources.

Based on the types of services offered to customers,  the Company has identified
two reportable  operating  segments:  commercial staffing and IT. The commercial
staffing  segment  provides  staffing   solutions  to  companies  by  furnishing
temporary clerical, industrial, light-industrial, and professional services. The
IT segment provides staffing, outsourcing, and consulting services in IT-related
fields.

The  accounting  policies  of the  operating  segments  are the  same  as  those
described in the summary of significant accounting policies (Note 2).




                                      F-34
<PAGE>




Information  concerning  continuing  operations by operating  segment for fiscal
1999, 1998 and 1997 is as follows (in thousands):
<TABLE>
<CAPTION>

                                                                 Fiscal Year (52/53 Week)
                                                     -------------------------------------------------
                                                          1999            1998             1997
                                                     --------------- ---------------- ----------------
<S>                                                    <C>             <C>                <C>
       Revenues
          Commercial                                   $   273,626     $   252,917        $   177,551
          IT                                               100,533          78,597             31,700
          Other                                             (3,105)         (1,185)                --
                                                     --------------- ---------------- ----------------
                                                       $   371,054     $   330,329        $   209,251
                                                     =============== =============== =================
       Income from Operations
          Commercial                                   $    10,773     $    12,177        $    11,438
          IT                                                 4,868           7,901              3,183
          Other (unallocated)                               (3,077)         (3,301)            (2,271)
                                                     --------------- ---------------- ----------------
                                                       $    12,564     $    16,777        $    12,350
                                                     =============== =============== =================
       Depreciation and Amortization
          Commercial                                   $     4,046     $     2,826        $     1,195
          IT                                                 4,048           2,534                962
                                                     --------------- ---------------- ----------------
                                                       $     8,094     $     5,360        $     2,157
                                                     =============== =============== =================
       Identifiable Assets
          Commercial                                   $    98,520     $    97,339        $    81,114
          IT                                                97,055          82,552             35,356
          Other (unallocated)                                5,049           3,018              1,820
                                                     --------------- ---------------- ----------------
                                                       $   200,624     $   182,909        $   118,290
                                                     =============== =============== =================
       Additions to Long-Lived Assets(1)
          Commercial                                   $     4,837     $    31,681        $    20,482
          IT                                                17,982          27,993             19,475
                                                     --------------- --------------- -----------------
                                                       $    22,819     $    59,674        $    39,957
                                                     =============== =============== =================
</TABLE>

        (1) Includes property & equipment and intangible asset additions





                                      F-35
<PAGE>




12.  Selected Quarterly Financial Data (Unaudited)

A summary of  quarterly  financial  information  for fiscal  1999 and 1998 is as
follows (in thousands, except per share data):
<TABLE>
<CAPTION>

                                              First Quarter  Second Quarter  Third Quarter   Fourth Quarter
                                              -------------- --------------- --------------- ---------------
<S>                                             <C>            <C>             <C>            <C>
     Fiscal 1999:
     Service revenues                           $   84,043     $   92,419      $    98,725    $    95,867
     Gross profit                                   19,769         22,378           22,889         20,768
     Net income                                        343          1,603            2,539            866
     Net income per common share:
       Basic                                          0.03           0.13             0.20           0.07
       Diluted                                        0.03           0.13             0.20           0.07

     Fiscal 1998:
     Gross profit                                   15,855         19,124           20,217         20,744
     Net income                                      2,397          3,035            3,404          1,022
     Net income per common share:
       Basic                                          0.19           0.24             0.27           0.08
       Diluted                                        0.19           0.24             0.27           0.08

</TABLE>



                                      F-36
<PAGE>



                       This page left blank intentionally




                                      F-37
<PAGE>




                    Report of Independent Public Accountants

To SOS Staffing Services, Inc.:

We have audited the  accompanying  consolidated  balance  sheets of SOS Staffing
Services,  Inc. (a Utah  Corporation) and subsidiaries as of January 2, 2000 and
January  3,  1999,   and  the  related   consolidated   statements   of  income,
shareholders' equity and cash flows for each of three fiscal years in the period
ended January 2, 2000. These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  consolidated  financial  position of SOS Staffing
Services,  Inc. and  subsidiaries as of January 2, 2000 and January 3, 1999, and
the  results  of their  operations  and their  cash  flows for each of the three
fiscal years in the period ended January 2, 2000 in conformity  with  accounting
principles generally accepted in the United States.

/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP



Salt Lake City,  Utah  February  9, 2000  (except  with  respect to the  matters
discussed in note 10 as to which the date is February 22, 2000)





                                      F-38
<PAGE>





(SOS LOGO)
NASDAQ/NMS: SOSS




                                      F-39


<PAGE>


                       This Page left blank intentionally




                                      F-40
<PAGE>




Corporate Information
---------------------
Shareholder inquiries should be directed to:
Investor Relations
SOS Staffing Services, Inc.
1415 South Main Street
Salt Lake City, UT 84115
Telephone: (801) 484-4400
www.sosstaffing.com
e-mail: webmaster@sosstaffing.com

Transfer Agent and Registrar
----------------------------
Zions First National Bank, N.A.
Stock Transfer Services
1 South Main Street
Salt Lake City, Utah 84101

Independent Accountants
-----------------------
Arthur Andersen LLP
15 West South Temple
Suite 700
Salt Lake City, Utah 84101-1533

Investor Relations
------------------
Jordan Richard Assoc.
1846 South 1200 East
PO Box 52210
Salt Lake City, Utah 84111

Stock Listing
-------------
SOS Staffing  Services,  Inc.'s  common  stock is traded on the Nasdaq  National
Market tier of The Nasdaq Stock Market under the symbol: "SOSS". The stock table
abbreviation is "SOS Stffg".

Form 10-K
---------
Copies of the Company's annual report to the Securities and Exchange  Commission
on Form  10-K may be  obtained,  without  charge,  by  contacting  the  Investor
Relations Department at SOS Staffing Services, Inc.


                                      F-41
<PAGE>


Common Stock Data
-----------------
As of March 6, 2000,  the  Company  had 74  stockholders  of record.  Based upon
shareholder  mailings,  the Company  believes  that there are in excess of 4,000
shareholders of beneficial interest. The following table sets forth the high and
low sales prices of the Company's common stock for the periods indicated:

                        High        Low

1997

First Quarter         13    3/8    10
Second Quarter        15    3/4    10  7/8
Third Quarter         19    1/2    14  5/8
Fourth Quarter        24           16  1/2

1998

First Quarter         26    3/8    17  1/4
Second Quarter        27           17  1/8
Third Quarter         21    5/8    12
Fourth Quarter        14    1/2     6  1/2

1999

First Quarter         10            7
Second Quarter         8    1/8     5
Third Quarter          6  15/16     5
Fourth Quarter         7            3  3/4

On March 6, 2000, the closing price of the Company's  common stock,  as reported
on the Nasdaq National Market was 5 1/8.

Since the  Company's  initial  public  offering,  the  Company  has not paid any
dividends.  The Company  currently  intends to retain  future  earnings  for its
operations and expansion of its business and does not anticipate paying any cash
dividends in the future.

Annual Meeting
--------------
Shareholders  and other  interested  parties  are  invited  to attend the Annual
Meeting of Shareholders on May 17, 2000 at 1:30 p.m.  (Mountain  Daylight Time).
The meeting will be held at the Wyndham Hotel,  located at 215 West South Temple
in Salt Lake City, Utah.


                                      F-42
<PAGE>


Directors and Officers
----------------------
JoAnn W. Wagner
Chairman of the Board
Chief Executive Officer and President
SOS Staffing Services, Inc.

Stanley R. deWaal(1)
Director
Vice President Century Business Services
Salt Lake City, Utah

Samuel C. Freitag(1,2)
Director
Senior Managing Director
George K. Baum Merchant Banc, L.L.C.
Kansas City, Missouri

R. Thayne Robson(1,2)
Director
Professor of Management and Research & Professor of Economics,
Univ. of Utah
Salt Lake City, Utah

Randolph K. Rolf(2)
Director
Vero Beach, Florida

Thomas K. Sansom
Director
Senior Vice President
President Commercial Division

Richard J. Tripp
Director
Senior Vice President

Brad L. Stewart
Executive Vice President
Chief Financial Officer

Dennis N. Emery
Senior Vice President Finance and
Controller

John E. Schaffer
Senior Vice President
President Inteliant Corporation

W.B. Collings
Vice President, Treasurer and
Assistant Secretary

John K. Morrison
Vice President, Secretary and
General Counsel

(1)  Member, Audit Committee
(2)  Member, Compensation Committee


                                      F-43
<PAGE>




                                    PART III

         The  information  required by this Part III is omitted from this Report
in that the Company  will file with the  Securities  and  Exchange  Commission a
definitive proxy statement for the Annual Meeting of Shareholders of the Company
to be held on May 17,  2000 (the  "Proxy  Statement"),  not later  than 120 days
after January 2, 2000, and certain information  included therein is incorporated
herein by reference.  Only those  sections of the Proxy  Statement  specifically
identified  below which address the items set forth herein are  incorporated  by
reference.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
         --------------------------------------------------

         The  information  required by this Item is incorporated by reference to
the sections  entitled  "Election of Directors" and "Executive  Officers" in the
Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION
         ----------------------

         The  information  required by this Item is incorporated by reference to
the  sections  entitled  "Election  of   Directors-Director   Compensation"  and
"Executive Officers-Executive Compensation" in the Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
         --------------------------------------------------------------

         The  information  required by this Item is incorporated by reference to
the  section  entitled  "Principal  Holders of Voting  Securities"  in the Proxy
Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
         ----------------------------------------------

         The  information  required by this item is incorporated by reference to
the section entitled  "Certain  Relationships  and Related  Transactions" in the
Proxy Statement.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
         ---------------------------------------------------------------

(a)      The following documents are filed as part of this Report:

1.       Consolidated Financial Statements: The following Consolidated Financial
         Statements of the Company and Report of Independent Public Accountants,
         are  incorporated  by reference to pages 17 through 38 of the Company's
         1999 Annual Report to Shareholders:

         Consolidated Balance Sheets--As of January 2, 2000 and January 3, 1999.

         Consolidated  Statements of Income--For  the Fiscal Years Ended January
         2, 2000, January 3, 1999 and December 28, 1997.

         Consolidated  Statements of Shareholders'  Equity--For the Fiscal Years
         Ended January 2, 2000, January 3, 1999 and December 28, 1997.



                                       11
<PAGE>


         Consolidated  Statements  of Cash  Flows--For  the Fiscal  Years  Ended
         January 2, 2000, January 3, 1999, and December 28, 1997.

         Notes to Consolidated Financial Statements

         Report of Independent Public Accountants

2.       Financial Statement Schedules
         -----------------------------

         No schedules submitted

(c)      Exhibits:
         --------

    Exhibit                                            Incorporated by    Filed
      No.                          Exhibit                   Reference Herewith
--------------------------------------------------------------------------------

      3.1   Amended and Restated Articles of Incorporation of   (1)
            the Company

      3.2   Amended and Restated Bylaws of the Company          (1)



      4.3   Amended and Restated Bylaws of the Company          (1)

     10.1   SOS Staffing Services, Inc. Stock Incentive Plan    (3)

     10.2   Form of Employment Agreement entered into by the    (1)

     10.3   Form of Consulting Agreement  between the Company   (2)

     10.4   Lease Agreement between the Company and Reed F.

     10.5   Credit Agreement dated as of July 11, 1996 by and   (4)

     10.6   Note Purchase Agreement dated September 1, 1999.    (5)




                                       12
<PAGE>

<TABLE>
<CAPTION>




    Exhibit                                                               Incorporated by    Filed Herewith
      No.                               Exhibit                              Reference
-----------------------------------------------------------------------------------------------------------
<S>                                                                              <C>               <C>
     10.7        Amended Credit Agreement dated July 27, 1998 by and            (5)
                 among the Company, The First National Bank of
                 Chicago and First Security Bank, N.A., together with
                 Security Agreement and Revolving Credit Notes

     10.8        First Amendment of Employment Agreement between the            (6)

     10.9        First Amendment to Amended and Restated Credit                 (6)

     10.10       Inteliant Stock Option Plan                                                       (7)

      13         Annual Report to Shareholders for the year ended                                  (7)

      21         Subsidiaries of the Company                                                       (7)

     23.2        Consent of Independent Public Accountants                                         (7)

      27         Financial Data Schedule                                                           (7)
</TABLE>

(1)      Incorporated  by reference to the exhibits to a Registration  Statement
         on Form S-1 filed by the  Company  on May 17,  1995,  Registration  No.
         33-92268.

(2)      Incorporated  by  reference  to the  exhibits to  Amendment  No. 1 to a
         Registration Statement on Form S-1 filed on June 22, 1995, Registration
         No. 33-92268.

(3)      Incorporated  by  reference  to the  exhibits to the  Company's  Annual
         Report of Form 10-K for the year ended  December  31, 1995 filed by the
         Company on March 29, 1996.

(4)      Incorporated by reference to the exhibits to a Quarterly Report on Form
         10-Q for the quarter  ended  September 26, 1996 filed by the Company on
         November 14, 1996.

(5)      Incorporated  by reference to the exhibits to an Annual  Report on Form
         10-K for the year ended  January 3, 1999 filed by the  Company on April
         2, 1999.

(6)      Incorporated by reference to the exhibits to a Quarterly Report on Form
         8-K for the  quarter  ended July 4, 1999 filed by the Company on August
         18, 1999.

(7)      Filed herewith and attached to this Report following page 16 hereof.


(d)      Financial Statement Schedules:
         -----------------------------

         No schedules submitted.




                                       13
<PAGE>




                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereto duly authorized.

                           SOS STAFFING SERVICES, INC.

Date:    March 31, 2000          By:/s/ Brad L. Stewart
                                 -------------------------
                                 Brad L. Stewart
                                 Executive Vice President and
                                 Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following  persons on behalf of the  Registrant and
in the capacities and on the dates indicated.

Name                       Title                               Date
----                       -----                               ----

/s/ JoAnn W. Wagner        Chairman of the Board and           March 31, 2000
------------------         Chief Executive Officer
JoAnn w. Wagner            (principal accounting officer)

/s/ Brad L. Stewart        Executive Vice President and Chief  March 31, 2000
-------------------        Financial Officer
Brad L. Stewart            (principal accounting officer)

/s/ Thomas K. Sansom       Director and                        March 31, 2000
--------------------       Senior Vice President
Thomas K. Sanson

/s/ Richard J. Tripp       Director and                        March 31, 2000
--------------------       Senior Vice President
Richard J. Tripp

/s/ Stanley R. deWaal      Director                            March 31, 2000
---------------------
Stanly R. dewaal

/s/ Samuel C. Freitag      Director                            March 31, 2000
 --------------------
Samuel C. Freitag

/s/ R. Thayne Robson       Director                            March 31, 2000
--------------------
R. Thayne Robson

/s/ Randolph K. Rolf       Director                            March 31, 2000
--------------------
Randolph K. Rolf