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 December 31, 1997

                        COMMISSION FILE NUMBER: 0-24484

                             ACCUSTAFF INCORPORATED
             (Exact name of registrant as specified in its charter)

                Florida                                     59-3116655
--------------------------------------               -------------------------
(State or other jurisdiction of                          (I.R.S. Employer
 incorporation or organization)                          Identification No.)

 1 Independent Drive, Jacksonville, FL                       32202
----------------------------------------                 --------------
(Address of principal executive offices)                   (Zip Code)

      (Registrant's telephone number including area code): (904) 360-2000

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

    Common Stock, Par Value $0.01 Per Share             New York Stock Exchange
           (Title of each class)                      (Name of each exchange on
                                                           which registered)

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

     The aggregate  market value of the voting stock held by  non-affiliates  of
the  Registrant  (assuming  for  these  purposes,  but not  conceding,  that all
executive officers and directors are "affiliates" of the Registrant), based upon
the closing sale price of common stock on March 9, 1998,  as reported by the New
York Stock Exchange, was approximately $3,253,996,000.

     As of March 9, 1998, the number of shares  outstanding of the  Registrant's
common stock was 104,293,288.

     DOCUMENTS INCORPORATED BY REFERENCE. List hereunder the following documents
if incorporated  by reference and the part of the Form 10-K (e.g.,  Part I, Part
II, etc.) into which the document is incorporated:  Portions of the Registrant's
Proxy Statement for its 1998 Annual Meeting of stockholders  are incorporated by
reference in Part III.

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (ss. 229,405 of this chapter) is not contained herein, and
will not be  contained,  to the best of  registrant's  knowledge,  in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [ ]

<PAGE>

<TABLE>
<CAPTION>
Index to Form 10-K
<S>                                                                                                     <C>
Part I

Item 1. Business                                                                                          2
Item 2. Properties                                                                                       11
Item 3. Legal Proceedings                                                                                11
Item 4. Submission of Matters to a Vote of Security Holders                                              11

Part II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters                           12
Item 6.  Selected Financial Data                                                                         13
Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations           14
Item 8.  Financial Statements and Supplementary Data                                                     21
Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            42

Part III

Item 10.  Directors and Executive Officers of the Registrant                                             42
Item 11.  Executive Compensation                                                                         42
Item 12.  Security Ownership of Certain Beneficial Owners and Management                                 42
Item 13.  Certain Relationships and Related Transactions                                                 42

Part IV

Item 14.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               43

Signatures                                                                                               45

</TABLE>


                                       1
<PAGE>




                                     PART I
ITEM 1.   BUSINESS

GENERAL

     AccuStaff Incorporated  (including,  unless the context otherwise requires,
all  subsidiaries)  ("AccuStaff",  or the  "Company")  is a global  provider  of
business services, including consulting, training, outplacement, outsourcing and
strategic   staffing   services   to   businesses,   professional   and  service
organizations and governmental  agencies through a network of over 1,000 offices
including 600 Company-owned, 83 franchised and 375 associated offices throughout
the United States,  United  Kingdom,  Europe,  Canada,  and Latin  America.  The
Company's  business  is  comprised  of six  divisions,  Information  Technology,
Professional Services, Commercial,  Teleservices, Health Care and Private Label.
The following table sets forth the respective business  divisions'  contributory
revenue and gross profit:

 <TABLE>
<CAPTION>
            Business Unit                    % of Consolidated Revenues           % of Consolidated Gross Margin
---------------------------------------      ---------------------------          -------------------------------
<S>                                                     <C>                                  <C>
Information Technology                                  32.2%                                  34.1%
Professional Services                                   15.8%                                  19.4%
Commercial                                              38.9%                                  34.2%
Teleservices                                             7.1%                                   3.5%
Health Care                                              5.3%                                   6.3%
Private Label                                            0.7%                                   2.5%
</TABLE>


     The  Company's  revenues  are  primarily  from the  United  States,  as the
Company's  global  expansion began during 1997 through a series of acquisitions.
In June 1997, the Company entered the European market place with the acquisition
of an accounting and financial  services  company with annual  revenues over $60
million.  Additionally,  in  November,  1997 the Company  acquired  two European
information  technology companies with combined annual revenues of approximately
$120  million.  The  Company  believes  a  consolidation  will take place in the
European business services industry much like the historical  consolidation seen
in the U.S. marketplace.

BUSINESS STRATEGY

     Overview.  The Business Services Industry has grown rapidly in recent years
as  companies  have  utilized  business  service  firms to provide  value  added
solutions  ranging from the use of outsourcing of non-core  competencies  to the
recruitment  of a flexible  workforce  able to provide a company with the unique
skills it does not house  internally.  AccuStaff  believes  that the  increasing
pressure  companies are  experiencing  to remain  competitive and efficient will
cause  companies  to focus their  permanent  internal  staff  around  their core
competencies  while expanding their use of business  service partners to provide
strategic solutions to fulfill their needs. AccuStaff also believes the business
services  industry  is  highly  fragmented,   but  is  experiencing   increasing
consolidation largely in response to increased demand for companies to provide a
wide  range  of  comprehensive  staffing  solutions  to  regional  and  national
accounts.

     Extensive  Range  of  Services.  AccuStaff  offers  a  broad  selection  of
strategic business services  including  consulting,  outsourcing,  outplacement,
training,  H.R.  services  and  strategic  staffing.  Areas  of  focus  include:
information technology, legal, engineering, accounting and financial services as
well as office automation and support.  AccuStaff's  strategy is to increase its
revenue  and  improve  its  profitability  by  shifting  the  Company  from  its
historical  position  as largely a  commercial  staffing  company  into a global
professional business services firm by expanding its higher margin,  value-added
Information   Technology  and  Professional  Services  Divisions.   The  Company
continues to leverage  existing  business  relationships  established  under the
Commercial  Division  to enable  the  Information  Technology  and  Professional
Services Divisions to expand their customer bases.


                                       2
<PAGE>


     Migration of Business  Focus.  The continued  shift towards the Information
Technology and Professional  Services  Divisions allows faster growth and higher
profit margins due to the specialized  expertise of the professional  personnel.
Management's  strategy  is  to  strengthen  its  position  as  one  of  the  few
full-service companies offering information technology and professional services
on  a  global  scale.  AccuStaff's  principal  competitors  in  the  information
technology and professional  services areas generally consist of specialty firms
that do not offer a broad range of business services.  The Company's strategy is
to continue to increase the percentage of its revenue and gross profits from the
Information  Technology and Professional Services divisions by expanding current
specialties  into new geographic  markets,  identifying  and adding new lines of
business, and leveraging wherever possible on existing specialty strengths.  The
Company has significantly  expanded its information technology operations during
1996 and 1997 by  acquiring  18 firms with  information  technology  operations.
These acquisitions extend the geographic coverage of the information  technology
operations  with  the  capacity  to  provide  clients  with  services  in the 48
contiguous  states,  Canada, the United Kingdom and the United Arab Emirates and
certain parts of Europe and Latin America.

     Increased  Penetration  of Existing  Markets.  A key element of AccuStaff's
growth  strategy is to cluster new offices in existing and  contiguous  markets.
The Company believes that growth in the staffing  industry comes mainly from the
establishment  or acquisition of new offices,  since the market for any specific
office is generally restricted by its proximity to clients and by the geographic
radius  in which  associates  are  willing  to  travel.  Office  clustering  and
increasing  revenue at existing offices create economies of scale through common
regional  management and the spreading of  advertising,  recruiting and training
costs over a larger revenue base. In certain key markets, the Company intends to
cross-sell information technology,  professional and commercial services through
market development managers.

         Strategic  Acquisitions.  The Company  has  supported  its  strategy of
service  diversification and geographic expansion with an aggressive acquisition
program and, to a lesser extent, with newly-opened branch offices. A key element
of the  Company's  expansion  strategy is to acquire  existing  businesses  with
strong  management,  profitable  operating  results  and  recognized  local  and
regional presence.

         Since its  formation  in 1992,  AccuStaff  has  pursued  an  aggressive
acquisition program, having acquired numerous staffing companies, highlighted by
the merger  with Career  Horizons,  Inc. in  November  1996.  AccuStaff  and its
subsidiaries  have acquired 83 staffing  companies  since 1993,  including 39 in
fiscal 1996, and 28 in fiscal 1997. The Company has found  acquisitions  to be a
valuable  vehicle in  increasing  the  Company's  breadth of service  solutions,
increasing its market share, entering new markets and achieving critical mass in
desired  locations.  A key  element of the  Company's  expansion  strategy is to
continue  to  acquire  existing   businesses  with  profitable   operations  and
recognized  local  and  regional  presence,  with a view  toward  expanding  the
Company's geographic service base and diversifying and strengthening its service
mix. Acquisition criteria also include a desirable market location,  significant
market  share,  new or expanded  specialties  that can be added to the Company's
existing lines of business,  efficient operating systems and existing management
that  will  fit  well   with  the   Company's   decentralized,   entrepreneurial
environment.

     The Company seeks acquisitions that will expand the geographic scope of its
Information   Technology,   Professional  Services,  and  Commercial  divisions,
strengthen its professional services and introduce new specialty services to its
business  mix.  Management  believes  that  AccuStaff's  strong  reputation  and
decentralized,  team-oriented management style facilitate its efforts to acquire
independent  staffing businesses seeking an alliance with a national company. In
determining  whether to proceed  with an  acquisition,  the Company  evaluates a
number of factors,  including:  the historical and projected  financial results;
the purchase price and expected impact on the Company's  earnings per share; the
expansion of the Company's  geographic  market  share;  the  enhancement  to the
Company's  breadth of services;  the  experience,  reputation and personality of
management; and any expected synergies with the Company's existing operations.


                                       3
<PAGE>


         The Company has established a  multi-disciplined  team  responsible for
coordinating   the  integration  of  acquired   businesses  into  the  Company's
operation.  Management  believes that acquired businesses can be integrated into
the Company with low incremental cost and will enable the Company to continue to
spread fixed costs over a larger revenue base. The Company will transition, when
in accordance with company strategy, the acquired companies to operate under the
brand name of the respective division or operating unit within the division.

     During 1997 the  Company's  acquisition  strategy  was  largely  focused on
information  technology and professional services where it acquired 20 companies
having   revenues   of   $340   million.   These   sectors,   domestically   and
internationally,  will  be the  Company's  focus  in the  immediate  future.  In
addition in 1997,  the Company  began  actively  pursuing the  European  market,
completing  3  acquisitions  during  the last  half of the  year,  with  further
acquisitions  anticipated in the future. In December the Company acquired Boston
based Office Specialists,  Inc. giving it a dominant position in high end office
automation and desk top publishing in New England and other key markets.

BUSINESS DIVISIONS

         Information Technology Division.

     Market Background.  The need for information  technology services continues
to expand as companies and governmental  agencies  continue to require increased
performance  from  their  information   management  systems.   The  reliance  on
information  systems  to  provide  companies  with a  competitive  advantage  in
operating  their  business has prompted an  exponential  demand for  information
technology services. The demand is driven by rapid technology shifts,  increased
cost pressures,  skill shortages,  and benefits from outsourcing the information
services  to allow a company  to focus on its core  competencies.  These  market
influences  are  expected  to remain  long term in nature  and to  increase  the
reliance upon information  technology services companies to recruit,  train, and
provide  personnel and technology  solutions as companies  increase their demand
for information technology needs.

     The rapid technology shifts include demand for migration from main frame to
client-server systems, utilization of internet/intranet applications, Enterprise
Resource  Planning (ERP),  data  warehousing,  help-desk  solutions,  electronic
commerce,  network systems, supply chain management,  Year 2000 compliance,  and
other  system wide  solutions.  The supply of qualified  information  technology
professionals  continues  to lag the global  demand for  information  technology
services and it is increasingly  difficult for corporate MIS departments to keep
internal staff current with the latest  technologies and skills. This results in
an increased  dependence on outside consulting and contract technology services.
This shortfall of professionals  has resulted in skill  shortages,  primarily in
the high end solutions  sector of the market,  which has resulted in an increase
in the costs of obtaining personnel who offer these unique skill sets.

     Division Operations.  The Information  Technology Division,  which operates
primarily  under the name modis and accounted for 32.2% of the Company's  fiscal
1997 revenue,  provides a full range of information  technology services through
two business  units:  modis  Solutions and modis  Consulting.  modis  Solutions'
services  include  enterprise  resource  planning (ERP)  implementation,  object
oriented  methodology,   web-enabled  services  life  cycle  development,   data
warehousing,  process  reengineering,  mainframe  to  client-server  transition,
client  service  application  development,   Year  2000  solutions,   management
consulting,  systems  integration,  and other  high-end IT practices.  The modis
Consulting unit provides  application  development services and brings in needed
technical  and project  management  processes  to help  businesses  achieve more
predictable   project   execution  and  develop  higher  quality   systems  more
efficiently and  effectively.  Application  development  teams include  software
application   developers,   system   analysts,   database   analysts,   software
specialists,    documentation    specialists,    project    managers,    systems
administrators, and software engineers.

     modis  Solutions  has,  or will soon  finalize,  major  alliances  with the
following ERP systems developers:  SAP (logo partner status),  PeopleSoft,  BAAN
and Oracle. modis also provides software  implementation for customers of Lawson
Software, J.D. Edwards, and American Software.


                                       4
<PAGE>



     Division Strategy. modis will pursue the following strategies in an attempt
to grow market share and further improve operating results.

          Leverage  Recruiting Power. With a base of over 100 offices worldwide,
     modis employs over 1,000 professional technical recruiters.  The resumes of
     nearly 1 million IT  professionals  are housed in the division's  corporate
     databases.  This  recruiting  power  gives  modis the  ability  to  compete
     effectively  for  relatively  scarce IT talent.  To support the  recruiting
     effort,  modis offers benefit  programs which include  medical,  dental and
     401(k)  plans.  The division  also  recruits  internationally  and provides
     sponsorships for H1B visas for qualified candidates.

     Emphasis on Specialty Solutions.  modis will enhance value to customers and
     improve operating margins by focusing on specialized  solutions such as ERP
     implementation,  application  development,  process reengineering and data
     warehousing.  It is  anticipated  that nearly 20% of modis' revenue in 1998
     will come from ERP software implementation services.

     Cross-Selling Between Offices. modis will drive greater volumes of high end
     specialty   solution   services  by  utilizing   its  100+  branches  as  a
     distribution  channel for  cross-selling.  This will positively  effect the
     revenue  growth and operating  margins of branches through the marketing of
     high hourly bill rates, and high value services.

     Upgrade Consultant Skills.  modis intends to continually upgrade the skills
     and  market  value  of its  consultants  by  providing  advanced  specialty
     training  in such areas as ERP  software  implementation,  object  oriented
     technologies and internet/intranet  application development.  This will aid
     in  consultant  retention  as well as leading to an upward  trend in hourly
     bill rates.

     International  Expansion.  In March 1997, the Company  entered the Canadian
market  with  the  acquisition  of  Computer  Action  and  now  operates  in two
provinces.  In November  1997,  the  Company  expanded  into the United  Kingdom
through the acquisitions of Hunterskil  Howard and IT Link. These companies have
offices in the United Kingdom as well as Western  Europe,  adding  approximately
$120 million in revenue.

                                       5
<PAGE>


         The Company  completed the following  acquisitions  in the  information
technology division for the year ended 1997:

<TABLE>
<CAPTION>
                                                                   FISCAL 1996
                                                 ACQUISITION        REVENUES
                                                     DATE         (IN MILLIONS)
                                                 ------------------------------
<S>                                                  <C>                <C>
Executive's Monitor, Inc.                            1/97               $12.7
Consultants in Computer Software, Inc.               1/97                13.2
Preferred Consulting, Inc.                           1/97                 9.0
Lenco Pro                                            1/97                16.1
Computer Action, Inc.                                3/97                10.1
Custom Software Services, Inc.                       4/97                 4.1
Wasser, Inc.                                         4/97                13.5
Computer Systems Development of America, Inc.        5/97                22.0
Technical Software Solutions, Inc.                   6/97                 6.0
Realtime Consulting, Inc.                           10/97                 4.3
Hunterskil Howard, Ltd.                             11/97               106.2
I.T. Link, Ltd.                                     11/97                11.8
</TABLE>

         Professional Services Division.

     The  Professional  Services  Division,  which  accounted  for  15.8% of the
Company's  fiscal  1997  revenue,  provides  consulting,  outsourcing  and  H.R.
solutions  for  legal,  technical,   accounting,   scientific  and  outplacement
functions.  The need for professional services,  specifically legal, accounting,
scientific,  and technical  solutions,  has increased rapidly in response to the
changing  shift  in the  respective  industries  in  which  these  professionals
operate.  The  focus of  large  corporations  has  migrated  to a more  flexible
professional  workforce which employs  personnel on a skill specific basis. This
shift has increased the reliance  upon business  service  partners to be able to
recruit and provide solutions to these companies on a skill specific basis.

     The Legal  unit,  which  operates  under the  Special  Counsel  brand name,
provides  legal  support,   H.R.  services  and  solutions  to  corporate  legal
departments  and law firms.  These services  include the provision of attorneys,
paralegals and legal  secretaries to corporate legal departments and private law
firms for litigation  support and other needs. The Company believes it is one of
the leading providers of staffing services to the legal services  industry.  The
Company primarily competes with local firms as this market is highly fragmented.
The Company entered the legal industry in 1995 primarily through the acquisition
of Special  Counsel,  Inc.,  a New York City  operation  with  approximately  $7
million  in  revenue.  Currently,  the  legal  unit  has 45  branches  operating
primarily in the United States.

     The Company's  Technical and Engineering unit,  Entege,  provides drafters,
designers and engineers in the mechanical and electrical  engineering  fields as
well as  personnel to the  chemical,  plastics  and other  industries  requiring
chemists,  laboratory  technicians and other  professionals.  The technical unit
also  provides  high level  engineering  and drafting  services,  including  the
outsourcing  of specialized  design  services such as  architectural  design and
drafting,  tool designs and computer-aided design (CAD) services.  The technical
unit operates 23 branches.

     The  Accounting  unit,  which  operates   primarily  under  the  Accounting
Principals brand name in the United States and the Badenoch and Clark brand name
throughout  the  United  Kingdom,   provides   professionals  in  finance,  data
processing and accounting,  including  auditors,  controllers,  CPAs,  financial
analysts, loan processors and tax accountants. Through providing these services,
the Company  offers  customers a reliable  and  economic  resource in  providing
financial  professionals  in periods of  uncertain  or uneven work loads such as
special projects or unforeseen  emergencies.  The Company entered the accounting
services  industry  in  1995  through  the  acquisition  of  a  small,  regional
accounting  firm and has since  increased  the division to encompass 40 branches
globally in 1997.


                                       6
<PAGE>



     The Scientific unit,  Scientific  Staffing,  provides  trained  scientists,
laboratory   technicians   and  chemists  to  Fortune  1000   companies  in  the
pharmaceutical and consumer products industries.  This unit was acquired in 1996
and currently  includes 17 branch offices  throughout the United States. For the
year ended 1997, Scientific Staffing opened 10 branch offices more than doubling
its branch network.

     The Leadership Resource Consulting unit,  Manchester,  offers outplacement,
career development,  leadership development, change management services and H.R.
consulting.  This unit  started  with an  acquisition  in  January  1997 and was
further  enhanced  through the acquisition of  Schwab-Carrese  and Associates in
October 1997 for a total of 26 branch  offices.  Additionally,  Manchester  is a
lead partner in a European venture which was formed to facilitate  international
assignments.

     During 1997, the Company began its initiative  into the specialty  training
business by branding its new training business unit MindSharp  Learning Centers,
Inc.  The introduction of MindSharp offers another  professional  service to its
existing  clients.  Additionally the Company  anticipates the training unit will
benefit the IT division,  modis, by ensuring that modis consultants maintain and
further enhance their technical skills which will allow the Company to re-deploy
existing  consultants  into higher  margin  practice  areas.  Additionally,  the
Company  believes  that  training and  certification  will provide a competitive
advantage in recruiting qualified IT professionals.

         The Company  completed the following  acquisitions in the  Professional
Services division during 1997:

<TABLE>
<CAPTION>
                                                                                       FISCAL 1996
                                                                     ACQUISITION        REVENUES
                                                                         DATE         (IN MILLIONS)
                                                                     --------------   --------------
<S>                                                                  <C>              <C>
Legal Information Technology, Inc.                                       1/97                  $10.4
Manchester, Inc.                                                         1/97                   30.2
Amicus Staffing, Inc.                                                    4/97                    4.9
Parker and Lynch, Inc.                                                   4/97                    4.3
Accounting Principals, Inc.                                              4/97                    6.1
Keystone Consulting Group, Inc.                                          4/97                    5.2
Badenoch and Clark, Ltd.                                                 6/97                   42.7
Schwab-Carrese and Associates, Inc.                                     10/97                    5.0
</TABLE>

         Commercial Division

     The Commercial Division, which operates primarily under the AccuStaff brand
name and  accounted for 38.9% of the  Company's  fiscal 1997  revenue,  provides
personnel, H.R. and outsourcing solutions to clients for office services and, to
a lesser extent,  light  industrial  needs. The Strategix,  H.R.  Management and
E-Staff  Brands  provide  primarily  H.R.  solutions.  The office  services unit
supplies a wide variety of  secretarial,  clerical,  word  processing and office
automation  personnel to perform skilled tasks,  as well as reception,  copying,
filing and other miscellaneous  office services.  Full turn-key  outsourcing and
H.R.  solutions  are also  provided by this  group.  The light  industrial  unit
supplies   personnel  to  perform  functions  such  as  unskilled  assembly  and
packaging,   light-duty   warehouse  work,   inventory  and  other   light-duty,
labor-intensive  tasks and provides personnel for the assembly of electronic and
other components.  This unit also supplies personnel to assist with banquets and
catering functions,  hospitality and other  labor-intensive  special engagements
such as sporting or political events and meetings and conventions.


                                       7
<PAGE>


         The Company acquired the following companies in the Commercial Division
during 1997:



<TABLE>
<CAPTION>
                                                                                       FISCAL 1996
                                                                     ACQUISITION        REVENUES
                                                                         DATE         (IN MILLIONS)
                                                                     ---------------  ----------------
<S>                                                                  <C>              <C>
CGS Services, Inc.                                                       1/97                  $10.1
Placers, Inc.                                                            1/97                   35.1
Esprit Staffing Services, Inc.                                           2/97                    5.0
Firstaff,Inc.                                                            3/97                   15.8
Staffing Resources, Inc.                                                 4/97                    6.5
Office Specialists, Inc.                                                11/97                  165.0
</TABLE>

          Teleservices Division

     The Teleservices division, which accounted for 7.1% of the Company's fiscal
1997 revenue,  primarily provides temporary staffing to MATRIXX Marketing,  Inc.
(MATRIXX), a leading provider of telemarketing services, formerly AT&T Solutions
Customer  Care,  Inc.  MATRIXX  requires  trained  personnel  for customer  care
services and inbound and outbound telemarketing services. These services involve
responding  to incoming  calls for employee  benefits  administration,  customer
service and other needs as well as initiating  outgoing  telemarketing  programs
for AT&T related  businesses  and others.  The Company  acquired  the  following
company in the Teleservices division (which provides telecommunications services
to clients other than MATRIXX) in 1997:

<TABLE>
<S>                                                                      <C>                   <C>
Training Delivery Systems, Inc.                                          5/97                 $45.3
</TABLE>

          Health Care Division

     The Health Care division,  which operates under the Health Force brand name
and which  accounted  for 5.3% of the Company's  fiscal 1997  revenue,  provides
personnel  primarily to individuals  requiring home health care and, to a lesser
extent, to health care facilities.  The division provides  certified home health
and personal care aides,  companions,  health care technicians,  licensed nurses
and therapists.

          Private Label Division

     The Private  Label  division,  operates  under two brand  names:  Temporary
Management Resources and Resource Funding Group. The companies,  which accounted
for 0.7% of the Company's fiscal 1997 revenue, provide financial and back office
support services to independently  owned temporary  personnel firms ("Associated
Offices").  These services  include billing and payroll services and preparation
of payroll tax filings and management  reports.  In addition,  the Private Label
division  advances the Associated  Offices an amount equal to their gross profit
after deduction of the Company's fees and expenses.

                                       8
<PAGE>


EMPLOYEES

     Full-Time  Employees  (FTE's).  At  March 9,  1998,  the  Company  employed
approximately 5,000 staff employees on a full-time  equivalent basis.  Full-time
employees are covered by life and  disability  insurance and receive  health and
other benefits. Salaried and hourly consultants in modis (information technology
division) and primarily  hourly employees in other divisions are not included in
the FTE count above.  During  fiscal  1997,  the Company  employed  over 300,000
billable consultants and associates, some of which have certain benefits such as
life, disability, health, etc.

COMPETITION

     The business services industry is fragmented and highly  competitive,  with
limited  barriers to entry. A large percentage of temporary  staffing  companies
are local operations with fewer than five offices.  Within local markets,  these
firms  actively  compete  with the  Company for  business,  and in most of these
markets no single company has a dominant  share of the market.  The Company also
competes  with larger  full-service  and  specialized  competitors  in national,
regional and local markets.  The principal national competitors of the Company's
Commercial,  Professional  Services and Health Care divisions  include Manpower,
Inc., Kelly Services,  Inc., The Olsten  Corporation,  Interim  Services,  Inc.,
Robert Half  International,  Adecco,  Inc. and CDI Corp. The principal  national
competitors of the Company's Information Technology division include Keane Inc.,
Renaissance  Worldwide,  Metamor  Worldwide,  Inc. and, to a lesser extent,  the
consulting  divisions of IBM and the "Big Six" accounting  firms.  Some of these
national competitors have greater marketing,  financial and other resources than
the  Company.  The  Company  believes  that the primary  competitive  factors in
obtaining  and  retaining  clients are the number and  location  of offices,  an
understanding  of clients'  specific  job  requirements,  the ability to provide
personnel in a timely manner,  the monitoring of quality of job  performance and
the price of services.  The primary  competitive  factors in obtaining qualified
candidates for employment  assignments  are quality and quantity of assignments,
training,  wages and  benefits.  Management  believes  that  AccuStaff is highly
competitive in these areas.

                                       9
<PAGE>



GOVERNMENT REGULATIONS

         The Company's Health Care division which operates through the Company's
Career  subsidiary  is subject to  extensive  federal,  state and local laws and
government regulations, including licensing requirements,  periodic examinations
by  government  agencies  and  federal  and  state  anti-fraud,  anti-abuse  and
anti-kickback statutes and regulations. Healthcare providers are also subject to
extensive  documentation   requirements  of  government  agencies  and  industry
participants,  such as insurance  companies  and managed care  companies.  These
regulations  can affect  the  ability  of the  Company  to collect  its fees for
services  provided.  Of  the  Health  Care  division's  sales  in  fiscal  1997,
approximately  36.7%  were  attributable  to  Medicaid  services  and 7.5%  were
attributable to Medicare services. The extent and type of government support for
healthcare services, as well as the extent and type of health insurance benefits
that  employers  are  required  to provide  employees,  have been the subject of
intense  scrutiny  and  debate in recent  years at both the  national  and state
levels.  Changes in government support of healthcare services or the regulations
governing such services,  including  regulations  governing the methods by which
services are delivered, the prices for services or reimbursements of fees, could
all have a  significant,  and  potentially  adverse,  effect on the Company.  In
addition,  as part of  healthcare  reform,  recent  federal  and  certain  state
legislative  proposals  have  included  provisions  extending  health  insurance
benefits  to  temporary  employees  who  currently  are not  provided  with such
benefits. The Company cannot currently predict what, if any, governmental action
will be taken.

         In many states in which the Health Care  division  operates,  Career is
required to be licensed in order to  establish  and operate a home care  service
agency. In approximately 21 states and the District of Columbia, home healthcare
providers must initially  receive  certificate of need ("CON") approval from the
state, in addition to complying with licensure requirements. In some states, the
process of obtaining a CON may be costly and time consuming,  and several states
currently are not granting  CONs.  CON and licensure laws can restrict the types
of services  that a company  may  provide.  Additionally,  such laws may limit a
company's ability to establish or expand its operations within a state.  Failure
to obtain any such approvals may have an adverse effect on such operations.

         New York State requires an approval by the Public Health Counsel of the
New York State Department of Health ("NYPHC") for any change in the "controlling
person"  of an  operator  of a licensed  home care  services  agency  ("LHCSA").
"Controlling  person" means a person or entity which  directly or indirectly has
the ability to direct the actions,  management or policies of an entity  whether
through the  ownership of voting  securities  or voting  rights,  by contract or
otherwise.  Control of an entity is presumed to exist if any person  directly or
indirectly  owns,  controls or holds the power to vote 10% or more of the voting
securities or voting  rights of such entity.  A person or entity which becomes a
controlling person of an operator of an LHCSA must file an application for NYPHC
approval within 30 days of becoming a controlling person, and pending a decision
by the NYPHC,  such person or entity may not  exercise  control  over the LHCSA.
Such  person or entity  must divest  itself of the  controlling  interest of the
operator  within 30 days if the NYPHC denies such  approval.  The Company has 13
offices in New York State which are LHCSA's.

         The Company is required by the Federal Trade Commission and by the laws
in a number of states to prepare,  update and  deliver an  offering  circular to
potential  franchisees.  In addition,  certain states require that such offering
circulars be registered with the state. The Company's franchise programs are, or
will be,  registered in those  jurisdictions  in which the Company's  activities
require registration.

         Outside of the United States and Canada the temporary staffing industry
is closely regulated. These regulations differ among countries but generally may
regulate:  (i) the relationship between the Company and its temporary employees;
(ii)  licensing  and  reporting  requirements;  and  (iii)  types of  operations
permitted.

                                       10
<PAGE>


TRADEMARKS

     The Company has applications pending before the Patent and Trademark Office
for federal  registration of the service marks  ACCUSTAFF,  modis  INCORPORATED,
MINDSHARP LEARNING CENTERS,  INC., SCIENTIFIC STAFFING,  INC., E-STAFF, INC. and
the  ACCUSTAFF  and modis logos for its services  generally,  ACCUDRIVE  for its
proprietary  software and  management  information  systems and ACCUTECH for its
technical services.  Subsidiaries of AccuStaff hold federally registered service
marks for ACCOUNTING  PRINCIPALS,  SPECIAL COUNSEL,  INC.  MANCHESTER  PARTNERS,
TEMPFORCE, FLEXI-FORCE, THE EXPERTS, the Experts hourglass logo, the Tempo logo,
and the Temporaries Inc. logo.  Subsidiaries  also have common law claims to the
trade names EXCEL TEMPORARY  SERVICES,  INC., EXCEL TRAINING SERVICES,  INC. and
EXCEL TECHNICAL SERVICES, INC.

ITEM 2.  PROPERTIES

         The  Company  owns no material  real  estate.  It leases its  corporate
headquarters and Northeast  Operations Center as well as its branch offices. The
branch office leases  generally  run for three to five-year  terms.  The Company
believes that its facilities  are generally  adequate for its needs and does not
anticipate   difficulty   replacing  such  facilities  or  locating   additional
facilities, if needed.

ITEM 3.  LEGAL PROCEEDINGS

         The Company,  in the ordinary  course of its business,  is from time to
time  threatened  with or named as a defendant  in various  lawsuits,  including
discrimination  and harassment and other similar claims.  The Company  maintains
insurance in such amounts and with such coverage and  deductibles  as management
believes  are  reasonable  and  prudent.  The  principal  risks that the Company
insures  against are workers'  compensation,  personal  injury,  bodily  injury,
property  damage,  professional  malpractice,  errors and omissions and fidelity
losses.

         There is no pending  litigation which the Company believes is likely to
have a material adverse effect on the Company.

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 twelve months ended December 31, 1997.



                                       11
<PAGE>




                                     PART II

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

                          PRICE RANGE OF COMMON STOCK

The  following  table sets forth the  reported  high and low sales prices of the
Common  Stock for the  quarters  indicated  as  reported  on the New York  Stock
Exchange and the Nasdaq  National  Market,  as adjusted to reflect the Company's
three-for-one stock split, effective March 27, 1996. The Common Stock was traded
on the  Nasdaq  National  Market  until  November  15,  1996,  at which  time it
commenced trading on the New York Stock Exchange under the symbol "ASI".

<TABLE>
<CAPTION>
FISCAL YEAR 1996                                                                       HIGH                LOW
         <S>                                                                           <C>                 <C>
         First Quarter........................................................           $26.50              $11.58

         Second Quarter.......................................................            38.00               22.75

         Third Quarter........................................................            31.75               21.00

         Fourth Quarter.......................................................            28.13               17.88

FISCAL YEAR 1997

         First Quarter........................................................           $25.25              $16.13

         Second Quarter.......................................................            26.63               15.75

         Third Quarter........................................................            31.50               23.31

         Fourth Quarter.......................................................            31.88               21.75
</TABLE>

         As of March 9, 1998, there were  approximately 858 holders of record of
the Company's Common Stock.

         No cash  dividend  or  other  cash  distribution  with  respect  to the
Company's Common Stock has ever been paid by the Company.  The Company currently
intends to retain any earnings to provide for the operation and expansion of its
business and does not anticipate  paying any cash  dividends in the  foreseeable
future.  The Company's  revolving credit facility  prohibits the payment of cash
dividends without the lender's consent.

     In December 1997, the Company  issued  2,919,073  shares of common stock to
the former shareholders of Office Specialists, Inc. in exchange for all of their
shares of Office  Specialists,  Inc.  This  issuance of  securities  was made in
reliance on the exemption from  registration  provided under Section 4(2) of the
Securities  Act of 1933 as a  transaction  by an issuer not  involving  a public
offering.  All of the securities  were acquired by the recipients for investment
and with no view  toward the public  resale or  distribution  of the  securities
without registration. There was not any public solicitation and the issued stock
certificates bear restrictive legends.
                                       12
<PAGE>
 ITEM 6. SELECTED FINANCIAL DATA

<TABLE>
<CAPTION>
                                                                   Fiscal Years Ended
                                       ------------------------------------------------------------------------------------
                                          DEC. 31,       Dec. 31,         Dec. 31,        Jan. 1,        Jan. 2,
(in thousands, except per share amounts)  1997 (1)       1996 (1)         1995 (1)       1995 (1)       1994 (1)
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>            <C>             <C>            <C>            <C>
Statement of Income Data:
Revenue                                $  2,424,826   $  1,611,447    $    862,968   $    621,033   $    497,795
Cost of Revenue                           1,811,098      1,234,754         670,589        482,801        389,817
                                       ------------------------------------------------------------------------------------
Gross Profit                                613,728        376,693         192,379        138,232        107,978
Operating expenses                          422,164        274,806         148,201        112,479         95,774
Merger related costs                          5,000         28,502               -              -              -
                                       ------------------------------------------------------------------------------------
Income from operations                      186,564         73,385          44,178         25,753         12,204
Other income, (expense), net                      -              -             146             46            135
Interest expense, net                       (18,989)        (3,403)         (2,764)        (3,042)        (6,380)
                                       ------------------------------------------------------------------------------------
Income before taxes                         167,575         69,982          41,560         22,757          5,959
Provision for income taxes                   65,542         38,772          12,988          7,635          2,138
                                       ------------------------------------------------------------------------------------
Income before extraordinary item            102,033         31,210          28,572         15,122          3,821
Extraordinary item                                -              -               -         (1,403)             -
                                       ------------------------------------------------------------------------------------
Net income                                  102,033         31,210          28,572         13,719          3,821
                                       ====================================================================================
Basic net income per common share      $       1.00   $       0.34    $       0.46   $       0.28   $       0.09
                                       ====================================================================================
Diluted net income per common share    $       0.93   $       0.33    $       0.42   $       0.26   $       0.08
                                       ====================================================================================
Pro forma net income (2)                    102,033         34,852          25,428         12,127          3,821
                                       ====================================================================================
Pro forma basic net income per
   common share                        $       1.00   $       0.38    $       0.41   $       0.25   $       0.09
                                       ====================================================================================
Pro forma diluted net income per
   common share                        $       0.93   $       0.36    $       0.38   $       0.23   $       0.08
                                       ====================================================================================
Basic average common shares
   outstanding                              101,914         90,582          62,415         48,132         36,549
Diluted average common                 ====================================================================================
   shares outstanding (3)                   113,109        103,680          69,328         51,919         38,669
                                       ====================================================================================
Division Revenue Data:
Commercial                             $    944,185   $    792,700    $    556,374   $    441,027   $    376,070
Information Technology                      780,634        400,408          61,424         17,600          2,102
Professional Services                       383,490        179,608          29,065         18,712          9,156
Teleservices                                171,351        112,375          99,470         39,598         19,900
Health Care                                 129,461        112,044         104,160         92,392         81,345
Private Label                                15,705         14,312          12,475         11,704          9,222
                                       ------------------------------------------------------------------------------------
Total revenue                          $  2,424,826   $  1,611,447    $    862,968   $    621,033   $    497,795
                                       ====================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                          As of
                                       ------------------------------------------------------------------------------------
                                           DEC. 31,       Dec. 31,        Dec. 31,        Jan. 1,        Jan. 2,
                                           1997 (1)       1996 (1)        1995 (1)       1995 (1)       1994 (1)
                                       ====================================================================================
<S>                                    <C>            <C>             <C>            <C>            <C>
Balance Sheet data:
Working capital                        $    325,388   $    280,246    $    175,944   $     91,177   $     27,593
Total assets                              1,479,516        929,215         380,160        171,811        133,177
Long term debt                              458,870        106,877          99,612         28,186         66,842
Stockholders' equity                        812,842        669,779         195,085         92,142         15,808
</TABLE>

(1)  Includes the financial  information of the Company for the respective years
     noted  above  restated to account for any  material  business  combinations
     accounted for under the pooling-of-interests method of accounting.
(2)  Pro forma net  income  is the  Company's  historical  net  income  less the
     approximate  federal and state income taxes that would have been  incurred,
     if the companies with which the Company merged had been subject to tax as a
     C Corporation.
(3)  Diluted  average  common shares  outstanding  have been computed  using the
     treasury  stock  method  and the as-if  converted  method  for  convertible
     securities  which  includes   dilutive  common  stock   equivalents  as  if
     outstanding during the respective periods.

                                       13
<PAGE>




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


   The  following  discussion  should be read in  connection  with the Company's
Consolidated  Financial  Statements  and  the  related  notes  thereto  included
elsewhere  herein.  The  Company's  fiscal  year ended on the Sunday  closest to
December  31 for the years  which  preceded  fiscal  year 1996 when the  Company
changed its fiscal year to comply with the calendar year.

INTRODUCTION

     The Company has acquired numerous staffing companies since its formation in
1992.  Each  of  these   acquisitions,   other  than  the  acquisitions  of  PTA
International,  The McKinley Group, Inc., Career Horizons, Inc., HJM Consulting,
Inc.,  Staffware,  Inc.,  Legal  Support  Personnel,  Inc.,  Schwab-Carrese and
Associates,  Inc., and Office  Specialists,  Inc. which were accounted for under
the pooling-of-interests  method of accounting, has been accounted for using the
purchase  method of  accounting.  The results of the  operations  of each of the
companies acquired through December 31, 1997, which were accounted for under the
purchase  method of accounting,  have been included in the following  discussion
since the date of acquisition.  The Company's  historical  financial  statements
have been restated to reflect the results of operations  and financial  position
of  the  companies  accounted  for  under  the  pooling-of-interests  method  of
accounting,  except for  Staffware,  Inc.,  Legal Support  Personnel,  Inc., and
Schwab  Carrese  and  Associates,  Inc.  due to the  immaterial  effect on prior
periods.  In the future, the Company's revenue and expenses may be significantly
affected by the number and timing of the opening or  acquisition  of  additional
offices.   The   timing   of  such   expansion   activities   can  also   affect
period-to-period comparisons.

     Accustaff offers a broad range of staffing and outsourcing services through
six divisions;  the Information  Technology  division,  which operates primarily
under the name of modis, provides computer consulting services; the Professional
Services  division,  which provides personnel who perform  specialized  services
such as accounting,  legal,  technical,  outplacement  and scientific  under the
following names: Accounting Principals,  Special Counsel, Entege, Manchester and
Scientific  Staffing,  respectively;  the  Commercial  division,  which operates
primarily under the name of Accustaff,  provides  clerical and light  industrial
staffing  services;  the  Teleservices  division,  which provides  personnel for
customer  care and inbound and  outbound  telemarketing  services,  primarily to
MATRIXX  Marketing,  Inc.;  the Health Care division,  which operates  primarily
under the name of Health Force, provides a wide range of personnel, primarily to
individuals  requiring home health care and, to a lesser extent,  to health care
facilities;  and the Private Label division,  which provides  Associated Offices
with a wide range of back office and financial support services. The Information
Technology and Professional  Services divisions generally enjoy higher gross and
operating margins than the Company's Commercial and Teleservices divisions.  The
Teleservices  division is characterized  by higher volumes,  lower gross margins
and lower operating expenses than the Company's other divisions.

     Temporary  personnel placed by AccuStaff are generally  Company  employees.
AccuStaff  is  responsible  for  employee  related  expenses  for its  temporary
employees, including workers' compensation, unemployment compensation insurance,
Medicare and Social Security taxes and general payroll expenses. Generally, the
Company does not provide  health,  dental,  disability or life  insurance to its
temporary  employees  except in certain  circumstances.  Generally,  the Company
bills its clients for the hourly wages paid to the  temporary  employees  placed
with  the  client,  plus a  negotiated  markup.  Depending  on the  arrangements
negotiated  with  the  client,  the  markup  may be fixed  or may  allow  direct
pass-throughs  of  increases  in  expenses  such  as  unemployment  compensation
insurance  and  worker's  compensation  insurance.  Because the Company pays the
majority of its temporary employees only for the hours they actually work, wages
for the  Company's  temporary  personnel  are a variable  cost that  increase or
decrease in proportion to revenue.

                                       14
<PAGE>


RESULTS OF OPERATIONS

   The  following  table sets forth the  percentage of revenues  represented  by
certain  items  in the  Company's  consolidated  statements  of  income  for the
indicated periods.

<TABLE>
<CAPTION>
                                                                                       Fiscal Years Ended
                                                                           ------------------------------------------
                                                                               Dec. 31,       Dec. 31,       Dec. 31,
                                                                                1997           1996           1995
---------------------------------------------------------------------------------------------------------------------
<S>                                                                        <C>                <C>            <C>
Revenue:
   Commercial division                                                          38.9%            49.2%         64.5%
   Information Technology division                                              32.2             24.8           7.1
   Professional Services division                                               15.8             11.1           3.3
   Teleservices division                                                         7.1              7.0          11.5
   Healthcare division                                                           5.3              7.0          12.1
   Private Label division                                                        0.7              0.9           1.5
                                                                           ------------------------------------------
      Total                                                                    100.0            100.0         100.0
Cost of revenue                                                                 74.7             76.6          77.7
                                                                           ------------------------------------------
Gross profit                                                                    25.3             23.4          22.3
Operating expenses                                                              17.6             18.8          17.2
                                                                           ------------------------------------------
Income from operations                                                           7.7              4.6           5.1
Other expense                                                                    0.8              0.3           0.3
                                                                           ------------------------------------------
Income before provision for income taxes                                         6.9              4.3           4.8
Provision for income taxes                                                       2.7              2.4           1.5
                                                                           ------------------------------------------
Net income                                                                       4.2%             1.9%          3.3%
                                                                           ------------------------------------------
</TABLE>

   The  following  table sets forth the gross profit as a percentage  of revenue
("gross  margin" or "margin")  for each of the  Company's  six divisions for the
indicated periods.


                                       Fiscal Years Ended
                            ------------------------------------------
                            DEC. 31,       Dec. 31,       Dec. 31,
                              1997           1996           1995
----------------------------------------------------------------------

Commercial                    22.2%          20.6%          19.6%
Information Technology        26.8           26.9           31.9
Professional Services         31.1           25.2           28.7
Teleservices                  12.4           10.0           10.0
Healthcare                    29.8           30.6           31.6
Private Label                100.0          100.0          100.0


                                       15
<PAGE>


FISCAL 1997 COMPARED TO FISCAL 1996

   Revenue.  Revenue increased $813.4 million,  or 50.5%, to $2,424.8 million in
fiscal 1997 from $1,611.4  million in fiscal 1996. The increase was attributable
by division to: Information Technology,  $380.2 million or an increase of 95.0%;
Professional  Services,  $203.9 million,  or an increase of 113.5%;  Commercial,
$151.5  million,  or an increase of 19.1%;  Teleservices,  $59.0 million,  or an
increase of 52.5%;  Health Care,  $17.4  million,  or an increase of 15.5%;  and
Private Label,  $1.4 million or an increase of 9.7%. The increase in the Private
Label and Health  Care  divisions  were due  entirely to  internal  growth.  The
increases in the Information Technology,  Professional Services,  Commercial and
Teleservices divisions were due to both internal growth and, more significantly,
the revenue contribution of acquired companies.

   Gross  Profit.  Gross  profit  increased  $237.0  million  or 62.9% to $613.7
million  in fiscal  1997  from  $376.7  million  in fiscal  1996.  Gross  margin
increased  to 25.3% in  fiscal  1997  from  23.4% in fiscal  1996.  The  overall
increase in gross margin was due to the  increase in revenue from the  Company's
Information Technology and Professional Services divisions, which produce higher
gross margins than the  Company's  Commercial  and  Teleservices  divisions.  In
addition,  the Professional Services division experienced a significant increase
in gross  margin  percentage  which when  coupled  with its increase in revenue,
attributed to the Company's  overall gain.  The gross margins in the Health Care
and  Private  Label  divisions   remained   relatively   unchanged,   while  the
Teleservices  division  experienced a slight gain due to an  acquisition  in the
division  which  contributed  a higher  gross  margin than the  divisions  other
operations.

          Operating  Expenses.  Operating expenses increased $123.9 million,  or
     40.9%, to $427.2 million in fiscal 1997 from $303.3 million in fiscal 1996.
     Operating  expenses  before   non-recurring   merger  related  costs  as  a
     percentage  of revenue  increased  to 17.4% in fiscal  1997,  from 17.1% in
     fiscal 1996. The increase was due primarily to an increase in  depreciation
     and  amortization  as a  percentage  of revenue in 1997  compared  to 1996.
     Operating   expenses   before   non-recurring   merger  related  costs  and
     depreciation  and  amortization  as a  percentage  of revenue  increased in
     fiscal  1997  as  compared  to  fiscal   1996.   Included  in  general  and
     administrative  expenses during 1997 are the costs associated with projects
     underway to ensure  accurate  date  recognition  and data  processing  with
     respect  to  the  Year  2000  as it  relates  to  the  Company's  business,
     operations,  customers and vendors.  The Company  expects to  substantially
     complete the Year 2000 conversion  projects by the end of 1998. These costs
     have been immaterial to date and are not expected to have a material impact
     on the Company's results of operations, financial condition or liquidity in
     the future.

     Income  from  Operations.  As  a  result  of  the  foregoing,  income  from
operations  increased  $113.2 or 154.2% to $186.6  million  in fiscal  1997 from
$73.4 million in fiscal 1996. Income from operations before non-recurring merger
related costs increased $89.7 million, or 88.0% to $191.6 million in fiscal 1997
from $101.9 million in fiscal 1996. Income from operations before  non-recurring
merger related costs as a percentage of revenue increased to 7.9% in fiscal 1997
from 6.3% in fiscal 1996.

   Interest  Expense.  Interest  expense  increased  $15.6, or 458.8%,  to $19.0
million  in fiscal  1997 from $3.4  million  in fiscal  1996.  The  increase  in
interest expense resulted from a combination of the utilization of the Company's
credit facility, and the timing of the common stock offering in 1996.

     Income  Taxes.  The  Company's  effective tax rate was 39.1% in fiscal 1997
compared  to 50.2%,  including  the  effect of the pro forma tax  provision,  in
fiscal 1996.  The decrease in the effective tax rate was due to the higher level
of  taxable  income  in 1996 as a result  of the  non-deductible,  non-recurring
merger related costs in connection with the  acquisitions of The McKinley Group,
Inc., HJM Consulting, Inc. and Career Horizons, Inc. during 1996.

     Pro Forma Net Income.  As a result of the  foregoing,  pro forma net income
increased $67.1 million, or 192.3%, to $102.0 million in 1997 from $34.9 million
in fiscal  1996.  Pro forma net income as a percentage  of revenue  increased to
4.2% in fiscal 1997 from 2.2% in fiscal 1996,  due primarily to the reduction of
non-recurring merger related costs. Exclusive of these merger related costs, pro
forma  net  income  would  have  increased  $45.5  million  to  $107.0  million,
increasing pro forma net income as a percentage of revenue to 4.4%.

                                       16
<PAGE>



FISCAL 1996 COMPARED TO FISCAL 1995

   Revenue.  Revenue  increased $748.4 million,  or 86.7% to $1,611.4 million in
fiscal 1996 from $863.0 million in fiscal 1995. The increase was attributable by
division to:  Information  Technology $339.0 million,  or an increase of 551.9%,
Professional  Services,  $150.5  million or an increase  of 518.0%,  Commercial,
$236.3  million,  or an  increase  of 42.5%,  Teleservices  $12.9  million or an
increase of 13.0%, Health Care $7.9 million, or an increase of 7.6%, and Private
Label,  $1.8 million,  or an increase of 14.7%.  The increases in the Commercial
and  Professional  Services  divisions  were due to  acquisitions  and  internal
growth. The increase in the Information Technology division was primarily due to
the  revenue   contribution  of  acquired   companies.   The  increases  in  the
Teleservices,  Health  Care and  Private  Label  divisions  were the  result  of
internal growth.

   Gross Profit.  Gross profit  increased  $184.3  million,  or 95.8%, to $376.7
million  in fiscal  1996  from  $192.4  million  in fiscal  1995.  Gross  margin
increased  to 23.4% in  fiscal  1996  from  22.3% in fiscal  1995.  The  overall
increase  in gross  margin was due to the impact of the  Company's  shift to the
Professional  Services and  Information  Technology  divisions  which  produce a
higher gross margin than the Company's Commercial and Teleservices divisions.

   Operating Expenses.  Operating expenses before  non-recurring  merger related
costs increased $126.6 million,  or 85.4%, to $274.8 million in fiscal 1996 from
$148.2 million in fiscal 1995.  Operating  expense before  non-recurring  merger
related costs as a percentage of revenue remained  relatively  constant at 17.1%
for fiscal 1996 as compared to 17.2% for fiscal 1995.

     Income  from  Operations.  As  a  result  of  the  foregoing,  income  from
operations  increased  $29.2 or 66.1% to $73.4 million in fiscal 1996 from $44.2
million in fiscal  1995.  Income from  operations  before  non-recurring  merger
related costs increased $57.7 million,  or 130.5%, to $101.9,  million in fiscal
1996  from  $44.2  million  in  fiscal  1995.   Income  from  operations  before
non-recurring  merger related costs as a percentage of revenue increased to 6.3%
in fiscal 1996 from 5.1% in fiscal 1995.

   Interest  Expense.  Interest expense  increased  $639,000,  or 21.4%, to $3.4
million in fiscal 1996 from $2.8  million in fiscal 1995.  The interest  expense
resulted  from  the  combination  of the  utilization  of the  Company's  credit
facility and the notes payable to shareholders of acquired companies.

   Income Taxes. The Company's  effective income tax rate,  including the effect
of the pro forma tax  provision,  was 50.2% in fiscal 1996  compared to 38.8% in
fiscal 1995.  The increase in the  effective tax rate was due to the increase in
taxable income as a result of the non-deductible,  non-recurring  merger related
costs with The McKinley Group, Inc., HJM Consulting,  Inc., and Career Horizons,
Inc.

     Pro Forma Net Income.  As a result of the  foregoing,  pro forma net income
increased  $9.5  million,  or 37.4%,  to $34.9 million in fiscal 1996 from $25.4
million  in fiscal  1995.  Pro  forma net  income  as a  percentage  of  revenue
decreased  to  2.2%  in  fiscal  1996  from  2.9%  in  fiscal  1995,  due to the
non-deductible,  non-recurring  merger  related  costs.  Exclusive of the merger
costs, pro forma net income would have increased $36.0 million to $61.5 million,
resulting in an increase to pro forma net income as a  percentage  of revenue to
3.8%.

                                       17
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

   The Company's primary sources of funds are from operations,  borrowings under
its  revolving  credit  facility  and proceeds of Common  Stock  offerings.  The
Company's  principal uses of cash are to fund acquisitions,  working capital and
capital expenditures.  The Company generally pays its temporary employees weekly
for their  services while  receiving  payments from customers 35 to 60 days from
the date of invoice. As new offices are established or acquired,  or as existing
offices expand, there will be increasing requirements for cash resources to fund
current operations.

     During  April  1996,  the Company  completed  a secondary  offering of 11.8
million  shares of common stock from which the Company  received net proceeds of
approximately  $304.9 million. In addition,  the Company's  subsidiary,  Career,
prior to the date of the merger with the Company, completed an offering in which
Career issued 8.2 million shares of common stock, adjusted for the conversion to
the  Company's  shares of common  stock,  from which the  Company  received  net
proceeds of $119.8 million.  The net proceeds of the respective  offerings were,
in part, to repay the  outstanding  indebtedness  under the Company's  revolving
credit facility, while the remaining proceeds were used to fund acquisitions and
for other general corporate purposes through December 31, 1996.

     The Company is also obligated under various acquisition  agreements to make
earn-out  payments to former  stockholders  of acquired  companies over the next
five years.  The Company  estimates  the maximum  amount of these  payments will
total $85  million,  $46  million,  $28  million,  $26 million and $3.0  million
annually  for the  next  five  years.  The  Company  anticipates  that  the cash
generated by the operations of the acquired companies will provide a substantial
part of the capital required to fund these payments.

     The  Company  anticipates  that  capital  expenditures  for  furniture  and
equipment,  including  improvements to its management  information and operating
systems  during the next twelve months will be  approximately  $15 million.  The
Company anticipates  recurring  expenditures in future years to be approximately
$10 million per year.

   The Company believes that funds provided by operations,  available borrowings
under the credit  facility,  and current  amounts of cash will be  sufficient to
meet its presently  anticipated needs for working capital,  capital expenditures
and acquisitions for at least the next 12 months.

INDEBTEDNESS OF THE COMPANY

   The Company  entered into an agreement on May 23, 1997  expanding  its credit
facility to $500 million. The facility is unsecured but is guaranteed by each of
the Company's  subsidiaries.  The facility is syndicated to a group of 20 banks,
with NationsBank (South), N.A. as agent.

   Outstanding  amounts  under the  credit  facility  bear  interest  at certain
floating rates as specified by the credit facility. The credit facility contains
certain affirmative and negative covenants relating to the Company's operations,
including a prohibition on making any business  acquisitions  which would result
in pro forma  noncompliance  with the related  covenants if the acquired company
would meet or exceed 10% of total assets or income on a consolidated  basis.  In
addition,  approval is required  by the  majority  lenders at such time that the
cash  consideration  of an individual  acquisition  exceeds 10% of  consolidated
shareholder's equity.

     On February 6, 1998,  the Company  received a commitment  from  NationsBank
(South),  N.A. to extend the Company an  additional  amount of borrowings in the
form of a revolving credit facility equal to $300 million. The commitment is for
a two year term expiring, February 5, 2000 and contains substantially all of the
same terms as the Company's existing $500 million facility.

                                       18
<PAGE>


     As  of  March  9,  1998,  the  Company  had a  balance  of  $385.0  million
outstanding under the credit facility.  The Company also had outstanding letters
of credit in the  amount of $22.7  million,  which  reduces  the amount of funds
available  under  the  facility.  Therefore,  the  remaining  balance  of  funds
available to the Company as of March 9, 1998 was $392.3 million.

     On October 16,  1995,  the  Company's  subsidiary,  Career,  issued  $86.25
million  of 7%  Convertible  Senior  Notes Due 2002  which  were  assumed by the
Company  pursuant to the merger.  Interest on the notes is paid  semiannually on
May 1 and November 1 of each year.  The notes are  convertible  at the option of
the holder  thereof,  at any time after 90 days  following  the date of original
issuance thereof and prior to maturity,  unless previously redeemed, into shares
of common  stock of the  Company  at a  conversion  price of $11.35  per  share,
subject to adjustment in certain events.  The notes are redeemable,  in whole or
in part, at the option of the Company, at any time on or after November 1, 1998,
at stated redemption  prices,  together with accrued interest.  The notes do not
provide for any sinking fund. Upon a Designated  Event (as defined and including
a change of  control)  holders  of the notes  will have the  right,  subject  to
certain  restrictions and conditions,  to require the Company to purchase all or
any part of the Notes at a purchase price equal to 101% of the principal  amount
thereof  together with accrued and unpaid interest to the date of purchase.  The
notes  have  been  unconditionally  guaranteed  by the  Company  and  joint  and
severally  guaranteed by each of Career's  present and any future  subsidiaries.
The  guarantee  of the Company  and each  subsidiary  of Career is an  unsecured
general  obligation  of the Company and such  subsidiary,  ranking  equally with
other unsecured  obligations of the Company and such subsidiary.  The obligation
of the Company and each of Career's  present and any future  subsidiaries  under
its guarantee is full and unconditional.

   The Company has certain notes payable to shareholders of acquired  companies.
The notes  payable  bear  interest at rates  ranging  from 5.0% to 8.0% and have
repayment terms from January 1998 to June 2000. As of March 9, 1998, the Company
owed approximately $43.0 million in such acquisition indebtedness.

   The  Company  had $1.0  million  of 6%  Convertible  Subordinated  Debentures
outstanding as of December 31, 1996, which were converted into 727,272 shares of
the Company's common stock during 1997.

INFLATION

   The effects of inflation on the  Company's  operations  were not  significant
during the periods presented in the financial statements.  Generally, throughout
the periods  discussed above,  the increases in revenue have resulted  primarily
from higher volumes, rather than price increases.

RECENT ACCOUNTING PRONOUNCEMENTS

   During 1997, the Financial Accounting Standards Board (FASB) issued Statement
of  Financial  Accounting  Standards  (SFAS) No.  130,  Reporting  Comprehensive
Income,  which  requires  that  changes  in  comprehensive  income be shown in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.  This statement is effective for the Company's 1998 fiscal
year.  The Company is in the process of  determining  its  preferred  disclosure
format.

         Additionally,  during 1997,  the FASB issued SFAS No. 131,  Disclosures
About Segments of an Enterprise and Related Information.  SFAS No. 131 requires,
among other things, that certain general and financial  information be disclosed
for reportable  operating  segments of a company.  SFAS No. 131 is effective for
fiscal years  beginning  after December 15, 1997,  with interim  application not
required in the initial year of adoption.

     During 1998,  the  American  Institute  of  Certified  Public  Accountants'
Executive  Committee  issued  Statement  of  Position  Number  98-1 (SOP  98-1),
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use". SOP 98-1 is effective for fiscal years  beginning after December 15, 1998.
Management  believes that the Company is  substantially  in compliance with this
pronouncement and that the  implementation of this pronouncement will not have a
material effect on the Company's  consolidated  financial  position,  results of
operations or cash flows.


                                       19
<PAGE>


OTHER MATTERS

     Foreign  Acquisitions.  During  1997,  the  Company,  through  a series  of
acquisitions,  expanded its  operations  into Canada and Europe  (primarily  the
United  Kingdom).  The results of  operations  of these  acquired  companies are
included with those of the Company from date of  acquisition  and are immaterial
to the Company's  results of operations for fiscal 1997, and financial  position
as of December 31, 1997.

     Impact of Year 2000. Some of the Company's older computer software programs
were written using two digits rather than four to define the applicable year. As
a  result,  those  computer  programs  have  time-sensitive  software  that  may
recognize a date using "00" as the year 1900 rather than the year 2000.

   The Company  commenced a  company-wide  assessment and will modify or replace
affected  software so that its computer  systems  will  function  properly  with
respect  to dates  beginning  in the  year  2000.  To the  best of  management's
knowledge  and belief,  and based on the work  completed  to date,  the required
modifications  or replacements  of the Company's  software to process data after
the turn of the  century are not  anticipated  to pose  significant  operational
problems.

FORWARD LOOKING STATEMENTS

     Statements  made in this Report  regarding  the  Company's  expectation  or
beliefs concerning future events,  including capital spending,  expected results
and  the  Company's  liquidity  situation  during  1998,  should  be  considered
forward-looking  and subject to various risks and  uncertainties.  The Company's
actual  results  may differ  materially  from the results  anticipated  in these
forward-looking  statements as a result of certain  factors set forth under Risk
Factors and elsewhere in the Company's prospectus dated January 15, 1997, and as
discussed  in the  Company's  reports  on  Forms  10-Q and 8-K  made  under  the
Securities  Exchange  Act of  1934.  For  instance,  the  Company's  results  of
operations may differ materially from those  anticipated in the  forward-looking
statements  due to, among other things:  the Company's  ability to  successfully
identify suitable acquisition candidates, complete acquisitions or integrate the
acquired business into its operations; the general level of economic activity in
the  Company's  markets;  increased  price  competition;  changes in  government
regulations  or  interpretations  thereof;  and the  continued  availability  of
qualified temporary  personnel,  particularly in the information  technology and
other professional segments of the Company's businesses. In addition, the market
price of the Company's stock may, from time to time, be  significantly  volatile
as a result of,  among  other  things:  the  Company's  operating  results;  the
operating  results of other  temporary  staffing  companies;  and changes in the
performance of the stock market in general. 20
<PAGE>




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


Report of Independent Accountants

To the Stockholders of
AccuStaff Incorporated

   We have audited the consolidated balance sheets of AccuStaff Incorporated and
Subsidiaries  as of  December  31, 1997 and 1996,  and the related  consolidated
statements of income,  stockholders' equity and cash flows for each of the three
years in the period ended December 31, 1997. 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  generally  accepted  auditing
standards.  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  consolidated  financial  statements  referred to above
present fairly, in all material respects, the consolidated financial position of
AccuStaff  Incorporated  and Subsidiaries at December 31, 1997 and 1996, and the
consolidated  results of their  operations  and their cash flows for each of the
three years in the period ended  December 31, 1997 in conformity  with generally
accepted accounting principles.

/s/ Coopers & Lybrand L.L.P.

Coopers & Lybrand L.L.P.



Jacksonville, Florida
March 20, 1998



                                       21
<PAGE>




AccuStaff Incorporated and Subsidiaries
Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,    December 31,
(dollar amounts in thousands except per share amounts)                                 1997             1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                         $     23,938   $    109,599
   Accounts receivable, net of allowance of $15,555 and $9,199                            426,349        266,853
   Due from associated offices                                                             41,749         38,897
   Prepaid expenses                                                                        18,859          8,405
   Deferred income taxes                                                                   10,149          3,605
                                                                                     ----------------------------------
      Total current assets                                                                521,044        427,359
Furniture, equipment and leasehold improvements, net                                       48,577         30,130
Goodwill, net                                                                             882,986        451,519
Other assets                                                                               26,909         20,207
                                                                                     ----------------------------------
    Total assets                                                                     $  1,479,516   $    929,215
                                                                                     ==================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
   Notes payable and convertible debt                                                $     18,024   $     15,142
   Accounts payable and accrued expenses                                                   95,886         62,947
   Accrued payroll and related taxes                                                       81,746         69,024
                                                                                     ----------------------------------
     Total current liabilities                                                            195,656        147,113
Convertible debt                                                                           86,250         86,250
Notes payable, long-term portion                                                          372,620         20,627
Other                                                                                      12,148          5,446
                                                                                     ----------------------------------
     Total liabilities                                                                    666,674        259,436
                                                                                     ----------------------------------
Commitments and contingencies
Stockholders' equity:
   Preferred stock, $.01 par value; 10,000,000 shares authorized;
      no shares issued and outstanding                                                          -              -
   Common stock, $.01 par value; 150,000,000 shares authorized
      103,692,098 and 99,226,813 shares issued and outstanding on
      December 31, 1997 and December 31, 1996, respectively                                 1,037            992
Additional contributed capital                                                            634,194        594,186
Retained earnings                                                                         181,068         79,035
Deferred stock compensation                                                                (3,457)        (4,434)
                                                                                     ----------------------------------
     Total stockholders' equity                                                           812,842        669,779
                                                                                     ----------------------------------
     Total liabilities and stockholders' equity                                      $  1,479,516   $    929,215
                                                                                     ==================================
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.





                                       22
<PAGE>

AccuStaff Incorporated and Subsidiaries
Consolidated Statements of Income


<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
                                                                      ------------------------------------------
(dollar amounts in thousands except per share amounts)                     1997            1996          1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>
Revenue                                                               $  2,424,826   $  1,611,447   $    862,968
Cost of revenue                                                          1,811,098      1,234,754        670,589
                                                                      ------------------------------------------
   Gross Profit                                                            613,728        376,693        192,379
                                                                      ------------------------------------------
Operating expenses:
   General and administrative                                              362,010        233,625        122,269
   Depreciation and amortization                                            36,059         19,970          7,443
   Remittance to franchisees                                                24,095         21,211         18,489
   Merger related costs                                                      5,000         28,502              -
                                                                      ------------------------------------------
      Total operating expenses                                             427,164        303,308        148,201
                                                                      ------------------------------------------
         Income from operations                                            186,564         73,385         44,178
                                                                      ------------------------------------------
Other income (expense):
   Interest expense, net                                                   (18,989)        (3,403)        (2,764)
   Other income, (expense), net                                                  -              -            146
                                                                      ------------------------------------------
      Total other expense, net                                             (18,989)        (3,403)        (2,618)
                                                                      ------------------------------------------
Income before provision for income taxes                                   167,575         69,982         41,560
Provision for income taxes                                                  65,542         38,772         12,988
                                                                      ------------------------------------------
Net income                                                            $    102,033   $     31,210   $     28,572
                                                                      ==========================================
Basic net income per common share                                     $       1.00   $       0.34   $       0.46
                                                                      ==========================================
Average common shares outstanding, basic                                   101,914         90,582         62,415
                                                                      ==========================================
Diluted net income per common share                                   $       0.93   $       0.33   $       0.42
                                                                      ==========================================
Average common shares outstanding, diluted                                 113,109        103,680         69,328
                                                                      ==========================================
Unaudited pro forma data (Note 2):
   Net income before provision for pro forma income taxes             $    102,033   $     31,210   $     28,572
   Provision for pro forma income taxes                                          -         (3,642)         3,144
                                                                      ------------------------------------------
         Pro forma net income                                         $    102,033   $     34,852   $     25,428
                                                                      ==========================================
Pro forma basic net income per common share                           $       1.00   $       0.38   $       0.41
                                                                      ==========================================
Pro forma diluted net income per common share                         $       0.93   $       0.36   $       0.38
                                                                      ==========================================
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.


                                       23
<PAGE>


Accustaff Incorporated and Subsidiaries
Consolidated Statements of Cash Flows


<TABLE>
<CAPTION>
                                                                             Years Ended December 31,
                                                                    ------------------------------------------
(dollar amounts in thousands except for per share amounts)             1997           1996          1995
--------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>             <C>            <C>
Cash flows from operating activities:
   Net income                                                       $  102,033      $   31,210     $   28,572
   Adjustments to net income to net cash provided by
    operating activities:
       Depreciation and amortization                                    36,059          19,970          7,443
       Deferred income taxes                                               453           1,234           (769)
       Changes in assets and liabilities:
         Accounts receivable                                           (86,562)        (72,505)       (20,201)
         Due from associated offices                                    (2,990)         (3,250)          (501)
         Prepaid expenses and other assets                              (3,550)          3,663           (447)
         Accounts payable and accrued expenses                          (8,915)         23,522          3,146
         Accrued payroll and related taxes                                 923             214          3,535
         Other, net                                                       (907)          7,991          3,418
                                                                    -----------------------------------------
           Net cash provided by operating activities                    36,544          12,049         24,196
                                                                    -----------------------------------------
Cash flows from investing activities:
   Purchase of investments                                                   -         (10,438)        (2,028)
   Sales and maturities of investments                                       -               -          8,842
   Investment in reverse repurchase agreements, net                          -          48,449        (48,449)
   Purchase of furniture, equipment and leasehold
     improvements, net of disposals                                    (17,943)        (13,126)        (8,129)
   Purchase of businesses, including additional earn-outs on
     acquisitions, net of cash acquired                               (442,282)       (354,691)       (68,308)
                                                                    -----------------------------------------
           Net cash used in investing activities                      (460,225)       (329,806)      (118,072)
                                                                    -----------------------------------------
Cash flows from financing activities:
   Bank overdraft, net                                                       -               -        (24,007)
   Proceeds from issuance of common stock, net of offering
     expenses paid                                                           -         424,677         72,403
   Proceeds from stock options exercised                                23,130           6,977          2,017
   Proceeds from issuance of convertible debentures                          -               -         85,663
   Borrowings on indebtedness                                          448,843          92,800         14,373
   Repayments on indebtedness                                         (133,853)       (131,172)       (18,058)
   Other, net                                                             (100)         (3,650)        (3,350)
                                                                    -----------------------------------------
           Net cash provided by financing activities                   338,020         389,632        129,041
                                                                    -----------------------------------------
Net increase (decrease) in cash and cash equivalents                   (85,661)         71,875         35,165
Cash and cash equivalents, beginning of year                           109,599          37,724          2,559
                                                                    =========================================
Cash and cash equivalents, end of year                              $   23,938      $  109,599     $   37,724
                                                                    =========================================
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.



                                       24
<PAGE>


<TABLE>
<CAPTION>
                                                                               Years Ended December 31,
(dollar amounts in thousands except for per share amounts)                 1997           1996           1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>
SUPPLEMENTAL CASH FLOW INFORMATION
   Interest paid                                                      $     18,243   $      8,402   $      3,303
   Income taxes paid                                                        62,437         22,489         13,918

NON-CASH INVESTING AND FINANCING ACTIVITIES
During fiscal 1995, the Company completed numerous  acquisitions.  In connection
with the acquisitions, liabilities were assumed as follows:
   Fair value of assets acquired                                                                    $    100,198
   Cash paid                                                                                             (60,328)
                                                                                                    ------------
   Liabilities assumed                                                                              $     39,870
                                                                                                    ============

In fiscal 1995, convertible  subordinated debentures of $1,500 were converted by
the Company into 1,127,262 shares of common stock.

During fiscal 1996, the Company completed numerous  acquisitions.  In connection
with the acquisitions, liabilities were assumed as follows:
   Fair value of assets acquired                                                                    $    437,724
   Cash paid                                                                                            (341,154)
                                                                                                    ------------
   Liabilities assumed                                                                              $     96,570
                                                                                                    ============

In fiscal 1996, Convertible  Subordinated Debentures of $1,300 were converted by
the Company into 1,040,000 shares of common stock. Also, 345,000 shares of stock
were issued to the President and Chief Executive  Officer  pursuant to the terms
of a restricted stock grant.

During fiscal 1997, the Company completed numerous  acquisitions.  In connection
with the acquisitions, liabilities were assumed as follows:
   Fair value of assets acquired                                                                    $    466,269
   Cash paid                                                                                            (360,575)
                                                                                                    ------------
   Liabilities assumed                                                                              $    105,694
                                                                                                    ============
</TABLE>

In fiscal 1997, Convertible  Subordinated Debentures of $1,000 were converted by
the Company into 727,272 shares of common stock.

                                       25
<PAGE>



AccuStaff Incorporated and Subsidiaries
Consolidated Statement of Stcokholders' Equity


<TABLE>
<CAPTION>
                                                                           Additional              Deferred
(dollar amounts in thousands                                              Contributed  Retained      Stock
except per share amounts)                Shares  Amount   Shares   Amount   Capital    Earnings  Compensation    Total
----------------------------------------------------------------------------------------------------------------------
<S>                                       <C>     <C>   <C>         <C>      <C>        <C>       <C>          <C>
Balance, January 1, 1995                   -      -    9,519,505   $   95   $ 69,154   $  23,068    $  (175)  $ 92,142
Sale of common stock                                   2,500,000       25     72,378           -          -     72,403
Conversion of subordinated debentures      -      -      187,877        2      1,498           -          -      1,500
Exercise of stock options and related
   tax benefit                             -      -      143,169        2      2,018           -          -      2,020
Amortization of unearned compensation      -      -            -        -          -           -         96         96
Net income                                 -      -            -        -          -      28,572          -     28,572
McKinley income for the three months
   ended December 31, 1994                 -      -            -        -          -         702          -        702
Distribution to former shareholders of
   acquired S-corporations                 -      -            -        -          -      (2,350)         -     (2,350)
2 for 1 stock split                        -      -   12,350,551      123       (123)          -          -          -
                                           ---------------------------------------------------------------------------
Balance, December 31, 1995                 -      -   24,701,102      247    144,925      49,992        (79)   195,085
3 for 1 stock split                        -      -   49,402,203      494       (494)          -          -          -
Sale of common stock                       -      -   20,017,575      200    424,477           -          -    424,677
Conversion of subordinated debentures      -      -    1,040,000       10      1,290           -          -      1,300
Issuance of restricted stock               -      -      345,000        3      4,889           -     (4,892)         -
Exercise of stock options and related
   tax benefit                             -      -    2,726,412       27     17,013           -          -     17,040
Vesting of restricted stock                -      -            -        -          -           -        537        537
Net income                                 -      -            -        -          -      31,210          -     31,210
Issuance of stock related to business
   combinations                            -      -      994,521       11      2,086       1,214          -      3,311
Distribution to former shareholders of
   acquired S-corporations                 -      -            -        -          -      (3,381)         -     (3,381)
                                           ---------------------------------------------------------------------------
Balance, December 31, 1996                 -      -   99,226,813      992    594,186      79,035     (4,434)   669,779
Conversion of subordinated debentures                    727,272        7        993                             1,000
Exercise of stock options and related
   tax benefit                             -      -    3,069,143       31     30,169           -          -     30,200
Vesting of restricted stock                -      -            -        -          -           -        977        977
Net income                                 -      -            -        -          -     102,033          -    102,033
Issuance of stock related to business
   combinations                            -      -      668,870        7      8,846           -          -      8,853
                                           ---------------------------------------------------------------------------
BALANCE, DECEMBER 31, 1997                 -      -  103,692,098   $1,037   $634,194   $ 181,068    $(3,457)  $812,842
                                           ===========================================================================
</TABLE>


SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

                                       26
<PAGE>


AccuStaff Incorporated and Subsidiaries
Notes to Consolidated Financial Statements

1.  DESCRIPTION OF BUSINESS:

     AccuStaff  Incorporated,  including  all  subsidiaries  unless the  context
requires otherwise, (AccuStaff, or the Company), is an international provider of
business services,  including  consulting,  training,  outsourcing and strategic
staffing  services to businesses,  professional  and service  organizations  and
governmental   agencies   through  a  branch   office   network  that   includes
Company-owned,  franchised  and  associated  offices.  The Company  operated 600
Company-owned, 83 franchised and 375 associated branch offices in 46 states, the
District of Columbia,  Canada,  and Europe. The Company's revenues are primarily
from the United States since the Company's  expansion  outside the United States
did not  begin  until  1997.  The  Company's  business  is  organized  into  six
divisions:  the  Information  Technology  division,  the  Professional  Services
division,  the Commercial division,  the Teleservices  division,  the HealthCare
division and the Private label division,  which generated 32.2%,  15.8%,  38.9%,
7.1%,  5.3% and 0.7% of the  Company's  fiscal 1997 revenue,  respectively.  The
Information  Technology,  Professional  Services,  Commercial,  Health  Care and
Private Label Divisions provide a wide range of services to a diversified mix of
clients,   while  its  Teleservices   division   primarily   furnishes   trained
telemarketing personnel to MATRIXX Marketing, Inc.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

   On  November  10,  1997 the  Company  acquired  all of the  stock  of  Office
Specialists, Inc. (OSI) in exchange for 2,919,073 shares of the Company's stock.
Through September 30, 1997, OSI had revenue and net income of $137,032 and $496,
respectively.

   Prior to changing to a calendar  year end,  OSI's  fiscal years ended on June
29, 1996, June 24, 1995 and June 25, 1994. The calendar year 1997, 1996 and 1995
results of OSI were  combined  with the fiscal  years ended  December  31, 1997,
1996, 1995, respectively of the Company.

   The reconciliation below details the effects of the pooling detailed above on
the previously reported revenues, net income,  stockholders' equity and earnings
per share of the Company.

<TABLE>
<CAPTION>
                                                                                             Year ended
                                                                                     ---------------------------
                                                                                       Dec. 31,       Dec. 31,
                                                                                         1996           1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>
Revenue as previously reported                                                       $  1,448,624   $    725,982
Revenue, OSI                                                                              162,823        136,986
                                                                                     ---------------------------
Revenue, as restated                                                                 $  1,611,447   $    862,968
                                                                                     ===========================

Net income, as previously reported                                                         27,942         26,069
Net income, OSI                                                                             3,268          2,503
                                                                                     ---------------------------
Net income, as restated                                                                    31,210         28,572
                                                                                     ===========================


Basic net income per common share, as previously reported                            $       0.32   $       0.44
Increase attributable to OSI                                                                 0.02           0.02
                                                                                     ---------------------------
Basic net income per common share, as restated                                       $       0.34   $       0.46
                                                                                     ===========================


Diluted net income per common share, as previously reported                          $       0.31   $       0.41
Increase attributable to OSI                                                                 0.02           0.01
                                                                                     ---------------------------
Diluted net income per common share, as restated                                     $       0.33   $       0.42
                                                                                     ===========================
</TABLE>

                                       27
<PAGE>



<TABLE>
<CAPTION>
                                                                                       Year Ended
                                                                      ------------------------------------------
                                                                        Dec. 31,        Dec. 31,       Jan. 1,
                                                                          1996            1995           1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>             <C>            <C>
Stockholders' equity, as previously reported                          $    654,921   $    183,495   $     83,055
Stockholders' equity, OSI                                                   14,858         11,590          9,087
                                                                      -------------------------------------------
Stockholders' equity, as restated                                     $    669,779   $    195,085   $     92,142
                                                                      ===========================================
</TABLE>

Basis of Consolidation

     The consolidated  financial  statements include the accounts of the Company
and its wholly  owned  subsidiaries.  All  intercompany  transactions  have been
eliminated in the accompanying consolidated financial statements.

Fiscal Year

   During 1996,  the Company  changed its fiscal year to a calendar year. In the
prior years,  the fiscal year ended on the Sunday closest to December 31 of each
year. All fiscal years presented herein consist of 52 weeks.

Cash and Cash Equivalents

     Cash and cash  equivalents  include  deposits  in banks,  government  money
market funds, and short-term  investments with maturities,  when acquired, of 90
days or less.

Furniture, Equipment, and Leasehold Improvements

   Furniture,  equipment,  and leasehold  improvements are recorded at cost less
accumulated  depreciation  and  amortization.   Depreciation  of  furniture  and
equipment is computed using the  straight-line  method over the estimated useful
lives of the  assets,  ranging  from 5 to 15 years.  Amortization  of  leasehold
improvements is computed using the straight-line  method over the useful life of
the asset or the term of the lease,  whichever is shorter. Costs associated with
the development of the Company's proprietary software package have been deferred
and  are  being  amortized  over a  five-year  period.  Total  depreciation  and
amortization  expense  was  $11,468,  $7,470 and $3,621 for 1997,  1996 and 1995
respectively.  Accumulated depreciation and amortization of furniture, equipment
and  leasehold  improvements  as of  December  31, 1997 and 1996 was $51,507 and
$38,317, respectively.

Goodwill

   Goodwill represents the excess of cost over fair value of net tangible assets
acquired  through  acquisitions.  Such  excess of cost  over  fair  value of net
tangible  assets  acquired  is being  amortized  on a  straight-line  basis over
periods  ranging  from  15 to 40  years.  Management  periodically  reviews  the
potential  impairment of goodwill on a non-discounted  cash flow basis to assess
recoverability. If the estimated future cash flows are projected to be less than
the carrying amount, an impairment write-down  (representing the carrying amount
of the goodwill  which  exceeds the present value of estimated  expected  future
cash flows) would be recorded as a period expense.  Accumulated amortization was
$48,407 and $24,523 as of December 31, 1997 and 1996, respectively.

                                       28
<PAGE>


Revenue Recognition

   The Company  recognizes  as revenue,  at the time the  staffing  services are
provided,   the  amounts  billed  to  clients  of   Company-owned   offices  and
substantially  all  franchisees.  In all such cases, the temporary worker is the
Company's  employee  and all costs of  employing  the  temporary  worker are the
responsibility of the Company and are included in cost of services. The accounts
receivable  of these  franchisees  belong to the Company and are  included  with
those  of  the  Company-owned   operations,   as  accounts  receivable,  in  the
consolidated balance sheets.

   With respect to services performed for independent  temporary personnel firms
("Associated  Offices") and certain other  franchisees,  the Company records the
service fee it receives as revenue.  In such cases,  the temporary worker is not
employed by the  Company.  All costs are the  responsibility  of the  Associated
Office or the franchisee  and are not included in cost of services.  The Company
advances to such  Associated  Offices or the  franchisees  the amounts billed to
their  clients  and  includes  the  amount  of the  advances  on  the  Company's
consolidated balance sheet as Due from Associated Offices.

   The Company  recognizes  revenue from  franchise  fees when it has  performed
substantially all of its obligations under its agreements.

Stock Based Compensation

     The Company  accounts for stock options as prescribed by APB Opinion No. 25
and  includes  pro  forma  information  as  prescribed  by SFAS  No.  123 in the
Stockholders' Equity footnote to the Consolidated Financial Statements.

Income Taxes

     Deferred tax  liabilities and assets are recognized for the expected future
tax  consequences of events that have been included in the financial  statements
or tax returns.  Under this  method,  deferred  tax  liabilities  and assets are
determined  based on the differences  between the financial  statement  carrying
amounts  and tax basis of assets  and  liabilities  using  enacted  tax rates in
effect for the year in which the differences are expected to reverse.

Net Income Per Common Share

     Basic and diluted net income per common share are  presented in  accordance
with SFAS No. 128. Basic net income per common share is computed by dividing net
income by the weighted average number of shares outstanding.  Diluted net income
per common share  includes the dilutive  effect of  convertible  debentures  and
stock options (See note 9).

Remittance to Franchisees

   The  remittance  to  franchisees  is that  portion  of gross  profit  owed to
substantially all franchisees after deduction of fees and expenses.

Pervasiveness of Estimates

   The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amount  of  assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the  reported  amounts of revenue  and  expenses  during the  reporting  period.
Although  management  believes  these  estimates and  assumptions  are adequate,
actual results may differ from the estimates and assumptions used.

                                       29
<PAGE>


Reclassifications

   Certain  amounts  have been  reclassified  in 1995 and 1996 to conform to the
1997 presentation.

Recent Accounting Pronouncements

   During 1997, the FASB issued SFAS No. 130,  Reporting  Comprehensive  Income,
which  requires  that  changes in  comprehensive  income be shown in a financial
statement  that is  displayed  with  the  same  prominence  as  other  financial
statements.  This statement is effective for the Company's 1998 fiscal year. The
Company is in the process of determining its preferred disclosure format.

   Additionally,  during 1997,  the FASB issued SFAS No. 131,  Disclosure  About
Segments of an Enterprise and Related Information,  which changes the way public
companies report information about segments. SFAS No. 131, which is based on the
management  approach  to  segment  reporting,  includes  requirements  to report
selected  segment  information  quarterly  and  entity-wide   disclosures  about
products and services,  major customers, and the material countries in which the
entity holds assets and reports  revenues.  This  statement is effective for the
Company's  1998 fiscal  year.  The Company is in the process of  evaluating  the
disclosure requirements under this standard.

     During 1998,  the  American  Institute  of  Certified  Public  Accountants'
Executive  Committee  issued  Statement  of  Position  Number  98-1 (SOP  98-1),
"Accounting for the Cost of Computer Software Developed or Obtained for Internal
Use". SOP 98-1 is effective for fiscal years  beginning after December 15, 1998.
Management  believes that the Company is  substantially  in compliance with this
pronouncement and that the  implementation of this pronouncement will not have a
material effect on the Company's  consolidated  financial  position,  results of
operations or cash flows.

Unaudited Pro Forma Data

   PTA  International  (PTA),  The  McKinley  Group,  Inc.  (McKinley)  and  HJM
Consulting,  Inc. (HJM), prior to their acquisition by the Company,  had elected
to be treated as S  Corporations  for federal and state income tax purposes.  As
such,  the taxable  income of each company was reported to and subject to tax to
its respective  shareholders.  The unaudited pro forma data on the  consolidated
statements  of income  provides  approximate  federal and state income taxes (by
applying  statutory  income tax rates)  that  would have been  incurred  if PTA,
McKinley and HJM had been subject to tax as a C Corporation.

3.   ACQUISITIONS


   The  Company  completed  numerous  acquisitions  during  1997,  1996 and 1995
including OSI, PTA, McKinley, Career and HJM, for which the financial statements
have been restated (See Note 2).

   In addition,  the Company merged with Schwab Carrese and Associates,  Inc. in
fiscal 1997,  and with  Staffware,  Inc. and Legal  Support  Personnel,  Inc. in
fiscal  1996,  all of which were  accounted  for under the  pooling-of-interests
method of accounting.  The Company  acquired all of the stock of these companies
in exchange for 263,550 and 926,486 shares of the Company's common stock for the
1997 and 1996 acquisitions,  respectively. Due to the immaterial effect on prior
periods, the Company's historical financial statements have not been restated.


                                       30
<PAGE>


Unaudited pro forma results of operations

   During 1997, 1996 and 1995, the Company made certain other acquisitions which
were accounted for under the purchase method of accounting. Their operations are
included in the Consolidated Statements of Income from the date of acquisition.

   The following  unaudited pro forma  consolidated  results of operations  give
effect  to the  acquisitions  made  during  1997,  1996  and 1995  assuming  the
acquisitions had occurred at the beginning of the year in which each company was
acquired and also at the beginning of the preceding year. Pro forma  adjustments
have been made to give effect to amortization of goodwill,  interest  expense on
additional  borrowings  used to fund the  acquisitions,  and other  adjustments,
together with income tax effects.

     The results for fiscal 1997,  include $5,000 in  non-recurring  acquisition
costs  related to the merger  with OSI.  The results  for fiscal  1996,  include
$28,502 in non-recurring acquisition costs related to the mergers with McKinley,
Career, and HJM. Exclusive of these non-recurring  costs, net income and diluted
net income per common  share would have been  $112,134  and $1.02 for the fiscal
year ended 1997,  respectively  and $67,168 and $0.68, for the fiscal year ended
1996,  respectively.  These pro forma amounts are not necessarily  indicative of
what actually would have occurred if the acquisitions had been in effect for the
entire periods presented.  In addition,  they are not intended to be projections
of future  results and do not reflect any synergies  that might be achieved from
combined operations.

<TABLE>
<CAPTION>
                                                                                        Fiscal
                                                                      -------------------------------------------
(unaudited)                                                               1997           1996            1995
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>
Revenue                                                               $  2,647,688   $  2,266,412   $  1,596,061
Net income                                                                 107,134         50,314         35,148
Diluted net income per common share                                   $       0.98   $       0.54   $       0.47

</TABLE>

                                       31
<PAGE>


4.  NOTES PAYABLE
Notes payable at December 31, 1997 and 1996 consisted of the following:

<TABLE>
<CAPTION>
                                                                                                Fiscal
                                                                                     ---------------------------
                                                                                         1997            1996
----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>
Credit facilities                                                                    $    347,620   $      2,710
Notes payable to former shareholder's of acquired companies, plus interest ranging
   from 5.05% to 8.0% due through June 2000                                                43,024         32,059
                                                                                     ---------------------------
                                                                                          390,644         34,769
Current portion of notes payable                                                           18,024         14,142
                                                                                     ---------------------------
Long-term portion of notes payable                                                   $    372,620   $     20,627
                                                                                     ===========================
</TABLE>

   The Revolving Credit Facility  contains  certain  covenants such as requiring
the Company to maintain certain minimum financial ratios and does not permit the
payment of dividends.  The facility is  unsecured,  but is guaranteed by each of
the Company's subsidiaries.  The Company was in compliance with all covenants as
of December 31, 1997 and 1996.

   On May 23,  1997,  the  Facility  was amended and  restated,  increasing  the
available  line from $150,000 to $500,000.  The Facility has a term expiring May
23, 2002 and bears interest using an incentive pricing model based on the LIBOR,
federal funds, or the prime rate.

   On February 6, 1998 the Company received a commitment from its primary lender
for $300  million of  additional  borrowings  in the form of a revolving  credit
facility. The commitment expires February 5, 2000 and contains substantially all
of the same terms as the Company's existing credit facility.


   Maturities  of loans and  convertible  debt (See Note 12), are as follows for
the fiscal years subsequent to December 31, 1997:


Fiscal year
------------------------------------

1998                        $ 18,024
1999                          23,865
2000                           1,135
2001                               -
2002                         433,870
                            --------
                            $476,894
                            ========



                                       32
<PAGE>


5.  COMMITMENTS AND CONTINGENCIES:

Leases

   The Company leases office space under various noncancelable operating leases.
The  following  is a schedule of future  minimum  lease  payments  with terms in
excess of one year:




Fiscal Year
---------------------------------------------------

1998                                        $18,260
1999                                         14,984
2000                                         10,909
2001                                          6,994
2002                                          4,102
Thereafter                                    7,057
                                            -------
                                             $62,306
                                             =======


Total rent expense for fiscal  1997,  1996 and 1995 was  $20,298,  $12,830,  and
$6,605 respectively.

Litigation

   The company is a party to a number of lawsuits and claims  arising out of the
ordinary  conduct of its business.  In the opinion of  management,  based on the
advice of in-house and external legal  counsel,  the lawsuits and claims pending
will not have a material adverse effect on the Company's financial position.


                                       33
<PAGE>


6.   INCOME TAXES:

   A comparative analysis of the provision for income taxes is as follows:

<TABLE>
<CAPTION>
                                           Fiscal
                          ------------------------------------
                             1997           1996          1995
--------------------------------------------------------------
<S>                       <C>            <C>          <C>
Current:
   Federal                $   56,772     $   31,687   $ 11,169
   State                       6,871          5,851      2,588
   Foreign                     1,446              -          -
                          ------------------------------------
                              65,089         37,538     13,757
                          ------------------------------------
Deferred:
   Federal:                        5            958       (604)
   State:                          -            276       (165)
   Foreign:                      448              -          -
                          ------------------------------------
                                 453          1,234       (769)
                          ------------------------------------
                          $   65,542     $   38,772     12,988
                          ====================================
</TABLE>


   The difference  between the actual income tax provision and the tax provision
computed by applying  the  statutory  federal  income tax rate to income  before
provision for income taxes is attributable to the following:

<TABLE>
<CAPTION>
                                                                                Fiscal
                                                         --------------------------------------------------------------
                                                           1997                  1996                 1995
                                                         --------------------------------------------------------------
                                                          AMOUNT   PERCENTAGE  AMOUNT   PERCENTAGE  AMOUNT  PERCENTAGE
-----------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>       <C>        <C>       <C>         <C>     <C>
Tax computed using the federal statutory rate            $  58,651     35.0%  $ 24,493     35.0%    $ 14,546      35.0%
State income taxes, net of federal income tax effect         4,466      2.7      3,183      4.5        1,824       4.4
Pre-acquisition earnings of acquired S corporations              -        -     (1,081)    (1.6)      (3,144)     (7.6)
Acquired subsidiaries change from cash to accrual basis      1,046      0.6      4,723      6.8            -         -
Non-deductible merger related costs                              -        -      7,250     10.4            -         -
Permanent differences and other                              1,379      0.8        204      0.3         (238)     (0.6)
                                                         --------------------------------------------------------------
                                                         $  65,542     39.1%  $ 38,772     55.4%    $ 12,988      31.2%
                                                         ==============================================================
</TABLE>

                                       34
<PAGE>


   The  components  of the deferred tax assets and  liabilities  recorded in the
accompanying consolidated balance sheets are as follows:

<TABLE>
<CAPTION>
                                                                                                 Fiscal
                                                                                     ---------------------------
                                                                                          1997            1996
----------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>
Gross deferred tax assets:
   Self-insurance reserves                                                           $      7,759   $      5,124
   Deferred income                                                                              -             71
   Allowance for doubtful accounts receivable                                               2,129          1,124
   Purchase accounting adjustments                                                          4,012          2,242
   Other                                                                                    3,371          1,171
                                                                                     ---------------------------
      Total gross deferred tax assets                                                      17,271          9,732
                                                                                     ---------------------------
Gross deferred tax liabilities:
   Amortization of computer software costs                                                   (184)          (128)
   Depreciation and amortization of furniture, equipment and leasehold improvements        (1,750)        (1,970)
   Amortization of goodwill                                                               (10,623)        (2,034)
   Acquired subsidiaries change from cash to accrual basis                                 (3,110)        (3,746)
   Other                                                                                        -           (292)
                                                                                     ---------------------------
      Total gross deferred tax liabilities                                                (15,667)        (8,170)
                                                                                     ---------------------------
      Net deferred tax asset(1)                                                      $      1,604   $      1,562
                                                                                     ===========================
</TABLE>


(1) Deferred  tax  liabilities  of $8,545 and $2,043  have been  included in the
    balance sheet caption "other" at December 31, 1997 and 1996, respectively.

   Management has determined, based on the history of prior taxable earnings and
its  expectations  for the future,  taxable  income will more likely than not be
sufficient  to fully  realize  deferred  tax assets  and,  accordingly,  has not
reduced deferred tax assets by a valuation allowance.


                                       35
<PAGE>


7.   EMPLOYEE BENEFIT PLANS:

Profit Sharing Plan

   The  Company  has a  discretionary  contribution  profit  sharing  plan  that
includes a 401(k) plan,  which covers all non-highly  compensated (as defined by
IRS regulations)  full time employees over age twenty-one with at least one year
of employment and 1,000 hours of service.  The Company also has a  non-qualified
deferred compensation plan for its highly compensated employees. The Company may
make annual  contributions  at the  discretion  of the Board of  Directors,  but
contributions  are limited to the maximum amount allowed under the provisions of
the Internal  Revenue Code. The Company did not contribute to the profit sharing
plan during fiscal 1997,  1996,  or 1995.  Effective  July 1, 1997,  the Company
established a separate plan for employees of the professional divisions so as to
make employees of those divisions  eligible to participate in that plan after 90
days or 375 hours of service. The amended plan is retroactive,  giving effect to
service performed prior to July 1, 1997.

   The  Company's  subsidiary,  Career,  has a  401(k)  plan  for  all of  their
non-highly  compensated  employees (as defined by IRS regulations) and temporary
employees,  and a  non-qualified  deferred  compensation  plan  for  its  highly
compensated  employees.  The plan allows eligible  employees to contribute up to
10% of compensation, as defined. Career matches employee contributions at 50% up
to the first 5% of total compensation.

   The Company  has assumed  many  401(k)  plans of  acquired  subsidiaries  and
intends to merge these plans, including the Career Plan, into the Company's plan
in the future.  Amounts charged to earnings with respect to the plans were $832,
$878  and  $695  for  the  years  ended  December  31,  1997,   1996  and  1995,
respectively.  Effective  January 1, 1998,  a  significant  number of the profit
sharing plans were merged and amended to become contributory plans.  Pursuant to
the terms of the various  profit  sharing  plans,  the Company will match 50% of
employee  contributions  up to the first 5% of total eligible  compensation,  as
defined.

8.  STOCKHOLDERS' EQUITY

Public Offerings of Common Stock

   On  October  3, 1995,  the  Company  completed  an  offering  for the sale of
15,000,000 shares of common stock. The Company received $72,403 from the sale of
the shares,  net of  underwriting  discount  and  expenses  associated  with the
offering.  A portion  of the net  proceeds  were  used to repay all  outstanding
indebtedness  under the  Company's  credit  facility,  which  was  approximately
$8,500.  The remaining  proceeds,  expended through December 31, 1995, were used
primarily to fund additional acquisitions.

   In April 1996,  the Company  completed an offering for the sale of 11,790,000
shares of common  stock.  The  Company  received  $304,900  from the sale of the
shares, net of underwriting  discount and expenses associated with the offering.
The net  proceeds  were used to repay  all  outstanding  indebtedness  under the
Company's  credit  facility,  which was  approximately  $92,800.  The  remaining
proceeds have been used primarily to fund acquisitions.

   The Company's  subsidiary,  Career,  prior to the date of the merger with the
Company,  completed  offerings in which Career issued 8,227,575 shares of common
stock,  adjusted for the conversion to the Company's  shares of common stock, in
which Career  received  $119,777,  net of  underwriting  discounts  and expenses
associated  with the  offerings.  Career used a portion of the proceeds from its
initial offering to repay subordinated notes.


                                       36
<PAGE>


Incentive Employee Stock Plans

   Effective  December 19, 1993, the Board of Directors  approved the 1993 Stock
Option Plan (the 1993 Plan) which  provides  for the granting of options for the
purchase  of up to an  aggregate  of  2,400,000  shares of  common  stock to key
employees.

   Under the 1993 Plan, the Stock Option  Committee (the Committee) of the Board
of Directors  has the  discretion  to award stock  options,  stock  appreciation
rights  (SARS) or  restricted  stock  options or  non-qualified  options and the
option price shall be established by the Committee.  Incentive stock options may
be granted at an exercise price not less than 100% of the fair market value of a
share on the  effective  date of the  grant  and  non-qualified  options  may be
granted at an  exercise  price not less than 50% of the fair  market  value of a
share on the effective date of the grant.

   On August 24,  1995,  the Board of  Directors  approved the 1995 Stock Option
Plan (the 1995  Plan)  which  provided  for the  granting  of  options  up to an
aggregate of 3,000,000  shares of common stock to key employees  under terms and
provisions  similar to the 1993 Plan. During fiscal 1996 and 1997, the 1995 Plan
was amended to provide for the granting of an additional 6,000,000 and 3,000,000
shares, respectively.

   The Company has assumed the stock option  plans of its  acquired  subsidiary,
Career,  in accordance  with terms of the merger  agreement  dated  November 14,
1996. At the date of acquisition Career had 2,254,831 options  outstanding under
the plans  which were  assumed.  As of  December  31,  1997 the plan had 372,445
options outstanding.

Non-Employee Director Stock Plan

     Effective December 29, 1993, the Board of Directors of the Company approved
a stock option plan (Director Plan) for non-employee directors,  whereby 600,000
shares  of  common  stock  have  been  reserved  for  issuance  to  non-employee
directors.  The  Director  Plan  allows each  non-employee  director to purchase
60,000 shares at an exercise price equal to the fair market value at the date of
the grant upon election to the Board. In addition, each non-employee director is
granted  20,000  options upon the  anniversary  date of the  director's  initial
election date. The options become  exercisable  ratably over a five-year  period
and  expire  ten years  from the date of the grant.  However,  the  options  are
exercisable  for a maximum of three  years after the  individual  ceases to be a
director  and if the  director  ceases  to be a  director  within  one  year  of
appointment the options are canceled. In fiscal 1996, the Company granted 80,000
options under the Director's  Plan at an average  exercise  price of $25.31.  In
fiscal 1997 the Company granted 120,000 options at an average  exercise price of
$28.35.  During 1997, the Board of Directors  amended the Non-Employee  Director
Stock  Plan,  increasing  the number of shares  available  under the plan to 1.6
million shares.

   The following table summarizes the Company's Stock Option Plans:

<TABLE>
<CAPTION>
                                                                                                         Weighted
                                                                                       Range of          Average
                                                                         Shares     Exercise Prices   Exercise Price
---------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>         <C>                  <C>
Balance, January 1, 1995                                                2,935,716   $ 0.18 - $ 5.81      $   1.08
   Granted                                                              4,002,493   $ 2.31 - $11.00      $   4.74
   Exercised                                                             (867,113)  $ 0.18 - $ 5.80      $   0.37
   Canceled                                                                (6,640)  $ 1.39 - $ 5.81      $   1.25
                                                                       ----------------------------------------------
Balance, December 31, 1995                                              6,064,456   $ 0.18 - $11.00      $   3.88
   Granted                                                              6,594,535   $11.27 - $33.75      $  19.50
   Exercised                                                           (2,029,163)  $ 0.18 - $12.09      $   2.76
   Canceled                                                               (61,467)  $ 5.81 - $22.22      $  11.69
                                                                       ----------------------------------------------
Balance, December 31, 1996                                             10,568,361   $ 0.69 - $33.75      $  13.67
   Granted                                                              2,452,176   $16.13 - $31.38      $  18.92
   Exercised                                                           (3,069,143)  $ 1.25 - $32.00      $   7.02
   Canceled                                                               (43,273)  $11.80 - $24.92      $  23.18
                                                                       ----------------------------------------------
BALANCE, DECEMBER 31, 1997                                              9,908,121   $ 0.69 - $33.75      $  16.76
                                                                       ==============================================
</TABLE>

                                       37
<PAGE>


   The following table summarizes information about stock options outstanding at
December 31, 1997:

<TABLE>
<CAPTION>
                                                         Outstanding                          Exercisable
                                           ------------------------------------------- -----------------------------
                                                                        Average                        Average
                                                          Average       Exercise                       Exercise
                                            Shares        life (a)        Price          Shares         Price
--------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>           <C>            <C>           <C>
$  0.83 - $ 13.67                          2,299,699       7.20             5.66       1,656,405         4.95
$ 13.83 - $ 13.83                            344,200       8.03            13.83          34,200        13.83
$ 14.50 - $ 14.50                          1,920,000       8.07            14.50       1,632,000        14.50
$ 16.00 - $ 19.75                          2,056,722       9.02            17.44         151,738        17.18
$ 20.00 - $ 33.75                          3,287,500       8.41            25.67       1,646,717        25.95
                                           -------------------------------------------------------------------------
Total                                      9,908,121       8.18         $  16.76       5,121,060     $  15.16
                                           =========================================================================
</TABLE>

(a) Average contractual life remaining in years.

     At year-end  1996,  options  with an average  exercise  price of $8.07 were
exercisable on 5.0 million  shares;  at year-end  1995,  options with an average
exercise price of $3.28 were exercisable on 3.5 million shares.

     The  Company  has  adopted  SFAS  No.  123,   "Accounting  for  Stock-Based
Compensation,"  issued in October 1995.  As permitted by the  provisions of SFAS
No. 123,  the Company  applied  APB  Opinion 25 and related  interpretations  in
accounting  for its  employee  stock  option  plans and,  accordingly,  does not
recognize   compensation   cost.   If  the  Company  had  elected  to  recognize
compensation  cost for options granted in 1996 and 1997, based on the fair value
of the options  granted at the grant date as  prescribed  by SFAS No.  123,  net
income and net income per share would have been reduced to the pro forma amounts
indicated below.

<TABLE>
<CAPTION>
                                                                                         1997            1996
--------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>            <C>
Net Income
   As reported                                                                       $    102,033   $     31,210
   Pro forma                                                                         $     92,353   $     21,717

Basic net income per common share
   As reported                                                                       $       1.00   $       0.34
   Pro forma                                                                         $       0.91   $       0.24

Diluted net income per common share
   As reported                                                                       $       0.93   $       0.33
   Pro forma                                                                         $       0.85   $       0.24


</TABLE>

   The weighted average fair values of options granted during 1997 and 1996 were
$6.16 and $4.57 per share, respectively.  The fair value of each option grant is
estimated on the date of grant using the Black Scholes option-pricing model with
the following assumptions:

<TABLE>
<CAPTION>
                                                                                               Fiscal
                                                                                         1997          1996
-------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>            <C>
Expected dividend yield                                                                     -             -
Expected stock price volatility                                                           .30           .30
Risk-free interest rate                                                                  6.12          5.90
Expected life of options (years)                                                         3.40          3.50

</TABLE>

   During  Fiscal 1996,  the  Company's  Board of Directors  issued a restricted
stock grant of 345,000 shares,  under the 1995 Plan, to the Company's  President
and Chief Executive  Officer,  which vests over five years. The Company recorded
$4,892 in deferred  compensation  expense which is being amortized on a straight
line basis over the vesting period of the grant.

                                       38
<PAGE>


Stock Splits

   Effective  November 27, 1995,  the  Company's  Board of Directors  approved a
two-for-one  stock  split of  common  stock  for  stockholders  of  record as of
November 9, 1995. A total of $123 was transferred  from  additional  contributed
capital to the stated value of common stock in connection  with the stock split.
The par value of the common  stock  remains  unchanged.  All share and per share
amounts have been restated to retroactively reflect the stock split.

   Effective March 6, 1996, the Company's  Board of Directors  approved a three-
for-one stock split of common stock for  stockholders  of record as of March 20,
1996. A total of $494 was transferred from additional contributed capital to the
stated value of common stock in connection  with the stock split.  The par value
of the common stock remains unchanged. All share and per share amounts have been
restated to retroactively reflect the stock split.

9.  NET INCOME PER COMMON SHARE

     In accordance with SFAS No. 128,  "Earnings per Share",  the calculation of
basic net income per common  share and  diluted  net income per common  share is
presented below:

<TABLE>
<CAPTION>
                                                                          1997            1996          1995
----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>            <C>            <C>
Basic net income per common share computation:
   Income available to common shareholders                            $    102,033   $     31,210   $     28,572
                                                                      ------------------------------------------
   Average common shares outstanding                                       101,914         90,582         62,415
                                                                      ------------------------------------------
   Basic net income per common share                                  $       1.00   $       0.34   $       0.46
                                                                      ==========================================
Diluted net income per common share computation:
   Income available to common shareholders                            $    102,033   $     31,210   $     28,572
   Interest paid on convertible debt, net of tax benefit                     3,712          2,784            840
   Income available to common shareholders and assumed                ------------------------------------------
   conversions                                                        $    105,745   $     33,994   $     29,412
                                                                      ------------------------------------------
   Average common shares outstanding                                       101,914         90,582         62,415
   Incremental shares from assumed conversions:
      Convertible debt                                                       7,599          8,363          4,286
      Stock options                                                          3,596          4,735          2,627
                                                                      ------------------------------------------
   Diluted average common shares outstanding                               113,109        103,680         69,328
                                                                      ------------------------------------------
   Diluted net income per common share                                $       0.93   $       0.33   $       0.42
                                                                      ==========================================
</TABLE>

10. CONCENTRATION OF CREDIT RISK:

   The Company's  financial  instruments that are exposed to  concentrations  of
credit risk consist primarily of cash and trade accounts receivable. The Company
places its cash with what it believes to be high credit quality institutions. At
times such investments may be in excess of the FDIC insurance limit. The Company
routinely   assesses  the  financial   strength  of  its  customers  and,  as  a
consequence, believes that its trade accounts receivable credit risk exposure is
limited.

11. ACCRUED WORKERS' COMPENSATION CLAIMS:

   The Company is primarily  self-insured with respect to workers'  compensation
claims for all employees,  supplemented  by insurance  coverage which limits the
Company's liability per occurrence.  The limit of the Company's liability ranges
from $250 to $350. The excess insurance  coverage provides coverage in excess of
the limit of the Company's liability per occurrence. In addition, several of the
Company's subsidiaries are fully insured under various plans and, therefore, are
not included in the self insured plans.

     Included in the Balance Sheet caption  "Accrued  Payroll and Related Taxes"
is an accrual of $19.5  million and $19.8  million for the years ended  December
31, 1997 and 1996, respectively,  for the estimated amount of unsettled workers'
compensation  claims.  This estimate is based,  in part, on an evaluation of the
information  provided  by  the  Company's  third-party   administrator  and  its
independent actuary, and represents  management's best estimate of the Company's
future liability. The Company's management believes that the difference, if any,
between the amounts  recorded at December 31, 1997, for its estimated  liability
and the costs of settling the actual claims, will not be material to the results
of operations.

   The Company has provided certain customers with irrevocable letters of credit
to guarantee  the payment of the  Company's  workers'  compensation  claims.  At
December  31,  1997 and 1996,  the  letters of credit  amounted  to $16,595  and
$15,225, respectively.
                                       39
<PAGE>


12. CONVERTIBLE DEBT:

     At January 1, 1995,  the Company had  outstanding  $1,800 of 6% Convertible
Subordinated Debentures due January 31, 1997. The debentures were convertible at
the option of the debenture holders into shares of the Company's common stock at
a price of $1.25 per share. In addition,  certain  debenture holders were issued
options  to  purchase  an  additional  $2,000  of  6%  convertible  subordinated
debentures,  due January 31,  1997,  which were  convertible  into shares of the
Company's  common  stock at $1.38 per share.  During  fiscal 1995 the  debenture
holders converted their options.  Debentures in the amount of $1,000, $1,300 and
$1,500 in principal  amount of the Company's 6% debentures  were  converted into
727,272,  1,040,000  and 1,127,262  shares of the Company's  common stock during
1997, 1996 and 1995, respectively.

   The Company's subsidiary,  Career, has $86,250 of 7% Convertible Senior Notes
due 2002 which have been assumed by the Company  pursuant to their November 1996
merger.  Interest on the notes is paid  semiannually  on May 1 and November 1 of
each year. The notes are convertible at the option of the holder thereof, at any
time after 90 days following the date of original  issuance thereof and prior to
maturity, unless previously redeemed, into shares of common stock of the Company
at a  conversion  price of $11.35 per share,  subject to  adjustment  in certain
events.

   The notes are redeemable,  in whole or in part, at the option of the Company,
at any time on or after November 1, 1998, at stated redemption prices,  together
with accrued  interest.  The notes do not provide for any sinking  fund.  Upon a
Designated  Event (as defined and including a change of control)  holders of the
notes will have the right,  subject to certain  restrictions and conditions,  to
require the Company to purchase all or any part of the Notes at a purchase price
equal to 101% of the principal  amount thereof  together with accrued and unpaid
interest to the date of purchase.

     The notes have been unconditionally guaranteed by the Company and joint and
severally  guaranteed by each of Career's  present and any future  subsidiaries.
The  guarantee  of the Company  and each  subsidiary  of Career is an  unsecured
general  obligation  of the Company and such  subsidiary,  ranking  equally with
other unsecured  obligations of the Company and such subsidiary.  The obligation
of the Company and each of Career's  present and any future  subsidiaries  under
its guarantee is full and unconditional.

13. FAIR VALUE OF FINANCIAL INSTRUMENTS

     The methods and assumptions  used to estimate the fair values of each class
of financial instruments are as follows:

   Debt. The fair value of debt  instruments is based on rates  available to the
Company for debt with similar terms and maturities and approximates its carrying
amount.

   Convertible  Senior  Notes.  There  are  no  quoted  market  prices  for  the
convertible  senior notes.  Given the terms of the respective  notes,  the notes
could be redeemed for $87,113,  or converted into shares of the Company's  stock
having a market value of approximately $174.8 million at December 31, 1997.

                                       40
<PAGE>


14.  SUMMARY DATA OF SUBSIDIARY:

   The  following  table details the  summarized  financial  information  of the
Company's wholly owned subsidiary,  Career Horizons,  Inc., and Career Horizons'
subsidiaries as of and for the fiscal year ended December 31, 1997:

<TABLE>
<CAPTION>
                                                                                Dec. 31, 1997
---------------------------------------------------------------------------------------------
<S>                                                                             <C>
Current assets                                                                   $    186,674
Non-current assets                                                                    251,261
Current liabilities                                                                    67,459
Non-current liabilities                                                               114,520
Revenue                                                                               901,465
Gross profit                                                                          232,520
Income from operations                                                                 59,883
</TABLE>

15.  QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
                                                     For the Three Months Period Ended                  For the
                                       ----------------------------------------------------------      Year Ended
                                          Mar. 31,        June 30,       Sept. 30,      Dec. 31,        Dec. 31,
                                            1997            1997           1997           1997           1997
-------------------------------------------------------------------------------------------------   ---------------
<S>                                    <C>            <C>             <C>            <C>            <C>
Revenue                                $    519,482   $    589,340    $    640,859   $    675,145   $  2,424,826
Gross profit                                125,472        147,128         164,164        176,964        613,728
Income from operations                       36,945         43,097          52,049         54,473        186,564
Income before provision for income
   taxes                                     34,905         38,887          45,993         47,790        167,575
Net income                                   21,461         23,887          28,691         27,994        102,033
Pro forma net income                         21,461         23,887          28,691         27,994        102,033
Pro forma basic net income per
   common share                        $       0.21   $       0.24    $       0.28    $      0.27   $       1.00
Pro forma diluted net income per
   common share                        $       0.20   $       0.22    $       0.26    $      0.25   $       0.93

</TABLE>


<TABLE>
<CAPTION>

                                                     For the Three Months Period Ended                   For the
                                       ----------------------------------------------------------       Year Ended
                                         Mar. 31,         June 30,       Sept. 30,      Dec. 31,         Dec. 31,
                                           1996             1996           1996           1996            1996
-------------------------------------------------------------------------------------------------   ---------------
<S>                                    <C>            <C>             <C>            <C>            <C>
Revenue                                $    317,834   $    386,322    $    434,528   $    472,763   $  1,611,447
Gross profit                                 71,071         87,874         101,866        115,882        376,693
Income from operations                       15,309         20,375          29,422          8,279         73,385
Income before provision for
   income taxes                              12,958         20,139          29,427          7,458         69,982
Net income                                    8,400         10,403          17,926         (5,519)        31,210
Pro forma net income                          7,945         11,420          17,926         (2,439)        34,852
Pro forma basic net income per
   common share                        $       0.11   $       0.12    $       0.18   $      (0.02)  $       0.38
Pro forma diluted net income per
   common share                        $       0.09   $       0.11    $       0.17   $      (0.01)  $       0.36
</TABLE>


                                       41
<PAGE>


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

     There  have  been no  disagreements  with or  changes  in the  registrant's
independent accountants since the Company's inception.

                                    PART III

         Information  required by Part III is  incorporated  by reference to the
Registrant's  Definitive  Proxy Statement to be filed pursuant to Regulation 14A
("the Proxy Statement") not later than 120 days after the end of the fiscal year
covered by this report.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     Part of the information  required by this item is incorporated by reference
from the section  entitled  "Election of Directors" and "Compliance with section
16(a) of the Securities  Exchange Act of 1934" contained in the proxy statement.
Information  regarding the Company's executive officers who are not discussed in
the Proxy Statement is as follows:

<TABLE>
<CAPTION>
Name                          Age                          Office
----                          ---                          ------
<S>                         <C>                          <C>
James R. O'Reilly             54                           Chief Operating Officer
Marc M. Mayo                  42                           Senior Vice President and General Counsel
Robert P. Crouch              29                           Vice President and Controller
</TABLE>

     James R. O'Reilly has served as the Company's Chief Operating Officer since
October,  1993 and as Vice  President  -  Southeast  Region  from the  Company's
formation in May 1992 to October 1993.

     Marc M. Mayo has served as Senior Vice President and General  Counsel since
February  1, 1997.  Prior  thereto,  Mr.  Mayo was with the law firm of Coffman,
Coleman, Andrews & Grogan for fourteen years, the last nine as a partner.

     Robert P.  Crouch,  29,  joined the  Company in  November  1995 as Internal
Auditor and in June 1997 was  promoted to Vice  President  and  Controller.  Mr.
Crouch is a  certified  public  accountant  and prior to joining the Company was
employed with Arthur  Andersen LLP. He received a Bachelor of Science  degree in
accounting  from the  University of Florida and a Masters of  Accounting  degree
from the University of North Carolina at Chapel Hill.

ITEM 11. EXECUTIVE COMPENSATION

         The information required by this item is incorporated by reference from
the section entitled "Executive Compensation" contained in the Proxy Statement.


ITEM     12. SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information required by this item is incorporated by reference from the
section entitled "Voting Securities" contained in the Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this item is incorporated by reference from
the  section  entitled   "Certain   Relationships   and  Related   Transactions;
Compensation  Committee Interlocks and Insider  Participation"  contained in the
Proxy Statement.


                                       42
<PAGE>
                                    PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
 (a)  1.  Financial Statements

         The following  consolidated financial statements of the Company and its
subsidiaries are included in Item 8 of this report.

Report of Independent Accountants

Consolidated  Balance Sheets as of December 31, 1997 and 1996

Consolidated  Statements  of Income  for each of the three  years in the  period
ended  December 31, 1997

Consolidated  Statements of Cash Flows for each of the three years in the period
ended December 31, 1997

Consolidated  Statements of Stockholders'  Equity for each of the three years in
the period ended December 31, 1997

Notes to Consolidated Financial Statements.

      2. Financial Statement Schedules

         Financial  statement  schedules  required to be included in this report
are either shown in the financial  statements and notes thereto included in Item
8 of this report or have been omitted because they are not applicable.

      3. Exhibits

<TABLE>
         <S>      <C>
         2.1      Agreement and Plan of Merger related to the acquisition of The McKinley Group, Inc.  and MGI
                  Services, Inc. (2)

         2.2      Agreement and Plan of Merger related to the acquisition of Career Horizons, Inc. (3)

         3.1      Articles of Incorporation, as amended. (1)

         3.2      Bylaws, as amended.(13)

         4.1      Indenture, dated as of October 19, 1995 between Career Horizons, Inc. and Chemical Bank, as
                  Trustee. (6)

         4.2      First Supplemental Indenture, dated October 19, 1996, among Career Horizons, Inc., each of the
                  subsidiaries of Career Horizons, Inc. and the Trustee. (6)

         4.3      Second Supplemental Indenture, dated November 13, 1996, by and among Career Horizons, Inc.,
                  each of the subsidiaries of Career Horizons, Inc. and the Trustee. (7)

         4.4      Third Supplemental Indenture, dated November 14, 1996, by and among Career Horizons, Inc., each
                  of the subsidiaries of Career Horizons, Inc. and the Trustee. (7)

         4.5      Form of Convertible Note. (6)

         10.1     AccuStaff Incorporated Employee Stock Plan. (4)*

         10.2     AccuStaff Incorporated Non-Employee Director Stock Plan. (4)*

         10.3     Form of Employee Stock Option Award Agreement. (4)*

         10.4     Form of Non-Employee Director Stock Option Award Agreement. (4)*

         10.5     Profit Sharing Plan. (4)*

         10.6     Amended and Restated Revolving Credit and Reimbursement Agreement by and between the Company
                  and NationsBank of Florida, National Association dated June 6, 1995. (4)
         10.7     Employment Agreement with Derek E. Dewan, as amended. (8)*

         10.8     Staffing Services Contract between American Transtech, Inc. and People Systems, Inc. (4)
         10.9     AccuStaff Incorporated 1995 Stock Option Plan. (4)*

         10.10    Form of Stock Option Agreement under AccuStaff Incorporated 1995 Stock Option Plan (4)*

         10.11    Executive Employment Agreement with Michael D. Abney. (1)*

         10.12    Executive Employment Agreement with James R. O'Reilly. (1)*

         10.13    Executive Employment Agreement with Marc M. Mayo.*

         10.14    Form of Director's and Officer's Indemnification Agreement. (4)*

         10.15    Franchise Agreement between the Company and People Systems, Inc. (4)
</TABLE>

                                       43
<PAGE>

<TABLE>
         <S>      <C>
         10.16    Second Amended and Restated Revolving Credit Facility with NationsBank, National Association
                  (South) dated February 12, 1996. (1)

         10.17    Warrant Agreement between the Registrant and NationsBank, National Association (South) dated
                  January 9, 1996. (1)

         10.18    Note  made by  Registrant  in favor of  NationsBank,  National
                  Association (South) dated March 18, 1996.(1)

         10.19    Third Amended and Restated Revolving Credit and Reimbursement Agreement by and among Company
                  and NationsBank, N.A. (South), dated May 2, 1996. (9)

         10.20    Fourth Amended and Restated Revolving Credit and Reimbursement Agreement by and among Company
                  and Nations Bank, N.A. (South), as Agent, dated May 23, 1997.(12)

         10.21    Purchase Agreement between Company and Payroll Transfers, Inc., dated   August 8, 1996. (10)

         10.22    8% Subordinated Convertible Note due August 8, 1996, made by Payroll Transfers, Inc. in favor
                  of Company. (10)

         10.23    Strategic Relationship Agreement between Company and Payroll Transfers, Inc., dated August 8,
                  1996. (10)

         10.24    Registration Rights Agreement between Company and Payroll Transfers, Inc., dated August 8,
                  1996. (10)

         21.1     Subsidiaries of the Registrant.

         23.1     Consent of Coopers & Lybrand L.L.P.

         27       Financial Data Schedule
</TABLE>

(b)      Reports on Form 8-K. The Registrant filed the following reports on Form
         8-K during the fourth quarter of 1997:

                  Form 8-K dated November 14, 1997, reporting the closing of the
                  acquisition of Hunterskil  Howard plc filed pursuant to Item 2
                  of Form 8-K and the  closing  of the  acquisition  of IT Link,
                  Ltd. filed pursuant to Item 5 of Form 8-K.

(c)      The  response  to this  portion of Item 14 is  submitted  as a separate
         section of this report.

(d)      Financial Statement Schedule - not applicable.
(1)      Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for the year ended December 31, 1995.
(2)      Incorporated  by reference to the Company's  Current Report on Form 8-K
         dated June 19, 1996.
(3)      Incorporated  by reference to the Company's  Current Report on Form 8-K
         dated August 25, 1996.
(4)      Incorporated  by reference to the Company's  Registration  Statement on
         Form S-1 (No. 33-79806).
(5)      Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the period ended July 2, 1995.
(6)      Previously filed as an exhibit to Career Horizons, Inc.'s Registration
         Statement on Form S-3 (Reg. No. 33-99840) and incorporated by reference
         herein.
(7)      Previously filed as an exhibit to Company's  Registration  Statement on
         Form S-3 (Reg. No. 333-18695) and incorporated by reference herein.
(8)      Employment Agreement,  First, Second and Third Amendments  incorporated
         by reference to the Company's Registration Statement on Form S-1, filed
         August 29, 1996 (Reg. No. 33-96372).  Fourth Amendment  incorporated by
         reference to the Company's Quarterly Report on Form 10-Q for the period
         ended March 31, 1996).
(9)      Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the period ended June 30, 1996.
(10)     Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the period ended September 30, 1996.
(11)     Incorporated  by reference to the Company's  Registration  Statement on
         Form S-4 (Reg.No. 333-12207) and incorporated by reference herein.
(12)     Incorporated  by reference to the  Company's  Quarterly  Report on Form
         10-Q for the period ended June 30, 1997.
(13)     Incorporated  by reference to the Company's  Annual Report on Form 10-K
         for the year ended December 31, 1996.
 *       A management contract or compensatory plan, contract or arrangement.
                                       44
<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, thereunto duly authorized.

ACCUSTAFF INCORPORATED


By:  /s/ Derek E. Dewan
   --------------------------
Derek E. Dewan
President, Chairman of
the Board and Chief Executive
Officer

Date: March 31, 1998

     Pursuant to the  requirements  of  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.





     Signatures                         Title                        Date
--------------------------------------------------------------------------------


/s/ DEREK E. DEWAN                   President, Chairman         March 31, 1998
-------------------------------      of the Board and Chief
Derek E. Dewan                       Executive Officer

/s/ MICHAEL D. ABNEY                  Senior Vice President,      March 31, 1998
-------------------------------      Chief Financial Officer,
Michael D. Abney                     Treasurer, Secretary and
                                     Director

/s/ ROBERT P. CROUCH                 Vice President and          March 31, 1998
-------------------------------      Controller
Robert P. Crouch

/s/ JOHN K. ANDERSON, JR.             Director                    March 31, 1998
-------------------------------
John K. Anderson

/s/ T. WAYNE DAVIS                   Director                    March 31, 1998
-------------------------------
T. Wayne Davis

/s/ DANIEL M. DOYLE                  Director                    March 31, 1998
-------------------------------
Daniel M. Doyle

/s/ PETER J. TANOUS                  Director                    March 31, 1998
-------------------------------
Peter J. Tanous

                                       45
<PAGE>


EXHIBIT INDEX

21     Subsidiaries of the Registrant

23     Consents of Experts and Counsel

29     Financial Data Schedule