<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

                  For the quarterly period ended December 31, 2000

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

                  For the transition period from __________ to __________

                  Commission file number 001-15789

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


           DELAWARE                                      22-3499261
--------------------------------------------------------------------------------
(State of other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

            500 CRAIG ROAD, SUITE 201, MANALAPAN, NEW JERSEY   07726
--------------------------------------------------------------------------------
                (Address of principal executive offices)     (Zip Code)

                                 (732) 866-0300
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
         (Former name, former address and former fiscal year, if changed
                               since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (1) has been subject to such filing
requirements for the past 90 days. Yes |X| No |_|

As of February 13, 2001, 5,811,619 shares of the Registrant's common stock were
outstanding.
<PAGE>

PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS

                          STRATUS SERVICES GROUP, INC.
                            Condensed Balance Sheets

                                     Assets

<TABLE>
<CAPTION>
                                                             December 31,    September 30,
                                                                 2000            2000
                                                             ------------    ------------
Current assets                                               (Unaudited)
<S>                                                          <C>             <C>
     Cash and cash equivalents                               $    993,914    $  1,030,722
     Due from factor - less allowance for recourse
         obligation of $ -0- and $30,000                             --         1,154,012
     Accounts receivable - less allowance for doubtful
         accounts of $335,000 and $225,000                     11,586,515         852,876
     Unbilled receivables                                       1,137,385       1,236,002
     Loans to related parties                                      64,500          64,500
     Loans receivable                                             161,000          56,000
     Prepaid insurance                                            125,364         432,674
     Prepaid expenses and other current assets                    332,210         278,169
     Deferred taxes                                               428,000         340,000
                                                             ------------    ------------
                                                               14,828,888       5,444,955

Property and equipment, net of accumulated depreciation         1,298,488       1,118,625
Goodwill, net of accumulated amortization                       4,496,656       3,716,538
Deferred financing costs, net of accumulated amortization         444,849            --
Other assets                                                       55,010          38,163
                                                             ------------    ------------
                                                             $ 21,123,891    $ 10,318,281
                                                             ============    ============

                      Liabilities and Stockholders' Equity
Current liabilities
     Loans payable (current portion)                         $     27,662    $     27,012
     Notes payable - acquisition (current portion)                160,425         275,000
     Line of credit                                             8,607,083            --
     Insurance obligation payable                                 145,194         367,100
     Accounts payable and accrued expenses                      1,191,509       1,172,148
     Accrued payroll and taxes                                  1,124,509       1,105,363
     Payroll taxes payable                                        443,849         412,513
                                                             ------------    ------------
                                                               11,700,231       3,359,136

Loans payable (net of current portion)                            127,530         134,700
Notes payable - acquisition (net of current portion)                 --            25,000
Convertible debt                                                1,436,724            --
                                                             ------------    ------------
                                                               13,264,485       3,518,836
Commitments and contingencies

Stockholders' equity
     Preferred stock, $.01 par value, 5,000,000 shares
        authorized, none issued and outstanding                      --              --
     Common stock, $.01 par value, 25,000,000 shares
        authorized 5,708,704 and 5,712,037 shares
        issued and outstanding                                     57,087          57,120
     Additional paid-in capital                                11,289,577      10,554,782
     Deferred compensation                                        (56,200)        (67,900)
     Accumulated deficit                                       (3,431,058)     (3,744,557)
                                                             ------------    ------------
         Total stockholders' equity                             7,859,406       6,799,445
                                                             ------------    ------------
                                                             $ 23,123,891    $ 10,318,281
                                                             ============    ============
</TABLE>

                  See notes to condensed financial statements.


                                       1
<PAGE>

                          STRATUS SERVICES GROUP, INC.
                       Condensed Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                             Three Months Ended
                                                                December 31,
                                                            2000            1999
                                                        ------------    ------------
<S>                                                     <C>             <C>
Revenues (including $ -0- and $194,000
  from related parties)                                 $ 18,660,417    $  7,723,887

Cost of revenue (including $ -0- and
  $172,000 from related parties)                          14,361,842       5,610,017

                                                        ------------    ------------
Gross Profit                                               4,298,575       2,113,870

Selling, general and administrative expenses               3,781,335       1,682,544
                                                        ------------    ------------

Earnings from operations                                     517,240         431,326
                                                        ------------    ------------

Other income (expenses)
  Finance charges                                           (100,934)       (173,115)
  Interest and financing costs                              (198,498)       (104,172)
  Other income                                                 7,691           1,897
                                                        ------------    ------------
                                                            (291,741)       (275,390)
                                                        ------------    ------------

Earnings before benefit from income taxes                    225,499         155,936

Income tax benefit                                            88,000            --
                                                        ------------    ------------

Net earnings                                            $    313,499    $    155,936
                                                        ============    ============

Net earnings per common share -
  Basic                                                 $        .05    $        .04
  Diluted                                               $        .05             .03

Weighted average shares, outstanding per common share
  Basic                                                    5,709,936       4,308,131
  Diluted                                                  6,112,727       4,492,024
</TABLE>

                  See notes to condensed financial statements.


                                       2
<PAGE>

                          STRATUS SERVICES GROUP, INC.
                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    Three Months Ended
                                                          December 31, 2000  December 31, 1999
                                                          -----------------  -----------------
<S>                                                          <C>               <C>
Cash flows from operating activities
  Net earnings                                               $   313,499       $   155,936
                                                             -----------       -----------
  Adjustments to reconcile net earnings
       to net cash used by operating activities
      Depreciation                                                81,314            29,319
      Amortization                                                75,599            41,124
      Deferred financing costs amortization                       10,879              --
      Deferred taxes - benefit                                   (88,000)             --
      Imputed interest                                           122,211            18,253
      Accrued interest                                              --              28,275
      Compensation - stock options                                11,700            11,700

  Changes in operating assets and liabilities
      Due from factor/Accounts receivable                     (4,339,585)       (1,025,351)
      Prepaid insurance                                          307,310           170,877
      Prepaid expenses and other current assets                  (54,041)          (52,684)
      Other assets                                               (16,847)            6,113
      Insurance obligation payable                              (221,906)         (150,044)
      Accrued payroll and taxes                                   19,146          (430,345)
      Payroll taxes payable                                       31,336            51,290
      Accounts payable and accrued expenses                     (155,639)          165,695
                                                             -----------       -----------
              Total adjustments                               (4,216,523)       (1,135,778)
                                                             -----------       -----------
                                                             $(3,903,024)      $  (979,842)
                                                             ===========       ===========
Cash flows (used in) investing activities
  Purchase of property and equipment                            (229,527)          (73,326)
  Payments for business acquisitions                            (637,367)             --
  Loans receivable                                              (105,000)             --
                                                             -----------       -----------
                                                                (971,894)          (73,326)
                                                             -----------       -----------
Cash flows from financing activities
  Proceeds from loans payable                                       --             750,000
  Payments of loans payable                                       (6,520)          (52,000)
  Payments of notes payable - acquisitions                      (214,575)             --
  Net proceeds from line of credit                             3,350,342              --
  Net proceeds from convertible debt                           1,723,988              --
  Purchase of treasury stock                                     (15,125)             --
  Payments of registration costs                                    --             (56,712)
                                                             -----------       -----------
                                                               4,838,110           641,288
                                                             -----------       -----------

Net change in cash and cash equivalents                          (36,808)         (411,880)

Cash and cash equivalents - beginning                          1,030,722           423,072
                                                             -----------       -----------

Cash and cash equivalents - ending                           $   993,914       $    11,192
                                                             ===========       ===========
Supplemental disclosure of cash paid
    Interest                                                 $    57,037       $    29,294
Schedule of Noncash Investing and Financing Activities
    Fair value of assets acquired                            $   887,367       $      --
    Less: cash paid                                             (637,367)             --
                                                             -----------       -----------
    Liabilities assumed                                      $   250,000       $      --
                                                             ===========       ===========
    Issuance of common stock in exchange for notes payable   $ 1,000,000           300,000
                                                             ===========       ===========
    Accrued and imputed interest                             $   122,211       $    46,528
                                                             ===========       ===========
</TABLE>

                  See notes to condensed financial statements.


                                       3
<PAGE>

                          STRATUS SERVICES GROUP, INC.
                     Notes to Condensed Financial Statements
                                   (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying condensed consolidated financial statements have been prepared
by the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted pursuant to such rules and regulations. These condensed consolidated
financial statements reflect all adjustments (consisting only of normal
recurring adjustments) that, in the opinion of management, are necessary to
present fairly the financial position, the results of operations and cash flows
of the Company for the periods presented. It is suggested that these condensed
consolidated financial statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report on Form 10-KSB/A.

The results of operations for the interim periods presented are not necessarily
indicative of the results to be expected for the full year.

Certain items in the condensed statement of operations for the three months
ended December 31, 1999 have been reclassified to conform to the three months
ended December 31, 2000 presentation.

NOTE 2 - EARNINGS/LOSS PER SHARE

Basic "Earnings Per Share" ("EPS") excludes dilution and is computed by dividing
earnings available to common stockholders by the weighted-average number of
common shares outstanding during the period. Diluted EPS assumes conversion of
dilutive options and warrants, and the issuance of common stock for all other
potentially dilutive equivalent shares outstanding. Dilutive shares were 402,791
and 183,893 for the three months ended December 31, 2000 and 1999, respectively.

NOTE 3 - ACQUISITION

On October 27, 2000, the Company purchased substantially all of the tangible and
intangible assets, excluding accounts receivable, of seven offices of Tandem, a
division of Outsource International, Inc. The initial purchase price for the
assets was $125,000; of which $50,000 was paid in cash at the closing and the
remaining $75,000 was represented by a promissory note secured by the assets
purchased by the Company. The note was payable in twenty-four equal monthly
installments of principal and interest at a variable rate of prime plus two
percent beginning December 1, 2000. In January 2001, the Company exercised an
option to repay the outstanding balance of the note plus $175,000 in lieu of an
earnout payment of thirty percent of the Earnings Before Interest, Taxes,
Depreciation and Amortization ("EBITDA") of the acquired business for a two year
period.

The excess of cost paid over net assets acquired resulted in goodwill of
$855,718, computed as follows:

<TABLE>
<S>                                                                   <C>
Net assets acquired
    Furniture and equipment                                           $  31,650
    Accrued holiday and vacation pay                                    (21,758)
                                                                      ---------
                                                                          9,892
    Amounts paid
           Cash                                                          50,000
           Note payable                                                  75,000
           Earnout payable                                              175,000
           Finder's fees and other costs                                565,610
                                                                      ---------
                                                                        865,610
                                                                      ---------

    Excess of amounts paid over net assets acquired - goodwill        $ 855,718
                                                                      =========
</TABLE>


                                       4
<PAGE>

NOTE 4 - FACTORING AGREEMENT

The Company had a factoring agreement under which it was able to sell qualified
trade accounts receivable, with limited recourse provisions. The Company was
required to repurchase or replace any receivable remaining uncollected for more
than 90 days.

On December 12, 2000, the Company terminated its agreement with the factor. As
part of the termination agreement, the Company repurchased all accounts
receivable from the factor with proceeds from a new line of credit (see
Note 5).

NOTE 5 - LINE OF CREDIT

On December 12, 2000, the Company entered into a loan and security agreement
with a lending institution whereby the Company can borrow up to 85% of eligible
accounts receivable, as defined, not to exceed $12 million. Borrowings under the
agreement bear interest at 1 1/2% above the prime rate and are collateralized by
substantially all of the Company's assets. Approximately $5,100,000 of the
initial borrowing under this agreement was used to repurchase accounts
receivable from the factor (see Note 4).

NOTE 6 - CONVERTIBLE DEBT

On December 4, 2000, the Company issued $1,987,400 of convertible debt,
comprised of 6% convertible debentures ("Debentures"). The Debentures have a
maturity date of five years from issuance. Each debenture is convertible after
120 days from issuance into the number of shares of common stock determined by
dividing the principal amount of the debenture by the lesser of (a) $4.65 or (b)
75% of the average closing bid price of the common stock for the five trading
days immediately preceding the date of conversion.

In accordance with generally accepted accounting principles, the discount
arising from the 75% beneficial conversion feature, amounting to $662,000, is
considered to be interest expense and is recognized in the statement of
operations during the period from the issuance of the debt to the earliest time
at which the debt becomes convertible.

NOTE 7 - INCOME TAXES

There was no provision for income taxes for the three months ended December 31,
1999, because the Company has net operating loss carryforwards with a
corresponding valuation allowance against them. The income tax benefit for the
three months ended December 31, 2000, is the result of a decrease in the
valuation allowance.


                                       5
<PAGE>

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

This Form 10-Q contains "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements relate to future
economic performance, plans and objectives of management for future operations
and projections of revenue and other financial items that are based on the
beliefs of our management, as well as assumptions made by, and information
currently available to, our management. The words "expect", "estimate",
"anticipate", "believe", "intend", and similar expressions are intended to
identify forward-looking statements. Such statements involve assumptions,
uncertainties and risks. If one or more of these risks or uncertainties
materialize or underlying assumptions prove incorrect, actual outcomes may vary
materially from those anticipated, estimated or expected. Among the key factors
that may have a direct bearing on our expected operating results, performance or
financial condition are economic conditions facing the staffing industry
generally; uncertainties related to the job market and our ability to attract
qualified candidates; uncertainties associated with our brief operating history;
our ability to raise additional capital; our ability to achieve and manage
growth; our ability to successfully identify suitable acquisition candidates,
complete acquisitions or integrate the acquired business into our operations;
our ability to attract and retain qualified personnel; our ability to develop
new services; our ability to cross-sell our services to existing clients; our
ability to enhance and expand existing offices; our ability to open new offices;
general economic conditions; and other factors discussed from time to time in
our filings with the Securities and Exchange Commission. These factors are not
intended to represent a complete list of all risks and uncertainties inherent in
our business. The following discussion and analysis should be read in
conjunction with the Condensed Financial Statements and notes appearing
elsewhere in this report.

INTRODUCTION

We provide a wide range of staffing, engineering and productivity consulting
services nationally through a network of offices located throughout the United
States. We recognize revenues based on hours worked by assigned personnel.
Generally, we bill our customers a pre-negotiated, fixed rate per hour for the
hours worked by our temporary employees. We are responsible for workers'
compensation, unemployment compensation insurance, Medicare and Social Security
taxes and other general payroll related expenses for all of the temporary
employees we place. These expenses are included in the cost of revenue. Because
we pay our temporary employees only for the hours they actually work, wages for
our temporary personnel are a variable cost that increases or decreases in
proportion to revenues. Gross profit margin varies depending on the type of
services offered. Our Engineering Services division typically generates higher
margins while Staffing Services division typically generates lower margins. In
some instances, temporary employees placed by us may decide to accept an offer
of permanent employment from the customer and thereby "convert" the temporary
position to a permanent position. Fees received from such conversions are
included in our revenues. Selling, general and administrative expenses include
payroll for management and administrative employees, office occupancy costs,
sales and marketing expenses and other general and administrative costs.


                                       6
<PAGE>

RESULTS OF OPERATIONS

THREE MONTHS ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

REVENUES. Revenues increased 141.6% to $18,660,417 for the three months ended
December 31, 2000 from $7,723,887 for the three months ended December 31, 1999.
Revenues increased primarily as a result of acquisitions and the growth of our
SMARTSolutions(TM) division.

GROSS PROFIT. Gross profit increased 103.4% to $4,298,575 for the three months
ended December 31, 2000 from $2,113,870 for the three months ended December 31,
1999. Gross profit as a percentage of revenues decreased to 23.0% for the three
months ended December 31, 2000 from 27.4% for the three months ended December
31, 1999. This decrease was due to a decrease in the gross profit percentage
being generated by our Engineering Division and lower gross profit percentages
realized by the acquired businesses as compared to our historical gross profit
percentages.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses, not including depreciation and amortization, increased
124.8% to $3,624,422 for the three months ended December 31, 2000 from
$1,612,101 for the three months ended December 31, 1999. Selling, general and
administrative expenses, not including depreciation and amortization, as a
percentage of revenues decreased to 19.4% for the three months ended December
31, 2000 from 20.9% for the three months ended December 31, 1999. The increase
in the amount is attributable to implementation costs associated with new and
future SMARTSolutions(TM) accounts and increased payroll in anticipation of
future growth and acquisitions.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses increased
122.8% to $156,913 for the three months ended December 31, 2000 from $70,443 for
the three months ended December 31, 1999. Depreciation as a percentage of
revenues decreased to 0.8% for the three months ended December 31, 2000 from
0.9% for the three months ended December 31, 1999. The increased dollar amount
was primarily due to the amortization of goodwill associated with the
acquisitions in June 2000 and October 2000, and the impact of increased capital
expenditures.

FINANCE CHARGES. Finance charges were the amounts charged under an agreement
with a factor, which was terminated on December 12, 2000. Finance charges
decreased 41.7% to $100,934 for the three months ended December 31, 2000 from
$173,115 for the three months ended December 31, 1999. As a percentage of
revenues, finance charges decreased to 0.5% for the three months ended December
31, 2000, from 2.2% for the three months ended December 31, 1999. This decrease
was due to the agreement being terminated December 12, 2000 and a decrease in
the percentage of accounts receivable sold to the factor during the three months
ended December 31, 2000 compared to the three months ended December 31, 1999.

INTEREST AND FINANCING COSTS. Interest and financing costs increased 90.5% to
$198,498 for the three months ended December 31, 2000 from $104,172 for the
three months ended December 31, 1999. Included in the amount for the three
months ended December 31, 2000 is $122,211, which is the portion of the discount
on the beneficial conversion feature of convertible debt issued on December 4,
2000.

INCOME TAX BENEFIT. Income tax benefit of $88,000 for the three months ended
December 31, 2000 is the result of a change in judgment about the realizability
of deferred tax assets. As a percentage of revenue, income tax benefit was
0.5%.

NET EARNINGS. As a result of the foregoing, we had net earnings of $313,499 for
the three months ended December 31, 2000 compared to net earnings of $155,936
for the three months ended December 31, 1999. Net earnings as a percentage of
revenues was 1.7% for the three months ended December 31, 2000 and 2.0% for the
three months ended December 31, 1999.


                                       7
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $3,903,024 and $979,842 in the three
months ended December 31, 2000 and 1999, respectively. A significant portion of
the amount in the three months ended December 31, 2000 was a result of our
terminating our agreement with a factor on December 12, 2000. Under that
agreement, we had sold our accounts receivable to the factor. On December 12,
2000, we obtained a line of credit from a lending institution, which was
initially used to repurchase the then outstanding accounts receivable sold to
the factor.

Net cash used in investing activities was $971,894 and $73,326 in the three
months ended December 31, 2000 and 1999, respectively. Cash used for
acquisitions for the three months ended December 31, 2000 was $637,367. The
balance in both periods was primarily for capital expenditures.

Net cash provided by financing activities was $4,838,110 and $641,288 in the
three months ended December 31, 2000 and 1999, respectively. We had net
borrowings of $3,350,342 under the line of credit obtained on December 12, 2000.
We also received net proceeds of $1,723,988 from the issuance of convertible
debt in the three months ended December 31, 2000. The source of cash provided by
financing activities in the three months ended December 31, 1999 was primarily
from loans payable.

Our principal uses of cash are to fund temporary employee payroll expense and
employer related payroll taxes; investment in capital equipment; start-up
expenses of new offices; expansion of services offered; and costs relating to
other transactions such as acquisitions. Temporary employees are paid weekly.

In December 2000, we sold $1,987,400 of 6% convertible debentures in a private
offering. The debentures mature in December 2005 and are convertible commencing
in April 2001 into a number of shares, which is determined by dividing the
principal amount by the lesser of (a) $4.65 or (b) 75% of the average closing
bid price of the common stock for the five trading days immediately preceding
the conversion.

On December 12, 2000, we entered into a loan and security agreement with a
lending institution which replaced our prior factoring arrangement and provides
for a line of credit up to 85% of eligible accounts receivable, as defined, not
to exceed $12,000,000. Advances under the credit agreement bear interest at a
rate of prime plus one and one-half percent (1 1/2 %). The credit agreement
restricts our ability to incur other indebtedness, pay dividends and repurchase
stock. Borrowings under the agreement are collateralized by substantially all of
our assets.

We believe that the new credit facility, together with cash reserves, proceeds
from the debenture offering and cash flow from operations will be sufficient to
fund our operations and capital expenditure requirements for at least the next
twelve months. However, if we were to expand our operations significantly,
especially through acquisitions, additional capital may be required. There can
be no assurance that we will be able to obtain additional capital at acceptable
rates.

SEASONALITY

Our business follows the seasonal trends of our customers business.
Historically, Staffing Services has experienced lower revenues in the first
calendar quarter with revenues accelerating during the second and third calendar
quarters and then starting to slow again during the fourth calendar quarter.

SMARTSolutions(TM) and Engineering Services do not experience the same level of
seasonality associated with Staffing Services.

IMPACT OF INFLATION

We believe that since our inception, inflation has not had a significant impact
on our results of operations.


                                       8
<PAGE>

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS

We are subject to the risk of fluctuating interest rates in the ordinary course
of business for borrowings under our Loan and Security Agreement with Capital
Tempfunds, Inc. This credit agreement provides for a line of credit up to 85% of
eligible accounts receivable, not to exceed $12,000,000. Advances under this
credit agreement bear interest at a rate of prime plus one and one-half percent
(1 1/2 %).

We believe that our business operations are not exposed to market risk relating
to foreign currency exchange risk, commodity price risk or equity price risk.


                                       9
<PAGE>

PART II - OTHER INFORMATION
ITEM 2 - CHANGES IN SECURITIES AND USE OF PROCEEDS

6% DEBENTURES

On December 4, 2000, we conducted a private placement of 6% convertible
debentures, which become due December 1, 2005, but may be prepaid in whole or in
part at any time upon ten (10) trading days notice. Prepayment may be made in an
amount equal to 115% of the aggregate principal amount that we elect to prepay
if the prepayment occurs within 120 days of December 4, 2000 (the "Original
Issue Date"), in an amount equal to 120% of the aggregate principal amount that
we elect to prepay if the prepayment occurs after 120 days but before 181 days
after the Original Issue Date and in an amount equal to 125% of the aggregate
principal amount that we elect to prepay if the prepayment occurs 181 days or
more after the Original Issue Date.

The 6% debentures require us to pay interest to the holders thereof on a
quarterly basis at a rate of 6% per annum, in cash or at our election, of common
stock. If interest is paid in common stock, then the number of shares issuable
on account of such interest will equal the cash amount of the interest divided
by the conversion price in effect at the time of conversion. The actual
conversion price is the lesser of (i) $4.65 or (ii) 75% of the average closing
price of a share of common stock during the five (5) consecutive trading days
immediately preceding the applicable conversion date.

Subject to certain limitations on conversion, the 6% debentures are convertible
into shares of common stock at the option of the holder, in whole or in part, at
any time after the expiration of 120 days from the Original Issue Date. A holder
may not convert a 6% debenture or receive shares of common stock as payment of
interest in connection with a 6% debenture to the extent such conversion or
receipt of such interest payment would result in the holder, together with any
affiliate, beneficially owning in excess of 4.999% of the then issued and
outstanding shares of common stock (including shares issuable upon conversion
of, and payment of interest on the 6% debentures held by such holder). A holder
of 6% debentures may waive this restriction.

The rules of the National Association of Securities Dealers, Inc. or NASD
provide that stockholder approval must be obtained in connection with a
transaction other than a public offering involving the sale or issuance of
common stock (or securities convertible into or exercisable for common stock)
equal to 20% or more of the voting power outstanding before the issuance for
less than the greater of the book or market value of the stock.

The 6% debentures contain provisions, which would prohibit the issuance of
common stock upon the conversion of the 6% debentures in excess of the limit
imposed by the NASD rule. The failure to obtain stockholder approval of the full
number of shares of common stock, issuable upon conversion of the 6% debentures,
could require us to pay cash to a holder of 6% debentures in an amount equal to
the aggregate principal amount of the 6% debentures than held by such holder for
which a conversion would result in an issuance of common stock in excess of the
limit imposed by the NASD rule.

We received net proceeds of approximately $1,724,000 from the offering, which
was used to pay outstanding indebtedness and for general working capital
purposes. The offering was conducted under Rule 506 under the Securities Act of
1933.

WARRANTS

In connection with the December 2000 private offering of 6% debentures, we
granted five (5) year warrants to a single investor and the placement agents in
the private offering. The placement agents received five (5) year warrants to
acquire 75,000 shares of common stock at an exercise price of $7.50 per share
and five (5) year warrants to acquire 50,000 shares of common stock at an
exercise price of $5.00. A single investor in the private placement received
warrants to purchase 25,000 shares at an exercise price of $7.50 per share.


                                       10
<PAGE>

ITEM 5 - OTHER INFORMATION

In January 2000, we entered into an agreement to sell the business and assets
of our Engineering Division to Stratus Engineering, Inc., a corporation
formed and owned by Charles Sahyoun, the President of the Engineering
Division, and four (4) other employees of the Engineering Division. The
closing of the transaction is subject to certain conditions, including the
completion of a transaction which would provide the funds necessary to
complete the purchase to Stratus Engineering, Inc. No assurance can be given
that the transaction will be completed.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

   (a)            Exhibits

Number            Description
------            -----------

   2.1            Asset Purchase Agreement dated October 13, 2000, by and
                  between Stratus Services Group, Inc. and Outsource
                  International of America, Inc. (1)

   10.1           Non-Competition Agreement dated October 27, 2000, between
                  Stratus Services Group, Inc. and Outsource International of
                  America, Inc. (1)

   10.2           Promissory Note and Security Agreement in the amount of
                  $75,000, dated as of October 27, 2000, issued by Stratus
                  Services Group, Inc. to Outsource International of America,
                  Inc. (1)

   27             Financial Data Schedule for the 3 months ended December 31,
                  2000.

   (b)            Reports on Form 8-K
                  On November 3, 2000, the Company filed Form 8-K with the
                  Securities and Exchange Commission reflecting the October 27,
                  2000 purchase of certain assets of the New England Tandem
                  division of Outsource International of America, Inc.


 ................................................................................
Footnote 1        Incorporated by reference to similarly numbered Exhibits filed
                  on Form 8-K (Commission File No. 001-15789) as filed with the
                  Securities and Exchange Commission on November 3, 2000.


                                       11
<PAGE>

                                   SIGNATURES

Pursuant to the requirements 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.


                               STRATUS SERVICES GROUP, INC.


Date: February 13, 2001        By:  /s/ Joseph J. Raymond
                                    --------------------------------------------
                                    Joseph J. Raymond
                                    Chairman of the Board of Directors,
                                    President and Chief Executive Officer


Date: February 13, 2001        By:  /s/ Michael A. Maltzman
                                    --------------------------------------------
                                    Michael A. Maltzman
                                    Chief Financial Officer
                                    (Principal Financial and Accounting Officer)


                                       12
<PAGE>

                                  EXHIBIT INDEX

Exhibit
-------

   27             Financial Data Schedule for the 3 months ended December 31,
                  2000

                                       13