SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

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

For the quarterly period ended September 30, 2003

OR

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
     OF 1934

        FOR THE TRANSITION PERIOD FROM ______________ TO _______________

Commission File Number: 0-29459

                                   PACEL CORP.
                     -------------------------------------
             (Exact name of registrant as specified in its charter)



VIRGINIA                                                54-1712558
----------------------------------              --------------------------------
(State or other jurisdiction of                 (I.R.S. Employer
incorporation or organization                           Identification Number)


7900 Sudley Road, SUITE 601
MANASSAS, VIRGINIA                                      20109-3795
----------------------------------------        --------------------------------
(Address of principal executive offices)                  (ZIP Code)


Registrant's telephone number, including area code: (703) 257-4759

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 day:       Yes [_] No [X]


Transitional Small Business Disclosure Format (check one)       Yes [_] No [X]

State the number of Shares outstanding of each of the issuer's classes of common
equity, as of the latest date:

As of November 12, 2003 there were 909,877,945 shares of the Registrant's common
stock outstanding.




<PAGE>



                          PACEL CORP. AND SUBSIDIARIES


Part I.  FINANCIAL INFORMATION (unaudited)
Item 1.  Consolidated Financial Statements
         Consolidated Balance Sheets                                         F-1
         Consolidated Statements of Operations                               F-3
         Consolidated Statements of Cash Flows                               F-4
         Notes to Consolidated Financial Statements                          F-6

Item 2.  Management's Discussion and
         Analysis of Financial Results of Operations                          12
Item 3.  Controls and Procedures                                              19

Part II. OTHER INFORMATION
Item 1.  Legal Proceedings                                                    19
Item 2.  Changes in Securities                                                19
Item 3.  Defaults upon Senior Securities                                      20
Item 4.  Submission of Matters to Vote of Security Holders                    20
Item 5.  Other Information                                                    20
Item 6.  Exhibits and Reports                                                 21
Item 7.  Signatures                                                           22


<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                                              September 30,     December 31,
                                                                  2003              2002
                                                            --------------      --------------
                                                               (Unaudited)         (Audited)
<S>                                                         <C>                 <C>
                                     ASSETS
Current assets:
       Cash                                                 $      180,995      $        8,379
       Accounts receivable                                          17,795                  -0-
       Stock subscription receivable                               275,000                  -0-
       Prepaid expenses                                             35,409                  -0-
       Workers compensation insurance deposits                     154,285                  -0-
       Other receivables                                                -0-            112,499
                                                            --------------      --------------

                Total current assets                               663,484             120,878
                                                            --------------      --------------

Property and equipment, net of accumulated depreciation
       of $139,810 and $128,140, respectively                      113,059              24,961
                                                            --------------      --------------

Other assets:
       Note receivable                                             600,000                  -0-
       Receivable - officers/stockholders                           65,103                  -0-
       Other receivables                                            15,255                  -0-
       Goodwill 3,937,438                                               -0-
       Security deposits                                             9,841               3,991
                                                            --------------      --------------

                Total other assets                               4,627,637               3,991
                                                            --------------      --------------

                Total assets                                $    5,404,180      $      149,830
                                                            ==============      ==============
</TABLE>













        See accompanying notes to the consolidated financial statements.

                                       F-1

<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                  (continued)

                                                              September 30,     December 31,
                                                                  2003              2002
                                                            --------------      --------------
                                                               (Unaudited)         (Audited)
<S>                                                         <C>                 <C>

               LIABILITIES AND STOCKHOLDERS' DEFECIT

Current liabilities:
       Accounts payable                                       $  1,254,725      $    1,353,022
       Payroll and payroll related liabilities                   2,312,898                  -0-
       Accrued expenses                                            326,486             234,602
       Accrued expenses - officers                                 291,120             316,533
       Loans payable - officers/stockholders                            -0-            639,776
       Deferred client revenue                                     391,389                  -0-
       Current portion of long-term debt                           990,958             873,750
       Convertible debentures                                       70,000                  -0-
       Notes payable - bank                                         37,108              45,565
       Income taxes payable                                          3,500                  -0-
                                                            --------------      --------------

              Total current liabilities                          5,678,184           3,463,248

Long-term liabilities:
       Notes payable                                               190,780                  -0-
       Convertible debentures                                      590,270             409,111
                                                            --------------      --------------

              Total liabilities                                  6,459,234           3,872,359

Stockholders' equity (deficit):
       Preferred stock, no par value, no liquidation value,
          5,000,000 shares authorized, 1,000,000 shares
          of 1997 Class A convertible preferred stock               11,320              11,320
       Common stock, no par value, 2,000,000,000 and
          650,000,000 shares authorized respectively,
          568,875,083 and 21,184,591 shares issued
                respectively                                    15,301,430          10,685,520
       Cumulative currency translation adjustment                  (18,720)            (18,720)
       Accumulated deficit                                     (16,349,084)        (14,400,649)
                                                            --------------      --------------

              Total stockholders' (deficit)                     (1,055,054)         (3,722,529)
                                                            --------------      --------------

              Total liabilities and stockholders' deficit   $    5,404,180      $      149,830
                                                            ==============      ==============
</TABLE>









        See accompanying notes to the consolidated financial statements.

                                       F-2

<PAGE>

<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                   (Unaudited)

                                                              Nine months ended                  Three months ended
                                                                  September 30,                     September 30,
                                                            2003             2002              2003             2002
                                                     --------------     -------------    -------------      ------------

<S>                                                  <C>                <C>              <C>                <C>
Revenue                                              $    2,507,291     $     435,218    $   1,369,370      $    118,261
Cost of sales                                             1,898,953           403,702          984,874            90,890
                                                     --------------     -------------    -------------      ------------
       Gross profit                                         608,338            31,516          384,496            27,371

Operating costs and expenses:
       Research and development                                  -0-          254,656               -0-           21,830
       Sales, general and administrative                  2,163,543         2,271,668        1,024,777           395,234
       Depreciation and amortization                         15,722            11,246            6,814             3,769
       Interest expense                                     125,015           122,808           32,852            52,500
       Financing costs                                      393,818            50,397          262,978            14,897
                                                     --------------     -------------    -------------      ------------

                Total operating expenses                  2,698,098         2,710,775        1,327,421           488,230
                                                     --------------     -------------    -------------      ------------

Other Income                                                     -0-               -0-              -0-            2,796

Operating loss from continuing operations
       before extraordinary items and
       discontinued operations                           (2,089,760)       (2,679,259)        (942,925)         (458,063)

Write-off of loan receivable                                     -0-          (71,000)              -0-          (71,000)
Gain on write-off of extinguishment of debt                      -0-          426,150               -0-          426,150

Discontinued operations (Note 3):
Loss from discontinued operations of EBStor                      -0-         (220,268)              -0-               -0-
Gain from disposal of EBStor                                     -0-          177,817               -0-               -0-
                                                     --------------     -------------    -------------      ------------

Loss before cumulative effect of accounting change       (2,089,760)       (2,366,560)        (942,925)         (102,913)

Cumulative effect of accounting change                           -0-         (407,049)              -0-               -0-
                                                     --------------     -------------    -------------      ------------

Net Loss                                             $   (2,089,760)    $  (2,773,609)   $    (942,925)     $   (102,913)
                                                     ==============     =============    =============      ============

Net loss per common and common equivalent share:
       Basic                                         $        (0.01)    $      (1.22)    $       (0.00)     $      (0.02)
       Diluted                                       $        (0.01)    $      (1.22)    $       (0.00)     $      (0.02)

Weighted average shares outstanding:
       Basic                                            193,620,431         2,274,786      400,935,214         4,938,504
       Diluted                                          193,620,431         2,274,786      400,935,214         4,938,504
</TABLE>






        See accompanying notes to the consolidated financial statements.

                                       F-3

<PAGE>

<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)

                                                                      Nine months ended
                                                                        September 30,
                                                                   2003                2002
                                                             -----------------  ----------------
                                                               (Unaudited)         (Unaudited)
<S>                                                          <C>                <C>
Cash flows from operating activities:
    Net loss                                                 $      (2,089,760) $     (2,773,609)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
    Cumulative effect of accounting change                                  -0-          407,049
    Depreciation                                                        15,722            11,246
    Provision for bad debts                                                 -0-           (1,311)
    Other non-cash items                                               800,694         1,309,112
    Gain on sale of EBStor                                                  -0-         (177,817)
  Increase (decrease) in cash from changes in:
    Accounts receivable                                                  4,643           324,819
    Other receivables                                                  (55,395)           36,579
    Inventory  -0-  61,306
    Insurance deposits                                                  28,006                -0-
    Prepaid expenses                                                     7,133                -0-
    Security deposits                                                     (600)          (15,237)
    Accounts payable                                                  (376,992)           34,185
    Accrued expenses                                                    62,717             8,751
    Payroll and payroll related liabilities                            611,785                -0-
    Deferred revenue                                                  (881,937)               -0-
    Loans payable - officers/stockholders                              (36,023)          752,358
    Income taxes payable                                                    -0-               -0-
                                                             -----------------  ----------------
      Net cash (used in) operating activities                       (1,910,007)          (22,569)

Cash flows from investing activities:
    (Purchases) disposals of property and equipment                     (8,942)               -0-
    Notes receivable                                                    50,000           (71,000)
    Net cash received in acquisition                                   160,744                -0-
    Cash used for acquisitions                                        (105,000)               -0-
                                                             -----------------  ----------------
      Net cash provided by (used in) investing activities               96,802           (71,000)

Cash flows from financing activities:
    Repayments of notes payable                                       (130,434)         (125,362)
    Issuance of convertible notes payable                            1,106,770            25,000
    Repayments from lines of credit                                     (2,690)               -0-
    Proceeds from sale of common stock                               1,012,275           150,000
                                                             -----------------  ----------------
      Net cash provided by financing activities                      1,985,821            49,638

Effects of exchange rates on cash                                           -0-           (7,720)
                                                             -----------------  ----------------
Net increase (decrease) in cash and cash equivalents                   172,616           (51,651)

Cash and cash equivalents, beginning of period                           8,379            65,761
                                                             -----------------  ----------------
Cash and cash equivalents, end of period                     $         180,995  $         14,110
                                                             =================  ================
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                       F-4


<PAGE>




<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                   (continued)



                                                                      Nine months ended
                                                                        September 30,
                                                                   2003                2002
                                                             -----------------  ----------------
                                                               (Unaudited)         (Unaudited)
<S>                                                          <C>                <C>
Supplemental disclosure of cash flow information:
       Cash paid for interest                                $          14,126  $          6,298
                                                             =================  ================
</TABLE>











                [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]









        See accompanying notes to the consolidated financial statements.

                                       F-5

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                               September 30, 2003

Note 1. Basis of Presentation.

     The unaudited  financial  statements  included in the Form 10-QSB have been
     prepared in accordance with generally  accepted  accounting  principles for
     interim financial  information and with the instructions to Form 10-QSB and
     Item 310(b) of  Regulation SB of the  Securities  and Exchange Act of 1934.
     The financial information furnished herein reflects all adjustments,  which
     in the opinion of management,  are necessary for a fair presentation of the
     Company's financial position,  the results of operations and cash flows for
     the periods presented.

     Certain  information  and  footnote   disclosures   normally  contained  in
     financial   statements  prepared  in  accordance  with  generally  accepted
     accounting  principles  have  been  omitted,  pursuant  to such  rules  and
     regulations.

     These interim  statements  should be read in  conjunction  with the audited
     consolidated financial statements and related notes thereto as presented in
     the Company's  certified  financial  statements for the year ended December
     31,  2002.  The  Company  presumes  that  users  of the  interim  financial
     information  herein  have  read or have  access to such  audited  financial
     statements and that the adequacy of additional disclosure needed for a fair
     presentation  may be determined in that context.  The results of operations
     for any  interim  period  are not  necessarily  indicative  of the  results
     expected or reported for the full year.

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

Note 2. Related Party Transactions.

     The company  purchased  $138,520 and  $223,798,  respectively,  of internet
     development  and  maintenance  services  from E-B Stor,  Inc. for the three
     months and nine months ended September 30, 2003. E-B Stor, Inc. is owned by
     F. Kay Calkins,  a director of the Company and wife of David  Calkins,  CEO
     and  Chairman  of the Board of the  Company.  Subsequent  to the end of the
     third quarter of 2003, E-B Stor, Inc. ceased all operations.

     On April 25,  2003,  the Company  issued  120,000,000  shares of its common
     stock,  no par value per share, to David and F. Kay Calkins in exchange for
     $600,000 of debts owed to them.  However,  because they are "Affiliates" of
     the Company,  Mr. and Mrs. Calkins will be able to sell such shares only in
     compliance  with Rule 144 and 145.  The  shares  were  issued  pursuant  to
     Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing
     with notice to, and an opportunity to be heard from, interested parties, as
     to the fairness of each transaction, by courts in Nevada and Illinois. Such
     courts   specifically   determined  that  the  transactions  were  fair  to
     interested  parties and declared  that the  transactions  were exempt under
     Section 3(a)(10).


                                       F-6

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                               September 30, 2003

Note 3. Revenue Recognition.

     The  gross  billings  that  the  Company  charges  its  clients  under  its
     Professional  Services  Agreement  include each worksite  employee's  gross
     wages and a service fee. The Company's  service fee, which is computed as a
     percentage of gross wages, is intended to yield a profit to the Company and
     cover the cost of employment-related taxes, workers' compensation insurance
     coverage,  and administration and field services provided by the Company to
     the client, including payroll administration and record keeping, as well as
     safety, human resources and regulatory compliance consulting services.  The
     component of the service fee related to administration  varies according to
     the size of the client,  the amount and  frequency of payroll  payments and
     the method of delivery of such  payments.  The component of the service fee
     related to workers' compensation and employer taxes, including unemployment
     insurance,  is based, in part, on the clients historical claims experience.
     All charges by the Company are invoiced  along with each  periodic  payroll
     delivered to the client.

     The Company  reports  revenue from service fees in accordance with Emerging
     Issues  Task  Force  ("EITF")  No.  99-19,  Reporting  Revenue  Gross  as a
     Principal  versus Net as an Agent.  The Company  reports as  revenue,  on a
     gross basis, the total amount billed to clients for service fees,  workers'
     compensation  and employer  taxes.  The Company  reports revenue on a gross
     basis for these fees because the Company is the primary  obligor and deemed
     to be the  principal in these  transactions  under EITF 99-19.  The Company
     typically  bills its  clients for wages paid to  worksite  employees  in an
     amount  equal to the  amounts  paid to these  employees  for  these  wages.
     Accordingly,  such  billings  result in no profit to the  Company  and when
     presented on a net basis results in no revenue being recorded.  The Company
     accounts for its revenue under the accrual method of accounting.  Under the
     accrual  method of accounting,  the Company  recognizes its revenues in the
     period in which the worksite employee performs the work.

Note 5. Common Stock.

     On March 17, 2003,  the Company  effected a  one-for-thirty  reverse  split
     restating  the  number  of  common  shares  as of  December  31,  2002 from
     635,537,735  to  21,184,591.  All  references  to average  number of shares
     outstanding  and  prices  per share  have been  restated  retroactively  to
     reflect the split.

Note 6. Contingent Liabilities.

     The  Securities  and  Exchange  Commission  (the "SEC")  filed an action in
     federal  district court  asserting  various  violations of securities  laws
     against the Company;  David F. Calkins (the Company's  current  Chairman of
     the Board) and others.  The complaint alleges that defendant Frank Custable
     "orchestrated" a "scheme" to illegally obtain stock from various companies,




                                       F-7

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                               September 30, 2003

Note 6. Contingent Liabilities. (continued)

     including  the Company,  through  "scam  Commission  Form S-8  registration
     statements, forged stock authorization form and at least one bogus attorney
     opinion  letter  arranged by  Custable."  The  complaint  alleges  that, in
     connection  with this  alleged  "scheme",  the Company  and its CEO,  David
     Calkins, violated Section 17(a) of the Securities Act and Section 10(b) and
     Rule 10b-5 of the  Exchange  Act. The SEC asks that the Company and Calkins
     be permanently enjoined from future violations, ordered to pay disgorgement
     and civil  penalties  and  Calkins be barred from  continued  service as an
     officer and director. As part of an ex parte proceeding, the District Court
     has  ordered the  Company  and  Calkins to provide an  accounting  of their
     assets and the  transactions  that are the  subject of the  complaint.  The
     Company has been served with the complaint,  and no further proceedings are
     scheduled at this time.

Note 7. Acquisitions.

     In  April  2003,  the  Company  completed  the  acquisition  of 100% of the
     outstanding  stock of BeneCorp.  Such  acquisition  was  accounted for as a
     purchase.  In  conjunction  with  the  acquisition,   the  Company  assumed
     approximately  $1,000,000 of debt.  Consideration  for the  transaction was
     $200,000 in cash,  of which the Company made an initial  deposit of $96,000
     in 2002, and the issuance of 200,000  shares of restricted  common stock of
     the Company.  The Company also executed one year employment  contracts with
     two principal officers of BeneCorp in conjunction with the acquisition. The
     Company recorded the acquisition as a purchase and recorded $17,500 of fees
     and $1,669,500 of goodwill in association with the acquisition.

     In April 2003, The Resourcing  Solutions  Group,  Inc.  ("TRSG"),  a Nevada
     corporation and a majority-owned subsidiary of the Company, entered into an
     agreement  for the  purchase of customer  contracts,  with a value of up to
     $100,000,000,  from  MRG,  LLC,  a  California  limited  liability  company
     ("MRG").  In conjunction with the agreement,  the Company issued 34,500,000
     shares of  unrestricted  common stock and recorded a  non-interest  bearing
     receivable  of $600,000.  On August 27, 2003,  the Company  terminated  its
     agreement  with MRG as delivery  of the  promised  contracts  was no longer
     viable  based  on  restrictions  in the  California  insurance  market.  In
     conjunction  with the  termination of this  agreement,  the Company entered
     into a settlement agreement for repayment of the $600,000 receivable as the
     stock  previously  issued by the Company  had been  divested by MRG and was
     unable to be returned to the Company for  cancellation.  Such receivable is
     now secured by assets of MRG, consisting of publicly held securities,  with
     an approximate value of $250,000.  Such assets are assigned to Pacel in the
     event of default on the  repayment  by MRG. The  repayment  requires MRG to



                                       F-8

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                               September 30, 2003


Note 7. Acquisitions. (continued)

     make  monthly  recurring  payment of $20,000  over a period of thirty  (30)
     months.  MRG is currently in compliance with this settlement  agreement and
     is making the required payments to the Company.

     In April 2003,  TRSG  acquired  substantially  all of the assets of Asmara,
     Inc. ("Asmara"),  a North Carolina corporation,  including its ownership of
     several subsidiary operations,  including Asmara Benefit Services, Inc. and
     Asmara  Services I, Inc.,  North Carolina  corporations,  Woodstock  Lumber
     Sales, Inc., an Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara
     of Florida II, Inc.,  Asmara of Florida III, Inc. and Asmara of Florida IV,
     Inc.,  Florida  corporations.  The  acquisition  was  accounted  for  as  a
     purchase.  The Company assumed all debts of the operations of approximately
     $1,400,000, issued a note payable to the shareholder of Asmara, Inc. in the
     amount of $431,530,  payable over a two year period and executed employment
     contracts  with the  principal  officer  and sole  shareholder  of  Asmara.
     Consideration  under such agreement consists of cash compensation,  bonuses
     based on  business  unit  performance  and  grants of options on the common
     stock of the Company.  The Company  recorded $70,000 of fees and $1,859,858
     of goodwill in conjunction with this acquisition.

     On May 15, 2003, the Company acquired,  through its wholly-owned subsidiary
     Asmara  Services I, Inc., the outstanding  membership  units of NSC, LLC, a
     North Carolina limited  liability  company as a vehicle for entering into a
     workers'   compensation  product  with  a  North  Carolina  carrier.   Such
     acquisition  was  accounted  for  as  a  purchase.  Consideration  for  the
     transaction  was  $100,000 in cash and the  issuance of a note  payable for
     $200,000.  Such note is  payable  over  eighteen  (18)  months and bears no
     interest.  The Company  recorded the acquisition as a purchase and recorded
     $300,000 of goodwill in association with the acquisition.









                                      F-9

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

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

Management's  discussion  and analysis of results of  operations  and  financial
condition include a discussion of liquidity and capital resources. The following
discussion  should  be read  in  conjunction  with  the  consolidated  financial
statements and notes thereto.

In 2002,  the Company  completed an  evaluation  of its  business  model and the
potential success of its existing business  initiatives.  It was determined that
the Company should,  as part of that review,  evaluate other potential  business
markets that could  provide the potential for success.  In September  2002,  the
Company announced its intention to enter the Professional  Employer Organization
("PEO")  industry.  The Company believed that this market offered an opportunity
to develop and  leverage  relationships  with small and medium  businesses.  The
Company now  provides  human  capital  solutions  through the  provision  of PEO
services  and  Administrative  Service  Organization  ("ASO")  services  to such
clients.  In April 2002, the Company  successfully  completed the acquisition of
two  existing  PEO  organizations  and  continues  to evaluate  other  potential
acquisition  candidates while also reviewing and  implementing  opportunities to
support organic growth in order to secure a position as an industry leader.  The
Company sees this initiative in the Human Resources Outsourcing ("HRO") industry
as an opportunity to tap into the small business market in the United States and
intends to compliment  the  provision of PEO and ASO services  with  information
technology  services,  business  consulting services and financial services at a
future time.

Through its PEO/ASO business unit, the Company markets to its clients, typically
small to medium-sized  businesses with between five and 1,500 employees, a broad
range of products  and  services  that  provide an  outsourced  solution for the
clients' human resources  ("HR") needs.  The Company's  products include payroll
services,  benefits  administration  (including  health,  welfare and retirement
plans),  governmental  compliance,  risk management (including safety training),
unemployment  administration  and other HR  related  services.  The  Company  is
currently  working to establish the national  vendor  relationships  in order to
effectively and competitively provide such services to a broad range of clients.

Nine Months ended September 30, 2003 compared to the Nine Months ended September
30, 2002

Sales for the nine  months  ended  September  30, 2003  increased  approximately
$2,072,000 to $2,507,291  when compared to sales of $435,218 for the nine months
ended  September 30, 2002.  The  Company's  revenue in 2003 was derived from the
Company's  recently  acquired PEO operating  units. In 2002, the Company derived
revenue from the sale of retail  hardware and software  products.  In 2003,  the
Company was not actively selling such products due to resources being devoted to
the acquisition and development of its PEO business.




                                        12

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations. (continued)

Due to the  significance  of the amounts  included in billings to the  Company's
clients  and its  corresponding  revenue  recognition  methods,  the Company has
provided the following  reconciliation  of billings to revenue for the three and
nine month periods ended  September 30, 2003. The Company had no such revenue in
the corresponding periods of 2002.

                                            Nine months ended Three months ended
                                              September 30,      September 30,
                                                   2003               2003
                                             ---------------   ----------------
                                                (Unaudited)      (Unaudited)
Reconciliation of billings
        to revenue recognized:
    Gross billings to clients                $    16,098,762   $      8,654,774
    Less - Gross wages billed to clients         (13,592,194)        (7,285,504)
                                             ---------------   ----------------

    Revenue from PEO services                $     2,506,568   $      1,369,270
    Other miscellaneous revenue                          723                100
                                             ---------------   ----------------

    Total revenue as reported                $     2,507,291   $      1,369,370
                                             ===============   ================

Cost of services for the nine months ended September 30, 2003 was  approximately
$1,899,000,  and is related  directly  to the  delivery  of  services to its PEO
clients.  No such PEO business  activity  occurred in the period ended September
30, 2002 and the cost of sales reflected for that period are related to the sale
of retail hardware and software products.

Research &  Development  expenses  decreased  to $-0- in the nine  months  ended
September  30,  2003 as compared to  $254,656  in the  comparable  period  ended
September 30, 2002.  The decrease in research and  development  expenses  during
2003  reflects  the  elimination  of the  development  staff  for  new  software
products.

Sales,  general  &  administrative  expenses,   including  salaries  and  wages,
decreased to  approximately  $2,163,000  in the nine months ended  September 30,
2003, compared to approximately  $2,272,000 in the corresponding period of 2002.
During the second half of 2002,  the Company  was  experiencing  declines in its
level of spending  for general and  administrative  expenses as it began to wind
down the operations of its retail hardware and software business.  Such overhead
expenses  accounted  for  approximately  $1,321,000  for the nine  months  ended
September  30,  2003  compared  to  $2,272,000  for the  same  period  of  2002.
Acquisitions completed in the second quarter of 2003 accounted for the remaining
$842,000 of sales, general and administrative  expenses,  including salaries and
wages.

Depreciation  expenses  increased  to  approximately  $16,000 in the nine months
ended   September  30,  2003,   compared  to   approximately   $11,000  for  the
corresponding  period  of  2002.  Such  increase  is  related  to the  Company's
acquisition of assets for its PEO business units.




                                        13

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations. (continued)

Interest Expense is interest accrued on the Convertible Notes, Notes payable and
the  interest  due  for  the  loan  from a  stockholder.  Interest  amounted  to
approximately  $125,000 in the nine months ended  September 30, 2003 compared to
$123,000 for the same period of 2002. The increase is primarily  attributable to
the Company's continued payment of financing costs for such indebtedness.

Finance  Expense  for the nine months  ended  September  30,  2003 was  $393,818
compared to $50,397 for the nine months ended  September  30, 2002.  The Company
recorded  imbedded  interest in  conjunction  with the  issuance of  convertible
debentures  during the period assuming  conversion of such debt was available on
an immediate  basis and has incurred fees associated with accessing its lines of
credit.

Three  Months  ended  September  30,  2003  compared to the Three  Months  ended
September 30, 2002

Sales for the three  months ended  September  30, 2003  increased  approximately
$1,250,000 to $1,369,370 when compared to sales of $118,261 for the three months
ended  September 30, 2002.  The  Company's  revenue in 2003 was derived from the
Company's  recently  acquired PEO operating  units. In 2002, the Company derived
revenue  from  the  sale  of  retail  hardware  and  software  products  and was
discontinuing  such sales in the  second  quarter  of that  year.  In 2003,  the
Company was not actively selling such products and was devoting its resources to
completing  previously  announced PEO business unit acquisitions.  Such business
accounted for almost all of the revenue generated in the second quarter of 2003.

Cost of services for the three months ended September 30, 2003 was approximately
$985,000,  and is  related  directly  to the  delivery  of  services  to its PEO
clients.  No such PEO business  activity  occurred in the period ended September
30, 2002 and the cost of sales reflected for that period are related to the sale
of retail hardware and software  products.  For the three months ended September
30, 2003,  the Company  reported a gross profit margin on its PEO  operations of
$384,000, or 28% of revenue from such operations.

Research &  Development  expenses  decreased  to $-0- in the three  months ended
September  30,  2003 as  compared  to $21,830  in the  comparable  period  ended
September 30, 2002.  The decrease in research and  development  expenses  during
2003 reflects the elimination of the development staff for new software products
as the Company devoted its resources to the development of its PEO operations.

Sales,  general  &  administrative  expenses,   including  salaries  and  wages,
increased to  approximately  $1,025,000 in the three months ended  September 30,
2003,  compared to approximately  $395,000 in the corresponding  period of 2002.
Acquisitions  of PEO  business  units  completed  in the second  quarter of 2003
contributed to the increase for the period.





                                        14

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations. (continued)

Depreciation  expenses  increased  to  approximately  $7,000 in the three months
ended September 30, 2003, compared to approximately $3,700 for the corresponding
period of 2002. Such increase is related to the Company's  acquisition of assets
for its PEO business units.

Interest Expense is interest accrued on the Convertible Notes, Notes payable and
the  interest  due  for  the  loan  from a  stockholder.  Interest  amounted  to
approximately  $33,000 in the three months ended  September 30, 2003 compared to
$52,000 for the same period of 2002. The decrease is primarily  attributable  to
the Company's  repayment and  settlement of outstanding  obligations  during the
period.

Finance  Expense for the three  months  ended  September  30, 2003 was  $262,978
compared to $15,000 for the three months ended  September 30, 2002.  The Company
recorded  imbedded  interest in  conjunction  with the  issuance of  convertible
debentures  during the period assuming  conversion of such debt was available on
an immediate  basis and has incurred fees associated with accessing its lines of
credit.

LIQUIDITY AND CAPITAL RESOURCES:

Cash and cash  equivalents  at September  30, 2003  increased  to $180,995  from
$8,379  at  December  31,  2002.  Net cash  used for  operating  activities  was
$1,910,007  during the nine months ended  September 30, 2003 compared to $22,569
in the  corresponding  period ended September 30, 2002. The increase in the cash
used in operating  activities is mainly  attributable to the increased operating
loss for the quarter,  settlement and repayment of outstanding  accounts payable
and  recognition  of  revenue  previously  deferred  by the  Company's  recently
acquired  BeneCorp  Business  Services  unit  offset  by  increases  in  accrued
expenses, payroll related liabilities related to the Company's recently acquired
PEO business units.

Net cash provided by investing  activities  for the nine months ended  September
30, 2003 was $96,802.  The Company utilized $71,000 in the corresponding  period
of 2002 for investing activities. During the second quarter of 2003, the Company
utilized  $105,000 of cash in the  acquisition  of the Asmara and NSC  operating
units and  acquired  cash of $160,744 in the  acquisition  of BeneCorp  Business
Services.

Net cash provided by financing activities in the nine months ended September 30,
2003 was  $1,985,821  compared  to $49,638  in the  corresponding  period  ended
September 30, 2002.  The cash  provided  during the first nine months of 2003 is
directly related to the Company's  execution and utilization of two equity-based
lines of credit.

In  September  2002,  the Company  entered in an Equity line of credit for up to
$10,000,000  from the Honor Hedge Fund and Reisco Hedge Fund through High Desert
Capital at a variable  discount rate of 12.5% to 50%. The Company can draw up to
$500,000 per month. The line is being used for acquisitions and working capital.
To date,  the Company has borrowed  $1,305,000 and issued  78,359,480  shares of
common  stock.  Subsequent  to the  end  of the  third  quarter,  the  principal
individual  involved  in  effecting  the draw down of funds  under  this line of
credit was unable to fulfill the most recent  commitments  under the  agreement.




                                        15

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

During the third  quarter of 2003 the Company  issued  37,075,448  shares of its
common stock in exchange for $325,000 of funding.  As of September 30, 2003, the
Company had not received $175,000 of funds for which shares had been issued. The
Company has recorded a receivable for that amount and is in negotiation with the
lender to reach a resolution.

In March  2003,  the  Company  entered  into an Equity  line of credit for up to
$10,000,000  from  Equities  First  Inc.  at a discount  rate of up to 50%.  The
Company  can draw up to  $500,000  per  month.  The  line is being  used to fund
shortfalls in operating capital for the Company's  business units,  acquisitions
and working  capital.  To date,  the Company has  borrowed  $583,200  and issued
44,000,000 shares of common stock.

In April 2003, the Company entered into a convertible note payable in the amount
of $200,000.  The note is for a three-year period and carries interest at a rate
of 8% per annum.  As of September 30, 2003, the holder of the note had converted
the entire balance of the note into 33,675,386 shares of the common stock of the
Company in accordance with the terms of the original agreement. At September 30,
2003, the Company had no remaining obligation under this debt instrument.

In April 2003, the Company entered into a two-year,  $500,000 Note payable at an
interest  of 9% per annum.  The  balance of such note at  September  30, 2003 is
approximately  $370,270.  In June 2003,  the Company  entered into a convertible
note payable in the amount of $95,000.  The note is for a three-year  period and
carries interest at a rate of 8% per annum. As of September 30, 2003, the holder
of the note had converted the entire balance of the note into 17,071,428  shares
of the common stock of the Company in accordance  with the terms of the original
agreement.  At September 30, 2003, the Company had no remaining obligation under
this debt instrument.

In June 2003, the Company  entered into two-year,  convertible  Note Payable for
$50,000 at an interest rate of 10%. The  conversion  clause allows the holder of
such note to convert the Note into the common stock of the Company at a discount
of 30% from the market price at the date of conversion.

In June 2003, the Company entered into a short term loan agreement for $150,000.
Such note is due to be paid on August 20, 2003. The Company issued approximately
8,823,000  shares of its common stock to serve as  collateral  for such loan and
recorded a financing fee of $75,000 in association  with the loan agreement.  On
August 19, 2003, the Company  settled this obligation in total with the issuance
of 19,623,590 shares of its common stock and has no remaining obligation.

In September  2003, the Company  entered into a convertible  note payable in the
amount of $150,000.  The note is for a three-year period and carries interest at
a rate of 8% per annum.  As of September  30,  2003,  the holder of the note had
converted the entire  balance of the note into  35,304,638  shares of the common
stock of the Company in accordance with the terms of the original agreement.  At
September  30,  2003,  the Company had no remaining  obligation  under this debt
instrument.



                                        16

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

In September  2003, the Company  entered into a convertible  note payable in the
amount of $150,000.  The note is for a three-year period and carries interest at
a rate of 8% per annum. The conversion  clause allows the holder of such note to
convert the Note into the common  stock of the Company at a discount of 30% from
the market price at the date of  conversion.  At September 30, 2003, the balance
of the note was $150,000.

In September  2003, the Company  entered into a convertible  note payable in the
amount of $20,000. The note is for a three-year period and carries interest at a
rate of 8% per annum.  The  conversion  clause allows the holder of such note to
convert the Note into the common  stock of the Company at a discount of 30% from
the market price at the date of  conversion.  At September 30, 2003, the balance
of the note was $20,000.

In April 2003, the Company  completed the acquisition of 100% of the outstanding
stock  of  BeneCorp.  Such  acquisition  was  accounted  for as a  purchase.  In
conjunction with the acquisition,  the Company assumed approximately  $1,000,000
of debt.  Consideration  for the  transaction was $200,000 in cash, of which the
Company made an initial  deposit of $96,000 in 2002, and the issuance of 200,000
shares of restricted common stock of the Company.  The Company also executed one
year employment contracts with two principal officers of BeneCorp in conjunction
with the  acquisition.  In October 2003,  the Company  terminated the employment
agreements with the two former  officers of BeneCorp and incurred  approximately
$3,000 in expenses in association with their  termination.  The Company recorded
the  acquisition  as a purchase and recorded  $17,500 of fees and  $1,669,500 of
goodwill in association with the acquisition.

In April 2003,  TRSG  entered  into an  agreement  for the  purchase of customer
contracts, with a value of up to $100,000,000, from MRG. In conjunction with the
agreement, the Company issued 34,500,000 shares of unrestricted common stock and
recorded a non-interest bearing receivable of $600,000.  On August 27, 2003, the
Company  terminated its agreement with MRG as delivery of the promised contracts
was no longer viable based on restrictions in the California  insurance  market.
In conjunction with the termination of this agreement,  the Company entered into
a settlement  agreement  for  repayment of the $600,000  receivable as the stock
previously  issued by the Company had been  divested by MRG and was unable to be
returned to the  Company for  cancellation.  Such  receivable  is now secured by
assets of MRG, consisting of publicly held securities, with an approximate value
of  $250,000.  Such assets are  assigned to Pacel in the event of default on the
repayment by MRG. The repayment  requires MRG to make monthly  recurring payment
of $20,000 over a period of thirty (30) months.  MRG is currently in  compliance
with this  settlement  agreement  and is making  the  required  payments  to the
Company.

In April 2003,  TRSG acquired  substantially  all of the assets of Asmara,  Inc.
("Asmara"),  a North  Carolina  corporation,  including its ownership of several
subsidiary  operations,  including  Asmara  Benefit  Services,  Inc.  and Asmara
Services I, Inc., North Carolina corporations,  Woodstock Lumber Sales, Inc., an
Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara of Florida II, Inc.,
Asmara  of  Florida  III,   Inc.  and  Asmara  of  Florida  IV,  Inc.,   Florida






                                        17

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

corporations.  The  acquisition  was  accounted  for as a purchase.  The Company
assumed all debts of the operations of approximately  $1,400,000,  issued a note
payable to the  shareholder of Asmara,  Inc. in the amount of $431,530,  payable
over a two year period and  executed  employment  contracts  with the  principal
officer and sole shareholder of Asmara. The balance of the note at September 30,
2003  was  $378,780.   Consideration  under  such  agreement  consists  of  cash
compensation,  bonuses based on business unit  performance and grants of options
on the common stock of the  Company.  The Company  recorded  $70,000 of fees and
$1,859,858 of goodwill in conjunction with this acquisition.

On May 15,  2003,  the Company  acquired,  through its  wholly-owned  subsidiary
Asmara Services I, Inc., the outstanding  membership  units of NSC, LLC, a North
Carolina  limited  liability  company as a vehicle for entering  into a workers'
compensation  product  with a  North  Carolina  carrier.  Such  acquisition  was
accounted for as a purchase.  Consideration  for the transaction was $100,000 in
cash and the issuance of a note payable for $200,000.  Such note is payable over
eighteen (18) months and bears no interest. The balance of the note at September
30, 2003 was $156,000.  The Company  recorded the  acquisition as a purchase and
recorded $300,000 of goodwill in association with the acquisition. The Company's
cash requirements for funding its administrative and operating needs continue to
greatly exceed its cash flows  generated from  operations.  Such  shortfalls and
other capital needs continue to be satisfied  through  equity  financing and the
issuance of convertible  notes payable until  additional  funds can be generated
from  operations   through   acquisitions  and  organic  business  growth.   The
liabilities of the Company consist of over-extended  accounts  payable,  payroll
related  liabilities  and taxes,  accrued  officer's  compensation  and deferred
revenue.  Currently, the Company has focused its efforts on developing strategic
relationships  with other  organizations  associated with the HRO industry.  The
loss of its  current  equity  financing  would  seriously  hinder the  Company's
ability to execute its HRO business  strategy and impair its ability to continue
as a going concern.  The Company  expects to continue its investing  activities,
including  expenditures  for  acquisitions,  sales  and  marketing  initiatives,
product support, and administrative support based on the availability of funds.

Forward Looking Statements

The  Company is making  this  statement  in order to satisfy  the "safe  harbor"
provisions contained in the Private Securities Litigation Reform Act of 1995.

This Form 10-QSB includes forward-looking statements relating to the business of
the Company.  Forward-looking statements contained herein or in other statements
made by the  Company  are made based on  management's  expectations  and beliefs
concerning  future events impacting the Company and are subject to uncertainties
and factors relating to the Company's operations and business  environment,  all
of which are  difficult  to predict  and many of which are beyond the control of
the Company, that could cause actual results of the Company to differ materially
from those matters expressed in or implied by  forward-looking  statements.  The
Company  believes that the  following  factors,  among others,  could affect its




                                        18


<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

future  performance and cause actual results of the Company to differ materially
from those expressed in or implied by  forward-looking  statements made by or on
behalf of the Company: (a) the effect of technological changes; (b) increases in
or unexpected losses; (c) increased  competition;  (d) fluctuations in the costs
to operate  the  business;  (e)  uninsurable  risks;  and (f)  general  economic
conditions.


Item 3. CONTROLS AND PROCEDURES.

As of September 30, 2003, an evaluation was performed  under the supervision and
with the  participation  of the  Company's  management,  including the Principal
Executive Officer and the Principal  Accounting Officer, of the effectiveness of
the design and operation of the Company's  disclosure  controls and  procedures.
Based on that  evaluation,  the  Company's  management,  including the Principal
Executive  Officer and the  Principal  Accounting  Officer,  concluded  that the
Company's disclosure controls and procedures were effective as of June 30, 2003.
There have been no significant  changes in the Company's internal controls or in
other factors that could  significantly  affect internal controls  subsequent to
September 30, 2003.


PART II. OTHER INFORMATION

Item 1.  LEGAL PROCEEDINGS

The  Securities  and  Exchange  Commission  ("SEC")  filed an action in  Federal
District  Court  asserting  various  violations of  securities  laws against the
Company;  David F. Calkins  (the  Company's  current  Chairman of the Board) and
others. The complaint alleges that Mr. Frank Custable  "orchestrated" a "scheme"
to illegally obtain stock from various companies, including the Company, through
"scam Commission Form S-8 registration  statements,  forged stock  authorization
forms and at least one bogus attorney  opinion letter arranged by Custable." The
complaint  alleges that, in connection  with this alleged  "scheme," the Company
and its CEO,  David Calkins  violated  Section 17(a) of the  Securities  Act and
Section  10(b) and Rule 10b-5 of the Exchange Act. The SEC asks that the Company
and  Calkins be  permanently  enjoined  from future  violations,  ordered to pay
disgorgement and civil penalties and Calkins be barred from continued service as
an office and director.  As part of an ex parte  proceeding,  the District Court
has ordered the Company and Calkins to provide an accounting of their assets and
the  transactions  that are the subject of the  complaint.  The Company has been
served with the  complaint,  and no further  proceedings  are  scheduled at this
time.

The Company is a defendant in various lawsuits,  mainly with previous vendors of
the Company still owed monies.  The Company  continues to settle such claims and
has  hired a firm to  handle  certain  of those  negotiations.  All  claims  are
recorded  as  liabilities  on the  balance  sheet of the Company and the Company
believes such recorded reserves to be adequate for the settlement of the claims.




                                       19

<PAGE>


                          PACEL CORP. AND SUBSIDIARIES

Item 2. Changes in Securities

None

     Option Grants

None

     Issuances of Stock for Services or in Satisfaction of Obligations

For the nine months ended  September 30, 2003, the Company issued  approximately
10,784,000  shares of its No Par  Value  common  stock as  payment  for  various
consulting and legal fees.

Item 3. Defaults Upon Senior Securities

None

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

None.

Item 5.       Other Information

Acquisitions

In April 2003, the Company  completed the acquisition of 100% of the outstanding
stock  of  BeneCorp.  Such  acquisition  was  accounted  for as a  purchase.  In
conjunction with the acquisition,  the Company assumed approximately  $1,000,000
of debt.  Consideration  for the  transaction was $200,000 in cash, of which the
Company made an initial  deposit of $96,000 in 2002, and the issuance of 200,000
shares of restricted common stock of the Company.  The Company also executed one
year employment contracts with two principal officers of BeneCorp in conjunction
with the  acquisition.  The Company  recorded the  acquisition as a purchase and
recorded $1,669,500 of goodwill in association with the acquisition.

In April 2003,  TRSG  entered  into an  agreement  for the  purchase of customer
contracts, with a value of up to $100,000,000, from MRG. In conjunction with the
agreement, the Company issued 34,500,000 shares of unrestricted common stock and
recorded a non-interest bearing receivable of $600,000.  On August 27, 2003, the
Company  terminated its agreement with MRG as delivery of the promised contracts
was no longer viable based on restrictions in the California  insurance  market.
In conjunction with the termination of this agreement,  the Company entered into
a settlement  agreement  for  repayment of the $600,000  receivable as the stock
previously  issued by the Company had been  divested by MRG and was unable to be
returned to the  Company for  cancellation.  Such  receivable  is now secured by
assets of MRG, consisting of publicly held securities, with an approximate value
of  $250,000.  Such assets are  assigned to Pacel in the event of default on the
repayment by MRG. The repayment  requires MRG to make monthly  recurring payment
of $20,000 over a period of thirty (30) months.  MRG is currently in  compliance
with this  settlement  agreement  and is making  the  required  payments  to the
Company.




                                       20

<PAGE>



                          PACEL CORP. AND SUBSIDIARIES

In April 2003,  TRSG acquired  substantially  all of the assets of Asmara,  Inc.
("Asmara"),  a North  Carolina  corporation,  including its ownership of several
subsidiary  operations,  including  Asmara  Benefit  Services,  Inc.  and Asmara
Services I, Inc., North Carolina corporations,  Woodstock Lumber Sales, Inc., an
Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara of Florida II, Inc.,
Asmara  of  Florida  III,   Inc.  and  Asmara  of  Florida  IV,  Inc.,   Florida
corporations.  The  acquisition  was  accounted  for as a purchase.  The Company
assumed all debts of the operations of approximately  $1,400,000,  issued a note
payable to the  shareholder of Asmara,  Inc. in the amount of $431,530,  payable
over a two year period and  executed  employment  contracts  with the  principal
officer  and sole  shareholder  of Asmara.  Consideration  under such  agreement
consists of cash  compensation,  bonuses based on business unit  performance and
grants of options on the  common  stock of the  Company.  The  Company  recorded
$70,000 of fees and $1,859,858 of goodwill in conjunction with this acquisition.
On May 15,  2003,  the Company  acquired,  through its  wholly-owned  subsidiary
Asmara Services I, Inc., the outstanding  membership  units of NSC, LLC, a North
Carolina  limited  liability  company as a vehicle for entering  into a workers'
compensation  product  with a  North  Carolina  carrier.  Such  acquisition  was
accounted for as a purchase.  Consideration  for the transaction was $100,000 in
cash and the issuance of a note payable for $200,000.  Such note is payable over
eighteen (18) months and bears no interest. The Company recorded the acquisition
as a  purchase  and  recorded  $300,000  of  goodwill  in  association  with the
acquisition.

Item 6.       Exhibits and Reports

Item 6.       Exhibits and Reports

Number     Description
------     -------------------------------------------------
31.1   *   302 Certification by Chief Executive Officer and
           Chief Financial Officer

32.1   *   Certification by Chief Executive Officer and Chief Financial Officer
           pursuant to 18 U.S.C. 1350.

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

*    Filed herewith




                                       21


<PAGE>




                                   Signatures

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


                               Pacel Corporation
                                  (Registrant)


BY: /s/David Calkins
   ----------------------
CEO/President
Chairman of the Board


DATED:     November 12, 2003








                                       22