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 March 31, 2005

                                       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)


     7621 Little Ave, Suite 101
     Charlotte, NORTH CAROLINA                              28226
----------------------------------------        --------------------------------
(Address of principal executive offices)                  (ZIP Code)


       Registrant's telephone number, including area code: (704) 643-0676

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 [X] No [ ]

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 May 23, 2004,  there were 930,701,020  shares of the  Registrant's  common
stock outstanding.




<PAGE>
                          PACEL CORP. AND SUBSIDIARIES


<TABLE>
<CAPTION>
<S>                                                                                     <C>
Part I.  FINANCIAL INFORMATION (unaudited)

Item 1.  Index to Consolidated Financial Statements
                  Consolidated Balance Sheets                                           F - 2-3
                  Consolidated Statements of Operations                                 F - 4
                  Consolidated Statements of Cash Flows                                 F - 5-6
                  Notes to Consolidated Financial Statements                            F - 7-9

Item 2.  Management's Discussion and Analysis of Financial Results of Operations        3 - 7

Item 3.  Controls and Procedures                                                        7

Part II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                              8

Item 2.  Changes in Securities                                                          8

Item 6.  Exhibits and Reports                                                           9

Item 7.  Signatures                                                                     10

Item 8.  Certifications                                                                 11 - 12
</TABLE>






























<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                               March 31,     December 31,
                                                                 2005            2004
                                                             -------------  ---------------
                                                              (Unaudited)      (Audited)
<S>                                                          <C>            <C>
                                     ASSETS
Current assets:
       Cash                                                  $     231,879  $       117,052
       Client deposit and advance payments                         316,071          826,598
       Accounts receivable                                           5,686          230,469
       Accounts receivable-Unbilled                                743,535          310,845
       Prepaid expenses                                             86,179          110,408
       Workers compensation insurance deposits                     112,602          139,089
       Restricted cash                                             916,089          913,009
                                                             -------------  ---------------

                Total current assets                             2,412,041        2,647,470
                                                             -------------  ---------------

Property and equipment, net of accumulated depreciation of
       $84,879 and $70,436, respectively                           171,793          147,831
                                                             -------------  ---------------

Other assets:
       Retirement Plan-Director                                    142,172          154,772
       Goodwill                                                    708,693        1,075,432
       Security deposits                                            18,358           15,182
                                                             -------------  ---------------

                Total other assets                                 869,223        1,245,386
                                                             -------------  ---------------

                Total assets                                 $   3,453,057  $     4,040,687
                                                             =============  ===============
</TABLE>

















        See accompanying notes to the consolidated financial statements.
                                       F-2

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                               March 31,     December 31,
                                                                 2005            2004
                                                             -------------  ---------------
                                                              (Unaudited)      (Audited)
<S>                                                          <C>            <C>

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
       Accounts payable                                      $    409,908   $      242,210
       Payroll and payroll related liabilities                  2,240,158        2,511,224
       Accrued work site employee payroll expense                 719,555          300,391
       Accrued expenses                                         1,688,314        1,330,456
       Assumed Liabilities                                        493,133          493,133
       Client deposits and advance payments                       316,071          826,598
       Short term payables                                      2,288,295        2,158,251
       Sales taxes payable                                            491               -0-
                                                             ------------   ---------------

                Total current liabilities                       8,155,925        7,862,263

Long-term liabilities:
       Notes Payable                                              239,781               -0-
       Deferred Compensation-Director Payable                     142,172          154,772
                                                             ------------   ---------------
                Total long-term liabilities                       381,953          154,772

                Total liabilities                               8,537,878        8,017,035

Stockholders' equity (deficit):
       Preferred stock, .001 par value, no liquidation value,
                5,000,000 shares authorized, 1,000,000 shares
                of 1997 Class A convertible preferred stock         1,000            1,000
       Common stock, .001 par value, 10,000,000,000 shares
                authorized, 927,726,020 and 1,773,001
                shares issued and outstanding in 2005 and 2004
                respectively.                                     927,726            1,773
       Additional paid-in capital                              22,225,998       22,401,562
       Cumulative currency translation adjustment                 (18,720)         (18,720)
       Accumulated deficit                                    (28,220,825)     (26,361,963)
                                                             -------------  ---------------

                Total stockholders' (deficit)                  (5,084,821)      (3,976,348)
                                                             -------------  ---------------

                Total liabilities and stockholders' deficit  $  3,453,057   $    4,040,687
                                                             =============  ===============
</TABLE>




        See accompanying notes to the consolidated financial statements.

                                       F-3
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                  Three months ended
                                                                       March 31,
                                                                 2005             2004
                                                             -------------  ---------------
<S>                                                          <C>            <C>
Revenue                                                      $    423,787   $      371,868
Cost of services                                                  326,963          288,973
                                                             -------------  ---------------
       Gross profit                                                96,824           82,895

Operating costs and expenses:
       General and administrative                                 643,090          382,398
       Sales & Marketing                                          238,942          101,988
       Depreciation and amortization                               14,444            6,500
       Loss on impairment of goodwill                             599,689               -0-
                                                             -------------  ---------------
          Total operating expenses                              1,496,165          490,886
                                                             -------------  ---------------

       Operating loss                                          (1,399,341)        (407,991)

Other expenses:
         Interest expense                                          92,801           41,157
         Financing costs                                          260,500          245,000
                                                             -------------  ---------------
           Total other expenses                                   353,301          286,157

Net loss before discontinued operations                        (1,752,642)        (694,148)

Loss from discontinued operations of AsmaraHR                     106,221           92,864

Net loss                                                     $ (1,858,863)  $     (787,012)
                                                             =============  ===============

Loss from discontinued operations per common and common equivalent share:
       Basic                                                 $     (0.001)  $   (30,954.67)
       Diluted                                               $     (0.001)  $   (30,954.67)


Net loss per common and common equivalent share:
       Basic                                                 $      (0.02)   $ (262,337.33)
       Diluted                                               $      (0.02)   $ (262,337.33)

Weighted average shares outstanding:
       Basic                                                  100,775,152                3
       Diluted                                                100,775,152                3
</TABLE>




        See accompanying notes to the consolidated financial statements.

                                       F-4
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                  Three months ended
                                                                       March 31,
                                                                  2005           2004
                                                             -------------  ---------------
<S>                                                          <C>            <C>
Cash flows from operating activities:
       Net loss                                              $ (1,858,863)  $     (787,012)
Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
                Depreciation                                       14,444            6,500
                Embedded interest                                 257,143          245,000
                Other non-cash items                                   -0-          90,000
                Loss on impairment of goodwill                    599,689               -0-
       Increase (decrease) in cash from changes in assets:
           Accounts receivable                                    224,783           54,598
           Accounts receivable-Unbilled                          (432,690)              -0-
           Other receivables                                           -0-          32,802
           Client deposits                                        510,527          499,988
           Insurance deposits                                      26,486               -0-
           Prepaid expenses                                        43,129          (68,255)
           Security deposits                                       (1,926)            (875)
       Increase (decrease) in cash from changes in liabilities:
           Accounts payable                                       167,698         (129,750)
           Accrued expenses                                       357,858          (71,441)
           Accrued expenses-Director                                   -0-         (52,442)
           Payroll and payroll related liabilities               (277,186)        (536,624)
           Accrued work site employee payroll cost                419,164               -0-
           Deferred Revenue                                      (510,527)        (499,988)
           Assumed liabilities                                         -0-        (189,190)
           Sales and income taxes payable                             491           (2,532)
                                                             -------------  ---------------
                Net cash (used in) operating activities          (459,780)      (1,409,221)

Cash flows from investing activities:
       Net purchases of property and equipment                    (13,384)         (50,262)
       Cash CD-Restricted                                          (3,080)              -0-
                                                             -------------  ---------------
                Net cash (used in) investing activities           (16,464)         (50,262)

Cash flows from financing activities:
           Repayments of notes payable                             (6,273)         (33,000)
           Issuance of notes payable                                   -0-          90,000
           Issuance of convertible notes payable                  600,000          755,898
           Receipts of stock subscription receivables                  -0-          50,000
           Repayments of lines of credit                           (2,656)          (1,732)
           Repayments of capital lease                                 -0-          (6,829)
                                                             -------------  ---------------
                Net cash provided by financing activities         591,071          854,337
                                                             -------------  ---------------

Net increase (decrease) in cash and cash equivalents              114,827         (605,146)

Cash and cash equivalents, beginning of period                    117,052          682,400
                                                             -------------  ---------------

Cash and cash equivalents, end of period                     $    231,879   $       77,254
                                                             =============  ===============
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                       F-5
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                  Three months ended
                                                                       March 31,
                                                                  2005           2004
                                                             -------------  ---------------
<S>                                                          <C>            <C>
Supplemental disclosure of cash flow information:
       Cash paid for interest                                $     10,080   $       22,598
                                                             =============  ===============
</TABLE>




































        See accompanying notes to the consolidated financial statements.

                                       F-6
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                                 March 31, 2005

Note 1.  Basis of Presentation.

         The   unaudited   financial   statements  of  Pacel   Corporation   and
         Subsidiaries  (collectively,  the Company)  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, 2004. 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.

Note 2.  Use of Estimates

         Our consolidated  financial statements have been prepared in accordance
         with generally accepted accounting  principles in the United States (US
         GAAP).  The  preparation of these financial  statements  requires us to
         make  estimates and judgments  that affect the reported  amounts in the
         financial  statements and accompanying  notes. These estimates form the
         basis for  judgments  we make about the  carrying  values of assets and
         liabilities that are not readily  apparent from other sources.  We base
         our estimates and  judgments on  historical  experience  and on various
         other   assumptions   that  we  believe   are   reasonable   under  the
         circumstances.  However,  future  events are  subject to change and the
         best  estimates and judgments  routinely  require  adjustment.  US GAAP
         requires us to make estimates and judgments in several areas, including
         those related to impairment of goodwill and equity investments, revenue
         recognition,  recoverability  of inventory and receivables,  the useful
         lives of long lived assets such as property and  equipment,  the future
         realization  of  deferred  income tax  benefits  and the  recording  of
         various accruals.  The ultimate outcome and actual results could differ
         from the estimates and assumptions used.

Note 3.  Revenue Recognition.

         We account for our revenues in  accordance  with  Emerging  Issues Task
         Force ("EITF") 99-19,  Reporting  Revenues Gross as a Principal  Versus
         Net as an Agent. Our revenues are derived from our billings,  which are
         based on:

         o        the payroll cost of our worksite employees; and
         o        a markup computed as a percentage of the payroll cost.

         In determining the pricing of the markup component of the billings,  we
         consider  our  estimates  of the  costs  directly  associated  with our
         worksite employees,  including payroll taxes and workers'  compensation
         costs,  plus an acceptable gross profit margin. We invoice the billings
         concurrently  with each  periodic  payroll of our  worksite  employees.
         Revenues,  which  exclude the payroll cost  component of billings,  are
         recognized  ratably  over the  payroll  period  as  worksite  employees
         perform their service at the client worksite.  We include revenues that
         have been recognized but not invoiced in unbilled  accounts  receivable
         on our Consolidated Balance Sheets.

                                       F-7
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                                 March 31, 2005

Note 3.  Revenue Recognition.

         Our revenues are primarily dependent on the number of clients enrolled,
         the resulting  number of worksite  employees paid each period.  Because
         our markup is computed as a percentage  of payroll  cost,  revenues are
         also  affected by the payroll  cost of  worksite  employees,  which can
         fluctuate  based on the  composition  of the  worksite  employee  base,
         inflationary  effects  on wage  levels  and  differences  in the  local
         economies of our markets.

         The  primary  direct  costs  associated  with  our  revenue  generating
         activities are:

         o        employment-related taxes ("payroll taxes");
         o        workers' compensation claim costs.

         Payroll taxes consist of the employer's  portion of Social Security and
         Medicare  taxes  under  FICA,  federal  unemployment  taxes  and  state
         unemployment taxes. Payroll taxes are generally paid as a percentage of
         payroll cost. The federal tax rates are defined by federal regulations.
         State  unemployment  tax rates are subject to claim  histories and vary
         from state to state.

Note 4.  Common Stock.

         In February 2005, the Company  effected a one-for-one  thousand reverse
         stock  split  restating  the number of common  shares of the Company at
         December 31, 2004 from  1,773,000,943  to 1,773,001.  All references to
         average number of shares,  shares outstanding and prices per share have
         been restated retroactively to reflect the split.

         In January 2005, by written consent of a majority of stockholders,  the
         Company  adopted  an  amendment  to the  Corporations'  Certificate  of
         Incorporation  to increase  the number of  authorized  shares of common
         stock, from 2,000,000,000 to 10,000,000,000 shares.

         In January 2005, by written consent of a majority of stockholders,  the
         Company changed its corporate  domicile from Virginia to Nevada. Due to
         Nevada requirements,  the Company's common stock par value changed from
         no par  value to .001 par  value.  As a result of this  change,  common
         stock  for  the  year  ended   December  31,  2004  was  restated  from
         $22,443,015 to $1,773.

Note 5.  Acquisitions

         In January 2005, the Company,  through its wholly-owned  subsidiary The
         Resourcing  Solutions Group, Inc., completed the acquisition of certain
         assets of Rossar HR LLC,  a  Pennsylvania  limited  liability  company,
         which operated under the name "Your Staff Solutions".  Rossar HR LLC is
         a  Professional  Employment  Organization  founded  in the  1987  which
         specializes in quality human resource  management services for small to
         medium sized  businesses.  Consideration  under such  agreement did not
         contemplate  any cash  paid to the  seller at  closing,  but call for a
         Promissory  Note of $272,000 to be paid in equal  monthly  installments
         over ten years.  The Company recorded the acquisition as a purchase and
         recorded  $52,000 of fees and $232,950 of goodwill in association  with
         this acquisition.

                                       F-8
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                 Notes to the Consolidated Financial Statements
                                 March 31, 2005

Note 6.  Contingent Liabilities.

         The  Securities  and  Exchange  Commission  ("SEC")  filed an action in
         Federal District Court asserting various  violations of securities laws
         against the Company and its principal  officer.  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  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.
         Pursuant  to  an  agreement  of  the  parties,  an  accounting  of  the
         transactions  at issue was provided on June 30,  2004.  The Company and
         Calkins answered the second amended  complaint on March 23, 2005. Under
         the current  scheduling  order fact discovery must be completed by June
         21, 2005. Final  dispositive  pre-trial motion deadlines will be set by
         the trial judge. A trial date has not yet been set.

Note 7.  Client Deposit

         The Company had $316,071 in Deferred  Revenue on March 31, 2005 related
         to amounts prepaid for 2005 services from a single client.  The Company
         executed a letter  agreement in conjunction with receipt of these funds
         that  provides  the  funds be held in  separate  trust  account  by the
         Company  and not  commingled  with any other  general  use funds of the
         Company.  The Company draws down the  pre-payment  account as needed to
         fund the payment of payroll,  deposit taxes,  benefits,  fees and other
         costs for this single client pursuant to the agreement.  The Company is
         currently in violation of this agreement.

Note 8.  Restricted Cash

         During the first quarter of 2005, as part of the Company  acquiring new
         office  space,   the  landlord   required  the  Company  to  secure  an
         irrevocable  letters of credit with an interest bearing CD (certificate
         of deposits). The value of the CD on March 31, 2005 was $100,239.

         During  the  second  quarter  of  2004,  the  Company  entered  into an
         agreement with a national bank to develop a program that eliminates the
         need for multiple  banks.  During the credit review  process,  the bank
         required  the  Company to secure  its ACH  (automated  clearing  house)
         exposure with a standby letter of credit.  ACH transactions are used to
         collect  funds due from the  Company's  clients for PEO services  along
         with  depositing  funds into  employee  bank accounts that have elected
         direct  deposit as a means of wage  payment.  The Company  secured this
         standby letter of credit with an interest  bearing CD  (certificate  of
         deposit) in the amount of $600,000.  In the first quarter of 2005,  the
         Company reduced the standby letter of credit to $500,000.  The value of
         the CD on March 31, 2005 was $508,218.

Note 9.  Subsequent Event

         On May 15, 2005, The Resourcing  Solutions Group,  Inc. a subsidiary of
         the Company sold 16 PEO accounts  located  primarily in North Carolina,
         South Carolina and Florida to Allegro, Inc. for approximately  $240,000
         and is  expected  to  report  a net  after  tax  loss of  approximately
         $468,000.  The  Company  will  receive  the  $240,000  over the next 12
         months.  The Company wrote off approximately  $468,000 in Goodwill as a
         result  of the  sale of these  contracts.  As a  result  of this  sale,
         activities  related  to these  contracts  have  been  accounted  for as
         discontinued operations.

                                       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.  Historical
         results are not necessarily  indicative of trends in operating  results
         for any future period.

         In 2005, the Company  continued its strategy for  penetrating the Human
         Resources  Outsourcing  ("HRO") industry based on its evaluation of its
         business model and existing business initiatives completed in 2002. The
         Company's  intention  to enter this  business  sector was  announced in
         September  2002 and was based on an  evaluation  of potential  business
         markets that provide the  potential for success.  The Company  provides
         human  capital  solutions  through the  provision  of PEO  services and
         Administrative  Service  Organization ("ASO") services to such clients.
         In 2003,  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.

         As part of its goal to bring  the  company  to  profitability  and less
         reliant on equity  financing  for ongoing  operations,  the company has
         developed an aggressive  marketing strategy as well as an investment to
         significantly  upgrade its HRIS  (Human  Resource  Information  System)
         capabilities to service its current and prospective clients.  This plan
         includes  hiring and training  the sales team as well as marketing  the
         company's  services  through  networks  of  national  associations  and
         chains.  The  company  has  successfully   negotiated  joint  marketing
         programs to market the company's products and services. The company has
         also engaged  Thinkware  Corporation  to implement its new HRIS system.
         This system will  provide the  company  with  "state-of-the-art"  human
         resource  data  necessary  to  service  the  growing  needs of small to
         mid-size clients as well as automate the company's internal  processes.
         The HRIS system became fully operational in January 2005.

         Through its PEO/ASO  business unit, the Company  markets to current and
         prospective  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  it believes  are  necessary to  effectively  and
         competitively provide such services to a broad range of clients.

         In a further effort to bring the Company to  profitability it evaluated
         its internal  operating  costs and evaluated  each  existing  client to
         determine  profitability.  The Company  determined that certain clients
         were not producing  sufficient  gross profit.  In May 2005, the Company
         sold 16 contracts to Allegro, Inc. approximately  $240,000. The Company
         will  establish  a  receivable  for  $240,000  for the  sale  of  these
         contracts.




                                        3
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES

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

         Three  Months  ended March 31, 2005  compared to the Three Months ended
         March 31, 2004

         Revenue for the quarter  ended March 31, 2005  increased  approximately
         $51,900 to $423,787  compared  to revenue of  $371,868  for the quarter
         ended March 31, 2004.  Revenues  generated from the Rossar  acquisition
         accounted for $135,645 of the increase  offset by a decrease of $83,726
         from the Company's existing clients.

         The company experienced a decrease in the number of work site employees
         it provided  PEO  services  to during the quarter  ended March 31, 2005
         compared to the quarter ended March 31, 2004. The company generates its
         revenue from services relating to work site employees. This decrease in
         work site  employees was primarily  from large  construction  and heavy
         industrial  clients that  terminated  PEO services with the company for
         reasons ranging from plant and company closings to clients bringing the
         services  typically  offered in a PEO  relationship  in-house.  The PEO
         industry  as a whole has found it more  difficult  to  provide  the PEO
         services to construction  and heavy  industrial  clients because of its
         inability to obtain  workers  compensation  insurance.  The company has
         focused  its  sales and  marketing  effort  to white  collar  and light
         industrial clients where workers compensation  insurance is readily and
         economically accessible.

         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 quarters ended March 31, 2005 and March 31, 2004.

<TABLE>
<CAPTION>
                                                          Three months ended       Three months ended
                                                              March 31,                 March 31,
                                                                2005                      2004
                                                          ------------------       ------------------
                                                             (Unaudited)               (Unaudited)
<S>                                                        <C>                      <C>
Reconciliation of billings to revenue recognized:
Gross billings to clients                                  $      3,467,634         $      2,341,908
Less - Gross wages billed to clients                             (3,043,847)              (1,970,040)
                                                          ------------------       ------------------

Total revenue as reported                                  $        423,787         $        371,868
                                                          ==================       ==================
</TABLE>





                                        4

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES

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

         Cost of services for the three months ended March 31, 2005 was $326,963
         compared to cost of services of  $288,973  for the three  months  ended
         March 31, 2004 and is related  directly to the  delivery of services to
         its PEO clients.  This increase was directly related to the increase in
         revenue.

         General  &  administrative  expenses,  including  salaries  and  wages,
         increased  to  $643,090  for the three  months  ended  March 31,  2005,
         compared to $382,398 in the corresponding  period of 2004. The increase
         was attributed additional expenditures needed to support the operations
         along with the general and  administrative  expenses  acquired with the
         Rossar HR acquisition.

         Sales and marketing expenses increased to $238,942 for the three months
         ended March 31, 2005, compared to $101,988 in the corresponding  period
         of  2004.  The  increase  was  attributed  to the  company's  continued
         transformation  of its sales and  marketing  function that began in the
         second quarter of 2004.

         Depreciation  expenses  increased to $14,444 for the three months ended
         March 31,  2005,  compared  to $6,500 for the  corresponding  period of
         2004. This increase was from the Human Resource  Information System and
         various other office equipment placed in service in the third and forth
         quarter of 2004.

         Interest expense is interest paid and accrued on the Convertible Notes,
         unpaid  payroll  taxes,  notes  payable,  bank  financing,  and capital
         leases. Interest expense amounted to $92,801 for the three months ended
         March 31, 2005  compared  to $41,157  for the same period of 2004.  The
         increase is primarily  attributable  to the  continued use of financing
         for working capital.

         Finance  expense for the three  months  ended March 31, 2005  increased
         $15,500 to $260,500  when  compared to finance  expense of $245,000 for
         the three months  ended March 31, 2004.  The increase was the result of
         increased  funding  requirements  for  administrative  and  operational
         needs. 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 March 31, 2005 increased to $231,879 from
         $117,052 at December 31, 2004.  Net cash used for operating  activities
         was $459,780  during the three months ended March 31, 2005  compared to
         $1,409,221  in the  corresponding  period  of 2004.  The  cash  used in
         operating  activities  is  attributable  to the  decrease  in  accounts
         receivable,   insurance   deposits,   payroll   and   payroll   related
         liabilities,  accounts payable and accrued expenses offset by increases
         in net loss,  unbilled  accounts  receivable,  security  deposits,  and
         payroll and payroll related liabilities.

         Net cash used in investing  activities for the three months ended March
         31,  2005  was  $16,464.  The  cash  used in  investing  activities  is
         attributable  to computer  equipment  and  software  purchased  for the
         company's business information system  implementation and the increased
         investment  in  CD's.  This  compares  to net cash  used for  investing
         activities for the three months ended March 31, 2004 of $50,262.

         Net cash  provided by  financing  activities  in the three months ended
         March 31, 2005 was $591,071  compared to $854,337 in the  corresponding
         period ended March 31, 2004.  The cash provided  during both periods is
         directly  related to the Company's  execution and  utilization of three
         equity-based lines of credit.

                                        5


<PAGE>
                          PACEL CORP. AND SUBSIDIARIES

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

         In August 2003,  the Company  entered into an equity line of credit for
         $10,000,000  from Compass  Capital Inc.,  Kentan Ltd, Reef Holding Ltd,
         and T&B  Associates,  Inc.  Borrowing  from this equity line allows the
         repayment by issuing  shares of the Company's  stock at a discount rate
         of up to  50%.  The  line  is  being  used  to  fund  acquisitions  and
         shortfalls in working capital.  During the three months ended March 31,
         2005,  the Company drew down $600,000 and issued  6,170,700,000  shares
         unrestricted  shares of the  Company's  .001 par common  stock,  before
         adjusting  such  shares to  reflect  the  effects  of any stock  splits
         occurring   subsequent   to  issuance.   After  giving  effect  to  the
         one-for-one  hundred  reverse  split on February 28, 2005,  925,950,000
         shares were issued in  conjunction  with this equity line.  The balance
         remaining on this equity line of credit at May 23, 2005 was $2,369,102.
         The lenders are not  obligated  to fund the  remaining  balance on this
         equity  line of credit and may  discontinue  funding the Company at any
         time without any further obligation.

         In January 2005, the Company,  through its wholly-owned  subsidiary The
         Resourcing  Solutions Group, Inc., completed the acquisition of certain
         assets of Rossar HR LLC,  a  Pennsylvania  limited  liability  company,
         which operated under the name "Your Staff Solutions".  Rossar HR LLC is
         a  Professional  Employment  Organization  founded  in the  1987  which
         specializes in quality human resource  management services for small to
         medium sized  businesses.  Consideration  under such  agreement did not
         contemplate  any cash  paid to the  seller at  closing,  but call for a
         Promissory  Note of $272,000 to be paid in equal  monthly  installments
         over ten years.  The Company  recorded  $52,000 of fees and $232,950 of
         goodwill in conjunction with this 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 convertible notes payable, until
         additional  funds can be  generated  through  acquisitions  and organic
         business   growth.   The   liabilities   of  the  Company   consist  of
         over-extended accounts payable, payroll taxes, and interest expense.

         As part of its goal to bring  the  company  to  profitability  and less
         reliant on equity  financing  for ongoing  operations,  the company has
         developed an aggressive  marketing strategy as well as an investment to
         significantly  upgrade its HRIS  (Human  Resource  Information  System)
         capabilities to service its current and prospective clients.  This plan
         includes  hiring and training  the sales team as well as marketing  the
         company's  services  through  networks  of  national  associations  and
         chains.  The  company  has  successfully   negotiated  joint  marketing
         programs to market the company's products and services. The company has
         also engaged  Thinkware  Corporation  to implement its new HRIS system.
         This system will  provide the  company  with  "state-of-the-art"  human
         resource  data  necessary  to  service  the  growing  needs of small to
         mid-size clients as well as automate the company's internal  processes.
         The HRIS system became fully operational in January 2005.




                                        6
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES

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

         The Company relies on equity  financing to fund its ongoing  operations
         and investing activities. The Company expects to continue its investing
         activities,   including   expenditures  for  acquisitions,   sales  and
         marketing  initiatives,  HRIS (Human Resource  Information System), and
         administrative  support. The loss of its current equity financing would
         seriously hinder the Company's ability to execute its business strategy
         and impair its ability to continue as a going concern.

         In a further effort to bring the Company to  profitability it evaluated
         its internal  operating  costs and evaluated  each  existing  client to
         determine  profitability.  The Company  determined that certain clients
         were not producing  sufficient  gross profit.  In May 2005, the Company
         sold 16 contracts  to Allegro,  Inc. for  approximately  $240,000.  The
         Company  estimates  the sales of these  contracts  will  reduce  annual
         operating losses by approximately $325,000.


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
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 March 31, 2005, an evaluation was performed under the supervision and with
the participation of the Company's management, including the Principal Executive
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 March 31, 2005.  There have been no significant
changes  in the  Company's  internal  controls  or in other  factors  that could
significantly affect internal controls subsequent to March 31, 2005.












                                        7

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES

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 and its principal officer. 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 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. Pursuant to an agreement of the parties, an accounting
of the  transactions  at issue was  provided on June 30,  2004.  The Company and
Calkins  answered the second  amended  complaint  on March 23,  2005.  Under the
current  scheduling  order fact  discovery  must be  completed by June 21, 2005.
Final  dispositive  pre-trial motion deadlines will be set by the trial judge. A
trial date has not yet been set.


Item 2.  Changes in Securities and Small Business Issuer Purchases of Equity
         Securities

In February  2005,  the Company  effected a one-for-one  thousand  reverse stock
split  restating the number of common shares of the Company at December 31, 2004
from  1,773,000,943  to 1,773,001.  All  references to average number of shares,
shares  outstanding  and prices per share have been  restated  retroactively  to
reflect the split.

In January 2005, by written consent of a majority of  stockholders,  the Company
adopted an  amendment  to the  Corporations'  Certificate  of  Incorporation  to
increase the number of authorized shares of common stock, from  2,000,000,000 to
10,000,000,000 shares.

In January 2005, by written consent of a majority of  stockholders,  the Company
changed  its  corporate   domicile  from  Virginia  to  Nevada.  Due  to  Nevada
requirements,  the Company's common stock par value changed from no par value to
..001 par  value.  As a result of this  change,  common  stock for the year ended
December 31, 2004 was restated from $22,443,015 to $1,773.



                                        8
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES



Item 6.       Exhibits and Reports

The following reports were filed during the period covered by this Form 10-QSB:

January 6, 2005    Item 2.01. Completion of acquisition or disposal of asset
                   Item 9.01. Financial Statements and Exhibits

January 12, 2005   Item 2.01. Completion of acquisition or disposal of asset
                   Item 9.01. Financial Statements and Exhibits

January 24, 2005   Item 5.02. Departure of directors or principal officers;
                              election of directors; appointment of principal
                              officers
                   Item 5.03. Amendment to articles of incorporation or bylaws;
                              changes in fiscal year
                   Item 8.01. Other events

March 11, 2005     Item 5.02. Departure of directors or principal officers;
                              election of directors; appointment of principal
                              officers
                   Item 5.03. Amendment to articles of incorporation or bylaws;
                              changes in fiscal year

March 25, 2005     Item 1.01. Entry into a material definitive agreement
                   Item 9.01. Financial Statements and Exhibits





























                                        9
<PAGE>
                               Item 7. 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 Corp.


BY:             /s/ GARY MUSSELMAN
                -------------------------------------------
                Gary Musselman, President, Chief Executive Officer, and Chief
                Financial Officer

DATED:          May 23, 2005






























                                       10