UNITED STATES
                       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 June 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 [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 August 28, 2003 there were 411,681,947  shares of the Registrant's  common
stock outstanding.





<PAGE>


                          PACEL CORP. AND SUBSIDIARIES


Part I.  FINANCIAL INFORMATION (unaudited)
Item 1.  Index to Consolidated Financial Statements
                  Consolidated Balance Sheets                                F-1
                  Consolidated Statements of Operations                      F-3
                  Consolidated Statements of Cash Flows                      F-5
                  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                                              16

Part II. OTHER INFORMATION
Item 1.  Legal Proceedings                                                    16
Item 2.  Changes in Securities                                                17
Item 3.  Defaults upon Senior Securities                                      17
Item 4.  Submission of Matters to Vote of Security Holders                    17
Item 5.  Other Information                                                    17
Item 6.  Exhibits and Reports                                                 18
Signatures                                                                    19


<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES

                           Consolidated Balance Sheets

                                                                    June 30,     December 31,
                                                                      2003         2002
                                                                -------------   ---------------
                                                                   (Unaudited)     (Audited)
<S>                                                             <C>             <C>
                                     ASSETS
Current assets:
       Cash                                                     $     306,674   $         8,379
       Accounts receivable                                             34,438               -0-
       Stock subscription receivable                                  130,000               -0-
       Prepaid expenses                                                49,948               -0-
       Workers compensation insurance deposits                        194,776               -0-
       Other receivables                                                  -0-           112,499
                                                                -------------   ---------------

                Total current assets                                  715,836           120,878
                                                                -------------   ---------------

Property and equipment, net of accumulated depreciation of
       $139,810 and $128,140, respectively                            108,168            24,961
                                                                -------------   ---------------

Other assets:
       Deposit - MRG Contracts Acquisition                            600,000               -0-
       Other receivables                                               17,373               -0-
       Goodwill 3,230,038                                                 -0-
       Security deposits                                                9,241             3,991
                                                                -------------   ---------------

                Total other assets                                  3,856,652             3,991
                                                                -------------   ---------------

                Total assets                                    $   4,680,656   $       149,830
                                                                =============   ===============
</TABLE>







        See accompanying notes to the consolidated financial statements.

                                       F-1

<PAGE>


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

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

                      LIABILITIES AND STOCKHOLDERS' DEFECIT

Current liabilities:
       Accounts payable                                         $   1,058,554   $    1,353,022
       Payroll and payroll related liabilities                      1,469,536              -0-
       Accrued expenses                                               355,933          234,602
       Accrued expenses - officers                                    320,286              -0-
       Loans payable - officers/stockholders                           32,616          956,309
       Deferred client revenue                                        764,562              -0-
       Current portion of long-term debt                            1,447,681          873,750
       Convertible debentures                                         125,000              -0-
       Notes payable - bank                                            48,847           45,565
       Income taxes payable                                             3,500              -0-
                                                                -------------   --------------

                Total current liabilities                           5,626,515        3,463,248

Long-term liabilities:
       Notes payable                                                  248,994              -0-
       Convertible debentures                                         651,520          409,111
                                                                -------------   --------------

                Total liabilities                                   6,527,029        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,
                327,205,569 and 119,791,243 shares issued
                respectively                                       13,547,205       10,685,520
       Cumulative currency translation adjustment                     (18,720)         (18,720)
       Accumulated deficit                                        (15,386,178)     (14,400,649)
                                                                -------------   --------------

                Total stockholders' (deficit)                      (1,846,373)      (3,722,529)
                                                                -------------   --------------

                Total liabilities and stockholders' deficit     $   4,680,656   $      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)

                                                           Six months ended                  Three months ended
                                                               June 30,                          June 30,
                                                         2003             2002              2003             2002
                                                    ------------     -------------    -------------      ------------
<S>                                                 <C>              <C>              <C>                <C>
Revenue                                             $  1,147,420     $     316,957    $   1,146,837      $    138,369
Cost of services                                         913,702           312,812          913,702           127,502
                                                    ------------     -------------    -------------      ------------
       Gross profit                                      233,718             4,145          233,135            10,867

Operating costs and expenses:
       Research and development                              -0-           232,826              -0-           129,455
       Sales and marketing                                   -0-           206,244              -0-           147,365
       General and administrative                      1,138,255         1,670,190          833,667           557,446
       Depreciation and amortization                       8,908             7,477            7,660             3,727
       Interest expense                                   91,723            70,308           63,637            35,013
       Financing costs                                   130,750            35,500          130,750            32,000
                                                    ------------     -------------    -------------      ------------

                Total operating expenses               1,369,636         2,222,545        1,035,714           905,006
                                                   -------------   ---------------   --------------     -------------

Operating loss from continuing operations             (1,135,918)       (2,218,400)        (802,579)         (894,139)

Loss from discontinued operations of EBStor                  -0-          (220,268)             -0-          (116,284)
Gain from disposal of EBStor                                 -0-           177,817              -0-           177,817
                                                    ------------     -------------    -------------      ------------

Loss before cumulative effect of accounting change    (1,135,918)       (2,260,851)        (802,579)         (832,606)

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

Net Loss                                            $ (1,135,918)    $  (2,667,900)   $    (802,579)     $   (832,606)
                                                    ------------     -------------    -------------      ------------

Net loss per common and common equivalent share:
       Basic                                      $         (0.01)  $        (0.10)   $       (0.01)     $      (0.02)
Diluted                                           $         (0.01)  $        (0.10)   $       (0.01)     $      (0.02)

Weighted average shares outstanding:
       Basic                                         119,890,785        27,740,062      184,288,967        52,219,456
       Diluted                                       119,890,785        27,740,062      184,288,967        52,219,456
</TABLE>












        See accompanying notes to the consolidated financial statements.

                                       F-3

<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
                                                                         Six months ended
                                                                           June 30,
                                                                      2003           2002
                                                               --------------   --------------
                                                                (Unaudited)       (Unaudited)
<S>                                                             <C>             <C>
Cash flows from operating activities:
       Net loss                                                 $  (1,135,917)  $   (2,667,900)
       Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
                Cumulative effect of accounting change                                 407,049
                Depreciation                                            8,908            7,477
                Other non-cash items                                  492,765        1,153,712
                Gain on sale of EBStor                                    -0-         (177,877)
       Increase (decrease) in cash from changes in:
           Accounts receivable                                        (12,001)         232,462
           Other receivables                                            7,590          (71,795)
Inventory  -0-  36,423
           Insurance deposits                                         (12,485)             -0-
           Prepaid expenses                                            (7,406)         287,357
           Security deposits                                              -0-          (15,237)
           Accounts payable                                          (573,164)          68,792
           Accrued expenses                                           121,331          636,971
           Payroll and payroll related liabilities                    582,205              -0-
           Deferred revenue                                          (508,764)             -0-
           Loans payable - officers/stockholders                       (3,407)
           Income taxes payable                                           -0-              -0-
                                                               --------------   --------------
                Net cash (used in) operating activities            (1,040,345)        (102,566)

Cash flows from investing activities:
       Disposals of property and equipment                              2,762              -0-
       Net cash received in acquisition                               160,744              -0-
       Cash used for acquisitions                                    (105,000)             -0-
                                                               --------------   --------------
                Net cash (used in) investing activities                58,506              -0-

Cash flows from financing activities:
       Repayments of notes payable                                    (22,610)        (125,362)
       Issuance of convertible notes payable                          631,520           25,000
       Borrowings from lines of credit                                  9,049              -0-
       Proceeds from sale of common stock                             662,175          150,000
                                                               --------------   --------------
                Net cash provided by financing activities           1,280,134           49,638

Effects of exchange rates on cash                                         -0-           (7,720)
                                                               --------------   --------------

Net increase (decrease) in cash and cash equivalents                  298,295          (60,648)

Cash and cash equivalents, beginning of period                          8,379           65,761
                                                               --------------   --------------

Cash and cash equivalents, end of period                       $      306,674   $        5,113
                                                               ==============   ==============
</TABLE>


        See accompanying notes to the consolidated financial statements.

                                       F-4


<PAGE>


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



                                                                           June 30,
                                                                      2003           2002
                                                               --------------   --------------
                                                                (Unaudited)       (Unaudited)
<S>                                                             <C>             <C>


Supplemental disclosure of cash flow information:
       Cash paid for interest                                   $       9,862   $        5,467
                                                                =============   ==============
</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
                                  June 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  $55,290  and  $85,278,  respectively,  of internet
     development  and  maintenance  services  from E-B Stor,  Inc. for the three
     months and six months  ended June 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.

     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
                                  June 30, 2003

Note 3. Accounting for Business Combinations.

     In July 2001, the Financial  Accounting Standards Board (the "FASB") issued
     Statement of Financial Accounting Standards No. 141, Business  Combinations
     and Statement of Financial Accounting Standards No. 142, Goodwill and Other
     Intangible Assets (collectively, the "Statements"). These Statements change
     the   accounting  for  business   combinations   by,  among  other  things,
     prohibiting  the  prospective  use of  pooling-of-interests  accounting and
     requiring   companies  to  discontinue   amortizing  goodwill  and  certain
     intangible assets deemed to have an indefinite useful life.  Alternatively,
     goodwill and  intangible  assets deemed to have an  indefinite  useful life
     will be subject to an annual review for impairment.  These  Statements were
     adopted by the  Company in the first  quarter of 2002 and for all  business
     purchase  combinations  consummated  after June 30, 2001.  Upon adoption of
     these  Statements,  the  Company  recorded a one-time,  non-cash  charge of
     $407,049  to reduce the  carrying  value of its  goodwill.  Such  charge is
     non-operational  in  nature  and is  reflected  as a  cumulative  effect of
     accounting change in the accompanying consolidated statement of operations.

Note 4. 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 result 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.









                                       F-7

<PAGE>


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

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.  The complaint  alleges that defendant  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  form and least one bogus attorney
     opinion  letter  arranged by  Custable."  The  complain  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 $20,000 of fees
     and $1,672,000 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. Consideration for
     such contracts is three times annualized net profit margin on each contract
     paid in either cash or freely  tradable  common  stock of the  Company.  To
     date, the Company has issued 34,500,000 shares of unrestricted common stock
     in conjunction with the purchase of the contracts and recorded a receivable
     of $600,000 in  conjunction  with that issuance.  In addition,  the Company
     entered  into  a  one-year   agreement  with  MRG  to  provide   continuing
     administrative services under such customer contracts.

     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 $50,000 of fees and $1,155,000
     of goodwill in conjunction with this acquisition.

                                       F-8


<PAGE>


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

     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.  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 believes that this market offers an opportunity to
develop and leverage relationships with small and medium businesses. The Company
will provide 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  will market 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
initially 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.

Six Months ended June 30, 2003 compared to the Six Months ended June 30, 2002

Sales for the six months ended June 30, 2003 increased approximately $830,000 to
$1,147,420  when compared to sales of $316,957 for the six months ended June 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.

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
six month  periods  ended June 30, 2003.  The Company had no such revenue in the
corresponding periods of 2002.

<TABLE>
<CAPTION>
                                                   Six months ended       Three months ended
                                                       June 30,                 June 30,
                                                         2003                     2003
                                                   ---------------          ---------------
                                                     (Unaudited)              (Unaudited)
<S>                                                <C>                      <C>
Reconciliation of billings to revenue recognized:
         Gross billings to clients                 $     7,253,487          $     7,253,487
         Less - Gross wages billed to clients           (6,106,690)              (6,106,690)
                                                   ---------------          ---------------

         Revenue from PEO services                 $     1,146,797          $     1,146,797
         Other miscellaneous revenue                           623                       40
                                                   ---------------          ---------------

         Total revenue as reported                 $     1,147,420          $     1,146,837
                                                   ===============          ===============
</TABLE>


                                       11
<PAGE>



                          PACEL CORP. AND SUBSIDIARIES

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

Cost of  services  for the six  months  ended  June 30,  2003 was  approximately
$913,000,  and is  related  directly  to the  delivery  of  services  to its PEO
clients.  No such PEO  business  activity  occurred in the period ended June 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 six months ended June
30, 2003 as compared to $232,826 in the  comparable  period ended June 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  $1,138,000  in the six months ended June 30, 2003,
compared to approximately  $1,876,000 in the corresponding period of 2002. Since
2002, the Company has significantly reduced its overhead operating requirements.
Such overhead expenses  accounted for approximately  $715,000 for the six months
ended  June  30,  2003  compared  to  $1,876,000  for the same  period  of 2002.
Acquisitions completed in the second quarter of 2003 accounted for the remaining
$423,000 of sales, general and administrative  expenses,  including salaries and
wages.  In addition,  the Company moved to a new facility for its  headquarters,
reducing its rental rates by approximately 66%.

Depreciation  expenses increased to approximately $9,000 in the six months ended
June 30, 2003, compared to approximately  $7,500 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 paid and accrued on the Convertible  Notes,  Notes
payable and the interest due for the loan from a stockholder.  Interest amounted
to  approximately  $91,000 in the six months  ended June 30,  2003  compared  to
$70,000 for the same period of 2002. The increase is primarily  attributable  to
the Company's continued payment of financing costs for such indebtedness as well
as the issuance of new debt during the period.

Finance Expense for the six months ended June 30, 2003 was $130,750  compared to
$35,500 for the six months ended June 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.

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

Sales  for  the  three  months  ended  June  30,  2003  increased  approximately
$1,000,000 to $1,146,837 when compared to sales of $138,369 for the three months
ended  June  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 June 30,  2003 was  approximately
$913,000,  and is  related  directly  to the  delivery  of  services  to its PEO
clients.  No such PEO  business  activity  occurred in the period ended June 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 June 30, 2003,
the Company reported a gross profit margin on its PEO operations of $233,000, or
20% of revenue from such operations.


                                       12
<PAGE>



                          PACEL CORP. AND SUBSIDIARIES

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

Research & Development expenses decreased to $-0- in the three months ended June
30, 2003 as compared to $129,455 in the  comparable  period ended June 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  $834,000 in the three  months ended June 30, 2003,
compared to approximately  $705,000 in the  corresponding  period of 2002. Since
2002, the Company has  significantly  reduced its corporate  overhead  operating
requirements.  Such overhead expenses  accounted for approximately  $411,000 for
the three months ended June 30, 2003 compared to $705,000 for the same period of
2002. Acquisitions of PEO business units completed in the second quarter of 2003
accounted  for the  remaining  $423,000  of sales,  general  and  administrative
expenses,  including salaries and wages. In addition, the Company moved to a new
facility for its headquarters, reducing its rental rates by approximately 66%.

Depreciation  expenses  increased  to  approximately  $8,000 in the three months
ended June 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 paid and accrued on the Convertible  Notes,  Notes
payable and the interest due for the loan from a stockholder.  Interest amounted
to  approximately  $64,000 in the three months  ended June 30, 2003  compared to
$35,000 for the same period of 2002. The increase is primarily  attributable  to
the Company's continued payment of financing costs for such indebtedness as well
as the issuance of new debt during the period.

Finance  Expense for the three months ended June 30, 2003 was $130,750  compared
to $32,000  for the three  months  ended June 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.

LIQUIDITY AND CAPITAL RESOURCES:

Cash and cash  equivalents at June 30, 2003 increased to $306,674 from $8,379 at
December 31, 2002. Net cash used for operating  activities was $1,040,345 during
the six months  ended June 30, 2003  compared  to $102,566 in the  corresponding
period  ended  June  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 and increased in accounts receivable to PEO clients.

Net cash provided by investing activities for the six months ended June 30, 2003
was $58,506.  The Company utilized no cash 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.







                                       13
<PAGE>



                          PACEL CORP. AND SUBSIDIARIES

Net cash provided by financing  activities in the six months ended June 30, 2003
was $1,280,134  compared to $49,638 in the  corresponding  period ended June 30,
2002. The cash provided during the first six 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  $980,000  and issued  41,284,032  shares of
common stock.

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 two-year,  $500,000 Note payable at an
interest  of 9% per  annum.  The  balance  of  such  note at  June  30,  2003 is
approximately  $295,000.  In May 2003,  the Company  entered into a Note payable
related to its  acquisition of NSC, LLC totaling  $200,000.  Such note is for an
eighteen (18) month period and carries no interest. The balance at June 30, 2003
is $189,000.  In May and June of 2003, the Company entered into two Note payable
agreements  totaling $295,000.  Such notes are for a three-year period and carry
interest  at a  rate  of  8%  per  annum.  The  balance  at  June  30,  2003  is
approximately $165,000.

In June 2003,  the Company  entered  into a two-year,  $61,500 Note payable with
interest at Prime.  The interest rate adjusts monthly and the loan is secured by
5,000,000  shares of the  Company's  common  stock.  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.  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  $20,000 of fees and  $1,672,000  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. Consideration for such
contracts is three times  annualized  net profit margin on each contract paid in
either cash or freely tradable common stock of the Company. To date, the Company
has issued  34,500,000  shares of unrestricted  common stock in conjunction with
the  purchase  of the  contracts  and  recorded  a  receivable  of  $600,000  in
conjunction with that issuance. In addition, the Company entered into a one-year
agreement  with MRG to provide  continuing  administrative  services  under such
customer contracts.


                                       14
<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
$50,000 of fees and $1,155,000 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.  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.

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  short-term  loans from  David and F. Kay  Calkins,  Officer  and
shareholder,  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 taxes, loans from officers,  accrued
officer's compensation and interest expense.

Currently,   the  Company  has  focused  its  efforts  on  developing  strategic
relationships  with other  organizations  associated with the PEO industry.  The
loss of its  current  equity  financing  would  seriously  hinder the  Company's
ability to execute its PEO 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.





                                       15
<PAGE>




                          PACEL CORP. AND SUBSIDIARIES

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 June 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 June 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 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 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.





                                       16
<PAGE>



                          PACEL CORP. AND SUBSIDIARIES



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
hired a law firm to  handle  such  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.

Item 2. Changes in Securities

None

Option Grants

None

Issuances of Stock for Services or in Satisfaction of Obligations

For the six  months  ended  June 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 $1,672,000 of goodwill in association with the acquisition.








                                       17
<PAGE>



                          PACEL CORP. AND SUBSIDIARIES


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. Consideration for such
contracts is three times  annualized  net profit margin on each contract paid in
either cash or freely tradable common stock of the Company. To date, the Company
has issued  34,500,000  shares of unrestricted  common stock in conjunction with
the purchase of the contracts.  In addition, the Company entered into a one-year
agreement  with MRG to provide  continuing  administrative  services  under such
customer contracts.

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
$50,000 of fees and $1,155,000 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.  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

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







                                       18
<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


BY: /s/David Calkins
   ----------------------

DATED:          August 29, 2003


In accordance with the Securities Exchange Act, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
and on the date indicated.

Signature                          Title                        Date


BY: /s/David Calkins
   ----------------------
         David Calkins          CEO/President                August 29, 2003
                                Chairman of the Board



                                       19