================================================================================
                    U. S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)
|X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 For the fiscal year ended December 31, 2000

| |   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934
      For the transition period from ______ to _______

                         Commission File Number: 0-25881

                                 NETSTAFF, INC.
                 (Name of small business issuer in its charter)

                      INDIANA                               35-2065470
            (State or other jurisdiction                 (I.R.S. Employer
          of incorporation or organization)             Identification No.)

                 168 SOUTH PARK
            SAN FRANCISCO, CALIFORNIA                          94107
    (Address of principal executive offices)                (Zip Code)

                                 (415) 908-1000
                           (Issuer's telephone number)

    Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

         Securities registered under Section 12(g) of the Exchange Act:
                    COMMON STOCK, PAR VALUE $0.001 PER SHARE
                                (Title of Class)

         Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

         The registrant did not report any revenues for the fiscal year ended
December 31, 2000.

         The aggregate market value of the voting stock held by non-affiliates
on April 12, 2001 was $501,114. The number of shares outstanding of the
registrant's only class of common stock was 13,550,000 on April 12, 2001.

         DOCUMENTS INCORPORATED BY REFERENCE.  None.
================================================================================

<PAGE>

<TABLE>
                                          TABLE OF CONTENTS
<CAPTION>

                                                                                                PAGE
                                                                                                ----
                                               PART I
                                               ------

   <S>           <C>                                                                             <C>
   Item 1.       Description of Business..........................................................1
   Item 2.       Description of Property..........................................................7
   Item 3.       Legal Proceedings................................................................7
   Item 4.       Submission of Matters to a Vote of Security Holders..............................7

                                               PART II
                                               -------

   Item 5.       Market for Common Equity and Related Shareholder Matters.........................8
   Item 6.       Management's Discussion and Analysis or Plan of Operation........................8
   Item 7.       Financial Statements............................................................17
   Item 8.       Changes in and Disagreements With Accountants on Accounting
                 and Financial Disclosure........................................................17

                                              PART III
                                              --------

   Item 9.       Directors, Executive Officers, Promoters and Control Persons; Compliance
                 with Section 16(a) of the Exchange Act..........................................18
   Item 10.      Executive Compensation..........................................................19
   Item 11.      Security Ownership of Certain Beneficial Owners and Management..................19
   Item 12.      Certain Relationships and Related Transactions..................................21
   Item 13.      Exhibits and Reports on Form 8-K................................................22
</TABLE>

<PAGE>

                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS.

COMPANY OVERVIEW

         NetStaff, Inc. is an Indiana corporation that was formed on October 7,
1996 under the name MAS Acquisition VIII Corp. On December 17, 1999, we
acquired, through a merger, NetStaff, Inc., a Delaware corporation formed in
1996, or NetStaff Delaware. Upon the effectiveness of the merger, we changed our
name to NetStaff, Inc. and also changed our fiscal year end from March 31 to
December 31.

         The merger involved an exchange by the former stockholders of NetStaff
Delaware of all of the outstanding shares of NetStaff Delaware for newly issued
shares of our company, representing a majority ownership interest in our
company. Because the merger resulted in a change in control of our company, the
merger was accounted for as a reverse acquisition, and historical financial
information of NetStaff Delaware is used as the historical financial information
of our company.

         Prior to the merger, we had no significant operations and had never
commenced any operational activities. Upon the consummation of the merger, we
acquired and assumed the properties, intellectual property rights, operations,
assets, liabilities and obligations of NetStaff Delaware.

         We are an Internet-based business-to-business electronic commerce
company that provides what we believe to be a first to market, unique
proprietary "multiple listing service" to the professional staffing industry.
Our Multiple Listing Service, or NetStaff(R) MLS, aggregates various candidate
databases of our client staffing companies, and allows staffing companies and
employers to simultaneously search the candidate databases of multiple staffing
companies on our website, WWW.NETSTAFF.COM. Our website also provides Internet
portals, catering directly to human resource departments of potential employers,
staffing companies, and candidates.

INDUSTRY OVERVIEW

         Over the years, employers have become increasingly dependent on the use
of staffing companies to manage their temporary staffing and recruiting needs
more efficiently and to remain competitive. The primary function of these
staffing companies is to provide to employers a steady and reliable source of
potential candidates, all of whom have been prescreened by the staffing company.
Typically, employers use multiple staffing companies to meet their needs, with
each staffing company providing to the employer potential candidates from the
staffing company's database. According to STAFFING INDUSTRY ANALYSTS, INC., a
staffing industry trade publication, revenues from staffing company services are
projected to be $135.7 billion in 2002.

         Businesses have also met their temporary staffing and recruiting needs
by relying on other methods, including newspaper classifieds and other print
advertisements, traditional career fairs, on-campus recruiting and internal
referral programs. We believe each of these staffing methods has limitations, as
described below.

         o    Newspaper classifieds and other print advertisements generally run
              for a fixed period of time, which may be longer or shorter than
              the time needed to fill the position. In addition, these
              advertisements may be costly if the employer wants to include a
              complete description of either the employer or the job
              opportunity.

         o    Traditional career fairs provide a limited amount of time for an
              employer to meet with prospective candidates, who are often not
              prescreened prior to the event.

                                       1
<PAGE>

         o    On-campus recruiting events require an employer to visit multiple
              campuses in search of qualified candidates.

         o    Internal referral programs may divert an employee's attention away
              from performing his or her job responsibilities, reducing
              productivity, and employees may focus more on the quantity, rather
              than the quality of referrals.

         We believe that the emergence of the Internet has created an
opportunity to enhance the services provided by staffing companies to employers.
Internet-based recruiting can automate the recruiting process, providing more
informative and responsive real-time interaction between staffing companies and
employers, and has the potential to lower the cost and time to fill open
positions. In addition, we believe that Internet-based solutions may replace
more expensive client/server recruiting software and change the way companies
manage and distribute information about employment openings throughout their
organizations.

OUR SOLUTION

         We seek to capitalize on the increasing demand by employers for skilled
candidates. Our services are aimed at assisting staffing companies and employers
in accessing a database of staffing companies' prescreened candidates. At
present, we are not aware of any other company that is approaching the staffing
industry with our business model. We believe that our intimate knowledge of the
staffing industry and our experience in providing Internet services to staffing
companies places us in a strong competitive position to serve employers and
staffing company professionals. Our staffing solutions include:

         NETSTAFF(R) MLS. Our NetStaff(R) MLS is an online database comprised of
candidates who have been prescreened by staffing companies. This database has
the following three components:

         o    Employers can search this database for qualified candidates to
              fill their temporary staffing and recruiting needs, or can submit
              a request in the database for a candidate with specified skills.

         o    Staffing companies can enter their prescreened candidates into the
              database, and can search the database for qualified prescreened
              candidates for their employer clients.

         o    Candidates can submit a profile of their skills directly to the
              database's Job Seeker section on our website, and staffing company
              professionals can search this database, review these profiles
              online and interview these candidates for inclusion in the
              NetStaff(R) MLS.

         NETSTAFF PRIVATE LABEL SERVICES. Our NetStaff(R) MLS database is
available in applications service provider, or ASP, versions for both staffing
companies and employers. Our ASP services allow staffing companies to
personalize the NetStaff(R) MLS and have candidates apply directly to them.
After a staffing company has screened the applicants, the candidates can be
added to the staffing company's private label NetStaff(R) MLS database. A
staffing company's employer clients can then search the prescreened candidates
on the staffing company's private label NetStaff(R) MLS database. These
prescreened candidates are also listed in the NetStaff(R) MLS database, which
potential employers can review. The employer private label allows an employer to
create its own NetStaff(R) MLS database. Candidates can apply directly to the
employer from the employer's website, and the employer can search its private
label NetStaff(R) MLS database for qualified candidates. Candidates who apply
directly to an employer will not be included in the NetStaff(R) MLS database.

         PORTALS. Our Internet portals offer content and commerce for staffing
companies and employers. The three segments within our portal community include
the staffing company portal, the employer portal, and the candidate portal. Each
portal provides information specifically tailored for its audience.

                                       2
<PAGE>

OUR STRATEGY

         Our goal is to become the leading Internet-based resource for staffing
related services aimed at both staffing companies and employers. Our business
strategy encompasses the following key elements:

         INCREASE NETSTAFF(R) BRAND AWARENESS. Our goal is to make the
NetStaff(R) brand name synonymous with leading Internet-based staffing solution
services. We have embarked on a brand-building campaign utilizing direct mail,
broadcast electronic mail and print media. We have participated in staffing
company conventions for the past five years and human resource conventions for
the past three years. Our management and employees are frequently asked to speak
at industry events and write columns concerning Internet recruitment.

         EXPAND THE MARKET PENETRATION OF THE NETSTAFF(R) MLS TO STAFFING
COMPANIES. By focusing on existing candidates within staffing company databases,
and using our online technology to market those candidates to a greater number
of potential employers than we believe is possible using traditional staffing
methods, we hope to assist staffing companies in gaining a higher placement
rate. We believe that our business model will also assist employers in locating
the most suitable candidate quickly and efficiently by providing them with a
short list of prescreened candidates to review and interview.

         AGGRESSIVELY EXPAND OUR PRIVATE LABEL SERVICES FOR BOTH EMPLOYERS AND
STAFFING COMPANIES. We intend to expand our ASP versions of our NetStaff(R) MLS
so that staffing companies and employers can manage their candidate pools from
their own websites. We hope that marketing our technology and services to
staffing professionals will result in staffing companies and employers relying
on NetStaff(R) over other Internet recruitment solutions such as job boards.

         PURSUE STRATEGIC RELATIONSHIPS AND ACQUISITIONS. We plan to pursue
strategic relationships with third parties to benefit both staffing and human
resource service professionals. Through these relationships, we plan to expand
our community of users, increase the number of visitors to our portals, and
provide enhanced business-to-business Internet product and service offerings. In
addition, we plan to pursue strategic acquisitions within the staffing services
industry with the goal of improving our content, service and product offerings.

OUR PRODUCTS AND SERVICES

         THE NETSTAFF(R) MULTIPLE LISTING SERVICE

         The NetStaff(R) MLS aggregates the various candidate databases of our
client staffing companies, and allows staffing companies and employers to
simultaneously search the candidate databases of multiple staffing companies.

         Once an employer decides which candidate(s) is suitable for an
interview, the employer submits to the staffing company a request for an
interview, and the staffing company responsible for that employer coordinates
the interview process until either the candidate is hired or rejected by the
employer. If a candidate is hired for a long-term position, the employer pays
the staffing company a fee equal to approximately 30-35% of the candidate's
first year's salary, and the staffing company pays us a referral fee equal to 5%
of the candidate's first year's salary. If a candidate is hired for a temporary
position, the candidate becomes an employee of the staffing company, and the
staffing company pays us a fee equal to 3% of the amount the staffing company
charges the company receiving the candidate's services, which fee continues
until the candidate is no longer providing services to the company. To date, we
have not generated any significant revenues from our NetStaff(R) MLS.

                                       3
<PAGE>

         The NetStaff(R) MLS offers:

         o    a browser-based application which can be accessed from any
              computer in the world by logging on to our website,
              WWW.NETSTAFF.COM;
         o    a user-friendly interface with no downloads required;
         o    no enrollment fee;
         o    fees charged only upon successful candidate placement;
         o    instant online access to multiple staffing companies' prescreened
              candidates; and
         o    efficient hiring and recruiting capabilities by combining local
              staffing companies into our centralized Internet database.

NETSTAFF(R) PRIVATE LABEL SERVICES

         The NetStaff(R) MLS is available in ASP versions for both staffing
companies and employers.

         STAFFING COMPANIES. The staffing company ASP allows a staffing
company's graphics to be overlaid on the database, which is housed on our
servers in our offices. The staffing company can access this database from its
own website, and have candidates apply directly to the staffing company. In
addition, after the staffing company has screened the candidates, its employer
clients can search its database for potential candidates. Any candidate listed
in a staffing company's private label is also listed in the NetStaff(R) MLS.

         EMPLOYERS. Our employer ASP allows the human resource department of
companies to create a database enabling candidates to apply directly to the
company from the company's website. Companies can search this database for
qualified candidates. These candidates will remain in the company's database,
and will not become part of the NetStaff(R) MLS. If none of these candidates
satisfy the company's requirements, the company can then search the candidates
listed within the NetStaff(R) MLS. If the company has a contracted relationship
with a staffing company, the candidates of that staffing company can be
segregated out of the NetStaff(R) MLS search.

         PORTALS

         Our Internet portal community is comprised of the following three
segments:

         STAFFING COMPANY PORTAL. Our staffing company portal provides
legislative updates, stock quotes, industry news, access to the NetStaff(R) MLS,
convention information, ask an expert column, message boards and resource links.

         EMPLOYER PORTAL. Our employer portal provides legislative updates,
stock quotes, industry news, access to the NetStaff(R) MLS, convention
information, ask an expert column, message boards, resource links and a staffing
company locator.

         JOB SEEKER PORTAL. Our job seeker portal provides resume tips,
interview tips, stock quotes, general news, access to the NetStaff(R) MLS, ask
an expert column, message boards, resource links and a staffing company locator.

         Additionally, our portal software allows users to customize portal
technology into their own custom portal called "My NetStaff(R)." All three
portal segments are available to "My NetStaff(R)" users, as well as a menu of
additional services that the users might find useful in operating their
day-to-day activities.

                                       4
<PAGE>

SALES AND MARKETING

         We seek to increase traffic to our website and to develop a strong
brand name as the leading Internet-based resource for staffing related services
aimed at both staffing companies and employers. Our success is dependent upon
staffing companies and employers relying on our business model and staffing
companies being successful in placing candidates. Therefore, we market and sell
our services directly to staffing companies and employers.

         We utilize a comprehensive marketing program involving broadcast
electronic mail, direct mail and print advertising, radio, television and cable
advertising, and participating in trade shows, industry functions, conferences
and other events to actively promote our company as a leading provider of online
staffing solutions services. We plan to continue to use key marketing events,
coupled with public relations efforts, to promote awareness of the NetStaff(R)
brand.

COMPETITION

         The business-to-business electronic commerce environment in which we
operate is still evolving and subject to rapid change. We believe that we
provide a first to market multiple listing service to the professional staffing
industry, and that we currently have no direct competitors. We believe that our
industry knowledge, our cost-effective fee schedule, and the accessibility of
our services to staffing companies and employers are competitive advantages for
us.

         We expect competition in the online staffing solutions industry to
increase because the market poses no substantial barriers to entry. We
anticipate that our ability to compete depends upon many factors both within and
beyond our control, including, but not limited to:

         o    the timing and market acceptance of new solutions and enhancements
              to existing solutions developed either by us or our competitors;
         o    service and support efforts;
         o    sales and marketing efforts; and
         o    ease of use, performance, price and reliability of solutions
              developed either by us or our competitors.

         We believe we have already achieved significant brand name recognition
through our website, broadcast electronic mail and our participation in trade
shows and industry functions. Because we believe we are the first to market our
services to staffing companies and employers, we hope that we will enjoy a
competitive advantage due in part to our NetStaff(R) brand awareness.

         We may experience competition from potential clients to the extent that
they develop their own online recruiting and staffing offerings internally. We
expect to face competition as other established and emerging companies,
including print media companies and staffing companies with established brands,
enter the online recruiting market.

         Many of our potential competitors have longer operating histories,
significantly greater financial, technical, marketing and other resources, and
larger client bases than we do. These factors may allow them to respond more
quickly than we can to new or emerging technologies and changes in client
requirements. It may also allow them to devote greater resources than we can to
the development, marketing and sale of their products and services. These
potential competitors may undertake more far-reaching marketing campaigns and
adopt more aggressive pricing policies. There can be no assurance that
competitors will not develop products or services that are equal or superior to
our solutions or achieve greater market acceptance than our solutions. In
addition, potential competitors are expected to make strategic acquisitions or

                                       5
<PAGE>

establish cooperative and, in some cases, exclusive relationships with
significant companies or competitors to expand their businesses or to offer more
comprehensive solutions.

PROPRIETARY RIGHTS

         Our success and ability to compete are dependent, in part, upon our
ability to develop and maintain the proprietary aspects of our technology and
operate without infringing on the proprietary rights of others. We have no
patents or patent applications pending. Instead, we rely primarily on a
combination of copyright, trademark and trade secret laws, confidentiality
procedures and contractual provisions to protect our intellectual property and
proprietary rights. Because the Internet-related and software development
industry is characterized by rapid technological change, we believe that factors
such as the technological and creative skills of our personnel, new product
developments, frequent product enhancements, name recognition and reliable
personalized service are important to establishing and maintaining a leadership
position.

         NetStaff(R) is a registered trademark of our company. We may not be
able to secure adequate protection for our trademarks in the United States and
in other countries in which we may do business.

         We require employee and third-party non-disclosure and confidentiality
agreements. We seek to protect our software, documentation and other written
materials under trade secret and copyright laws, which afford only limited
protection. We cannot be certain that others will not develop technologies that
are similar or superior to our technology or design around the copyrights and
trade secrets we own. Despite these precautions, it may be possible for
unauthorized parties to copy portions of our software products, reverse
engineer, or obtain and use information that we regard as proprietary.

         We rely, in part, upon software that we license from third parties,
including software that is integrated with our internally developed software and
is used in our services to perform key functions. There can be no assurance that
these third-party software licenses will continue to be available to us on
commercially reasonable terms. The loss of, or inability to maintain, any such
software licenses could result in delays or reductions until equivalent software
could be developed, identified, licensed and integrated, and could materially
adversely affect our business, operating results and financial condition.

         We hold the Internet domain names "netstaff.com," "netstaff.org,"
"staffworld.com" and "millenniumstaffing.com." Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as ".net," or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third-parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names.

GOVERNMENT REGULATION

         The United States Congress has recently passed or is considering
legislation regulating certain aspects of the Internet, including online
content, copyright infringement, user privacy, taxation, access charges, digital
signatures and liability for third-party activities. The European Union also has
recently enacted several directives relating to the Internet, including
directives that address the use of personal data, e-commerce activities,
security, commercial piracy, consumer protection and taxation of e-commerce
transactions. Various states have adopted and are considering Internet-related
legislation and regulations. Governmental authorities in the United States and
abroad are considering other legislative and regulatory proposals to further
regulate the Internet. Areas of potential regulation include libel, pricing,
quality of products and services and intellectual property ownership. We cannot
predict what new laws will be enacted, or how courts will interpret existing and
new laws, and therefore are uncertain as to how new laws or the application of

                                       6
<PAGE>

existing laws will affect our business. In addition, our business may be
indirectly affected by legislation that affects the ability of our clients to
engage in e-commerce activities. Increased regulation of the Internet may
decrease the growth in the use of the Internet, which could decrease the demand
for our products and services, increase our cost of doing business or otherwise
harm our business, results of operations and financial condition.

EMPLOYEES

         We are in the process of building our staff. As of April 12, 2001, we
had two full-time employees. None of our employees are represented by a union.
We have not experienced any work stoppages and consider our relations with our
employees to be good. We intend to increase the number of employees over the
next 12 months to approximately 10 to support our business plan and growth. We
believe that these resources will be necessary to execute the business
initiatives scheduled for the following months.

ITEM 2.    DESCRIPTION OF PROPERTY

         Our principal business offices are located in approximately 2,500
square feet of space in San Francisco, California. We occupy these premises
under a lease for a five-year term, from June 1, 1997 through May 31, 2002. The
monthly rental on this space is $6,000 from March 1, 2001 until May 31, 2002.

         We consider our facilities to be sufficient for our current and
anticipated near-term operations. We believe that we may need to lease
additional office space to accommodate our anticipated long-term expansion
plans.

ITEM 3.    LEGAL PROCEEDINGS

         We are not a party to any material pending legal proceedings.

ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of our security holders during the
fourth quarter of the fiscal year ended December 31, 2000.

                                       7
<PAGE>

                                     PART II

ITEM 5.    MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

         Our common stock is quoted on the National Association of Securities
Dealers, Inc. OTC Bulletin Board under the symbol "NTSF" and is not listed for
trading on any exchange. The OTC Bulletin Board, which is separate and distinct
from the Nasdaq Stock Market, is a quotation service for subscribing members and
is regulated by the Securities and Exchange Commission and the National
Association of Securities Dealers, Inc., or NASD. OTC Bulletin Board securities
are traded by a community of market makers that enter quotes and trade reports
through a closed computer network.

         Our common stock began trading on the OTC Bulletin Board on January 14,
2000. Prior to this date, our common stock was not publicly traded.

         Set forth below are the high and low closing bid prices for our common
stock, from the inception of our trading on the OTC Bulletin Board through
December 31, 2000, as reported by a member firm of the NASD that effects
transactions in stocks quoted on the OTC Bulletin Board and acts as one of the
market makers for our common stock. The quotations listed below reflect
interdealer prices, without retail mark-up, mark-down or commission, and may not
represent actual transactions.

      FISCAL 2000                                          HIGH          LOW
      -----------                                          ----          ---

      First Quarter (commencing January 14, 2000)         $6.125        $2.50
      Second Quarter                                        3.50        1.125
      Third Quarter                                        1.406         0.44
      Fourth Quarter                                        0.45         0.05

         As of April 12, 2001, we had 13,550,000 shares of our common stock
outstanding, held of record by approximately 217 shareholders, and the high and
low closing bid prices of our common stock on the OTC Bulletin Board were $0.08
and $0.07, respectively. Within the holders of record of our common stock are
depositories, such as Cede & Co., that hold shares of stock for brokerage firms
which, in turn, hold shares of stock for beneficial owners.

         We have never declared or paid any cash dividends on our common stock
and do not expect to declare or pay any cash dividend in the foreseeable future.
We currently intend to retain all future earnings, if any, to fund the
development and growth of NetStaff. Any future payment of dividends, if any,
will be at the discretion of our board of directors and will depend upon our
future earnings, capital requirements, financial condition, general business
conditions and other factors deemed relevant by our board of directors. Certain
financing agreements we have entered into contain limitations on our ability to
pay cash dividends.

ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following discussion and analysis should be read in conjunction
with our financial statements and notes to financial statements included
elsewhere in this Annual Report on Form 10-KSB. This report and our financial
statements and notes to financial statements contain forward-looking statements,
which generally include the plans and objectives of management for future
operations, including plans and objectives relating to our future economic
performance and our current beliefs regarding revenues we might earn if we are
successful in implementing our business strategies. The forward-looking
statements and associated risks may include, relate to or be qualified by other
important factors, including, without limitation:

                                       8
<PAGE>

         o   market acceptance of new product or service introductions by us or
             our competitors;
         o   the financial health of our clients;
         o   the overall state of the Internet and e-commerce industries; and
         o   economic conditions generally.

         We do not undertake to update, revise or correct any forward-looking
statements.

         The information contained in this report is not a complete description
of our business or the risks associated with an investment in our common stock.
Before deciding to buy or maintain a position in our common stock, you should
carefully review and consider the various disclosures we made in this report,
and in our other materials filed with the Securities and Exchange Commission
that discuss our business in greater detail and that disclose various risks,
uncertainties and other factors that may affect our business, results of
operations or financial condition.

         Any of the factors described above or in the "Risk Factors" section
below could cause our financial results, including our net income (loss) or
growth in net income (loss) to differ materially from prior results, which in
turn could, among other things, cause the price of our common stock to fluctuate
substantially.

OVERVIEW

         On December 17, 1999, we acquired NetStaff Delaware through a merger
involving the exchange by the former stockholders of NetStaff Delaware of all of
the outstanding shares of that company for newly issued shares of our company
representing a majority interest in our company. Concurrent with the merger, we
changed our name to NetStaff, Inc. Prior to the merger, we had no significant
operations and had not commenced any operational activities. Pursuant to the
merger, however, we acquired the properties, intellectual property rights,
operations, assets, liabilities and obligations of NetStaff Delaware.

         We are in the business of providing an Internet-based multiple listing
service for the professional staffing industry - the NetStaff(R) MLS. The
NetStaff(R) MLS brings together the resources of the staffing industry with the
needs of the corporate human resources community, primarily by offering an
aggregated database of prequalified screened candidates from staffing companies
that register with the NetStaff(R) MLS to employers that have access to our
staffing industry Internet portal. We earn a fee from staffing companies upon
the successful placement of a candidate through the NetStaff(R) MLS. Because the
merger with NetStaff Delaware was accounted for as a reverse acquisition, the
historical financial statements of NetStaff Delaware are used as our historical
financial information.

RESULTS OF OPERATIONS

         YEAR ENDED DECEMBER 31, 2000 COMPARED TO THE YEAR ENDED DECEMBER 31,
1999

         We did not generate any revenues for the year ended December 31, 2000
and we reported only modest revenues in the amount of $500 for the year ended
December 31, 1999. Total expenses increased by $2,549,068 (668%) to $2,931,012
for 2000 as compared to $381,944 for 1999. This increase was primarily
attributable to increases in our general and administrative expenses, including
salaries and marketing costs, which increased by $1,652,725 to $2,024,445 for
2000 as compared to $371,720 for 1999, and an increase in our stock compensation
expense by $801,500 to $841,500 for 2000 as compared to $40,000 for 1999. This
significant increase in stock compensation expense was a direct result of
issuing stock warrants to non-employees. In addition, our depreciation and
amortization costs increased to $65,067 for 2000 as compared to $10,613 for
1999, primarily due to an increase in amortization of our proprietary software.

         During 2000, we also incurred a loss in the amount of $118,283 in
connection with the disposition of proprietary software. We recorded interest
income in the amount of $12,582, for 2000 as compared to $111 for 1999. This
increase in interest income was primarily due to our receipt of payments
pursuant to the terms of a license agreement that we have elected to treat as an
equity transaction. During 2000 we did not record any office sublease income as
compared to $70,941 for 1999. This reduction in office sublease income was due
to the termination of the prior sublease arrangement.

                                       9
<PAGE>

         Our net loss increased by $2,725,710 (876%) to $3,036,713 for 2000 as
compared to $311,003 for 1999.

LIQUIDITY AND CAPITAL RESOURCES

         We have incurred significant net losses and negative cash flows from
our inception as a result of the development and initial testing of our business
model and operations. We have funded these losses primarily from cash
investments by our founders and loans by third parties.

         As of December 31, 2000, we had negative working capital of $722,785
and an accumulated deficit of $4,090,528. As of that date, we had $270 in cash
and no accounts receivable.

         Cash used in our operating activities totaled $1,614,868 for 2000 as
compared to $261,250 for 1999. This increase was primarily due to an overall
increase in the level of operating expenses.

         Cash used in our investing activities totaled $255,409 for 2000 as
compared to $12,525 for 1999. The amount for 2000 resulted from the acquisition
of property and equipment.

         Cash provided by our financing activities totaled $941,892 for 2000 as
compared to $1,202,100 for 1999. The amount for 2000 consisted primarily of
proceeds from the issuance of shares of our common stock.

         In March 2001, we issued $500,000 of our 12% secured convertible
debentures due March 27, 2002 to two accredited investors. The debentures were
accompanied by warrants to purchase up to 1,000,000 shares of our common stock.
The net proceeds of that offering, after payment of related expenses, were
approximately $424,900. We are obligated to register for resale by the investors
the shares of common stock underlying the debentures and warrants. The debenture
purchase documents provide that if certain conditions are satisfied, the
investors will be obligated to purchase, and we will be obligated to issue,
additional debentures in the aggregate principal amount of $100,000, which will
be accompanied by warrants to purchase up to 200,000 shares of our common stock,
within thirty days following the date that the registration statement covering
the shares of common stock underlying the debentures and warrants is declared
effective by the Securities and Exchange Commission. To the extent debentures
issued by us are converted into shares of common stock, we will not be obligated
to repay the converted amounts.

         In an effort to generate revenues, we have implemented a variety of
strategies, including broadcast electronic mail, direct mail and print
advertising, radio, television and cable advertising, and participating in trade
shows, industry functions and conferences to actively promote NetStaff(R) as a
leading provider of online staffing solutions services. We believe that if we
are successful in implementing our business strategies, we will generate
revenues.

                                       10
<PAGE>

         We believe that current and future available capital resources and
anticipated revenues generated from operations will be adequate to meet our
anticipated working capital and capital expenditure requirements for at least
the next 12 months. If, however, our capital requirements or cash flow vary
materially from our current projections or if unforeseen circumstances occur, we
may require additional financing sooner than we anticipate. Failure to raise
necessary capital could restrict our growth, limit our development of new
products and services or hinder our ability to compete.

         Our financial statements included in this annual report have been
prepared assuming we will continue as a going concern. We have experienced
significant operating losses since our inception. In addition, we have both
working capital and shareholders' deficiencies. These factors raised substantial
doubt about our ability to continue as a going concern and led our independent
certified public accountants to include in their report an explanatory paragraph
related to our ability to continue as a going concern. The financial statements
included in this annual report do not include any adjustments that might result
from the outcome of this uncertainty. There can be no assurance that we will be
profitable or that we will be able to generate necessary capital in the future.

RISK FACTORS

WE HAVE A LIMITED OPERATING HISTORY AND IF WE ARE UNABLE TO ADEQUATELY ADDRESS
THE RISKS AND UNCERTAINTIES OF OPERATING OUR BUSINESS, WE MAY NOT BE SUCCESSFUL.

         We have not yet generated any significant revenue from our business
operations. As a new operating entity, we face risks and uncertainties relating
to our ability to successfully implement our strategy. Some of these include:

         o    ability to develop and sustain revenue growth;
         o    ability to increase awareness of the NetStaff(R)brand;
         o    managing expanding operations;
         o    potential competition;
         o    attracting, retaining and motivating qualified personnel;
         o    developing strategic relationships;
         o    ability to anticipate and adapt to the changing Internet market
              and any changes in government regulation; and
         o    attracting and retaining a large number of staffing company
              clients.

         We also depend on the growing use of the Internet for recruiting,
staffing and hiring purposes and on general economic conditions. If we cannot
appropriately address these risks and uncertainties and the other risk factors
addressed in this annual report, or if we are unable to execute our strategy, we
may not be successful.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT THAT MAY CONTINUE IN THE
FUTURE AND THAT MAY ADVERSELY IMPACT OUR BUSINESS AND OUR SHAREHOLDERS.

         Our financial statements have been prepared assuming we will continue
as a going concern. We incurred significant net operating losses in the years
ended December 31, 2000 and 1999 of $3,036,713 and $311,003, respectively. At
December 31, 2000, we had an accumulated deficit of $4,090,528. These factors
raised substantial doubt about our ability to continue as a going concern and
led our independent certified public accountants to modify their unqualified
opinion to include an explanatory paragraph related to our ability to continue
as a going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.

                                       11
<PAGE>

         We expect to continue to lose money in the foreseeable future because
we anticipate incurring significant expenses in connection with building
NetStaff(R) brand awareness, expanding content on our website, rapidly expanding
management and other personnel, developing strategic relationships and improving
products and services. Although we expect our revenues to grow in the future,
there can be no assurance that revenues will grow or that we will achieve
sufficient revenues for profitability. Even if we do achieve profitability,
there can be no assurance that we can sustain or increase profitability on a
quarterly or annual basis in the future. If our revenues grow at a slower rate
than we anticipate, or if our spending levels exceed our expectations or cannot
be adjusted to reflect slower revenue growth, we may not generate sufficient
revenues to achieve or sustain profitability. This, along with the explanatory
paragraph contained in our audit report prepared by our independent certified
public accountants, could impede our ability to raise capital through debt or
equity financing to the extent needed for our continued operations or for
planned expansion. Consequently, future losses may have a material adverse
effect on our business, prospects, financial condition, results of operations
and cash flows.

IF WE ARE NOT ABLE TO ANTICIPATE CHANGES IN THE ONLINE STAFFING AND RECRUITING
MARKET OR IF OUR BUSINESS MODEL IS NOT SUCCESSFUL, WE MAY NOT BE ABLE TO EXPAND
OUR BUSINESS OR TO SUCCESSFULLY COMPETE WITH OTHER COMPANIES, WHICH COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL
CONDITION.

         Our current business model depends on recurring revenue from employers
and staffing companies using our website, and staffing companies paying us fees
associated with a successful placement. This revenue model and profit potential
in an online context are unproven. If we are unable to attract and retain
employer and staffing company clients, or if current employers and staffing
companies decide to discontinue their relationship with us, and we are unable to
replace them with new employers and staffing companies, our revenues could
decrease or grow at a slower rate than expected. It is possible that we will be
required to further adapt our business model in response to competition,
additional changes in the online staffing and recruiting market or if the
current business model is not successful.

WE MAY NEED AND BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS,
WHICH COULD INTERFERE WITH OUR EXISTING AND PLANNED OPERATIONS, DILUTE OUR
SHAREHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS ON OUR BUSINESS.

         Our financial statements have been prepared assuming we will continue
as a going concern. Historically, we have relied upon cash investments by our
founders and loans from third parties to fund most of the cash requirements of
our operating activities. Because we expect to generate losses for the
foreseeable future, we do not expect that income from our operations will be
sufficient to meet our capital needs. We expect to raise funds in the future in
order to grow our business. Our ability to obtain financing will depend upon a
number of factors including, but not limited to, market and economic conditions,
our financial condition and operating performance, and investor sentiment. These
factors, along with the explanatory paragraph contained in our audit report
prepare by our independent certified public accountants, may make the timing,
amount, terms and conditions of additional financing unattractive for us. If
financing is not available when required or is not available on acceptable
terms, we may be unable to fund our expansion, successfully promote the
NetStaff(R) brand, develop or enhance our website, products and services, take
advantage of business opportunities or respond to competitive pressures, any of
which could have a material adverse effect on our ongoing business. If we are
able to raise funds, and we do so by issuing equity securities, holders of our
common stock may experience significant dilution of their ownership interest,
and holders of these newly issued securities may have rights senior to those of
the current holders of our common stock. If we obtain financing by issuing debt
securities, the terms of these securities could restrict or prevent us from
paying dividends and could limit our flexibility in making business decisions.

                                       12
<PAGE>

OUR BUSINESS MODEL DEPENDS ON USE OF THE INTERNET EXPANDING, IN PARTICULAR AS A
RECRUITING MEDIUM, THE FAILURE OF WHICH COULD HAVE A MATERIAL ADVERSE EFFECT ON
OUR BUSINESS AND FINANCIAL CONDITION.

         The Internet is unproven as a recruiting medium. The future of our
business is dependent on the acceptance by staffing companies and employers of
the Internet as an effective staffing and recruiting tool. The online staffing
and recruiting market is new and rapidly evolving, and we do not yet know how
effective online staffing and recruiting is compared to traditional staffing and
recruiting methods, or whether our services provide added value in the
recruiting process. The adoption of online staffing and recruiting, particularly
among those companies that have historically relied upon traditional recruiting
methods, requires the acceptance of a new way of conducting business, exchanging
information, advertising and fulfilling job openings. Many of our potential
clients have little or no experience using the Internet as a staffing tool.
There can be no assurance that companies will allocate or continue to allocate
portions of their budgets to Internet-based recruiting and staffing. As a
result, we cannot be sure that we will be able to effectively compete with
traditional recruiting and staffing methods. If Internet-based recruiting and
staffing is not widely accepted, we may not generate revenues and, as a result,
our business, results of operations and financial condition could be materially
adversely affected.

IF WE DO NOT BUILD THE NETSTAFF(R) BRAND NAME AND REPUTATION QUICKLY, OUR
ABILITY TO ATTRACT AND RETAIN CLIENTS COULD BE ADVERSELY AFFECTED.

         We believe it is critical to establish, maintain and strengthen our
NetStaff(R) reputation and brand in order to further establish and expand our
client base. We also believe that as the markets in which we compete become
increasingly competitive, the importance of reputation and brand will increase.
If our brand-building efforts are unsuccessful, we may not experience an
increase in Internet traffic needed to increase our client base which, in turn,
is needed to generate sufficient revenues to offset the increase in expenses
related to the expansion of our business. As a result, our operating results and
financial condition could be adversely affected. Our portal will be more
attractive to staffing companies if we can provide content that will enable them
to more efficiently operate their day-to-day business. Accordingly, we intend to
introduce additional and enhanced content offerings, interactive tools and other
services and features in the future in an effort to retain our current clients
and to attract new ones. Our reputation and brand name could be adversely
affected if we are unable to successfully enhance our portal.

IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH, WE COULD INCUR UNFORESEEN
COSTS OR DELAYS AND OUR REPUTATION AND RELIABILITY IN THE MARKETPLACE COULD BE
DAMAGED.

         We have begun to grow rapidly and intend to pursue further growth,
through acquisitions and otherwise, as part of our business strategy. Our growth
has presented and will continue to present numerous administrative and
operational challenges, including the management of an expanding client base,
the assimilation of financial reporting systems, increased pressure on our
senior management and increased demand on our systems and internal controls.
There can be no assurance that we will be able to effectively and efficiently
manage our growth. Our inability to manage our growth effectively and
efficiently could cause us to incur unforeseen costs, time delays or otherwise
adversely impact our business.

IF WE ARE UNABLE TO ESTABLISH AND MAINTAIN ALLIANCES WITH OTHER INTERNET-BASED
COMPANIES, THE GROWTH OF OUR BUSINESS COULD BE LIMITED.

         We have entered into and we expect to continue to enter into
arrangements with third parties to increase our database, bring traffic to our
website and enhance our brand. We cannot determine with certainty whether we

                                       13
<PAGE>

will be successful in entering into strategic alliances or that any
relationships, if entered into, will be on terms favorable to us.

THE LOSS OF MR. RYLEE COULD ADVERSELY AFFECT OUR BUSINESS, INCLUDING OUR ABILITY
TO SECURE AND MAINTAIN CLIENT RELATIONSHIPS AND ATTRACT AND RETAIN EMPLOYEES.

         We do not have an employment agreement with Patrick Rylee, our
President and Chief Executive Officer. If we lose the services of Mr. Rylee, we
may be less likely to secure and maintain client relationships and to attract
and retain additional employees. The efforts, abilities, business generation
capabilities and name recognition of Mr. Rylee are important to our success in
those activities.

IF WE ARE UNABLE TO SUCCESSFULLY IMPLEMENT OUR ACQUISITION STRATEGY, WE MAY NOT
MEET CURRENT EXPECTATIONS OF OUR GROWTH OR OPERATING RESULTS.

         Our growth strategy includes the strategic acquisition of companies
that expand our service offerings. If we are unsuccessful in implementing our
acquisition strategy, we could fail to achieve the revenue and profitability
growth that we currently expect.

ONLINE SECURITY BREACHES COULD HARM OUR BUSINESS.

         Security breaches of our systems and network infrastructure, or the
perception that they could occur, could harm our business and reputation.
Despite the implementation of security measures, our infrastructure may be
vulnerable to physical break-ins, computer viruses, programming errors or
similar disruptive problems. If our security measures are circumvented, the
security of confidential information stored on our systems could be jeopardized,
proprietary information could be misappropriated and interruptions in our
operations could result. We may be required to make significant additional
investments and efforts to protect against or remedy security breaches. A
material security breach could damage our reputation or result in liability to
us, and we do not carry insurance that protects us from this kind of loss.

ALTHOUGH INTERNET COMMERCE HAS YET TO ATTRACT SIGNIFICANT REGULATION, GOVERNMENT
REGULATION MAY RESULT IN FINES, PENALTIES, TAXES OR OTHER COSTS OR CONSEQUENCES
THAT MAY REDUCE OUR FUTURE EARNINGS.

         The United States Congress has recently passed or is considering
legislation regulating certain aspects of the Internet, including online
content, copyright infringement, user privacy, taxation, access charges, digital
signatures and liability for third-party activities. The European Union also has
enacted several directives relating to the Internet, including directives that
address the use of personal data, e-commerce activities, security, commercial
piracy, consumer protection and taxation of e-commerce transactions. Various
states have adopted and are considering Internet-related legislation and
regulations. Governmental authorities in the United States and abroad are
considering other legislative and regulatory proposals to further regulate the
Internet. Areas of potential regulation include libel, pricing, quality of
products and services and intellectual property ownership. We cannot predict
what new laws will be enacted, or how courts will interpret existing and new
laws, and therefore are uncertain as to how new laws or the application of
existing laws will affect our business. In addition, our business may be
indirectly affected by legislation that affects the ability of our clients to
engage in e-commerce activities. Increased regulation of the Internet may
decrease the growth in the use of the Internet, which could decrease the demand
for our products and services, increase our cost of doing business or otherwise
harm our business, results of operations and financial condition.

                                       14
<PAGE>

BECAUSE WE BELIEVE THAT PROPRIETARY RIGHTS ARE MATERIAL TO OUR SUCCESS,
MISAPPROPRIATION OF THESE RIGHTS OR CLAIMS OF INFRINGEMENT OR LEGAL ACTIONS
RELATED TO INTELLECTUAL PROPERTY COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION.

         The unauthorized reproduction or other misappropriation of our
proprietary technology could enable third parties to benefit from our technology
and brand without paying us. If this were to occur, our revenues could be
materially adversely affected, and the value of our mark and brand could be
diminished. We currently rely on a combination of contractual rights, service
marks and trade secrets to protect our proprietary technology and intellectual
property rights. However, the steps we have taken to protect our proprietary
rights may not be adequate to deter misappropriation of proprietary information.
We may not be able to detect unauthorized use of our proprietary information or
take appropriate steps to enforce our intellectual property rights. In addition,
the validity, enforceability and scope of protection of intellectual property in
Internet-related industries is uncertain and still evolving. The laws of other
countries in which we may market our services in the future are uncertain and
may afford little or no effective protection of our intellectual property. If we
resort to legal proceedings to enforce our intellectual property rights, the
proceedings could be burdensome and expensive. The proceedings also could
involve a high degree of risk.

         In addition, we cannot be certain that our products, services, content
and brand do not or will not infringe valid patents, copyrights or other
intellectual property rights held by third parties. We may receive infringement
claims from third parties relating to our technologies, and we may incur
substantial expenses in defending against these third party infringement claims,
regardless of their merit. Successful intellectual property infringement claims
against us could result in monetary liability or a material disruption in the
conduct of our business.

         We hold the Internet domain names "netstaff.com," "netstaff.org,"
"staffworld.com" and "millenniumstaffing.com." Under current domain name
registration practices, no one else can obtain an identical domain name, but
someone might obtain a similar name, or the identical name with a different
suffix, such as ".net," or with a country designation. The regulation of domain
names in the United States and in foreign countries is subject to change, and we
could be unable to prevent third-parties from acquiring domain names that
infringe or otherwise decrease the value of our domain names. If this were to
occur, the value of our mark and brand, and our reputation, could be adversely
affected, which could have a material adverse effect on our business, financial
condition, and results of operations.

WE MAY BE LIABLE TO THIRD PARTIES FOR INFORMATION RETRIEVED FROM THE INTERNET.

         Because visitors to our portal may distribute our content to others,
third parties may sue us for defamation, negligence, copyright or trademark
infringement, personal injury or other matters. We could also become liable if
confidential information is disclosed inappropriately. These types of claims
have been brought, sometimes successfully, against online services in the United
States and Europe. Others could also sue us for the content and services that
are accessible from our portal through links to other websites or through
content and materials that may be posted by our users in chat rooms or bulletin
boards. We do not carry insurance to protect us against these types of claims.

OUR STOCK PRICE MAY EXPERIENCE EXTREME PRICE AND VOLUME FLUCTUATIONS, WHICH
COULD RESULT IN SUBSTANTIAL LOSSES FOR INVESTORS PURCHASING SHARES OF OUR STOCK
AND COULD RESULT IN LITIGATION AGAINST US.

         The stock market in general and the market prices of shares in
technology companies, particularly those such as ours that offer Internet-based
products and services, have been extremely volatile and have experienced
fluctuations that have often been unrelated to the operating performance of such

                                       15
<PAGE>

companies. The trading price of our common stock has fluctuated widely in the
past and is likely to continue to be volatile and subject to wide fluctuations
in response to quarterly variations in results of operations, adverse business
developments, changes in financial estimates by securities analysts, investor
perception of the company and online recruiting and staffing services in
general, announcements by competitors of new products and services, general
economic conditions both in the United States and in foreign countries, or other
events or factors, many of which are beyond our control.

         In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has occurred against
the issuing company. There can be no assurance that such litigation will not
occur in the future. Litigation brought against us could result in substantial
costs to us in defending against the lawsuit and a diversion of management's
attention, which could have a material adverse effect on our business, financial
condition, cash flow and results of operations. Any adverse determination in
this type of litigation could also subject us to substantial liabilities.

BECAUSE WE ARE SUBJECT TO THE "PENNY STOCK" RULES, THE LEVEL OF TRADING ACTIVITY
IN OUR STOCK MAY BE REDUCED.

         Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by penny stock rules adopted by the Securities and
Exchange Commission. Penny stocks, like shares of our common stock, generally
are equity securities with a price of less than $5.00 (other than securities
registered on some national securities exchanges or quoted on Nasdaq). The penny
stock rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker-dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker-dealer and its salesperson in the transaction and, if
the broker-dealer is the sole market maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market, and monthly
account statements showing the market value of each penny stock held in the
customer's account. In addition, broker-dealers who sell these securities to
persons other than established customers and "accredited investors" must make a
special written determination that the penny stock is a suitable investment for
the purchaser and receive the purchaser's written agreement to the transaction.
Consequently, these requirements may have the effect of reducing the level of
trading activity, if any, in the secondary market for a security subject to the
penny stock rules, and investors in our common stock may find it difficult to
sell their shares.

FUTURE SALES OF OUR COMMON STOCK MAY NEGATIVELY AFFECT OUR STOCK PRICE AND MAKE
IT DIFFICULT FOR US TO RAISE CAPITAL THROUGH SALES OF EQUITY SECURITIES.

         As of April 12, 2001, we had outstanding 13,550,000 shares of common
stock, and debentures and warrants that were exercisable for or convertible into
approximately 37,547,435 shares of common stock. Sales of a substantial number
of shares of our common stock in the public market, or the perception that these
sales could occur, could adversely affect the market price for our common stock.
Certain shareholders hold large amounts of shares which they are able to sell in
the public market. Although some of the shares held by these shareholders may be
subject to restrictions on resale under Rule 144 of the Securities Act of 1933,
as amended, as these restrictions end, significant resales of these shares could
cause the market price of our common stock to decline regardless of the
performance of our business. These sales also might make it difficult for us to
sell equity securities at a time and at a price that we deem appropriate.

                                       16
<PAGE>

BECAUSE OUR STOCK IS NOT LISTED ON A NATIONAL SECURITIES EXCHANGE, YOU MAY FIND
IT DIFFICULT TO DISPOSE OF OR OBTAIN QUOTATIONS FOR OUR COMMON STOCK.

         Since January 14, 2000, our common stock has been traded under the
symbol "NTSF" on the NASD's OTC Bulletin Board. Because our stock trades on the
OTC Bulletin Board rather than on a national securities exchange, you may find
it difficult to either dispose of, or to obtain quotations as to the price of,
our common stock.

ITEM 7.    FINANCIAL STATEMENTS

         The financial statements of the company are submitted as a separate
section of this Annual Report on Form 10-KSB, beginning at page F-1.

ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
           FINANCIAL DISCLOSURE

         On April 25, 2000, we filed a Current Report on Form 8-K, reporting
changes in our certifying accountants. We filed an amendment to this report on
May 4, 2000. The report discloses that, on March 16, 2000, we engaged Arthur
Yorkes & Company as our new accountants, to replace Tubbs & Bartnick, P.A., who
declined to stand for re-election as our accountants. On April 14, 2000, we
accepted the resignation of Arthur Yorkes & Company as our accountants and, on
April 17, 2000, we engaged Stark Tinter & Associates, LLC to act as our new
independent accountants. Reference is hereby made to such Form 8-K, as amended,
for further discussion of our change in accountants.

                                       17
<PAGE>

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

         The following table sets forth certain information concerning our
executive officers and directors as of April 12, 2001.

     NAME               AGE                  POSITION/OFFICE HELD
     ----               ---                  --------------------

Patrick Rylee            42    Chief Executive Officer, President, Acting Chief
                               Financial Officer, Secretary and Director

Colin Childerley         53    Director

BUSINESS EXPERIENCE

         PATRICK RYLEE has served as Chief Executive Officer, President and a
director of the company since September 1999. In addition, he has served as our
Acting Chief Financial Officer since June 2000. He was the founder and served as
President and a director of NetStaff Delaware, which was merged into our company
in September 1999, since its inception in June 1996. Prior to that, from July
1993 to July 1996, he was National Sales Director for Qualify International, a
software company specializing in search and retrieval software for the staffing
industry.

         COLIN CHILDERLEY has served as a director of the company since
September 1999, and was a founder of NetStaff Delaware. Since 1995, he has been
an owner of Millennium 3 Design, a real estate development company.

         Directors are generally elected at the annual meeting of our
shareholders. Each director holds office until his successor is elected and
qualified and, thus, generally hold one-year terms.

         Executive officers are chosen by, and serve at the discretion of, our
board of directors, absent any employment agreement, of which none currently
exists.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act requires our executive officers and
directors, and persons who beneficially own more than 10% of a registered class
of our equity securities, to file with the Securities Exchange Commission, or
Commission, initial reports of ownership and reports of changes in ownership of
common stock and our other equity securities. Such officers, directors and
shareholders are required by Commission regulations to furnish us with copies of
all reports so filed.

         Based solely upon review of the copies of such reports furnished to us
during, and with respect to, the fiscal year ended December 31, 2000, or any
written representations received by our company from a director, officer, or
beneficial owner of more than 10% of our common stock that no other reports were
required, we believe that, for the fiscal year ended December 31, 2000, all
Section 16(a) filing requirements applicable to our reporting persons were met,
with the following exceptions: (a) Patrick Rylee did not report the transfer of
shares of common stock in January and February 2000, but subsequently reported
the transfers in a filing on Form 4 in April 2001; and (b) Colin Childerley did
not report the transfer of shares of common stock in January 2000, but
subsequently reported the transfers in a filing on Form 4 in April 2001.

                                       18
<PAGE>

ITEM 10.   EXECUTIVE COMPENSATION

         The following table sets forth information concerning compensation
earned for all services rendered to our company in all capacities during the
fiscal years ended December 31, 2000 and 1999 for our Chief Executive Officer,
President and Acting Chief Financial Officer:

                           SUMMARY COMPENSATION TABLE

                                                             ANNUAL COMPENSATION
                                                             -------------------
NAME AND POSITION                                 YEAR       SALARY       BONUS
-----------------                                 ----       ------       -----
Patrick Rylee                                     2000     $120,000(1)      --
   Chief Executive Officer, President,            1999       20,769         --
   Acting Chief Financial Officer, Secretary
   and Director

--------

(1)  Includes $72,692 in accrued salary not yet paid to Mr. Rylee.

         We have not granted any stock options or stock appreciation rights to
any of our executive officers.

         Directors are not compensated for any services they may provide as
directors on our board of directors.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth information regarding the beneficial
ownership of our common stock as of April 12, 2001 by:

         o    each person known by us to own beneficially more than 5%, in the
              aggregate, of the outstanding shares of our common stock;
         o    each of our directors;
         o    our named executive officer in the Summary Compensation Table
              above; and
         o    all of our directors and executive officers as a group.

         The following calculations of the percent of outstanding shares are
based on 13,550,000 shares of our common stock issued and outstanding as of
April 12, 2001. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission, and generally includes voting or
investment power with respect to securities. Except as indicated in the
footnotes to the table, we believe each shareholder possesses sole voting and
investment power with respect to all of the shares of common stock owned by that
shareholder, subject to community property laws where applicable. In computing
the number of shares beneficially owned by a shareholder and the percentage
ownership of that shareholder, shares of common stock subject to options or
warrants held by that person that are currently exercisable or are exercisable
within sixty days after the date of the table are deemed outstanding. Those
shares, however, are not deemed outstanding for the purpose of computing the
percentage ownership of any other person or group. Except as described below,
beneficial ownership and, accordingly, percent of class ownership, is calculated
pursuant to Securities and Exchange Commission Rule 13d-3.

         The amounts shown in the table as beneficially owned by AJW Partners,
LLC and New Millennium Capital Partners II, LLC, the debenture holders, are
determined in part based upon the terms of convertible debentures and related

                                       19
<PAGE>

warrants held by these debenture holders as of the date of the table. Shares
included in this report as beneficially owned by the debenture holders also
include shares of common stock that may become issuable upon conversion of
interest that is scheduled to become payable on debentures after sixty days from
the date of the table.

         For purposes of the table, we have disregarded provisions contained in
the debentures and warrants that prohibit conversion of the debentures or
exercise of the warrants to the extent that conversion of the debentures would
result in the debenture holder, together with its affiliates, beneficially
owning in excess of 4.9% of our outstanding shares of common stock, and to the
extent that exercise of the warrants would result in the debenture holder,
together with its affiliates, beneficially owning in excess of 4.9% of our
outstanding shares of common stock. Further, these limitations do not preclude
the debenture holders from converting or exercising and selling shares
underlying the debentures and warrants in stages over time where each stage does
not cause a debenture holder to beneficially own in excess of the limitation
amounts.

         In light of the discussion above concerning the terms of the debentures
and warrants, the number of shares shown in the table as beneficially owned by
each debenture holder represents a good faith estimate of the number of shares
of common stock issuable upon conversion of the debentures and upon exercise of
the warrants as of the date of the table and has not been calculated in strict
compliance with Rule 13d-3.

                                    AMOUNT AND NATURE OF
NAME AND ADDRESS                    BENEFICIAL OWNERSHIP         PERCENT
OF BENEFICIAL OWNER(1)                OF COMMON STOCK        OF COMMON STOCK
-------------------                   ---------------        ---------------
Patrick Rylee.......................    4,080,093                 30.11%
c/o NetStaff, Inc.
168 South Park
San Francisco, CA 94107

Colin Childerley....................    2,788,392                 20.58%
c/o NetStaff, Inc.
168 South Park
San Francisco, CA 94107

AJW Partners, LLC...................   22,003,881(2)              61.89%
155 First Street, Suite B
Mineola, NY 11501

New Millennium Capital
  Partners II, LLC..................   11,848,243(3)              46.65%
155 First Street, Suite B
Mineola, NY 11501

All executive officers and
directors as a group (2 persons)....    6,868,485                 50.69%
-------------------------

(1)      Messrs. Rylee and Childerley are directors of the company. Mr. Rylee is
         an executive officer of the company.

                                       20
<PAGE>

(2)      Includes 20,833,333 shares of our common stock issuable to AJW
         Partners, LLC upon conversion of outstanding debentures, together with
         interest accrued thereon through 60 days after the date of the table,
         and 650,000 shares of our common stock issuable upon exercise of
         outstanding warrants.
(3)      Includes 11,217,948 shares of our common stock issuable to New
         Millennium Capital Partners II, LLC upon conversion of outstanding
         debentures, together with interest accrued thereon through 60 days
         after the date of the table, and 350,000 shares of our common stock
         issuable upon exercise of outstanding warrants.

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

STOCK EXCHANGE AGREEMENT

         On September 15, 1999, we entered into a Stock Exchange Agreement with
NetStaff Delaware, which provided for the merger of NetStaff Delaware into the
company, and we changed our name to "NetStaff, Inc."

         At the time of signing the Stock Exchange Agreement, Patrick Rylee was
the Chief Executive Officer, President, Treasurer and a director of NetStaff,
Delaware, and Colin Childerley was the Secretary and a director of NetStaff
Delaware. In connection with the transactions, Messrs. Rylee and Childerley were
appointed as directors of NetStaff(R), and Mr. Rylee was appointed Chief
Executive Officer and President of NetStaff(R). In addition, under the terms of
the Stock Exchange Agreement, one share of common stock of NetStaff Delaware,
par value $0.001 per share, was to be exchanged for 5.0943 shares of our common
stock. Upon consummation of the transactions on December 17, 1999, a total of
1,669,505 shares of the common stock of NetStaff Delaware were exchanged for an
aggregate of 8,505,000 shares of our common stock. As a result, Patrick Rylee
became the holder of 4,274,393 shares of our common stock, and Mr. Childerley
became the holder of 2,849,592 shares of our common stock.

INDEPENDENT CONTRACTOR AGREEMENT

         On December 1, 1999, we entered into an independent contractor
agreement with Millennium 3 Design, a sole proprietorship, or M3D. Colin
Childerley, a director of NetStaff(R), is the owner of M3D. Pursuant to the
terms of the agreement, M3D provides us with corporate image design and
development services. As compensation for these services, we pay M3D an
aggregate fee of $90,000 per year, payable monthly at the rate of $7,500 per
month, at the beginning of each month. In addition, we reimburse M3D on a
monthly basis for out-of-pocket expenses incurred during the course of its
performance of services for us upon the presentation of an itemized invoice for
these expenses. The term of the agreement continues until December 1, 2001;
however, we may terminate the agreement, with or without cause, at any time,
upon providing written notice to M3D. In the event of our termination, the
balance of the fee that remains due and owing for the full term must be paid
within thirty days.

                                       21
<PAGE>

INDEMNIFICATION AGREEMENTS

         We have entered into Indemnification Agreements with Patrick Rylee and
Colin Childerley. Messrs. Rylee and Childerley are directors of the company, and
Mr. Rylee is an executive officer of the company. Pursuant to the terms of the
Indemnification Agreements, we agree to indemnify Messrs. Rylee and Childerley
to the fullest extent permitted by Indiana law. However, no indemnification is
provided:

         (i)      on account of any suit in which judgment is rendered against
                  the indemnitee for an accounting of profits made from the
                  purchase or sale by the indemnitee of our securities pursuant
                  to the provisions of Section 16(b) of the Securities Exchange
                  Act of 1934, as amended, or similar provisions of any federal,
                  state or local statutory law;

         (ii)     on account of the indemnitee's conduct which is finally
                  adjudged to have been knowingly fraudulent or deliberately
                  dishonest, or to constitute willful misconduct;

         (iii)    to the extent expressly prohibited by applicable law or our
                  Bylaws;

         (iv)     for which payment is actually made to the indemnitee under a
                  valid and collectible insurance policy or under a valid and
                  enforceable indemnity clause, Bylaw or agreement, except in
                  respect of any excess beyond payment under the insurance,
                  clause, Bylaw or agreement; or

         (v)      in connection with any proceeding initiated by the indemnitee,
                  or any proceeding by the indemnitee against NetStaff or its
                  directors, officers, employees or other indemnitees, unless
                  (a) the indemnification is expressly required to be made by
                  law; (b) the proceeding was authorized by our Board of
                  Directors; or (c) we provide the indemnification in our sole
                  discretion under applicable law.

ITEM 13.   EXHIBITS AND REPORTS ON FORM 8-K.

         (a)      EXHIBITS.
                  --------

EXHIBIT NO.                             DESCRIPTION
-----------                             -----------

   2.0          Stock Exchange Agreement, dated September 15, 1999, between the
                Registrant and NetStaff, Inc., a Delaware corporation*

   3.0          Articles of Incorporation of the Registrant**

   3.1          Articles of Amendment of the Articles of Incorporation for the
                Registant, effective September 1, 1999*

   3.2          Articles of Merger of NetStaff, Inc., a Delaware corporation,
                into the Registrant, dated September 16, 1999*

   3.3          Certificate of Merger of NetStaff, Inc., a Delaware corporation,
                and the Registrant, dated September 15, 1999, filed December 9,
                1999 with the Secretary of State of the  State of Delaware***

   3.4          Bylaws of the Registrant**

   4.0          Specimen stock certificate for the Registrant***

   4.1          Secured Convertible Debenture issued by the Registrant to New
                Millennium Capital Partners II, LLC on March 27, 2001

   4.2          Secured Convertible Debenture issued by the Registrant to AJW
                Partners, LLC on March 27, 2001

                                       22
<PAGE>
EXHIBIT NO.                             DESCRIPTION
-----------                             -----------

   4.3          Warrant dated March 14, 2000, issued by the Registrant to David
                M. Davis*****

   4.4          Stock Purchase Warrant issued by the Registrant to New
                Millennium Capital Partners II, LLC on March 27, 2001

   4.5          Stock Purchase Warrant issued by the Registrant to AJW Partners,
                LLC on March 27, 2001

   4.6          Warrant dated April 1, 2000, issued by the Registrant to
                Elliott, Lane & Associates***

   4.7          Warrant dated May 24, 2000, issued by the Registrant to Elliott,
                Lane & Associates*****

   4.8          Warrant dated May 24, 2000, issued by the Registrant to Elliott,
                Lane & Associates*****

   4.9          Warrant dated July 14, 2000, issued by the Registrant to Fast
                Net Communications Inc.*****

   4.10         Warrant dated September 7, 2000, issued by the Registrant to
                Golden Horde Investments Ltd.****

   4.11         Warrant dated September 17, 2000, issued by the Registrant to
                Theresa Daly****

   4.12         Warrant dated September 26, 2000, issued by the Registrant to
                Richard Malconian****

   4.13         Warrant dated October 20, 2000, issued by the Registrant to
                Jamie Spangler****

   4.14         Warrant dated October 24, 2000, issued by the Registrant to
                Richard Malconian****

  10.1          Commercial Lease, dated May 16, 1997, between the Registrant and
                Michael J. Kirsch***

  10.2          Lease Addendum, undated, between the Registrant and Michael J.
                Kirsch

  10.3          Independent Contractor Agreement, dated December 1, 1999,
                between the Registrant and Millennium 3 Design***

  10.4          License Agreement, dated September 21, 1999, between the
                Registrant and Commodore Sales Corp.***

  10.5          Letter agreement, dated December 2, 1999, between the Registrant
                and Golden Horde Investments Ltd.***

  10.6          Agreement between the Registrant and Intellectual Capital, Inc.,
                dated January 15, 2000***

  10.7          Professional Service Agreement between the Registrant and
                Elliott, Lane & Associates, Inc., dated March 31, 2000***

  10.8          Securities Purchase Agreement, dated as of March 27, 2001, among
                the Registrant, New Millennium Capital Partners II, LLC and AJW
                Partners, LLC

  10.9          Registration Rights Agreement, dated as of March 27, 2001, among
                the Registrant, New Millennium Capital Partners II, LLC and AJW
                Partners, LLC

  10.10         Security Agreement, dated as of March 27, 2001, among the
                Registrant, New Millennium Capital Partners II, LLC and AJW
                Partners, LLC

  10.11         Guaranty and Pledge Agreement, dated as of March 27, 2001,
                among the Registrant, Patrick Rylee, New Millennium Capital
                Partners II, LLC and AJW Partners, LLC

  10.12         Form of Indemnification Agreement between the Registrant and its
                Directors and Executive Officer

                                       23
<PAGE>

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

*        Filed as an exhibit to the Registrant's Current Report on Form 8-K
         filed with the Securities and Exchange Commission on September 16, 1999
         and incorporated herein by reference.

**       Filed as an exhibit to the Registrant's registration statement on Form
         10-SB filed with the Securities and Exchange Commission on April 27,
         1999 and incorporated hereby by reference.

***      Filed as an exhibit to the Registrant's Annual Report on Form 10-KSB
         for the year ended December 31, 1999, filed with the Securities and
         Exchange Commission on May 8, 2000, and incorporated herein by
         reference.

****     Filed as an exhibit to the Registrant's Report on Form 10-QSB for the
         quarter ended September 30, 2000, filed with the Securities and
         Exchange Commission on November 14, 2000, and incorporated herein by
         reference.

*****    Filed as an exhibit to the Registrant's Report on Form 10-QSB for the
         quarter ended June 30, 2000, filed with the Securities and Exchange
         Commission on August 14, 2000, and incorporated herein by reference.


         (b)      REPORTS ON FORM 8-K.
                  -------------------

         We did not file any Current Reports on Form 8-K during the last quarter
of the fiscal year ended December 31, 2000.

                                       24
<PAGE>


                                 Netstaff, Inc.
                          (A Development Stage Company)
                         Index to Financial Statements

                                                                           Page
                                                                           ----

Report of Independent Auditors                                              F-2

Balance Sheet                                                               F-3

Statements of Operations                                                    F-4

Statement of Changes in Stockholders' Equity (Deficit)                      F-5

Statements of Cash Flows                                                    F-6

Notes to Financial Statements                                               F-7





                                      F-1
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



Shareholders and Board of Directors
Netstaff, Inc.


We have audited the accompanying balance sheet of Netstaff, Inc. (a development
stage company) as of December 31, 2000, and the related statements of
operations, stockholders' equity (deficit), and cash flows for the years ended
December 31, 2000 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Netstaff, Inc. (a development
stage company) as of December 31, 2000, and the results of its operations, and
its cash flows for the years ended December 31, 2000 and 1999, in conformity
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has suffered recurring losses from operations
and has both working capital and stockholders' deficiencies. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also discussed in Note 2. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty


Stark Tinter & Associates, LLC


Denver, Colorado
April 21, 2001

                                       F-2
<PAGE>

                             NETSTAFF, INC.
                      (A DEVELOPMENT STAGE COMPANY)
                              BALANCE SHEET
                            DECEMBER 31, 2000


                                 ASSETS

CURRENT ASSETS
  Cash                                                              $       270
                                                                    -----------

PROPERTY AND EQUIPMENT, net                                             253,493

TRADEMARK,  net of accumulated amortization of $2,312                    13,957

OTHER ASSETS                                                             13,400
                                                                    ------------

                                                                    $   281,120
                                                                    ============


                 LIABILITIES AND STOCKHOLDERS' (DEFICIT)

CURRENT LIABILITIES
  Accounts payable and accrued expenses                             $   515,261
  Accounts payable - related parties                                     44,594
  Notes payable - related parties                                       163,200
                                                                    ------------
    Total current liabilities                                           723,055
                                                                    ------------

STOCKHOLDERS' (DEFICIT)
  Preferred stock, $0.001 par value,
     20,000,000 shares authorized, no shares issued
     or outstanding                                                           -
  Common stock, $0.001 par value,
     100,000,000 shares authorized,
     13,550,000 shares issued and outstanding                            13,550
  Additional paid in capital                                          3,635,043
  Deficit accumulated during the
     development stage                                               (4,090,528)
                                                                    ------------
                                                                       (441,935)
                                                                    ------------

                                                                    $   281,120
                                                                    ============

    The accompanying notes are an integral part of the financial statements.

                                       F-3
<PAGE>
<TABLE>

                                      NETSTAFF, INC.
                               (A DEVELOPMENT STAGE COMPANY)
                                 STATEMENTS OF OPERATIONS
<CAPTION>

                                                                                             OCTOBER 7, 1996
                                                                                               (INCEPTION)
                                                          YEAR ENDED         YEAR ENDED          THROUGH
                                                         DECEMBER 31,       DECEMBER 31,       DECEMBER 31,
                                                            2000                1999              2000
                                                        -------------      -------------      -------------
<S>                                                     <C>                <C>                <C>
REVENUE                                                 $          -       $        500       $     16,100

COST AND EXPENSES
  General and administrative                               2,024,445            331,831          3,126,849
  Stock compensation expense                                 841,500             40,000            881,500
  Depreciation and amortization                               65,067             10,613             85,202
                                                        -------------      -------------      -------------

(LOSS) FROM OPERATIONS                                    (2,931,012)          (381,944)        (4,077,451)
                                                        -------------      -------------      -------------

OTHER INCOME (EXPENSE)
   Loss on disposition of property and equipment            (118,283)                 -           (118,283)
   Interest income                                            12,582                111             12,693
   Sub-lease income                                                -             70,830             92,513
                                                        -------------      -------------      -------------
                                                            (105,701)            70,941            (13,077)
                                                        -------------      -------------      -------------

NET (LOSS)                                              $ (3,036,713)      $   (311,003)      $ (4,090,528)
                                                        =============      =============      =============

PER SHARE INFORMATION
  Weighted average number
  of common shares outstanding - basic and diluted        13,508,356         11,755,494          8,831,960
                                                        =============      =============      =============

  Net (loss) per common share - basic and diluted       $      (0.22)      $      (0.03)      $      (0.46)
                                                        =============      =============      =============

                   The accompanying notes are an integral part of the financial statements.
</TABLE>
                                                    F-4
<PAGE>
<TABLE>

                                                     NETSTAFF, INC.
                                              (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                          FOR THE PERIOD OCTOBER 7, 1996 (INCEPTION) THROUGH DECEMBER 31, 2000
<CAPTION>


                                                         Preferred Stock             Common Stock
                                                     ------------------------  -------------------------   Additional
                                                      Shares        Amount        Shares       Amount    Paid in Capital
                                                     -------------------------------------------------------------------
<S>                                                    <C>        <C>            <C>          <C>          <C>
Balance, October 7, 1996 (inception)                         -    $        -              -   $       -    $         -

Issuance of preferred stock for cash                    35,000        35,000              -           -              -

Issuance of stock for cash                                   -             -      4,535,848         890              -

Net (loss) for the period ended December 31, 1996            -             -              -           -              -
                                                     ----------   -----------  -------------  ----------   ------------

Balance, December 31, 1996                              35,000        35,000      4,535,848         890              -

Net (loss) for the year ended December 31, 1997              -             -              -           -              -
                                                     ----------   -----------  -------------  ----------   ------------

Balance, December 31, 1997                              35,000        35,000      4,535,848         890              -

Issuance of common stock for cash                            -             -      2,849,578       2,850        556,516

Reclassification of paid in capital                          -             -              -       3,645         (3,645)

Net (loss) for the year ended December 31, 1998              -             -              -           -              -
                                                     ----------   -----------  -------------  ----------   ------------

Balance, December 31, 1998                              35,000        35,000      7,385,426       7,385        552,871

Issuance of common stock for cash                            -             -         21,585          22         19,978

Issuance of common stock for cash                            -             -         32,430          32         14,968

Common stock issued in consideration for services            -             -        203,772         204         39,796

Conversion of preferred stock to common stock          (35,000)      (35,000)       178,301         178         34,822

Common stock issued for conversion of notes payable          -             -        683,487         684        160,316

Acquisition of the net assets of MAS Acquisition
  Corp. VIII                                                 -             -      4,995,000       4,995         (4,950)

Commodore license agreement                                  -             -              -           -      2,000,000

Loans payable converted to warrants                          -             -              -           -        100,000

Net (loss) for the year ended December 31, 1999              -             -              -           -              -
                                                     ----------   -----------  -------------  ----------   ------------

Balance, December 31, 1999                                   -             -     13,500,000      13,500      2,917,801

Settlement of subscription receivable with cash              -             -              -           -              -

Allocation of subscription expenses                          -             -              -           -        (34,208)

Cancellation of stock subscription                           -             -              -           -        (90,000)

Exercise of stock warrants                                   -             -         50,000          50         11,450

Grant of stock warrants                                      -             -              -           -        830,000

Net (loss) for the year ended December 31, 2000              -             -              -           -              -
                                                     ----------   -----------  -------------  ----------   ------------

Balance, December 31, 2000                                   -    $        -     13,550,000   $  13,550    $ 3,635,043
                                                     ==========   ===========  =============  ==========   ============
</TABLE>
<PAGE>
<TABLE>

                                                     NETSTAFF, INC.
                                              (A DEVELOPMENT STAGE COMPANY)
                                       STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
                          FOR THE PERIOD OCTOBER 7, 1996 (INCEPTION) THROUGH DECEMBER 31, 2000
                                                      (CONTINUED)
<CAPTION>
                                                       Deficit
                                                     Accumulated
                                                      During the       Stock
                                                     Development   Subscriptions
                                                         Stage       Receivable        Total
                                                     ------------------------------------------
<S>                                                  <C>            <C>            <C>
Balance, October 7, 1996 (inception)                 $         -    $         -    $         -

Issuance of preferred stock for cash                           -              -         35,000

Issuance of stock for cash                                     -              -            890

Net (loss) for the period ended December 31, 1996       (110,674)             -       (110,674)
                                                     ------------   ------------   ------------

Balance, December 31, 1996                              (110,674)             -        (74,784)

Net (loss) for the year ended December 31, 1997         (403,150)             -       (403,150)
                                                     ------------   ------------   ------------

Balance, December 31, 1997                              (513,824)             -       (477,934)

Issuance of common stock for cash                              -              -        559,366

Reclassification of paid in capital                            -              -              -

Net (loss) for the year ended December 31, 1998         (228,988)             -       (228,988)
                                                     ------------   ------------   ------------

Balance, December 31, 1998                              (742,812)             -       (147,556)

Issuance of common stock for cash                              -              -         20,000

Issuance of common stock for cash                              -              -         15,000

Common stock issued in consideration for services              -              -         40,000

Conversion of preferred stock to common stock                  -              -              -

Common stock issued for conversion of notes payable            -              -        161,000

Acquisition of the net assets of MAS Acquisition
  Corp. VIII                                                   -              -             45

Commodore license agreement                                    -     (1,000,000)     1,000,000

Loans payable converted to warrants                            -              -        100,000

Net (loss) for the year ended December 31, 1999         (311,003)             -       (311,003)
                                                     ------------   ------------   ------------

Balance, December 31, 1999                            (1,053,815)    (1,000,000)       877,486

Settlement of subscription receivable with cash                -        875,792        875,792

Allocation of subscription expenses                            -         34,208              -

Cancellation of stock subscription                             -         90,000              -

Exercise of stock warrants                                     -              -         11,500

Grant of stock warrants                                        -              -        830,000

Net (loss) for the year ended December 31, 2000       (3,036,713)             -     (3,036,713)
                                                     ------------   ------------   ------------

Balance, December 31, 2000                           $(4,090,528)   $         -    $  (441,935)
                                                     ============   ============   ============

                        The accompanying notes are an integral part of the financial statements.
</TABLE>
                                                         F-5
<PAGE>
<TABLE>

                                                NETSTAFF, INC.
                                         (A DEVELOPMENT STAGE COMPANY)
                                           STATEMENTS OF CASH FLOWS
<CAPTION>

                                                                                                  OCTOBER 7, 1996
                                                                                                    (INCEPTION)
                                                                 YEAR ENDED        YEAR ENDED         THROUGH
                                                                DECEMBER 31,      DECEMBER 31,       DECEMBER 31,
                                                                   2000              1999              2000
                                                                ------------      ------------      ------------
<S>                                                             <C>               <C>               <C>
Cash flows from operating activities:
    Net (loss)                                                  $(3,036,713)      $  (311,003)      $(4,090,528)
    Adjustments to reconcile net (loss) to net
      cash (used in) operating activities:
           Depreciation and amortization                             65,067            10,613            85,202
           Loss on fixed asset disposition                          118,283                 -           118,283
           Stock compensation expense                               841,500            40,000           881,500
           Write off of assets of MAS                                     -               (45)              (45)
           Loan forgiveness                                               -            (5,000)           (5,000)
    Changes in assets and liabilities
           (Increase) decrease in other assets                       (5,700)            1,300           (13,400)
           Increase in accounts payable - related parties            44,594                 -            44,594
           Increase in accounts payable and accrued expenses        358,101             2,885           515,261
                                                                ------------      ------------      ------------
    Net cash (used in) operating activities                      (1,614,868)         (261,250)       (2,464,133)
                                                                ------------      ------------      ------------

Cash flows from investing activities:
  Acquisition of property and equipment                            (255,409)           (2,525)         (452,208)
  Purchase of trademarks                                                  -           (10,000)          (16,269)
                                                                ------------      ------------      ------------
Net cash (used in) investing activities                            (255,409)          (12,525)         (468,477)
                                                                ------------      ------------      ------------

Cash flows from financing activities:
  Increase in notes payable - related party                          66,100           167,100           426,832
  Proceeds from the sale of preferred stock                               -                 -            35,000
  Proceeds from the sale of common stock                            875,792         1,035,000         2,471,048
                                                                ------------      ------------      ------------
Net cash provided by financing activities                           941,892         1,202,100         2,932,880
                                                                ------------      ------------      ------------

Net increase (decrease) in cash                                    (928,385)          928,325               270

Beginning cash                                                      928,655               330                 -
                                                                ------------      ------------      ------------
Ending cash                                                     $       270       $   928,655       $       270
                                                                ============      ============      ============

SUPPLEMENTAL CASH FLOW INFORMATION

CASH PAID FOR:
   Interest                                                     $    20,115       $         -       $    20,115
                                                                ============      ============      ============
   Income taxes                                                 $         -       $         -       $        -
                                                                ============      ============      ============


SUPPLEMENTAL DISCLOSURE OF NON CASH FINANCING AND INVESTING ACTIVITIES

Cancellation of common stock subscription                       $    90,000       $         -       $    90,000
                                                                ============      ============      ============
Common stock issued for conversion of loans                     $         -       $   161,000       $   161,000
                                                                ============      ============      ============
Warrants issued for conversion of loan                          $         -       $   100,000       $   100,000
                                                                ============      ============      ============

                   The accompanying notes are an integral part of the financial statements.
</TABLE>
                                                    F-6
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Note 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Netstaff, Inc. (the "Company") is an Indiana corporation that was formed on
October 7, 1996. The Company has been in the development stage since its
inception. The Company is an Internet-based business-to-business electronic
commerce company that provides a proprietary "multiple listing service" to the
professional staffing industry. The Multiple Listing Service, or Netstaff MLS,
aggregates various candidate databases of client staffing companies, and allows
staffing companies and employers to simultaneously search the candidate
databases of multiple staffing companies on the Company's website,
www.netstaff.com. The website also provides Internet portals, catering directly
to human resource departments of potential employers, staffing companies, and
candidates.

The Company was originally formed under the name MAS Acquisition VIII Corp.
("MAS"). On December 17, 1999, the Company acquired, through a merger, Netstaff,
Inc. ("Netstaff Delaware"), a Delaware corporation formed in 1996. Upon the
effectiveness of the merger the Company changed its name to Netstaff, Inc.

The merger involved an exchange by the former stockholders of Netstaff Delaware
of all the outstanding shares of Netstaff Delaware for shares of the Company,
representing a majority ownership interest in the Company. Pursuant to the terms
of the agreement, each common share of Netstaff Delaware was exchanged for
5.0943 common shares of the MAS. A total of 1,669,505 shares of common stock of
Netstaff were exchanged for 8,505,000 common shares of MAS.

Because the merger resulted in a change of control of the Company, the merger
was accounted for as a recapitalization of Netstaff Delaware and sale, by
Netstaff Delaware, of 4,995,000 shares of common stock in exchange for the net
assets of MAS.

Revenue Recognition

For staffing placements, revenue is recognized when the candidate accepts
employment. For temporary or contract placements, fee revenue is recognized
during the period in which the candidate provides services to the employer.

Depreciation

The cost of property and equipment is depreciated over the estimated useful life
of the related asset. Depreciation is computed using the straight-line method
over a three to five year period.

                                     F-7
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Intangibles

Trademarks are amortized over their estimated useful life of 15 years.
Amortization of the trademarks expensed to operations during years ended
December 31, 2000 and 1999 and the period from October 7, 1996 (inception) to
December 31, 2000 were $811, $1,083, and $2,312, respectively.

Software and Website Development costs

Product and website development costs incurred in developing the Company's
website are accounted for in accordance with SOP 98-1. Product and website
development costs include amounts incurred by the Company to develop, enhance,
manage, monitor and operate the Company's website. The Company rewrote their
web-based software during the year ended December 31, 2000. The Company has
capitalized software development costs of $164,566 related to this effort. The
capitalized software costs incurred prior to this rewrite of $132,609, with
accumulated amortization of $14,326, was written off due to obsolescence during
the year ended December 31, 2000, resulting in a loss of $118,283. Accumulated
amortization for capitalized software development costs for the years ended
December 31, 2000 and 1999 and the period from October 7, 1996 (inception) to
December 31, 1999 were $26,184, $0, and $26,184, respectively.

Use of Estimates

The preparation of the Company's 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 balance sheet date and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.

Net Loss Per Share

The Company follows Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"). Basic earnings (loss) per common share
("EPS") calculations are determined by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the year.
Diluted earnings (loss) per common share calculations are determined by dividing
net income (loss) by the weighted average number of common shares and dilutive
common share equivalents outstanding. Common stock equivalents were not
considered during the periods presented, as their effect would be anti dilutive.

Cash and Cash Equivalents

For purposes of balance sheet classification and the statements of cash flows,
the Company considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents.

                                       F-8
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Segment Information

The Company follows SFAS No. 131, "Disclosure about Segments of an Enterprise
and Related Information". Certain information is disclosed, per SFAS No. 131,
based on the way management organizes financial information for making operating
decisions and assessing performance. The Company currently operates in one
business segment and will evaluate additional segment disclosure requirements as
it expands operations.

Stock-Based Compensation

The Company accounts for stock based compensation in accordance with SFAS No.
123, "Accounting for Stock-Based Compensation." The provisions of SFAS No. 123
allow companies to either expense the estimated fair value of stock options or
to continue to follow the intrinsic value method set forth in APB Opinion 25,
"Accounting for Stock Issued to Employees" ("APB 25") but disclose the pro forma
effects on net income (loss) had the fair value of the options been expensed.
The Company has elected to continue to apply APB 25 in accounting for its stock
option incentive plans.

Comprehensive Income

There have been no items of comprehensive income since the Company's inception
on October 7, 1996.

Advertising Costs

Advertising is expensed as incurred. Advertising costs expensed during years
ended December 31, 2000 and 1999 and the period from October 7, 1996 (inception)
to December 31, 2000 were $36,682, $2,482, and $97,190, respectively.

Impairment Of Long-Lived Assets

The Company periodically reviews the carrying amount of property, plant and
equipment and its identifiable intangible assets to determine whether current
events or circumstances warrant adjustments to such carrying amounts. If an
impairment adjustment is deemed necessary, such loss is measured by the amount
that the carrying value of such assets exceeds their fair value. Considerable
management judgement is necessary to estimate the fair value of assets,
accordingly, actual results could vary significantly from such estimates. Assets
to be disposed of are carried at the lower of their financial statement carrying
amount or fair value less costs to sell. As of December 31, 2000, management
does not believe there is any impairment of the carrying amounts of assets.

                                       F-9
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Fair Value of Financial Instruments

Fair value estimates discussed herein are based upon certain market assumptions
and pertinent information available to management as of December 31, 2000. The
respective carrying value of certain on-balance-sheet financial instruments
approximated their fair values. These financial instruments include cash,
accounts payable and accrued expenses, and notes payable. Fair values were
assumed to approximate carrying values for these financial instruments because
they are short term in nature, their carrying amounts approximate fair values,
or they are receivable or payable on demand.

Reclassifications

Certain amounts from prior year's financial statements have been reclassified to
conform to current year presentation.

Recent Pronouncements

The FASB recently issued Statement No 137, "Accounting for Derivative
Instruments and Hedging Activities-Deferral of Effective Date of FASB Statement
No. 133". The Statement defers for one year the effective date of FASB Statement
No. 133, "Accounting for Derivative Instruments and Hedging Activities". The
rule now will apply to all fiscal quarters of all fiscal years beginning after
June 15, 2000. In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". The Statement will require the
Company to recognize all derivatives on the balance sheet at fair value.
Derivatives that are not hedges must be adjusted to fair value through income.
If the derivative is a hedge, depending on the nature of the hedge, changes in
the fair value of derivatives will either be offset against the change in fair
value of the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. The Company has not engaged in any hedging
activities since its inception on October 7, 1996.

During December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements (SAS
No. 101), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements. SAB No. 101 did not impact the
Company's revenue recognition policies.

Note 2.  GOING CONCERN

The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
Company as a going concern. The Company has generated recurring losses since its
inception on October 7, 1996, aggregating $4,090,528 through December 31, 2000.
Additionally, the Company has a working capital deficit of $722,785 and a
stockholders' deficit of $441,935. The Company has been reliant on funding from
stockholders.

                                       F-10
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Management's plans include the development of the Company's operations to a
commercial level and pursuing additional equity and debt financing. Subsequent
to December 31, 2000, the Company has secured funding from a single source
through the issuance of convertible debentures and stock warrants. The Company
anticipates total proceeds from the agreement of $600,000, of which $500,000 has
been received as of the date of the audit report (See note 11).

The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the possible inability of
the Company to continue as a going concern.

NOTE 3. LICENSE AGREEMENT AND STOCK SUBSCRIPTION RECEIVABLE

The Company entered into a License Agreement, dated September 21, 1999, with
Commodore Sales Corporation ("Commodore") an unaffiliated third party. Pursuant
to the license agreement the Company granted Commodore a nontransferable, ten
year limited license for the purpose of exploiting the Company's multiple
listing service (MLS) within South Africa. Pursuant to the terms of the license
agreement, the Company is to receive a license fee of $2,000,000 payable in
installments. On December 31, 1999, the Company received $1,000,000,
representing the first installment of the license fee.

During the year ended December 31, 2000 the Company received $875,792 in cash
related to this agreement. The Company was required to reimburse Commodore's
expenses related to this agreement in the amount of $34,208. The remaining
$90,000 of the receivable was cancelled due to the Company not meeting certain
specified performance goals.

The Company has characterized the $2,000,000 fee as equity. Management concluded
that because Commodore used the proceeds from the sale of shares of the Company
to pay the license fee, the transaction more closely resembles that of an equity
transaction than the generation of revenue despite the execution of a license
agreement.

NOTE 4. PROPERTY AND EQUIPMENT

The following is a summary of property and equipment at cost, less accumulated
depreciation at December 31, 2000:

         Computer equipment                     $ 123,120
         Proprietary software                     164,566
         Furniture and equipment                   23,909
         Leasehold improvements                    10,529
                                                ----------
                                                  322,124
         Less: Accumulated depreciation            68,631
                                                ----------
                                                $ 253,493
                                                ==========

                                      F-11
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


For the years ended December 31, 2000 and 1999, and the period from October 7,
1996 (inception) to December 31, 2000, depreciation expense charged to
operations was $64,256, $9,530, and $82,890, respectively.

NOTE 5. LEASE OBLIGATION

The Company leases office space under an operating lease arrangement. The lease
expires on May 31, 2002.

Minimum future lease payments on the office lease are as follows:

                           Year                      Amount
                           ----                      ------
                           2001                     $ 72,000
                           2002                       30,000
                                                    ---------
                           Totals                   $102,000
                                                    =========

For the years ended December 31, 2000 and 1999, and the period from October 7,
1996 (inception) to December 31, 2000, the amounts charged to operations for
rent expense were $67,800, $43,151 and $238,840, respectively.

The Company had sublet a portion of the premises to a non-related company. The
lease expired October 31, 1999. The annual rental approximates $97,100. For the
year ended December 31, 1999, and the period from October 7, 1996 (inception) to
December 31, 1999, the amounts included in other income for sub-lease income
were $70,830 and $92,513, respectively.


NOTE 6. NOTES PAYABLE - RELATED PARTY

The Company has issued unsecured promissory notes bearing interest at rates
ranging from 10% 12% per annum. Of this amount, $33,100 is delinquent as of the
date of the audit report. The remainder of the promissory notes are due on
demand.

Note 7.  STOCKHOLDERS' EQUITY (DEFICIT)

During the period ended December 31, 1996, the Company had the following equity
transactions:

         o        Issued 35,000 shares of Preferred Stock at $1.00 per share for
                  cash aggregating $35,000
         o        Issued 4,535,848 shares of Common Stock at $0.0002 per share
                  for cash aggregating $890

                                      F-12
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


During the year ending December 31, 1998, the Company had the following equity
transactions:

         o        Issued 2,849,578 shares of Common Stock at $0.20 per share for
                  cash aggregating $559,366

During the year ended December 31, 1999, the Company had the following equity
transactions:

         o        Issued 21,585 shares of Common Stock at $0.93 per share for
                  cash aggregating $20,000
         o        Issued 32,430 shares of Common Stock at $0.46 per share for
                  cash aggregating $15,000
         o        Issued 203,772 shares of Common Stock at $0.20 per share (the
                  fair market value of the shares) for services rendered. The
                  value of the services of $40,000 has been charged to
                  operations
         o        Converted $161,000 in debt to 683,487 shares of Common Stock
         o        Converted 35,000 shares of Preferred Stock to 178,301 shares
                  of Common Stock
         o        Converted $100,000 in debt to 200,000 stock warrants
                  exercisable at $1.00 per share (see Note 8)

During the year ended December 31, 2000, the Company had the following equity
transactions:

         o        A cashless stock warrant was exercised for 50,000 shares of
                  Common Stock at its fair market value of $11,500
         o        Stock compensation of $830,000 was charged to operations for
                  the issuance of stock warrants

During the periods covered by these financial statements the Company issued
shares of common stock without registration under the Securities Act of 1933.
Although the Company believes that the sales did not involve a public offering
of its securities and that the Company did comply with the "safe harbor"
exemptions from registration, it could be liable for rescission of the sales and
any other applicable remedies if such exemptions were found not to apply, which
could have a material negative impact on the Company.

NOTE 8. STOCK WARRANTS

During the year ended December 31, 2000, the Company issued stock warrants
exercisable into 650,000 shares of Common Stock. The Company has recorded
stock-based compensation of $830,000, which has been charged to operations for
the issuance of stock warrants to non-employees (see Note 7). The fair value for
these warrants were estimated as of the grant date using the Black-Scholes
option pricing model with the following assumptions:, risk free interest rate of
6%; dividend yield of 0%; volatility factor of the expected market price of the
Company's stock of 296%; and a weighted average life of the warrant of 3 years.

                                      F-13
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Common stock warrant activity is as follows:

                                                          Weighted Average
                                                 Stock        Exercise
                                               Warrants         Price
                                               --------         -----
Outstanding at beginning of year                      -           -
Granted                                         200,000       $   1.00
Exercised                                             -           -
Forfeited                                             -           -
                                               ---------
Outstanding at December 31, 1999                200,000           1.00
Granted                                         650,000           1.60
Exercised                                       (50,000)           .15
Forfeited                                             -           -
                                               ---------      ---------
Outstanding at December 31, 2000                800,000       $   1.54
                                               =========      =========

Warrants exercisable at December 31, 2000       800,000
                                               =========

Weighted average fair value of warrants
 granted during year                           $   1.31
                                               =========

<TABLE>
<CAPTION>
                                           Outstanding                 Exercisable
                                   --------------------------   -------------------------
                                    Weighted-       Weighted-                   Weighted-
Range of                            Average          Average                    Average
Exercise            Number         Contractual      Exercise      Number        Exercise
Prices            Outstanding         Life           Price      Exercisable      Price
------            -----------         ----           -----      -----------      -----
<S>                <C>             <C>               <C>            <C>          <C>
$0.15 - $0.50      100,000         2.7 years         $0.33          100,000      $0.33
$1.00 - $2.00      600,000         2.2 years         $1.44          600,000      $1.44
$4.50 - $6.50      100,000         2.7 years         $5.50          100,000      $5.50

</TABLE>

The Company has reserved a total of 800,000 shares of common stock related to
stock warrants. The Company has reserved a total of 1,350,000 shares of common
stock related to their stock option plan. As of December 31, 2000, the Company
had not granted any stock options.

                                      F-14
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Note 9.  INCOME TAXES

The Company accounts for income taxes under Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS No. 109"), which
requires use of the liability method. SFAS No. 109 provides that deferred tax
assets and liabilities are recorded based on the differences between the tax
bases of assets and liabilities and their carrying amounts for financial
reporting purposes, referred to as temporary differences. Deferred tax assets
and liabilities at the end of each period are determined using the currently
enacted tax rates applied to taxable income in the periods in which the deferred
tax assets and liabilities are expected to be settled or realized.

The types of temporary differences between the tax basis of assets and their
financial reporting amounts that give rise to a significant portion of the
deferred tax asset are as follows:
                                       Reconciling        Tax
                                          Item           Effect
                                       ----------      ----------

Net operating loss carryforward        $4,000,000      $1,300,000
                                       ==========      ==========

The net operating loss carryforward will expire through 2020. The deferred tax
asset has been fully reserved at December 31, 2000. The change in the valuation
allowance during the year ended December 31, 2000 was $942,000.

The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate of 34% to income before income taxes due to
the effect of the net operating loss. The net operating loss negates any
provision for income taxes.

NOTE 10.  RELATED PARTY TRANSACTIONS

On December 1, 1999, the Company entered into an independent contractor
agreement ("the Agreement") with Millennium 3 Design ("M3D). A director of the
Company is the sole owner of M3D. Pursuant to the terms of the Agreement, M3D
provides corporate image design and development services for the Company. For
providing the stipulated services the Company has agreed to compensate M3D with
an annual fee of $90,000, payable monthly at the rate of $7,500 per month
commencing December 1, 1999. The Agreement may be terminated, with or without
cause, at any time, upon written notice by the Company. In the event of
termination by the Company, the balance of the fee that remains due and owing
for the full term must be paid within thirty days of the termination date. For
the year ended December 31, 1999, the Company had paid M3D and aggregate amount
of $13,233, including expense reimbursement. For the year ended December 31,
2000 the Company had recorded $97,959 of fees and expense reimbursements to M3D,
$40,959 of which were unpaid and included in accounts payable - related parties
as of December 31, 2000.

During the year ended December 31, 2000, the Company received legal services
from a firm in which a member of the Board of Directors is affiliated. The
Company has recorded fees of $4,661 to this firm, $3,635 that is unpaid and
included in accounts payable - related parties as of December 31, 2000.

                                      F-15
<PAGE>

                                 Netstaff, Inc.
                          (A Development Stage Company)
                        Notes to the Financial Statements


Note 11.  SUBSEQUENT EVENTS

During March 2001 the Company entered into a securities purchase agreement for a
maximum of $600,000. The agreement calls for the issuance of convertible
debentures, which are convertible at the debenture holder's request. On March
27, 2001, the Company issued a $500,000 convertible debenture, bearing interest
at 12% per annum and maturing on March 27, 2002. The debenture was accompanied
by warrants to purchase up to 1,000,000 shares of Common Stock. The $500,000
debenture is convertible into shares of Common Stock as will be determined by
specified future events. The Company has reserved 83,500,000 shares for this
conversion and any future debentures related to this agreement. The debenture
will be convertible into Common Stock at a discount from its fair market value
on the date of conversion.

                                      F-16


<PAGE>

                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated:  April 27, 2001            NETSTAFF, INC.

                                  BY: /S/ PATRICK RYLEE
                                      -----------------------------------------
                                      Patrick Rylee
                                      Chief Executive Officer, President, Acting
                                      Chief Financial Officer, Secretary and
                                      Director


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

       SIGNATURE                      TITLE                           DATE
       ---------                      -----                           ----

/S/ PATRICK RYLEE           Chief Executive Officer,              April 27, 2001
----------------------      President, Acting Chief Financial
Patrick Rylee               Officer, Secretary and Director
                            (Principal Executive Officer and
                            Principal Financial Officer)

/S/ COLIN CHILDERLEY        Director                              April 27, 2001
----------------------
Colin Childerley

                                       25
<PAGE>

                                  EXHIBIT INDEX


EXHIBIT NO.                       DESCRIPTION
-----------                       -----------

     4.1     Secured Convertible Debenture issued by the Registrant to New
             Millennium Capital Partners II, LLC on March 27, 2001

     4.2     Secured Convertible Debenture issued by the Registrant to AJW
             Partners, LLC on March 27, 2001

     4.4     Stock Purchase Warrant issued by the Registrant to New Millennium
             Capital Partners II, LLC on March 27, 2001

     4.5     Stock Purchase Warrant issued by the Registrant to AJW Partners,
             LLC on March 27, 2001

     10.2    Lease Addendum, undated, between the Registrant and Michael J.
             Kirsch

     10.8    Securities Purchase Agreement, dated as of March 27, 2001, among
             the Registrant, New Millennium Capital Partners II, LLC and AJW
             Partners, LLC

     10.9    Registration Rights Agreement, dated as of March 27, 2001, among
             the Registrant, New Millennium Capital Partners II, LLC and AJW
             Partners, LLC

     10.10   Security Agreement, dated as of March 27, 2001, among the
             Registrant, New Millennium Capital Partners II, LLC and AJW
             Partners, LLC

     10.11   Guaranty and Pledge Agreement, dated as of March 27, 2001, among
             the Registrant, Patrick Rylee, New Millennium Capital Partners II,
             LLC and AJW Partners, LLC

     10.12   Form of Indemnification Agreement between the Registrant and its
             Directors and Executive Officer