U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

(Mark One)

| X | Annual report under Section 13 or 13(d) of the Securities Exchange Act of
1934

For the fiscal year ended: December 31, 2004

| _ | Transition report under Section 13 or 15(d) of the Securities Exchange Act
of 1934

For the transition period from _____________________  to  ___________________.

Commission File Number:    000-29459

                                Pacel Corporation
                  ---------------------------------------------
                 (Name of small business issuer in its charter)

            NEVADA                                               54-1712558
-------------------------------                           ----------------------
(State or other jurisdiction of                           (IRS Employer
 incorporation or organization)                           Identification Number)

7621 Little Ave  Suite 101
Charlotte, North Carolina                                          28226
----------------------------------------                         ----------
(Address of principal executive offices)                         (Zip Code)

Issuers telephone number:  (704) 643-0676

Securities registered under Section 12(b) of the Exchange Act:

Title of each class                                       Name of each exchange
                                                          on which registered
None                                                              N/A
-------------------------                                -----------------------

Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE .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 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 contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or




<PAGE>
information statements incorporate by reference in Part III f this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

The issuer's revenue for the fiscal year ended December 31, 2004 was $3,997,522.

As of April 12, 2005, the aggregate market value of the voting and non-voting
common stock of the registrant held by non-affiliates of the registrant computed
by reference to the average bid and asked price of such common equity on that
date was $93,070. As of April 12, 2005, the issuer had 930,698,300 outstanding
shares of common stock.

Transitional small business format   Yes [ _ ]  No [ X ]


TABLE OF CONTENTS


Part I
Item 1.   Description of Business                                         1-11
Item 2.   Description of Property                                          11
Item 3.   Legal Proceedings                                                11
Item 4.   Submission of Matters to a Vote of Security Holders              11

Part II
Item 5.   Market for the Common Equity and Related Stockholder Matters    12-14
Item 6.   Management's Discussion and Analysis of Financial Conditions
          And Results of Operations                                       14-19
Item 7.   Financial Statements and Supplementary Data                      19
Item 8.   Changes in and Disagreements with Accountants on Accounting and
          Financial Disclosure                                             19
Item 8A.  Controls and Procedures                                         19-20
Item 9.   Directors, Executive Officers, Promoters and Control Persons;
          Compliance With Section 16(a) of the Exchange Act               20-21
Item 10.  Management Remuneration and Transactions                         22
Item 11.  Security Ownership of Certain Beneficial Owners and Management   23
Item 12.  Certain Relationships and Related Transactions                   23
Item 13.  Exhibits and Reports on Form 8-K                                 24
Item 14.  Principal Accountant Fees and Services                           25






















<PAGE>
PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

The  Company  provides  a  comprehensive   Personnel   Management   System  that
encompasses  a  broad  range  of  services,   including   benefits  and  payroll
administration,  health and workers' compensation insurance programs,  personnel
records  management,  employer  liability  management,  employee  recruiting and
selection,   employee   performance   management,   and  employee  training  and
development services.

In 2004, the Company  continued its strategy for penetrating the Human Resources
Outsourcing  ("HRO")  industry based on its evaluation of its business model and
existing  business  initiatives  completed in 2002.  The Company's  intention to
enter this business  sector was announced in September  2002 and was based on an
evaluation of potential business markets that provide the potential for success.

The HRO market is a component part of the Business Process  Outsourcing  ("BPO")
industry. The broad category of BPO is a huge area that includes such outsourced
functions as information  technology,  human  resources,  logistics,  facilities
management   and   finance/accounting   where  an  external   provider   assumes
responsibility  to own, manage and administer a particular  process on the basis
of performance  criteria that have been mutually agreed upon. HRO is a large and
complex  universe in itself,  encompassing the outsourcing of the many different
functions  generally  considered  to  be  the  domain  of  the  Human  Resources
department.

The HRO industry began to evolve in the early 1980s,  largely in response to the
difficulties  faced by small to medium sized  businesses  in procuring  workers'
compensation and group health insurance  coverage on a cost-effective  basis and
operating in an  increasingly  complex legal and regulatory  environment.  While
various service providers, such as payroll processing firms, benefits and safety
consultants  and  temporary  staffing  firms  were  available  to  assist  these
businesses  with  specific  tasks,  PEOs began to emerge as  providers of a more
comprehensive  outsourcing  solution.  PEOs  combined  the  employees of a large
number of  clients  and  leveraged  their  purchasing  power to obtain  workers'
compensation and group health programs.  With the subsequent  hardening of those
insurance  markets  for  PEOs in the  early  2000's,  PEOs  began  investigating
additional market opportunities for further development of their business model.

The Company's  began its entry into the HRO market through the 2003  acquisition
of two Professional Employer Organizations ("PEO") located in North Carolina and
Texas.  The  Company's  is focusing  its  efforts on the PEO and  Administrative
Services  Organization  ("ASO")  sectors of the HRO  industry,  providing  human
capital  management  solutions to small and medium sized business clients within
the  United  States.  Evaluation  of organic  growth  strategies  combined  with
continued scrutiny and examination of potential acquisition candidates continues
in order to secure the  Company's  position  as a leader  within  the  industry.
Though the  Company  remains  exclusively  focused on the PEO and ASO markets at
this time,  it sees its entry into these markets as an  opportunity  to tap into
the lucrative  small  business BPO market and intends to compliment  its PEO and
ASO activities with additional services such as information technology services,
business  consulting and financial services at a still undetermined future time.
In 2004,  the Company  continues  its focus on its PEO and ASO  business  model,
evaluating, completing and integrating planned acquisitions,  developing leading
vendor  relationships and establishing  itself as an industry leader. To further
improve  services by the Company to its clients a major  investment in upgrading
technology  occurred  during  2004.  The Company  implemented  new systems  that
integrate  Human   Resource,   payroll,   benefits  and  workers'   compensation
administration.  The advent of this  system  permits  to Company to  effectively
market to larger clients.

                                        1
<PAGE>
Through  its PEO and ASO  business  unit,  the Company  markets to its  clients,
typically  small  to  medium  sized  businesses  with  between  five (5) and one
thousand (1,000) employees,  a broad range of products and services that provide
an outsourced  solution for the client's Human Resources ("HR") needs.  Industry
estimates   indicate   that  this  "middle   market"   opportunity   encompasses
approximately 100,000 small to medium-sized businesses employing over 40 million
people.  Another  benefit  of the  industry  is that the  target  market  is not
restricted  as to industry,  sector or size.  Virtually  every company has human
resources  needs and almost  all can  benefit  from some  level of  outsourcing.
Smaller firms appreciate the professional expertise and pooled resources brought
by a PEO  or  ASO  while  the  potential  for  economies  of  scale  created  by
outsourcing  the heavily  transaction-intensive  HR function  make a  compelling
economic  argument.  The Company's  service  offerings include payroll services,
benefits administration,  governmental compliance, risk management, unemployment
administration,  and health, welfare and retirement plan benefits.  Although the
Company  maintains  successful  relationships  with its existing  vendors in the
Southeastern  United States,  it continues  negotiations  with several  national
vendors in these areas in order to effectively  and  competitively  provide such
services to a broad range of clients on a national scale.

By allowing the  management of these small to medium sized  business  clients to
focus  on the  "business  of  business"  rather  than the  complicated  and time
consuming administrative tasks of managing human capital issues, the Company, in
delivering  its services,  should be well positions to improve the efficiency of
its clients'  businesses,  enhancing  their  ability to be  profitable  in their
chosen marketplace. Additionally, such initiatives as improving their ability to
attract and retain talent, improving the planning and management of payroll cash
flows and managing  employment risks should enhance the success of the Company's
clients.

In a PEO relationship, the client transfers certain employment-related risks and
liabilities  to the  Company and retains  other risks and  liabilities.  In this
context,   the  client  and  the  Company  are  each  viewed  as  and  become  a
"co-employer"  of the  client's  worksite  employees.  In order to enter  into a
co-employer  relationship,  the  Company  operates  as a  Professional  Employer
Organization.

As a co-employer,  employment-related  liabilities are  contractually  allocated
between  the  Company  and the  client  under a  written  Professional  Services
Agreement.  Under the  Professional  Services  Agreement,  the  Company  assumes
responsibility  for and manages the risks associated with each client's worksite
employee  payroll  obligations,  including the liability for payment of salaries
and wages  (including  payroll  taxes) to each  worksite  employee  and,  at the
client's options, responsibility for planning, providing and administering group
health,  welfare and retirement benefits to such individuals.  These obligations
of the Company are fixed,  whether or not the client makes timely payment of the
associated  service fee. In this regard,  it is  important to  understand  that,
unlike payroll processing  service providers,  the Company issues to each of the
client's worksite employees,  Company payroll checks drawn on the Company's bank
accounts.   The  Company  also  reports  and  remits  all  required   employment
information  and taxes to the  Internal  Revenue  Service  ("IRS")  and issues a
Federal Form W-2 to each worksite employee under the appropriate Company Federal
Employer  Identification Number ("FEIN"). The Company assumes the responsibility
for compliance with those  employment-related  governmental regulations that can
be  effectively  managed away from the  client's  worksite.  In many cases,  the
Company provides the employee workers' compensation insurance coverage under the
Company's  insurance policy. The client may elect, or the workers'  compensation
carrier may require,  retaining its own policy for the  management of this risk.
In all  cases,  the  Company  remains  heavily  involved  with  safety  and risk
management to assist the client in controlling risk and potentially reducing the
cost of such coverage.  The client contractually  retains the general day-to-day
responsibility  to direct,  control,  hire,  terminate  and  manage  each of the
client's  worksite  employees.  The worksite employee services are performed for
the  exclusive  benefit  of the  client's  business.  The  client  also  remains
responsible   for   compliance   with  those   employment-related   governmental
regulations  that are more  closely  related  to the  day-to-day  management  of
worksite employees.

                                       2
<PAGE>
In an ASO  relationship,  the client  retains all  employment-related  risks and
liabilities  and  the  Company  provides   outsourced   solutions  to  meet  the
administrative and HR needs of the client.

The Company charges its clients a service fee that is designed to yield a profit
to the Company and cover the cost of certain  employment-related taxes, workers'
compensation  insurance  coverage and administrative and field services provided
by the  Company to the  client.  The  component  of the  service  fee related to
administration  varies  according  to the size of the  client,  the  amount  and
frequency  of  payroll  payments,  whether a PEO or an ASO  arrangement  and the
method of delivery for such payments.  In a PEO  relationship,  the component of
the service fee related to workers'  compensation and unemployment  insurance is
based, in part, on the client's historical claims experience.  In addition,  the
client may choose to offer certain  health,  welfare and retirement  benefits to
its  worksite  employees.  In  addition to the service fee and costs of selected
benefit  plans,  billings  to each  client  also  include  the  wages  and other
employment-related taxes of each worksite employee. The billings are invoiced at
the time of deliver of each periodic payroll delivered to the client.

Currently, the Company provides workers' compensation insurance coverage for its
worksite  employees  through  several  vendor  arrangements,  depending  on  the
geographic location of the client's worksite(s).  The Company has, to date, been
unsuccessful  in  obtaining a national  program for its current  client base and
anticipated growth. The Company is continuing negotiations with several carriers
in order to obtain such national coverage program.  The Company pays the premium
for coverage and passes to its clients some or all of the costs  attributable to
the coverage  for their  respective  worksite  employees in its service fee. The
Company  does  not  act as an  insurance  company.  However,  as  part of a 2003
acquisition,  the Company acquired a fully-licensed,  but  non-operating,  North
Carolina-based  insurance  company.  The Company  does assume  certain  workers'
compensation risk as a result of providing these services.

Human Resources Outsourcing Industry

Human  Resources  Outsourcing  ("HRO")  is a subset  of the  more  comprehensive
Business Process Outsourcing ("BPO") sector. Since the 1980's, American industry
has embraced the general concept of outsourcing non-core or non-mission critical
processes,  incorporating  it into the American way of business.  Outsourcing is
perceived as bringing economies of scale, higher levels of expertise and greater
efficiency to those processes.

One of the  sectors  of the HRO  industry  began to evolve  in the early  1980s,
largely  in  response  to  the  difficulties  faced  by  small  to  medium-sized
businesses  in  procuring  workers'  compensation  and  group  health  insurance
coverage on a  cost-effective  basis and  operating in an  increasingly  complex
legal and  regulatory  environment.  While various  service  providers,  such as
payroll processing firms, benefits and safety consultants and temporary staffing
firms,   were  available  to  assist  these   businesses  with  specific  tasks,
Professional  Employer  Organizations  ("PEO") began to emerge as providers of a
more comprehensive outsourcing solution for these activities.  PEOs combined the
employees of a large number of clients and leveraged their  purchasing  power to
obtain more  cost-effective  workers'  compensation  and group health  insurance
programs.

The Company  believes that the key factors  driving  demand for HRO services are
the increasing  acceptance in the small to  medium-sized  business  community of
outsourcing  certain  non-core  business  functions such as those offered by the
Company; the size and growth of the small to medium-sized  business community in
the United States; the increasing complexity of employment-related  governmental
regulations and the related costs of compliance with those regulations; the need
of  businesses  to manage the cash  expenditures  associated  with  payroll  and
payroll-related  expenses,  including workers' compensation  insurance;  and the
need to provide  competitive  benefit programs,  including  health,  welfare and
retirement, on a cost-effective and convenient basis.

                                       3
<PAGE>
The Company further believes that many small to mid-sized  businesses  recognize
the need to manage employee data and information in a single  coordinated basis.
During  2004,  the  Company  invested  in a  "state-of  the art" Human  Resource
Information  System with an integrated  payroll system as a mechanism to address
this need by the business community.  Utilization of the Company's systems allow
small to mid-sized businesses to offer capabilities  previously  associated with
only larger businesses.

Another factor  affecting the HRO industry has been the  increasing  recognition
and  acceptance  by  regulatory   authorities   of  PEOs  and  the   co-employer
relationship  that  exists  when  a  client  contract  with a PEO  for  services
reflected in the  development of licensing or  registration  requirements at the
state level.  The National  Associated of  Professional  Employer  Organizations
("NAPEO"),  of which the Company is a member,  has worked,  along with  industry
leaders,  with the  relevant  government  entities  for the  establishment  of a
regulatory framework that would clarify the roles and obligations of the PEO and
the client in the co-employer  relationship.  This framework  generally  imposes
financial responsibility on the PEO in order to promote the increased acceptance
and further development of the industry.

Twenty-six states,  including states where the Company currently has operations,
have  passed  laws  that  have  licensing,   registration  or  other  regulatory
requirements  for  PEOs and  several  additional  states  are  considering  such
regulation.  Such laws  vary  from  state to state,  but  generally  codify  the
requirements  that the PEO  must  reserve  the  right  to  hire,  terminate  and
discipline  worksite employees and secure workers'  compensation  insurance.  In
certain  instances,  the Company delegates or assigns such rights to the client.
The laws also generally provide for monitoring the fiscal  responsibility of the
PEOs and, in many cases, the licensure of the controlling officers of the PEO.

Since the late  1990's,  due to changes in the workers'  compensation  and group
health insurance markets, many PEOs have encountered significant difficulties in
obtaining  workers'  compensation and group health benefit  insurance  policies.
Many  PEOs  have  exited  the  industry  due to the lack of  available  workers'
compensation  and  group  health  benefit  insurance  programs  or due to  their
inability to provide the financing  security required by insurance  companies in
order to obtain such coverage.  The Company views this continued pressure on the
market as an opportunity,  providing  potentially viable acquisition  targets to
further support its business development strategy.

All  of  the  Company's  clients  are  required  to  enter  into  the  Company's
Professional  Services  Agreement  (the "PSA").  The PSA provides for an initial
one-year term and is subject to  termination by the Company or the client at any
time upon thirty (30) days written notice.  The Company has several  versions of
its basic PSA and utilizes each depending upon the relationship with the client.
Clients may enter into PEO or Administrative Services Only ("ASO") arrangements,
may bring their own benefit  programs,  provide their own workers'  compensation
coverage,  use only payroll services,  etc. and the agreement is available to be
modified to suit the individual client's needs and elections.  After the initial
one-year term,  the contract may be renewed or terminated.  Based on the results
of a financial review, the Company may require the owners of client companies to
personally guarantee the client's obligations under the PSA.



                                       4
<PAGE>
In the PEO environment the PSA also establishes the division of responsibilities
between the Company and the client as co-employers.  Pursuant to the PSA, we are
responsible   for   personnel   administration   and  are  liable  for   certain
employment-related  government regulations. In addition, we assume liability for
payment of salaries and wages (as well as related payroll taxes) of our worksite
employees and responsibility  for providing  specified employee benefits to such
persons. These liabilities are not contingent on the prepayment by the client of
the  associated  comprehensive  service fee and,  as a result of our  employment
relationship with each of our worksite  employees,  we are liable for payment of
salary and wages to the worksite  employees  and are  responsible  for providing
specified  employee  benefits to such persons,  regardless of whether the client
company pays the  associated  comprehensive  service fee. The client retains the
employees'  services and remains  liable for the purposes of certain  government
regulations,  compliance  with which  requires  control of the worksite or daily
supervisory responsibility or is otherwise beyond our ability to assume. A third
group of  responsibilities  and  liabilities  are shared by the  Company and the
client where such joint responsibility is appropriate.  The specific division of
applicable responsibilities under the PSA is as follows:

The Company
-----------

     o   Payment of wages and related tax reporting and remittance (local, state
         and federal withholding, FICA, FUTA, state unemployment
     o   Workers' compensation compliance, procurement, management and
         reporting;
     o   Compliance with COBRA, HIPAA and ERISA (for each employee benefit plan
         sponsored by the Company only), as well as monitoring changes in other
         governmental regulations governing the employer/employee relationship
         and updating the client when necessary; and
     o   Employee benefits administration of plans.

Client
------

     o   Payment, through the Company, of commissions, bonuses, paid leaves of
         absence and severance payments;
     o   Payment and related tax reporting and remittance of non-qualified
         deferred compensation and equity-based compensation;
     o   Assignment to, and ownership of, all client intellectual property
         rights;
     o   Compliance with OSHA regulations, EPA regulations, FLSA, WARN, USERRA
         and state and local equivalents and compliance with government
         contracting provisions;
     o   Compliance with the National Labor Relations Act ("NLRA"), including
         all organizing efforts and expenses related to a collective bargaining
         agreement and related benefits;
     o   Professional licensing requirements, fidelity bonding and professional
         liability insurance
     o   Products produced and/or services provided; and
     o   ERISA compliance for client-sponsored benefit plans.

Joint
-----

     o   Implementation of policies and practices relating to the
         employee/employer relationship; and
     o   Compliance with all federal, state and local employment laws,
         including, but not limited to Title VII of the Civil Rights Act of
         1964, ADEA, Title I of ADA, FMLA, the Consumer Credit Protection Act,
         and immigration laws and regulations.


                                       5
<PAGE>
Because we are a co-employer  with the client company for some  purposes,  it is
possible that we could incur  liability for violations of such laws,  even if we
are not  responsible  for the  conduct  giving rise to such  liability.  The PSA
addresses  this  issue  by  providing  that the  client  will  indemnify  us for
liability incurred to the extent the liability is attributable to conduct by the
client.  Notwithstanding  this  contractual  right  to  indemnification,  it  is
possible that we could be unable to collect on a claim for  indemnification  and
may  therefore  be  ultimately  responsible  for  satisfying  the  liability  in
question.

The Company retains the right to terminate the PSA as well as its  co-employment
relationship,  if  applicable,  with the  worksite  employees  immediately  upon
non-payment  by a client.  The  Company  manages  its credit  risk  through  the
periodic nature of payroll,  client credit and banking checks, owner guarantees,
the Company's  client  selection  process and its right to terminate the PSA and
the co-employment relationship with the worksite employees.

In the ASO environment the PSA defines the  responsibility of each party.  There
is no co-employment  relationship in the ASO environment,  thus, the Company has
no  employer  liability.  The  Company  acts as an agent of the client and has a
contractual  obligation to perform the functions  contracted by the Client.  The
PSA in the ASO  environment  is  tailored to the  specific  needs of the Client.
Typically the Company has a contractual obligation for the following:

     o   Payment of wages and related tax reporting and remittance (local, state
         and federal withholding, FICA, FUTA, state unemployment;
     o   Compliance with COBRA, and HIPAA, as well as monitoring changes in
         other governmental regulations governing the employer/employee
         relationship and updating the client when necessary; and
     o   Employee benefits administration of plans.

The Client is responsible for all other employer responsibilities.

The Company retains the right to terminate the PSA as well as its  co-employment
relationship,  if  applicable,  with the  worksite  employees  immediately  upon
non-payment  by a client.  The  Company  manages  its credit  risk  through  the
periodic nature of payroll,  client credit and banking checks, owner guarantees,
the Company's  client  selection  process and its right to terminate the PSA and
the co-employment relationship with the worksite employees.

Competition

The PEO sector of the industry is highly fragmented.  The primary competition is
other PEOs,  insurance agents, and  fee-for-service  providers,  such as payroll
processors  and HR  consultants.  The  market  for  human  resources  consulting
services is expected to become  increasingly  competitive  as larger  companies,
some of which have greater financial resources than the Company,  compete in the
market.

The key  competitive  factors in the HRO  industry  are  breadth  and quality of
services,  price, reputation,  financial stability, and choice, quality and cost
of benefits.  The Company will seek to compete  through its ability to provide a
full-service HR solution using a variety of delivery  methods best suited to the
individual client with an emphasis on leveraging technology.

The Company  believes  that some  smaller  PEOs are exiting the  industry due to
increased  collateral required by providers of workers'  compensation and health
benefits  insurance.  In addition,  an increase in costs and a lack of available
workers'  compensation and health benefits insurance programs is impacting these
PEOs.


                                       6
<PAGE>
Industry Regulation

Numerous federal and state laws and regulations  relating to employment matters,
benefit plans and  employment  taxes affect the  operations  of the Company.  By
entering into a co-employer  relationship with its clients,  the Company assumes
certain  obligations  and  responsibilities  as an  employer  under  these laws.
Because many of these federal and state laws were enacted before the development
of non-traditional employment relationships,  such as PEOs, temporary employment
and other employment-related outsourcing arrangements, many of these laws do not
specifically  address the obligations and  responsibilities  of  non-traditional
employers.  In addition,  the  definition of "employer"  under these laws is not
uniform.

Some  governmental  agencies that regulate  employment have developed rules that
specifically  address issues raised by the relationship  among PEOs, clients and
worksite  employees.  Such  regulations are relatively new and,  therefore,  the
interpretation  and application of these regulations by administrative  agencies
and Federal and state courts are limited or  non-existent.  The  development  of
additional  regulations  and  interpretation  of  existing  regulations  can  be
expected  to evolve  over time.  In  addition,  from time to time,  states  have
considered,  and may in the future  consider,  imposing  certain  taxes on gross
revenues or service fees of the Company and its competitors.

The Company  believes  that its  operations  are  currently in compliance in all
material respects with applicable Federal and state statutes and regulations.

Employee Benefit Plans

The Company currently offers a 401(k) retirement plan,  designed to be "multiple
employer" plans under the Internal Revenue Code of 1986, as amended (the "Code")
Section 413(c) by way of recent acquisitions.  The plan design enables owners of
clients and highly compensated worksite employees, as well as highly compensated
internal  employees of the Company,  to participate.  Employee benefit plans are
subject  to  provisions  of both  the Code and the  Employee  Retirement  Income
Security Act ("ERISA").

In order to qualify for favorable tax treatment  under the Code,  the plans must
be established  and  maintained by an employer for the exclusive  benefit of its
employees.  Generally, an entity is an "employer" of certain workers for federal
employment tax purposes if an employment  relationship exists between the entity
and the  workers  under the  common law test of  employment.  In  addition,  the
officers of a  corporation  are deemed to be employees of that  corporation  for
federal employment tax purposes.  The common law test of employment,  as applied
by the Internal  Revenue Service ("IRS") involves an examination of many factors
to ascertain  whether an employment  relationship  exists between a worker and a
purported  employer.  Such a test is generally  applied to determine  whether an
individual is an  independent  contractor or an employee for federal  employment
tax  purposes and not to  determine  whether each of two or more  companies is a
"co-employer."  Substantial weight is typically given to the question of whether
the  purported  employer  has the right to direct and  control the details of an
individual's  work.  The courts have  provided that the common law employer test
applied to determine  the  existence of an  employer-employee  relationship  for
federal  employment  tax  purposes  can be  different  than the  common law test
applied  to  determine  employer  status  for other  federal  tax  purposes.  In
addition,  control and supervision  have been held to be less important  factors
when determining employer status for ERISA purposes.

                                       7
<PAGE>
Employee  pension and welfare  benefit plans are also  governed by ERISA.  ERISA
defines "employer" as "any person acting directly as an employer,  or indirectly
in the interest of an employer,  in relation to an employee benefit plan." ERISA
defines the term  "employee" as "any  individual  employed by an employer."  The
courts  have held that the  common  law test of  employment  must be  applied to
determine  whether an  individual  is an employee or an  independent  contractor
under ERISA.  However,  in applying that test,  control and supervision are less
important for ERISA  purposes when  determining  whether an employer has assumed
responsibility  for an  individual's  benefits  status.  A  definitive  judicial
interpretation  of  "employer"  in  the  context  of a PEO or  employee  leasing
arrangement has not been established.

Federal Employment Taxes

As an employer, the Company assumes responsibility and liability for the payment
of Federal and state employment taxes with respect to wages and salaries paid to
worksite employees.  There are essentially three types of Federal employment tax
obligations:(i)  withholding  of income tax  governed by Code Section  3401,  et
seq.;  (ii)  obligations  under the Federal Income  Contributions  Act ("FICA"),
governed by Code Section 3101, et seq.; and (iii)  obligations under the Federal
Unemployment  Tax Act ("FUTA"),  governed by Code Section  3101,  et seq.  Under
these Code  sections,  employers  have the  obligation to withhold and remit the
employer portion and, where applicable, the employee portion of these taxes.

Among other  employment  tax issues  related to whether  PEOs are  employers  of
worksite  employees are issues under the Code  provisions  applicable to Federal
employment  taxes. The issue arises as to whether the Company is responsible for
payment  of  employment  taxes  on  wages  and  salaries  paid to such  worksite
employees.  Code  Section  3401(d)(1),  which  applies  to  Federal  income  tax
withholding  requirements,  contains an exception to the general common law test
applied to determine  whether an entity is an "employer" for purposes of Federal
income tax  withholding.  The courts  have  extended  this  common law  employer
exception to apply for both FICA and FUTA tax purposes.  Code Section 3401(d)(1)
states that if the person for whom  services are rendered  does not have control
of the payment of wages,  the  "employer"  for this purpose is the person having
control of the payment of wages.  The  Treasury  Regulations  issued  under Code
Section  3401(d)(1) state that a third party can be deemed to be the employer of
workers under this Section for income tax withholding  purposes where the person
for whom  services  are rendered  does not have legal  control of the payment of
wages. Although several courts have examined Code section 3401(d)(1) with regard
to PEOs its ultimate  scope has not been  delineated.  Moreover,  the IRS has to
date relied  extensively  on the common law test of  employment  in  determining
liability   for  failure  to  comply  with   Federal   income  tax   withholding
requirements.

Accordingly,   while  the  Company  believes  it  has  assumed  the  withholding
obligations  for  worksite  employees,  should  the  Company  fail to meet these
obligations, the client may be held jointly and severally liable.

State Regulation

While many states do not explicitly regulate PEOs, twenty-six states,  including
several  states  where the  Company has  operations  (North  Carolina,  Florida,
Oklahoma,  South Carolina,  Texas, West Virginia, and Virginia) have passed laws
that have licensing,  registration or other  compliance  requirements  for PEOs.
Several additional states are considering such regulation. Regulations vary from
state to state but generally provide for monitoring the fiscal responsibility of
PEOs. The Company holds  licenses,  is registered or otherwise  compliant in the
states in which it  currently  has  operations.  The Company  plans to seek such
registration and licensing in the remaining  states in the near future.  Whether
or not a state has licensing, registration or other compliance requirements, the
Company  faces a number of other state and local  regulations  that could impact
its operations.

                                       8
<PAGE>
In  connection  with  the  safe  harbor  provisions  of the  Private  Securities
Litigation  Reform  Act of 1995  (the  "Reform  Act"),  the  Company  is  hereby
providing cautionary  statements  identifying important factors that could cause
the  Company's  actual  results to differ  materially  from those  projected  in
forward-looking  statements  (as such term is defined in the Reform Act) made by
or on behalf of the Company  herein,  in other  filings made by the Company with
the Securities and Exchange Commission,  in press releases or other writings, or
orally,  whether in  presentations,  in response to questions or otherwise.  Any
statements that express,  or involve discussions as to,  expectations,  beliefs,
plans,  objectives,  assumptions or future events or performance (often, but not
always, through the use of words or phrases such as "will result," "are expected
to,"  "anticipated,"  "plans,"  "intends,"  "will  continue,"  "estimated,"  and
"projection")  are  not  historical  facts  and  may  be  forward-looking   and,
accordingly,  such  forward-looking  statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results or performance
of the Company to be materially different from any future results or performance
expressed or implied by such forward-looking  statements. Such known and unknown
risks,  uncertainties  and other  factors  include,  but are not limited to, the
following:

 i)      volatility  of costs of workers'  compensation  insurance  coverage and
         excess premium  generated from the workers'  compensation  component of
         the  Company's  service  offering  under the Company's  loss  sensitive
         workers' compensation programs;
 ii)     volatility of state unemployment taxes;
 iii)    the uncertainties of the collateralization  required by, as well as the
         availability  and/or renewal of, the Company's  medical  benefit plans,
         general insurance and workers' compensation  insurance programs for the
         worksite employees;
 iv)     uncertainties  as to the amount the company will pay to  subsidize  the
         costs of medical benefit plans;
 v)      possible adverse  application of certain federal and state laws and the
         possible  enactment of unfavorable  laws or regulation;  vi) litigation
         and other  claims  against the Company and its clients,  including  the
         impact of such claims on the cost,  availability  and  retention of the
         Company's insurance coverage programs;
 vii)    impact of competition  from existing and new businesses  offering human
         resources outsourcing services;
 viii)   risks  associated  with  expansion  into  additional  markets where the
         Company does not have a presence or significant market penetration;
 ix)     risks  associated with the Company's  dependence on key vendors and the
         ability to obtain or renew  benefit  contracts  and  general  insurance
         policies at rates and with retention amounts acceptable to the Company;
 x)      an  unfavorable  determination  by  the  Internal  Revenue  Service  or
         Department  of  Labor  regarding  the  status  of  the  Company  as  an
         "employer";
 xi)     the  possibility  of client  attrition due to price  competition or the
         Company's  decision to increase  the price of its  services,  including
         medical benefits;
 xii)    risks associated with geographic market concentration;
 xiii)   the financial condition of clients;
 xiv)    the effect of economic conditions in the United States generally on the
         Company's  business;  xv) the  failure to  properly  manage  growth and
         successfully integrate acquired companies and operations;
 xvi)    risks associated with providing new service offerings to clients; xvii)
         the ability to secure  outside  financing  at rates  acceptable  to the
         Company;
 xviii)  risks associated with third party claims related to the acts, errors or
         omissions of the worksite employees; and
 xix)    other  factors  which are  described  in further  detail in this Annual
         Report on Form  10-KSB  and in other  filings by the  Company  with the
         Securities and Exchange Commission.

                                       9
<PAGE>
The Company cautions that the factors described above could cause actual results
or outcomes to differ  materially  from those  expressed in any  forward-looking
statements made by or on behalf of the Company.  Any  forward-looking  statement
speaks  only as of the date on which such  statement  is made,  and the  Company
undertakes no obligation to update any  forward-looking  statement or statements
to reflect  events or  circumstances  after the date on which such  statement is
made or to reflect the occurrence of  unanticipated  events.  New factors emerge
from time to time,  and it is not possible for management to predict all of such
factors. Further, management cannot assess the impact of each such factor on the
business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained in any  forward-looking
statements.

Acquisitions

In January 2005, the Company, through its wholly-owned subsidiary The Resourcing
Solutions Group, Inc.,  completed the acquisition of certain assets of Rossar HR
LLC, a Pennsylvania  limited  liability  company,  which operated under the name
"Your Staff Solutions".  Rossar HR LLC is a Professional Employment Organization
founded  in the 1987 which  specializes  in quality  human  resource  management
services for small to medium sized businesses.

In October 2004, the Company acquired PiedmontHR,  Inc., a Virginia corporation,
from Kaye  Calkins,  Secretary  and Director of the  Company,  and wife of David
Calkins.  This company was acquired in anticipation of the Company re-organizing
its subsidiary operations into a more streamlined management. PiedmiontHR is the
operating  entity which all Human Resource,  risk and safety  consulting will be
provided.  The acquisition of PiedmontHR  permits the Company to segregate Human
Resource, Risk and Safety consulting from its PEO/HRO operations.

Plan of Internal Reorganization

Management of the Company has  undertaken  an  evaluation of the  organizational
structure  of  the  Company  and  its  subsidiaries  and  has  concluded  that a
restructuring  would  be in  the  Company's  best  interests  operationally  and
financially.  With  that in mind,  management  has  recommended  that all of the
Company's   Professional   Employee  Organization  ("PEO")  activities  will  be
conducted through The Resourcing  Solutions Group, Inc.,  ("TRSG") the Company's
subsidiary.  All other non-PEO activities will be conducted through the Company.
Under the current  corporate  structure,  all PEO  businesses,  except  Benecorp
Business  Services  ("BBS"),  transact business under the TRSG subsidiary of the
Company. This structure causes the Company to have multiple filings with various
states  for PEO  licensing.  TRSG is  required  to file  various  state  mandate
documents and post indemnity bonds, up to $100,000 per state, in order to secure
its PEO  license.  In order  for BBS to  secure  its PEO  license,  it must file
essentially  duplicate documents and post similar indemnity bonds.  Furthermore,
in reviewing the market potential in the human resources  outsourcing  industry,
management  of the  Company  believes  that  significant  future  revenue can be
generated by offering insurance products and services. In order to capitalize on
this  revenue  potential  and to ensure  compliance  with the  Federal  Employee
Retirement Income Security Act of 1974, management believes that it is necessary
to segregate the insurance and risk  management  services from the PEO services.
The proposed reorganization will also streamline management reporting. This will
permit the Company to leverage its resources in its various business operations.
The proposed reorganization will not have a direct impact on shareholders of the
Company.

                                       10
<PAGE>
Effective  January 25, 2005, by written  consent of the  shareholders  holding a
majority  of the voting  power of the  Company  as  disclosed  in the  Company's
Information Statement filed with the Securities and Exchange Commission approved
(a) an  amendment to the  Company's  Articles of  Incorporation  to increase the
authorized common stock to 10 billion shares; (b) a change of corporate domicile
from Virginia to Nevada;  (c) the election of Gary  Musselman,  Joseph Amato and
Thorn  Auchter  to the board of  directors.  These new  directors  have  delayed
acceptance  of their  election  until  such  time as the  Company  has  obtained
directors and officers liability insurance.

Employees

As of March 31,  2005,  Pacel  Corp.  employed  17 persons on a full time basis.
Pacel Corp.  supplements  fulltime  employees with  subcontractors and part-time
individuals,  consistent  with workload  requirements.  The Company's  continued
success  depends  heavily  upon its  ability  to  retain  highly  qualified  and
competent personnel.

Compliance with Environmental Laws

Company  operations  do not pollute nor involve  discharge of material  into the
environment. As a result, no expenditure is budgeted or required for environment
protection or restoration.  Pacel is concerned about  protecting the environment
and participates in recycling programs.

ITEM 2. DESCRIPTION OF PROPERTY

In February  2005,  the Company  relocated its executive  offices to 7621 Little
Ave, Suite 101, Charlotte, North Carolina, 28226. The Company has a full service
lease until July 31, 2010. The Company's  telephone number is (704) 643-0676 and
its facsimile  number is (704)  643-0678.  The Company is also a party to leases
for three "key-man"  office spaces located in Coraopolis,  Pennsylvania,  Plano,
Texas, and Washington, Virginia.

ITEM 3. LEGAL PROCEEDINGS

The  Securities  and  Exchange  Commission  ("SEC")  filed an action in  Federal
District  Court  asserting  various  violations of  securities  laws against the
Company and its principal officer. The complaint alleges that Mr. Frank Custable
"orchestrated"  a "scheme" to illegally  obtain  stock from  various  companies,
including  the  Company,   through  "scam   Commission  Form  S-8   registration
statements,  forged stock  authorization  forms and at least one bogus  attorney
opinion letter arranged by Custable." The complaint  alleges that, in connection
with this alleged  "scheme,"  the Company and its CEO,  David  Calkins  violated
Section  17(a) of the  Securities  Act and  Section  10(b) and Rule 10b-5 of the
Exchange Act. The SEC asks that the Company and Calkins be permanently  enjoined
from future  violations,  ordered to pay  disgorgement  and civil  penalties and
Calkins be barred from continued service as an officer and director.  As part of
an ex parte  proceeding,  the District Court has ordered the Company and Calkins
to provide an  accounting  of their  assets  and the  transactions  that are the
subject of the complaint. Pursuant to an agreement of the parties, an accounting
of the  transactions  at issue was  provided on June 30,  2004.  The Company and
Calkins  answered the second  amended  complaint  on March 23,  2005.  Under the
current  scheduling  order fact  discovery  must be  completed by June 21, 2005.
Final  dispositive  pre-trial motion deadlines will be set by the trial judge. A
trial date has not yet been set.

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

None.

                                       11
<PAGE>
PART II

ITEM 5. MARKET FOR THE COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The  common  stock of the  Company  is  traded  on  over-the-counter  Electronic
Bulletin  Board  under the symbol  "PCLL." On  December  31, 2004 there were 199
holders of record of our common  stock.  As many such shares are held by brokers
and other  institutions  on behalf of  stockholders,  the  Company  is unable to
estimate the total number of  stockholders  represented by these record holders.
The  following  tables  set forth the high and low sales  price per share of our
common stock, for the periods  indicated.  The quotations  reflect  inter-dealer
prices,  without retail mark-up,  mark-down or commissions and may not represent
actual transactions.

The "high" and "low" bid  quotations  for the  Company's  Common  Stock for each
quarterly  period for the fiscal years ended  December 31, 2003 and December 31,
2004 were as follows:

Calendar Quarter     High Bid Price          Low Bid Price

    2003
    First                  $ 0.0057              $ 0.00023
    Second                   0.0021                0.00017
    Third                    0.0008                0.00003
    Fourth                   0.0002                0.00003

    2004
    First                    0.3700                0.03600
    Second                   0.0300                0.00200
    Third                    0.0300                0.00020
    Fourth                   0.0050                0.00020

The "high" and "low" bid  quotations  for the  Company's  Common  Stock for each
quarterly  period for the fiscal years ended  December 31, 2003 and December 31,
2004,  all of which are  adjusted  for all stock  splits  and  reverses  were as
follows:

Calendar Quarter     High Bid Price          Low Bid Price

    2003
    First            $ 1,700,000.00            $ 70,000.00
    Second               630,000.00              50,000.00
    Third                240,000.00              10,000.00
    Fourth                70,000.00              10,000.00

    2004
    First              3,700,000.00               3,600.00
    Second                  3000.00                 200.00
    Third                    400.00                   5.00
    Fourth                     5.00                   0.20

The  Company  has  paid no cash  dividends  since  its  inception.  The  Company
currently  plans to retain any future  earnings for use in its business and does
not  intend to pay cash  dividends  in the  foreseeable  future.  Holders of the
Common stock are entitled to share ratably in dividends  when and as declared by
the Board of Directors out of funds legally available therefore.

                                       12
<PAGE>
Recent Sales of Unregistered Securities

In the fiscal year ended December 31, 2004, the Company utilized its $10,000,000
equity line of credit from Compass  Capital Inc.,  Kentan Ltd, Reef Holding Ltd,
and T&B Associates, Inc. Borrowing from this equity line allows the repayment by
issuing  shares of the  Company's  stock at a discount rate of up to 50% off the
closing bid stock price. The equity line is being used to fund  acquisitions and
shortfalls  in working  capital.  During the year ended  December 31, 2004,  the
Company drew down $4,440,898 and issued 4,177,281,829 unrestricted shares of the
Company's  no par common  stock,  before  adjusting  such  shares to reflect the
effects of any stock splits occurring subsequent to issuance.  These shares were
issued  pursuant to Section  3(a)(10) of the Securities Act of 1933, as amended,
after a hearing with notice to, and an opportunity to be heard from,  interested
parties, as to the fairness of each transaction, by a state court in Florida who
specifically  determined,  prior to declaring that the transactions  were exempt
under  Section  3(a)(10),  that the  transactions  were  fair to the  interested
parties.

In 2003, in connection with the acquisition of BeneCorp Business Services, Inc.,
the acquisition of contracts from Management Resource Group California,  LLC and
other working  capital  purposes,  the Company  issued a total of  1,576,834,553
unrestricted shares of the Company's no par value common stock, before adjusting
such shares to reflect the effects of any stock splits  occurring  subsequent to
issuance.  After giving effect to the one-for-thirty  reverse split on March 17,
2003 the one-for-one hundred reverse split on February 24, 2004, the one-for-one
hundred  reverse  split on September  13,  2004,  and the  one-for-one  thousand
reverse split on February 28, 2005, such shares would be restated as 124 shares.
Such shares were issued to The Honor Hedge Fund, LLC, a Nevada limited liability
company;  Reisco Consulting,  Inc., a Nevada Corporation;  Equities First, LLC a
Delaware Limited  Liability  Company;  MRG California LLC, a California  Limited
Liability  Company;  Compass  Capital,  Inc.,  a New York  Corporation;  and T&B
Associates,  Inc., a Florida  Corporation.  These shares were issued pursuant to
Section 3(a)(10) of the Securities Act of 1933, as amended, after a hearing with
notice to, and an opportunity to be heard from,  interested  parties,  as to the
fairness  of each  transaction,  by courts in Nevada,  Illinois  and Florida who
specifically  determined,  prior to declaring that the transactions  were exempt
under  Section  3(a)(10),  that the  transactions  were  fair to the  interested
parties.

On April 25, 2003, the Company issued 120,000,000 shares of its common stock, no
par value per share,  to David and F. Kay  Calkins in exchange  for  $600,000 of
debts owed to them.  Subsequent  to the  one-for-one  hundred  split in February
2004,  the  one-for-one  hundred  reverse split on September  13, 2004,  and the
one-for-one  thousand  reverse  split on  February  28,  2005,such  shares  were
replaced  with 12 shares of the common  stock of the Company.  However,  because
they are "Affiliates" of the Company,  Mr. and Mrs. Calkins will be able to sell
such shares  only in  compliance  with Rule 144 and 145.  The shares were issued
pursuant to Section 3(a)(10) of the Securities Act of 1933, as amended,  after a
hearing with notice to, and an opportunity to be heard from, interested parties,
as to the fairness of each transaction, by courts in Nevada and Illinois.



                                       13
<PAGE>
From January 1, 2005 until March 31,  2005,  in  connection  with the funding of
working capital shortfalls,  the Company issued a total of 6,170,700,000  shares
of its common stock with the conversion value of $478,246, before adjusting such
shares to  reflect  the  effects of any stock  splits  occurring  subsequent  to
issuance.  After giving  effect to the  one-for-one  thousand  reverse  split on
February 28, 2005,  such shares would be restated as  925,950,000  shares.  Such
shares were issued to Compass  Capital,  Inc.,  a New York  Corporation;  Kentan
Limited, a Turks & Cacos Islands Corporation, and Reef Holdings Limited, a Turks
& Cacos  Islands  Corporation.  These  shares  were  issued  pursuant to Section
3(a)(10) of the Securities Act of 1933, as amended,  after a hearing with notice
to, and an opportunity to be heard from,  interested parties, as to the fairness
of each  transaction,  by a state court in Florida who specifically  determined,
prior to declaring  that the  transactions  were exempt under Section  3(a)(10),
that the transactions were fair to the interested parties.  The Company received
$600,000 of additional funding From January 1, 2005 until March 31, 2005 through
the issuance of convertible notes.

On November 30, 2004, the Company's subsidiary,  The Resourcing Solutions Group,
Inc., issued its 8% Convertible  Redeemable  Debentures due November 30, 2005 in
the aggregate  principal  amount of $100,000.  The debentures  were purchased by
OHHN Holdings, LLC and Hatov Holdings,  LLC. The debentures were issued pursuant
to the exemption from registration  under the Securities Act of 1933 provided by
Regulation D Rule 504. As collateral for the debenture, The Resourcing Solutions
Group, Inc. placed 1,000,000,000 shares in escrow. If the debenture is converted
for stock, the price value of the Resourcing Solutions Group, Inc. stock will be
diluted by the amount of shares  necessary  to repay the  $100,000.00  principle
plus any outstanding interest.

Option Grants

None.

Issuances of Stock for Services or in Satisfaction of Obligations

None

ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

You should read the following  discussion in conjunction  with our  Consolidated
Financial Statements and related Notes included elsewhere in this annual report.
Historical results are not necessarily indicative of trends in operating results
for any future period.

Year Ended December 31, 2004 Compared to Year Ended December 31, 2003

Revenue for the year ended December 31, 2004 was $3,997,522  compared to revenue
of $3,840,586 for the year ended December 31, 2003. The difference is attributed
to the  comparison of twelve  months of PEO revenue for the year ended  December
31, 2004 to nine months of the PEO revenue  recorded from the Benecorp  Business
Services  acquisition  and eight  months of the PEO  revenue  recorded  from the
Asmara  acquisition  during  the year  ended  December  31,  2003.  The  Company
generates it revenue from services relating to work site employees. During 2004,
the Company experienced a decrease in the number of work site employees (WSE) it
provided PEO services  to. The average  monthly WSE for the year ended  December
31,  2004  decreased  from 988 to 742 when  compared to the average WSE from the
year ended  December  31,  2003.  These  losses were  primarily  in  blue-collar
industries.  The Company  has been  heavily  marketing  its  services  and Human
Resources  Information  Systems  to  national  chains,  white-collar,  and light
industrial clients.  The Company expects white-collar and national chain clients
to replace its expected loss in blue-collar clients.

                                       14
<PAGE>
We account  for our  revenues  in  accordance  with  Emerging  Issues Task Force
("EITF") 99-19,  Reporting Revenues Gross as a Principal Versus Net as an Agent.
Our revenues are derived from our billings, which are based on:

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

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

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

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

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

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

Due to the  significance  of the amounts  included in billings to the  Company's
clients  and its  corresponding  revenue  recognition  methods,  the Company has
provided the following  reconciliation of billings to revenue for the year ended
December 31, 2004 and December 31, 2003.


                                                    Year ended     Year ended
                                                   December 31,   December 31,
                                                       2004           2003

 Reconciliation of billings to revenue recognized:
          Billings to clients                     $ 26,384,025    $ 25,437,118
          Less - Gross wages billed to clients     (22,386,503)    (21,597,214)
                                                  -------------   -------------

          Revenue from PEO services               $  3,997,522    $  3,839,904
          Other miscellaneous revenue                       -0-            682
                                                  -------------   -------------

          Total revenue as reported               $  3,997,522    $  3,840,586
                                                  =============   =============


                                       15
<PAGE>
Cost of services for the year ended  December 31, 2004  increased  approximately
$364,600 to $3,350,105  compared to cost of services of $2,985,530  for the year
ended  December 31, 2003 and is related  directly to the delivery of services to
its PEO clients. This increase is the result of having twelve months of PEO cost
of services in the year ended  December 31, 2004 when compared to nine months of
PEO cost of services from the Benecorp  acquisition and eight months of PEO cost
of services from the Asmara  acquisition  in 2003.  Also,  the Company  recorded
$154,300 in cost of services during the fourth quarter of 2004 for unpaid client
payroll taxes from years prior to and relating to the Benecorp acquisition.

General & administrative  expenses,  including salaries and wages,  increased to
$2,864,097 for the year ended  December 31, 2004,  compared to $2,625,343 in the
corresponding  period of 2003.  Acquisitions  completed in the second quarter of
2003, in conjunction with the Company's entry into the HRO market, accounted for
the majority of the increase in 2004.

Sales and Marketing  expenses  increased to $495,025 for the year ended December
31, 2004,  compared to $440,075 in the  corresponding  period of 2003. The sales
approach in prior years was to employ salespeople to actively find potential PEO
clients primarily in blue-collar industries. During the second and third quarter
of 2004, the Company  redesigned all marketing  literature and hired a new sales
force.  During the fourth quarter of 2004,  the Company  updated its website and
implemented a new Human Resource  Information System to target  white-collar and
light industrial  clients where the Company believes it can be successful.  This
complete  restructuring of the Company's sales and marketing  function completed
in the fourth  quarter of 2004 is  expected  to realize an increase in work site
employees beginning in the second quarter of 2005.

Depreciation expenses increased to $53,734 for the year ended December 31, 2004,
compared  to $25,438  for the  corresponding  period of 2003.  Such  increase is
related to the Company's  acquisition of its Human Resource  Information  System
and other technology equipment used for its operations.

Loss on write-down of loan  receivables  was -0- for the year ended December 31,
2004  compared to $717,500 for the year ended  December  31,  2003.  The loss in
December 31, 2003  consisted of $575,000  from the MRG  acquisition  and various
other receivables deemed uncollectible.

Interest expense is interest paid and accrued on the Convertible  Notes,  unpaid
payroll taxes,  Notes payable,  bank  financing,  and capital  leases.  Interest
expense  amounted to $402,565 for the year ended  December 31, 2004  compared to
$410,718 for the same period of 2003.


Item 6.  Management's Discussion and Analysis of Financial Condition and
Results of Operations.

Finance  expense for the year ended  December 31, 2004  increased  approximately
$1,345,000  to $1,930,761  compared to finance  expense of $585,905 for the year
ended  December 31, 2003.  The  increase  was the result of  additional  funding
requirements  for  administrative  and operational  needs.  The Company recorded
imbedded  interest in conjunction  with the issuance of  convertible  debentures
during the period assuming conversion of such debt was available on an immediate
basis and has incurred fees associated with accessing its lines of credit.

                                       16
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Cash and cash  equivalents  at December  31,  2004  decreased  to $117,052  from
$682,400  at December  31,  2003.  Net cash used for  operating  activities  was
$4,150,530 during the year ended December 31, 2004 compared to $3,592,727 in the
corresponding  period  of  2003.  The  increase  in the cash  used in  operating
activities is mainly  attributable to billed and unbilled  accounts  receivable,
deposits,  prepaid  expenses,  settlement and repayment of outstanding  accounts
payable, accrued expenses-director,  payroll related liabilities, recognition of
revenue  previously  deferred,  assumed  liabilities,  offset  by  decreases  in
operating loss for the year ended December 31, 2004,  embedded  interest,  other
receivables,  client deposits,  accrued expenses, and accrued work site employee
costs.

Net cash used for investing  activities for the year ended December 31, 2004 was
$1,017,220.  The cash used in investing  activities is  attributable to computer
equipment and software purchased for the Company's  business  information system
implementation  as well as an investment in four CD's (certificate of deposits).
These CD's were used to secure  Letters of Credit for its payroll ACH (automated
clearing house) exposure,  one of the Company's workers  compensation  insurance
policy,  and two state PEO  licenses.  This  compares  to net cash  provided  by
investing activities for the year ended December 31, 2003 of $38,052. During the
second quarter of 2003, the Company utilized $105,000 of cash in the acquisition
of the Asmara and NCS operating  units and acquired  $160,744 in the acquisition
of Benecorp Business Services.

Net cash provided by financing  activities  in the year ended  December 31, 2004
was  $4,602,402  compared  to  $4,228,696  in  the  corresponding  period  ended
September 30, 2003. The cash provided during both periods is directly related to
the Company's execution and utilization of three equity-based lines of credit.

In  August  2003,  the  Company  entered  into  an  equity  line of  credit  for
$10,000,000  from Compass  Capital  Inc.,  Kentan Ltd, Reef Holding Ltd, and T&B
Associates, Inc. Borrowing from this equity line allows the repayment by issuing
shares of the Company's stock at a discount rate of up to 50%. The line is being
used to fund  acquisitions  and shortfalls in working  capital.  During the year
ended  December  31,  2004,   the  Company  drew  down   $4,440,898  and  issued
4,177,281,829  unrestricted  shares of the Company's no par common stock, before
adjusting  such  shares to reflect  the  effects of any stock  splits  occurring
subsequent to issuance.  After giving effect to the one-for-one  hundred reverse
split on February 24, 2004, the  one-for-one  hundred reverse split on September
13,  2004,  and the  one-for-one  thousand  reverse  split on February 28, 2005,
1,994,500  shares were issued in conjunction  with this equity line. The balance
remaining  on this equity line of credit at April 12, 2005 was  $2,584,100.  The
lenders are not obligated to fund the  remaining  balance on this equity line of
credit and may  discontinue  funding the Company at any time without any further
obligation.

On November 30, 2004, the Company's subsidiary,  The Resourcing Solutions Group,
Inc., issued its 8% Convertible  Redeemable  Debentures due November 30, 2005 in
the aggregate  principal  amount of $100,000.  The debentures  were purchased by
OHHN Holdings, LLC and Hatov Holdings,  LLC. The debentures were issued pursuant
to the exemption from registration  under the Securities Act of 1933 provided by
Regulation D Rule 504. This debenture is included in convertible  notes payable.
As collateral for the debenture,  The Resourcing  Solutions  Group,  Inc. placed
1,000,000,000  shares in escrow.  Based on the price of The Resourcing Solutions
Group,  Inc. stock when the debenture was secured,  the collateral was valued at
100 times the amount of the debenture.  If the debenture is converted for stock,
the Company's  percentage of ownership in The Resourcing  Solutions Group,  Inc.
will be substantially  reduced. The Company can not determine the dilution since
there is an inverse  relationship of the number of shares issued to the value of
the shares necessary to repay the debenture.

                                       17
<PAGE>
In September 2004, The Company entered into a ten year employment  contract with
Gary A. Musselman.  Compensation  will include an annual base salary of $168,000
and an incentive bonus plan based on the EBITDA (earnings before interest,  tax,
depreciation and  amortization).  The agreement also includes severance payments
upon  termination of employment.  Mr. Musselman will hold the title of President
and Chief Executive Officer.

In September 2004, The Company entered into a ten year employment  contract with
David E. Calkins.  Compensation  will include an annual base salary of $300,000,
an incentive  bonus plan based on the EBITDA  (earnings  before  interest,  tax,
depreciation and  amortization),  and the funding of a Variable Flexible Premium
Universal  Life Policy.  The  agreement  also includes  severance  payments upon
termination  of  employment.  Mr. Calkins will hold the title of Chairman of the
Board of Directors.

The Company's cash  requirements  for funding its  administrative  and operating
needs continue to greatly exceed its cash flows generated from operations.  Such
shortfalls  and other  capital  needs  continue to be satisfied  through  equity
financing and convertible notes payable, until additional funds can be generated
through acquisitions and organic business growth. The liabilities of the Company
consist of over-extended accounts payable, payroll taxes, and interest expense.

As part of its goal to bring the Company to  profitability  and less  reliant on
equity financing for ongoing operations, the Company has developed an aggressive
marketing  strategy as well as an investment to  significantly  upgrade its HRIS
(Human  Resource  Information  System)  capabilities  to service its current and
prospective  clients.  The  Company  has  engaged  Lincoln  Consulting,  LLC,  a
strategic  marketing  firm, to develop and launch an aggressive  and  innovative
marketing and sales plan.  This plan includes hiring and training the sales team
as well as  marketing  the  Company's  services  through  networks  of  national
associations and chains.  The Company has also engaged Thinkware  Corporation to
implement  its new HRIS  system.  This  system will  provide  the  Company  with
"state-of-the-art" human resource data necessary to service the growing needs of
small to mid-size clients as well as automate the Company's internal  processes.
The HRIS system was fully operational at January 1, 2005.

A strategic  analysis of the overall Human Resource  Outsourcing market occurred
in 2004 with the goal of  developing a  comprehensive  market study that focused
the  Company  on the  areas  in which  the  Company  could  achieve  success  in
penetrating.  As a result of this study, the Company  identified a major segment
of the overall  business  community  that had unique human resource and employer
liability  risks.  At the  request of a national  trade  association  within the
business  segment the Company was asked to develop a plan to address three major
areas of concern -  workers'  compensation  insurance,  employee  retention  and
employee  benefits.  The Company entered into a Memorandum of Understanding with
the trade  association  in November 2004 and February 2005 that  recognized  the
Company as the sponsored organization to which association members should engage
to address the areas of concern. The Company created a comprehensive  program to
address the issues and expanded the program to the much broader economic sector.
The Company  believes  revenue will be generated  from this program  during late
second  quarter 2005. The Company will generate  revenue from multiple  vertical
markets.

The market  analysis  concluded that separating the Company's  overall  products
into multiple  offerings would achieve greater success in penetrating larger and
more diverse prospects.  The Company implemented the strategy in the 4th quarter
of 2004 and expects  significant  results  during  2005.  As of March 2005,  the
Company efforts have resulted in a significant increase in customer prospects.

The Company  believes these revised and aggressive  sales efforts will bring the
Company profitable on a monthly basis during 2005.

                                       18
<PAGE>
The  Company  relies on equity  financing  to fund its  ongoing  operations  and
investing activities.  The Company expects to continue its investing activities,
including expenditures for acquisitions,  sales and marketing initiatives,  HRIS
(Human Resource Information System), and administrative support. The loss of its
current equity financing would seriously hinder the Company's ability to execute
its business strategy and impair its ability to continue as a going concern.

In February and  September  2004,  the Company  effected a  one-for-one  hundred
reverse  stock split and in February  2005,  the Company  effected a one-for-one
thousand  reverse stock split  restating the number of common shares at December
31, 2003 from  1,675,736,763  to 167. All references to average number of shares
outstanding and prices per share have been restated retroactively to reflect the
split.

Forward Looking Statements

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

This Form 10-KSB includes forward-looking statements relating to the business of
the Company.  Forward-looking statements contained herein or in other statements
made by the  Company  are made based on  management's  expectations  and beliefs
concerning  future events impacting the Company and are subject to uncertainties
and factors relating to the Company's operations and business  environment,  all
of which are  difficult  to predict  and many of which are beyond the control of
the Company, that could cause actual results of the Company to differ materially
from those matters expressed in or implied by  forward-looking  statements.  The
Company  believes that the  following  factors,  among others,  could affect its
future  performance and cause actual results of the Company to differ materially
from those expressed in or implied by  forward-looking  statements made by or on
behalf of the Company: (a) the effect of technological changes; (b) increases in
or unexpected losses; (c) increased  competition;  (d) fluctuations in the costs
to operate  the  business;  (e)  uninsurable  risks;  and (f)  general  economic
conditions.

ITEM 7. FINANCIAL STATEMENTS

The  Financial  Statements  are  listed  at  "Index  to  Consolidated  Financial
Statements".

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

There were no disputes or disagreements of any nature between the Company or its
management  and its public  auditors with respect to any aspect of accounting or
financial disclosure.

ITEM 8A.  CONTROLS AND PROCEDURES

As required by Rule 13a-15 under the Exchange Act,  within the ninety days prior
to the filing date of this report,  the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's  disclosure  controls
and  procedures.  This evaluation was carried out under the supervision and with
the participation of Company's management, including the Company's President and
Chief Executive  Officer and the Company's Chief Financial  Officer.  Based upon
that  evaluation,  the Company's  President and Chief Executive  Officer and the
Company's  Chief  Financial  Officer  concluded  that the  Company's  disclosure
controls and procedures are effective. There have been no significant changes in
the Company's  internal controls  subsequent to the date the Company carried out
its evaluation.

                                       19
<PAGE>
Disclosure  controls and procedures are controls and other  procedures  that are
designed to ensure that information  required to be disclosed in Company reports
filed or submitted under the Exchange Act is recorded, processed, summarized and
reporting,  within the time  periods  specified in the  Securities  and Exchange
Commission's  rules and  forms.  Disclosure  controls  and  procedures  include,
without limitation,  controls and procedures designed to ensure that information
required to be  disclosed  in Company  reports  filed under the  Exchange Act is
accumulated  and  communicated  to  management,  including the  Company's  Chief
Executive Officer and Chief Financial Officer,  as appropriate,  to allow timely
decisions regarding required disclosure.

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

Directors, Executive Officers, Promoters and Control Persons

a) Set forth below are the names, age, positions,  with the Company and business
experiences of the executive officers and directors of the Company.

Name               Age    Position(s) with Company
-----------------  ----   ----------------------------------
David E. Calkins   61     Chairman of the Board, Director
F. Kay Calkins     46     Secretary, Director
Gary A. Musselman  49     President and Chief Executive Officer, Chief Financial
                          Officer

All  directors  hold  office  until the next  annual  meeting  of the  Company's
shareholders and until their successors have been elected and qualify.  Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary  to  perform  their  responsibilities  as  executive  officers  and/or
directors of the Company.

Family Relationships

David E. Calkins and F. Kay Calkins are husband and wife.

Business Experience

David E. Calkins, Chairman, Director

David E. Calkins founded PACEL in 1994 and is a member and Chairman of the Board
of Directors. Mr. Calkins also served as President,  Chief Executive Officer and
Chief  Financial  Officer of the Company until  December  2003.  From 1992 until
founding  PACEL,  Mr.  Calkins was the  Regional  Manager of three  divisions of
Pacific Nuclear Corporation ("PRC"), now known as Vectra Technologies,  Inc., an
engineering and information services company,  listed and traded on NASDAQ Stock
Market.  Vectra  Technologies  provides power plant  modifications,  maintenance
support and nuclear fuel  handling to utility  companies  and the United  States
Department of Energy.  From 1987 to 1993, Mr. Calkins served as Project Manager,
Program Director, Vice President of Operations, and Executive Vice President for
Business Development for PRC. Mr. Calkins served from 1981 to 1986 as Manager of
Engineering  and  Construction  for  the  Zack  Company,  a  Chicago,   Illinois
mechanical contractor to the utility industry. Mr. Calkins was also a Manager of
Quality  Engineering and Startup Engineer for  Westinghouse.  From 1972 to 1981,
Mr. Calkins served as an Executive  Engineer and Consultant for NUS Corporation,
a consulting firm for domestic and  international  utilities,  The United States
Nuclear  Regulatory  Commission and Department of Energy. Mr. Calkins resides in
Virginia and is the spouse of F. Kay Calkins.

                                       20
<PAGE>
F. Kay Calkins, Secretary, Director

F. Kay Calkins currently serves as Secretary and Director of the Company.  Prior
to the fourth  quarter of 2003,  she served as  President  of  EBStor.com,  Inc.
("EBStor"), an Internet and web development company, until that operation ceased
activities  in the fourth  quarter of 2003.  In her capacity as  President,  Ms.
Calkins was  responsible  for oversight of all  operations  of the Company.  Ms.
Calkins is experienced  in the  management of technology  companies and utilized
that experience in the start-up and growth of EBStor. Prior to her position with
EBStor,  Ms.  Calkins was Vice  President and Chief  Operating  Officer of PACEL
Corp.,  where she oversaw the  day-to-day  operations of the Company and managed
the development and deployment of software systems. Ms. Calkins has over fifteen
years of  experience  in  technology-related  companies.  Before  accepting  the
positions with PACEL Ms. Calkins was President of CMC Services,  a marketing and
consulting firm based in Virginia. Ms. Calkins resides in Virginia.

Gary A. Musselman

Mr.  Musselman  was elected as President and Chief  Executive  Officer and Chief
Financial  Officer of the Company in April 2004.  Prior to joining  Pacel Corp.,
Mr.  Musselman  served as the Chief Financial  Officer of Grace Global,  LLC, an
international media company operating within the Untied Stated and three foreign
locations. Mr. Musselman was responsible for due diligence for several companies
being  considered  for  acquisition  as well as overseeing  the  integration  of
companies that were acquired.  From 2000 to 2002, Mr. Musselman was the managing
Partner for Stratford Financial Resources,  LLC, business development consulting
firm  specializing  in  commercial  finance,  human  resources  and  mergers and
acquisitions.  From  1993 to  2000,  Mr.  Musselman  founded  and was the  Chief
Executive  Officer  of ECS  Financial  Management  Services,  LLC,  a  financial
management company specializing in account receivable management.  Mr. Musselman
resides in North Carolina.

Section 16(a) Beneficial Ownership Reporting Compliance

The Company's President and Chief Executive Officer,  Gary Musselman,  failed to
file a  report  on Form 3 upon his  appointment  in April  2004  disclosing  his
initial  beneficial  ownership of the Company's  securities.  Mr. Musselman will
file an appropriate Form 5. Upon Mr. Musselman's  appointment in April 2004, and
at this time, Mr. Musselman does not hold any of the Company's securities.

Code of Ethics

Effective  March 22, 2005,  the Board of Directors  adopted a Code of Ethics for
Senior  Financial  Officers.  The Code of Ethics  was  adopted  pursuant  to the
requirements of the  Sarbanes-Oxley Act of 2002 and the rules and regulations of
the Securities and Exchange Commission thereunder.  A copy of the Code of Ethics
will be made available upon request at no charge. Requests should be directed in
writing to the Company at7621 Little Ave. Suite 101, Charlotte, NC 28226.

                                       21
<PAGE>
ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS

Executive Compensation
<TABLE>
<CAPTION>
                              Annual      Annual     Annual          LT Comp           LT
                                Comp        Comp       Comp             Rest         Comp       LTIP
Name and Post          Year   Salary       Bonus      Other            Stock      Options    Payouts

<S>                    <C>   <C>     <C> <C>        <C>              <C>          <C>        <C>
David E. Calkins,      2002  175,000 [1]       0          0               12 [2]        0          0
Chairman of the Board  2003  127,497 [3]       0    120,609 [3],[5]        0            0          0
                       2004  240,049 [3]       0    379,370 [3],[5]        0            0          0

Gary A. Musselman,     2002        0           0          0
President and CEO, CFO 2003        0           0          0
                       2004  118,255 [4]       0     40,999 [6]            0            0          0

William R. Bellamy     2002        0           0          0
Former President & CEO 2003   98,077 [7]  49,545      6,423   [5]
                       2004   57,115 [7]  17,308      3,609   [5]

Timothy L. Maness      2002        0           0          0
Former CFO             2003   77,499 [8]  10,840      4,469   [5]
                       2004   54,879 [8]       0      2,384   [5]
</TABLE>

[1] - Annual salary accrued on books, but not paid to Mr. Calkins.

[2] - Pursuant to a 3 (a) (10) filing, the Company issued 120,000,000 shares of
      the common stock of the Company to David E. and F. Kay Calkins to repay a
      loan made to the Company. The issuance has been restated for the February
      2004, one-for-one hundred reverse split, the September 2004, one-for-one
      hundred reverse split, and February 2005 one-for-one thousand reverse
      split.

[3] - Mr. Calkins is currently compensated at an annual salary of $300,000. In
      addition to his regular salary, Mr. Calkins also received other
      compensation of $116,667 (2003)and $184,408 (2004) in payment of prior
      years' salaries that had been previously accrued on the books of the
      Company.

[4] - Mr. Musselman became an employee of the Company on April 7, 2004 and is
      currently compensated at an annual salary of $168,000.

[5] - Other annual compensation includes payments made on behalf on employees
      for health, life and dental benefits and a variable flexible premium
      universal life policy (183,333).

[6] - Other annual compensation includes payments made on behalf
      on employees for health, life and dental benefits, wages paid to Mr.
      Musselman's spouse as an employee of the Company, as well as payments made
      for services performed by a company owned by Mrs. Musselman.

[7] - Mr. Bellamy became an employee of the Company on April 26, 2003 in
      conjunction with the acquisition of substantially all the assets of
      Asmara, Inc. On December 22, 2003, Mr. Bellamy was elected as President &
      CEO of the Company. Mr. Bellamy was terminated in April 2004.

[8] - Mr. Maness became an employee of the Company on April 26, 2003 in
      conjunction with the acquisition of substantially all assets of Asmara,
      Inc. On December 22, 2003, Mr. Bellamy was elected as Chief Financial
      Officer of the Company. Mr. Maness resigned in April 2004.

                                       22
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain  information  concerning the ownership of
the  Company's  Common Stock as of December 31, 2004,  with respect to: (i) each
person known to the Company to be the beneficial owner of more than five percent
of the  Company's  Common Stock;  (ii) all  directors;  and (iii)  directors and
executive  officers of the Company as a group.  To the knowledge of the Company,
each  shareholder  listed below possesses sole voting and investment  power with
respect to the shares indicated.
<TABLE>
<CAPTION>

TITLE OF         NAME AND ADDRESS OF                      AMOUNT AND NATURE OF          PERCENT
CLASS            BENEFICIAL OWNER                         BENEFICIAL OWNERSHIP          OF CLASS
------------     -----------------------------------   --------------------------   ---------------
<S>              <C>                                       <C>                       <C>
Common Stock     Gary Musselman                                -0-                       -0-
                 7621 Little Ave Suite 101
                 Charlotte, NC 28226

Common Stock     David Calkins                                  6                      less than 1%
                 7621 Little Ave Suite 101
                 Charlotte, NC 28226

                 F. Kay Calkins                                 6                      less than 1%
Common Stock     7621 Little Ave Suite 101
                 Charlotte, NC 28226

------------     ------------------------------------   --------------------------   ---------------
Common Stock     All Executive Officers and Directors          12                      less than 1%
                 as a Group ( 3 persons)
------------      -----------------------------------   --------------------------   ---------------
</TABLE>


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In May 2004, Kaye Calkins,  Director,  and wife of David Calkins formed Piedmont
HR Inc. The purpose of Piedmont HR Inc is to provide  Human  Resources  and Risk
Management consulting services. In September 2004, the Company acquired Piedmont
HR for the sum of the set-up costs of approximately $20,000.

In September 2004, the Company entered into a ten year employment  contract with
Gary A. Musselman.  Compensation  will include an annual base salary of $168,000
and an incentive bonus plan based on the EBITDA (earnings before interest,  tax,
depreciation and  amortization).  The agreement also includes severance payments
upon  termination of employment.  Mr. Musselman holds the title of President and
Chief Executive Officer and Chief Financial Officer.

In September 2004, the Company entered into a ten year employment  contract with
David E. Calkins.  Compensation  will include an annual base salary of $300,000,
an incentive  bonus plan based on the EBITDA  (earnings  before  interest,  tax,
depreciation and  amortization),  and the funding of a Variable Flexible Premium
Universal Life Policy which is a vehicle to fund a deferred  compensation  plan.
The agreement also includes  severance  payments upon termination of employment.
Mr. Calkins holds the title of Chairman of the Board of Directors.


                                       23
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBIT No.           DESCRIPTION
-----------     -----------------------
                      PLAN OF REORGANIZATION

2.1             *     Articles and Agreement of Merger dated January 17, 2005

                      ARTICLES OF INCORPORATION AND BY-LAWS

3(i)            *     Articles of Incorporation dated March 13, 2003

3(ii)           *     Certificate of Amendment dated January 18,2005

3(iii)                Bylaws

21                    Subsidiaries

                      Certifications

31                    Rule 15d-14(a) certification of Gary Musselman

32                    Section 1350 certification of Gary Musselman

*  Incorporated herein by reference from filings previously made by the Company


































                                       24
<PAGE>
ITEM 14.  Principal Accountant Fees and Services:

The  following  table sets forth fees  billed to us by our  auditors  during the
fiscal  years ended  December  31, 2004 and  December  31, 2003 for (i) services
rendered for the audit of our annual financial  statements and the review of our
quarterly financial statement,  (ii) services by our auditor that are reasonably
related to the  performance  of the audit or review of our financial  statements
and are not reported as Audit Fees,  (iii) services  rendered in connection with
tax  compliance,  tax  advice  and tax  planning,  and (iv) all  other  fees for
services rendered.

                                                    December 31,
                                                2004             2003
                                            ----------       ----------
        (i) Audit Fees                      $  87,600        $  70,875
        (ii) Audit Related Fees                    -0-              -0-
        (iii) Tax Fees                          6,500            6,500
        (iv) All Other Fees                        -0-              -0-
                                            ----------       ----------
        Total Fees                          $  94,100        $  77,375
                                            ==========       ==========

AUDIT FEES.  Consist of Fees billed for professional  services  rendered for the
audit of Pacel  Corp's  consolidated  financial  statements  and  review  of the
interim  consolidated  financial  statements  included in quarterly  reports and
services  that are normally  provided by Peter C. Cosmas Co. CPAs in  connection
with statutory and regulatory filings or engagements.

AUDIT-RELATED  FEES.  Consists of fees billed for assurance and related services
that are reasonably  related to the  performance of the audit or review of Pacel
Corp's  consolidated  financial  statements  and are not  reported  under "Audit
Fees." There were no Audit-Related services provided in fiscal 2004 or 2003.

TAX FEES. Consists of fees billed for professional  services for tax compliance,
tax advice, and tax planning.

ALL OTHER  FEES.  Consists  of fees for  products  and  services  other than the
services reported above. There were no management  consulting  services provided
in fiscal 2004 or 2003.


                                       25


<PAGE>
INDEX TO FINANCIAL STATEMENTS

Auditor's Report...........................................................F-2

Balance Sheets as of December 31, 2004 and 2003............................F-3

Statement of Operations for the years ended December 31, 2004 and 2003.....F-5

Statement of Changes in Stockholder's Equity for the years ended
        December 31, 2004 and 2003.........................................F-6

Statement of Cash Flows for the years ended December 31, 2004 and 2003.....F-7

Notes to Financial Statements..............................................F-9

<PAGE>
             Report of Independent Registered Public Accounting Firm



         To The Board of Directors and Shareholders of
         Pacel Corp.



         We have audited the accompanying  consolidated  balance sheets of Pacel
  Corp.  and its  subsidiaries  as of December 31, 2004 and 2003 and the related
  consolidated  statements of operations,  stockholders'  equity (deficit),  and
  cash flows for the years then ended. These consolidated  financial  statements
  are the responsibility of the Company's  management.  Our responsibility is to
  express an opinion on these  consolidated  financial  statements  based on our
  audits.


         We conducted our audits in accordance  with the standards of the Public
  Company  Accounting  Oversight Board (United States).  Those standards require
  that we plan and  perform  the  audits to obtain  reasonable  assurance  about
  whether  the  financial  statements  are free of  material  misstatement.  The
  Company is not required to have,  nor were we engaged to perform,  an audit of
  its  internal   control  over   financial   reporting.   Our  audit   included
  consideration  of internal  control  over  financial  reporting as a basis for
  designing audit procedures that are appropriate in the circumstances,  but not
  for the purpose of expressing an opinion on the effectiveness of the Company's
  internal  control over financial  reporting.  Accordingly,  we express no such
  opinion. 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 made by
  management,  and  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 consolidated financial statements referred to above
  present  fairly,  in all material  respects,  the financial  position of Pacel
  Corp.  and  subsidiaries  as of December 31, 2004 and 2003, and the results of
  their  operations  and their cash flows for the years then ended in conformity
  with accounting principles generally accepted in the United States of America.


         The accompanying  consolidated  financial statements have been prepared
  assuming  that Pacel Corp will  continue as a going  concern.  As discussed in
  Note1(c) to the financial  statements,  the Company has generated  significant
  losses and requires additional working capital to continue  operations.  These
  conditions  raise  substantial  doubt about its ability to continue as a going
  concern.  Management's  plans in  regard  to  these  matters  are  more  fully
  described in Note 1(c). The consolidated  financial  statements do not include
  any adjustments that might result from the outcome of this uncertainty.









Peter C. Cosmas Co., CPAs

370 Lexington Ave.
New York, NY 10017
March 18, 2005
(March 31, 2005 as to Note 10B)

                                       F-2
<PAGE>
<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                                                December 31,    December 31,
                                                                    2004            2003
                                                                    ----            ----
                                     ASSETS

<S>                                                            <C>               <C>
Current assets:
       Cash                                                    $    117,052      $    682,400
       Client deposits and advance payments                         826,598         1,100,000
       Accounts receivable                                          230,469            70,384
       Accounts receivable-Unbilled                                 310,845                -0-
       Prepaid expenses                                             110,408            44,326
       Workers compensation insurance deposits                      139,089           132,851
       Restricted Cash                                              913,009                -0-
                                                               -------------     -------------

                Total current assets                              2,647,470         2,029,961
                                                               -------------     -------------
Property and equipment, net of accumulated depreciation of
       $70,436 and $153,578 respectively                            147,831            97,355
                                                               -------------     -------------
Other assets:
       Other receivables                                                 -0-            7,902
       Retirement Plan-Director                                     154,772                -0-
       Goodwill                                                   1,075,432         1,075,432
       Security deposits                                             15,182             9,366
                                                               -------------     -------------

                Total other assets                                1,245,386         1,092,700
                                                               -------------     -------------

                Total assets                                   $  4,040,687      $  3,220,016
                                                               =============     =============



















            See accompanying notes to the consolidlidated statements.
                                       F-3

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                                                                December 31,    December 31,
                                                                    2004            2003
                                                                    ----            ----
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
       Accounts payable                                        $    242,210      $    449,426
       Payroll and payroll related liabilities                    2,511,224         2,591,675
       Accrued work site employee payroll expenses                  300,391                -0-
       Accrued expenses                                           1,330,456         1,050,915
       Accrued expenses - officers                                       -0-          251,583
       Assumed liabilities                                          493,133         1,116,381
       Client deposits and advance payments                         826,598         1,100,000
       Short term payables                                        2,158,251           552,726
       Income taxes payable                                              -0-            2,532
                                                               -------------     -------------

                Total current liabilities                         7,862,263         7,115,238

Long-term liabilities:
       Deferred compensation-Director payable                       154,772                -0-
                                                               -------------     -------------

                Total liabilities                                 8,017,035         7,115,238

Stockholders' equity (deficit):
       Preferred stock, .001 par value, no liquidation value,
                5,000,000 shares authorized, 1,000,000 shares
                of 1997 Class A convertible preferred stock           1,000             1,000
       Common stock, .001 par value, 10,000,000,000 shares
                 authorized, 1,773,001 and 167 shares
                 issued respectively                                  1,773                 1
       Additional paid-in capital                                22,401,562        17,510,696
       Less:  Stock subscription receivable                              -0-         (125,000)
       Cumulative currency translation adjustment                   (18,720)          (18,720)
       Accumulated deficit                                      (26,361,963)      (21,263,199)
                                                               -------------     -------------

                Total stockholders' (deficit)                    (3,976,348)       (3,895,222)
                                                               -------------     -------------

                Total liabilities and stockholders' deficit    $  4,040,687      $  3,220,016
                                                               =============     =============
</TABLE>












        See accompanying notes to the consolidated financial statements.
                                       F-4
<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations


                                                           Year ended
                                                          December 31,
                                                     2004             2003

Revenue                                         $  3,997,522      $  3,840,586
Cost of sales                                      3,350,105         2,985,530
                                                -------------     -------------
       Gross profit                                  647,417           855,056

Operating costs and expenses:
       General and Administrative                  2,864,097         2,625,343
       Sales and Marketing                           495,025           440,075
       Depreciation and amortization                  53,734            25,438
       Loss on impairment of goodwill                     -0-        2,912,627
                                                -------------     -------------
                Total operating expenses           3,412,856         6,003,483
                                                -------------     -------------

Net operating loss before other expenses          (2,765,439)       (5,148,427)
                                                -------------     -------------
Other Expenses:
       Interest expense                              402,564           410,718
       Financing costs                             1,930,761           585,905
       Loss on write-down of loan receivables             -0-          717,500
                                                -------------     -------------
                Total other expenses               2,333,325         1,714,123
                                                -------------     -------------

Net Loss                                        $ (5,098,764)     $ (6,862,550)
                                                =============     =============

Net loss per common and common equivalent share:
       Basic                                    $    (21.81)      $(163,394.05)
       Diluted                                  $    (21.81)      $(163,394.05)

Weighted average shares outstanding:
       Basic                                         233,817                42
       Diluted                                       233,817                42

















        See accompanying notes to the consolidated financial statements.
                                       F-5
<PAGE>
<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
               Consolidated Statements of Stockholders' (Deficit)
               For the Two Years Ended December 31, 2004 and 2003


                                                                             Additional                  Currency        Total
                                   Preferred Stock       Common Stock     Paid-in capital               Translation   Stockholders
                                   Shares    Amount    Shares[1]   Amount      Amount      (Deficit)     Adjustment      Deficit
                                 ---------   ------    ---------   -------  -----------  -------------    ---------   ------------
<S>                              <C>         <C>       <C>         <C>      <C>          <C>              <C>         <C>
Balance, December 31, 2002       1,000,000   $1,000            2   $     1  $10,695,839  $(14,400,649)    $(18,720)   $(3,722,529)

Issuance of common stock,
  in connection with convertible
  notes payable                                               26         0      964,934                                   964,934
Issuance of common stock,
  for professional services                                    3         0       53,575                                    53,575
Issuance of common stock,
  In connection with section
  3(a)(10) filings                                           120         0    4,035,548                                 4,035,548
Embedded interest in
  connection with convertible
  debt issued under section
  3(a)(10) filings                                                       0      360,800                                   360,800
Issuance of common stock, in
  connection with repayment
  of loans from officers                                      12         0      600,000                                   600,000
Issuance of common stock, in
  connection with acquisitions                                 4         0      800,000                                   800,000
Less subscription receivables                                                  (125,000)                                 (125,000)
Net loss                                                                                   (6,862,550)                 (6,862,550)
                                 ---------   ------    ---------   -------  -----------  -------------    ---------   ------------

Balance, December 31, 2003       1,000,000    1,000          167         1   17,385,696   (21,263,199)     (18,720)    (3,895,222)

Subscription receivable                                                         125,000                                   125,000
Issuance of common stock, in
  connection with payment of
  Interest                                                     7         0       90,000                                    90,000
Issuance of common stock,
  in connection with Section
  3(a)(10) filings                                       1,772,827   1,772    2,870,105                                 2,871,877
Embedded interest in
  connection with convertible
  debt issued under Section
  3(a)(10) filings                                             -         0    1,930,761                                 1,930,761
Net loss                                                                                   (5,098,764)                 (5,098,764)
                                 ---------   ------    ---------   -------  -----------  -------------    ---------   ------------

Balance, December 31, 2004       1,000,000   $1,000    1,773,001   $ 1,773  $22,401,562  $(26,361,963)    $(18,720)   $(3,976,348)
                                 =========   ======    =========   =======  ===========  =============    =========   ============
</TABLE>

[1] - Shares are restated to reflect a one-for-thirty reverse stock split in
March 2003, a one-for-one hundred reverse stock split in February 2004, a
one-for-one hundred reverse stock split in September 2004 and a one-for-one
thousand reverse split in February 2005.

        See accompanying notes to the consolidated financial statements.
                                       F-6
<PAGE>
<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                                                                                      Year ended
                                                                                     December 31,
                                                                                 2004             2003
                                                                                 ----             ----
<S>                                                                         <C>              <C>
Cash flows from operating activities:
       Net loss                                                             $ (5,098,764)    $ (6,862,550)
Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
                Depreciation                                                      53,734           25,438
                Provision for bad debts                                               -0-         625,000
                Embedded interest                                              1,930,761          585,905
                Other non-cash items                                              90,000         (180,892)
                Loss on impairment of asset                                           -0-       2,912,627
       (Increase)/decrease in cash from changes in assets:
           Accounts receivable                                                  (160,085)         (47,947)
           Accounts receivable-Unbilled                                         (310,845)              -0-
           Other receivables                                                       7,901          (20,995)
       Client Deposits                                                           273,402       (1,100,000)
           Insurance deposits                                                     (6,237)          49,440
           Prepaid expenses                                                      (66,082)          (5,160)
           Security deposits                                                      (5,816)            (125)
       Increase (decrease) in cash from changes in liabilities:
           Accounts payable                                                     (207,216)        (417,593)
           Accrued expenses                                                      279,541          396,013
           Accrued expenses-Director                                            (251,583)              -0-
           Payroll and payroll related liabilities                               (80,450)         617,054
           Accrued work site employee payroll costs                              300,391               -0-
           Deferred revenue                                                     (273,402)        (162,970)
           Assumed liabilities                                                  (623,248)          (5,003)
           Income taxes payable                                                   (2,532)            (969)
                                                                            -------------    -------------
                Net cash (used in) operating activities                       (4,150,530)      (3,592,727)

Cash flows from investing activities:
       Net purchases of property and equipment                                  (104,211)         (17,692)
       Cash CD-Restricted                                                       (913,009)              -0-
       Net cash received in acquisition                                               -0-         160,744
       Cash used for acquisitions                                                     -0-        (105,000)
                                                                            -------------    -------------
                Net cash (used in) investing activities                       (1,017,220)          38,052

Cash flows from financing activities:
       Repayments of notes payable                                              (123,000)         945,457
       Issuance of notes payable                                                  90,000               -0-
       Issuance of convertible notes payable                                   4,540,898        3,285,929
       Receipts of stock subscription receivables                                125,000               -0-
       Repayments from lines of credit                                            (9,669)          (2,690)
       Repayment of capital leases                                               (20,827)              -0-
                                                                            -------------    -------------
                Net cash provided by financing activities                      4,602,402        4,228,696

Net increase (decrease) in cash and cash equivalents                            (565,348)         674,021

Cash and cash equivalents, beginning of period                                   682,400            8,379
                                                                            -------------    -------------

Cash and cash equivalents, end of period                                    $    117,052     $    682,400
                                                                            =============    =============

        See accompanying notes to the consolidated financial statements.
                                       F-7

<PAGE>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows

                                                                                      Year ended
                                                                                     December 31,
                                                                                 2004             2003
                                                                                 ----             ----
Supplemental disclosure of cash flow information:
       Cash paid for interest                                               $     46,690     $     24,980
                                                                            =============    =============
</TABLE>














































        See accompanying notes to the consolidated financial statements.
                                       F-8
<PAGE>
                           PACEL CORP. AND SUBSIDARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           DECEMBER 31, 2004 AND 2003

1. Summary of Significant Accounting Policies:

     A.  Nature of the business. PACEL Corp. (the "Company") was incorporated on
         May 3, 1994 under the laws of the State of Virginia. In September 2002,
         the Company announced its intention to enter the Professional  Employer
         Organization  (PEO)  industry.  In December  2002, the Company formed a
         wholly owned subsidiary, The Resourcing Solutions Group Inc. (TRSG) for
         the purpose of acquiring and running the PEO companies. On December 10,
         2002,  the  Company  issued a one time stock  dividend  of one share of
         "TRSG" (an OTC Non- Reporting  company symbol - RSGS) for each share of
         record of Pacel Corp.  stock on December 10, 2002.  The Company  issued
         493,511,735  shares of Resourcing  Solutions  Group no par value common
         stock  representing  approximately  25% of the total shares issued.  In
         October 2004, The Resourcing  Solutions Group,  Inc. effected a one-for
         one thousand  reverse  split.  After giving effect for the  one-for-one
         thousand  reverse stock split,  the Company now owns 1,506,488  shares.
         Management of the Company evaluated the organizational structure of the
         Company and its subsidiaries  and concluded that a restructuring  would
         be in the Company's best interests operationally and financially.  With
         that  in  mind,  management  recommended  that  all  of  the  Company's
         Professional Employee Organization ("PEO") activities will be conducted
         through The Resourcing  Solutions Group,  Inc.,  ("TRSG") the Company's
         subsidiary.  All other non-PEO activities will be conducted through the
         Company.  Under the current  corporate  structure,  all PEO businesses,
         except Benecorp Business Services ("BBS"),  transact business under the
         TRSG  subsidiary of the Company.  This structure  causes the Company to
         have multiple  filings with various states for PEO  licensing.  TRSG is
         required to file various  state mandate  documents  and post  indemnity
         bonds, up to $100,000 per state, in order to secure its PEO license. In
         order  for BBS to secure  its PEO  license,  it must  file  essentially
         duplicate documents and post similar indemnity bonds.  Furthermore,  in
         reviewing  the  market  potential  in the human  resources  outsourcing
         industry,  management of the Company believes that  significant  future
         revenue can be generated by offering  insurance  products and services.
         In  order  to  capitalize  on  this  revenue  potential  and to  ensure
         compliance  with federal  Employee  Retirement  Income  Security Act of
         1974,  management  believes  that  it is  necessary  to  segregate  the
         insurance  and risk  management  services  from the PEO  services.  The
         reorganization  will also streamline  management  reporting.  This will
         permit the Company to leverage its  resources  in its various  business
         operations.  The  reorganization  will  not  have a  direct  impact  on
         shareholders  of the  Company.  As  consideration  for  payment  to the
         Company,  The Resourcing  Solutions  Group,  Inc. will issue  1,000,000
         shares of its common  stock to the Company in April 2005.  The issuance
         of these shares will change the Company's  ownership  percentage of The
         Resourcing  Solutions  Group,  Inc  from  75% to  84%.  The  subsidiary
         operated at a loss during the years ended  December  31, 2004 and 2003.
         The  minority  25% share of the loss for the years ended  December  31,
         2004 and 2003 were $76,080 and $157,136  respectively  and is reflected
         in the  statement of  operations.  See Note 6 Short term  borrowing for
         possible  material  dilution of the  Company's  interest  in TRSG.  The
         Company has no recourse to collect the receivable from these losses.

                                       F-9
<PAGE>
         Effective  January 25,  2005,  by written  consent of the  shareholders
         holding a majority of the voting  power of the Company as  disclosed in
         the  Company's  Information  Statement  filed with the  Securities  and
         Exchange Commission approved (a) an amendment to the Company's Articles
         of Incorporation to increase the authorized  common stock to 10 billion
         shares; (b) a change of corporate domicile from Virginia to Nevada; (c)
         the election of Gary  Musselman,  Joseph Amato and Thorn Auchter to the
         board of  directors.  These new  directors  have delayed  acceptance of
         their  election  until such time as the Company has obtained  directors
         and officers liability insurance.

     B.  Principles of  consolidation.  The  consolidated  financial  statements
         include the  accounts of the  Company  and all of its  subsidiaries  in
         which  a   controlling   interest  is   maintained.   All   significant
         inter-company   accounts  and  transactions  have  been  eliminated  in
         consolidation.

     C.  Basis of Financial Statement  Presentation.  The accompanying financial
         statements  have  been  prepared  on  a  going  concern  basis,   which
         contemplates   the  realization  of  assets  and  the  satisfaction  of
         liabilities in the normal course of business. The Company has generated
         significant losses; however, is unable to predict profitability for the
         future.  These factors indicate that the Company's  continuation,  as a
         going  concern  is  dependent  upon  its  ability  to  obtain  adequate
         financing as well as implement  its sales and marketing  strategy.  The
         Company  plans to address the going  concern by  increasing  equity and
         continuing to grow the Company with profitable  sales both  organically
         and through acquisitions.  Management believes  successfully  executing
         these tasks will  inevitably  lead to the removal of the going  concern
         comment from our audited financials.

     D.  Cash  and  cash  equivalents.   Cash  equivalents   consist  of  liquid
         investments,  with a  maturity  of three  months or less at the time of
         purchase. Cash equivalents are stated at cost, which approximate market
         value.

     E.  Property and Equipment.  Property and equipment are stated at cost less
         accumulated  depreciation and amortization.  Depreciation is determined
         using the  straight-line  method over the estimated useful lives of the
         assets.  Estimated useful lives of 24 to 36 months are used on computer
         equipment  and  related  software,  five  years for  office  equipment,
         furniture,  and fixtures.  Depreciation  and  amortization of leasehold
         improvements  is computed using the shorter of the remaining lease term
         or five years.  Maintenance  and repairs are charged against income and
         betterments are capitalized.

     F.  Reclassification.  Certain prior year amounts have been reclassified to
         conform to current year's presentation.

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

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

                                      F-10
<PAGE>
         In determining the pricing of the markup component of the billings,  we
         consider  our  estimates  of the  costs  directly  associated  with our
         worksite employees,  including payroll taxes and workers'  compensation
         costs,  plus an acceptable gross profit margin. We invoice the billings
         concurrently  with each  periodic  payroll of our  worksite  employees.
         Revenues,  which  exclude the payroll cost  component of billings,  are
         recognized  ratably  over the  payroll  period  as  worksite  employees
         perform their service at the client worksite.  We include revenues that
         have been recognized but not invoiced in unbilled  accounts  receivable
         on our Consolidated Balance Sheets.

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

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

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

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

     H.  Advertising  Costs.  The  Company  expenses  all  advertising  costs as
         incurred.

     I.  Use of Estimates.  The preparation of financial  statements and related
         disclosures in conformity with generally accepted accounting principles
         requires  management to make estimates and assumptions  that affect the
         reported   amounts  in  the  Consolidated   Financial   Statements  and
         accompanying  notes.  The actual  amounts may differ from the estimated
         amounts.

     J.  Impairment of long-lived Assets. Effective January 1, 1996, the Company
         adopted SFAS NO. 121,  "Accounting  for the  Impairment  of  long-lived
         Assets and for long-lived  Assets to be disposed of." SFAS 121 required
         the Company to review the recoverability of the carrying amounts of its
         long-lived assets whenever events or changes in circumstances  indicate
         that  the  carrying  amount  of the  asset  might  not be  recoverable.
         Long-lived assets and certain identifiable intangible assets to be held
         and used are  reviewed  for  impairment  whenever  events or changes in
         circumstances  indicate that the carrying amount of such assets may not
         be recoverable. Determination of recoverability is based on an estimate
         of discounted future cash flows resulting from the use of the asset and
         its  eventual  disposition.  Measurement  of  an  impairment  loss  for
         long-lived  assets and  certain  identifiable  intangible  assets  that
         management  expects  to hold and use are based on the fair value of the
         asset.  Long-lived assets and certain identifiable intangible assets to
         be  disposed of are  reported  at the lower of carrying  amount or fair
         value less costs to sell.

     K.  Fair Value  Disclosures.  The carrying  amounts reported in the balance
         sheets for cash and cash equivalents, accounts receivable, inventories,
         accounts payable and accrued  expenses,  approximate fair value because
         of the immediate or short-term maturity of these financial instruments.

                                      F-11
<PAGE>
     L.  Stock  Options.  The Company has adopted the  disclosure  provisions of
         SFAS No. 148. The Company  accounts for its stock options in accordance
         with the  provisions of Accounting  Principles  Board (APB) Opinion No.
         25,   Accounting   for  Stock   Issued  to   Employees,   and   related
         interpretations. As such, compensation expense would be recorded on the
         date of grant only if the current market price of the underlying  stock
         exceeded the exercise  price.  On January 1, 1996, the Company  adopted
         the  disclosure  requirements  of  Statement  of  Financial  Accounting
         Standards (SFAS) No. 123, Accounting for Stock-based Compensation.  Had
         the  Company  determined  compensation  cost based on fair value at the
         grant date for stock  options  under SFAS No. 123 the effect would have
         been immaterial.  In December 2002, the Financial  Accounting  Standard
         Board  ("FASB")  issued  SFAS  No.  148,  "Accounting  for  Stock-Based
         Compensation  -  Transition  and  Disclosure",   SFAS  No.  148  amends
         Statement of Financial  Accounting  Standards No. 123,  "Accounting for
         Stock-Based  Compensation,"  to provide alternate methods of transition
         for companies  electing to voluntarily  change to the fair value method
         of  accounting  for  stock-based   compensation  and  also  amends  the
         disclosure  provisions of SFAS No. 123. The  provisions of SFAS No. 148
         are  effective for fiscal years ending  December 15, 2002.  The Company
         has not issued any stock options.

2. Acquisitions

   In  April  2003,  the  Company  completed  the  acquisition  of  100%  of the
   outstanding  stock of  BeneCorp.  Such  acquisition  was  accounted  for as a
   purchase.   In  conjunction  with  the   acquisition,   the  Company  assumed
   approximately  $1,000,000  of debt.  Consideration  for the  transaction  was
   $200,000 in cash, of which the Company made an initial  deposit of $96,000 in
   2002,  and the issuance of 200,000  shares of restricted  common stock of the
   Company.  After giving  effect to the  one-for-one  hundred  reverse split on
   February 24, 2004,  the  one-for-one  hundred  reverse split on September 13,
   2004,  and the  one-for-one  thousand  reverse  split on February 28, 2005, 1
   share was issued in  conjunction  with this  acquisition.  The  Company  also
   executed  one year  employment  contracts  with  two  principal  officers  of
   BeneCorp  in  conjunction  with the  acquisition.  The Company  recorded  the
   acquisition  as a purchase and  recorded  $17,500 of fees and  $1,685,120  of
   goodwill in association  with the  acquisition.  During the fourth quarter of
   2003, the Company recorded an impairment of $1,320,697  reducing the value of
   goodwill to $364,423.

   In April 2003, The Resourcing  Solutions Group, Inc. ("TRSG") entered into an
   agreement  for the  purchase  of  customer  contracts,  with a value of up to
   $100,000,000,   from  Management  Resource  Group  California,  LLC  ("MRG").
   Consideration  for such contracts was to be three times annualized net profit
   margin on each contract paid in either cash or freely  tradable  common stock
   of  the  Company.   Initially,   the  Company  issued  34,500,000  shares  of
   unrestricted  common stock in conjunction  with the purchase of the contracts
   and  recorded a receivable  of $600,000 in  conjunction  with that  issuance.
   After giving effect to the one-for-one  hundred reverse split on February 24,
   2004, the  one-for-one  hundred  reverse split on September 13, 2004, and the
   one-for-one thousand reverse split on February 28, 2005, 3 shares were issued
   in conjunction with this acquisition. In addition, the Company entered into a
   one-year  agreement with MRG to provide  continuing  administrative  services
   under such customer contracts. On August 27, 2003, the Company terminated its
   agreements  with MRG as  delivery  of the  promised  contracts  was no longer
   viable  based  on  restrictions  in  the  California   insurance  market.  In
   conjunction with the termination of this agreement,  the Company entered into
   a  settlement  agreement  for  repayment  of  the  $600,000  receivable.  The
   repayment  required MRG to make monthly  recurring  payment of $20,000 over a
   period of thirty (30) months.  MRG has failed to meet its  obligations  under
   this  agreement  and the Company is currently  reviewing its  settlement  and
   litigation  options. As of December 31, 2003, there was $575,000 remaining as
   due to the Company  from MRG. The Company has fully  reserved  this amount as
   uncollectible in the years ended December 31, 2004 and 2003.

                                      F-12
<PAGE>
   In April 2003, TRSG acquired  substantially all of the assets of Asmara, Inc.
   ("Asmara"), a North Carolina corporation,  including its ownership of several
   subsidiary  operations,  including Asmara Benefit  Services,  Inc. and Asmara
   Services I, Inc., North Carolina corporations,  Woodstock Lumber Sales, Inc.,
   an Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara of Florida II,
   Inc.,  Asmara of Florida III,  Inc.  and Asmara of Florida IV, Inc.,  Florida
   corporations.  The acquisition  was accounted for as a purchase.  The Company
   assumed all debts of the  operations of  approximately  $1,400,000,  issued a
   note payable to the  shareholder  of Asmara,  Inc. in the amount of $431,530,
   payable over a two year period and  executed  employment  contracts  with the
   principal  officer and sole shareholder of Asmara.  Consideration  under such
   agreement  consists of cash  compensation,  bonuses  based on  business  unit
   performance  and grants of options on the common  stock of the  Company.  The
   balance  of the note at  December  31,  2004  and  2003  was $0 and  $303,030
   respectively. The Company recorded $70,000 of fees and $2,002,938 of goodwill
   in conjunction with this acquisition.  During the fourth quarter of 2003, the
   Company  recorded an impairment of $1,591,929  reducing the value of goodwill
   to $411,009.

   On May 15, 2003, the Company  acquired,  through its wholly-owned  subsidiary
   Asmara  Services I, Inc.,  the  outstanding  membership  units of NSC, LLC, a
   North Carolina limited liability company.  Such acquisition was accounted for
   as a purchase. Consideration for the transaction was $100,000 in cash and the
   issuance of a note payable for  $200,000.  Such note is payable over eighteen
   (18) months and bears no  interest.  The balance of the note at December  31,
   2004 and 2003 was $0 and  $123,000  respectively.  The Company  recorded  the
   acquisition  as a purchase  and recorded  $300,000 of goodwill in  connection
   with the acquisition.

3. Accounts Receivable

   The Company's accounts  receivable is primarily composed of trade receivables
   and unbilled  receivables.  The Company's trade receivables,  which represent
   outstanding  billings to clients,  are reported net of allowance for doubtful
   accounts of $533 and $-0- as of December 31, 2004 and 2003, respectively. The
   Company  establishes an allowance for doubtful accounts based on management's
   assessment of the collectibility of specific accounts and by making a general
   provision for other potentially uncollectible amounts.

   The  Company  makes an accrual at the end of each  accounting  period for its
   obligations  associated  with the  earned but  unpaid  wages of its  worksite
   employees  and for the accrued  billings  associated  with such wages.  These
   accruals are included in accrued worksite  employee payroll cost and unbilled
   accounts  receivable;  however,  these  amounts  are  presented  net  in  the
   Consolidated  Statements of Operations.  The Company generally  requires that
   clients  pay  invoices  for  service  fees no later than one day prior to the
   applicable  payroll date.  As such,  the Company  generally  does not require
   collateral.  Customer prepayments directly  attributable to unbilled accounts
   receivable  have been netted  against such  receivables  as the billings have
   been earned and the payroll cost has been incurred,  thus the Company has the
   legal right of offset for these  amounts.  As of December  31, 2004 and 2003,
   unbilled accounts receivable consisted of the following:

                                                           December 31,
                                                       2004            2003
                                                       ----            ----
         Accrued worksite employees payroll cost   $  300,391      $       -0-
         Unbilled revenue                              10,454              -0-
                                                   ----------      -----------
         Unbilled accounts receivable              $  310,845      $       -0-

                                      F-13
<PAGE>
4. Property and Equipment:

   Property and equipment consist of the following:

                                                           December 31,
                                                       2004            2003
                                                       ----            ----
            Computers and office Equipment         $  218,267      $  250,933
            Less accumulated depreciation              70,436         153,578
                                                   ----------      ----------
                                                   $  147,831      $   97,355
                                                   ==========      ==========

5. Short term Borrowings Consists of:

                                                             December 31,
                                                        2004            2003
                                                        ----            ----
              Note payable bank                    $    24,230     $    33,900
              Notes Payable-Other                      465,000         498,000
              Convertible notes payable              1,669,021              -0-
              Capital lease                                 -0-         20,826
                                                  ------------     -----------
              Total Short-term borrowings         $  2,158,251     $   552,726
                                                  ============     ===========

         The Company  borrowed  $50,000 from the bank in the form of 5 year term
         note due February 20, 2007 at an interest rate of 8.5%.  The balance at
         December 31, 2004 and 2003 was $24,230 and $33,900 respectively.

         In January  2002,  the Company  issued  three short term notes  payable
         totaling $375,000,  the notes bear an interest rate of 9% per annum. At
         December 31, 2004,  the Company was in default under the terms of these
         note  agreements.  The  Company  considers  these  notes as short  term
         borrowings.  The Company is working with the note holders to remedy the
         payment of these loans through working  capital or possible  conversion
         into stock.

         The  Company  acquired,  through  its  wholly-owned  subsidiary  Asmara
         Services I, Inc., the outstanding membership units of NSC, LLC, a North
         Carolina limited liability  company.  Consideration for the transaction
         was $100,000 in cash and the  issuance of a note payable for  $200,000.
         Such note was payable over  eighteen  (18)  months.  The balance of the
         note at December 31, 2004 and 2003 was $0 and $123,000 respectively.

         In January 2004, the Company  issued a $90,000  short-term  note.  This
         note is payable upon demand and is included in notes payable other.


                                      F-14
<PAGE>
         In August 2003,  the Company  entered into an equity line of credit for
         $10,000,000  from Compass  Capital Inc.,  Kentan Ltd, Reef Holding Ltd,
         and T&B  Associates,  Inc.  Borrowing  from this equity line allows the
         repayment by issuing  shares of the Company's  stock at a discount rate
         of up to  50%.  The  line  is  being  used  to  fund  acquisitions  and
         shortfalls in working capital. During the year ended December 31, 2004,
         the Company drew down $4,440,898 and issued 4,177,281,829  unrestricted
         shares of the  Company's no par common  stock,  before  adjusting  such
         shares to reflect the effects of any stock splits occurring  subsequent
         to issuance.  After giving effect to the  one-for-one  hundred  reverse
         split on February 24, 2004, the  one-for-one  hundred  reverse split on
         September  13, 2004,  and the  one-for-one  thousand  reverse  split on
         February 28, 2005,  1,994,500  shares were issued in  conjunction  with
         this equity line.  The balance  remaining on this equity line of credit
         at April 12, 2005 was  $2,584,100.  During the years ended December 31,
         2004 and 2003, the Company incurred  embedded interest relating to this
         equity line in the amount of $1,930,761 and $585,905 respectively.  The
         lenders are not obligated to fund the remaining  balance on this equity
         line of credit  and may  discontinue  funding  the  Company at any time
         without any further obligation.

         On  November  30,  2004,  the  Company's  subsidiary,   The  Resourcing
         Solutions Group, Inc., issued its 8% Convertible  Redeemable Debentures
         due November 30, 2005 in the  aggregate  principal  amount of $100,000.
         The debentures were purchased by OHHN Holdings, LLC and Hatov Holdings,
         LLC.  The  debentures  were  issued  pursuant  to  the  exemption  from
         registration  under the Securities Act of 1933 provided by Regulation D
         Rule 504. This debenture is included in convertible  notes payable.  As
         collateral for the  debenture,  The Resourcing  Solutions  Group,  Inc.
         placed  1,000,000,000  shares  in  escrow.  Based  on the  price of The
         Resourcing  Solutions Group, Inc. stock when the debenture was secured,
         the collateral was valued at 100 times the amount of the debenture.  If
         the  debenture is converted  for stock,  the  Company's  percentage  of
         ownership in The Resourcing Solutions Group, Inc. will be substantially
         reduced.  The Company can not determine the dilution  since there is an
         inverse relationship of the number of shares issued to the value of the
         shares necessary to repay the debenture.

         The balance of these  convertible  notes at December  31, 2004 and 2003
         was $1,665,021 and $-0- respectively.

6. Assumed Liabilities

   As part of the asset  purchase  agreement  of Asmara Inc. in April 2003,  the
   Company assumed certain debts attributed to the President and CEO who was the
   sole  shareholder  of Asmara Inc. These debts were  previously  classified as
   Notes Payable to Officers. Upon the dismissal of the President and CEO, these
   debts were  reclassified  as Assumed  Liabilities.  The balances at the years
   ended December 31, 2004 and 2003 was $493,133 and $1,116,381 respectively.

                                      F-15
<PAGE>
7. Long Term Liabilities

   A. Retirement Plan-Director

   During  the first  quarter  of 2004,  the  Company  entered  into a  Variable
   Flexible Premium Universal Life policy naming David E. Calkins,  the Chairman
   of the Company, as the insured.  The Company is the owner of the policy while
   David E.  Calkins and his spouse are the  beneficiaries  of the  policy.  The
   insurance policy carries a face value of $3,100,000. The account value of the
   insurance policy can be invested in various  investment  accounts as directed
   by the Company.  The policy calls for the Company to make monthly payments of
   $18,333 for five years.  Upon age 70,  David E.  Calkins  will be eligible to
   withdraw  the assets of the policy over a 15 year  period.  During the twelve
   months ended December 31, 2004, the Company recorded  $183,333 in General and
   Administrative expense. The Company also recorded the value of the assets and
   deferred  compensation  equal to  $154,772  related to the  issuance  of this
   policy.

8. Income Taxes

   At inception,  the Company adopted SFAS No. 109, Accounting for income taxes.
   Under the provision of SFAS No. 109, the Company elected not to restate prior
   years due to immateriality.

   At  this  time,  the  Company  does  not  believe  it  can  reliably  predict
   profitability  for  the  long-term.   Accordingly,  the  deferred  tax  asset
   applicable to 2004 and 2003 operation has been reduced in its entirety by the
   valuation allowance.

As a result of the  operating  losses for the years ended  December 31, 2004 and
1992-2003,  the Company has  available  to offset  future  taxable  income a net
operating loss of approximately $18 Million expiring in 2005-2018.  In addition,
research credits expiring 2005-2018 are available to offset future taxes.

The  components  of this  provision  (credit) for income  taxes from  continuing
operations is as follow:

                                                      2004          2003
                                                      ----          ----
Deferred
Federal                                              $         -   $         -

Current
Federal                                              $         -   $         -
State                                                $         -   $         -
                                                     -----------   -----------
                                                     $         -   $         -
                                                     ===========   ===========

                                      F-16
<PAGE>
Difference between the tax provision computed using the statutory federal income
tax rate ant the effective income tax rate on the operations is as follow:

                                                      2004          2003
                                                      ----          ----
Federal
   Statutory rate                                    $(1,220,331)  $(1,177,406)
   Research tax credits                                       -0-           -0-

   Tax benefit not provided
   Due to valuation allowance                        $ 1,220,331   $ 1,177,406
                                                     -----------   -----------
                                                     $        -0-  $        -0-
                                                     ===========   ===========

Components of the Company's deferred tax assets and liabilities are as follow:

                                                          December 31,
                                                      2004          2003
                                                      ----          ----
Deferred tax assets:
   Tax benefit related to net operating loss
     carry forward and research tax credit           $ 5,865,744   $ 4,645,414
                                                     -----------   -----------
   Total deferred tax assets                         $ 5,865,744   $ 4,645,414

   Valuation allowance for
   Deferred tax assets                               $ 5,865,744   $ 4,645,414
                                                     -----------   -----------
   Net deferred tax assets                           $        -0-  $        -0-
                                                     ===========   ===========







9. Earning (Loss) Per Share:

   In February 1997, the Financial  Accounting Standards Board issued Statements
   of Financial  Accounting  Standards  ("SFAS") No. 128.  "Earnings  Per Share"
   applicable for financial  statements issued for periods ending after December
   15, 1997. As required the Company  adopted  "SFAS" No. 128 for the year ended
   December 31, 1997 and restated all prior period  earnings per share  figures.
   The Company has presented basic earnings per share.  Basic earnings per share
   exclude potential dilution and are calculated by dividing income available to
   common  stockholders  by the weighted  average number of  outstanding  common
   shares.  Diluted earnings per share incorporate the potential  dilutions from
   all  potentially  dilutive  securities  that would have reduced  earnings per
   share.  Since the potential  issuance of additional  shares would reduce loss
   per  share  they  are  considered  anti-dilutive  and are  excluded  from the
   calculation.

   Basic net income  per common  share is  computed  using the  weighted-average
   number of common shares outstanding during the period. Diluted net income per
   common  share is  computed  using the  weighted-average  number of common and
   dilutive common equivalent  shares  outstanding  during the period.  Dilutive
   common equivalent shares consist of stock options. Share and per-common share
   data for all periods presented reflect the effect of a one-for-thirty reverse
   stock split in March  2003,  a  one-for-one  hundred  reverse  stock split in
   February  2004, a one-for-one  hundred  reverse stock split in September 2004
   and a one-for-one thousand reverse stock split in February 2005.

   The weighted  average number of shares used to compute basic earnings  (loss)
   per share was 233,817 and 42 at December 31, 2004 and 2003 respectively.

                                      F-17
<PAGE>
10. Commitments and Contingencies:

   A.    Operating Leases

   Future  annual  minimum lease  payments  under all  non-cancelable  operating
   leases as of December 31, 2004 are as follows:

                2005                $  78,554
                2006                  112,608
                2007                  115,204
                2008 & thereafter     292,164
                                    ---------
     Total Minimum Lease Payments   $ 598,530
                                    =========

   Rent  expense  for  December  31,  2004 and 2003 was  $117,738  and  $126,931
   respectively.


   Legal

   B.    The  Securities  and  Exchange  Commission  ("SEC")  filed an action in
         Federal District Court asserting various  violations of securities laws
         against the Company and its principal  officer.  The complaint  alleges
         that Mr. Frank Custable  "orchestrated"  a "scheme" to illegally obtain
         stock from various  companies,  including  the Company,  through  "scam
         Commission Form S-8 registration statements, forged stock authorization
         forms  and at least one  bogus  attorney  opinion  letter  arranged  by
         Custable." The complaint  alleges that, in connection with this alleged
         "scheme," the Company and its CEO, David Calkins violated Section 17(a)
         of the  Securities Act and Section 10(b) and Rule 10b-5 of the Exchange
         Act. The SEC asks that the Company and Calkins be permanently  enjoined
         from future violations, ordered to pay disgorgement and civil penalties
         and  Calkins  be  barred  from  continued  service  as an  officer  and
         director.  As part of an ex parte  proceeding,  the District  Court has
         ordered  the  Company  and  Calkins to provide an  accounting  of their
         assets and the  transactions  that are the  subject  of the  complaint.
         Pursuant  to  an  agreement  of  the  parties,  an  accounting  of  the
         transactions  at issue was provided on June 30,  2004.  The Company and
         Calkins answered the second amended  complaint on March 23, 2005. Under
         the current  scheduling  order fact discovery must be completed by June
         21, 2005. Final  dispositive  pre-trial motion deadlines will be set by
         the trial judge. A trial date has not yet been set.

   C.    During 2003, the Company began experiencing  difficulties in processing
         unemployment  claims for its North Carolina  worksite  employees.  Upon
         research  of the  difficulties,  the  Company  learned  that its  North
         Carolina  Employment  Security  Commission  ("ESC")  account  was being
         actively reviewed by that agency. Through discussions with the ESC, the
         Company learned that these difficulties were the result of underpayment
         for unemployment taxes. The underpayments  resulted from the operations
         of a non-acquired companies, owned by the former President & CEO of the
         Company,  whose experience was imputed to the Company.  The Company and
         the ESC reached an  agreement  of an amount and a payment  schedule for
         these unpaid taxes. The Company had previously recorded a liability for
         $291,900 as assumed liabilities.  The Company agreed to pay this amount
         in  installments  during the third and fourth  quarters of 2004. Due to
         cash flow  difficulties,  the  Company  was  unable to make the  fourth
         quarter payments of $245,599.  The Company is working with the ESC on a
         new payment plan.

                                      F-18
<PAGE>
   D.    The Internal Revenue Service claims  principal,  interest and penalties
         owed by the Company and two of its inactive PEO companies, Benecorp and
         Asmara Services I, as of December 31, 2004 of  approximately  $201,000,
         $276,000 and $1,542,000  respectively.  On March 10, 2005, Benecorp and
         Asmara  Services I submitted  Offers in Compromise  with respect to the
         amounts allegedly owed by them. In the offers,  the companies  asserted
         doubt about collectibility as the basis for compromise, and proposed to
         pay the principal (without penalties or interest) claimed to be due. To
         date,  the  companies  have not  received a response  from the Internal
         Revenue Service with respect to these offers.


11. Goodwill and other Intangible Assets

   During  2003,  as a result  of  adoption  SFAS No.  142,  Goodwill  and Other
   Intangible  Assets,  the Company recorded an impairment of $2,912,627 related
   to goodwill in the Company's PEO business. The fair value of the PEO business
   was determined using discounted cash flows. This impairment was reported as a
   cumulative effect of a change in accounting principle.


12. Stockholders' Equity:

   A.    Preferred Stock:

         The Company's Amended Certificate of Incorporation authorizes 5,000,000
         shares  of no par,  non-liquidating  value  preferred  stock,  of which
         1,000,000  shares  have been  designated  the 1997 class A  Convertible
         Preferred  Stock.  The  number of  shares of the 1997  Class A shall be
         limited to  1,000,000.  The Board of  Directors  of the Company has the
         authority to establish  and  designate any shares of stock in series or
         classes and to fix any variations in the designations, relative rights,
         preferences and limitations between series as it deems appropriate,  by
         a majority vote.

         The shares of the 1997 Class A Convertible  Preferred  Stock shall have
         no  liquidation  value,  and shall be entitled  to receive,  out of any
         funds of the Company at the time legally  available for the declaration
         of dividends,  a per share  participating  dividend  equivalent to that
         declared and or paid with respect to a share of Common Stock.

         At any time  after June 30,  2000,  the  Company,  at the option of the
         Board of Directors, may redeem the whole of or part of, the 1997, Class
         A Convertible Preferred Stock by paying in cash $ .001 per share and in
         addition an amount equal to all unpaid dividends.

         In January 2005, by written consent of a majority of stockholders,  the
         Company changed its corporate  domicile from Virginia to Nevada. Due to
         Nevada  requirements,  the Company's  preferred stock par value changed
         from no par  value  to .001 par  value.  As a  result  of this  change,
         preferred  stock for the years  ended  December  31, 2004 and 2003 were
         restated from $11,320 to $1,000.

   B.    Common Stock:

         The authorized  common stock of the Company  consists of  2,000,000,000
         shares of no par value common stock at December 31, 2004 and 2003.

                                      F-19
<PAGE>
         In January 2005, by written consent of a majority of stockholders,  the
         Company  adopted  an  amendment  to the  Corporations'  Certificate  of
         Incorporation  to increase  the number of  authorized  shares of common
         stock, from 2,000,000,000 to 10,000,000,000 shares.

         In January 2005, by written consent of a majority of stockholders,  the
         Company changed its corporate  domicile from Virginia to Nevada. Due to
         Nevada requirements,  the Company's common stock par value changed from
         no par  value to .001 par  value.  As a result of this  change,  common
         stock for the years ended December 31, 2004 and 2003 were restated from
         $22,443,015 to $1,773 and from $17,385,696 to $1 respectively.

         In February 2004 and September 2004, the Company effected a one-for-one
         hundred reverse stock split, and in February 2005, the Company effected
         a  one-for-one  thousand  reverse  stock split  restating the number of
         common shares at December 31, 2003 from 1,675,736,763 to 167.

13. Related Party Transactions:

      A. Employment Agreements

         In  September  2004,  The Company  entered  into a ten year  employment
         contracts with Gary A. Musselman.  Compensation  will include an annual
         base salary of $168,000 and an incentive bonus plan based on the EBITDA
         (earnings before interest,  tax,  depreciation and  amortization).  The
         agreement  also  includes   severance   payments  upon  termination  of
         employment.  Mr.  Musselman  will hold the title of President and Chief
         Executive Officer.

         In  September  2004,  The Company  entered  into a ten year  employment
         contracts  with David E. Calkins.  Compensation  will include an annual
         base salary of $300,000,  an  incentive  bonus plan based on the EBITDA
         (earnings before interest, tax, depreciation and amortization), and the
         funding of a Variable Flexible Premium Universal Life Policy which is a
         vehicle  to fund a  deferred  compensation  plan.  The  agreement  also
         includes severance payments upon termination of employment. Mr. Calkins
         will hold the title of Chairman of the Board of Directors.

      B. Related Party Acquisitions

         In September 2004, the Company  acquired  PiedmontHR,  Inc., a Virginia
         corporation,  from Kaye Calkins, Secretary and Director of the Company,
         and  wife  of  David  Calkins  for  the  sum of  the  set-up  costs  of
         approximately $20,000. This company was acquired in anticipation of the
         Company re-organizing its subsidiary operations into a more streamlined
         management.  PiedmiontHR  is  the  operating  entity  which  all  Human
         Resource,  risk and safety consulting will be provided. The acquisition
         of PiedmontHR permits the Company to segregate Human Resource, Risk and
         Safety consulting from its PEO/HRO operations.


                                      F-20
<PAGE>
14. Common Stock Options and Warrants

   On April 25, 2003, the Company issued 120,000,000 shares of its common stock,
   no par value per share,  to David and F. Kay Calkins in exchange for $600,000
   of debts owed to them. Subsequent to the one-for-one hundred reverse split in
   February 2004, the  one-for-one  hundred reverse split in September 2004, and
   the  one-for-one  thousand  reverse split in January  2005,  such shares were
   replaced with 12 shares of the common stock of the Company.  However, because
   they are  "Affiliates" of the Company,  Mr. and Mrs.  Calkins will be able to
   sell such shares only in  compliance  with Rule 144 and 145.  The shares were
   issued  pursuant  to  Section  3(a)(10)  of the  Securities  Act of 1933,  as
   amended, after a hearing with notice to, and an opportunity to be heard from,
   interested  parties,  as to the  fairness of each  transaction,  by courts in
   Nevada  and  Illinois.   Such  courts   specifically   determined   that  the
   transactions   were  fair  to  interested   parties  and  declared  that  the
   transactions were exempt under Section 3(a)(10).

15. Comprehensive Income:

   At December  31, 2004 and 2003 net income and  comprehensive  income were the
   same.

16. Client Deposits

   The Company had $826,598 and  $1,100,000 in Deferred  Revenue at December 31,
   2004 and 2003 related to amounts prepaid for 2004 and 2005  respectively  for
   services from a single  client.  The Company  executed a letter  agreement in
   conjunction  with  receipt of these funds that  provides the funds be held in
   separate  trust  account by the  Company  and not  commingled  with any other
   general  use funds of the  Company.  The Company  draws down the  pre-payment
   account as needed to fund the payment of payroll,  deposit  taxes,  benefits,
   fees and other costs for this single client  pursuant to the  agreement.  The
   Company is currently in violation of this agreement.

17. Restricted Cash

   During the second quarter of 2004, the Company entered into an agreement with
   a national  bank to develop a program that  eliminates  the need for multiple
   banks.  During the credit  review  process,  the bank required the Company to
   secure its ACH (automated  clearing  house) exposure with a standby letter of
   credit.  ACH  transactions  are used to collect  funds due from the Company's
   clients for PEO  services  along with  depositing  funds into  employee  bank
   accounts that have elected  direct  deposit as a means of wage  payment.  The
   Company  secured  this standby  letter of credit with an interest  bearing CD
   (certificate  of deposit) in the amount of  $600,000.  The value of the CD on
   December 31, 2004 was $606,503.

   During the second and third quarter of 2004,  as part of the renewal  process
   for one of its insurance  carriers and two state PEO  (Professional  Employer
   Organization)  licenses,  the Company secured  irrevocable  letters of credit
   with interest bearing CD's (certificate of deposits).  The value of the CD on
   December 31, 2004 was $306,506.


                                      F-21
<PAGE>
18. Subsequent Event

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

   In January 2005, the Company, through its wholly-owned subsidiary The
   Resourcing Solutions Group, Inc., completed the acquisition of certain assets
   of Rossar HR LLC, a Pennsylvania limited liability company, which operated
   under the name "Your Staff Solutions". Rossar HR LLC is a Professional
   Employment Organization founded in the 1987 which specializes in quality
   human resource management services for small to medium sized businesses.

   Effective January 25, 2005, by written consent of the shareholders holding a
   majority of the voting power of the Company as disclosed in the Company's
   Information Statement filed with the Securities and Exchange Commission there
   was approved (a) an amendment to the Company's Articles of Incorporation to
   increase the authorized common stock to 10 billion shares; (b) a change of
   corporate domicile from Virginia to Nevada; (c) the election of Gary
   Musselman, Joseph Amato and Thorn Auchter to the board of directors. These
   new directors have delayed accepted their election until such time as the
   Company has obtained directors and officers liability insurance.



































                                      F-22
<PAGE>

                                   SIGNATURES

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

                                   Pacel Corp.
                                  (Registrant)

Date:    April 14, 2005
         --------------

By:      /s/ DAVID E. CALKINS
         --------------------
         David E. Calkins, Director and Chairman of the Board

By:       /s/ F. KAY CALKINS
         -------------------
         F. Kay Calkins, Secretary, Director

By:      /s/ GARY A. MUSSELMAN
         ---------------------
         Gary A. Musselman, President and Chief Executive Officer

By:      /s/ GARY A. MUSSELMAN
         ---------------------
         Gary A. Musselman, Chief Financial Officer

Pursuant to the requirements of the Exchange Act, this report has been signed by
the following persons in the capacities and on the dates indicated.

Signature                            Title                     Date

By:      /s/ DAVID E. CALKINS
         --------------------
         David E. Calkins            Director, Chairman        April 14, 2005
                                                               --------------
By:      /s/ F. KAY CALKINS
         ------------------
         F. Kay Calkins Director                               April 14, 2005
                                                               --------------
By:      /s/ GARY A. MUSSELMAN
         ---------------------
         Gary A. Musselman           President and CEO         April 14, 2005
                                                               --------------
By:      /s/ GARY A. MUSSELMAN
         ---------------------
         Gary A. Musselman           CFO                       April 14, 2005
                                                               --------------