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, 2002

|_|  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)

VIRGINIA                                                 54-1712558
--------------------------------                --------------------------------
(State or other jurisdiction of                         (IRS Employer
incorporation or organization)                          Identification No.)

7900 Sudley Road, Suite 601
Manassas, VA                                            80109
--------------------------------                --------------------------------
(Address of principal executive offices)                 (Zip Code)

Issuer's telephone number (703) 257-4759

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, NO PAR VALUE
                        -------------------------------
                                (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 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  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The  issuer's  revenues  for the  fiscal  year  ending  December  31,  2002 were
$298,419.

As of May 9, 2003,  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 3,514,074.  As of May 9, 2003, the issuer had  287,336,868  outstanding
shares of Common Stock.

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


<PAGE>


PART I

ITEM 1. DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

     In 2002,  Pacel  completed  an  evaluation  of its  business  model and the
potential success in its existing business  initiatives.  It was determined that
the Company should,  as part of that review,  evaluate other potential  business
markets that could provide the potential for success.  In September 2002,  Pacel
announced its intention to enter the Professional  Employer Organization ("PEO")
industry.  In  addition,  the Company  plans to provide  Administrative  Service
Organization ("ASO") services. The Company will provide human capital management
solutions to small  business  clients  within the United  States.  Subsequent to
December 31, 2002, the Company successfully completed the acquisition of two PEO
organizations   and  one  ASO   organization   and  is   evaluating   additional
opportunities  with the  potential  for  organic  growth in order to secure  its
position  as an  industry  leader.  The Company  sees this  initiative  in these
industries as an opportunity to tap into the lucrative  small business market in
the United  States and intends to compliment  its  activities  with  information
technology  services,  business  consulting  and financial  services at a future
time.  The focus of the  Company in 2003 and early  2004 will be on its  PEO/ASO
business  unit,  integrating is completed and planned  acquisitions,  developing
leading vendor relationships and establishing itself as an industry leader.

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

     By allowing the  management of these small to medium size business  clients
to  focus  on the  "business  of  business"  rather  than  complicated  and time
consuming administrative tasks, the Company, in delivering its services,  should
be well  positioned  to improve the  efficiency of its clients'  businesses  and
enhancing   their  ability  to  be  profitable  in  their  chosen   marketplace.
Additionally,  such  initiatives  as improving the 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.


                                       2
<PAGE>


     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 ("PEO").

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  option,   responsibility  for  providing  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 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 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,  to retain its own policy for the
management of this risk. In those cases,  the Company remains  heavily  involved
with safety and risk  management  to assist the client in  controlling  risk and
potentially  reducing  the  costs 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.

     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 to 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 the payroll payments, whether a PEO or an ASO client and the method
of  delivery of such  payments.  In a PEO  relationship,  the  component  of the


                                       3
<PAGE>


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 cost of selected
benefit  plans,  billings  to each  client  also  include  the  wages  and other
employment  related  taxes of each  worksite  employee.  The gross  billings are
invoiced at the time of  delivery  of each  periodic  payroll  delivered  to the
client.

     Currently,  the Company provides workers'  compensation  insurance coverage
for its worksite  employees through a variety of vendor  arrangements.  It's two
acquired PEO business units have workers' compensation programs in place for the
coverage of their respective worksite employees. The third acquisition is an ASO
and,  accordingly,  offers no workers'  compensation  coverage,  although it may
assist the client in the management of its existing  carrier  relationship.  The
Company is currently in talks with three  carriers in order to secure a national
workers'  compensation  plan for all of its recent and planned PEO acquisitions.
Once such a program has been  developed,  the Company  will pay the premiums for
this  coverage  and  pass  along  to its  clients  some  or  all  of  the  costs
attributable  to the  coverage  for their  respective  worksite  employees.  The
Company  does  not act as an  insurance  company.  However,  as part of a recent
acquisition  and in an effort to manage its  workers'  compensation  and benefit
programs in 2003,  the Company  acquired a wholly  owned  North  Carolina  based
insurance company. The Company does assume certain workers' compensation risk as
a result of providing its services.

     The Company has an  incentive to minimize  its  workers'  compensation  and
unemployment  tax costs because the Company bears the risk that its actual costs
will exceed  those billed to clients,  and  conversely,  the Company  profits on
these  components  of its  service  offerings  in the event that it  effectively
manages such costs.


HR Outsourcing Industry

     The HR outsourcing  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  to these
burdens.  PEOs combined the employees of a large number of clients and leveraged
their  purchasing  power to obtain  discounted  workers'  compensation and group
health insurance policies.


     The Company believes that the key factors driving demand for HR outsourcing
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


                                       4
<PAGE>


business  community  in  the  United  States;   the  increasing   complexity  of
employment-related governmental regulations and the related costs of compliance;
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  health,  welfare  and  retirement  benefits  on a
cost-effective and convenient basis.

     Another  factor  affecting  the  HR  outsourcing   industry  has  been  the
increasing  recognition and acceptance by regulatory authorities of PEOs and the
co-employer  relationship  created by PEOs, with the development of licensing or
registration  requirements  at the state  level.  The  National  Association  of
Professional Employer Organizations  ("NAPEO"),  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-two states,  including states where the Company recent  acquisitions
have  operations,  have passed laws that have  licensing,  registration or other
regulatory  requirements  for PEOs  and  several  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
coverage. In certain instances,  the Company delegates or assigns such rights to
the  client.   The  laws  also  generally  provide  for  monitoring  the  fiscal
responsibility  of 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 the
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  insurance  coverage.  The  Company  views  this
continued  pressure on the market as  providing  viable  acquisition  targets to
further support its business development strategy.

     All clients are required to enter into the Company's  Professional Services
Agreement.  The Professional Services Agreement provides for an initial one-year
term,  subject to  termination  by the Company or the client at any time upon 30
days prior written  notice.  After the initial 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 Professional Services Agreement.


                                       5
<PAGE>


     The Company  retains the ability to  terminate  the  Professional  Services
Agreement as well as its co-employment  relationship 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 checks, owner guarantees,
the  Company's  client  selection   process  and  its  right  to  terminate  the
Professional  Services  Agreement and the  co-employment  relationship  with the
worksite employees.

Competition

     The HR consulting industry is highly fragmented. The primary competition is
PEOs,  insurance  agents,  and  fee-for-service   providers,   such  as  payroll
processors and HR consultants. The market for human resource 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 human resource  consulting 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 PEO 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.

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,
their  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.


                                       6
<PAGE>


     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 has begun to offer a 401(k)  retirement plan,  designed to be a
"multiple  employer"  plan under the Internal  Revenue Code of 1986,  as amended
(the "Code")  Section  413(c) by way of a recent  acquisition.  This 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").

     Employer Status.  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.

     ERISA  Requirements.  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.


                                       7
<PAGE>


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 that it can assume the withholding
obligations  for  worksite  employees,  if  the  Company  fails  to  meet  these
obligations, the client may be held jointly and severally liable.

State Regulation

     While many states do not explicitly regulate PEOs, 22 states including four
states where the Company has offices  (Florida,  Tennessee,  South  Carolina and
Texas) have passed laws that have licensing,  registration  or other  compliance
requirements for PEOs and several states are considering  such regulation.  Such
laws 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 four states in which it  currently  has  business.  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
     profits  generated  from  the  workers'  (  composition  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  relating  to the  collateralization  requirements
     related to as well as availability  and ( 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;


                                       9
<PAGE>


     (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 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-K and in other filings by the Company with the Securities
     and Exchange Commission.

     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 April 2003,  the Company  acquired 100% 2,940 shares of the  outstanding
stock of Benecorp Business  Services Inc. to be accounted for as a purchase.  As
consideration the Company will pay $300,000 in cash to and issued 200,000 shares
of Section 144  restricted  Pacel  common  stock.  The Company made a deposit of
$96,000  in  2002.  In  connection  with the  purchase  we  signed  two one year
employment contracts with the officers for $75,000 each.


                                       10
<PAGE>


     In April  2003,  the  Company  purchased  up to  $100,000,000  of  customer
contracts from MRG  California  LLC for 3 times  annualized net profit margin on
each  contract in either cash or free  trading  stock.  In  connection  with the
purchase of the contracts we have signed a one year servicing agreement with MRG
to services these contracts  until RSG becomes  registered as a PEO in the state
of California.

     In April  2003,  the  Company  acquired  100% of the  stock of Asmara to be
accounted for as a purchase.  The Company  agreed to acquire all of the debts up
to  $2,000,000.  In connection  with this purchase the Company signed a two year
employment  with the  officers  of Asmara for  $150,000.  In  addition he may be
granted options to purchase up to 1,500,000 shares of the Companies common stock
for .03 per  share.  These  options  will be issued  upon the  Company  reaching
certain goals.

Employees

     As of May 9, 2003,  Pacel  Corp.  employed 33 persons on a full time basis.
Pacel Corp.  supplements  full-time  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


     The Company maintains its executive offices at 7900 Sudley Road, Suite 601,
Manassas,  Virginia  20109.  The company has a full service  lease that is price
controlled  until November 30, 2003. Its telephone  number is (703) 257-4759 and
its facsimile number is (703) 361-6706.


ITEM 3. LEGAL PROCEEDINGS

     The  Securities and Exchange  Commission  ("SEC") filed an action in the US
federal  district  court for Norther  District of Illinois  Case number  03c2182
complaint,  alleges  inpart  ,asserting  various  violations of securities  laws
against us. The complaint alleges that defendant Frank Custable "orchestrated" a
"scheme"  to  illegally  obtain  stock from  various  companies,  including  the
Company, through


                                       11
<PAGE>


"scam Commission Form S-8 registration  statements,  forged stock  authorization
form and at least one bogus attorney  opinion letter  arranged by Custable." The
complaint  alleges that , in connection with this alleged  "scheme," the Company
and its CEO,  David Calkins  violated  Section 17(a) of the  Securities  Act and
Section  10(b) and Rule 10b-5 of the Exchange Act. The SEC asks that the Company
and  Calkins be  permanently  enjoined  from future  violations,  ordered to pay
disgorgement and civil penalties and Calkins be barred from continued service as
an officer and director.  As part of an ex parte proceeding,  the District Court
has ordered the Company and Calkins to provide an accounting of their assets and
the transactions that are the subject of the complaint.  The Company has not yet
been served with the complaint, and no further proceedings are scheduled at this
time.

     We are a  defendant  in various  lawsuits,  with  vendors  from whom we owe
monies.  We have hired a firm to try and settle our delinquent  account payable.
These claims are recorded as liabilities at December 31, 2002.


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

None.


PART II


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

     Our common stock is traded on  over-the-counter  Electronic  Bulletin Board
under the symbol  "PACC." On December  31, 2002 there were 186 holders of record
of our common  stock.  Because many of such shares are held by brokers and other
institutions  on behalf of  stockholders,  we are unable to  estimate  the total
number of stockholders  represented by these record holders. The following table
sets forth the high and low sales price per share of our common  stock , for the
periods indicated,  all of which are adjusted for all stock splits and reverses.
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, 2001 and December 31,
2002 were as follows:


                                       12
<PAGE>


Calendar Quarter     High Bid Price        Low Bid Price

    2001
    First                   $3.75                $  .93
    Second                   2.70                   .90
    Third                     .60                   .03
    Fourth                    .30                   .063

    2002
    First                  $16.50                $ 2.70
    Second                   3.60                   .60
    Third                     .87                   .15
    Fourth                    .37                   .06

     On December 31, 2002, there were  approximately  186 shareholders of record
of our Common Stock.

     The Company has paid no cash  dividends  since its  inception.  The Company
presently intends to retain any future earnings for use in its business and does
not presently 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.


RECENT SALES OF UNREGISTERED SECURITIES

     In January and March  2003,  in  connection  with the  acquisition  of Bene
Corp.and  MRG  California  LLC,  we issued a total of  _43,385,707  unrestricted
shares of our Common  Stock,  No Par Value per share,  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;  and MRG
California   LLC.  In  addition  the  Company  issued   120,000,000   shares  of
unrestricted stock to David and F. Kay Calkins in exchange for $600,000 of debts
owed to them.  However,  because they are  "Affiliates"  of Pacel,  Mr. And Mrs.
Calkins will be able to re-sell their shares only in  compliance  with Ryles 144
and  145.  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 and Illinois 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.


Option Grants

     In April  2002,  David  Calkins  president,  director  and F.  Kay  Calkins
director of Pacel were granted a noncash option to purchase  100,000,000  shares
of the company's  common stock in exchange for the a loan made to the company in
1999  amounting to $124,000 and securing and loaning to the Company,  a personal
line of credit of up to $3,000,000 using the stock as collateral. Our ability to


                                       13
<PAGE>


draw on this line is based on the volume of the Common Stock  multiplied  by the
VWAP (volume weighted average price) for the thirty days preceding  funding must
be a minimum of $75,000. The maximum amount of collateral at any closing may not
exceed 4.9% of the issued and outstanding  shares of the Company.  Loan to value
is 35%. The interest  rate is prime+2  payable in cash  quarterly  and financing
expense of 9% of the draws.  The Company will pay these expenses  directly.  The
terms and  conditions set fourth in the agreement we may not be able to meet. To
date we have  drawn  approximately  $764,000.  Due to the low price of the stock
additional  proceeds from this line of credit maybe limited.  In August 2002, we
defaulted on the interest payments.  The collateral of the 100,000,000 shares of
stock has surrendered.


Issuances of Stock for Services or in Satisfaction of Obligations

     We  issued  10,7201,000  shares of No Par Value  common  stock for  various
consulting and Legal fees.  Included in those share were share issued as payment
for rent and early termination of our lease.


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

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

     Revenues  decreased to $298,419 in 2002 compared to $1,491,203 in 2001. The
decrease is directly attributed to not receiving any NATO contracts and the loss
of our major client, in Advantage systems.

     Cost of Goods Sold decreased to $281,339  compared to $783,204 in 2001. The
decrease is directly attributed to the decrease in sales.

     Research  and  Development  expenses  consist  principally  of salaries for
software developers,  outside consulting, related facilities costs, and expenses
associated with computer  equipment used in software  development.  Research and
development  expenses decreased to $9,121 compared to $443,369 in 2001. Our lack
of funding has forced us to cut further  research and development on E-Centurion
and as well  as  development  of new  products  and  enhancements.  The  Company
believes that research and  development  activities are crucial to maintaining a
competitive  edge in  markets  characterized  by rapid  rates  of  technological
advancements.  Without  adequate  financing  we may  not be  able to stay on the
cutting edge of technology.

     Sales  and  marketing   expenses  include  salaries  and  benefits,   sales
commissions,  travel  expenses,  and  related  facilities  costs for our  sales,
marketing,  customer support, and distribution consultants.  Sales and marketing
expenses also include the costs of programs aimed at increasing revenue, such as
advertising,  trade  shows,  public  relations,  and  other  market  development
programs.  Sales and  marketing  expenses  decreased  to  $218,313  compared  to
$261,750 in 2001.  The decrease is attributed  to the lack of sales,  decreasing
commissions. In addition only limited funding was available for use in sales and
marketing.


                                       14
<PAGE>


     General and  administrative  expenses  consist  principally of salaries and
benefits,  travel  expenses,  and  related  facilities  costs  for  finance  and
administration,  human resources,  legal,  information  services,  and executive
personnel . General and  administrative  expenses also include outside legal and
accounting  fees, and expenses  associated with computer  equipment and software
used in the administration of the business.  General and administrative expenses
increased  81.5% to  $4,149,052  in 2002 compared to  $2,284,891,  in 2001.  The
increase in administrative  expenses is directly related  $3,108,980  charged on
the books for consulting, legal and rent expenses paid in stock instead of cash.

     Interest  expense  decreased  to $141,450  in 2002  Compared to $316,220 in
2001.  Interest  expense  at  December  31,  2002 and 2001  included a charge of
$50,000 and $232,272  respectively,  which resulted from the recognition of debt
discount from a beneficial  conversion feature embedded in the convertible notes
issued in 2002 and 2001.  Per  Emerging  Issues Task Force  (EITF)  Number 98-5,
"Accounting for Convertible  Securities with Beneficial  Conversion  Features or
Contingently  Adjustable Conversion Rations", this beneficial conversion feature
was assigned an intrinsic value as calculated  under the provisions of the EITF,
this amount was immediately expensed. The remaining interest expense is interest
paid and accrued on the Convertible Notes and Notes payable.

     Financing  costs were $235,509 in December 31, 2002 compared to $311,417 in
2001. The costs were related to fees related to obtaining  various loans through
the year.


LIQUIDITY AND CAPITAL RESOURCES

     Net cash used from  operating  activities  for the years ended December 31,
2002  and 2001  was  $36,475  and  $1,418,591  respectively.  The use of cash in
operating  activities  for the year ended  December 31, 2002 resulted  primarily
from the shortfall in sales.

     Net cash used in investing activities for the years ended December 31, 2002
and 2001 was  $25,000  and  $10,794  respectively.  The cash  used in  investing
activities  was derived from the repayment of a long term  receivable off set by
the deposit of an acquisition

     Net cash provided by financing  activities for the years ended December 31,
2002 and 2001 was $11,815 and  $1,458,957,  respectively.  The cash  provided in
financing activities was attributable to repayment of notes payable of $$188,185
offset by convertible notes payable and sale of common stock options.

     On December 31, 2002, we had $8,379 in cash and cash  equivalents  compared
to $65,761 at December 31, 2001.  We will continue to have  significant  capital
requirements due to limited sales  projections as well as expected  increases in
expenditures  for sales and  marketing.  By December,  2002 we were down to only
essential  administrative  staff to ensure  minimization of our cash usage until
significant sales had occurred and we secured adequate financing.


                                       15
<PAGE>


     In April  2002,  David  Calkins  president,  director  and F.  Kay  Calkins
director of Pacel were granted a noncash option to purchase  100,000,000  shares
of the company's  common stock in exchange for the a loan made to the company in
1999  amounting to $124,000 and securing and loaning to the Company,  a personal
line of credit of up to $3,000,000 using the stock as collateral. Our ability to
draw on this line is based on the volume of the Common Stock  multiplied  by the
VWAP (volume weighted average price) for the thirty days preceding  funding must
be a minimum of $75,000. The maximum amount of collateral at any closing may not
exceed 4.9% of the issued and outstanding  shares of the Company.  Loan to value
is 35%. The interest  rate is prime+2  payable in cash  quarterly  and financing
expense of 9% of the draws.  The Company will pay these expenses  directly.  The
terms and  conditions set fourth in the agreement we may not be able to meet. To
date we have  drawn  approximately  $764,000.  Due to the low price of the stock
additional  proceeds from this line of credit maybe limited.  In August, 2002 we
defaulted on the interest payments.  The collateral of the 100,000,000 shares of
stock was surrendered.

     In September  2002, we entered in an Equity line of credit for  $10,000,000
from the Honor Hedge Fund and Reisco Hedge Fund through High Desert Capital at a
variable  discount  rate of 12.5% to 50%. We can draw up to $500,000  per month.
The  line  will  is  being  used  for  the  acquisition  of  BeneCorp.  ,  other
acquisitions  and  working  capital.  We drew down  $465,000  to date and issued
8,885,707 shares of common stock .

     In  March,2003,  we entered  into an Equity line of credit for  $10,000,000
from  Equities  First Inc.  at a discount  rate of up to 50%.  We can draw up to
$500,000  per  month.  The line was  being  used  for the  acquisition  customer
contracts from MRG California, LLC. , other acquisitions and working capital.
We drew down $172,200 and issued 6,000,000 shares of
common stock.

     Our cash  requirements  for  funding  our  operations  continue  to greatly
exceeded  cash flows from  operations.  We continue to satisfy our capital needs
through equity financing until we can turn our cash flow around. Our liabilities
consist of over extended  accounts payable,  payroll taxes,  loans from officers
and officer's compensation. We drew down $172,200 and issued 6,000,000 shares of
common stock.

     We  continually  look for  strategic  relationships  that will  enhance our
products  and  services.  Currently  we have  focused our efforts on  developing
strategic  relationships  with  other  organizations  associated  with  the  PEO
business.  The loss of equity  financing would  seriously  hinder our ability to
continue as a going concern.

     We expect to continue our investing activities,  including expenditures for
PEO  acquisitions,   including  sales  and  marketing,   product  support,   and
administrative support, as funds become available.

     In December,  2002 , we formed a wholly owned  subsidiary,  The  Resourcing
Solutions  Group,  Inc.(TRSG).  The company has started a human resource support
company,  out of our Manassas,  VA offices. In April 2003 we signed an agreement
with MRG to  purchase up to  $100,000,000  of  customer  contracts  at a cost of
3times the  annualized net profit  margin.  We believe that  development of this
business  in  conjunction  with the  acquisitions  of other PEO  companies  will
provide us with a direct marketing  channel for direct marketing channel for our
IT consulting, System Security, hardware and Web based technologies.


                                       16
<PAGE>



     In October  2002,  signed an  agreement  to purchase  100% of the assets of
BeneCorp.  Business Services Inc. a human resource support company, for $720,000
to be paid  over the next six  months in equal  monthly  payments  of  $180,000.
$96,000 was transferred to BeneCorp in 2002.  However,  due to delays in funding
in the  implementation of the Section 3) a) 10) reorganization we were unable to
make the payments as scheduled. Due to these delays the acquisition contract was
renegotiated as a stock purchase,  the final closing was in April, 2003. We will
assume  approximately  $1,000,000  in debt.  In  connection  with  the  BeneCorp
acquisition we signed two, employment  agreements with the officers of BeneCorp.
for $75,000 per year each. We believe that this acquisition will help expand the
TRSG business.

     In December  2002,  the company also  announced a one time  dividend of one
share of The Resourcing  Solutions  Group,  Inc.( a OTC Non-  Reporting  company
symbol - RESG) for each  share  shareholder  of record of Pacel  Corp.  stock on
December  10,  2002.  Due to  delays  in  filings  the  stock  was not  actually
distributed until April, 2003.

     In April  2003,  the  Company  acquired  100% of the  stock of Asmara to be
accounted for as a purchase.  The Company  agreed to acquire all of the debts up
to  $2,000,000.  In connection  with this purchase the Company signed a two year
employment  agreement  with the officers of Asmara for $150,000.  In addition he
may be granted  options to  purchase  up to  1,500,000  shares of the  Companies
common  stock for .03 per share.  These  options will be issued upon the Company
reaching certain goal

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".



                                       17
<PAGE>



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 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,  ages,  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           59       Chairman, President and CEO
F. Kay Calkins             44       Director

     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, President, Chief Executive Officer and Chairman

     David  E.  Calkins  founded  PACEL  in  1994  and is its  acting  Chairman,
President and Chief  Executive  Officer.  From 1992 until  founding  PACEL,  Mr.
Calkins was the  Regional  Manager of three  divisions of Pacific  Nuclear,  now
known as Vectra  Technologies,  Inc., an engineering  and  information  services
company and a NASDAQ Stock Market listed company.  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-Operations,  and Executive Vice President Business Development for PRC
Inc., an information  systems  development  and Services  Company.  PRC provides
support services to the Federal government and the utility industry. 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 is the spouse of F. Kay Calkins.


                                       18
<PAGE>


F. Kay Calkins, Director

     F. Kay Calkins is  President  of  EBStor.com,  Inc.,  an  Internet  and web
development  company.  In her capacity of president,  Ms. Calkins is responsible
for oversight of all  operations of the company.  Ms.  Calkins is experienced in
management  of  technology  companies  and has utilized  this  experience in the
start-up and growth of the company.  EBStor  offers a wide range of Internet and
web services  including  design,  web site  development,  database  development,
ColdFusion development and hosting.

     Prior to her position with EBStor,  Ms. Calkins was Vice  President/COO  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 15+
years of  experience  in  technology-related  companies.  Before  accepting  the
positions with PACEL Ms. Calkins was President of CMC Services,  a marketing and
consulting Virginia based corporation.


ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS

Executive Compensation

<TABLE>
<CAPTION>
                                 Annual      Annual     Annual  LT Comp  LT                All
                                 Comp        Comp       Comp    Rest     Comp     LTIP     Other
Name and Post              Year  Salary (1)  Bonus ($)  Other   Stock    Options  Payouts  (1)
-----------------------    ----  ----------  ---------  ------  -------  -------  -------  ------
<S>                        <C>   <C>          <C>        <C>       <C>     <C>       <C>     <C>
David E. Calkins,          2001  $175,000*    0          0         0       0         0       0
Chairman,                  2002  $175,000*    0          0         0     100,000,000**shares 0
President and CEO          2003  $175,000*    0          0    120,000,000***0        0       0
-----------------------
</TABLE>

*    = salary accumulated on the books but not paid
**   = 100,000,000 stock options provided to pay for prior loans, stock options
     used to finance co.
***  = 120,000,000 shares paid to Dave and Kay Calkins to repay loan to company
     as part of 3(a)(10) filing

(1)  All other compensation  includes certain health and life insurance benefits
     paid by the Company on behalf of its employees.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND

     The following  table sets forth certain  information as of May 9, 2003 with
respect to the beneficial ownership of the common stock by each beneficial owner
of more  than 5% of the  outstanding  shares  thereof,  by each  director,  each
nominee to become a director  and each  executive  officer  named in the Summary
Compensation  Table and by all  executive  officers,  directors  and nominees to
become directors of the Company as a group. Under the rules of the Commission, a
person is deemed to be the beneficial  owner of a security if such person has or
shares the power to vote or direct the voting of such  security  or the power to
dispose or direct the  disposition of such security.  A person is also deemed to
be a beneficial  owner of any securities if that person has the right to acquire


                                       19
<PAGE>


beneficial  ownership within 60 days.  Accordingly,  more than one person may be
deemed  to be a  beneficial  owner  of the  same  securities.  Unless  otherwise
indicated by footnote,  the named entities or  individuals  have sole voting and
investment power with respect to the shares of common stock beneficially  owned.
There are no arrangements  known to the Company including pledges of securities,
which  might,  at a  subsequent  date,  result in any  change of  control of the
Company.

Name and Address                  Title     Amount and Nature    Percent
      of                           of              of              of
Beneficial Owner                  Class      Beneficial Owner     Class
----------------------------    ---------  -------------------   -------
David & Kay Calkins              Common    60,000,000 shares ea.  21%ea.

All Executive Officers and
Directors as a Group             Common    120,000,000             42%
---------
(1)  The address for each of the above is c/o Pacel Corp.  7900 Sudley Rd. Suite
     601, Manassas, VA 20109.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On May 31, 2002, the Company  completed an agreement to sell E-Bstor an 80%
owned  subsidiary to F. Kay Calkins a director.  The Company  recorded a gain on
the sale of $177,817.  Ms. Calkins  assumed all of the assets and liabilities on
the books as of May 31, 2002. There is an inter-company receivable of $1,568,815
which we have taken a 100% reserve  against,  due to our  inability to determine
when E-Bstor will have adequate cash flow to repay this loan.  The  Consolidated
Financial  Statements  have been  restated,  where  applicable,  to reflect  the
E-Bstor  Discontinued  operations.  At December 31, 2002 we had a receivable  of
$16,499 from E-Bstor for rent from June 1, 2002 through November 30,2002.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) The following documents are filed as part of this report

                         Financial Statement Description                   PAGE

  Management's Report                                                         II
  Independent Auditors' Report                                               III
  Consolidated Balance Sheets
     December 31, 2002 and December 31, 2001                                  IV
  Consolidated Statements of Operations
     Years Ended December 31, 2002, and 2001                                   V
  Consolidated Statements of Stockholders' Equity (Deficit)
     December 31, 2002, and 2001                                              VI
  Consolidated Statements of Cash Flows
     Years Ended December 31, 2002,  and 2001                                VII
  Notes to Consolidated Financial Statements                                VIII


Item 14 - Controls and Procedures

As required by Rule 13a-15 under the Exchange  Act,  within the 90 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 the Company's management, including the Company's President
and Chief Executive  Officer along with the Company's  Chief Financial  Officer.
Based upon that evaluation,  the Company's President and Chief Executive Officer
along with 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 or in other  factors,  which could
significantly  affect  internal  controls  subsequent  to the date  the  Company
carried out its evaluation.

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
reported,  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.

                                       20

<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: May 13, 2003


 By:   /s/ David Calkins
       ---------------------------------
        David Calkins, CEO and President


 By:   /s/ F. Kay Calkins
       ---------------------------------
        F. Kay Calkins, Director


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 Calkins
 ---------------------------------
       David Calkins                   CEO and President         May 13, 2003


By:   /s/ F. Kay Calkins
 ---------------------------------
       F. Kay Calkins                  Director                  May 13, 2003


                                       21

<PAGE>

                                  CERTIFICATION

     I, David Calkins, CEO and President, certify that:

1. I have reviewed this annual report on Form 10-KSB of Pacel Corp. for the year
ended December 31, 2002;

2. Based on my  knowledge,  this  quarterly  report  does not contain any untrue
statement of a material fact or omit to state a material fact  necessary to make
the statements made, in light of the  circumstances  under which such statements
were made, not  misleading  with respect to the period covered by this quarterly
report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
information  included in this quarterly  report,  fairly present in all material
respects the financial  condition,  results of operations  and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

     a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others  within those  entities,  particularly  during the
period in which this quarterly report is being prepared;

     b) evaluated the effectiveness of the registrant's  disclosure controls and
procedures  as of a date  within  90  days  prior  to the  filing  date  of this
quarterly  report (the  "Evaluation  Date");  and c) presented in this quarterly
report our conclusions  about the  effectiveness of the disclosure  controls and
procedures based on our evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation,  to the registrant's auditors and the audit committee of
registrant's   Board  of  Directors  (or  persons   performing   the  equivalent
functions):

     a) all  significant  deficiencies  in the design or  operation  of internal
controls  which  could  adversely  affect  the  registrant's  ability to record,
process,  summarize  and  report  financial  data  and have  identified  for the
registrant's auditors any material weaknesses in internal controls; and

     b) any fraud,  whether or not material,  that involves  management or other
employees who have a significant role in the registrant's internal controls; and

6. The  registrant's  other  certifying  officers  and I have  indicated in this
quarterly  report  whether or not there  were  significant  changes in  internal
controls or in other factors that could  significantly  affect internal controls
subsequent to the date of our most recent  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.

May 13, 2003

/s/David Calkins, CEO and CFO
David Calkins, CEO and CFO

                                       22

<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To The Board of Directors
PACEL Corp.



     We have audited the accompanying  consolidated balance sheet of Pacel Corp.
and  Subsidiaries as of December 31, 2002 and 2001 and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended.  These  financial  statements  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Pacel Corp. and subsidiaries
as of December 31, 2002 and 2001, and results of their operations and their cash
flows for the years then ended in conformity with generally accepted  accounting
principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming that the Company will continue as a going concern. As discussed in Note
1(p) to the financial  statements,  the Company has had minimal  revenues  since
inception  and  requires  additional  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 also  described in
Note 1(p). The financial  statements do not include any  adjustments  that might
result from the outcome of this uncertainty.

                            /s/Peter C. Cosmas Co., CPAs
                            Peter C. Cosmas Co., CPAs

370 Lexington Ave.
New York, NY 10017
May 2, 2003

                                      II

<PAGE>

<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


                                                                                   December 31,      December 31,
                                                                                      2002              2001
                                                                                ------------------ ----------------
<S>                                                                             <C>                <C>
                     ASSETS
Current assets:
   Cash and cash equivalents                                                    $            8,379 $         65,761
   Accounts receivable, net of allowance for doubtful
     accounts of $0 and $1,311 respectively                                                      -          324,134
   Inventory                                                                                                 61,306
   Deposit on Benecorp                                                                      96,000
   Other receivables                                                                        16,499           36,684
                                                                                ------------------ ----------------
      Total current assets                                                                 120,878          487,885
                                                                                ------------------ ----------------
Property and equipment, net of accumulated depreciation
of $128,140 and $73,946 respectively                                                        24,961           81,123
                                                                                ------------------ ----------------
Non-current assets:
     Note receivable                                                                             -           71,000
     Goodwill                                                                                    -          407,049
     Security deposits                                                                       3,991           10,122
                                                                                ------------------ ----------------
        Total non-current assets                                                             3,991          488,171
                                                                                ------------------ ----------------
      Total assets                                                              $          149,830 $      1,057,179
                                                                                ================== ================

                LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
   Accounts payable                                                               $      1,353,022 $      1,423,979
   Accrued expense                                                                         234,602          175,511
   Loans payable officers-Stockholders                                                     956,309          143,853
   Notes payable                                                                           873,750        1,007,500
   Notes payable bank                                                                       45,565           50,000
   Net liabilities of discontinued operations                                                    -          236,731
                                                                                ------------------ ----------------
         Total current liabilities                                                       3,463,248        3,037,574
                                                                                ------------------ ----------------

Long Term liabilities:
   Convertible debentures                                                                  409,111          875,479
                                                                                ------------------ ----------------
         Total long term liabilities                                                       409,111          875,479
                                                                                ------------------ ----------------
      Total liabilities                                                                  3,872,359        3,913,053
                                                                                ------------------ ----------------
Minority interest Commitments:
Stockholders' equity (deficit)
Preferred stock, no par value,
   no liquidation value, 5,000,000 shares authorized,
   issued 1,000,000 shares 1997 class A convertible preferred stock                         11,320           11,320
Common stock - no par value,
   200,000,000,000 and 650,000,000 shares authorized in 2002 and 2001,
   respectively.  21,184,591 and 82,355 shares outstanding in
   2002 and 2001, respectively                                                          10,685,520        6,729,122
   Cumulative currency translation adjustment                                              (18,720)         (11,000)
       Deficit                                                                         (14,400,649)      (9,585,316)
                                                                                ------------------ ----------------
   Total stockholders' equity  (deficit)                                                (3,722,529)      (2,855,874)
                                                                                ------------------ ----------------

   Total liabilities and stockholders' equity                                   $          149,830 $      1,057,179
                                                                                ================== ================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       III

<PAGE>



<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                                                   Year Ended
                                                                     December 31, 2002     December 31, 2001
                                                                   --------------------- ---------------------

<S>                                                                <C>                   <C>
 Sales                                                             $             298,419 $           1,491,203
 Direct Cost of Goods Sold                                                       281,339               783,204
                                                                   --------------------- ---------------------
Gross Profit                                                                      17,080               707,999
                                                                   --------------------- ---------------------

Operating costs and expenses:
      Research and development                                                     9,121               443,369
      Depreciation & Amortization                                                 55,618                25,531
      Interest expense                                                           141,450               316,220
      Sales and Marketing                                                        218,313               261,750
      Financing Expenses                                                         235,509               311,417
      General and Administrative                                               4,149,052             2,287,436
                                                                   --------------------- ---------------------

     Total operating costs and expenses                                        4,809,063             3,645,723
                                                                   --------------------- ---------------------

      Other Income                                                                     -                 3,728

     Loss before extraordinary items (including discontinued
        operations and the effect of an accounting change)                    (4,791,983)           (2,933,996)

      Gain on wirte-off of extinguishment of debt                                426,150
   Discontinued operations (Note 3)
       Loss from operations of discontinued E-Bstore business                   (220,268)             (646,550)
       Gain on disposal of E-Bstore business                                     177,817                     -

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

           Net (loss)                                              $          (4,815,333)$          (3,580,546)
                                                                   ===================== =====================

Net  (loss) per common share
     Basic                                                                         (0.33)              (124.18)
     Diluted                                                                       (0.33)              (124.18)
Weighted Average shares outstanding
     Basic                                                                    14,714,561                28,834
     Diluted                                                                  14,714,561                28,834
</TABLE>




          See accompanying notes to consolidated financial statements.

                                        IV


<PAGE>



<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
                   FOR THE TWO YEARS ENDED DECEMBER 31, 2002



                                               Preferred Stock        Common Stock        Retained       Currency        Total
                                                                                          Earnings     Translation    Stockholders
                                           Shares      Amount      Shares     Amount      (Deficit)     Adjustment       Equity
                                          ---------------------------------------------------------------------------------------

<S>                                        <C>       <C>           <C>     <C>          <C>           <C>           <C>
Balance, December 31, 2000                 1,000,000 $ 11,320      13,116  $ 5,155,914  $ (6,004,770) $  (10,833)   $    (848,369)
 Issuance of common stock, options and
   warrants net of expenses                                         44,776     584,950                                    584,950
 Issuance of restricted common stock for
    professional services                                            4,561     368,738                                    368,738
 Issuance of restricted common stock
   Held In Escrow                                                    1,852                                                      -
 Issuance of common stock for
   professional services                                            18,050     619,520                                    619,520
 Effect of currency translation                                                                             (167)            (167)
Net loss
                                                                                          (3,580,546)                  (3,580,546)
                                          ---------- -------- ------------ ----------- ------------- ----------- ----------------
Balance, December 31, 2001                 1,000,000   11,320      82,355    6,729,122    (9,585,316)    (11,000)      (2,855,874)

 Issuance of common stock, in
connection with convertible notes
payable                                                          4,797,903     541,418                                    541,418
 Issuance of restricted common stock for
 professional services                                              20,000      36,000                                     36,000
 Exercise of stock options                                       3,333,333     124,000                                    124,000
 Issuance of common stock, options in
 connection with S-8 registrations                              12,951,000   3,244,980                                  3,244,980
 Effect of currency translation                                                                           (7,720)          (7,720)
Net loss                                                                                  (4,815,333)                  (4,815,333)
                                          ---------- -------- ------------ ----------- ------------- ----------- ----------------
Balance, December 31, 2002                 1,000,000 $ 11,320   21,184,591 $10,675,520 $ (14,400,649)$   (18,720)$     (3,732,529)
                                          ========== ======== ============ =========== ============= =========== ================
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       V


<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                       2002          2001
                                                                 -------------- --------------
<S>                                                              <C>            <C>
Cash flows from operating activities:
   Net (loss)                                                    $   (4,815,333)$   (3,580,546)
Adjustments to reconcile net (loss) to net cash
 (used in) provided by operating activities:
   Cumulative effect of accounting change                               407,049
   Depreciation                                                          55,618         25,531
   Provision for Bad Debts                                               (1,311)          (829)
   Other non cash items                                               3,282,972      1,064,741
   Gain on sale of EB-Store                                            (177,817)
Increase (Decrease) in Cash from changes in:
    Accounts receivable                                                 324,134       (325,301)
    Other receivables                                                    20,185         28,076
    Inventory                                                            61,306       (45,816)
    Security deposits                                                     6,131        (1,033)
    Prepaid expenses                                                          0          2,469
    Accounts payable                                                    (70,956)     1,104,655
    Accrued expense                                                      59,091        112,517
    Loans Payable Officers-Stockholders                                 812,457        196,945
                                                                 -------------- --------------
 Net cash (used in) operating activities                                (36,475)    (1,418,591)
                                                                 -------------- --------------

Cash flows from investing activities:
    Deposit on Acquisition                                              (96,000)
    Purchase of property and equipment                                        -        (10,794)
    Notes Receivable                                                     71,000              -
                                                                 -------------- --------------

       Net cash used in investing activities                            (25,000)       (10,794)
                                                                 -------------- --------------

Cash flows from financing activities:
   Repayment of loans payable                                          (188,185)
   Notes payable convertible debenture                                                 777,985
   Notes payable                                                         50,000        350,000
   Proceeds from sale of common stock options                           150,000        330,972
                                                                 -------------- --------------

   Net cash provided by financing activities                             11,815      1,458,957
                                                                 -------------- --------------
Effect of exchange rates on cash                                         (7,720)          (167)
                                                                 -------------- --------------

Net increase (Decrease) in cash and cash equivalents                    (57,380)        29,405

Cash and cash equivalents at beginning of year                           65,761         36,356
                                                                 -------------- --------------

Cash and cash equivalents at end of period                       $        8,379 $       65,761
                                                                 ============== ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
     Cash paid for interest                                               8,092          2,380
                                                                 ============== ==============
</TABLE>



          See accompanying notes to consolidated financial statements.

                                       VI

<PAGE>


                           PACEL CORP. AND SUBSIDARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATMENTS
                           DECEMBER 31, 2002 AND 2001


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.
     The  Company  will also  provide  Administrative  Services  along  with its
     technology services, and business consulting. In December 2002, the Company
     formed a wholly owned  subsidiary  The Resourcing  Solutions  Group Inc. to
     acquire and run the PEO companies.

     The sales in 2002 were derived from computer  hardware,  software sales and
consulting services.


     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.  For those  consolidated  subsidiaries  where
     Company  ownership is less than 100%, the minority  stockholders'  interest
     are shown as a minority interest.  Investments in affiliates over which the
     Company  has  significant  influence  but not a  controlling  interest  are
     carried on the equity basis.


     c)   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.


     d)   Inventories

     Inventories are stated at the lower of cost or market,  which  approximates
     actual cost, using the first in, first out method.


                                      VII

<PAGE>



     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

     Revenue is  recognized  when  earned.  The  Company's  revenue  recognition
     policies are in  compliance  with  American  Institute of Certified  Public
     Accountants  Statement  of Position  97-2.  Software  Revenue  Recognition.
     Revenue  from  products  licensed to original  equipment  manufacturers  is
     recorded when the  manufacturers  ship licensed products while revenue from
     organization  license  programs  are  recorded  when the  software has been
     delivered and the customer is invoiced. Revenue from packaged product sales
     to  distributors  and  resellers  is recorded  when  related  products  are
     shipped.  Maintenance and subscription  revenue is recognized  ratably over
     the contract period.  Revenue  attributable to significant support is based
     on the price  charged or derived value of the  undelivered  elements and is
     recognized ratably on a straight-line basis over the producer's life cycle.
     Costs related to insignificant obligations, which include telephone support
     for certain products, are accrued.  Provisions are recorded for returns and
     bad debts.


     h)   Advertising Costs

     The Company expenses all advertising costs as incurred.


     i)   Research and Development Expenses

     Costs  incurred in the product  development  of new  software  products are
     expensed as incurred until technological  feasibility has been established.
     Software  development costs, which are required to be capitalized  pursuant
     to Statement of Financial  Accounting Standards No. 86, "Accounting for the
     Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed," have
     not been  material to date. To date,  the  establishment  of  technological
     feasibility  of the Company's  products and general  release  substantially
     coincide.  As a  result,  the  Company  has not  capitalized  any  software
     development costs.

                                       VIII

<PAGE>


     j)   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.


     k)   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.


     l)   Foreign Currency Translation

     The financial statements of the Company's foreign subsidiaries are measured
     using the local currency as the functional currency. Assets and liabilities
     of these  subsidiaries  are  translated at exchange rates as of the balance
     sheet date with the resulting translation  adjustments recorded directly to
     a separate component of shareholders'  equity.  Income and expense accounts
     are  translated at average  exchange  rates during the year.  The resulting
     cumulative  translation  adjustments are included in the  consolidated  and
     combined  statements  of  operations  and were not material for any periods
     presented herein.


     m)   Segment Information

     SFAS No. 13 1,  "Disclosures  about  Segments of an Enterprise  and Related
     Information"   establishes   standards  for  reporting   information  about
     operating segments in financial statements.  Operating segments are defined
     as components of an enterprise about which separate  financial  information
     is available that is evaluated  regularly by the chief  operating  decision
     maker,  or  chief  decision  making  group,  in  deciding  how to  allocate
     resources  and  in  assessing  performance.  The  Company  operates  in one
     segment.

                                       IX

<PAGE>


     n)   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.


     o)   Stock Options

     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.


     p)   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
     minimal  revenues  since  inception  to December 31,  2002.  These  factors
     indicate that the Company's  continuation,  as a going concern is dependent
     upon its ability to obtain adequate financing


     q)   Impact of Recently Issued Accounting Standards

     The financial  Accounting  Standards Board (FASB) recently issued SFAS 141,
     "Business  Combinations,"  SFAS  142,  "Goodwill  and  Intangible  Assets,"
     SFAS143,  "Accounting  for  Asset  Retirement  obligations"  and SFAS  144,
     "Accounting for the impairment or Disposal of Long -Lived Assets."

     SFAS 141 requires companies to account for acquisitions  entered into after
     June 30,2001 using the purchase method and establishes  criteria to be used
     in  determining  whether  acquired  intangible  assets  are to be  recorded
     separately  from  goodwill.  Statement  142 sets forth the  accounting  for
     goodwill  and  intangible   assets  after  the  completion  of  a  business
     acquisition and for goodwill and intangible assets already recorded. We are
     no longer amortizing good will beginning January 1, 2002. Rather,  goodwill
     will be tested for  impairment  by comparing  the asset's fair value to its
     carrying value. The Company has adopted Statement 142 on January 1, 2002.

                                       X

<PAGE>


     SFAS 143  requires  the fair  value of a  liability  for  asset  retirement
     obligations  to be  recorded  in the  period in which it is  incurred.  The
     statement applies to a company's legal or contractual obligation associated
     with the retirement of a tangible  long-lived  asset that resulted from the
     acquisition,  construction or development through the normal operation of a
     long-lived  asset.  The  statement was adopted by the Company on January 1,
     2003.

     SFAS 144 addresses  the  accounting  and  reporting  for the  impairment or
     disposal of long-lived  assets.  The statement provides a consistent method
     to value  long-lived  assets to be disposed of. New criteria must be met to
     classify the asset as a asset  held-for-sale.  This  statement also changes
     the rules  for  reporting  the  effects  of a  disposal  of a segment  of a
     business. This statement was adopted January 1, 2002.


2)   Business Combinations:

     On September  4, 2001 PLRP  Acquisitions  Corp.  a wholly owned  subsidiary
     acquired all of the outstanding  stock,  90,000 shares of Advantage Systems
     Inc. a wholly owned  subsidiary of Advantage  Technologies  for $70,000 and
     assumption  of $739,523 of debt.  The  acquisition  was  accounted for as a
     purchase under Accounting  Principles Board opinion No. 16 (APB no. 16). In
     accordance with APB No. 16, the Company  allocated the purchase price based
     on the fair value of the assets acquired and liabilities assumed. Good will
     resulting  from the purchase of $401,107 was written off in March 2002.  In
     September  2002 the Company  discontinued  the  manufacturing  and sales of
     computer hardware in California.


3)   Discontinued Operations

     On May 31, 2002, the Company  completed an agreement to sell E-Bstor an 80%
     owned subsidiary to F. Kay Calkins a director.  The Company recorded a gain
     on the  sale  of  $177,817.  Ms.  Calkins  assumed  all of the  assets  and
     liabilities  on the  books as of May 31,  2002.  There is an  inter-company
     receivable of $1,568,815 which we have taken a 100% reserve against, due to
     our  inability to determine  when E-Bstor will have  adequate  cash flow to
     repay this loan. The Consolidated  Financial Statements have been restated,
     where applicable, to reflect the E-Bstor Discontinued operations.

     In September  2002,  the Company  discontinued  operations  relating to the
     manufacturing and sales of computer  hardware.  The Consolidated  Financial
     Statements have been restated, where applicable, to reflect this.

                                      XI

<PAGE>


4)   Property and Equipment:

     Property and equipment consist of the following:

                                                        December 31,
                                                      2002         2001
                                                    --------     --------
         Computers and office Equipment              153,101     $155,069
         Less accumulated depreciation               128,140       73,946
                                                    --------     --------
                                                    $ 24,961     $ 81,123
                                                    --------     --------


5)   Notes Receivable

     The company extended a long-term note to CTM Automated Systems, Inc. in the
     amount of $75,000  at an  interest  rate of 5.25%  payable  monthly  with a
     balloon payment October 2002. 1,000 shares of CTM stock  collateralize  the
     loan. The balance of the loan $71,000 was paid in November 2002.

6)   Notes Payable

     a)   Note payable bank

     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, 2002 and 2001 was$45,565 and $50,000 respectively.


     b)   Notes payable - Other

     The Company has issued five short term notes payable  amounting to $873,750
     that bear an interest  rate of 9% and was due 180 days from the approval of
     a $5,000,000 SB-2 filing.  See subsequent  events for details.  At December
     31,  2002  these  notes are in  default.  We were  unable to secure an SB-2
     filing to satisfy  these  notes.  We are working  with the note  holders to
     remedy the  payment of these  loans  through  working  capital of  possible
     conversion into stock.


     c)   Convertible Notes payable

     The Company had convertible  notes of $409,111 and $875,479 at December 31,
     2002 and 2001  respectively.  The notes bear interest rates of 8%-11%.  The
     conversion price of the debentures ranges from 70% to 40% of the average of
     the 5 trading days prior to conversion.

                                      XII

<PAGE>


     Under  the  terms of the  warrant  agreements,  the  exercise  price of the
     warrants  and the  number  of shares  purchasable  with  each  warrant  are
     adjusted when converted.  On the conversion date, the exercise price of the
     warrant is 70%-40% of the  average  market  price of the stock for the five
     days prior to  conversion.  Per Emerging  Issues Task Force  (EITF)  Number
     98-5,  "Accounting  for Convertible  Securities with Beneficial  Conversion
     Features or Contingently  Adjustable  Conversion  Ratios",  this beneficial
     conversion  feature was assigned an intrinsic value of $50,000 and $232,272
     have been  recorded as of  December  31,  2002 and 2001  respectively  , as
     calculated  under the provisions of the EITF.  This amount was  immediately
     expensed, at the time the Company signed the Agreement.


7)   Income Taxes

     The Company  provides for the tax effects of  transactions  reported in the
     financial statements. The provision if any, consists of taxes currently due
     plus deferred taxes related  primarily to differences  between the basis of
     assets and liabilities for financial and income tax reporting. The deferred
     tax  assets  and  liabilities,  if any,  represent  the  future  tax return
     consequences  of  those  differences,  which  will  either  be  taxable  or
     deductible when the assets and liabilities are recovered or settled.  As of
     December  31,  2002  and 2001  the  Company  had no  material  current  tax
     liability,  deferred tax assets, or liabilities  respectively.  The Company
     has  available a net  operating  loss carry  forward of  approximately  $12
     million for tax purposes to offset future taxable income. The net operating
     loss carryforwards expire in 2012-2020.

8)   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
     4-for-1  stock split,  in April of 1998 and a 1-for-4  reverse  stock split
     that became  effective on December 31, 1998 and April 2002 100 to 1 reverse
     stock split.

                                      XIII

<PAGE>


     The weighted average number of shares used to compute basic earnings (loss)
     per  share  was  14,714,561  and  28,834  at  December  31,  2002  and 2001
     respectively.


9)   Commitments and Contingencies:

     Operating Leases

     Future annual  minimum lease payments  under all  non-cancelable  operating
     leases as of December 31, 2002 are as follows:

                                       2003   $  23,947
                                       2004         -0-
                                       2005         -0-
                                       2006         -0-
                                              ---------
       Total Minimum Lease Payments           $  23,947


     Rent  expense  for  December  31,  2002 and  2001was  $109,789  and $97,871
     respectively

10)  Stockholders' Equity:

     a)   Preferred Stock:

     The Company's  Amended  Certificate of Incorporation  authorizes  5,000,000
     shares of no par, no 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.

                                       XIV

<PAGE>



     b)   Common Stock:

     The  authorized  common  stock of the  Company  consists of 200 billion and
     650,000,000  shares at December 31, 2002 and 2001 respectively  without par
     value.

     On November , 2002 by written consent of the 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 650 million to 200 billion shares

     On November 7, 2001, the  shareholders of the Company  approved an increase
     to the authorized  number of shares of common stock from 150 million to 650
     million  shares,  on December 5, 2001; the Board of Directors  approved the
     increase.

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

     On April 5, 2002 the Company  effected a one-for-one  hundred reverse split
     restating  the number of common  shares as of  December  31, 2001 from 247,
     064, 347 and December 31, 2000 from  39,348,486 to 393,485.  All references
     to  average  number of shares  outstanding  and  prices per share have been
     restated retroactively to reflect the split.

     On December 10, 2002,  the company  issued a one time stock dividend of one
     share of The Resourcing Solutions Group, Inc.( a OTC Non- Reporting company
     symbol - RESG) for each share of record of Pacel  Corp.  stock on  December
     10, 2002. We issued 478,037,735 shares of Resourcing Solutions Group common
     stock no par value stock  representing  24 %. These  shares had no value at
     December 31, 2002.


11)  Related Party Transactions:

     a)   Officers Loans

     The Company  recorded a liability to David and F. Kay Calkins in the amount
     of $1,080,309 and $259,686 at December 31,2002 and 2001  respectively,  for
     accrued payroll, loans and unreimbersed business expenses.


     b)   Employment Agreements

     In 2000 the Company  entered into a three year  employment  agreements with
     David  Calkins.  At  base  salaries  of  $175,000  per  year  respectively,
     effective January 1, 2001 and are eligible for retroactive  increases based
     on earnings per share of the Company.

                                      XV

<PAGE>


12)  Common Stock Options and Warrants

     In April  2002,  David  Calkins  president,  director  and F.  Kay  Calkins
     director of Pacel were  granted a noncash  option to  purchase  100,000,000
     shares of the company's common stock in exchange for the a loan made to the
     company in 1999  amounting  to  $124,000  and  securing  and loaning to the
     Company,  a personal line of credit of up to $3,000,000  using the stock as
     collateral.  Our ability to draw on this line is based on the volume of the
     Common Stock multiplied by the VWAP (volume weighted average price) for the
     thirty days  preceding  funding  must be a minimum of $75,000.  The maximum
     amount of  collateral  at any closing may not exceed 4.9% of the issued and
     outstanding shares of the Company.  Loan to value is 35%. The interest rate
     is prime+2  payable in cash  quarterly and  financing  expense of 9% of the
     draws.  The  Company  will pay  these  expenses  directly.  The  terms  and
     conditions  set fourth in the agreement we may not be able to meet. To date
     we have  drawn  approximately  $764,000.  Due to the low price of the stock
     additional proceeds from this line of credit maybe limited. In August 2002,
     we defaulted on the interest  payments.  The collateral of the  100,000,000
     shares of stock has surrendered.


13)  Business and Credit Concentrations:

     The amount  reported in the financial  statements for cash,  trade accounts
     receivable  and  investments  approximates  fair market value.  Because the
     difference  between cost and the lower of cost or market is immaterial,  no
     adjustment  has been  recognized  and  investments  are  recorded  at cost.
     Financial  instruments that potentially  subject the company to credit risk
     consist  principally  of trade  receivables.  Collateral  is generally  not
     required

14)  Comprehensive Income:

     At December 31, 2002 and 2001 net income and comprehensive  income were the
same.


15)  Subsequent Events

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

     b. In January and March 2003, in connection  with the  acquisition  of Bene
     Corp.and MRG California  LLC, we issued a total of 49,385,707  unrestricted
     shares of our  Common  Stock,  No Par Value per share,  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; and MRG California LLC. In addition the Company issued 120,000,000
     shares of  unrestricted  stock to David and F. Kay Calkins in exchange  for

                                      XVI

<PAGE>


     $600,000 of debts owed to them.  However,  because they are "Affiliates" of
     Pacel,  Mr. And Mrs.  Calkins will be able to re-sell  their shares only in
     compliance  with Rules 144 and 145.  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 and
     Illinois  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.

     c. In April 2003, the Company acquired 100% 2,940 shares of the outstanding
     stock of Benecorp Business Services Inc. to be accounted for as a purchase.
     The Company will assume approximately $1,000,000 of debt in connection with
     this purchase.  As  consideration  the Company will pay $300,000 in cash to
     and issued 200,000 shares of Section 144 restricted Pacel common stock. The
     Company made a deposit of $96,0000 in 2002. In connection with the purchase
     we signed two one year  employment  contracts with the officers for $75,000
     each.

     d. In April 2003,  the Company  purchased  up to  $100,000,000  of customer
     contracts from MRG California LLC for 3 times  annualized net profit margin
     on each  contract  in either  cash or free  trading  stock.  We have issued
     34,500,000  shares of the Companies free trading stock.  In connection with
     the purchase of the contracts we have signed a one year servicing agreement
     with MRG to services these contracts until RSG becomes  registered as a PEO
     in the state of California.

     e. In April 2003,  the Company  acquired  100% of the stock of Asmara to be
     accounted for as a purchase. The Company agreed to acquire all of the debts
     up to $2,000,000. In connection with this purchase the Company signed a two
     year  employment  with the officers of Asmara for $150,000.  In addition he
     may be granted options to purchase up to 1,500,000  shares of the Companies
     common  stock for .03 per  share.  These  options  will be issued  upon the
     Company reaching certain goal.

     f. The Securities and Exchange Commission ("SEC") filed an action in the US
     federal district court for Norther District of Illinois Case number 03c2182
     complaint,  alleges  inpart,asserting various violations of securities laws
     against us. The federal  district  court  asserting  various  violations of
     securities  laws against us. The  complaint  alleges that  defendant  Frank
     Custable  "orchestrated"  a "scheme" to illegally obtain stock from various
     companies,  including  the  Company ,  through  "scam  Commission  Form S-8
     registration  statements,  forged stock authorization form and at least one
     bogus attorney opinion letter arranged by Custable." The complaint  alleges
     that , in connection  with this alleged  "scheme," the Company and its CEO,
     David  Calkins  violated  Section 17(a) of the  Securities  Act and Section
     10(b) and Rule 10b-5 of the Exchange Act. The SEC asks that the Company and
     Calkins be  permanently  enjoined  from future  violations,  ordered to pay
     disgorgement  and civil  penalties  and  Calkins be barred  from  continued
     service as an office and director.  As part of an ex parte proceeding,  the
     District Court has ordered the Company and Calkins to provide an accounting
     of their assets and the transactions that are the subject of the complaint.
     The  Company has not yet been  served  with the  complaint,  and no further
     proceedings are scheduled at this time.



                                     XVIII