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, 2003

[_]  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 Number)

10108 Industrial Drive
Pineville, North Carolina                             28134
-----------------------------------------     ----------------------------------
(Address of principal executive offices)              (Zip Code)

Issuers telephone number: (704) 643-0676

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

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

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

                           COMMON STOCK, NO PAR VALUE
           ----------------------------------------------------------
                                (Title of Class)




<PAGE>



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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporate  by  reference  in Part III f this  Form  10-KSB  or any
amendment to this Form 10-KSB. [X]

The issuer's revenue for the fiscal year ended December 31, 2003 was $3,840,586.

As of March 25, 2004,  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 $1,134,880. As of March 25, 2004, the issuer had 27,903,051 outstanding
shares of common stock.

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










<PAGE>



PART I.

ITEM 1.  DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

In 2003, the Company  continued its strategy for penetrating the Human Resources
Outsourcing  ("HRO")  industry based on its evaluation of its business model and
existing  business  initiatives  completed in 2002.  The Company's  intention to
enter this business  sector was announced in September  2002 and was based on an
evaluation of potential business markets that provide the potential for success.

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

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

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

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

                                                                               3

<PAGE>


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

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

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

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

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


                                                                               4
<PAGE>


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

Human Resources Outsourcing Industry

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

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

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

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

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


                                                                               5
<PAGE>


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

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

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

Competition

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

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

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

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.



                                                                               6
<PAGE>


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

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

Employee Benefit Plans

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

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

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

Federal Employment Taxes

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

Among other  employment  tax issues  related to whether  PEOs are  employers  of
worksite  employees are issues under the Code  provisions  applicable to Federal
employment  taxes. The issue arises as to whether the Company is responsible for
payment  of  employment  taxes  on  wages  and  salaries  paid to such  worksite
employees.  Code  Section  3401(d)(1),  which  applies  to  Federal  income  tax
withholding  requirements,  contains an exception to the general common law test


                                                                               7
<PAGE>


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

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

State Regulation

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

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  insuranc coverage and excess
     premium generated from the workers' compensation component of the Company's
     service offering under the Company's loss sensitive  workers'  compensation
     programs;
ii)  volatility  of state  unemployment  taxes;
iii) the  uncertainties  of the  collateralization  required  by, as well as the
     availability  and/or  renewal  of, the  Company's  medical  benefit  plans,
     general  insurance  and workers'  compensation  insurance  programs for the
     worksite employees;
iv)  uncertainties  as to the amount the company wil 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;


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<PAGE>



vi)  litigation and other claims against the Company and its clients,  including
     the impact of such claims on the cost,  availability  and  retention of the
     Company's insurance coverage programs;
vii) impact of  competition  from  existing and new  businesses  offering  human
     resources outsourcing services;
viii)risks  associated with expansion into additional  markets where the Company
     does not have a  presence  or  significant  market  penetration;
ix)  risks  associated  with the  Company's  dependence  on key  vendors and the
     ability to obtain or renew benefit contracts and general insurance policies
     at rates and with retention amounts acceptable to the Company;
x)   an unfavorable  determination by the Internal Revenue Service or Department
     of Labor regarding the status of the Company as an "employer";
xi)  the  possibility  of  client  attrition  due  to  pric  competition  or the
     Company's decision to increase the price of its services, including medical
     benefits;
xii) risks associated with geographic market concentration;
xiii) the financial condition of clients;
xiv) the effect of economic  conditions  in the Unite  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 rate acceptable to the Company;
xviii) risks  associated  with third party claims relate to the acts,  errors or
     omissions of the worksite employees; and
xix) other factors  which are described in further  detail in this Annual Report
     on Form 10-KSB and in other filings by the Company with the  Securities and
     Exchange Commission.

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  completed the acquisition of 100% of the outstanding
stock of BeneCorp Business  Services,  Inc.  ("BeneCorp").  Such acquisition was
accounted for as a purchase.  In conjunction with the  acquisition,  the Company
assumed approximately  $1,000,000 of debt. Consideration for the transaction was
$200,000  in cash,  of which the Company  made an initial  deposit of $96,000 in
2002,  and the  issuance of 200,000  shares of  restricted  common  stock of the
Company.  The Company  also  executed  one year  employment  contracts  with two
principal officers of BeneCorp in conjunction with the acquisition.  The Company
recorded  the  acquisition  as a  purchase  and  recorded  $17,500  of fees  and
$1,669,500 of goodwill in association  with the acquisition.  In October,  2003,
the Company terminated the employment agreements with the two former officers of
BeneCorp.

In April 2003, The Resourcing  Solutions  Group,  Inc.  ("TRSG") entered into an
agreement  for  the  purchase  of  customer  contracts,  with a  value  of up to
$100,000,000,   from  Management   Resource  Group   California,   LLC  ("MRG").
Consideration  for such  contracts was to be three times  annualized  net profit
margin on each contract paid in either cash or freely  tradable  common stock of
the Company.  Initially,  the Company issued  34,500,000  shares of unrestricted
common stock in  conjunction  with the purchase of the  contracts and recorded a
receivable  of $600,000 in  conjunction  with that  issuance.  In addition,  the
Company  entered  into a  one-year  agreement  with  MRG to  provide  continuing
administrative  services under such customer contracts.  On August 27, 2003, the
Company  terminated its agreement with MRG as delivery of the promised contracts
was no longer viable based on restrictions in the California  insurance  market.



                                                                               9
<PAGE>


In conjunction with the termination of this agreement,  the Company entered into
a settlement agreement for repayment of the $600,000  receivable.  The repayment
requires  MRG to make  monthly  recurring  payment of  $20,000  over a period of
thirty (30) months.  MRG has failed to meet its obligations under this agreement
and the Company is currently reviewing its settlement and litigation options. As
of December  31, 2003,  there was $575,000  remaining as due to the Company from
MRG. The Company has fully reserved this amount as uncollectible.

In April 2003,  TRSG acquired  substantially  all of the assets of Asmara,  Inc.
("Asmara"),  a North  Carolina  corporation,  including its ownership of several
subsidiary  operations,  including  Asmara  Benefit  Services,  Inc.  and Asmara
Services I, Inc., North Carolina corporations,  Woodstock Lumber Sales, Inc., an
Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara of Florida II, Inc.,
Asmara  of  Florida  III,   Inc.  and  Asmara  of  Florida  IV,  Inc.,   Florida
corporations.  The  acquisition  was  accounted  for as a purchase.  The Company
assumed all debts of the operations of approximately  $1,400,000,  issued a note
payable to the  shareholder of Asmara,  Inc. in the amount of $431,530,  payable
over a two year period and  executed  employment  contracts  with the  principal
officer  and sole  shareholder  of Asmara.  Consideration  under such  agreement
consists of cash  compensation,  bonuses based on business unit  performance and
grants of options on the  common  stock of the  Company.  The  Company  recorded
$70,000 of fees and $1,859,858 of goodwill in conjunction with this acquisition.

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

Employees

As of March 31,  2004,  Pacel  Corp.  employed  16 persons on a full time basis.
Pacel Corp.  supplements  fulltime  employees with  subcontractors and part-time
individuals,  consistent  with workload  requirements.  The Company's  continued
success  depends  heavily  upon its  ability  to  retain  highly  qualified  and
competent personnel.

                       COMPLIANCE WITH ENVIRONMENTAL LAWS

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

ITEM 2. DESCRIPTION OF PROPERTY

The  Company   maintains  its  executive  offices  at  10108  Industrial  Drive,
Pineville,  North  Carolina  28134.  The company has a full service  lease until
December 31, 2004.  The  Company's  telephone  number is (704)  643-0676 and its
facsimile  number is (704)  643-0678.  The Company is also a party to leases for
three "key-man" office spaces located in Plano,  Texas;  Jacksonville,  Florida;
and Washington, Virginia.

ITEM 3. LEGAL PROCEEDINGS

The  Securities and Exchange  Commission  (the "SEC") filed an action in federal
district  court  asserting  various  violations of  securities  laws against the
Company.  The complaint  alleges that defendant Frank Custable  "orchestrated" a
"scheme"  to  illegally  obtain  stock from  various  companies,  including  the
Company, through "scam Commission Form S-8 registration statements, forged stock
authorization  form and least one bogus  attorney  opinion  letter  arranged  by
Custable." The complain alleges that, in connection with this alleged  "scheme",
the Company and its Chairman and former CEO,  David  Calkins,  violated  Section


                                                                              10
<PAGE>


17(a) of the  Securities  Act and Section  10(b) and Rule 10b-5 of the  Exchange
Act.  The SEC asks that the  Company and Calkins be  permanently  enjoined  from
future  violations,  ordered to pay disgorgement and civil penalties and Calkins
be barred from  continued  service as an officer and director.  As part of an ex
parte  proceeding,  the  District  Court has  ordered the Company and Calkins to
provide an accounting of their assets and the transactions  that are the subject
of the complaint. The Company has been served with the complaint, and no further
proceedings are scheduled at this time.

The Company is a defendant in various lawsuits,  mainly with previous vendors of
the Company still owed monies.  The Company  continues to settle such claims and
hired a law firm to  handle  such  negotiations.  All  claims  are  recorded  as
liabilities  on the balance  sheet of the Company and the Company  believes such
recorded reserves to be adequate for the settlement of the claims.

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

None.

PART II

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

The  common  stock of the  Company  is  traded  on  over-the-counter  Electronic
Bulletin  Board  under the symbol  "PCCL." On  December  31, 2003 there were 195
holders of record of our common  stock.  As many such shares are held by brokers
and other  institutions  on behalf of  stockholders,  the  Company  is unable to
estimate the total number of  stockholders  represented by these record holders.
The  following  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, 2002 and December 31,
2003 were as follows:

Calendar Quarter     High Bid Price        Low Bid Price

    2002
    First             $ 1,650.00            $ 270.00
    Second                360.00               60.00
    Third                  87.00               15.00
    Fourth                 37.00                6.00

    2003
    First                  17.00                0.70
    Second                  6.30                0.50
    Third                   2.40                0.10
    Fourth                  0.70                0.10

On December 31, 2003, there were approximately 195 shareholders of record of the
Company's Common Stock.

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

RECENT SALES OF UNREGISTERED SECURITIES

In 2003, in connection with the acquisition of BeneCorp Business Services, Inc.,
the acquisition of contracts from Management Resource Group California,  LLC and
other working  capital  purposes,  the Company  issued a total of  1,576,834,553
unrestricted shares of the Company's no par value common stock, before adjusting
such shares to reflect the effects of any stock splits  occurring  subsequent to
issuance.  After giving effect to the one- for-thirty reverse split on March 17,
2003 and the one-for-one hundred reverse split on February 24, 2004, such shares


                                                                              11

<PAGE>


would be restated  as  12,448,550  shares.  Such shares were issued to The Honor
Hedge Fund, LLC, a Nevada limited liability company; Reisco Consulting,  Inc., a
Nevada  Corporation;  Equities First, LLC a Delaware Limited Liability  Company;
MRG California LLC, a California  Limited  Liability  Company;  Compass Capital,
Inc., a New York Corporation;  and T&B Associates,  Inc., a Florida Corporation.
These shares were issued  pursuant to Section  3(a)(10) of the Securities Act of
1933, as amended, after a hearing with notice to, and an opportunity to be heard
from,  interested parties, as to the fairness of each transaction,  by courts in
Nevada,  Illinois and Florida who  specifically  determined,  prior to declaring
that the transactions were exempt under Section 3(a)(10),  that the transactions
were fair to the interested parties.

On April 25, 2003, the Company issued 120,000,000 shares of its common stock, no
par value per share,  to David and F. Kay  Calkins in exchange  for  $600,000 of
debts owed to them.  Subsequent  to the  one-for-one  hundred  split in February
2004, such shares were replaced with 1,200,000 shares of the common stock of the
Company.  However,  because they are  "Affiliates" of the Company,  Mr. and Mrs.
Calkins  will be able to sell such shares only in  compliance  with Rule 144 and
145. The shares were issued  pursuant to Section  3(a)(10) of the Securities Act
of 1933, as amended,  after a hearing with notice to, and an  opportunity  to be
heard from,  interested  parties,  as to the  fairness of each  transaction,  by
courts in Nevada and Illinois. Such courts

From January 1, 2004 until March 25,  2004,  in  connection  with the funding of
working capital shortfalls and expenses  associated with the review of potential
acquisition candidates,  the Company issued a total of 332,166,221  unrestricted
shares of the Company's no par value common stock,  before adjusting such shares
to reflect the effects of any stock  splits  occurring  subsequent  to issuance.
After giving  effect to the  one-for-one  hundred  reverse split on February 24,
2004,  such  shares  would be restated as  11,145,615  shares.  Such shares were
issued to Honor Hedge Fund,  LLC, a Nevada  limited  liability  company;  Reisco
Consulting,  Inc.,  a Nevada  corporation;  Compass  Capital,  Inc.,  a New York
Corporation; and T&B Associates, Inc., a Florida Corporation.  These shares were
issued  pursuant to Section  3(a)(10) of the Securities Act of 1933, as amended,
after a hearing with notice to, and an opportunity to be heard from,  interested
parties, as to the fairness of each transaction,  by courts in Nevada,  Illinois
and  Florida  who   specifically   determined,   prior  to  declaring  that  the
transactions were exempt under Section 3(a)(10), that the transactions were fair
to the interested parties.

Option Grants

None.

Issuances of Stock for Services or in Satisfaction of Obligations

The  Company  issued  41,623,496  shares  of its no par value  common  stock for
various  consulting,  financing  and legal fees for the year ended  December 31,
2003. After giving effect to the one-for-thirty  reverse split on March 17, 2003
and the  one-for-one  hundred  reverse  split on February 24, 2004,  such shares
would be restated as 319,567 shares.

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

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

Revenue for the year ended December 31, 2003 to $3,840,586. All of the Company's
revenue in 2003 was derived from its recently  acquired PEO operating  units. In
2002, the Company  derived revenue from the sale of retail hardware and software
products,   but  all  such  operations  have  been  classified  as  discontinued
operations  for  presentation  purposes.  In 2003,  the Company was not actively
selling such products due to all resources  being devoted to the acquisition and
development of its PEO business.


                                                                              12

<PAGE>



Due to the  significance  of the amounts  included in billings to the  Company's
clients  and its  corresponding  revenue  recognition  methods,  the Company has
provided the following  reconciliation of billings to revenue for the year ended
December 31, 2003. The Company had no such revenue in the corresponding  periods
of 2002.

                                                                   Year ended
                                                               December 31, 2003

       Reconciliation of billings to revenue recognized:
                Gross billings to clients                       $    25,437,118
                Less - Gross wages billed to clients                (21,597,214)
                                                                ---------------

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


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


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

Cost of services  for the year ended  December 31, 2003 was  $2,985,530,  and is
related  directly to the  delivery of services to its PEO  clients.  No such PEO
business activity occurred in the year ended December 31, 2002. During 2003, the
Company began experiencing  difficulties in processing  unemployment  claims for
its North Carolina worksite  employees.  Upon research of the difficulties,  the
Company learned that its North Carolina  Employment  Security Commission account
was being actively reviewed by that agency. Although the Company has received no
notices in writing from the agency,  it has engaged counsel to bring this matter
to a close as quickly as possible. There is a possibility that liability for the
Company may be the result of this review,  but management is currently unable to
provide a reasonable estimate of the amount.

Gross profit  contributed by the PEO operations of the Company totaled  $855,056
for 2003. This amount is equivalent of 3.42% of billings or 22.6% of revenue.

Sales,  general  &  administrative  expenses,   including  salaries  and  wages,
decreased  to$3,065,418  for the year  ended  December  31,  2003,  compared  to
$4,367,365 in the  corresponding  period of 2002. During 2002, the Company began
to decrease its level of spending for general and administrative  expenses as it
had discontinued the operations of its retail hardware and software business.

Depreciation expenses decreased to $25,438 for the year ended December 31, 2003,
compared to $55,618 for 2002. The majority of the 2003  depreciation  expense is
related to the Company's  acquisition of assets for its PEO business units.  The
decrease is due to the disposal of assets  related to the  Company's  relocation
and downsizing of its operating activities in 2002.

Interest  Expense is  interest  paid and  accrued on  convertible  notes,  notes
payable,  taxes and loans from officers or  stockholders.  Interest for the year
ended December 31, 2003 was $410,718 compared to $141,450 for the same period of
2002. The increase is primarily  attributable to the Company's continued need to
borrow for working capital needs.

Finance Expense for 2003 was $585,905 compared to $235,509 for 2002. The Company
recorded  imbedded  interest in  conjunction  with the  issuance of  convertible
debentures  during the period assuming  conversion of such debt was available on
an immediate  basis and has incurred fees associated with accessing its lines of
credit. The Company anticipates that such costs will continue at the 2003 levels
until an alternative source of financing can be implemented.

                                                                              13

<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

Net cash used for operating activities for the years ended December 31, 2003 and
2002 was  $3,592,727  and  $36,475  respectively.  The use of cash in  operating
activities  for the year ended December 31, 2003 is mainly  attributable  to the
increased  operating loss for the year,  settlement and repayment of outstanding
accounts payable and recognition of revenue previously deferred by the Company's
recently acquired BeneCorp Business Services unit offset by increases in accrued
expenses, payroll related liabilities related to the Company's recently acquired
PEO business units.

Net cash provided by investing  activities  for the year ended December 31, 2003
was $38,052.  The Company utilized $25,000 in the  corresponding  period of 2002
for  investing  activities.  During the  second  quarter  of 2003,  the  Company
utilized  $105,000 of cash in the  acquisition  of the Asmara and NSC  operating
units and  acquired  cash of $160,744 in the  acquisition  of BeneCorp  Business
Services.

Net cash provided by financing  activities  for the year ended December 31, 2003
was $4,228,696  compared to $11,815 in the  corresponding  period ended December
31, 2002. The cash provided  during the 2003 fiscal year is directly  related to
the Company's execution and utilization of three equity-based lines of credit.

On December  31,  2003,  the Company had  $682,400 in cash and cash  equivalents
compared to $8,379 at December 31, 2002.  In addition,  the Company  maintains a
trust account that, at December 31, 2003 had a balance of $1,100,000  related to
funds  prepaid  for 2004  services  by a client of the  Company.  Such funds are
segregated  and are  unavailable  for general  operating  purposes.  The Company
anticipates  that it will continue to have significant  capital  requirements as
operations  continue to use cash in excess of billings.  The Company  views this
investment in building its  infrastructure  as necessary to the execution of its
business plan.  The Company  consolidated  all operations  except sales and risk
management at its corporate headquarters in Charlotte, North Carolina by the end
of 2003 in order to reduce operating expenses.

In  September  2002,  the  Company  entered  into 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%. The Company can draw up to
$500,000 per month.  The line is being used to fund  acquisitions and shortfalls
in working  capital.  During 2003,  the Company drew down  $1,385,000 and issued
407,123,834  shares,  before the effect of any splits subsequent to the issuance
of those shares,  of common stock in  conjunction  with this equity line.  After
giving  effect  to the  one-for-thirty  reverse  split  in  March  2003  and the
one-for-one  hundred  reverse  split in February  2004,  the total shares issued
would be restated as 1,534,844 shares.

In March 2003, the Company entered into an equity line of credit for $10,000,000
from  Equities  First  Inc.  at a  discount  rate of up to 50%.  Pursuant  to an
Assignment and Assumption  Agreement dated February 10, 2004,  Gala  Enterprises
Ltd. Was  substituted  for Equities First Inc. Access to the funds is limited to
$500,000 per month.  The line is being used to fund  acquisitions and shortfalls
in working  capital.  The  Company  drew down  $377,675  and issued  119,000,000
shares,  before the effect of any splits  subsequent  to the  issuance  of those
shares,  of common  stock in 2003.  After  giving  effect to the  one-for-thirty
reverse  split  in March  2003  and the  one-for-one  hundred  reverse  split in
February 2004, the total shares issued would be restated as 320,000 shares.

                                                                              14

<PAGE>



Subsequent to the end of 2003 and the  substitution of Gala Enterprise  Ltd., no
funding under this line has occurred.

In  August  2003,  the  Company  entered  into  an  equity  line of  credit  for
$10,000,000  from Compass  Capital Inc. and T&B  Associates,  Inc. at a discount
rate of up to 50%.  The Company can draw up to $500,000  per month.  The line is
being used to fund acquisitions and shortfalls in working capital.  During 2003,
the Company drew down $2,275,000 and issued  1,017,210,718 share of common stock
in  conjunction  with this equity line.  After giving effect to the  one-for-one
hundred  reverse  split in  February  2004,  the total  shares  issued  would be
restated as 10,172,106 shares.

The cash  requirements  of the Company  needed to fund  corporate  and operating
expenditures  continue  to exceed  cash flows  generated  from  operations.  The
Company  continues to satisfy its capital needs through equity  financing  until
sufficient cash flows can be generated from PEO revenues  through organic growth
initiatives  for the  existing  operations  and the  acquisition  of  additional
business  units.  Liabilities of the Company  consist of over extended  accounts
payable,  payroll taxes, loans from officers and accrued officer's compensation.
The loss of equity  financing  would seriously  hinder the Company's  ability to
continue as a going concern.

The  Company is  continually  seeking  strategic  relationships  to enhance  its
products  and  services.  Currently,  the  Company  has  focused  its efforts on
developing strategic relationships with other organizations  associated with the
PEO  business.  The  Company  expects  to  continue  its  investing  activities,
including  expenditures  for PEO  acquisitions,  sales  and  marketing,  product
support, and administrative support, as funds are available.

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

In February 2004, the Company effected a one-for-one hundred reverse stock split
restating the number of common shares  outstanding  as of December 31, 2002 from
21,184,591 to 211,846 and the number of common shares outstanding as of December
31, 2003 from  1,675,736,763 to 16,757,368.  All references to average number of
shares  outstanding  and prices per share have been  restated  retroactively  to
reflect the split.

In April  2003,  the  Company  issued a one time  dividend  of one  share of The
Resourcing  Solutions Group, Inc. ("TRSG") (an  Over-the-Counter,  non-reporting
company,  Symbol:  RESG) for each share of the Company held by  shareholders  of
record on December 10, 2002.

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.

                                                                              15

<PAGE>



ITEM 7. FINANCIAL STATEMENTS

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

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

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

ITEM 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           60      Chairman of the Board, Director
F. Kay Calkins             45      Director
W. Revel Bellamy           54      President and Chief Executive Officer
Timothy L. Maness          43      Chief Financial Officer

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

Family Relationships

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

Business Experience

David E. Calkins, Chairman of the Board and Director

David E. Calkins founded PACEL in 1994 and is a member and Chairman of the Board
of Directors. Mr. Calkins also served as President,  Chief Executive Officer and
Chief  Financial  Officer of the Company until  December  2003.  From 1992 until
founding  PACEL,  Mr.  Calkins was the  Regional  Manager of three  divisions of
Pacific Nuclear Corporation ("PRC"), now known as Vectra Technologies,  Inc., an
engineering and information services company,  listed and traded on NASDAQ Stock
Market.  Vectra  Technologies  provides power plant  modifications,  maintenance
support and nuclear fuel  handling to utility  companies  and the United  States
Department of Energy.  From 1987 to 1993, Mr. Calkins served as Project Manager,
Program Director, Vice President of Operations, and Executive Vice President for
Business Development for PRC. Mr. Calkins

                                                                              16

<PAGE>



served from 1981 to 1986 as Manager of Engineering and Construction for the Zack
Company, a Chicago,  Illinois mechanical contractor to the utility industry. Mr.
Calkins  was also a Manager of Quality  Engineering  and  Startup  Engineer  for
Westinghouse. From 1972 to 1981, Mr. Calkins served as an Executive Engineer and
Consultant for NUS Corporation, a consulting firm for domestic and international
utilities,  The United States  Nuclear  Regulatory  Commission and Department of
Energy. Mr. Calkins resides in Virginia and is the spouse of F. Kay Calkins.

F. Kay Calkins, Director

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

W. Revel Bellamy

Mr. Bellamy was elected as President and Chief Executive  officer of the Company
in December 2003. Mr. Bellamy founded Asmara, the North  Carolina-based PEO that
was acquired by the Company in April 2003. Prior to the acquisition of Asmara by
the Company,  Mr.  Bellamy  served as President and Chief  Executive  Officer of
Asmara and its affiliated  companies.  Prior to founding Asmara, Mr. Bellamy had
accumulated  over twenty  years of  experience  building  and  operating a large
commercial   construction  company.  Mr.  Bellamy  currently  resides  in  North
Carolina.

Timothy L. Maness

Mr.  Maness was  elected as Chief  Financial  Officer of the Company in December
2003. He had served as Chief Financial Officer of Asmara from May 2002 until its
acquisition  by the Company in April 2003,  after  spending  three years with an
early-stage internet brokerage firm as Chief Financial Officer. Before that, Mr.
Maness spent five years, in several senior capacities,  with Broadway & Seymour,
Inc., a publicly  traded  software  concern  focused on the  financial  services
industry.  He  is a  senior  financial  executive  with  over  twenty  years  of
experience  in managing  and  directing  the  financial  activities  of business
organizations.  He  received  his  Bachelor  of Science in  Accounting  from the
University of North Carolina at Charlotte and is licensed as a Certified  Public
Accountant in North Carolina. Mr. Maness resides in North Carolina.



                                                                              17

<PAGE>



ITEM 10. MANAGEMENT REMUNERATION AND TRANSACTIONS

<TABLE>
<CAPTION>
Executive Compensation

                                   Annual        Annual      Annual              LT Comp       LT
                                     Comp          Comp        Comp                 Rest       Comp            LTIP
Name and Post           Year       Salary         Bonus       Other                Stock      Options         Payouts
-------------
<S>                     <C>       <C>            <C>        <C>                <C>             <C>              <C>
David E. Calkins,       2001      175,000 [1]         0           0                    0       33,333 [2]           0
Chairman of the Board   2002      175,000 [1]         0           0            1,200,000 [3]        0               0
                        2003      127,497 [4]         0     120,609 [4], [6]           0            0               0

William R. Bellamy,     2001            0             0           0                    0            0               0
President and CEO       2002            0             0           0                    0            0               0
                        2003       98,077 [5]    49,545       6,423    [6]             0            0               0

Timothy L. Maness,      2001            0             0           0                    0            0               0
CFO                     2002            0             0           0                    0            0               0
                        2003       77,499 [7]    10,840       4,469    [6]             0            0               0
</TABLE>

[1]  - Annual salary accrued on books, but not paid to Mr. Calkins.
[2]  - The Company issued  100,000,000  options for the purchase of common stock
     of the  Company to repay Mr.  Calkins  for prior  loans used to finance the
     Company. The issuance has been restated for the March 2003,  one-for-thirty
     reverse split and the February 2004, one-for-one hundred reverse split.
[3]  - Pursuant to a 3 (a) (10) filing, the Company issued 120,000,000 shares of
     the common  stock of the  Company to David E. and F. Kay Calkins to repay a
     loan made to the Company.  The issuance has been  restated for the February
     2004, one-for-one hundred reverse split.
[4]  - Mr. Calkins began receiving compensation payments from the Company in May
     2003.  He is currently  compensated  at an annual  salary of  $240,000.  In
     addition  to  his  regular   salary,   Mr.   Calkins  also  received  other
     compensation  of $116,667 in payment of prior years' salaries that had been
     previously accrued on the books of the Company.
[5]  - Mr.  Bellamy  became an  employee  of the  Company  on April 26,  2003 in
     conjunction  with the  acquisition  of  substanitally  all of the assets of
     Asmara, Inc. On December 22, 2003, Mr. Bellamy was elected as President and
     CEO of the  Company.  Mr.  Bellamy is  currently  compensated  at an annual
     salary of $216,000.
[6]  - Other annual  compensation  includes payments made on behalf on employees
     for health,  life and dental benefits and employer  matching  contributions
     for retirement plans.
[7]  - Mr.  Maness  became an  employee  of the  Company  on April  26,  2003 in
     conjunction  with the  acquisition  of  substantially  all of the assets of
     Asmara,  Inc.  On  December  22,  2003,  Mr.  Maness  was  elected as Chief
     Financial Officer of the Company. Mr. Maness is currently compensated at an
     annual salary of $135,000.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The  following  table sets forth certain  information  as of March 31, 2004 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

                                                                              18

<PAGE>



has the right to acquire 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  that may, at a subsequent  date,  result in any change of
control of the Company.


Name and Address                Title of      Amount and Nature     Percent
of Beneficial Owner [1]         Class         of Beneficial Owner   of Class
-----------------------------   ----------    -------------------  ----------
David E. Calkins                Common         600,010              3.60%
F. Kay Calkins                  Common         600,005              3.60%
All Directors and Executive
  Officers as a Group           Common         1,200,015            7.20%

[1]  - The  address  for each of the above is c/o Pacel  Corp.,  311 Gay Street,
     Suite 3E, Washington, Virginia 22747.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In April 2003, in connection with its acquisition of Asmara, the Company entered
into a two year  employment  agreement  with W.  Revel  Bellamy.  The  agreement
stipulated a base salary of $150,000 per year.

In April 2003, in connection with its acquisition of Asmara,  the Company became
party to a real  estate  lease for  office  space  located in  Charlotte,  North
Carolina.  The lessor for this property is W. Revel  Bellamy,  the President and
CEO of the Company.  The lease expires on December 31, 2004 and requires monthly
lease payments of $5,000.

In August 2003, the Company  entered into a one year  employment  agreement with
Timothy L. Maness. The agreement stipulates a base salary of $135,000 per year.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

     (a) Exhibits:

Exhibit No.     Description
----------      -----------

31.1     *      Section 302 Certification by the CEO

31.2     *      Section 302 Certification by the CFO

32.1     *      CEO Certification Pursuant to the Sarbanes-Oxley Act

32.2     *      CFO Certification Pursuant to the Sarbanes-Oxley Act

*       Filed herewith


     (b) Reports on Form 8-KSB:  8-K/A filed with the  Securities  and  Exchange
Commission on December 16, 2003


                                                                              19

<PAGE>



ITEM 14.  CONTROLS AND PROCEDURES

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

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

                                                                              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:    March 29, 2004


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

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

By:      /s/ W. Revel Bellamy
         ------------------------------------------------------
         W. Revel Bellamy, President and Chief Executive Officer

By:      /s/ Timothy L. Maness
         ------------------------------------------------------
         Timothy L. Maness, Chief Financial Officer

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

        Signature                 Title                             Date

By: /s/ David E. Calkins
    ------------------------
    David E. Calkins          Director, Chairman              March 29, 2004

By: /s/ F. Kay Calkins
    ------------------------
    F. Kay Calkins            Director                        March 29, 2004

By: /s/ W. Revel Bellamy
    ------------------------
    W. Revel Bellamy          President and CEO               March 29, 2004

By: /s/ Timothy L. Maness
    ------------------------
    Timothy L. Maness         CFO                             March 29, 2004



                                                                              21

<PAGE>






Financial Statement Table of Contents                                    Page

Independent Auditors' Report                                              F-2

Consolidated Balance Sheets
         December 31, 2003 and December 31, 2002                          F-3

Consolidated Statement of Operations
         For the years ended December 31, 2003 and December 31, 2002      F-5

Consolidated Statement of Stockholders' Deficit
         December 31, 2003 and December 31, 2002                          F-6

Consolidated Statement of Cash Flows
         For the years ended December 31, 2003 and December 31, 2002      F-7

Notes to Consolidated Financial Statements                                F-9






<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To The Board of Directors
Pacel Corp.

     We have  audited  the  accompanying  consolidated  balance  sheet  of Pacel
Corp.and  Subsidiaries  as of  December  31,  2003  and  2002  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  auditing  standards  generally
accepted in the United States of America.  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, 2003 and 2002, 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(l) to the financial  statements,  the Company has sustained significant losses
from  operations  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(l).  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

March 24, 2004


                                                                             F-2

<PAGE>



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

                                                                             December 31,             December 31,
                                                                                 2003                     2002
                                                                        ----------------            ---------------
<S>                                                                     <C>                         <C>
                                ASSETS
Current assets:
       Cash                                                             $        682,400            $         8,379
       Trust account - client deposits and advance payments                    1,100,000                        -0-
       Accounts receivable                                                        70,384                        -0-
       Stock subscription receivable                                             125,000                        -0-
       Prepaid expenses                                                           44,326                        -0-
       Workers compensation insurance deposits                                   132,851                        -0-
       Other receivables                                                             -0-                    112,499
                                                                        ----------------            ---------------

                Total current assets                                           2,154,961                    120,878
                                                                        ----------------            ---------------

Property and equipment, net of accumulated depreciation of
       $153,578 and $128,140, respectively                                        97,355                     24,961
                                                                        ----------------            ---------------

Other assets:
       Other receivables                                                           7,902                        -0-
       Goodwill                                                                1,075,432                        -0-
       Security deposits                                                           9,366                      3,991
                                                                        ----------------            ---------------

                Total other assets                                             1,092,700                      3,991
                                                                        ----------------            ---------------

                Total assets                                            $      3,345,016            $       149,830
                                                                        ================            ===============
</TABLE>






        See accompanying notes to the consolidated financial statements.

                                                                             F-3

<PAGE>


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

                                                                             December 31,             December 31,
                                                                                 2003                     2002
                                                                        ----------------            ---------------
<S>                                                                     <C>                         <C>
                LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
       Accounts payable                                                 $      1,119,543            $     1,353,022
       Payroll and payroll related liabilities                                 2,413,244                        -0-
       Accrued expenses                                                          559,229                    234,602
       Accrued expenses - officers                                               251,583                    316,533
       Loans payable - officers/stockholders                                   1,063,131                    639,776
       Client deposits and advance payments                                    1,100,000                        -0-
       Notes payable                                                             505,218                    873,750
       Notes payable - bank                                                       33,900                     45,565
       Capital Leases                                                             13,608                        -0-
       Income taxes payable                                                        2,532                        -0-
                                                                        ----------------            ---------------

                Total current liabilities                                      7,061,988                  3,463,248

Long-term liabilities:
       Loans payable-officers/stockholders                                        53,250                        -0-
       Convertible debentures                                                        -0-                    409,111
                                                                        ----------------            ---------------

                Total liabilities                                              7,115,238                  3,872,359

Stockholders' equity (deficit):
       Preferred stock, no par value, no liquidation value,
                5,000,000 shares authorized, 1,000,000 shares
                of 1997 Class A convertible preferred stock                       11,320                     11,320
       Common stock, no par value, 2,000,000,000 shares
                 authorized, 16,757,368 and 211,846 shares
                 issued respectively                                          17,500,377                 10,685,520
       Cumulative currency translation adjustment                                (18,720)                   (18,720)
       Accumulated deficit                                                   (21,263,199)               (14,400,649)
                                                                        ----------------            ---------------

                Total stockholders' (deficit)                                 (3,770,222)                (3,722,529)
                                                                        ----------------            ---------------

                Total liabilities and stockholders' deficit             $      3,345,016            $       149,830
                                                                        ================            ===============
</TABLE>






        See accompanying notes to the consolidated financial statements.

                                                                             F-4

<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                      Consolidated Statements of Operations


                                                                               Year ended
                                                                              December 31,
                                                                         2003             2002
                                                                ----------------  ----------------

<S>                                                             <C>               <C>
Revenue                                                         $      3,840,586  $            -0-
Cost of sales                                                          2,985,530               -0-
                                                                ----------------  ----------------
       Gross profit                                                      855,056               -0-

Operating costs and expenses:
       Sales, General and administrative                               3,065,418         4,367,365
       Depreciation and amortization                                      25,438            55,618
Interest expense                                                         410,718           141,450
       Financing costs                                                   585,905           235,509
                                                                ----------------  ----------------

                Total operating expenses                               4,087,479         4,799,942
                                                                ----------------  ----------------


Operating loss from continuing operations
       before extraordinary items                                     (3,232,423)       (4,799,942)

Loss on write-down of loan receivables                                  (717,500)              -0-
Gain on extinguishment of debt                                               -0-           426,150
Discontinued operations (Note 3):
Income from discontinued operations of FCL                                   -0-             7,959
Loss from discontinued operations of EBStor                                  -0-          (220,268)
Gain from disposal of EBStor                                                 -0-           177,817
                                                                ----------------  ----------------

Loss before cumulative effect of accounting change                    (3,949,923)       (4,408,284)

Cumulative effect of accounting change                                (2,912,627)         (407,049)
                                                                ----------------  ----------------

Net Loss                                                        $     (6,862,550) $     (4,815,333)
                                                                ================  ================

Net loss per common and common equivalent share:
       Basic                                                    $          (1.63) $         (32.72)
       Diluted                                                  $          (1.63) $         (32.72)

Weighted average shares outstanding:
       Basic                                                           4,207,603           147,146
       Diluted                                                         4,207,603           147,146
</TABLE>






        See accompanying notes to the consolidated financial statements.

                                                                             F-5

<PAGE>


<TABLE>
<CAPTION>
                          PACEL CORP. AND SUBSIDIARIES
                    Consolidated Statements of Stockholders'



                                                                                           Currency                      Total
                                  Preferred Stock               Common Stock              Translation               Stockholders
                                Shares       Amount        Shares[1]     Amount         (Deficit)      Adjustment     Deficit
                               ----------  -----------    -----------  -------------   --------------  ----------  ------------
<S>                             <C>          <C>          <C>          <C>             <C>             <C>         <C>
Balance, December 31, 2001      1,000,000    $  11,320            824  $   6,729,122   $   (9,585,316) $  (11,000) $ (2,855,874)

Issuance of common stock, in
  connection with convertible
  notes payable                                                47,979        541,418                                    541,418
Issuance of common stock,
  for professional services                                       200         36,000                                     36,000
Exercise of stock options                                      33,333        124,000                                    124,000
Issuance of common stock,
  options in connection with
  S-8 registrations                                           129,510      3,254,980                                  3,254,980
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        211,846     10,685,520      (14,400,649)    (18,720)   (3,722,529)

Issuance of common stock, in
  connection with convertible
  notes payable                                             2,577,405        964,934                                    964,934
Issuance of common stock,
  for professional services                                   384,567         53,575                                     53,575
Issuance of common stock,
  in connection with Section
  3(a)(10) filings                                         12,026,950      4,035,548                                  4,035,548
Embedded interest in
  connection with convertible
  debt issued under Section
  3(a)(10) filings                                                  -        360,800                                    360,800
Issuance of common stock, in
  in connection with repayment
  of loans from officers                                    1,200,000        600,000                                    600,000
Issuance of common stock, in
  connection with acquisitions                                356,600        800,000                                    800,000

Net loss                                                                                   (6,862,550)               (6,862,550)
                               ----------  -----------    -----------  -------------   --------------  ----------  ------------

Balance, December 31, 2003      1,000,000  $    11,320     16,757,368    $17,500,377   $  (21,263,199) $  (18,720) $ (3,770,222)
                               ==========  ===========    ===========  =============   ==============  ==========  ============
</TABLE>


[1]  - Shares are restated to reflect a  one-for-thirty  reverse  stock sp on
     March 17, 2003 and a  one-for-one  hundred  reverse stock split on February
     24, 2003.







        See accompanying notes to the consolidated financial statements.

                                                                             F-6

<PAGE>


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

                                                                             Year ended
                                                                            December 31,
                                                                         2003             2002
                                                                ----------------  ----------------
<S>                                                              <C>              <C>
Cash flows from operating activities:
       Net loss                                                  $  (6,862,550)   $    (4,815,333)
Adjustments to reconcile net loss to net cash
           provided by (used in) operating activities:
                Cumulative effect of accounting change                     -0-            407,049
                Depreciation                                            25,438             55,618
                Provision for bad debts                                625,000             (1,311)
                Other non-cash items                                   405,013          3,282,972
                Loss on impairment of asset                          2,912,627                -0-
                Gain on sale of EBStor                                     -0-           (177,817)
       Increase (decrease) in cash from changes in:
           Accounts receivable                                         (47,947)           324,134
           Other receivables                                           (20,995)            20,185
       Client Deposits                                              (1,100,000)               -0-
           Inventory                                                       -0-             61,306
           Insurance deposits                                           49,440                -0-
           Prepaid expenses                                             (5,160)               -0-
           Security deposits                                              (125)             6,131
           Accounts payable                                           (417,593)           (70,957)
           Accrued expenses                                            396,013             59,091
           Payroll and payroll related liabilities                     617,054                -0-
           Deferred revenue                                           (162,970)               -0-
           Loans payable - officers/stockholders                        (5,003)           812,457
           Income taxes payable                                           (969)               -0-
                                                                ---------------   ---------------
                Net cash (used in) operating activities             (3,592,727)          (36,475)

Cash flows from investing activities:
       (Purchases) disposals of property and equipment                 (17,692)               -0-
       Deposits on Acquisitions                                            -0-            (96,000)
       Notes receivable                                                    -0-             71,000
       Net cash received in acquisition                                160,744                -0-
       Cash used for acquisitions                                     (105,000)               -0-
                                                                ---------------   ---------------
                Net cash (used in) investing activities                 38,052            (25,000)

Cash flows from financing activities:
       Repayments of notes payable                                     945,457             50,000
       Repayment of Loans Payable                                          -0-           (188,185)
       Issuance of convertible notes payable                           (37,250)               -0-
       Repayments from lines of credit                                  (2,690)               -0-
       Proceeds from sale of common stock                            3,323,179            150,000
                                                                --------------    ---------------
                Net cash provided by financing activities            4,228,696             11,815

Effects of exchange rates on cash                                          -0-             (7,720)
                                                                -------------     ---------------
Net increase (decrease) in cash and cash equivalents                   674,021            (57,380)

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

Cash and cash equivalents, end of period                        $      682,400    $         8,381
                                                                ==============    ===============
</TABLE>

        See accompanying notes to the consolidated financial statements.

                                                                             F-7

<PAGE>



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

                                                                             Year ended
                                                                            December 31,
                                                                         2003             2002
                                                                ----------------  ----------------
<S>                                                              <C>              <C>

Supplemental disclosure of cash flow information:
       Cash paid for interest                                    $        24,980  $         8,092
                                                                 ===============  ===============
</TABLE>
















                [BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]








        See accompanying notes to the consolidated financial statements.

                                                                             F-8

<PAGE>



                           PACEL CORP. AND SUBSIDARIES
                    NOTES TO CONSOLIDATED FINANCIAL STATMENTS
                           DECEMBER 31, 2003 AND 2002

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.

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 is
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.  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.

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

f. Revenue recognition.  The gross billings that the Company charges its clients
under its Professional Services Agreement include each worksite employee's gross
wages and a service  fee.  The  Company's  service  fee,  which is computed as a
percentage  of gross  wages,  is  intended  to yield a profit to the Company and
cover the cost of  employment-related  taxes,  workers'  compensation  insurance
coverage,  and  administration and field services provided by the Company to the
client,  including payroll administration and record keeping, as well as safety,
human resources and regulatory compliance consulting services.  The component of
the service fee related to  administration  varies  according to the size of the
client,  the amount and frequency of payroll payments and the method of delivery
of  such  payments.  The  component  of the  service  fee  related  to  workers'
compensation and employer taxes, including unemployment  insurance, is based, in
part, on the clients  historical claims  experience.  All charges by the Company
are invoiced  along with each  periodic  payroll  delivered  to the client.  The
Company  reports  revenue from service fees in accordance  with Emerging  Issues
Task Force ("EITF") No. 99-19, Reporting Revenue Gross as a Principal versus Net
as an Agent. The Company reports as revenue,  on a gross basis, the total amount
billed to clients for service fees,  workers'  compensation  and employer taxes.
The Company  reports revenue on a gross basis for these fees because the Company
is the primary  obligor  and deemed to be the  principal  in these  transactions
under EITF  99-19.  The  Company  typically  bills its clients for wages paid to
worksite employees in an amount equal to the amounts paid to these employees for
these wages.  Accordingly,  such billings result in no profit to the Company and
when presented on a net basis results in no

                                                                             F-9

<PAGE>



revenue being recorded.  The Company  accounts for its revenue under the accrual
method of  accounting.  Under the  accrual  method of  accounting,  the  Company
recognizes  its revenues in the period in which the worksite  employee  performs
the work.

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

h.  Use of  Estimates.  The  preparation  o  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.

i.  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.

j. 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.

k. Stock Options.  The Company has adopte the disclosure  provisions of SFAS No.
148.  The  Company  accounts  for its  stock  options  in  accordance  with  the
provisions of Accounting  Principles Board (APB) Opinion No. 25,  Accounting for
Stock Issued to Employees,  and related  interpretations.  As such, compensation
expense would be recorded on the date of grant only if the current  market price
of the  underlying  stock exceeded the exercise  price.  On January 1, 1996, the
Company adopted the disclosure requirements of Statement of Financial Accounting
Standards  (SFAS) No. 123,  Accounting  for  Stock-based  Compensation.  Had the
Company  determined  compensation cost based on fair value at the grant date for
stock  options  under  SFAS No. 123 the effect  would have been  immaterial.  In
December 2002, the Financial  Accounting Standard Board ("FASB") issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure", SFAS
No. 148 amends Statement of Financial  Accounting Standards No. 123, "Accounting
for Stock-Based  Compensation,"  to provide  alternate methods of transition for
companies  electing to voluntarily change to the fair value method of accounting
for stock- based compensation and also amends the disclosure  provisions of SFAS
No. 123. The  provisions  of SFAS No. 148 are  effective for fiscal years ending
December 15, 2002.

l.  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 sustained  significant and continuing  losses from
operations.  These factors  indicate that the Company's  continuation as a going
concern is dependent upon its ability to obtain adequate  financing and becoming
profitable through growth in the PEO market.




                                                                            F-10

<PAGE>




2. Acquisitions

In April 2003, the Company  completed the acquisition of 100% of the outstanding
stock  of  BeneCorp.  Such  acquisition  was  accounted  for as a  purchase.  In
conjunction with the acquisition,  the Company assumed approximately  $1,000,000
of debt.  Consideration  for the  transaction was $200,000 in cash, of which the
Company made an initial  deposit of $96,000 in 2002, and the issuance of 200,000
shares of restricted common stock of the Company.  The Company also executed one
year employment contracts with two principal officers of BeneCorp in conjunction
with the  acquisition.  The Company  recorded the  acquisition as a purchase and
recorded  $17,500 of fees and  $1,669,500  of goodwill in  association  with the
acquisition.

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

In April 2003,  TRSG acquired  substantially  all of the assets of Asmara,  Inc.
("Asmara"),  a North  Carolina  corporation,  including its ownership of several
subsidiary  operations,  including  Asmara  Benefit  Services,  Inc.  and Asmara
Services I, Inc., North Carolina corporations,  Woodstock Lumber Sales, Inc., an
Oklahoma  Corporation and Asmara of Florida I, Inc., Asmara of Florida II, Inc.,
Asmara  of  Florida  III,   Inc.  and  Asmara  of  Florida  IV,  Inc.,   Florida
corporations.  The  acquisition  was  accounted  for as a purchase.  The Company
assumed all debts of the operations of approximately  $1,400,000,  issued a note
payable to the  shareholder of Asmara,  Inc. in the amount of $431,530,  payable
over a two year period and  executed  employment  contracts  with the  principal
officer  and sole  shareholder  of Asmara.  Consideration  under such  agreement
consists of cash  compensation,  bonuses based on business unit  performance and
grants of options on the  common  stock of the  Company.  The  Company  recorded
$70,000 of fees and $1,859,858 of goodwill in conjunction with this acquisition.

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

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

                                                                            F-11

<PAGE>



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.
Goodwill  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 and  software.  The  Consolidated
Financial  Statements  have been  restated,  where  applicable,  to reflect  the
discontinuance of these operations.

4. Property and Equipment:

   Property and equipment consist of the following:

                                                      December 31,
                                                  2003           2002
                                                  ----           ----

   Computers and office Equipment              $ 250,933     $ 153,101
   Less accumulated depreciation                 153,578       128,140
                                               ---------     ---------
                                               $  97,355     $  24,961
                                               =========     =========

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.

In August 2003, in conjunction  with the termination of its agreements with MRG,
the Company  entered into a  settlement  agreement  for  repayment of a $600,000
receivable.  The  repayment  required MRG to make monthly  recurring  payment of
$20,000  over a  period  of  thirty  (30)  months.  MRG has  failed  to meet its
obligations  under this  agreement  and the Company is currently  reviewing  its
settlement and litigation  options.  As of December 31, 2003, there was $575,000
remaining as due to the Company from MRG.  The Company has fully  reserved  this
amount as uncollectible.



                                                                            F-12

<PAGE>


6. Long and Short term Borrowings

     a. Short-term borrowings

                                              December 31,
                                          2003              2002
                                          ----              ----
Note payable bank                     $   33,900         $   45,565
Notes payable - Other                    505,218            873,750
Capital lease                             13,608                -0-

        Total Short-term borrowings   $  552,851         $  919,315
                                      ==========         ==========

     b.   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, 2003 and 2002 was $33,900 and $45,565 respectively.

     c.   Notes payable - Other.

          1) The Company  has issued  three  short term notes  payable  totaling
     $375,000,  the notes bear an interest rate of 9% per annum. At December 31,
     2003, the Company was in default under the terms of these note  agreements.
     The Company is working with the note holders to remedy the payment of these
     loans through working capital or possible conversion into stock.

          2) In connection with the acquisition of NSC, LLC the Company issued a
     note for $200,000. Such note is payable over eighteen (18) months and bears
     no interest. The balance at December 31, 2003 was $130,218.

     d.   Convertible Notes payable

     The Company had convertible notes of $-0- and $409,111 at December 31, 2003
     and 2002  respectively.  The notes  outstanding  at December  31, 2002 bore
     interest of 8%-11% per annum. The conversion price of the debentures ranged
     from 70% to 40% of the average of the 5 trading days prior to conversion.

     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 recorded
     as of December 31, 2002,  as calculated  under the  provisions of the EITF.
     This amount was  immediately  expensed,  at the time the Company signed the
     Agreement.





                                                                            F-13

<PAGE>


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,  2003  and 2002  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  $15
     million for tax purposes to offset future taxable income. The net operating
     loss carryforwards expire in 2012-2023.

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 one-for-one  hundred reverse stock
split in April 2002, a one-for-  thirty  reverse stock split in March 2003 and a
one-for-one hundred reverse stock split in February 2004.

The weighted  average number of shares used to compute basic earnings (loss) per
share was 4,207,603 and 147,146 at December 31, 2003 and 2002 respectively.

9. Commitments and Contingencies:

Operating Leases

Future annual minimum lease payments under all  non-cancelable  operating leases
as of December 31, 2003 are as follows:

                              2004         $  99,268
                              2005            24,292
                              2006            14,426
                              2007             5,910
                                           ---------
       Total Minimum Lease Payments        $ 143,896
                                           =========

Rent  expense  for  December  31,  2003  and  2002  was  $126,931  and  $109,789
respectively.



                                                                            F-14

<PAGE>


Legal

The  Securities and Exchange  Commission  (the "SEC") filed an action in federal
district  court  asserting  various  violations of  securities  laws against the
Company.  The complaint  alleges that defendant Frank Custable  "orchestrated" a
"scheme"  to  illegally  obtain  stock from  various  companies,  including  the
Company, through "scam Commission Form S-8 registration statements, forged stock
authorization  form and least one bogus  attorney  opinion  letter  arranged  by
Custable." The complain alleges that, in connection with this alleged  "scheme",
the Company and its CEO, David Calkins, violated Section 17(a) of the Securities
Act and Section  10(b) and Rule 10b-5 of the Exchange Act. The SEC asks that the
Company and Calkins be permanently  enjoined from future violations,  ordered to
pay  disgorgement  and civil  penalties  and  Calkins be barred  from  continued
service as an  officer  and  director.  As part of an ex parte  proceeding,  the
District  Court has ordered the Company and Calkins to provide an  accounting of
their assets and the  transactions  that are the subject of the  complaint.  The
Company has been  served  with the  complaint,  and no further  proceedings  are
scheduled at this time.

During  2003,  the  Company  began   experiencing   difficulties  in  processing
unemployment  claims for its North Carolina  worksite  employees.  In 2004, upon
research of those  difficulties,  the Company  learned  that its North  Carolina
Employment  Security  Commission  account  was being  actively  reviewed by that
agency. Although the Company has received no notices in writing from the agency,
it has engaged  counsel to bring this matter to a close as quickly as  possible.
There is a possibility  that liability for the Company may be the result of this
review,  but management is currently unable to provide a reasonable  estimate of
the amount.

10. Goodwilll and other Intangible Assets

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

In March 2002, the Company  recorded a charge for the impairment of the goodwill
that resulted  from its September 4, 2001 purchase of Advantage  Systems Inc. of
$401,107.  This  impairment  was reported as a cumulative  effect of a change in
accounting principle.

11. Stockholders' Equity:

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

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

                                                                            F-15

<PAGE>



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.

b.  Common  Stock:  The  authorized  common  stock of the  Company  consists  of
2,000,000,000 shares of no par value common stock at December 31, 2003 and 2002.

In November 2002, by written consent of a majority of stockholders,  the Company
adopted an  amendment  to the  Corporations'  Certificate  of  Incorporation  to
increase the number of authorized  shares of common stock,  from  650,000,000 to
2,000,000,000 shares.

In February 2004 the Company effected a one-for-one  hundred reverse stock split
restating the number of common shares at December 31, 2003 from 1,675,736,763 to
16,757,368.  All references to average number of shares  outstanding  and prices
per share have been restated retroactively to reflect the split.

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

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.  The
Company issued  478,037,735  shares of Resourcing  Solutions  Group no par value
common stock representing 24% of the total shares  authorized.  These shares had
no value at December 31, 2003.

12. Related Party Transactions:

a. Officers  Loans The Company  recorded a liability to David and F. Kay Calkins
in the  amount  of  $251,583  and  $1,080,309  at  December  31,  2003  and 2002
respectively, for accrued payroll, loans and unreimbursed business expenses.

In conjunction with its acquisition of Asmara, the Company issued a non-interest
bearing  note  payable  to the  shareholder  of  Asmara,  Inc.  in the amount of
$431,530,  payable over a two year period and executed employment contracts with
W. Revel  Bellamy,  the  principal  officer and sole  shareholder  of Asmara and
President  and CEO of the Company.  The balance of the note at December 31, 2003
was  $266,250.  In  addition,  the Company  provided a letter  agreement  to Mr.
Bellamy to provide  payment for  certain  personal  liabilities  retained by Mr.
Bellamy in conjunction with the  acquisition.  At December 31, 2003, the Company
had recorded  $850,131 as a note  payable to Mr.  Bellamy.  The Company  accrues
interest  on this note at a rate of 9% per annum.  The  Company  has  recorded a
total of $1,116,381 at December 31, 2003 payable to Mr.  Bellamy,  classified as
$1,063,131 in short-term notes payable and $53,250 as long-term notes payable.



                                                                            F-16

<PAGE>



b.  Employment  Agreements In April 2003, in connection  with its acquisition of
Asmara,  the Company entered into a two year employment  agreement with W. Revel
Bellamy. The agreement stipulates a base salary of $150,000 per year.

In August 2003, the Company  entered into a one year  employment  agreement with
Timothy L. Maness. The agreement stipulates a base salary of $135,000 per year.

13. Common Stock Options and Warrants

In April 2002,  David  Calkins,  Chairman and F. Kay Calkins,  Director of Pacel
were granted a non-cash  option to purchase  1,000,000  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. The Company's ability to draw on
this line was based on the volume of the  Common  Stock  multiplied  by the VWAP
(volume  weighted  average  price) for the thirty days  preceding  funding.  The
agreement requires minimum funding 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.  The loan to value ratio is 35%. The interest rate is prime + 200 basis
points,  payable quarterly and financing expense of 9% of the draws. The Company
may be unable to meet the terms and conditions set forth in the agreement. Until
August  2002,  the Company drew  approximately  $764,000.  In August  2002,  the
Company  defaulted on the interest  payments and the collateral of the 1,000,000
shares of stock was surrendered.

On April 25, 2003, the Company issued 120,000,000 shares of its common stock, no
par value per share,  to David and F. Kay  Calkins in exchange  for  $600,000 of
debts owed to them.  Subsequent  to the one-for-  one hundred  split in February
2004, such shares were replaced with 1,200,000 shares of the common stock of the
Company.  However,  because they are  "Affiliates" of the Company,  Mr. and Mrs.
Calkins  will be able to sell such shares only in  compliance  with Rule 144 and
145. The shares were issued  pursuant to Section  3(a)(10) of the Securities Act
of 1933, as amended,  after a hearing with notice to, and an  opportunity  to be
heard from,  interested  parties,  as to the  fairness of each  transaction,  by
courts in Nevada and  Illinois.  Such courts  specifically  determined  that the
transactions were fair to interested  parties and declared that the transactions
were exempt under Section 3(a)(10).

14. 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.

15. Comprehensive Income:

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

16. Customer Deposit

The Company had  $1,100,000 in Deferred  Revenue at December 31, 2003 related to
amounts prepaid for 2004 services from a single client.  The Company  executed a
letter agreement in conjunction with

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receipt of these funds that provides the funds be held in separate trust account
by the  Company  and not  commingled  with any  other  general  use funds of the
Company.  The Company draws down the pre- payment  account as needed to fund the
payment of  payroll,  deposit  taxes,  benefits,  fees and other  costs for this
single client pursuant to the agreement.

17. Subsequent Event

In February 2004, the Company effected a one-for-one hundred reverse stock split
restating  the number of common  shares of the Company at December 31, 2003 from
1,675,736,763 to 16,757,368.  All references to average number of shares, shares
outstanding and prices per share have been restated retroactively to reflect the
split.
















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