SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


[X]  Annual  Report  Pursuant  to  Section  13 or  15(d) of the  Securities  and
     Exchange Act of 1934

     For the fiscal year ended December 31, 1999

                                       OR


[_]  Transition  Report  Pursuant to Section 13 or 15(d) of the  Securities  and
     Exchange Act of 1934

     For the transition period from _______________ to _______________


                                            Commission file number
                                            COMFORCE Corporation:  1-6081
                                            COMFORCE Operating, Inc.: 333-43341


                              COMFORCE Corporation
                                       and
                            COMFORCE Operating, Inc.
             (Exact name of registrant as specified in its charter)


                                            COMFORCE Corporation: 36-23262248


           Delaware                         COMFORCE Operating, Inc.: 11-3407855
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)


415 Crossways Park Drive, P.O. Box 9006, Woodbury, New York             11797
         (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code: (516) 437-3300

Securities registered pursuant to Section 12(b) of the Act:

                                                          Name of Each Exchange
                          Title of Each Class              on Which Registered

COMFORCE Corporation: Common stock, $.01 par value       American Stock Exchange

COMFORCE Operating, Inc.: None

Securities registered pursuant to Section 12(g) of the Act:

COMFORCE Corporation: None

COMFORCE Operating, Inc.: None


                        (Cover page continued next page)



<PAGE>

                             (Cover page continued)



Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best  of  registrant's   knowledge,  in  the  definitive  proxy  or  information
statements  incorporated  by  reference  in Part  III of this  Form  10-K or any
amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes _X_ No ___

State the aggregate  market value of the voting stock held by  nonaffiliates  of
the registrant at March 24, 2000:

COMFORCE Corporation: $ 22,807,088

COMFORCE Operating, Inc.: Not Applicable

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

COMFORCE Corporation:


               Class                           Outstanding at March 24, 2000
      --------------------------               -----------------------------
     Common stock, $.01 par value                        16,430,575



COMFORCE Operating, Inc.:     COMFORCE  Corporation  owns all of the 100  issued
                              and outstanding shares of Common Stock of COMFORCE
                              Operating, Inc.


Documents Incorporated by Reference: None


                                        2

<PAGE>



                                     PART I


ITEM 1.  BUSINESS

Overview


     COMFORCE  Corporation  ("COMFORCE")  is a  leading  provider  of  specialty
staffing, consulting and outsourcing services primarily to Fortune 500 companies
for   their   information   technology,   telecommunications,   scientific   and
engineering-related  needs.  COMFORCE  Operating,  Inc. ("COI"),  a wholly-owned
subsidiary of COMFORCE,  was formed for the purpose of  facilitating  certain of
the  Company's  financing  transactions  in  November  1997.  Unless the context
otherwise  requires,  the term the "Company" refers to COMFORCE,  COI and all of
their direct and indirect subsidiaries.

     Through  a  national  network  of  62  offices  (47  company-owned  and  15
licensed),  the Company recruits and places highly skilled contingent  personnel
and provides  financial  and  outsourcing  services for a broad  customer  base,
including Sun Microsystems,  Bellsouth  Telecommunications,  Inc.  (directly and
through Anderson Consulting, LLP) and Microsoft Corporation. The Company's labor
force  consists  primarily  of computer  programmers,  systems  consultants  and
analysts,  engineers,  technicians,  scientists,  researchers and skilled office
support personnel.

     In February 2000, the Company completed the acquisition of Gerri G. Inc., a
Staten  Island based  provider of  staffing,  permanent  placement  and training
services. In 1999 Gerri G. generated sales of approximately $4.8 million.

Services

     The Company  provides a wide range of staffing,  consulting,  financial and
outsourcing services.  The Company's extensive proprietary database and national
presence  enable it to draw from a wealth of  resources  to link  highly-trained
computer,  telecommunications  and  other  professionals,  as well  as  clerical
personnel,  with  businesses  that need  highly  skilled  labor.  The  Company's
services  are designed to give its  customers  maximum  flexibility  and maximum
choice.  The Company's  professionals are available on a short-term or long-term
basis. The Company's  services permit businesses to increase the volume of their
work without increasing fixed overhead and permanent personnel costs.

     The Company  operates in two business  segments -- Staff  Augmentation  and
Financial  Services.   The  Staff  Augmentation   segment  provides  Information
Technology (IT), Telecom and Staffing  services.  The Financial Services segment
provides  outsourcing  and  consulting  services.  A description of the types of
services provided by each segment follows.

STAFF AUGMENTATION

Information Technology

     In the IT field, the Company provides highly skilled programmers, help desk
personnel,  systems  consultants  and analysts,  software  engineers and project
managers for a wide range of technical  assignments,  including  client  server,
mainframe,  desktop services and Internet/Intranet.  In 1999, placements related
to internet development  represented an increasing  percentage of new placements
in this field. In addition to these staffing services, the Company also provides
non-recruited payrolling services to certain of its IT customers. These services
consist  of acting as the  employer  for  workers  identified  by the  customer,
preparing  payrolls,  withholding  taxes, and tracking hours,  vacation and sick
days. In addition, these employees participate in the Company's benefit programs
rather than those of the customer.

     The  Company's  IT  customers  include  Microsoft  Corporation,   BellSouth
Telecommunications, Inc. (directly and through Anderson Consulting, LLP), Boeing
Information  Services,  Inc.,  Eastman  Kodak  Company,  Bank of America,  Xerox
Corporation, Southwest Airlines and Fidelity Investments.



                                       3
<PAGE>


Telecom

     The Company has  significantly  increased the amount of Telecom services it
has provided to its clients in recent  years,  fueled by the surge in demand for
voice and data transfer capacity. The Company provides skilled Telecom personnel
to  plan,  design,   engineer,   install  and  maintain  wireless  and  wireline
telecommunications systems, including cellular, PCS, microwave, radio, satellite
and other networks.

     The Company's Telecom customers include AT&T Corporation, Northern Telecom,
Inc.,  Reltec  Corporation,  ALCATEL  Network  Systems,  Inc.,  Motorola,  Inc.,
Ericsson Corporation and Pacific Intertel.

Staffing

     The Company  provides both  Technical  Staffing  services and  Professional
Staffing services.

     Technical  Staffing.  The Company provides  Technical Staffing services for
national laboratory research in such areas as environmental safety,  alternative
energy source  development  and laser  technology,  and provides  highly-skilled
labor  meeting  diverse   commercial   needs  in  the  avionics  and  aerospace,
architectural,   automotive,  energy  and  power,  pharmaceutical,   marine  and
petrochemical  fields.  The  Company  also  provides  non-recruited   payrolling
services to certain Technical Staffing customers.

     The  Company's   Technical   Staffing  customers  include  Boeing  Company,
Westinghouse  Electric  Corporation,  and  the  National  Department  of  Energy
National Research Laboratories at Los Alamos and Sandia.

     Professional  Staffing.  The Company offers Professional  Staffing services
through 12 Company-owned and 15 licensed  locations.  In this field, the Company
provides  highly  specialized  professional  chemists,  biologists,   engineers,
laboratory  instrumentation  operators,  technicians  and  others  to  companies
involved in pharmaceutical,  environmental,  biotech and processing  businesses.
The Company also recruits and trains skilled clerical personnel who provide more
traditional services for medical office, legal and accounting professionals.

     The Company's Professional Staffing customers include R.R. Donnelley & Sons
Co., Estee Lauder Companies, Inc. and Dial Corporation,  as well as many smaller
companies such as independent medical providers and accounting firms.

FINANCIAL SERVICES

PrO Unlimited

     PrO  Unlimited  has become the industry  leader in  providing  confidential
consulting  and  conversion  services to companies  that require  assistance  in
complying with regulations  associated with the use of independent  contractors,
returning retirees and consultants.  If appropriate,  the Company may become the
employer of some or all of these clients' staff (on a non-recruited  basis) and,
in such cases,  will provide  various  services for these  employees,  including
preparing  payrolls,  withholding taxes and tracking hours and vacation and sick
days. In 1999, an increasing  proportion of PrO Unlimited's  revenue was derived
from its "Managing the Contingent Workforce" capability,  in which PrO Unlimited
assumes responsibility for all of a client's contingent workforce.

Funding and Support Services

     The Company also provides  payroll funding services and back office support
to  approximately  115  independent  consulting  and  staffing  companies.   The
Company's  back  office  services   include  payroll   processing  and  billing,
preparation of various management reports and analysis,  payment of all federal,
state and local payroll taxes and preparation and filing of quarterly and annual
payroll  tax  returns  for the  contingent  personnel  employed  and  placed  by
independently  owned and operated  staffing  and  consulting  firms.  Contingent
personnel  placed by such  independent  staffing  and  consulting  firms  remain
employees of such firms.  In providing  payroll  funding  services,  the Company
purchases the accounts receivable of


                                       4
<PAGE>


independent  staffing  firms and receives  payments  directly  from these firms'
clients.  The Company pursues the collection of those receivables;  however, the
amount of any  account  receivable  which is not  collected  within a  specified
period after billing is charged back by the Company to such firm.

Customers

     The Company  provides  staffing,  consulting and outsourcing  services to a
broad range of customers including  telecommunication  equipment  manufacturers,
telecommunication  service providers (wireline and wireless),  computer software
and hardware manufacturers,  aerospace and avionics firms,  utilities,  national
laboratories,   pharmaceutical  companies,   cosmetics  companies,  health  care
facilities,  educational  institutions and accounting firms. Services to Fortune
500 companies represent a majority of the Company's revenues.

     In certain cases, the Company's  contracts with its customers  provide that
the Company will have the first opportunity to supply the personnel  required by
that customer. Other staffing companies not under contract with the customer are
then offered the  opportunity to supply  personnel only if the Company is unable
to meet the customer's requirements.

     The Company  generally  invoices  its  customers  weekly.  IT,  Telecom and
Professional  Staffing  customers  generally obtain the Company's  services on a
purchase order basis,  while Technical Staffing and Financial Services customers
generally enter into long-term contracts with the Company.

     During the year ended December 31, 1999, no single  customer  accounted for
10% or more of the Company's revenues.  The largest four customers accounted for
approximately 27.7% of the Company's revenues.

Sales and Marketing

     The Company  services its customers  through a network of 47  company-owned
and 15 licensed branch offices located in 22 states across the United States and
its corporate  headquarters  located in Woodbury,  New York. The Company's sales
and marketing  strategy is focused on increasing its share of existing  customer
business,  expanding its business with existing customers through  cross-selling
to customers and by establishing  relationships with new customers.  The Company
solicits customers through personal sales  presentations,  telephone  marketing,
direct mail solicitation, referrals from customers, and advertising in a variety
of local and national media including the Yellow Pages,  magazines,  newspapers,
trade publications and through the Company's Internet home page.

     The  Company's  sales and  marketing  strategy is to maintain  its existing
account   relationships   while  developing  new  relationships   with  smaller,
faster-growing  companies.  The Company's  Relationship Managers are responsible
for  maintaining  contact  with  existing  clients,  maximizing  the  number  of
requisitions  that the  Company  will  have the  opportunity  to fill,  and then
working  with  the  recruiting  staff to  offer  the  client  the  candidate  or
candidates  that best fit the  specification.  New account targets are chosen by
assessing:  (1) their need for  contract  labor with skill sets  provided by the
Company; (2) the appropriateness of the Company's niche products to the client's
needs;  (3) the potential growth and  profitability of the account;  and (4) the
creditworthiness of the client.  While the Company's corporate office assists in
the  selection  of target  accounts,  the  majority  of  account  selection  and
marketing  occurs  locally,  and  the  emphasis  is on  smaller,  faster-growing
companies  rather than  larger,  national  accounts.  Relationship  Managers are
compensated primarily by commissions on gross profits generated.

Recruiting and Training of Billable Employees

     The Company's success depends on its ability to effectively and efficiently
match skilled  personnel  with specific  customer  assignments.  The Company has
established an extensive national resume database of prospective  employees with
expertise  in the  disciplines  served by the  Company.  To  identify  qualified
personnel for inclusion in this database,  the Company  solicits  referrals from
its existing personnel and customers, places advertisements in local newspapers,
trade magazines,  its Internet home page and other Internet sites, and otherwise
actively  recruits through the Internet.  The Company  continuously  updates its
proprietary   database  to  reflect   changes  in  personnel  skill  levels  and
availability.  Upon receipt of assignment  specifications,  the Company searches
the database to identify  suitable  personnel.  Once an individual's  skills are


                                       5
<PAGE>


matched to the  specifications,  the Company considers other selection  criteria
such as interpersonal skills,  availability and geographic preferences to ensure
there is a proper fit between the employee and the assignment being staffed. The
Company  can search  its  resume  database  by a number of  different  criteria,
including specific skills or qualifications,  to match the appropriate  employee
with the assignment.

     Management  believes  that the  Company  enhances  its  ability  to attract
recruits by making extensive training opportunities  available to its employees.
The Company employs  Internet-based  educational  programs to train employees in
the latest developments in IT,  telecommunications  and other technologies.  The
Company  also  maintains a training  facility in Dallas,  Texas,  where  Telecom
staffers  are  trained to install  and test  telecommunications  equipment,  and
provides a telephone  hot line to assist its clerical  employees  with  software
problems or questions.

     The Company  believes it has a  competitive  advantage  in  attracting  and
retaining specialty staffing and consulting personnel as it provides assignments
with high-profile  customers that make use of advanced  technology and offer the
employees the opportunity to obtain additional experience that can enhance their
skills and overall  marketability.  The Company also offers flexible  schedules,
wages and, depending on the contract or assignment, paid holidays, vacation, and
certain benefit plan opportunities to attract and retain qualified personnel.

Information Systems

     During 1999, the Company completed the  implementation of its PeopleSoft(R)
Enterprise Resource Planning system,  which the Company believes is the industry
standard.   With  its  PeopleSoft(R)  system,  the  Company  has  been  able  to
substantially  consolidate its back office operations.  Through this system, the
Company has also been able to substantially integrate the management information
systems of its 11 acquired companies.

     The Company is in the process of implementing  its  EZAccess(R)  recruiting
and database software system to consolidate the resume databases of its acquired
companies.  This software allows easier,  faster and more accessible updating of
its resume database and posting of job openings on a national basis. The Company
believes  that  EZAccess(R)  will  enhance both its  recruiting  efforts and its
customer service capabilities.

Competition

     The contingent  staffing and consulting  industry is very  competitive  and
fragmented.  There are relatively  limited barriers to entry and new competitors
frequently  enter the  market.  The  Company's  competitors  vary  depending  on
geographic  region and the nature of the service(s) being provided.  The Company
faces  substantial  competition from both larger firms possessing  substantially
greater  financial,  technical  and  marketing  resources  than the  Company and
smaller,  regional  firms  with a  strong  presence  in their  respective  local
markets.

     Management  believes that the availability  and quality of candidates,  the
effective monitoring of job performance, the scope of geographic service and the
price of service are the principal elements of competition.  The availability of
quality  contingent  personnel is an especially  important facet of competition.
The Company  believes its ability to compete also depends in part on a number of
competitive   factors  outside  its  control,   including  the  ability  of  its
competitors  to hire,  retain and  motivate  skilled  technical  and  management
personnel and the extent of its competitors' responsiveness to customer needs.

Employees

     The Company currently  employs  approximately 600 full-time staff employees
at its headquarters and Company-owned  offices. The Company issued approximately
52,000 W-2s to employees who provided  services to the Company's  clients during
1999.  In  addition  to  employees  on  assignment,   the  Company  maintains  a
proprietary database of prospective  employees with expertise in the disciplines
served by the  Company.  Billable  employees  are  employed by the Company on an
as-needed  basis  dependent  on customer  demand and are paid only for time they
actually work. Non-billable  administrative personnel provide management,  sales
and marketing and other services in support of the Company's staffing services.


                                       6
<PAGE>



Licensed Offices

     The Company has  granted a limited  number of licenses to operate  COMFORCE
offices.  The most recent license for a new office was granted in July 1992, and
the Company does not presently expect to grant more licenses.  Licensees recruit
contingent personnel and promote their services to both existing and new clients
obtained through the licensees' marketing efforts. Performance of the contingent
personnel and overall service quality is the direct responsibility of licensees,
and the  licensees are  ultimately  responsible  for the  collection of accounts
receivable.  The Company and the  licensees  share the gross  profits  from each
licensed office.

Regulations

     Contingent  staffing and consulting services firms are generally subject to
one or more of the following types of government  regulations:  (1) registration
of  the  employer/employees;   (2)  licensing,   record  keeping  and  recording
requirements; and (3) substantive limitations on operations. Contingent staffing
and consulting  firms are the legal employers of their workers.  Therefore,  the
Company is governed by laws regulating the employer/employee  relationship, such
as   tax   withholding   or   reporting,    social   security   or   retirement,
antidiscrimination  and  workers'  compensation.   In  addition,  the  Company's
licenses are considered to be franchises,  which are subject to regulation, both
by the Federal Trade Commission and a number of states.

ITEM 2. PROPERTIES

     The  Company  leases  all of its  office  space.  Excluding  the  Company's
headquarters,   these  leases  are  for  office  space   ranging  in  size  from
approximately  150 square  feet to  approximately  15,600  square  feet and have
remaining  lease terms of from less than one year to five years.  The  Company's
headquarters in Woodbury, New York occupies approximately 23,500 square feet and
the lease term for this space extends until 2010.  Effective  March 1, 2000, the
Company  entered into a lease for an  additional  14,500 square feet of space in
Woodbury, New York for headquarters expansion.  The Company owns no real estate,
except for an approximately 700 square foot condominium.

     The Company  believes that its  facilities are adequate for its present and
reasonably  anticipated  future business  requirements,  except to the extent of
future  acquisitions of existing  businesses.  In the case of such acquisitions,
the  Company  expects  to assume the leases of  businesses  acquired  or, to the
extent possible,  consolidate such operations with existing offices. The Company
does not anticipate difficulty locating additional facilities, if needed.

ITEM 3. LEGAL PROCEEDINGS

     In  January  1997,  Austin A.  Iodice,  who served as the  Company's  Chief
Executive Officer,  President and Vice Chairman while the Company was engaged in
the jewelry  business,  and Anthony  Giglio,  who performed the functions of the
Company's Chief  Operating  Officer while the Company was engaged in the jewelry
business,  filed separate suits against the Company in the Connecticut  Superior
Court alleging that the Company had breached the terms of management  agreements
entered  into with them by failing to honor  options to  purchase  Common  Stock
awarded to them in connection with the management of the jewelry  business under
the  terms of such  management  agreements  and the  Company's  Long-Term  Stock
Investment  Plan.  The suits  allege  that the  plaintiffs  are  entitled  to an
unspecified amount of damages.  The Company believes that the option to purchase
370,419  shares  granted to Mr.  Iodice  (through  Nitsua,  Ltd., a  corporation
wholly-owned  by him) and the option to purchase  185,210  shares granted to Mr.
Giglio,  each  having an  exercise  price of $1.125 per share,  expired in 1996,
three  months  after  Messrs.  Giglio and Iodice  ceased to be  employed  by the
Company.  Messrs.  Giglio  and  Iodice  maintain  that they were  agents and not
employees  of the Company and that the options  continue to be  exercisable.  In
October 1998,  plaintiffs  filed  motions for partial  summary  judgment,  which
motions  were  denied  by the  court in  March  1999.  The  parties  attended  a
non-binding mediation conference in February 2000 but were unable to resolve the
dispute.  The Company  intends to continue to vigorously  defend itself  against
these suits. Trial has been scheduled for November 2000.

     The  Company  is  a  party  to  routine  contract  and   employment-related
litigation  matters in the  ordinary  course of its  business.  No such  pending
matters, individually or in the aggregate, if adversely determined, are believed
by  management  to be material to the  business or  financial  condition  of the
Company. The Company maintains general liability insurance,  property insurance,
automobile insurance,  employee benefit liability insurance,  fidelity insurance
and directors' and officers'


                                       7
<PAGE>


liability  insurance.  The Company is  generally  self-insured  with  respect to
workers' compensation,  but maintains umbrella workers' compensation coverage to
limit its maximum exposure to such claims.

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

     None.


                                     PART II

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

     The  Company's  Common  Stock is  traded  on the  American  Stock  Exchange
(AMEX:CFS).  The high and low sales prices for the Common Stock,  as reported by
the American  Stock  Exchange in the Monthly  Market  Statistics for the periods
indicated, were as follows:

                                                    High      Low
                                                    ----      ---

1998      First Quarter ........................    9         6 9/16
          Second Quarter .......................   11 7/16    7 1/8
          Third Quarter ........................    9 3/4     4 5/8
          Fourth Quarter .......................    6 3/16    3 1/2

1999      First Quarter ........................    6 1/4     3 1/2
          Second Quarter .......................    3 15/16   2 5/8
          Third Quarter ........................    3 1/16    2
          Fourth Quarter .......................    3         1

2000      First Quarter (through March 24, 2000)    3 5/8     1 7/8

     The last  reported  sale  price of the Common  Stock of the  Company on the
American Stock Exchange on March 24, 2000 was $2.00. As of such date, there were
approximately 4,600 shareholders of record.

     The Company  anticipates  that it will not pay cash dividends on the Common
Stock for the foreseeable future and that it will retain its earnings to finance
future  growth.  The  declaration  and payment of  dividends  by the Company are
subject  to the  discretion  of its  Board  of  Directors  and  compliance  with
applicable law. Any  determination  as to the payment of dividends in the future
will depend upon, among other things, general business conditions, the effect of
such  payment  on the  Company's  financial  condition  and  other  factors  the
Company's Board of Directors may in the future consider relevant.  The revolving
credit facility  entered into with Heller  Financial,  Inc., as lender and agent
for other participating  lenders (the "Credit Facility"),  prohibits the payment
of cash  dividends.  In  addition,  the terms of COI's 12% Senior Notes due 2007
restrict COI's payment of dividends to the Company,  which is expected to be the
only source of funds from which the Company  could pay  dividends.  No dividends
were declared or paid on the Common Stock during 1999.

ITEM 6. SELECTED FINANCIAL DATA

     The following  table sets forth selected  historical  financial data of the
Company as of and for each of the five years in the period  ended  December  31,
1999. The Company  derived the statement of operations and balance sheet data as
of and for each of the five years in the period ended December 31, 1999 from its
audited historical consolidated financial statements.


                                       8
<PAGE>

<TABLE>
<CAPTION>
                                               1995         1996        1997         1998        1999
                                               ----         ----        ----         ----        ----
                                                          (in thousands, except per share data)
<S>                                         <C>          <C>         <C>          <C>         <C>
Statement of Operations Data: (1)
Net sales of services ...................   $   2,387    $  55,867   $ 216,521    $ 459,022   $ 436,221
Operating income (loss) .................      (3,679)       2,413       6,865       24,924      21,863
                                            ---------    ---------   ---------    ---------   ---------
Income (loss) from continuing operations       (4,332)       1,352      (3,700)         805      (2,038)
                                            ---------    ---------   ---------    ---------   ---------
Income (loss) available to common
   stockholders .........................     (14,886)         362      (4,437)         784      (2,038)
                                            =========    =========   =========    =========   =========
Diluted net income (loss) per share .....   $   (3.24)   $    0.03   $   (0.33)   $    0.05   $   (0.12)
Balance Sheet Data:
Working capital (deficit) ...............   $  (1,697)   $   8,012   $  59,762    $  65,563   $  65,989
Accounts receivable, net ................       1,698       12,042      72,865       81,680      81,834
Intangible assets, net ..................       4,801       24,756     135,516      138,847     139,010
Total assets ............................       8,536       43,366     235,934      246,082     249,710
Total debt, including current maturities          500        3,850     171,038      178,579     182,346
Preferred stock .........................        --              2           1         --          --
Stockholders' equity ....................       2,238       34,744      39,402       44,334      43,163
</TABLE>


----------

(1) Results for the year ended December 31, 1995  represent  results of COMFORCE
Telecom,  Inc. from the date of its acquisition,  October 17, 1995.  Results for
the year ended December 31, 1996 represent  results of COMFORCE  Telecom for the
entire  year,  results  of  Williams  Communications  Services,  Inc.  from  the
acquisition  date of March 3, 1996 through  December  31, 1996,  results of RRA,
Inc. and certain  related  entities  from the  acquisition  date of May 10, 1996
through  December 31, 1996,  results of Force Five, Inc. from the effective date
of  acquisition  of July 31, 1996 through  December 31, 1996,  results of AZATAR
Computer  Systems,  Inc. from the effective  date of  acquisition of November 1,
1996 through  December  31,  1996,  and results of  Continental  Field  Services
Corporation  and a related  entity from the  effective  date of  acquisition  of
November 8, 1996 through December 31, 1996.  Results for the year ended December
31, 1997 represent  results of RHO Company,  Incorporated  from the  acquisition
date of February  28,  1997  through  December  31, 1997 and results of Uniforce
Services,  Inc. from the acquisition  date of November 26, 1997 through December
31,  1997.  Results for the year ended  December 31, 1998  represent  results of
Camelot  Consulting  Group Inc.,  Camelot  Communications  Group  Inc.,  Camelot
Control Group Inc. and Camelot  Group Inc.  (collectively,  "Camelot")  from the
beginning of January 1998 through  December  31,  1998.  The  Company's  jewelry
operations were discontinued effective as of September 30, 1995.

ITEM 7. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

     The discussion set forth below  supplements  the  information  found in the
consolidated financial statements and related notes.

Overview

     Since October 1995,  the Company has completed 11  acquisitions,  including
one in the first quarter of 2000 (see "Overview" in Item 1 of this Report). Each
of these acquisitions has been accounted for on a purchase basis and the results
of  operations  of each of the  businesses  acquired  have been  included in the
Company's historical consolidated financial


                                       9
<PAGE>


statements from the date of acquisition.  Certain of these acquisitions  provide
for contingent  payments by the Company as a part of the purchase  consideration
based upon the operating results of the acquired businesses for specified future
periods.  The acquisitions were financed by the Company  principally through its
issuance of debt and equity  securities and borrowings under credit  facilities.
As a result,  the  Company's  historical  results of operations  include  bridge
financing  costs,  which are not expected to be incurred in future periods,  and
preferred  stock  dividends.  All  previously  issued  preferred  stock has been
repurchased or redeemed by the Company.

     Staffing personnel placed by the Company are employees of the Company.  The
Company  is  responsible  for  employee  related  expenses  for  its  employees,
including workers' compensation,  unemployment compensation insurance,  Medicare
and Social  Security  taxes and general  payroll  expenses.  The Company  offers
health,  dental,  disability  and  life  insurance  to its  billable  employees.
Staffing and consulting  companies,  including the Company,  typically pay their
billable  employees  for their  services  before  receiving  payment  from their
customers, often resulting in significant outstanding receivables. To the extent
the Company  increases  revenues  through  acquisitions  and/or internal growth,
these receivables will grow and there will be greater requirements for borrowing
availability under its credit facilities to fund current operations.

Results of Operations

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

     Net sales of  services  for the year ended  December  31,  1999 were $436.2
million,  a  decline  of 5.0%  from net  sales of  services  for the year  ended
December  31,  1998 of $459.0.  The  decrease  in 1999 net sales of  services is
principally  attributable  to a decrease  in sales to Staffing  and  Information
Technology customers,  offset partially by higher sales to the Company's Telecom
and  Financial   Services   customers.   The  Company's   business  with  Boeing
Corporation, its largest customer in 1998, was substantially lower in 1999. This
represented  the  majority of the decline  the Company  experienced  in sales to
Staffing  customers.  The Company also  experienced a decline in IT sales in the
second half of 1999 as result of the Year 2000 lockdown,  which slowed  contract
activity,  as many customers  limited or delayed IT development work until after
January 1, 2000.

     Cost of  services  for the year ended  December  31,  1999 was 80.7% of net
sales of  services  compared  to cost of  services  of 81.2% for the year  ended
December 31, 1998.  The cost of services  decrease as a percentage  of net sales
for the 1999 is a result of the strategies  undertaken by management to increase
margins,  as well as the Company's  business mix, which reflected  growth in the
Company's  Telecom sales and declines in certain of the  Company's  lower margin
Staffing services businesses.

     Selling,  general and administrative  expenses as a percentage of net sales
of services was 12.7% for the year ended  December  31, 1999,  compared to 12.1%
for the year ended December 31, 1998. This  percentage  increase was principally
attributable to the decline of net sales of services discussed above.

     Operating  income for the year ended  December 31, 1999 was $21.9  million,
compared to operating  income of $24.9  million for the year ended  December 31,
1998.  This decrease was  principally  attributable  to the reduced net sales of
services discussed above, partially offset by increased margins.

     The Company's  interest  expense for 1999 and 1998 is  attributable  to the
interest on the  Company's  credit  facility  with Heller  Financial,  Inc. (the
"Credit  Facility"),  COI's 12% Senior  Notes due 2007 (the "COI Notes") and the
Company's 15% Senior  Secured PIK  Debentures  due 2009 (the "PIK  Debentures"),
which  obligations  were incurred in 1997,  principally  in connection  with the
funding of business acquisitions.

     The income tax  provision  for the year ended  December  31,  1999 was $2.2
million on a profit  before  taxes of  $131,000,  as  compared  to an income tax
provision for the year ended  December 31, 1998 of $2.7 million on pretax income
of $3.5 million.  The difference  between the Federal  statutory income tax rate
and the Company's effective tax rate relates


                                       10
<PAGE>


primarily  to the  nondeductibility  of  amortization  expense  associated  with
certain  intangible assets,  the  nondeductibility  of a portion of the interest
expense  associated  with the PIK Debentures and adjustments to prior period tax
estimates.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

     Net sales of services of $459.0  million  for the year ended  December  31,
1998 were $242.0  million,  or nearly 112% higher than net sales of services for
the year ended  December 31, 1997. The increase in 1998 net sales of services is
attributable  principally  to the Company's  acquisition of Uniforce on November
26, 1997.

     Cost of  services  for the year ended  December  31,  1998 was 81.2% of net
sales of  services  compared  to cost of  services  of 86.1% for the year  ended
December 31, 1997. The cost of services decrease of 4.9% for 1998 is a result of
the Company's  business mix in that year, which reflected the full period impact
of  acquisitions  completed  during  1997 as  well as  growth  in  sales  to the
Company's IT, Telecom and Financial  Services  customers.  Sales in these fields
have  historically  generated higher gross margins than those in the more mature
Technical Staffing field.

     Selling, general and administrative expenses as a percentage of revenue was
12.1% for the year ended December 31, 1998,  compared to 9.1% for the year ended
December 31, 1997. This percentage increase was principally  attributable to the
operations of the  Company's  Uniforce  subsidiary,  which was acquired in 1997.
Uniforce's selling,  general and administrative  fees, which include significant
licensee costs related to its franchise operations,  are substantially higher on
a percentage basis than those historically recorded by the Company. The licensee
costs included in selling, general and administrative fees were $6.9 million for
1998 and $0.5  million for 1997  (which  included  only one month of  Uniforce's
operations).

     Operating  income for the year ended  December 31, 1998 was $24.9  million,
compared to  operating  income of $6.9  million for the year ended  December 31,
1997. This increase was principally  attributable to the Company's completion of
the Rhotech and Uniforce acquisitions in 1997.

     The Company's  interest expense for 1998 is attributable to the interest on
the  Credit  Facility,  the COI Notes and  COMFORCE's  15%  Senior  Secured  PIK
Debentures,  all of which  obligations  were incurred in November  1997. For the
year ended  December 31, 1997,  interest  expense is  attributable  to the $25.2
million principal amount of the Subordinated Debentures issued by the Company in
February  and March  1997 (the "Old  Subordinated  Debentures"),  the  Company's
credit  facilities  outstanding  during  the  year  and  the COI  Notes  and PIK
Debentures issued in November 1997. The amortization of the costs payable on the
Old  Subordinated  Debentures is reflected in bridge and  financing  charges for
1997.

     The income tax provision for the year ended  December 31, 1998 was for $2.7
million  on pretax  income of $3.5  million,  compared  to a tax  credit of $1.4
million on a loss before taxes of $5.1  million for the year ended  December 31,
1997.  The  difference  between  the Federal  statutory  income tax rate and the
Company's  effective  tax rate  relates  primarily to state income taxes and the
nondeductibility  of amortization  expense  associated  with certain  intangible
assets.

Financial Condition, Liquidity and Capital Resources

     The Company  pays its billable  employees  weekly for their  services,  and
remits  certain  statutory  payroll  and related  taxes as well as other  fringe
benefits.  Invoices  are  generated  to reflect  these costs plus the  Company's
markup.  These bills are typically paid in approximately  45 days.  Increases in
the  Company's  net sales of  services,  resulting  from  expansion  of existing
offices or establishment of new offices, will require additional cash resources.

     Management of the Company believes that cash flow from operations and funds
anticipated  to be available  under the Credit  Facility  will be  sufficient to
service the  Company's  indebtedness  and to meet  anticipated  working  capital
requirements for the foreseeable future.

     As of December  31,  1999,  the Company had  outstanding  $26.8  million in
principal  amount of PIK Debentures  bearing  interest at a rate of 15%,  $110.0
million in principal  amount of COI Notes bearing  interest at a rate of 12% and
$45.6  million  outstanding  under the Credit  Facility  bearing  interest at an
average rate of 8.6% per annum. The debt service costs


                                       11
<PAGE>


associated with the borrowings  under the COI Notes and the Credit Facility have
significantly reduced the Company's liquidity. The debt service costs associated
with the PIK Debentures may be satisfied  through the issuance of new notes.  To
date, the Company has chosen to issue new notes to pay these costs.

     As of December 31, 1999,  approximately  $139.0  million,  or 55.7%, of the
Company's  total  assets  were  intangible   assets.   These  intangible  assets
substantially  represent amounts attributable to goodwill recorded in connection
with the  Company's  acquisitions  and will be amortized  over a five to 40 year
period, resulting in an annual charge of approximately $4.5 million.

     The Company is  obligated  under  various  acquisition  agreements  to make
earn-out payments to the sellers of acquired companies,  subject to the acquired
companies' having met certain  contractual  requirements.  The maximum amount of
the remaining potential earn-out payments is $3.1 million in cash payable in the
two-year period beginning January 1, 2000. The Company cannot currently estimate
whether it will be obligated  to pay the maximum  amount;  however,  the Company
anticipates that the cash generated by the operations of the acquired  companies
will provide all or a substantial  part of the capital required to fund the cash
portion of the earn-out payments.

     During the year ended December 31, 1999, the Company's  primary  sources of
funds  to  meet  working  capital  needs  were  from  operating  activities  and
borrowings under the Credit Facility.  Cash and cash equivalents  increased $3.2
million  during  the year ended  December  31,  1999.  Cash  flows  provided  by
operating  activities  of $11.0  million  exceeded  cash flows used in financing
activities  of  $75,000  and  $7.7  million  of cash  flows  used  in  investing
activities.

Year 2000

     As described in the Company's annual report on Form 10-K for the year ended
December 31, 1998 and its quarterly  reports on Form 10-Q for the quarters ended
March 31, 1999,  June 30, 1999 and September 30, 1999,  the Company has examined
its critical IT and non-IT  operating  systems for Year 2000  compliance.  Since
entering  the  year  2000,  the  Company  has not  experienced  any  significant
disruptions  to its  business  either  directly  or by  reason  of any Year 2000
problems  affecting  the  Company's  customers  or  suppliers.  The Company will
continue to monitor its critical systems over the next several months,  but does
not anticipate any significant  Year 2000 impact on its business.  As previously
disclosed,  the Company  significantly  upgraded its computing  systems over the
last  several  years,  principally  for reasons  unrelated  to Year 2000 issues.
Consequently, the Company did not incur significant incremental costs in seeking
to become Year 2000 compliant.

Seasonality

     The Company's  quarterly  operating  results are affected  primarily by the
number of billing  days in the quarter  and the  seasonality  of its  customers'
businesses.  Demand for Technical  Staffing services has historically been lower
during the year-end  holidays  through  January of the following  year,  showing
gradual  improvement  over the remainder of the year.  Although less  pronounced
than in technical services,  the demand for Telecom and IT services is typically
lower during the first quarter until customers' operating budgets are finalized.
The Company  believes that the effects of seasonality will be less severe in the
future if sales to IT,  Telecom and  Financial  Services  customers  continue to
increase as a percentage of the Company's consolidated net sales of services.


                                       12
<PAGE>


Other Matters

     In June 1998, the Financial  Accounting  Standards  Board  ("FASB")  issued
Statement of Financial  Accounting  Standards No. 133, Accounting for Derivative
Instruments and Hedging Activities ("SFAS 133"). The FASB issued SFAS No. 137 in
June 1999 to delay the  effective  date of SFAS 133 to the first  quarter of the
fiscal year beginning after June 15, 2000 (January 1, 2001 for the Company). The
Company  does not expect the  adoption  of SFAS 133,  as amended by SFAS 137, to
have a  significant  effect  on  the  Company's  results  of  operations  or its
financial position.

Forward Looking Statements

     Various  statements  made  in this  Item 7 and  elsewhere  in  this  Report
concerning  the  manner in which the  Company  intends  to  conduct  its  future
operations,  and potential  trends that may impact future results of operations,
are forward looking  statements.  The Company may be unable to realize its plans
and objectives due to various important factors,  including, but not limited to,
heightened  competition for customers as well as for contingent  personnel which
could potentially require the Company's to reduce its current fee scales without
being able to reduce the personnel costs of its billable  employees;  due to the
Company's significant leverage,  its greater vulnerability to economic downturns
and its diminished  ability to obtain additional  financing for working capital,
capital  expenditures,  debt service requirements or for other purposes;  and if
the  Company  is unable  to  sustain  the cash flow  necessary  to  support  the
significant   amortization   charges   related  to  goodwill  for  its  acquired
businesses,  it could be required to write-off the impaired assets,  which could
have a  material  adverse  impact on its  financial  condition  and  results  of
operations.  Additional  important  factors  that could  cause the Company to be
unable to realize its plans and objectives are described under "Risk Factors" in
the Registration  Statement on Form S-3 of the Company filed with the Securities
and  Exchange  Commission  on July 2, 1999  (Registration  No.  333-82201).  The
disclosure  under "Risk Factors" in the  Registration  Statement may be accessed
through the Web site  maintained by the  Securities  and Exchange  Commission at
"http://www.sec.gov."  In addition, the Company will provide,  without charge, a
copy of such "Risk  Factors"  disclosure to each  stockholder of the Company who
requests  such  information.  Requests  for  copies  should be  directed  to the
attention  of Linda  Annicelli,  Vice  President of  Administration  at COMFORCE
Corporation,  415 Crossways Park Drive, P.O. Box 9006, Woodbury, New York 11797,
telephone 516-437-3300.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The  preponderance of the Company's  borrowings are fixed rate obligations.
During  1999,  only  approximately  16% of the  Company's  interest  expense was
attributable  to  variable  rate  loans,  all of which  were  under  the  Credit
Facility. Consequently,  management does not believe that any adjustments to the
rate under the  Credit  Facility  are  likely to have a  material  impact on the
Company's results of operations in the immediate  future.  Assuming an immediate
10% increase in the interest rate under the Credit  Facility,  the impact to the
Company in annualized  interest payable would be approximately  $450,000.  Since
management  does not believe that any  adjustments  to the rate under the Credit
Facility  are  likely to have a  material  impact on the  Company's  results  of
operations,  the  Company  has not  entered  into any swap  agreements  or other
hedging   transactions  as  a  means  of  limiting  exposure  to  interest  rate
fluctuations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Financial Statements and Schedules as listed on page F-1.

ITEM  9.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

     None.



                                       13
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information  required by this section will be included in the Company's
Proxy Statement which will be filed with the Securities and Exchange  Commission
on or before April 29, 2000 and is incorporated by reference herein.

ITEM 11. EXECUTIVE COMPENSATION

     The information  required by this section will be included in the Company's
Proxy Statement which will be filed with the Securities and Exchange Commission
on or before April 29, 2000 and is incorporated by reference herein.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The information  required by this section will be included in the Company's
Proxy Statement which will be filed with the Securities and Exchange  Commission
on or before April 29, 2000 and is incorporated by reference herein.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information  required by this section will be included in the Company's
Proxy Statement which will be filed with the Securities and Exchange  Commission
on or before April 29, 2000 and is incorporated by reference herein.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)  1.   Financial Statements as listed on page F-1.

     2.   Financial Statement Schedules as listed on page F-1.

     3.   Exhibits as listed on page E-1.

(b)  Reports on Form 8-K.

     No current  reports on Form 8-K were filed by the Company during the fourth
quarter of 1999.


                                       14
<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934,  each  registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

COMFORCE Corporation

By:  /s/ John C. Fanning
     -----------------------------------------------------
     John C. Fanning, Chairman and Chief Executive Officer

Date: March 29, 2000





COMFORCE Operating, Inc.

By:  /s/ John C. Fanning
     -----------------------------------------------------
     John C. Fanning, Chairman and Chief Executive Officer

Date: March 29, 2000


                                       15
<PAGE>



     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has been  signed  below  by the  following  persons  on  behalf  of each
registrant and in the capacities and on the dates indicated.

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


/s/ John C. Fanning             Chairman, Chief Executive
----------------------------    Officer and Director
    John C. Fanning             (Principal Executive Officer)    March 29, 2000




/s/ Harry Maccarrone            Executive Vice President
----------------------------    and Director (Principal
    Harry Maccarrone            Accounting Officer)              March 29, 2000




/s/ Robert H.B. Baldwin, Jr.    Senior Vice President and
----------------------------    Chief Financial Officer
    Robert H.B. Baldwin, Jr.    (Principal Financial Officer)    March 29, 2000




/s/ Michael D. Madden           Vice Chairman and
----------------------------    Director                         March 24, 2000
    Michael D. Madden




                                Director
----------------------------
    Daniel Raynor




/s/ Gordon Robinett             Director                         March 24, 2000
----------------------------
    Gordon Robinett




/s/ Keith Goldberg              Director                         March 24, 2000
----------------------------
    Keith Goldberg




/s/ Kenneth J. Daley            Director                         March 24, 2000
----------------------------
    Kenneth J. Daley


                                       16
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                                Table of Contents

                                                                          Page

Independent Auditors' Reports                                             F-2

Consolidated Financial Statements:
    Consolidated Balance Sheets as of December 31, 1999 and 1998          F-4

    Consolidated Statements of Operations for the
       years ended December 31, 1999, 1998 and 1997                       F-5

    Consolidated Statements of Stockholders' Equity for the
       years ended December 31, 1999, 1998 and 1997                       F-6

    Consolidated Statements of Cash Flows for the
       years ended December 31, 1999, 1998 and 1997                       F-8

    Notes to Consolidated Financial Statements                            F-10

Schedule

    Schedule II Valuation and Qualifying Accounts                         F-26


                                      F-1
<PAGE>

                          Independent Auditors' Report

Board of Directors and Stockholders
COMFORCE Corporation:

We  have  audited  the  accompanying  consolidated  balance  sheet  of  COMFORCE
Corporation  and   subsidiaries  as  of  December  31,  1999,  and  the  related
consolidated  statements of operations,  stockholders' equity and cash flows for
the  year  ended  December  31,  1999.  In  connection  with  our  audit  of the
consolidated financial statements,  we have also audited the financial statement
schedule  as listed in the  accompanying  index.  These  consolidated  financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated  financial statements and financial statement schedule based on our
audit.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects, the financial position of COMFORCE Corporation
and  subsidiaries  as of December 31, 1999, and the results of their  operations
and their cash flows for the year ended  December 31, 1999, in  conformity  with
generally  accepted  accounting  principles.  Also, in our opinion,  the related
financial  statement  schedule,   when  considered  in  relation  to  the  basic
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects, the information set forth therein.



                                                       KPMG LLP


Melville, New York
February 28, 2000


                                      F-2
<PAGE>




Report of Independent Accountants

To the Shareholders and Board of Directors of
of COMFORCE Corporation:




In our  opinion,  the  consolidated  financial  statements  listed  in the index
appearing on page F-1, present fairly, in all material  respects,  the financial
position of COMFORCE  Corporation and Subsidiaries at December 31,1998,  and the
results  of their  operations  and their cash flows for each of the two years in
the period ended December  31,1998,  in conformity  with  accounting  principles
generally  accepted in the United  States.  In  addition,  in our  opinion,  the
financial  statement  schedules for 1998 and 1997, listed in the index appearing
on page F-1, present fairly, in all material respects, the information set forth
therein  when  read in  conjunction  with  the  related  consolidated  financial
statements. These financial statements and financial statement schedules are the
responsibility of the Company's management;  our responsibility is to express an
opinion on these financial statements and financial statement schedules based on
our audits.  We conducted  our audits of these  statements  in  accordance  with
auditing standards  generally accepted in the United States,  which 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,   assessing  the  accounting  principles  used  and
significant  estimates made by management,  and evaluating the overall financial
statement  presentation.  We believe that our audits provide a reasonable  basis
for the opinion expressed above.




PricewaterhouseCoopers LLP
New York, New York
February 25,1999



                                      F-3
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                           Consolidated Balance Sheets

                           December 31, 1999 and 1998

               (in thousands, except share and per share amounts)



<TABLE>
<CAPTION>
                                     Assets                           1999         1998
                                                                   ---------    ---------
<S>                                                                <C>              <C>
Current assets:
    Cash and cash equivalents                                      $   7,818        4,599
    Accounts receivable, less allowance of
       $868 and $790 in 1999 and 1998, respectively                   45,872       47,727
    Funding and service fees receivable                               35,962       33,953
    Prepaid expenses and other current assets                          2,786        3,342
    Deferred income taxes, net                                         1,554        2,306
                                                                   ---------    ---------
                   Total current assets                               93,992       91,927

Property and equipment, net                                           11,490        9,256
Intangible assets, net                                               139,010      138,847
Deferred financing costs                                               5,218        6,052
                                                                   ---------    ---------

                   Total assets                                    $ 249,710      246,082
                                                                   =========    =========

                        Liabilities and Stockholders' Equity

Current liabilities:
    Borrowings under revolving line of credit                      $   4,000        4,000
    Accounts payable                                                   3,015        4,296
    Accrued expenses                                                  20,988       18,068
                                                                   ---------    ---------
                   Total current liabilities                          28,003       26,364

Long-term debt                                                       178,346      174,579
Deferred income taxes                                                     --          224
Other liabilities                                                        198          581
                                                                   ---------    ---------

                   Total liabilities                                 206,547      201,748
                                                                   ---------    ---------

Commitments and contingencies

Stockholders' equity:
    Common stock, $.01 par value; 100,000,000 shares authorized,
       16,395,549 and 16,129,322 shares issued and
       outstanding in 1999 and 1998, respectively                        164          161
    Additional paid-in capital                                        48,328       47,464
    Accumulated deficit, since January 1, 1996 (note 1)               (5,329)      (3,291)
                                                                   ---------    ---------

                   Total stockholders' equity                         43,163       44,334
                                                                   ---------    ---------

                   Total liabilities and stockholders' equity      $ 249,710      246,082
                                                                   =========    =========
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-4
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Operations

                  Years ended December 31, 1999, 1998 and 1997

                    (in thousands, except per share amounts)


<TABLE>
<CAPTION>
                                                         1999         1998         1997
                                                      ---------    ---------    ---------
<S>                                                   <C>            <C>          <C>
Revenue:
    Net sales of services                             $ 436,221      459,022      216,521
                                                      ---------    ---------    ---------

Costs and expenses:
    Cost of services                                    352,101      372,877      186,455
    Selling, general and administrative expenses         55,596       55,827       19,718
    Restructuring charge (credit)                          (163)        (211)       1,600
    Depreciation and amortization                         6,824        5,605        1,883
                                                      ---------    ---------    ---------

            Total costs and expenses                    414,358      434,098      209,656
                                                      ---------    ---------    ---------

Operating income                                         21,863       24,924        6,865
                                                      ---------    ---------    ---------

Other income (expense):
    Bridge and financing charges                             --           --       (7,672)
    Interest expense                                    (21,825)     (21,490)      (4,588)
    Other income (expense), net                              93           35          344
                                                      ---------    ---------    ---------
                                                        (21,732)     (21,455)     (11,916)

Income (loss) before income taxes                           131        3,469       (5,051)
Provision (credit) for income taxes                       2,169        2,664       (1,351)
                                                      ---------    ---------    ---------

            Net income (loss)                            (2,038)         805       (3,700)
                                                      ---------    ---------    ---------

Dividends on preferred stock                                 --           21          737
                                                      ---------    ---------    ---------

            Income (loss) available to common
               stockholders                           $  (2,038)         784       (4,437)
                                                      =========    =========    =========

Basic net income (loss) per common share              $   (0.12)        0.05        (0.33)
                                                      =========    =========    =========

Weighted average common shares outstanding, basic        16,315       15,971       13,493
                                                      =========    =========    =========

Diluted net income (loss) per common share            $   (0.12)        0.05        (0.33)
                                                      =========    =========    =========

Weighted average common shares outstanding, diluted      16,315       16,648       13,493
                                                      =========    =========    =========
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>

                      COMFORCE CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1999, 1998 and 1997

                      (in thousands, except share amounts)

<TABLE>
<CAPTION>
                                                                                                  Series D
                                                                  Common stock                 preferred stock
                                                           --------------------------    --------------------------
                                                              Shares         Amount         Shares         Amount
                                                           -----------    -----------    -----------    -----------
<S>                                                         <C>           <C>                 <C>       <C>
Balance at December 31, 1996                                12,701,934    $       127          7,002    $         1

Exercise of stock options                                      124,000              1             --             --
Exercise of stock warrants                                      80,000              1             --             --
Redemption of Series F preferred stock                              --             --             --             --
Conversion of Series D preferred stock                         583,500              6         (7,002)            (1)
Issuance of common stock as inducement
    to effect Series D conversion                               87,750              1             --             --
SEC registration fees                                               --             --             --             --
Issuance of warrants in connection with debt placement              --             --             --             --
Issuance of common stock in
    connection with payment right                              385,591              4             --             --
Issuance of common stock as consideration
    for interest owed on debt                                  118,145              1             --             --
Issuance of common stock in connection
    with the acquisition of Uniforce Services, Inc.          1,585,208             16             --             --
Issuance of warrants in connection with the
    acquisition of Uniforce Services, Inc.                          --             --             --             --
Redemption of common stock                                    (321,881)            (4)            --             --
Net loss                                                            --             --             --             --
Dividends:
    Series D preferred stock                                        --             --             --             --
    Series F preferred stock                                        --             --             --             --
                                                           -----------    -----------    -----------    -----------

Balance at December 31, 1997                                15,344,247            153             --             --
                                                           -----------    -----------    -----------    -----------

Exercise of stock options                                       80,500              1             --             --
Exercise of stock warrants                                     108,132              1             --             --
Conversion of Series F preferred stock                          57,143              1             --             --
SEC registration fees                                               --             --             --             --
Issuance of common stock in connection
    with the acquisition of Camelot                            203,307              2             --             --
Issuance of common stock in connection with acquisitions       335,993              3             --             --
Tax benefit from exercise of stock options                          --             --             --             --
Net income                                                          --             --             --             --
Dividends:
    Series F preferred stock                                        --             --             --             --
                                                           -----------    -----------    -----------    -----------

Balance at December 31, 1998                                16,129,322            161             --             --
                                                           -----------    -----------    -----------    -----------

<CAPTION>

                                                                   Series F                               Retained        Total
                                                                preferred stock          Additional       earnings        stock-
                                                           -----------    -----------      paid-in      (accumulated      holders'
                                                              Shares         Amount        capital        deficit)        equity
                                                           -----------    -----------    -----------    -----------    -----------
<S>                                                             <C>       <C>                 <C>            <C>            <C>
Balance at December 31, 1996                                     3,250    $         1         34,253            362         34,744

Exercise of stock options                                           --             --            141             --            142
Exercise of stock warrants                                          --             --            214             --            215
Redemption of Series F preferred stock                          (2,750)            --         (3,162)            --         (3,162)
Conversion of Series D preferred stock                              --             --             (5)            --             --
Issuance of common stock as inducement
    to effect Series D conversion                                   --             --            492           (493)            --
SEC registration fees                                               --             --           (625)            --           (625)
Issuance of warrants in connection with debt placement              --             --          1,511             --          1,511
Issuance of common stock in
    connection with payment right                                   --             --             (4)            --             --
Issuance of common stock as consideration
    for interest owed on debt                                       --             --            632             --            633
Issuance of common stock in connection
    with the acquisition of Uniforce Services, Inc.                 --             --         12,143             --         12,159
Issuance of warrants in connection with the
    acquisition of Uniforce Services, Inc.                          --             --            150             --            150
Redemption of common stock                                          --             --         (2,417)            --         (2,421)
Net loss                                                            --             --             --         (3,700)        (3,700)
Dividends:
    Series D preferred stock                                        --             --             --           (195)          (195)
    Series F preferred stock                                        --             --             --            (49)           (49)
                                                           -----------    -----------    -----------    -----------    -----------

Balance at December 31, 1997                                       500              1         43,323         (4,075)        39,402
                                                           -----------    -----------    -----------    -----------    -----------

Exercise of stock options                                           --             --            137             --            138
Exercise of stock warrants                                          --             --            459             --            460
Conversion of Series F preferred stock                            (500)            (1)          (298)            --           (298)
SEC registration fees                                               --             --            (46)            --            (46)
Issuance of common stock in connection
    with the acquisition of Camelot                                 --             --          1,498             --          1,500
Issuance of common stock in connection with acquisitions            --             --          2,005             --          2,008
Tax benefit from exercise of stock options                          --             --            386             --            386
Net income                                                          --             --             --            805            805
Dividends:
    Series F preferred stock                                        --             --             --            (21)           (21)
                                                           -----------    -----------    -----------    -----------    -----------

Balance at December 31, 1998                                        --             --         47,464         (3,291)        44,334
                                                           -----------    -----------    -----------    -----------    -----------
</TABLE>




                                                                     (Continued)


                                      F-6
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                 Consolidated Statements of Stockholders' Equity

                  Years ended December 31, 1999, 1998 and 1997

                      (in thousands, except share amounts)



<TABLE>
<CAPTION>

                                                                                                  Series D
                                                                  Common stock                 preferred stock
                                                           --------------------------    --------------------------
                                                              Shares         Amount         Shares         Amount
                                                           -----------    -----------    -----------    -----------
<S>                                                         <C>              <C>            <C>            <C>

Balance at December 31, 1998                                 16,129,322      $161                --        $    --
                                                             ----------      ----           -------        -------

Issuance of common stock                                         17,549        --                --             --
Issuance of common stock in connection with acquisitions        248,678         3                --             --
Net loss                                                             --        --                --             --
                                                             ----------      ----           -------        -------

Balance at December 31, 1999                                 16,395,549      $164                --        $    --
                                                             ==========      ====           =======        =======


<CAPTION>

                                                                   Series F                               Retained        Total
                                                                preferred stock          Additional       earnings        stock-
                                                           -----------    -----------      paid-in      (accumulated      holders'
                                                              Shares         Amount        capital        deficit)        equity
                                                           -----------    -----------    -----------    -----------    -----------
<S>                                                             <C>         <C>            <C>            <C>            <C>
Balance at December 31, 1998                                      --        $    --        47,464         (3,291)         44,334
                                                             -------        -------        ------         ------         -------

Issuance of common stock                                          --             --            --             --              --
Issuance of common stock in connection with acquisitions          --             --           864             --             867
Net loss                                                          --             --            --         (2,038)         (2,038)
                                                             -------        -------        ------         ------         -------

Balance at December 31, 1999                                      --        $    --        48,328         (5,329)         43,163
                                                             =======        =======        ======         ======         =======
</TABLE>


See accompanying notes to consolidated financial statements.



                                      F-7
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1999, 1998 and 1997

                                 (in thousands)


<TABLE>
<CAPTION>
                                                                             1999          1998         1997
                                                                           --------      -------      --------
<S>                                                                        <C>             <C>           <C>
Cash flows from operating activities:
    Net income (loss)                                                      $ (2,038)         805        (3,700)
    Adjustments to reconcile net income (loss) to
       net cash provided by (used in) operations:
          Depreciation and amortization of fixed assets                       2,342        1,255           482
          Amortization of intangible assets                                   4,482        4,326         1,401
          Amortization of deferred financing costs                              835          836            --
          Allowance for doubtful accounts                                        79          (17)          106
          Deferred income taxes                                                 529        1,747          (578)
          Issuance of notes in lieu of interest                               3,604        3,162            --
          Changes in assets and liabilities, net of the effects
            of acquisitions of businesses:
               Accounts receivables                                            (233)      (3,848)       (1,177)
               Prepaid expenses and other current assets                       (323)        (746)          714
               Income taxes receivable                                          879        2,896        (1,218)
               Other noncurrent assets                                           --           --         2,021
               Accounts payable and accrued expenses                            874       (5,966)       (8,162)
               Other liabilities                                                 --           --        (1,322)
                                                                           --------      -------      --------
                   Net cash provided by (used in)
                     operating activities                                    11,030        4,450       (11,433)
                                                                           --------      -------      --------

Cash flows from investing activities:
    Acquisitions, net of cash acquired                                           --       (3,574)      (97,006)
    Purchase of property and equipment                                       (4,576)      (6,182)         (832)
    Increase in deferred costs and other assets                                (471)          --            --
    Payments of contingent consideration                                     (2,689)      (1,912)           --
    Decrease in restricted cash                                                  --        1,036        (1,036)
    Other                                                                        --           --          (636)
                                                                           --------      -------      --------

                   Net cash used in investing activities                     (7,736)     (10,632)      (99,510)
                                                                           --------      -------      --------

Cash flows from financing activities:
    Net decrease in short-term debt                                              --           --        (7,302)
    Net borrowings (repayments) under line of credit agreements                 162        4,170        (4,790)
    Proceeds from issuance of equity securities                                  --          639           983
    Dividends paid                                                               --          (21)         (244)
    Proceeds from long-term borrowings                                           --           --       130,000
    Debt financing costs                                                         --         (309)       (4,800)
    Reduction of capital lease obligations                                     (237)        (210)           --
                                                                           --------      -------      --------

                   Net cash provided by (used in) financing activities          (75)       4,269       113,847
                                                                           --------      -------      --------

Increase (decrease) in cash and cash equivalents                              3,219       (1,913)        2,904

Cash and cash equivalents, beginning of year                                  4,599        6,512         3,608
                                                                           --------      -------      --------

Cash and cash equivalents, end of year                                     $  7,818        4,599         6,512
                                                                           ========      =======      ========
</TABLE>


                                                                     (Continued)
Supplemental cash flow information:


                                      F-8
<PAGE>



                      COMFORCE CORPORATION AND SUBSIDIARIES

                      Consolidated Statements of Cash Flows

                  Years ended December 31, 1999, 1998 and 1997

                                 (in thousands)



<TABLE>
<CAPTION>
                                                                             1999          1998         1997
                                                                           --------      -------      --------
<S>                                                                        <C>           <C>          <C>
Cash paid during the year for:
       Interest                                                            $16,712        17,068         2,575
       Income taxes                                                            669         1,585           347
    Details of acquisition (note 3):
       Fair value of assets acquired                                            --         9,071       185,175
       Liabilities assumed                                                      --        (3,855)      (70,700)
       Less stock issued                                                        --        (1,500)      (12,157)
                                                                           -------       -------      --------
                   Cash paid                                                    --         3,716       102,318

       Less cash acquired                                                       --           142         5,312
                                                                           -------       -------      --------

                   Net cash paid                                           $    --         3,574        97,006
                                                                           =======       =======      ========

Supplemental schedule of significant noncash
    investing and financing activities:
       Common stock issued in connection with acquisitions                     867         3,508        12,159
       Tax benefit from exercise of stock options                               --           386            --
       Common stock issued to restructure and settle liabilities                --            --           636
       Issuance of short-term debt to redeem
          Series F preferred stock                                              --            --         3,162
       Dividends paid through issuance of common stock                          --            --           493
       Warrants issued in connection with debt and acquisitions                 --            --         1,931
       Forgiveness of officer loans                                             --            --           352
</TABLE>


See accompanying notes to consolidated financial statements.


                                      F-9
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


(1)  Basis of Presentation

     COMFORCE  Corporation  (COMFORCE),  is  a  leading  provider  of  staffing,
     outsourcing and consulting  solutions primarily to Fortune 500 companies in
     the   information   technology   (IT),    telecommunications,    technical,
     professional and financial market sectors.  COMFORCE Operating, Inc. (COI),
     a  wholly-owned  subsidiary  of COMFORCE,  was  incorporated  as a Delaware
     corporation in October 1997 for the purpose of facilitating  certain of the
     Company's financing  transactions in November 1997 (see note 9). Unless the
     context otherwise requires,  the term "Company" refers to COMFORCE, COI and
     all of their wholly-owned direct and indirect subsidiaries.

     Effective  January 1, 1996,  the  Company  effected a  quasi-reorganization
     through  the  application  of  $93,847,000  of its  $95,993,000  additional
     paid-in capital account to eliminate its accumulated deficit. The Company's
     Board  decided  to effect a  quasi-reorganization  given  that the  Company
     achieved  profitability  following  its entry into the  technical  staffing
     business and discontinuation of its unprofitable jewelry business.

(2)  Summary of Significant Accounting Policies

     Principles of Consolidation

     The consolidated financial statements include the accounts of COMFORCE, COI
     and  their  subsidiaries.   All  significant   intercompany   accounts  and
     transactions have been eliminated in consolidation.

     Revenue Recognition

     Revenue for  providing  staffing  services is  recognized  at the time such
     services are rendered.

     A portion of the Company's revenue is attributable to franchise operations.
     The Company  includes  such  revenues  and related  direct costs in its net
     sales of services and cost of services,  respectively. The net distribution
     to the franchisee is based on a percentage of gross profit generated and is
     included in operating expenses. The licensee share in operating expenses at
     December 31, 1999, 1998 and 1997 was approximately  $5,374,000,  $6,946,000
     and $8,976,000, respectively.

     Funding and support  services  provide  payroll  funding  services and back
     office  support  to  independent  consulting  and  staffing  companies.  In
     providing  payroll  funding  services,  the Company  purchases the accounts
     receivable of  independent  staffing firms and receives  payments  directly
     from these firms'  clients.  The Company  pursues the  collection  of these
     receivables;  however,  the amount of any account  receivable  which is not
     collected  within a specified  period after  billing is charged back by the
     Company to such firm. The Company receives a fee for providing such funding
     and other  services,  which is  included  in net sales of  services  in the
     accompanying consolidated statements of operations.

                                                                     (Continued)

                                      F-10
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     Cash and Cash Equivalents

     The Company  considers all highly  liquid  short-term  investments  with an
     original  maturity of three months or less to be cash and cash equivalents.
     Cash equivalents consists primarily of money market funds.

     Property and Equipment

     Property  and  equipment  are  carried at cost.  Depreciation  is  provided
     primarily on a straight-line  basis over the estimated  useful lives of the
     related assets.  Leasehold  improvements  are amortized over the shorter of
     the life of the lease or of the  improvement.  Maintenance  and repairs are
     charged to expense as incurred and improvements that extend the useful life
     are  capitalized.  Upon  retirement  or  sale,  the  cost  and  accumulated
     depreciation  are removed  from the  respective  accounts,  and the gain or
     loss, if any, is reflected in earnings.

     If events or changes in circumstances  indicate that the carrying amount of
     a long-lived asset may not be recoverable, the Company estimates the future
     cash flows  expected to result  from the use of the asset and its  eventual
     disposition. If the sum of the expected future cash flows (undiscounted and
     without  interest  charges)  is  less  than  the  carrying  amount  of  the
     long-lived asset, an impairment loss is recognized.  To date, no impairment
     losses have been recognized.

     Intangible Assets

     The net assets of a purchased  business are recorded at their fair value at
     the date of acquisition.  Goodwill  represents the excess of purchase price
     over the fair  value of  identifiable  net  assets of  companies  acquired.
     Goodwill is  amortized  on a  straight-line  basis over periods of 20 to 40
     years (see note 6).

     The  Company  assesses  the  recoverability  of this  asset by  determining
     whether the  amortization  of the goodwill  balance over its remaining life
     can be  recovered  through  forecasted  future  operations.  Impairment  is
     evaluated by comparing future cash flows (undiscounted and without interest
     charges)  expected  to  result  from the use or sale of the  asset  and its
     eventual disposition, to the carrying amount of the asset.

     Income Taxes

     The Company recognizes deferred tax liabilities and assets for the expected
     future tax consequences of differences  between the tax basis of assets and
     liabilities and their financial reporting amounts at each year-end based on
     enacted tax laws and statutory tax rates applicable to the periods in which
     the differences are expected to affect taxable income. Valuation allowances
     are established  when necessary to reduce deferred tax assets to the amount
     expected to be realized. Income tax expense consists of the tax payable for
     the  period and the change  during  the period in  deferred  tax assets and
     liabilities.

                                                                     (Continued)

                                      F-11
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     Estimates

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

     Fair Values of Financial Instruments

     Cash and cash equivalents,  accounts  receivable,  funding and service fees
     receivable,  accounts  payable and accrued  expenses  are  reflected in the
     financial  statements at fair value because of the  short-term  maturity of
     these financial instruments.

     The Company's fixed rate debt obligations are traded very infrequently, and
     their fair market value may fluctuate  significantly  due to changes in the
     demand for securities of their type,  the overall level of interest  rates,
     conditions in the high yield capital  markets,  and  perceptions  as to the
     Company's  condition and prospects.  After giving  consideration to similar
     debt  issues,  indicated  bid levels,  and other  market  information,  the
     Company  believes that the approximate  fair value of the COI Notes and the
     PIK  Debentures  is $66.0  million  and  $10.9  million,  respectively,  at
     December 31,1999.

     Deferred Licensee Acquisition Costs

     In  connection  with the  Uniforce  acquisition  (see note 3), the  Company
     acquired  executed  contracts for affiliations  with existing  supplemental
     staffing  service  companies.   Such  contracts  required  the  payment  of
     affiliation  fees which are being amortized on a straight-line  method over
     the minimum terms of the  affiliation  agreements  which range from five to
     ten years.  Amortization  of deferred  licensee  acquisition  costs was not
     significant for 1999 and 1998.

     Deferred Financing Costs

     Deferred  financing costs consist of costs  associated with the issuance of
     the Company's  long-term debt (see note 9). Such costs are being  amortized
     on a  straight-line  basis over the life of each  financing  source,  which
     ranges from 5 to 12 years.

     Income (Loss) Per Share

     Basic earnings (loss) per common share is computed by dividing net earnings
     (losses)  available for common  shareholders by the weighted average number
     of shares of common stock outstanding during each period.  Diluted earnings
     (loss) per share is computed  assuming  the  conversion  of stock  options,
     warrants  and  contingent  shares  with a  market  value  greater  than the
     exercise price.

                                                                     (Continued)

                                      F-12
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     Newly Issued Accounting Standards

     In June 1998,  the  Financial  Accounting  Standards  Board  (FASB)  issued
     Statement  of  Financial  Accounting  Standards  No. 133,  "Accounting  for
     Derivative  Instruments and Hedging  Activities".  The FASB issued SFAS No.
     137 in June 1999 to delay the  effective  date of SFAS 133 to fiscal  years
     beginning  after  June 15,  2000  (January  1, 2001 for the  Company).  The
     Company  does not expect the  adoption of SFAS 133, as amended by SFAS 137,
     to have a significant  effect on the Company's results of operations or its
     financial position.

(3)  Acquisitions

     During January 1998, COMFORCE Telecom,  Inc., a wholly-owned  subsidiary of
     the Company,  purchased all of the issued and outstanding  stock of Camelot
     Consulting Group Inc., Camelot  Communications  Group Inc., Camelot Control
     Group  Inc.  and  Camelot  Group  Inc.  (collectively,  Camelot)  for total
     consideration of  approximately  $3.7 million in cash and 203,307 shares of
     the Company's  common stock.  In addition,  the Company  issued  contingent
     payment  certificates  under  which it could be required to pay up to $3.25
     million  in  cash  over a  three-year  period.  The  acquisition  has  been
     accounted for under the purchase  method and,  accordingly,  the results of
     operations  are  included  in the  financial  statements  from  the date of
     acquisition.   Camelot  is  in  the  business  of  selling  and  installing
     telecommunications equipment and of providing staffing services.

     On November 26, 1997,  the Company  completed the  acquisition  of Uniforce
     Services, Inc. and subsidiaries (Uniforce).  The Company purchased Uniforce
     for  $93,600,000 in cash and 1,585,208 of its common shares with a value of
     approximately $12,200,000. The acquisition has been accounted for under the
     purchase method and, accordingly, the results of operations are included in
     the financial statements from the date of acquisition.  The cash portion of
     the  purchase  price paid at closing  was  principally  funded  through the
     Company's offering of 12% Senior Notes (see note 9).

     On  February  28,  1997,  the  Company  purchased  all of the  stock of RHO
     Company,  Inc.  (Rhotech) for $14,800,000 in cash, plus a contingent payout
     to be paid over  three  years  based on future  earnings  of  Rhotech,  and
     payable in stock in an aggregate amount not to exceed $3,300,000.  COMFORCE
     issued  386,249   shares  in   satisfaction   of  the  contingent   payment
     obligations.  Rhotech  provides  specialists  primarily  in  the  technical
     services and information technology sectors.

     In the year ended December 31, 1996, the Company completed the acquisitions
     of the  following  businesses  which  have  been  accounted  for  under the
     purchase  method  of  accounting:  Williams  Communication  Services,  Inc.
     (Williams),  Project  Staffing  Support Team,  Inc., RRA, Inc. and Datatech
     Technical Services, Inc. (collectively RRA), Force Five, Inc. (Force Five),
     Azatar Computer  Systems,  Inc.  (Azatar),  and Continental  Field Services
     Corporation and its affiliate, and Progressive Telecom, Inc. (collectively,
     Continental).  The aggregate purchase price of the acquisitions in the year
     ended  December  31,  1996  was  approximately  $21,029,000,  comprised  of
     $15,834,000  in cash and  approximately  $5,195,000  in common stock of the
     Company. In addition, certain of the acquisitions contain contingent payout
     provisions based on the attainment of specified earnings.

                                                                     (Continued)

                                      F-13
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     During 1999, contingent payments in connection with these acquisitions were
     approximately $2,689,000 in cash and 248,678 shares of the Company's common
     stock.  At  December  31,  1999,  maximum  future  contingent  payments  in
     connection with all acquisitions approximate $3,100,000 in cash.

(4)  Restructuring Charges

     The  Company  recorded a $1.6  million  restructuring  charge in the fourth
     quarter of 1997 related to merger and  integration  charges  resulting from
     the  acquisition  of  Uniforce.  All of the  actions  under these plans are
     completed and have resulted in lower costs than originally estimated.  As a
     result of these developments, the Company recognized a restructuring credit
     of $163,000 in 1999 and $211,000 in 1998.  As of December  31, 1999,  there
     were no remaining restructuring liabilities.

(5)  Fixed Assets

     Fixed assets consist of (in thousands):

                                              Estimated
                                            useful lives
                                              in years       1999         1998
                                              --------     --------     -------
Computer and related software                    3-7       $ 13,243       9,193
Furniture, fixtures and vehicles                 3-7          1,921       1,633
Leasehold improvements                           3-7            578         346
                                                           --------     -------
                                                             15,742      11,172

Less accumulated depreciation and amortization               (4,252)     (1,916)
                                                           --------     -------

                                                           $ 11,490       9,256
                                                           ========     =======


     Depreciation  and  amortization  expense  was  $2,342,000,  $1,255,000  and
     $482,000  for  the  years  ended   December   31,  1999,   1998  and  1997,
     respectively.

(6)  Intangibles

     Intangibles as of December 31, 1999 and 1998 consisted of (in thousands):

                                                                     (Continued)

                                      F-14
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


                                           Estimated
                                         useful lives
                                           in years         1999          1998
                                           --------      ---------      -------
Goodwill                                     20-40       $ 147,491      143,245
Non-compete covenants                          5             1,190          737
Other                                          5               716        1,130
                                                         ---------      -------
                                                           149,397      145,112
Less accumulated amortization                              (10,387)      (6,265)
                                                         ---------      -------

                                                         $ 139,010      138,847
                                                         =========      =======

     Amortization expense was $4,482,000, $4,326,000 and $1,401,000 in the years
     ended December 31, 1999, 1998 and 1997, respectively.

(7)  Accrued Expenses

     Accrued expenses consist of the following (in thousands):

                                                          1999             1998
                                                        -------           ------

Payroll and payroll taxes                               $ 9,729            9,023
Vacation/pension plan                                     1,742            1,382
Income taxes payable                                      1,048               --
Commissions                                               1,424            1,401
Medical insurance                                         1,100              563
Interest                                                  1,867            1,733
Restructuring                                                --              635
Other                                                     4,078            3,331
                                                        -------           ------

                                                        $20,988           18,068
                                                        =======           ======


(8)  Income Taxes

     The provision  (benefit) for income taxes as of December 31, 1999, 1998 and
     1997 consists of (in thousands):

                                       1999             1998              1997
                                      ------           ------            ------
Current:
   Federal                            $1,338              621              (695)
   State                                 303              296               (78)
Deferred                                 528            1,747              (578)
                                      ------           ------            ------

                                      $2,169            2,664            (1,351)
                                      ======           ======            ======

                                                                     (Continued)

                                      F-15
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     Total income tax expense  differed from the statutory United States Federal
     income tax rate of 34%  before  income  taxes as a result of the  following
     items (in thousands):

                                                     1999      1998       1997
                                                    ------    ------     ------

Statutory Federal tax rate provision

    (benefit) at 34.0%                              $   45     1,181     (1,719)
State and local taxes, net of Federal benefit            5       133       (193)
Change in deferred tax rates and estimates used        157        --        116
Effect of non-deductible items                       1,820     1,350        232
Alternative minimum tax                                 --        --         46
Other, individually less than 5%                        --        --        167
Change in estimates used for prior years               142        --         --
                                                    ------    ------     ------
                                                    $2,169     2,664     (1,351)
                                                    ======    ======     ======

     The  components  of deferred  tax assets and deferred  tax  liabilities  at
     December 31, 1999 and 1998 (in thousands) are as follows:

                                                             1999          1998
                                                            ------         -----
Deferred tax assets:
   Reserves and allowances                                  $  637         1,277
   Accrued severance                                            19           111
   Accrued liabilities and other                             3,110         1,823
                                                            ------         -----

         Total deferred tax assets                           3,766         3,211
                                                            ------         -----

Deferred tax liability:
   Intangibles                                                 896           677
   Excess depreciation                                       1,316           452
                                                            ------         -----

         Total deferred tax liabilities                      2,212         1,129
                                                            ------         -----

         Net deferred tax asset                             $1,554         2,082
                                                            ======         =====


     The net  deferred  income  tax  assets are  reflected  in the  accompanying
     balance sheets as follows (in thousands):

                                                               1999        1998
                                                              ------       -----

Net deferred income tax assets - current                      $1,554       2,306
Net deferred income tax liability - noncurrent                    --         224
                                                              ------       -----

                                                              $1,554       2,082
                                                              ======       =====

                                                                     (Continued)

                                      F-16
<PAGE>




                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     In assessing the realizability of deferred tax assets, management considers
     whether it is more likely than not that some portion or all of the deferred
     tax assets will not be realized.  The ultimate  realization of deferred tax
     assets is dependent  upon the  generation of future  taxable income and tax
     planning strategies implemented. Based upon the level of historical taxable
     income and  projections for future taxable income over the periods in which
     the  deferred  tax assets are  deductible,  management  believes it is more
     likely  than  not that the  Company  will  realize  the  benefits  of these
     deductible differences at December 31, 1999. The amount of the deferred tax
     asset  considered  realizable,  however,  could be reduced if  estimates of
     future taxable income change.

(9)  Debt

     Notes  payable  and  long-term  debt at  December  31,  1999  and  1998 (in
     thousands) consisted of the following:

                                                             1999         1998
                                                           --------      -------

12% Senior Notes, due 2007 (a)                             $110,000      110,000
15% Senior Secured PIK Debentures,
    due 2009 (b)                                             26,766       23,162
Revolving line of credit, due November 26, 2002,
    with interest payable monthly at LIBOR plus
    2.0%.  At December 31, 1999 and 1998, the
    weighted average rate was 8.17% and
    7.53%, respectively (c)                                  45,580       45,417
                                                           --------      -------
                                                            182,346      178,579

Less current portion                                          4,000        4,000
                                                           --------      -------

              Total long-term debt                         $178,346      174,579
                                                           ========      =======


     (a)  The  12%  Senior   Notes  (the  Notes)  are  senior   uncollateralized
          obligations  of COI and  rank  equal  in  right  of  payment  with all
          existing and future senior  indebtedness of COI and senior in right of
          payment to all existing and future  subordinated  indebtedness of COI.
          The Notes  provide for the payment of  interest  semi-annually  at the
          rate of 12% per annum and mature on December 1, 2007.

          COI may redeem the Notes, in whole or in part, at any time on or after
          December  1,  2002 at a  redemption  price of 106%  for the 12  months
          commencing December 1, 2002, declining annually to 100% at any time on
          or after December 1, 2005,  together with accrued and unpaid  interest
          to the date of redemption.  In addition, at any time prior to December
          1, 2000, COI may, subject to certain requirements, redeem up to 35% of
          the  aggregate  principal  amount of the Notes with the cash  proceeds
          received from one or more equity offerings at a redemption price equal
          to 112% of

                                                                     (Continued)

                                      F-17
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


          the principal amount to be redeemed,  together with accrued and unpaid
          interest to the date of redemption,  provided that at least 65% of the
          aggregate  principal  amount of the Notes  issued  through the date of
          redemption remains outstanding immediately after each such redemption.

          Upon the occurrence of certain  specified events deemed to result in a
          change of control, COI will be required to make an offer to repurchase
          the Notes at a price equal to 101% of the  principal  amount  thereof,
          together with accrued and unpaid interest to the date of repurchase.

          Subject  to  certain   qualifications  and  exceptions  the  indenture
          governing   the  Notes  limits  (i)  the   incurrence   of  additional
          indebtedness  by  COI  and  its  subsidiaries,  (ii)  the  payment  of
          dividends  on,  and  redemption  of,  capital  stock  of COI  and  the
          redemption  of  certain   subordinated   obligations   of  COI,  (iii)
          investments,   (iv)  sales  of  assets  and  subsidiary   stock,   (v)
          transactions  with  affiliates,   (vi)  consolidations,   mergers  and
          transfers  of all or  substantially  all the assets of COI,  and (vii)
          distributions from subsidiaries.

     (b)  The  15%  Senior  Secured  PIK  Debentures  (the  Senior   Debentures)
          constitute direct and unconditional  senior obligations of the Company
          and are collateralized by a pledge by the Company of all of the issued
          and  outstanding  common stock of COI. The payment  obligations of the
          Company  under the Senior  Debentures  must at all times rank at least
          equal in priority of payment with all existing and future indebtedness
          of the Company. The Senior Debentures are structurally subordinated to
          all indebtedness of the Company's direct and indirect subsidiaries.

          The  Senior  Debentures  bear  interest  at the rate of 15% per annum,
          subject to increases in certain circumstances,  payable semi-annually,
          and mature on December 1, 2009. Through December 1, 2002,  interest is
          payable in cash or in additional  Senior Debentures paid in kind (PIK)
          on  each  interest  payment  date,  at  the  option  of  the  Company.
          Thereafter, interest is payable only in cash. During 1999, the Company
          issued $3,604,000 of additional Senior Debentures in lieu of interest.

          Subject to certain  requirements,  the  Company may at any time redeem
          any or all of the Senior Debentures at the price of 107.5%.

          Upon the occurrence of certain  specified events deemed to result in a
          change  of  control,  COMFORCE  will be  required  to make an offer to
          repurchase  the  Senior  Debentures  at a price  equal  to 101% of the
          principal  amount thereof,  together with accrued and unpaid interest,
          if any, to the date of repurchase.

          Subject  to  certain  qualifications  and  exceptions,  the  indenture
          governing  the  Senior   Debentures   limits  (i)  the  incurrence  of
          additional indebtedness by the Company and its subsidiaries,  (ii) the
          payment of  dividends  on, and  redemption  of,  capital  stock of the
          Company and the redemption of certain subordinated  obligations of the
          Company, (iii) investments, (iv) sales of assets and subsidiary stock,
          (v) transactions  with affiliates,  (vi)  consolidations,  mergers and
          transfers  of all or  substantially  all the assets of the Company and
          (vii) distributions from subsidiaries.

                                                                     (Continued)

                                      F-18
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     (c)  The  Company   maintains  a  revolving  credit  facility  (the  Credit
          Facility)  providing  for  borrowings  of up to $75 million based on a
          specified  percentage of the Company's  eligible accounts  receivable.
          The Company has pledged  substantially all of its assets as collateral
          for the Credit Facility.

          Borrowings  under the Credit Facility bear interest,  at the Company's
          option,  at a rate based on a margin over either  prime rate or LIBOR.
          The  terms  of  the  agreement  include  a  commitment  fee  based  on
          unutilized amounts.

          The  agreements   evidencing  the  Credit  Facility   contain  various
          financial  and other  covenants  and  conditions,  including,  but not
          limited to,  limitations  on paying  dividends,  engaging in affiliate
          transactions,    making   acquisitions   and   incurring    additional
          indebtedness.  The scheduled  maturity date of the Credit  Facility is
          November 26, 2002.

          Required  principal  payments  of  long-term  debt are as follows  (in
          thousands):

                            2002           $ 45,580
                            Thereafter      132,766
                                           --------
                                           $178,346
                                           ========

(10) Income (Loss) Per Share

     The  following   represents  a   reconciliation   of  the   numerators  and
     denominators of the basic and diluted income (loss) per share  computations
     (in thousands):

                                                 1999        1998        1997
                                               --------     -------     -------
Numerator:
    Net income (loss)                          $ (2,038)        805      (3,700)
    Preferred stock dividends                        --         (21)       (737)
                                               --------     -------     -------

Numerator for basic and diluted income
    (loss) per share - income (loss)
    available to common stockholders           $ (2,038)        784      (4,437)
                                               ========     =======     =======

Denominator:
    Denominator for basic income (loss)
       per share - weighted-average shares       16,315      15,971      13,493
                                               --------     -------     -------
    Effect of dilutive securities:
       Employee stock options                        --         280          --
       Warrants                                      --         397          --
                                               --------     -------     -------

                                                     --         677          --
                                               --------     -------     -------

                                                                     (Continued)

                                      F-19
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


                                                    1999         1998      1997
                                                  --------     --------   ------
Dilutive potential common shares:
    Denominator for diluted income (loss)
       per share - adjusted weighted-
       average shares and assumed
       conversions                                $ 16,315       16,648   13,493
                                                  ========     ========   ======

     Options and warrants to purchase 4,781,487,  2,043,370 and 4,826,818 shares
     of common stock were  outstanding  for the years ended 1999, 1998 and 1997,
     respectively,  but were not included in the  computation  of diluted income
     (loss) per share because their effect would be anti-dilutive.

(11) Stock Options and Warrants

     Long-Term Stock Investment Plan

     Effective  December 16, 1993, the Company's Board of Directors approved the
     Long-Term  Stock  Investment  Plan (the 1993 Plan),  which provided for the
     granting  of options  for the  purchase of the  Company's  common  stock to
     executives,  key employees and  non-employee  consultants and agents of the
     Company and its  subsidiaries.  The 1993 Plan  authorizes  the  awarding of
     Stock Options, Incentive Stock Options and Alternative Appreciation Rights.
     The 1993 Plan reserved  1,500,000  shares of the Company's common stock for
     grant on or before  December 31,  2002.  All options  have  generally  been
     granted at a price equal to or greater  than the fair  market  value of the
     Company's common stock at the date of grant. Generally, options are granted
     with a vesting period of up to 4 years and expire 10 years from the date of
     grant. In October 1996, the 1993 Plan was amended to allow for the issuance
     of an additional  2,500,000 options under the plan for a total of 4,000,000
     shares.

     A summary of stock  option  transactions  for the years ended  December 31,
     1999, 1998 and 1997 is as follows:

<TABLE>
<CAPTION>
                                      1999                               1998                                1997
                           -------------------------------     -------------------------------     -------------------------------
                             Shares        Exercise price        Shares        Exercise price        Shares        Exercise price
                           ----------      ---------------     ----------      ---------------     ----------      ---------------
<S>                         <C>            <C>       <C>        <C>            <C>       <C>        <C>            <C>       <C>
Outstanding, beginning
   of year                  2,565,625      $1.125 to 18.50      2,135,775      $1.125 to 18.50      2,091,525      $1.125 to 22.75
Granted                       440,000         2.00 to 5.25        580,700        5.50 to 12.90        184,750        5.88 to 10.00
Exercised                        --                   --          (95,500)       1.125 to 6.00       (124,000)       1.125
Forfeited/expired            (243,800)      1.125 to 18.50        (55,350)       6.00 to 18.50        (16,500)       7.625 to 9.00
                           ----------      ---------------     ----------      ---------------     ----------      ---------------

Options outstanding,
   end of year              2,761,825      $1.125 to 18.50      2,565,625      $1.125 to 18.50      2,135,775      $1.125 to 18.50
                           ==========      ===============     ==========      ===============     ==========      ===============

Options exercisable,
   end of year              2,026,131                           1,964,475                           1,896,293
                           ==========                          ==========                          ==========
</TABLE>

                                                                     (Continued)

                                      F-20
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


<TABLE>
<CAPTION>
                                      1999                               1998                                1997
                           -------------------------------     -------------------------------     -------------------------------
                             Shares        Exercise price        Shares        Exercise price        Shares        Exercise price
                           ----------      ---------------     ----------      ---------------     ----------      ---------------
<S>                         <C>            <C>                  <C>            <C>                  <C>            <C>
Options available for
   grant, end of year         855,659                           1,051,859                          1,577,209
                           ==========                          ==========                          ==========

Weighted-average fair
   value of options
   granted during
   the year                $     4.53                                9.35                               4.13
                           ==========                          ==========                          ==========
</TABLE>

     The following table summarizes  information about stock options outstanding
     at December 31, 1999:

<TABLE>
<CAPTION>
                                           Weighted-
                                            average          Weighted-                      Weighted-
                                           remaining          average                        average
   Range of               Shares          contractual        exercise        Shares        exercisable
exercise prices         outstanding      life (years)          price       exercisable        price
---------------         -----------      ------------          -----       -----------        -----
<S>                      <C>                  <C>             <C>           <C>              <C>
$1 - $4                    289,500            6.14            $ 1.93          174,500        $ 1.56
$5 - $7                  1,991,500            6.74              6.52        1,607,500          6.76
$8 - $13                   436,010            8.35              9.48          210,520          9.33
$14 - $17                    7,815            6.85             15.05            5,861         15.05
$18 - $19                   37,000            6.54             18.39           27,750         18.39
                         ---------          ------            ------        ---------        ------
$1 - $19                 2,761,825            6.93              6.69        2,026,131          6.77
</TABLE>


     The  weighted-average  fair value of each option has been  estimated on the
     date of grant  using  the  Black-Scholes  options  pricing  model  with the
     following  weighted-average  assumptions  used for grants in 1999, 1998 and
     1997,  respectively:   no  dividend  yield;  expected  volatility  of  46%;
     risk-free interest rate (ranging from 4.61% - 5.94%); and expected lives of
     approximately  3 years.  Weighted-averages  are  used  because  of  varying
     assumed exercise dates.

     The  Company  applies  APB  Opinion  25  and  related   interpretations  in
     accounting for stock options;  accordingly,  no compensation  cost has been
     recognized. Had compensation cost been determined based upon the fair value
     of the stock  options  at grant  date  consistent  with the  method in SFAS
     Statement  123, the  Company's  net income  (loss) and earnings  (loss) per
     share  would  have  been  reduced  (increased)  to the  pro  forma  amounts
     indicated below:

                                                                     (Continued)

                                      F-21
<PAGE>




                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


                                             1999          1998          1997
                                             ----          ----          ----
                                        (in thousands, except per share amounts)
Net income (loss) attributable to
    common shareholders as reported      $  (2,038)         784        (4,437)
Pro forma income (loss)                     (2,445)         538        (5,053)
Basic earnings (loss) per share as
    reported                                  (.12)         .05          (.33)
Pro forma basic earnings (loss)
    per share                                 (.15)         .03          (.37)
Diluted earnings (loss) per share as
    reported                                  (.12)         .05          (.33)
Pro forma diluted earnings per share          (.15)         .03          (.37)

     Warrants

     At December  31, 1999 and 1998,  the  Company had  outstanding  warrants to
     purchase a total of  2,019,662  and  2,034,662  of common  shares at prices
     ranging from $2.00 to $24.00 per share.  These  warrants  expire at various
     dates through 2009.

(12) Litigation

     In  January  1997,  Austin A.  Iodice,  who served as the  Company's  Chief
     Executive  Officer,  President  and Vice  Chairman  while the  Company  was
     engaged in the jewelry  business,  and Anthony  Giglio,  who  performed the
     functions of the Company's  Chief  Operating  Officer while the Company was
     engaged in the jewelry  business,  filed separate suits against the Company
     in the  Connecticut  Superior  Court alleging that the Company had breached
     the terms of  management  agreements  entered  into with them by failing to
     honor options to purchase  common stock awarded to them in connection  with
     the management of the Jewelry  business under the terms of such  management
     agreements and the Company's  long-term  stock  investment  plan. The suits
     allege  that the  plaintiffs  are  entitled  to an  unspecified  amount  of
     damages.  The Company  believes that the option to purchase  370,419 shares
     granted to Mr. Iodice (through Nitsua, Ltd., a corporation  wholly-owned by
     him) and the option to purchase 185,210 shares granted to Mr. Giglio,  each
     having an exercise price of $1.125 per share, expired in 1996, three months
     after  Messrs.  Giglio and Iodice  ceased to be  employed  by the  Company.
     Messrs.  Giglio and Iodice maintain that they were agents and not employees
     of the Company and that the options continue to be exercisable.  In October
     1998, Messrs. Giglio and Iodice filed motions for partial summary judgment,
     which motions were denied by the court in March 1999. The parties  attended
     a  non-binding  mediation  conference  in February  2000 but were unable to
     resolve the dispute. Trial has been scheduled for November 2000.

     The  Company is also a party to  routine  contract  and  employment-related
     litigation matters in the ordinary course of its business.  No such pending
     matters,  individually or in the aggregate,  if adversely  determined,  are
     believed  by  management  to be  material  to  the  business  or  financial
     condition of the Company.

                                                                     (Continued)

                                      F-22
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


(13) Savings Incentive and Profit Sharing Plan

     The Company  participates  in a savings  incentive and profit  sharing plan
     (the Plan). All eligible  employees may make contributions to the Plan on a
     pre-tax salary reduction basis in accordance with the provisions of Section
     401(k) of the Internal Revenue Code. No material contributions were made by
     the Company in 1999 and 1998.

     Certain  employees  who work for  governmental  agencies are required to be
     covered under a separate  pension plan.  During 1999 and 1998,  the Company
     recorded approximately $1,492,000 and $1,649,000,  respectively, of expense
     related to these benefits.

(14) Lease Commitments

     The Company leases certain office space and equipment. Rent expense for all
     operating leases in 1999, 1998 and 1997 approximated $2,952,000, $2,286,000
     and $969,000, respectively.

     As of December 31, 1999,  future  minimum rent payments due under the terms
     of  noncancelable  operating  leases excluding any amount that will be paid
     for operating costs are (in thousands):

                             2000           $ 3,055
                             2001             2,377
                             2002             1,846
                             2003             1,622
                             2004             1,091
                             Thereafter       6,400
                                            -------
                                            $16,391
                                            =======

(15) Concentration of Credit Risk

     Financial  instruments which potentially subject the Company to credit risk
     consist primarily of cash and cash equivalents and trade receivables.

     The  Company  maintains  cash in bank  accounts  which at times may  exceed
     federally  insured  limits.  The Company has not  experienced any losses in
     such accounts and believes it is not exposed to any significant credit risk
     on its cash  balances.  The  Company  believes  it  mitigates  such risk by
     investing its cash through major financial institutions.

                                                                     (Continued)

                                      F-23
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     At  December  31,  1999,  the  Company had three  customers  with  accounts
     receivable  balances that aggregated  17.0% of the Company's total accounts
     receivable.  At December 31,  1998,  one  customer  aggregated  5.4% of the
     Company's  total  accounts  receivable.  Percentages of total revenues from
     significant  customers for the years ended December 31, 1999, 1998 and 1997
     are summarized as follows:

                                            1999           1998           1997
                                           ------         ------         ------

Customer 1                                   *             10.1%          14.5%
Customer 2                                   *               *            11.6%

*Less than 10%


(16) Industry Segment Information

     COMFORCE has determined that its reportable  segments can be  distinguished
     principally by the types of services offered to the Company's clients.

     Revenues  and profits in the Staff  Augmentation  segment are  generated by
     providing   temporary   employees  to  client  companies   generally  on  a
     time-and-materials  basis. Staff Augmentation  services are offered through
     several sectors. Telecom provides  telecommunications workers, primarily to
     telecommunications    companies;    Information    Technologies    provides
     programmers,  systems consultants,  software engineers and other IT workers
     to a broad  range  of  companies  which  outsource  portions  of  their  IT
     requirements;  and Staffing Services provides primarily  technical workers,
     including  engineers,  scientists and laboratory  workers,  to a variety of
     corporations and laboratories.

     Revenues  and  profits in the  Financial  Services  segment  are  generated
     through outsourcing and consulting services for client companies. Financial
     Services is composed of two distinct activities: the Pro Unlimited division
     provides  confidential   consulting  and  conversion  services  related  to
     clients'  employment of  independent  contractors,  and typically  involves
     providing non-recruited payrolling services to those clients. The Financial
     Services  segment  also  includes   outsourcing   services  to  independent
     consulting  and staffing  companies,  in which  COMFORCE  provides  payroll
     funding services and back office support to those clients.

     The accounting  policies of the segments are the same as those described in
     the "Summary of Significant  Accounting  Policies."  COMFORCE evaluates the
     performance  of its  segments  and  allocates  resources  to them  based on
     operating contribution, which represents segment revenues less direct costs
     of  operations,   excluding  the   allocation  of  corporate   general  and
     administrative expenses. Assets of the operating segments reflect primarily
     net  accounts  receivable  associated  with segment  activities;  all other
     assets  are  included  as  Corporate  assets.  The  Company  does not track
     expenditures for long-lived assets on a segment basis.

                                                                     (Continued)

                                      F-24
<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                   Notes to Consolidated Financial Statements

                        December 31, 1999, 1998 and 1997


     The  table  below  presents  information  on  the  revenues  and  operating
     contribution  for each segment for the three years ended December 31, 1999,
     and items which  reconcile  segment  operating  contribution  to COMFORCE's
     reported pre-tax income.

                                                   Year ended December 31,
                                               1999          1998        1997
                                            ---------     --------     --------
                                                       (in thousands)

Net sales of services:
    Financial Services                      $ 114,930       91,026        6,497
    Staff Augmentation                        321,291      367,996      210,024
                                            ---------     --------     --------

                                            $ 436,221      459,022      216,521
                                            =========     ========     ========

Operating contribution:
    Financial Services                      $  14,579       12,393          754
    Staff Augmentation                         28,989       32,374       14,319
                                            ---------     --------     --------

                                               43,568       44,767       15,073
                                            ---------     --------     --------

Consolidated expenses:
    Interest                                   21,732       21,455        4,244
    Bridge and financing charges                   --           --        7,672
    Restructuring charge                         (163)        (211)       1,600
    Depreciation and amortization               6,824        5,605        1,883
    Corporate general and administrative       15,044       14,449        4,725
                                            ---------     --------     --------

                                               43,437       41,298       20,124
                                            ---------     --------     --------

    Income (loss) before income taxes       $     131        3,469       (5,051)
                                            =========     ========     ========

Total assets:
    Financial Services                      $  42,812       39,967       36,113
    Staff Augmentation                         39,022       41,714       36,752
    Corporate                                 167,876      164,401      163,069
                                            ---------     --------     --------

                                            $ 249,710      246,082      235,934
                                            =========     ========     ========



                                      F-25

<PAGE>


                      COMFORCE CORPORATION AND SUBSIDIARIES

                  Schedule II Valuation and Qualifying Accounts

                  Years ended December 31, 1999, 1998 and 1997

                                 (in thousands)


<TABLE>
<CAPTION>
                                                          Balance at     Charged to      Charged                       Balance
                                                          beginning      costs and       to other                     at end of
                                                          of period       expenses       accounts       Deductions     period
                                                          ----------     ----------      --------     ------------    ----------
<S>                                                          <C>              <C>          <C>             <C>           <C>
For the year ended December 31, 1999:
   Deducted from assets to which they apply:
       Allowance for doubtful accounts                       $790             78            --              --           868
                                                             ====            ===           ===             ===           ===

For the year ended December 31, 1998:
   Deducted from assets to which they apply:
       Allowance for doubtful accounts                       $807            (17)           --              --           790
                                                             ====            ===           ===             ===           ===

For the year ended December 31, 1997:
   Deducted from assets to which they apply:
       Allowance for doubtful accounts                       $213             79           515              --           807
                                                             ====            ===           ===             ===           ===
</TABLE>



                                      F-26
<PAGE>


                                  EXHIBIT INDEX

2.1       Agreement  and Plan of  Merger,  dated as of August 13,  1997,  by and
          among  COMFORCE  Corporation,  COMFORCE  Columbus,  Inc.  and Uniforce
          Services,  Inc.  (included  as an  exhibit to  COMFORCE  Corporation's
          Current  Report on Form 8-K dated  August  20,  1997 and  incorporated
          herein by reference).

2.2       Stockholders  Agreement,  dated as of August  13,  1997,  by and among
          COMFORCE  Corporation,  COMFORCE  Columbus,  Inc.,  John  Fanning  and
          Fanning Limited Partnership,  L.P. (included as an exhibit to COMFORCE
          Corporation's  Current  Report on Form 8-K dated  August 20,  1997 and
          incorporated herein by reference).

2.3       Registration Rights Agreement dated as of August 13, 1997 by and among
          COMFORCE Corporation, John Fanning and Fanning Asset Partners, L.P., a
          Georgia limited partnership (included as an exhibit to Amendment No. 2
          to the  Registration  Statement  on Form S-4 of  COMFORCE  Corporation
          filed with the Commission on October 24, 1997 and incorporated  herein
          by reference).

3.1       Restated  Certificate of  Incorporation  of COMFORCE  Corporation,  as
          amended by Certificates of Amendment filed with the Delaware Secretary
          of State on June  14,  1987 and  February  12,  1991  (included  as an
          exhibit to Amendment No. 1 to the  Registration  Statement on Form S-1
          of COMFORCE  Corporation filed with the Commission on May 10, 1996 and
          incorporated herein by reference).

3.2       Certificate of Ownership  (Merger) of COMFORCE  Corporation  into Lori
          Corporation  (included as an exhibit to COMFORCE  Corporation's Annual
          Report  on  Form  10-K  for the  year  ended  December  31,  1995  and
          incorporated herein by reference).

3.3       Bylaws of COMFORCE  Corporation,  as amended and restated effective as
          of February 26, 1997 (included as an exhibit to COMFORCE Corporation's
          Annual  Report on Form 10-K for the year ended  December  31, 1996 and
          incorporated herein by reference).

3.4       Certificate of Ownership (Merger) of AZATAR into COMFORCE  Corporation
          (included as an exhibit to COMFORCE  Corporation's  Current  Report on
          Form 8-K dated November 8, 1996 and incorporated herein by reference).

3.5       Certificate of Incorporation of COMFORCE  Operating,  Inc., as amended
          by  Certificates  of Amendment  filed with the  Delaware  Secretary of
          State on November 24, 1997 (included as an exhibit to the Registration
          Statement  on Form S-4 of  COMFORCE  Operating,  Inc.  filed  with the
          Commission on December 24, 1997 and incorporated herein by reference).

3.6       Bylaws of  COMFORCE  Operating,  Inc.  (included  as an exhibit to the
          Registration  Statement on Form S-4 of COMFORCE Operating,  Inc. filed
          with the  Commission on December 24, 1997 and  incorporated  herein by
          reference).

4.1       Indenture  dated as of November  26,  1997 with  respect to 12% Senior
          Notes due 2007  between  COMFORCE  Operating,  Inc.,  as  issuer,  and
          Wilmington  Trust  Company,  as  trustee  (included  as an  exhibit to
          COMFORCE  Corporation's  Current  Report on Form 8-K dated December 9,
          1997 and incorporated herein by reference).

4.2       Indenture  dated as of November  26,  1997 with  respect to 15% Senior
          Secured PIK  Debentures  due 2009  between  COMFORCE  Corporation,  as
          issuer,  and The Bank of New York, as trustee  (included as an exhibit
          to COMFORCE Corporation's Current Report on Form 8-K dated December 9,
          1997 and incorporated herein by reference).

10.1      Loan and  Security  Agreement  dated as of  November  26,  1997  among
          COMFORCE  Corporation  and specified  subsidiaries  thereof and Heller
          Financial, Inc., as lender and agent for other lenders (included as an
          exhibit to


                                      E-1
<PAGE>


          COMFORCE  Corporation's  Current  Report on Form 8-K dated December 9,
          1997 and incorporated herein by reference).

10.2      Purchase  Agreement,  dated as of November  19,  1997,  by and between
          COMFORCE  Operating,  Inc. and NatWest  Capital  Markets  Limited,  as
          Initial  Purchaser   (included  as  an  exhibit  to  the  Registration
          Statement  on  Form  S-4  of  COMFORCE   Corporation  filed  with  the
          Commission on December 24, 1997 and incorporated herein by reference).

10.3      Purchase  Agreement,  dated as of November  19,  1997,  by and between
          dated as of November 26, 1997, by and between COMFORCE Operating, Inc.
          and NatWest Capital Markets Limited, as Initial Purchaser (included as
          an  exhibit  to the  Registration  Statement  on Form S-4 of  COMFORCE
          Corporation  filed  with  the  Commission  on  December  24,  1997 and
          incorporated herein by reference).

10.4      Warrant  Agreement  dated  November  26, 1997 by and between  COMFORCE
          Corporation and The Bank of New York, as Warrant Agent (included as an
          exhibit  to  the  Registration  Statement  on  Form  S-4  of  COMFORCE
          Corporation  filed  with  the  Commission  on  December  24,  1997 and
          incorporated herein by reference).

10.5      Pledge  Agreement  dated  November  26, 1997 by and  between  COMFORCE
          Corporation and The Bank of New York, as Collateral Agent (included as
          an  exhibit  to the  Registration  Statement  on Form S-4 of  COMFORCE
          Corporation  filed  with  the  Commission  on  December  24,  1997 and
          incorporated herein by reference).

10.6      Employment  Agreement  dated as of  January 1, 1999  between  COMFORCE
          Corporation, COMFORCE Operating, Inc. and John C. Fanning (included as
          an exhibit to COMFORCE  Corporation's  Annual  Report on Form 10-K for
          the  year  ended  December  31,  1998  and   incorporated   herein  by
          reference).

10.7*     Amendment  to  Employment  Agreement  dated  March 28,  2000  amending
          Employment  Agreement  dated as of  January 1, 1999  between  COMFORCE
          Corporation, COMFORCE Operating, Inc. and John C. Fanning.

10.8      Employment  Agreement  dated as of  January 1, 1999  between  COMFORCE
          Corporation,  COMFORCE Operating,  Inc. and Harry Maccarrone (included
          as an exhibit to COMFORCE Corporation's Annual Report on Form 10-K for
          the  year  ended  December  31,  1998  and   incorporated   herein  by
          reference).

21.1*     List of Subsidiaries.

23.1*     Consent of KPMG LLP.

23.2*     Consent of PricewaterhouseCoopers, LLP

27.1*     Financial   Data  Schedule  of  COMFORCE   Corporation   and  COMFORCE
          Operating, Inc.

----------
* Filed herewith.




                                      E-2