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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

                 ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                   FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002

                         COMMISSION FILE NUMBER: 0-21533

                               TEAM AMERICA, INC.
                (Name of registrant as specified in its charter)

             OHIO                                     31-1209872
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

130 E. WILSON BRIDGE ROAD WORTHINGTON, OHIO                43085
 (Address of principal executive offices)                (Zip Code)

                                 (614) 848-3995
              (Registrant's telephone number, including area code)

        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                           COMMON STOCK, NO PAR VALUE

         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 the
filing requirements for at least the past 90 days. Yes |X| No | |

         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 definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. |X|

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes | | No
|X|

         Aggregate market value of the Company's voting common equity held by
its non-affiliates as of June 28, 2002 was approximately $5,913,000 based on
the closing price of the Company's common stock on the NASDAQ.

         There were 8,215,628 shares of the Company's common stock outstanding
at March 25, 2003.

         Documents Incorporated by Reference: Portions of the registrant's
definitive Proxy Statement for its Annual Meeting of Shareholders are
incorporated by reference into Part III of this Annual Report on Form 10-K.
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                                TABLE OF CONTENTS
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                                                                                                                    PAGE

<S>                                                                                                                <C>
PART I

Item 1.        Business......................................................................................         1
Item 2.        Properties....................................................................................        10
Item 3.        Legal Proceedings.............................................................................        11
Item 4.        Submission of Matters to a Vote of Security Holders...........................................        11

PART II

Item 5.        Market for Registrant's Common Equity and Related Stockholder Matters.........................        12
Item 6.        Selected Financial Data.......................................................................        12
Item 7.        Management's Discussion and Analysis of Financial Condition and Results of Operation..........        14
Item 7A.       Quantitative and Qualitative Disclosures About Market Risk....................................        30
Item 8.        Financial Statements and Supplementary Data...................................................        30
Item 9.        Changes in and Disagreements with Accountants on Accounting and Financial Disclosure..........        59

PART III

Item 10.       Directors and Executive Officers of the Registrant............................................        60
Item 11.       Executive Compensation........................................................................        60
Item 12.       Security Ownership of Certain Beneficial Owners and Management................................        60
Item 13.       Certain Relationships and Related Transactions................................................        60
Item 14.       Controls and Procedures.......................................................................        60

PART IV

Item 15.       Exhibits, Financial Statement Schedules and Reports on Form 8-K...............................        63

Signatures     ..............................................................................................        66
Certifications ..............................................................................................        67
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                                     PART I

This document contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended (the "Securities Act") and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). You
can identify such forward-looking statements by the words "expects," "intends,"
"plans," "projects," "believes," "estimates," and similar expressions. It is
important to note that the Company's actual results could differ materially from
those projected in such forward-looking statements. In the normal course of
business, we, in an effort to help keep the Company's shareholders and the
public informed about our operations, may from time to time issue such
forward-looking statements, either orally or in writing. Generally, these
statements relate to business plans or strategies, projected or anticipated
benefits or other consequences of such plans or strategies, or projections
involving anticipated revenues, earnings or other aspects of operating results.
We base the forward-looking statements on our current expectations, estimates
and projections. We caution you that these statements are not guarantees of
future performance and involve risks, uncertainties and assumptions that we
cannot predict. In addition, we have based many of these forward-looking
statements on assumptions about future events that may prove to be inaccurate.
Therefore, the actual results of the future events described in the
forward-looking statements in this Annual Report on Form 10-K, or elsewhere,
could differ materially from those stated in the forward-looking statements.
Among the factors that could cause actual results to differ materially are the
risks and uncertainties discussed in this Annual Report on Form 10-K, including,
without limitation, factors discussed under the caption "Risk Factors,"
beginning on page 27. Shareholders are cautioned not to put undue reliance on
forward-looking statements. In addition, the Company does not have any intention
or obligation to update forward-looking statements after the date hereof, even
if new information, future events, or other circumstances have made them
incorrect or misleading. For those statements, the Company claims the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.

As used in this Annual Report on Form 10-K and except as the context otherwise
may require, "Company," "we," "us," and "our" refer to TEAM America, Inc. and
its subsidiaries.

ITEM 1. BUSINESS.

GENERAL

TEAM America, Inc. (the "Company") is a Business Process Outsourcing company
that specializes in human resource management and administration, which was
formed in December 2000 through the merger of TEAM America Corporation and
Mucho.com, Inc. The Company currently operates primarily as a Professional
Employer Organization ("PEO") throughout the United States. The Company, through
its subsidiaries, provides comprehensive human resource services, including
payroll and payroll administration, benefits administration, on-site and on-line
employee and employer communications, employment practices and human resource
risk management and workforce compliance administration. The Company provides
these services by becoming a co-employer of its clients' employees.

In addition to these traditional PEO services, the Company introduced a new
suite of products during March 2003 aimed at assisting our clients with employee
recruiting and retention issues. These services can be marketed to the Company's
existing clients and to other businesses.

By becoming the co-employer of its clients' employees, the Company is able to
take advantage of certain economies of scale in the "business of employment" and
to pass those benefits on to its clients and worksite employees. As a result,
clients are able to obtain, at an economical cost, services and expertise
similar to those provided by the human resource departments of large companies.
These services provide substantial benefits to both the client and its worksite
employees. The Company believes its services assist business owners by:

         -        permitting the managers of the client to concentrate on the
                  client's core business as a result of the reduced time and
                  effort that they are required to spend dealing with complex
                  human resource, legal and regulatory compliance issues and
                  employee administration; and

         -        managing escalating costs associated with unemployment,
                  workers' compensation, health insurance coverage, worksite
                  safety programs and employee-related litigation.

The Company also believes that worksite employees benefit from their
relationship with the Company by having access to better, more affordable
benefits, enhanced benefit portability, improved worksite safety and employment
stability.


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The Company provides its services by entering into a client services agreement,
which usually establishes a three-party relationship whereby it and the client
act as co-employers of the employees who work at the client's location
("worksite employees"). In connection with the client services agreement, the
Company typically charges a comprehensive service fee, which is invoiced
concurrently with the processing of payroll for the worksite employees of the
client.


The Company believes that there is an increasing trend of businesses to
outsource non-core activities and functions. Only a relatively small percentage
of businesses, however, currently utilize PEOs, although there is significant
growth in the number of small businesses. The Company believes that these
factors, coupled with the ever increasing complexity of the human resource,
legal and regulatory framework and the costs associated with implementing the
necessary management information systems to deal with these issues, will lead to
growth opportunities in the PEO industry.

The Merger. On June 16, 2000, TEAM America Corporation entered into an agreement
and plan of merger with TEAM Merger Corporation, a wholly-owned subsidiary, and
Mucho.com, Inc., pursuant to which TEAM Merger Corporation would be merged with
and into Mucho.com, and Mucho.com would become a wholly-owned subsidiary of TEAM
America Corporation. Under the terms of the merger agreement, TEAM America
Corporation agreed to acquire all of the stock (including options and warrants)
of Mucho.com in exchange for up to 5,925,925 shares of TEAM America
Corporation's common stock. The merger was completed on December 28, 2000.

Pursuant to the terms of the merger agreement, 3,643,709 shares of common stock
were issued, 196,105 shares were reserved for future issuance for Mucho.com
options and 1,111,111 shares were placed in escrow (the "Escrow"). In July 2001,
these shares were released from escrow.

Simultaneous with the merger, the Company announced an issuer tender offer to
all of its existing shareholders. Under the terms of the issuer tender offer,
the Company offered to purchase up to 2,175,492 shares of its common stock,
representing 50% of its outstanding common stock on November 10, 2000, at a
price of $6.75 per share. In connection with the issuer tender offer, a total of
1,721,850 shares of its common stock were tendered and accepted for payment at
$6.75 per share, for a total redemption of $11,622,488.

On December 28, 2000, immediately following the merger, the Company received a
$10 million investment from Stonehenge Opportunity Fund, LLC and Provident Bank
for 100,000 shares of its Series 2000 Class A cumulative convertible preferred
stock ("2000 Class A Preferred Shares"), which as of December 28, 2002 were
convertible into 1,481,481 shares of its common stock. As additional
consideration for the purchase of the preferred stock, the Company issued a
warrant to purchase an additional 1,481,481 shares of its common stock at an
exercise price of $6.75 per share, exercisable for a period of ten years from
December 28, 2000. The Company also secured up to $18 million of senior secured
credit from Provident and from Huntington National Bank for acquisitions.

On March 13, 2001, the Company acquired certain assets of Professional Staff
Management, Inc. ("PSMI"). The purchase price of $6,664,000 included cash of
$4,250,000, seller financing of $1,000,000, common shares of TEAM America, Inc.
(74,074 shares), 10,000 shares of 2000 Class A Preferred Shares and 148,148
common stock warrants. PSMI was based in Salt Lake City, Utah and had clients
throughout the United States, but primarily in Utah, Nevada and Ohio.

RECENT DEVELOPMENTS

Restructuring of Bank Debt and Preferred Stock

On March 28, 2003, the Company entered into certain agreements with its bank
group and its 2000 Class A Preferred Shareholders. The Company entered into a
Third Amendment and Waiver to its Senior Credit Facility (the "Bank Agreement")
and a Memorandum of Understanding (the "Preferred Agreement") with its 2000
Class A Preferred Shareholders.

Bank Agreement

The Company and its senior lenders agreed to amend the Senior Credit Facility as
follows:

-    The outstanding amounts under the Senior Credit Facility of $8,728,000 were
     restructured into three separate tranches. Tranche A representing a
     $6,000,000 Term Loan, Tranche B representing a $2,728,000 Balloon Loan and
     Tranche C representing $914,000 of outstanding letters of credit.

-    The Senior Credit Facility is senior to the $1,500,000 subordinated note
     issued in satisfaction of the Bridge Note discussed below under Preferred
     Agreement.


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-    The maturity of the Senior Credit Facility is January 5, 2004.

-    The interest rate on each tranche is: Tranche A - the Provident Bank Prime
     Commercial Lending Rate plus two percent (6.25% at March 28, 2003); Tranche
     B - 12%, eight percent payable in cash and four percent payable in kind;
     and Tranche C (if drawn) - the Provident Bank's Prime Lending Rate plus
     five percent (9.25% at March 28, 2003).

-    Tranche A requires principal payments of $100,000 per month beginning July
     2003, Tranche B is due at maturity and Tranche C is due immediately upon
     any draw under the letters of credit.

In addition to the above terms, the Company issued to the banks 1,080,000
warrants to purchase common stock of the Company at a price of $0.50 per share.
These warrants expire in seven years. The Bank Agreement states that no new
indebtedness may be incurred under the facility and that any future acquisitions
are subject to consent of the banks.

The Senior Credit Facility is collateralized by all of the assets of the
Company.

Preferred Agreement

The Company and its Class A 2000 Preferred Shareholders agreed to restructure
the preferred shareholders' investment in the Company as follows:

-    The $1,500,000 Bridge Note that was to be paid from proceeds of an equity
     financing that would occur prior to August 9, 2002, will be converted into
     subordinated debt with an interest rate accruing at 14%, which shall be
     subordinated to the Senior Credit Facility (the "Subordinated Debt").
     The Subordinated Debt will be due June 30, 2006 along with all accrued
     interest.

-    The Series 2000 Preferred Shares will be exchanged by the holders for:

-    $2,500,000 Class B Series 2003 Preferred Shares which will have a dividend
     rate of 14% and be non-voting shares. This dividend will be accrued and
     paid-in-kind. These shares will maintain a liquidation preference equal to
     par value plus accrued and unpaid dividends. The holders of these shares
     may, at any time, after the third anniversary of the issuance of such
     shares and with the consent of holders of no fewer than two-thirds of the
     shares, may require the Company to redeem all or any portion of such
     shares at par value plus accrued and unpaid dividends;

-    Warrants to purchase 2,400,000 common shares of the Company at an exercise
     price of $0.50 per share. These warrants expire in 10 years; and

-    4,800,000 common shares of the Company.

The following table shows the pro forma capitalization of the Company as of
December 28, 2002 assuming the above transactions were consummated as of that
date:



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<TABLE>
<CAPTION>

                                                YEAR ENDED
                                               DECEMBER 28,            PRO FORMA
                                                  2002               ADJUSTMENTS            PRO FORMA
                                               ------------          -----------            ---------
                                                                      (UNAUDITED)          (UNAUDITED)
<S>                                         <C>                   <C>                          <C>
Bank debt...............................    $           600       $       -               $          600
Other current liabilities...............             29,132               -                       29,132
                                            ---------------                               --------------
         Total Current Liabilities......             29,732               -                       29,732

Bank debt, non-current..................              8,128          (8,128) (a)          $            -
Bank debt, Term Loan A..................                  -           5,400  (a)                   5,400
Bank debt - Term Loan B.................                  -           2,728  (a)                   2,728
Other non-current liabilities...........              4,748               -                        4,748
                                            ---------------                               --------------
         Total Non-Current Liabilities..             12,876                                       12,876

Subordinated debt.......................                  -           1,500  (c)                   1,500
Series 2003 Preferred Sock..............                  -           2,500  (d)                   2,500

Preferred stock.........................              9,552          (9,552) (d)                       -
Bridge note.............................              1,500          (1,500) (c)                       -
Other - common..........................                  -               -                            -

Shareholders' equity....................              9,603             270  (b)                       -
                                                                        700  (d)                       -
                                                          -           6,352  (d)                  16,925
                                            ---------------                               --------------
Total Liabilities and Shareholders'
   Equity...............................    $        63,263                               $       63,533
                                            ===============                               ==============
</TABLE>

(a)  Exchange existing Bank Credit Facility for Term Loan A and Term Loan B

(b)  Issue warrants to bank (1,080,000 at an assumed fair value of $0.25
     per share)

(c)  Exchange Bridge Note for Subordinated Debt

(d)  Exchange existing preferred for $2,500,000 new preferred; 4,800,000 common
     shares; 2,800,000 warrants (assumed fair value of $0.25 per share)

Restatement of 2001 and 2000 Financial Statements

During the first quarter of 2002, management became aware that the accounting
applied to the issuance of preferred stock, common stock and warrants in
December 2000 was not in accordance with Emerging Issues Task Force ("EITF")
Issue Nos. 98-5, "Accounting for Convertible Securities with Beneficial
Conversion Features or Contingently Adjustable Conversion Ratios," and 00-27
"Application of EITF Issues 98-5, "Accounting for Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios."
Accordingly, the Company restated its 2001 and 2000 financial statements to
properly account for these transactions. The result of the restatement (as more
fully described in Note 4 to the Company's financial statements) was to
increase the net loss for 2000 by approximately $1,047,000, or $0.37 per share.
Additionally, the allocation of amounts between preferred stock and common stock
were adjusted as of December 29, 2001 and December 31, 2000. In connection with
these adjustments, the Company filed restated financial statements on Form
10-K/A with the SEC on August 13, 2002.

NASDAQ Matters

On August 21, 2002, the Company received notification from the NASDAQ that it
was not in compliance with the NASDAQ continued listing requirements relative to
compliance with the Exchange Act. As a result of restating its 2001 and 2000
financial statements in August 2002 and its change in auditors, the Company was
not able to have the restatement of its 2001 and 2000 financial statements
audited in connection with the filing of its Annual Report on Form 10-K/A. As a
result, the NADSAQ determined that the Company was not in compliance with the
NASDAQ listing requirements and issued the delisting notification. Management
responded to the delisting notification and requested a hearing regarding the
matter before the NASDAQ panel. Such hearing was granted and took place on
September 21, 2002. As a result of the


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hearing, the NASDAQ panel determined that the Company would remain listed with
an "E" until such time as the Company becomes compliant with the NASDAQ listing
requirements, which was deemed to be with a timely filing of this Form 10-K.

Acquisitions

On March 1, 2002, the Company acquired certain assets and assumed certain
liabilities of Strategic Staff Management, Inc. ("SSMI"). The purchase price
of $476,000 included cash of $300,000, the assumption of customer deposits of
$172,000 and other costs of $4,000. The Company borrowed $750,000 under its
Credit Facility in connection with this acquisition. SSMI operated as a PEO
primarily in Nebraska and Iowa.

On May 1, 2002, the Company purchased certain assets of Inovis Corporation
("Inovis"). Under the terms of this transaction, the Company is required to pay
the greater of $1,150,000, (the "Minimum Price") or a factor of gross profits
generated by the Inovis business over the 24 months beginning May 2002 and
ending April 2004. Inovis was based in Atlanta, Georgia and had clients
throughout the United States, but primarily concentrated in Georgia.

PEO INDUSTRY

The PEO industry began to evolve in the early 1980's largely in response to the
burdens placed on small and medium-sized employers by an increasingly complex
legal and regulatory environment. While various service providers were available
to assist these businesses with specific tasks, PEOs emerged as providers of a
more comprehensive range of services relating to the employer/employee
relationship. PEO arrangements generally transfer broad aspects of the
employer/employee relationship to the PEO. Because PEOs provide employee-related
services to a large number of employees, they can achieve economies of scale
that allow them to perform employment-related functions more efficiently,
provide employee benefits at a level typically available only to large
corporations with substantial resources and devote more attention to human
resources management.

The Company believes that growth in the PEO industry has been significant. The
Company believes that the key factors driving demand for PEO services include
(i) trends relating to the growth and productivity of the small and medium-sized
business community in the United States, such as outsourcing and a focus on core
competencies, (ii) the need to provide competitive health care and related
benefits to attract and retain employees, (iii) the increasing costs associated
with health and workers' compensation insurance coverage, workplace safety
programs, employee-related complaints and litigation and (iv) complex regulation
of labor and employment issues and the related costs of compliance, including
the allocation of time and effort to such functions by owners and key
executives.

A significant factor in the growth of the PEO industry has been increasing
recognition and acceptance of PEOs and the co-employer relationship by federal
and state governmental authorities. The Company and other industry leaders, in
concert with the National Association of Professional Employer Organizations
(NAPEO), have worked with the relevant governmental entities for the
establishment of a regulatory framework that would clarify the roles and
obligations of the PEO and the client in the "co-employee" relationship. While
47 states have recognized PEOs in their employment laws, many states do not
explicitly regulate PEOs. However, 21 states have enacted legislation containing
licensing, registration, or certification requirements, and several others are
considering such regulation. Such laws vary from state to state but generally
provide for monitoring the fiscal responsibility of PEOs. State regulation
assists in screening insufficiently capitalized PEO operations and, in the
Company's view, has the effect of legitimizing the PEO industry by resolving
interpretive issues concerning employee status for specific purposes under
applicable state law. The Company has actively supported such regulatory efforts
and is currently licensed or registered in 47 of these states. The cost of
compliance with these regulations is not material to the Company's financial
position or results of operations.

Two federal bills have been introduced, H.R. 2807 and S. 1305, that would
formally legislate the regulation of PEOs nationally. Currently, PEOs are
subject to a variety of state laws that require the Company to submit filings,
maintain state specific data and incur the expense of auditing certain states
separately. The Company believes that enacted federal legislation will
facilitate the development of the PEO industry.

SERVICES

Client Service Teams. The Company has five regional directors who oversee a
service staff consisting of Human Resource Consultants (HRC) and Human Resource
Assistants (HRA). An HRC and/or HRA is assigned to each client. The HRC is
responsible for the client's personnel administration, for coordinating the
Company's response to client needs for administrative support and for responding
to any questions or problems encountered by the client.




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The HRC acts as the principal client contact and typically is on call and in
contact with each client throughout the week. This individual serves as the
communication link between the Company's corporate departments and the client's
on-site supervisor, who in many cases is the owner of the client's business.
Accordingly, this individual is involved in every aspect of delivery of services
to clients. For example, the HRC is responsible for gathering all information
necessary to process each payroll of the client and for all other information
needed by the Company's human resources, accounting and other departments with
respect to such client and to worksite employees. An HRC also actively
participates in hiring, disciplining and terminating worksite employees;
administering employee benefits; and responding to employee complaints and
grievances.

Core Activities. The Company provides professional employer services through six
core activities:

-        human resources administration;

-        regulatory compliance management;

-        employee benefits administration;

-        risk management services and employer liability protection;

-        payroll and payroll tax administration; and

-        placement services.

Human Resources Administration. The Company provides its clients with a broad
range of human resource services including on-going supervisory education and
training regarding risk management and employment laws, policies and procedures.
In addition, the Company's Human Resources Department handles sensitive and
complicated employment issues such as employee discipline, termination, sexual
harassment, and wage and salary planning and analysis. The Company provides a
comprehensive employee handbook, including customized, site-specific materials
concerning each worksite, to all worksite employees. In addition, extensive
files and records regarding worksite employees for compliance with various state
and federal laws and regulations are maintained. This extensive record keeping
is designed to substantially reduce legal actions arising from lack of proper
documentation.

Regulatory Compliance Management. Under its client agreement, the Company may
assume responsibility for complying with many employment related regulatory
requirements. Accordingly, it must comply with numerous federal, state and local
laws, including:

-        certain tax, workers' compensation, unemployment, immigration, civil
         rights, and wage and hour laws;

-        the Americans with Disabilities Act of 1990;

-        the Family and Medical Leave Act;

-        laws administered by the Equal Employment Opportunity Commission; and

-        employee benefits laws, such as ERISA and COBRA.

The Company provides bulletin boards to its clients and maintains them for
compliance with required posters and notices. It also assists clients in their
efforts as employers to comply with and understand certain other laws and
responsibilities with respect to which it does not assume liability and
responsibility. For example, while the Company may provide significant safety
training and risk management services to its clients, it may not assume
responsibility for compliance with the Occupational Safety and Health Act
because the client controls its worksite facilities and equipment.

Employee Benefits Administration. The Company offers a broad range of employee
benefit programs to its worksite employees. The Company administers such benefit
programs, thereby reducing the administrative responsibilities of its clients
for maintaining complex and tax-qualified employee benefit plans. By combining
multiple worksite employees, the Company is able to take advantage of certain
economies of scale in the administration and provision of employee benefits. As
a result, the Company is


                                       6
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able to offer to its worksite employees benefit programs that are comparable to
those offered by large corporations. Eligible worksite and corporate staff
employees are entitled to participate in the Company's employee benefit programs
without discrimination. Such programs include life insurance coverage as well as
a cafeteria plan that offers a choice of different health, dental, vision and
prescription card coverage. In addition, each eligible employee may participate
in a 401(k) retirement plan and a medical and dependent care reimbursement
program. Each worksite employee is given the opportunity to purchase
group-discounted, payroll-deducted optional life insurance and long-term
disability insurance and various other discount programs.

By offering its worksite employees a broad range of large corporation style
benefit plans and programs, the Company believes it is able to reduce worksite
employee turnover, which results in cost savings for its clients. The Company
performs regulatory compliance and plan administration in accordance with state
and federal benefit laws.

Risk Management Services and Employer Liability Protection. The Company's risk
management of the worksite includes policies and procedures designed to
proactively prevent and control costs of lawsuits, fines, penalties, judgments,
settlements and legal and professional fees. In addition, it controls benefit
plan costs by attempting to prevent fraud and abuse by closely monitoring
claims. Other risk management programs include effectively processing workers'
compensation and unemployment claims and aggressively contesting any suspicious
or improper claims. The Company believes that such risk management efforts
increase its profitability by reducing liability exposure and by increasing the
value of the services it provides.

Payroll and Payroll Tax Administration. The Company provides its clients with
comprehensive payroll and payroll tax administration services. Subject to the
client's obligation to pay, the Company as the co-employer, assumes
responsibility for the obligations of clients to make federal and state
unemployment and workers' compensation filings, FICA deposits, child support
levies and garnishments, and new hire reports. The Company receives all payroll
information, calculates, processes and records all such information, and either
issues payroll checks or directly deposits the net pay of worksite employees
into their bank accounts. All payroll checks are delivered either to the on-site
supervisor of the worksite or directly to the worksite employees.

Placement Services. As a part of the overall employment relationship, the
Company assists its clients in their efforts to hire new employees. As a result
of the Company's advertising volume and contracts with newspapers and other
media, it is able to place such advertisements at significantly lower prices
than are available to its clients. In addition, in some cases, the Company does
not have to place such advertisements because it already has multiple qualified
candidates in a job bank or pool of candidates. The Company interviews, screens
and pre-qualifies candidates based on criteria established in a job description
prepared by it with the client's assistance and performs background checks. In
addition, depending on the needs of the client, the Company may test worksite
employees for skills, health, and drug-use in accordance with state and federal
laws. Following the selection of a candidate, the Company completes all hiring
paperwork and, if the employee is eligible, enrolls the employee in benefit
programs. The Company believes that this unique approach in providing such
services gives it an advantage over its competitors. These services also enable
it to reduce administrative expenses and employee turnover and to avoid hiring
unqualified or problem employees.

CLIENTS

Client Services Agreement. The Company's client services agreement generally is
for one year and provides for an on-going relationship thereafter, subject to
termination by the Company or the client upon 30 days written notice.

The client services agreement establishes a comprehensive service fee, which is
subject to periodic adjustments to account for changes in the composition of the
client's workforce and statutory changes that affect costs. The client services
agreement also establishes the division of responsibilities between the Company
and the client. Pursuant to the client services agreement, the Company is
responsible for all personnel administration and is liable for certain
employment-related government regulation. In addition, subject to the obligation
of the client to pay the Company, the Company assumes responsibility for payment
of salaries and wages of worksite employees and responsibility for providing
employee benefits to such persons. The client retains the employees' services
and remains liable for compliance with certain governmental regulations, which
requires control of the worksite, daily supervisory responsibility, or is
otherwise beyond the Company's ability to assume. A third group of
responsibilities and liabilities are shared by the Company and the client where
such joint responsibility is appropriate.

Because the Company is a co-employer, it is possible that it could incur
liability for violations of certain employment laws even if it is not
responsible for the conduct giving rise to such liability. The client services
agreement addresses this issue by providing that the client will indemnify the
Company for liability incurred to the extent the liability is attributable to
conduct by the client. Notwithstanding this contractual right to
indemnification, it is possible that the Company could be unable to collect on a
claim for


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indemnification and may therefore be ultimately responsible for satisfying the
liability in question. The Company maintains certain general insurance coverages
(including coverages for its clients) to manage its exposure for these types of
claims, and, as a result, settlement costs with respect to this exposure have
historically been insignificant to its operating results.

Clients are generally required to remit their comprehensive service fees no
later than one day prior to the applicable payroll date by wire transfer or
automated clearinghouse transaction. The Company retains the ability to
terminate the client services agreement as well as the continued employment of
the employees upon non-payment by a client. This right, the periodic nature of
payroll and the overall quality of the client base has resulted in an excellent
overall collection history.

At December 28, 2002, the Company served approximately 1,500 clients and
approximately 12,750 worksite employees resulting in an average of nine worksite
employees per client. No single client accounted for more than 1.5% of revenues
for the 12 months ended December 28, 2002. As a result of acquisitions in 1997
and 1998, the Company's clientele is geographically diverse. In 1996,
approximately 94% of the client base was located in Ohio. At December 28, 2002,
less than 30% of the worksite employees were located in Ohio. The client base is
broadly distributed throughout a wide variety of industries, but is heavily
weighted towards professional, service, light manufacturing and non-profit
businesses. Exposure to higher workers' compensation claims businesses such as
construction, transportation and commercial is less than 5% of the Company's
total business.

In general, the Company has benefited from a high level of client retention,
resulting in a significant recurring revenue stream. The attrition that has been
experienced has typically been caused by a variety of factors, including:

-        sale or acquisition of the client;

-        termination resulting from the client's inability to make timely
         payments;

-        client business failure or downsizing; and

-        client non-renewal due to price or service dissatisfaction.

The Company believes that the risk of a client terminating its relationship with
the Company decreases substantially after the client has been associated with it
for over one year because of the client's increased appreciation of its
value-added services and because of the difficulties associated with a client
reassuming the burdens of being the sole employer. The Company believes that
only a small percentage of nonrenewing clients withdraw due to dissatisfaction
with services or to retain the services of a competitor. The Company did,
however, experience an increase in attrition during fiscal 2002 due to the
Company's efforts to change its client base to larger metropolitan areas, a
change in medical insurance premiums by one of the Company's suppliers and
issues faced by clients as a result of the general downturn in the economy.

SALES AND MARKETING

The Company markets its services through a direct sales force. Each of its sales
personnel enters into an employment agreement that establishes a
performance-based compensation program, which currently includes a base salary,
sales commissions and a bonus for each new worksite employee enlisted. These
employment agreements contain certain non-competition and non-solicitation
provisions that prohibit the sales personnel from competing against the Company.
In certain states, the non-compete agreements may have limited enforceability
but non-solicitation is protected by federal trade secrets laws. The
productivity of the Company's sales personnel is attributed in part to their
experience in fields related to one or more of the Company's core services. The
background of the Company's sales personnel includes experience in industries
such as information services, health insurance, business consulting and
commercial sales. Sales materials emphasize a broad range of high-quality
services and the resulting benefits to clients and worksite employees.

The Company's sales and marketing strategy is to achieve higher penetration in
certain existing markets by increasing sales productivity. Currently, sales
leads are generated from the two primary sources of referrals and direct sales
efforts. These leads result in initial presentations to prospective clients.
Sales personnel gather information about the prospective client and its
employees, including job classification, workers' compensation and health
insurance claims history, salary and the desired level of employee benefits. The
Company performs a risk management analysis of each prospective client which
involves a review of such factors as the client's credit history, financial
strength, and workers' compensation, and health insurance and unemployment
claims history. Following a review of these factors, a client proposal is
prepared for acceptable clients. Stringent underwriting procedures greatly
reduce controllable costs and liability exposure.


                                       8
<PAGE>

COMPETITION

The PEO industry is highly fragmented and served by many companies operating in
small geographical areas. The Company believes it is one of the largest PEOs
operating on a national scale. Some of the Company's principal competitors, all
of which are larger than the Company, include Administaff, Gevity HR, Inc.,
TeamStaff, Inc. and PEO divisions of large business service companies like
Automated Data Processing, Inc. and Paychex, Inc. The Company considers its
primary competition to be traditional in-house providers of human resource
services.

INFORMATION TECHNOLOGY

Since October 1995, the Company has been developing and continues to develop its
proprietary integrated information system based on client-server technology
using an Oracle(TM) relational database. The system, called TEAM Direct(TM)
allows clients to enter and submit payroll data via modem and over the Internet.
The system also is used to store and retrieve information regarding all aspects
of the Company's business, including human resource administration, regulatory
compliance management, employee benefits administration, risk management
services, payroll and payroll tax administration, and placement services. As of
December 28, 2002, all Company locations were utilizing TEAM Direct(TM). The
Company believes that this system will be capable of being upgraded and expanded
to meet its needs for the foreseeable future.

The Company's primary information-processing center is located at its corporate
headquarters near Columbus, Ohio. Other offices are connected to its centralized
system through network services. Industry-standard software is used to process
payroll and other commercially available software manages standard business
functions such as accounting and finance. The Company maintains a back-up
payroll processing facility in Atlanta, Georgia, and maintains a back up of its
TEAM Direct(TM) PEO operating system. The Company also maintains a contract with
a mobile recovery service as part of a disaster recovery plan for its corporate
headquarters.

CORPORATE EMPLOYEES

As of December 28, 2002, the Company had 174 corporate employees located at its
headquarters in Worthington, Ohio and at its offices around the country.

PEO RESPONSIBILITIES

Federal, State and Local Employment Taxes. The Company assumes the
administrative responsibility for the payment of federal, state and local
employment taxes with respect to wages and salaries paid to its employees,
including worksite employees. There are essentially three types of federal,
state and local employment tax obligations:

-        income tax withholding requirements;

-        social security obligations under FICA; and

-        unemployment obligations under FUTA and SUTA.

Under these Internal Revenue Code sections, the employer has the obligation to
withhold and remit the employer portion and, where applicable, the employee
portion of these taxes.

Employee Benefit Plans. TEAM America offers various employee benefit plans to
its worksite employees. These plans include a multi-employer 401(k) plan, a
section 125 plan, group health plans, dental and vision insurance, a group life
insurance plan, a group disability insurance plan and an employee assistance
plan. Generally, employee benefit plans are subject to the provisions of the
Internal Revenue Code and ERISA. The Company's corporate employees also
participate in these plans.

In order to qualify for favorable tax treatment under the Internal Revenue Code
(the "Code"), benefit plans must be established and maintained for the exclusive
benefit of the Company's employees. In addition to the employer/employee
threshold, pension and profit sharing plans, including plans under Code Section
401(k) and matching contributions under Code Section 401(m), must satisfy
certain other requirements under the Code. These other requirements are
generally designed to prevent discrimination in favor of highly compensated
employees to the detriment of non-highly compensated employees with respect to
the availability of, and the benefits, rights and features offered in qualified
employee benefit plans.

In April 2002, the IRS issued Revenue Procedure 2002-21 ("Rev. Proc. 2002-21").
While Rev. Proc. 2002-21 is intended to describe the steps that may be taken to
ensure the qualified status of defined contribution plans maintained by PEO's
for the benefit of worksite employees, there remain uncertainties regarding the
operating and interpretation of that revenue procedure. Under Rev. Proc.
2002-21, if a PEO operates a multiple employer retirement plan in accordance
with Code Section 413(c), the IRS will not disqualify the retirement plan solely
on the grounds that the plan violates or has violated the exclusive benefit
rule. The Company's current, active retirement savings plan is designed and
intended to be operated in accordance with the Code Section 413(c). Rev. Proc.
2002-21 also provides that if a PEO's retirement savings plan is not operated as
a multiple employer


                                       9
<PAGE>

retirement savings plan, the plan risks disqualification for violation of the
exclusive benefit rule unless the PEO either converts the plan to a multiple
employer plan or terminates the plan by December 31, 2003. The Company also
maintains a "frozen" retirement savings plan that is not a multiple employer
plan. The Company anticipates that it will terminate this plan in accordance
with Rev. Proc. 2002-21.

Workers' Compensation. Workers' compensation is a state mandated, comprehensive
insurance program that requires employers to fund medical expenses, lost wages
and other costs resulting from work-related injuries, illnesses and deaths. In
exchange for providing workers' compensation coverage for employees, employers
are not subject to litigation by employees for benefits in excess of those
provided by the relevant state statute. In most states, the extensive benefits
coverage (for both medical cost and lost wages) is provided through the purchase
of commercial insurance from private insurance companies, participation in
state-run insurance funds or employer self-insurance. Workers' compensation
benefits and arrangements vary on a state-by-state basis and are often highly
complex. These laws establish the rights of workers to receive benefits and to
appeal benefit denials.

As a creation of state law, workers' compensation is subject to change by the
state legislature in each state and is influenced by the political processes in
each state. Four states, including Ohio, have mandated that employers receive
coverage only from state operated funds. Although Ohio maintains such a "state
fund," it does allow employers that meet certain criteria to self-insure for
workers' compensation purposes. The Company maintained a self-insured workers'
compensation program for most of its Ohio corporate and worksite employees from
July 1999 through May 2002 and maintained a high retention workers' compensation
policy covering most of its non-Ohio employees until December 31, 2002. The
Company records workers' compensation expense for the historical loss sensitive
programs based upon the estimated ultimate total cost of each claim, plus an
estimate for incurred but not reported claims. Under the Ohio self-insured
program, the Company was self-funded up to $250,000 per occurrence through
December 31, 2001 and $500,000 per occurrence for the period January 1, 2002
through May 31, 2002 and purchased private insurance for individual claims in
excess of that amount. Effective June 1, 2002, the Company's Ohio worksite
employees became insured through the Ohio Bureau of Workers' Compensation
Program, which is a fully insured program, where premiums represent the maximum
cost.

Under its insured program for non-Ohio employees that was in existence for 2002
and prior years, the Company has a per claim retention limit of $500,000 for the
first two occurrences and $250,000 per occurrence thereafter. For the insurance
program covering the periods July 1, 1999 through September 30, 2000, October 1,
2000 through December 31, 2001 and January 1, 2002 through December 31, 2002,
the aggregate caps are estimated to be $4,176,000, $4,950,000 and $9,000,000,
respectively.

Effective January 1, 2003, the Company participates in fully insured workers'
compensation programs provided by Cedar Hill Zurich, various other regional
insurers and certain state workers' compensation funds. Under these programs,
the Company's maximum cost is represented by the premiums paid to these
insurers.

Other Employer Related Requirements. As an employer, the Company is subject to a
wide variety of federal and state laws and regulations governing
employer-employee relationships, including the Immigration Reform and Control
Act, the Americans with Disabilities Act of 1990, the Family Medical Leave Act,
the Occupational Safety and Health Act and comprehensive state and federal civil
rights laws and regulations, including those prohibiting discrimination and
sexual harassment. The definition of employer may be broadly interpreted under
these laws.

Responsibility for complying with various state and federal laws and regulations
is allocated by agreement between the Company and its clients, or, in some
cases, is the joint responsibility of both. Because the Company acts as a
co-employer of worksite employees for many purposes, it is possible that it
could incur liability for violations of laws even though it is not contractually
or otherwise responsible for the conduct giving rise to such liability. The
standard client agreement generally provides that the client will indemnify the
Company for liability incurred both as a result of an act of negligence of a
worksite employee under the direction and control of the client and to the
extent the liability is attributable to the client's failure to comply with any
law or regulation for which it has specified contractual responsibility.
However, there can be no assurance that the Company will be able to enforce such
indemnification, and may therefore be ultimately responsible for satisfying the
liability in question.

ITEM 2.  PROPERTIES.

The Company leases office facilities in Worthington, Ohio, Las Vegas, Nevada,
Dallas and Midland, Texas, Atlanta, Georgia, Salt Lake City, Utah and Bethesda,
Maryland. Its corporate headquarters is located in Worthington, Ohio, a suburb
of Columbus, Ohio, in two leased buildings that house its executive offices and
operations for central Ohio worksite employees. Other offices are used to
service local PEO operations and are also leased. The Company believes that its
current facilities are adequate for its current needs and that additional
suitable space will be available as required.


                                       10
<PAGE>

ITEM 3.  LEGAL PROCEEDINGS.

The Company is not involved in any material pending legal proceedings, other
than ordinary routine litigation incidental to its business. The Company does
not believe that any such pending legal proceedings, individually or in the
aggregate, will have a material adverse effect on its financial results.

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

No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year ended December 28, 2002.



                                       11
<PAGE>


                                     PART II

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

The Company's common stock was quoted on the Nasdaq National Market under the
symbol "TMAM" from the commencement of its initial public offering on December
10, 1996 until October 1, 1999, when the Company's common stock began trading on
the Nasdaq SmallCap Market. Following the merger with Mucho.com, Inc. on
December 28, 2000, the Company's trading symbol was changed to "TMOS." Since
August 23, 2002, the Company's trading symbol has been "TMOSE." The
following table sets forth, for the periods indicated, the high and low bid
prices for the Company's common stock, as reported on the Nasdaq SmallCap
Market.

<TABLE>
<CAPTION>

CALENDAR PERIOD                                                                             COMPANY COMMON STOCK
---------------                                                                             --------------------
                                                                                            HIGH              LOW
                                                                                            ----              ---
<S>                                                                                    <C>               <C>
Fiscal 2001:
    First Quarter...................................................................    $       5.06      $        2.50
    Second Quarter..................................................................    $       3.54      $        2.50
    Third Quarter...................................................................    $       3.30      $        2.51
    Fourth Quarter..................................................................    $       5.30      $        2.70

Fiscal 2002:
    First Quarter ..................................................................    $       3.98      $        2.11
    Second Quarter..................................................................    $       3.60      $        1.90
    Third Quarter...................................................................    $       2.50      $        0.25
    Fourth Quarter..................................................................    $       0.71      $        0.10

Fiscal 2003:
    First quarter (through March 26, 2003)..........................................    $       0.58      $        0.32
</TABLE>

As of March 26, 2003, the number of record holders of the Company's common stock
was approximately 247. The closing sales price of the common stock on March 26,
2003 was $0.48.

The Company has not paid any cash dividends to holders of its common stock and
does not anticipate paying any cash dividends in the foreseeable future, but
intends instead to retain any future earnings for reinvestment in its business.
The payment of any future dividends is currently contingent upon approval of the
Company's 2000 Class A Preferred Shareholders and its lenders.

In April 2002, the Company entered into a Bridge Agreement and Common Stock
Purchase Agreement with one of its 2000 Class A Preferred Shareholders. In
connection with these agreements, the Company issued 166,667 shares of common
stock for $500,000. In addition, the purchaser received a warrant to purchase
100,000 shares of common stock exercisable at $3.00 per share.

In March 2001, the Company received $1 million from the issuance of additional
2000 Class A Preferred Shares. As additional consideration for the purchase,
the Company issued a warrant to purchase an additional 148,148 shares of
common stock exercisable at $6.75 per share.

In connection with the purchase of substantially all of the assets of
Professional Staff Management, Inc., the Company issued 74,074 common shares.

The following table sets forth information about the Company's common stock
that may be issued under the Company's existing equity compensation plans as
of December 28, 2002:

<TABLE>
<CAPTION>
                                                  NUMBER OF SHARES     WEIGHTED AVERAGE         NUMBER OF
                                                 TO BE ISSUED UPON         PRICE OF       SECURITIES REMAINING
                                                    EXERCISE OF          OUTSTANDING          AVAILABLE FOR
                                                      OPTIONS              OPTIONS           FUTURE ISSUANCE
                                                      -------              -------           ---------------
<S>                                               <C>                  <C>                 <C>
Equity compensation plans approved by
  security holders........................           1,289,000            $   5.93                523,000
</TABLE>


ITEM 6.  SELECTED FINANCIAL DATA.

SUMMARY OF TEAM AMERICA, INC. SELECTED FINANCIAL DATA

The following table presents summary selected financial data of TEAM America,
Inc. as of and for the period from July 8, 1999 to December 31, 1999, and as of
and for the years ended December 28, 2002, December 29, 2001 and December 31,
2000. This


                                       12
<PAGE>

financial data should be read in conjunction with TEAM America, Inc.'s
historical financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contained elsewhere in this
Annual Report on Form 10-K.

The reported results for 1999 and 2000 are those of Mucho.com, Inc. No PEO
results are provided for fiscal years 1999 and 2000.

                     (000'S OMITTED, EXCEPT PER SHARE DATA)
<CAPTION>
<TABLE>

                                                                                                             PERIOD FROM
                                                YEAR ENDED           YEAR ENDED         YEAR ENDED          INCEPTION TO
                                               DECEMBER 28,          DECEMBER 29,      DECEMBER 31,         DECEMBER 31,
                                                  2002                  2001               2000                 1999
                                                  ----                  ----               ----                 ----
<S>                                      <C>                   <C>                  <C>                   <C>
Statement of Operations Data:
Revenues  (2)...........................    $        58,939       $       57,036       $           51        $          -
                                            ---------------       --------------       --------------        ------------
Cost of Services........................             38,334               37,167                    -                   -
                                            ---------------       --------------       --------------        ------------
Gross Profit............................             20,605               19,869                   51                   -
                                            ---------------       --------------       --------------        ------------
Expenses:
   Administrative salaries..............             11,377               10,743                5,651                 883
   Other selling, general and
      administrative expenses...........              7,925                7,588                2,468                 271
   Depreciation and amortization........              1,414                2,808                  262                  20
   Restructuring charges................                738                1,834                  654                   -
   Systems and operations development
      costs ............................                312                    -                    -                   -
                                            ---------------       --------------       --------------        ------------
      Total operating expenses..........             21,766               22,973                9,035               1,174
                                            ---------------       --------------       --------------        ------------
      Loss from operations..............             (1,161)              (3,104)              (8,984)             (1,174)
                                            ----------------      ---------------      ---------------       -------------
   Interest expense.....................             (1,672)              (1,051)                (512)                (80)
                                            ----------------      ---------------      ---------------       -------------
   Income tax benefit (expense).........                982                  (35)                   -                   -
                                            ---------------       ---------------      --------------        ------------
Net loss................................             (1,851)              (4,190)              (9,496)             (1,254)
Deemed dividend (1).....................                                       -               (1,047)                  -
Preferred stock dividends...............             (1,224)              (1,100)                   -                   -
                                            ----------------      ---------------      --------------        ------------
Net loss attributable to common
   shareholders (1).....................    $        (3,075)      $       (5,290)      $      (10,543)       $     (1,254)
                                            ================      ===============      ===============       =============
Net loss per common share
   Basic and diluted (1)................    $         (0.38)      $       (0.72)       $        (3.74)       $      (0.66)

Balance Sheet Data:
Working capital deficit.................    $        (9,241)      $       (8,222)      $       (4,803)       $       (957)
Total assets............................    $        63,263       $       58,844       $       56,960        $        292
Long-term obligations...................    $        12,876       $       13,044       $        3,665        $         62
Total shareholders' equity (deficit) (1)    $         9,603       $       12,064       $       17,021        $       (803)
</TABLE>

(1).      As described in Note 4 to the Company's Consolidated Financial
          Statements, the Company's Statements of Operations and of Cash Flows
          for the year ended December 31, 2000 and its Balance Sheets and
          Statements of Changes in Shareholders' Equity at December 29, 2001 and
          December 31, 2000 have been restated.

(2).      As described in Note 2 to the Company's Consolidated Financial
          Statements, revenues for 2001 have been reclassified to conform to the
          2002 presentation.



                                       13
<PAGE>


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

OVERVIEW

The Company has operated as a Professional Employer Organization ("PEO")
actively since 1986 as TEAM America. The Company participated in a reverse
merger with Mucho.com (based in Lafayette, California) on December 28, 2000,
which had operated as an Online Business Center ("OBC") since July 1999.

PEO revenue is recognized as service is rendered. The PEO revenue consists of
charges by the Company for the administrative service fees, health insurance,
workers' compensation charges and employer paid unemployment insurance. These
charges, along with gross payroll, payroll taxes and retirement benefits are
invoiced to the client at the time of each periodic payroll. The Company
negotiates the pricing for its various services on a client-by-client basis
based on factors such as market conditions, client needs and services requested,
the client's workers' compensation experience, credit exposure and the required
resources to service the account. Because the pricing is negotiated separately
with each client and varies according to circumstances, the Company's revenue,
and therefore its gross margin, will fluctuate based on the Company's client
mix. Costs of services in the Company's Statement of Operations are reflective
of the type of revenue being generated. Costs of services include health
insurance, workers' compensation insurance and unemployment insurance costs. The
Company maintained a self-insured workers' compensation program for most of its
Ohio employees from July 1999 through May 2002 and maintained a high retention
workers' compensation policy covering most of its non-Ohio employees or all
other states ("AOS") until December 31, 2002. Effective June 1, 2002, the
Company's Ohio worksite employees became insured through the Ohio Bureau of
Workers' Compensation Program, which is a fully insured program, where premiums
represent the maximum cost. Effective January 1, 2003, the Company participates
in fully insured workers' compensation programs provided by Cedar Hill Zurich,
various other regional insurers and certain state workers' compensation funds.
Under these programs, the Company's maximum cost is represented by the premiums
paid to these insurers. The Company does not provide workers' compensation
coverage to non-employees of the Company. The AOS workers' compensation
insurance program provider was The Hartford Insurance Company ("Hartford") for
the period July 1999 through December 2002.

With respect to the historical loss sensitive programs, the Company records in
cost of services a monthly charge based upon its estimate of the year's ultimate
fully developed losses plus the fixed costs charged by the insurance carrier to
support the program. This estimate is established each quarter based in part
upon information provided by the Company's insurers, internal analysis and its
insurance broker. The Company's internal analysis includes a quarterly review of
open claims and review of historical claims and losses related to the workers'
compensation programs. While management uses available information, including
nationwide loss ratios, to estimate ultimate losses, future adjustments may be
necessary based on actual losses.

As of December 28, 2002, the adequacy of the workers' compensation reserves were
determined, in management's opinion, to be reasonable. However, since these
reserves are for losses that have not been sufficiently developed due to the
relatively young age of these claims, and variables such as timing of payments
are uncertain or unknown, actual results may vary from current estimates. The
Company will continue to monitor the development of these reserves, the actual
payments made against the claims incurred, the timing of these payments and
adjust the reserves as deemed appropriate.

The Company's clients are billed at fixed rates determined when the contract is
negotiated with the client. The fixed rates include charges for workers'
compensation based upon the Company's assessment of the costs of providing
workers' compensation to the client. If the Company's costs for workers'
compensation are greater than the costs included in the client's contractual
rate, the Company may be unable to recover these excess charges from the
clients. The Company reserves the right in its contracts to increase the
workers' compensation charges on a prospective basis only.

On March 1, 2002, the Company acquired certain assets and assumed certain
liabilities of Strategic Staff Management, Inc. ("SSMI"). The purchase price of
$476,000 included cash of $300,000, the assumption of customer deposits of
$172,000 and other costs of $4,000. The Company borrowed $750,000 under its
Credit Facility in connection with this acquisition. SSMI operated as a PEO
primarily in Nebraska and Iowa.

On May 1, 2002, the Company purchased certain assets of Inovis Corporation
("Inovis"). Under the terms of this transaction, the Company is required to pay
the greater of $1,150,000, (the "Minimum Price") or a factor of gross profits
generated by the Inovis business over the 24 months beginning May 2002 and
ending April 2004. Inovis was based in Atlanta, Georgia and had clients
throughout the United States, but primarily concentrated in Georgia.



                                       14
<PAGE>

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to customer bad debts, workers' compensation
reserves, income taxes, and contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates.

The Company believes the following critical accounting policies reflect the more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

Revenue Recognition. The Company bills its clients on each payroll date for (i)
the actual gross salaries and wages, related employment taxes and employee
benefits of the Company's worksite employees, (ii) actual advertising costs
associated with recruitment, (iii) workers' compensation and unemployment
service fees and (iv) an administrative fee. The Company's administrative fee is
computed based upon either a fixed fee per worksite employee or an established
percentage of gross salaries and wages (subject to a guaranteed minimum fee per
worksite employee), negotiated at the time the client service agreement is
executed. The Company's administrative fee varies by client based primarily upon
the nature and size of the client's business and the Company's assessment of the
costs and risks associated with the employment of the client's worksite
employees. Accordingly, the Company's administrative fee income will fluctuate
based on the number and gross salaries and wages of worksite employees, and the
mix of client fee income will fluctuate based on the mix of total client fee
arrangements and terms. Although most contracts are for one year and renew
automatically, the Company and its clients generally have the ability to
terminate the relationship with 30 days' notice.

The Company bills its clients for workers' compensation and unemployment costs
at rates that vary by client based upon the client's claims and rate history.
The amount billed is intended (i) to cover payments made by the Company for
insurance premiums and unemployment taxes, (ii) to cover the Company's cost of
contesting workers' compensation and unemployment claims, and other related
administrative costs and (iii) to compensate the Company for providing such
services. The Company has an incentive to minimize its workers' compensation and
unemployment costs because the Company bears the risk that its actual costs will
exceed those billed to its clients, and conversely, the Company profits in the
event that it effectively manages such costs. The Company believes that this
risk is mitigated by the fact that its typical standard client agreement
provides that the Company, at its discretion, may adjust the amount billed to
the client to reflect changes in the Company's direct costs, including, without
limitation, statutory increases in employment taxes and insurance. Any such
adjustment that relates to changes in direct costs is effective as of the date
of the changes, and all changes require 30 days' prior notice.

In accordance with Emerging Issues Task Force (EITF) Issue No. 99-19, "Reporting
Revenue Gross as a Principal versus Net as an Agent," the Company recognizes
amounts billed to clients for administrative fees, health insurance, workers'
compensation and unemployment insurance as revenues as the Company acts as a
principal with regards to these matters. Amounts billed for gross payrolls (less
employee health insurance contributions), employer taxes and 401(k) matching are
recorded net as the Company is deemed to act only as an agent in these
transactions. The Company recognizes in its balance sheet the entire amounts
billed to clients for gross payroll and related taxes, health insurance,
workers' compensation, unemployment insurance and administrative fees as
unbilled receivables, on an accrual basis, any such amounts that relate to
services performed by worksite employees that have not yet been billed to the
client at the end of an accounting period. The related gross payroll and related
taxes and costs of health insurance, workers' compensation and unemployment
insurance are recorded as accrued compensation at the end of an accounting
period.

Because the acquisition of TEAM America Corporation occurred on December 28,
2000, the Company recognized no revenue or expenses related to the PEO business
segment prior to 2001. Unbilled revenues on the balance sheet at December 31,
2000 represent amounts generated by TEAM America Corporation prior to the
acquisition and billed to clients after the acquisition.

Workers' Compensation. The Company maintained a self-insured workers'
compensation program for most of its Ohio employees from July 1999 through May
2002 and maintained a high retention workers' compensation policy covering most
of its non-Ohio employees until December 31, 2002. The Company records workers'
compensation expense for the loss


                                       15
<PAGE>

sensitive programs based upon the estimated ultimate total cost of each claim,
plus an estimate for incurred but not reported claims. Under the Ohio
self-insured program, the Company was self-funded up to $250,000 per occurrence
through December 31, 2001 and $500,000 per occurrence for the period January 1,
2002 through May 31, 2002 and purchased private insurance for individual claims
in excess of that amount. Effective June 1, 2002, the Company's Ohio worksite
employees became insured through the Ohio Bureau of Workers' Compensation
Program, which is a fully insured program, where premiums represent the maximum
cost.

Under its historical insured program for non-Ohio employees, the Company has a
per claim retention limit of $500,000 for the first two occurrences and $250,000
per occurrence thereafter. For the insurance program covering the periods July
1, 1999 through September 30, 2000, October 1, 2000 through December 31, 2001
and January 1, 2002 through December 31, 2002, the aggregate caps are estimated
to be $4,176,000, $4,950,000 and $9,000,000, respectively.

In addition to providing the claims expense under the plan, as described above,
the Company was required to "pre-fund" a portion of the estimated claims under
the non-Ohio program. The amounts "pre-funded" are used by the insurance carrier
to pay claims. The amount "pre-funded" is measured at various periods in the
insurance contract to determine, based upon paid and incurred claims history,
whether the Company is due a refund or owes additional funding.

Effective January 1, 2003, all workers' compensation coverage has been obtained
on a guaranteed cost basis, so that the premiums for any program represents the
Company's maximum liability.

Goodwill. Effective December 30, 2001, the Company adopted SFAS No. 142,
"Goodwill and Other Intangible Assets." Under SFAS No. 142, the Company no
longer amortizes goodwill, but is required to test for impairment on an annual
basis and at interim periods if certain factors are present that may indicate
that the carrying value of the reporting unit is greater than its fair value.
The Company has determined that it operates as a single reporting unit,
therefore, any potential goodwill impairment is measured at the corporate level.

In connection with the adoption of SFAS No. 142, management, in determining its
methodology for measuring fair value, assessed that its market price may not be
reflective of fair value due to various factors, including that the Company's
officers, directors and significant shareholders own a controlling interest in
the Company's common shares and, as a result, that the market may be illiquid at
times with regard to the remaining shares as such shares are thinly traded.
Accordingly, in order to assess fair value of the Company, management determined
that a number of measures should be considered, including but not limited to,
market capitalization of the Company, market capitalization of the Company plus
a "control" premium, discounted projected earnings before interest, depreciation
and amortization (EBITDA), multiples of sales and EBITDA as compared to other
industry participants and comparison of historical transactions.

SFAS No. 142 required that the Company adopt an annual date at which it would
test for impairment of goodwill. In connection with the adoption of this
statement, the Company chose the end of the third quarter as its date to test
for such impairment. At the end of the third quarter of fiscal year 2002,
management determined that no impairment existed using the following
calculations and assumptions:

-        The common shareholders' equity of the Company at the end of the third
         quarter of 2002 was $9,481,000.

-        Calculations and assumptions used in the determination of fair value
         included the following:

         -        Market capitalization of the Company based on the closing
                  price of the Company's common shares on September 27, 2002 was
                  $0.70 per share. Using this market price, the Company's market
                  capitalization at the end of the third quarter of fiscal year
                  2002 was approximately $5,751,000.

         -        Market capitalization plus a "control" premium assumed to be
                  20% was approximately $6,901,000.

         -        The Company prepared a discounted EBITDA analysis based upon
                  the Company's forecast EBITDA (before restructuring charges)
                  for 2002 and applying certain growth factors for 2003 through
                  2007. The significant assumptions used in these calculations
                  included:

                  -        Fiscal year 2003 EBITDA was estimated assuming a
                           gross margin similar to 2002 and certain changes
                           in the Company's business, including the impact of
                           2002 restructuring.


                                       16
<PAGE>

                  -        Management assumed the following growth rates in
                           gross margin: 2004-10%, 2005-8%, 2006-6%, and
                           2007-4%. Corporate payroll and selling, general and
                           administrative expenses were assumed to remain at
                           similar levels relative to gross margin.

                  -        A 20% discount rate was used as well as a 20%
                           "control" premium.

                  -        Using the above assumptions, the discounted EBITDA
                           was calculated to be approximately $35,760,000. In
                           order to arrive at a value attributable to the common
                           shares, management reduced this amount by the
                           Company's outstanding senior debt of $8,744,000 and
                           the amount for preferred shareholders of $9,235,000.
                           The residual amount of $17,781,000 was used as the
                           estimate of fair value of the Company under this
                           methodology.

In assessing the Company's fair value at the end of the third quarter of 2002,
management determined that the Company's market capitalization was not
reflective of fair value as the common stock price dropped precipitously
immediately following a NASDAQ required press release describing NASDAQ's
initial determination that the Company was not in compliance with NASDAQ listing
requirements and was therefore subject to delisting. These events were caused by
the Company's filing of its second quarter Form 10-Q without an independent
auditor's review, due to the demise of Arthur Andersen LLP, and the Company's
related restatement of its 2001 and 2000 financial statements as described in
Note 4. In accordance with this process, the NASDAQ appended an "E" to the
Company's trading symbol, noting the failure to comply with continued listing
requirements and potential delisting. Following the Company's press release, the
Company's common stock price dropped from $1.36 to $0.45 per share. For the
period from July 1, 2002 up to the date of the press release, the common stock
had traded in the range of $1.36 to $2.50. Accordingly, in management's
judgment, the drop in the stock price is a temporary event related to the
potential delisting and not due to fundamental changes in the business.
Management believes that shortly following a timely filing of this 10-K, the
appended "E" will be removed.

Based upon management's determination that the market capitalization was not
necessarily reflective of fair value, the other measurement factors were heavily
considered in this analysis, the most significant being the discounted EBITDA
model that yielded a value of approximately $17,781,000. In order to reconcile
this back to the market capitalization, management assessed the market price
($1.36) immediately prior to the press release regarding delisting and the
average market price ($1.54) for the quarter. Based on each of these measures,
the market capitalization of the Company would have been $11,173,000 using the
market price of $1.36 per share and $12,652,000 using the average price of $1.54
per share for the third quarter of 2002.

After assessing all of the information regarding fair value as outlined above,
management determined that as of the end of the third quarter, no impairment
charge of goodwill was required. Had the Company used only the market
capitalization of the Company as a measure of fair value, an impairment charge
would have been required. Management estimates that the minimum required charge
under this market capitalization methodology would have been approximately
$3,484,000.

During the fourth quarter of 2002, management, as required by SFAS No. 142,
assessed whether or not events or circumstances had occurred subsequent to the
Company's annual measurement date that would more likely than not reduce the
fair value of the Company below its carrying amount. Based upon its assessment,
management determined that there were no factors subsequent to the third quarter
that would more likely than not reduce the fair value of the Company. Management
believes that during the fourth quarter positive developments occurred,
including improvement in EBITDA and the signing of a Forbearance Agreement with
its banks. Moreover, management assessed that the stock price had continued to
trade in a range of approximately $0.40 per share to $0.70 per share subsequent
to the third quarter. Consistent with their conclusions at the end of the third
quarter, management determined that the market price was not reflective of fair
value due to the appended "E" denoting potential delisting of its common shares
and, therefore, was not an indicator that potential impairment may exist.

Management will continue to assess the potential indicators of impairment,
including the Company's common stock price during 2003. If after removal of the
appended "E" to the Company's trading symbol, the common stock price does not
positively change, management believes that the declined stock price may then be
an indicator of potential impairment and will perform an interim test at that
time. Should the market price of the Company's common stock not improve,
management believes that this test may be performed as early as the second
quarter of 2003. Had management performed the same test of fair value as of the
end of the year that was applied at the end of the third quarter, management
believes that the results would have been similar to those described above for
the third quarter. Accordingly, management does not believe that this test would
have resulted in an impairment charge. Had an interim impairment test been
required and had management used only the market capitalization of the Company
to measure fair value at December 28, 2002, an impairment charge would have been
required. Management estimates that the minimum required charge under this
methodology market capitalization would have been approximately $5,413,000.




                                       17
<PAGE>

There can be no assurance that future goodwill impairment tests, including
interim tests as may be required, will not result in a charge to future
operations.

Further, there can be no assurance that the Staff of the United States
Securities and Exchange Commission will not have different views in respect to
whether the Company's stock price is reflective of an active market and that the
use of market price should have been used in valuation of goodwill. As
previously stated, the use of only quoted market price to determine any goodwill
impairment would have resulted in a minimum impairment charge of approximately
$5,413,000 at December 28, 2002.

During 2001, the Company recognized $1,783,000 of amortization expense related
to goodwill. Had the Company adopted SFAS No. 142 as of the beginning of 2001,
$1,783,000 of amortization expense would not have been recognized and net loss
would have decreased by $1,783,000 and loss per share attributable to common
shareholders would have decreased by $0.24 per share.

FISCAL YEAR 2002 COMPARED TO FISCAL YEAR 2001

REVENUES

For the fiscal year ended December 28, 2002, total revenues increased by
$1,903,000, or 3.34%, as compared to the fiscal year ended December 29, 2001.
This higher revenue is a result of the combination of the Company's efforts
during 2002 and 2001 to focus its sales efforts in certain major metropolitan
markets, where clients represent lower risk and have higher gross margin
potential and the revenue added by two market acquisitions, which was partially
offset by a decline in worksite employees in the Company's existing client base
at the beginning of the year. As a result of the above factors, the average
number of paid worksite employees during 2002 decreased to 12,849 from 14,154 in
2001, or a reduction of 9.22%. At the same time, the average revenue per
worksite employee increased to $4,587 in 2002 from $4,030 in 2001, representing
an increase of 13.82%.

During 2002, the Company added incremental worksite employees through its
acquisitions of SSMI and Inovis. From their respective dates of acquisition,
SSMI contributed 712 and Inovis contributed 2,008 average worksite employees. On
an annualized basis, revenues per worksite employee for SSMI were $3,687 and for
Inovis were $7,732. Excluding the effect of these acquisitions, average paid
worksite employees decreased to 10,917 from 14,154, or 22.87%, while the revenue
per worksite employee increased to $4,618 from $4,030, or 14.59%.

COST OF REVENUE/GROSS PROFIT

For the fiscal year ended December 28, 2002, gross profit was $20,605,000, or
34.96% of revenues compared to the fiscal year ended December 29, 2001 gross
profit of $19,869,000, or 34.84% of revenues, representing an increase in gross
profit of $736,000, or 3.70%. This increase in gross profit is primarily
attributable to the Company's focus on lower risk higher margin business in
major metropolitan markets. Gross margin per average paid worksite employees
increased to $1,604 in 2002 from $1,404 in 2001, resulting in an increase of
$200, or 14.25%. The annualized gross profit per average paid worksite employee
for the clients acquired through the SSMI acquisition was $784 and the Inovis
acquisition was $1,058. Excluding the impact of these acquisitions, gross profit
per average paid worksite employee increased by $311, or 22.15%, to $1,715 in
2002.

OPERATING EXPENSES

For the fiscal year ended December 28, 2002, total operating expenses were
$21,766,000, or 36.93% of revenues, compared to $22,973,000, or 40.28% of
revenues, for the fiscal year ended December 29, 2001. This decrease of
$1,207,000, or 5.25%, is due to a decrease in depreciation and amortization
expense of $1,394,000 and a decrease in restructuring costs charges of
$1,096,000 partially offset by increases in corporate administrative salaries of
$634,000, an increase in other selling, general and administrative expenses of
$337,000 and certain expenses related to systems development of $312,000.

Depreciation and amortization expense decreased primarily as a result of the
elimination of amortization expense related to goodwill. During 2001, the
Company recorded $1,783,000 of goodwill amortization expense that was not
recognized in 2002. This decrease was offset by additional amortization expense
incurred during 2002 as a result of the acquisitions of SSMI and Inovis. During
2002, the Company recorded $211,000 of amortization expense related to customer
relationships acquired in those acquisitions.

The Company continued its efforts to reduce costs in 2002 through the
consolidation of operating centers and the associated elimination of corporate
positions. During 2002, the Company recognized $738,000 of restructuring costs
associated with these efforts compared to $1,834,000 in 2001. The 2002
restructuring costs include $158,000 paid in employee severance, $199,000
related to employee relocation and $381,000 for leases related to sales and
services offices, as well as a payroll


                                       18
<PAGE>

processing center closed during the year.

Corporate administrative salaries were $11,377,000, or 19.30% of revenue, in
2002 compared to $10,743,000, or 18.84% of revenue, in 2001, representing an
increase of $634,000, or 5.90%. During 2002, the Company reduced its corporate
payroll headcount from 209 at the beginning of the year to 174 at the end of the
year. A significant portion of this reduction was attributable to the
consolidation of sales and service offices and the closing of a payroll
processing center. These consolidations took place during the fourth quarter
2002; therefore, a significant portion of the savings were not realized in 2002.
Additionally, the Inovis acquisition was primarily operated as a stand-alone
business from the date of acquisition, May 2002, through its integration into
the Company's operating systems in November 2002. This resulted in additional
headcount and payroll dollars through 2002.

Other selling, general and administrative expenses were $7,925,000, or 13.45% of
revenues, in 2002 compared to $7,588,000, or 13.3% of revenues, in 2001,
representing an increase of $337,000, or 4.44%.

Significant increases in selling, general and administrative expense categories
included professional fees of $413,000, banking fees of $140,000, rent of
$130,000, other consulting fees of $106,000, corporate insurance of $82,000,
investor relations of $78,000 and marketing costs of $49,000. These increases
were partially offset by decreases in bad debt expense of $156,000, temporary
labor of $68,000 and information technology consulting of $39,000.

Professional fees increased primarily due to the Company's change in auditors
during the year, as well as costs associated with restating its 2001 and 2000
financial statements. Additional professional fees were also incurred as a
result of the potential NASDAQ delisting. Rent and marketing costs increased
primarily as a result of having a full year of operations in Dallas, Texas
compared to only three months in fiscal 2001, as well as the addition of markets
in Omaha, Nebraska and Atlanta, Georgia through acquisitions. Banking fees
increased as a result of additional cost incurred related to cash collections
from clients associated primarily with moving a substantial number of clients
from ACH collection to wire. Other consulting fees increased primarily due to
costs associated with various advisors regarding capital raises and/or strategic
opportunities. Corporate insurance increased due to related premium increases.

The reduction in bad debt expense is primarily attributable to concerted efforts
on behalf of the Company to adhere to strict financial underwriting criteria, as
well as the elimination of certain credit risk due to the changing demographics
of its book of business. Temporary labor and information technology consulting
costs decreased primarily as a result of no significant systems charges or
issues such as those incurred in 2001 surrounding the implementation of the
Great Plains accounting system.

RESTRUCTURING AND OTHER COSTS

The Company incurred $738,000 of restructuring costs during 2002 compared to
$1,834,000 in 2001. The 2002 restructuring was primarily focused on the
Company's consolidation of operations and the associated relocation of key
personnel, as well as the resultant rationalization of the Company's workforce.
In connection with this restructuring, the Company closed several sales and
service offices, as well as a payroll processing center. The major components of
this restructuring charge included relocation costs of $199,000, employee
severance of $158,000 and costs associated with building leases of $381,000.

As a result of the problems associated with the implementation of the Great
Plains accounting system in 2001, the Company hired an outside consultant to
assist in the assessment of and to make recommendations regarding improvements
to the Company's information systems and processes. The Company incurred
$312,000 of costs associated with this project.

OPERATING LOSS

For the fiscal year ended December 28, 2002, the Company's operating loss was
$1,161,000 compared to $3,104,000 for the fiscal year ended December 29, 2001.
This improvement of $1,943,000 was attributable to the combination of factors
discussed in Gross Profit and Operating Expenses above.

INTEREST EXPENSE

For the fiscal year ended December 28, 2002, the Company incurred $1,565,000 of
interest expense compared to $863,000


                                       19
<PAGE>

for the fiscal year ended December 29, 2001. The increase in net interest
expense of $702,000 is attributable to interest on the bridge note of $81,000,
amortization of warrants issued in connection with the bridge note of $105,000,
increased interest associated with capital leases of $74,000, an increase in
interest associated with an interest rate swap instrument of $128,000 and an
increase in amortization of deferred financing costs of $371,000 offset by other
changes, net of $49,000.

The increase in amortization of deferred financing costs is primarily
attributable to amounts paid by the Company related to entering into an Omnibus
Forbearance Agreement in October 2002. These costs included legal fees,
consulting fees and a $100,000 forbearance fee. As the term of the Forbearance
Agreement was six months, the Company is amortizing these costs over that
period.

In connection with its Credit Facility, the Company was required to enter into
an interest rate swap agreement. This instrument has not been designated as a
hedge. Accordingly, changes in the fair value of this instrument are recorded as
a gain or loss in the Company's financial statements. The Company recorded
expense representing losses due to the change in fair value of this instrument
of $107,000 during 2002 and $188,000 during 2001.

INCOME TAX BENEFIT

For the fiscal year ended December 28, 2002, the Company recorded a federal
income tax benefit of $1,067,000. The Company incurred certain state and local
income tax expense of approximately $85,000. The tax provision in the fiscal
year ended December 29, 2001 related entirely to state and local taxes. The
significant change in federal income taxes for 2002 is primarily due to a change
in tax law during 2002 that allowed the carryback of net operating losses for
five years as opposed to the prior law of three years. This change in tax law
allowed the Company to carryback its net operating losses and recover previously
paid taxes. The Company continues to carry net deferred tax assets related to
certain temporary differences. A valuation allowance has been provided for all
deferred tax assets related to net operating loss carryfowards. Management
believes that it is more likely than not that the remaining deferred tax assets
are realizable primarily through various tax planning strategies.

NET LOSS AND LOSS PER SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS

The Company incurred a net loss of $1,851,000 in its fiscal year ended December
28, 2002 compared to $4,190,000 in its fiscal year ended December 29, 2001. This
improvement is due to the factors described above. The Company recorded
preferred stock dividends of $1,224,000 during fiscal year 2002 and $1,100,000
during fiscal year 2001. After the preferred stock dividend, the Company had a
net loss attributable to common shareholders of $3,075,000, or $0.38 per share,
for the fiscal year ended December 28, 2002 and $5,290,000, or $0.72 per share,
for the fiscal year ended December 29, 2001.

The weighted average number of shares used in the calculation of per share loss
attributable to common shareholders for the fiscal years ended December 28, 2002
and December 29, 2001, excludes options, warrants and convertible preferred
stock, as their inclusion would be anti-dilutive.

FISCAL YEAR 2001 COMPARED TO FISCAL YEAR 2000

The Company's revenue changed substantially from the 2000 and 1999 fiscal years.
The Company's reported results for 1999 were those of the Mucho.com Internet
operations based in Lafayette, California. Accordingly, no meaningful comparison
can be made on the Company's overall results for fiscal years 2001 to 2000.

The Company's revenues for the fiscal year ended December 2001 were $57,036,000,
of which $78,000 was related to the Mucho.com Internet operations. This compares
to Mucho.com's reported revenue for fiscal year 2000 of $51,000, which
represents an increase of 52.9%. The Mucho.com Internet operations were closed
in Lafayette, California by December 29, 2001.

Costs of services for fiscal year 2001 were $37,167,000. As a percentage of
revenue, cost of services for fiscal year 2001 was 65.16%.

Gross profits were $19,869,000 for fiscal year 2001. Gross profits, as a
percentage of revenue, were 34.84% for the fiscal year 2001. Additional expenses
were incurred as a result of the events surrounding the September 11th tragedy.
These expenses, totaling $149,000, were primarily due to additional charges
associated with the delivery of payroll by ground and other available means due
to the problems associated with air freight around the country.


                                       20
<PAGE>

Selling, general and administrative expenses ("SG&A") for fiscal 2001 amounted
to $7,588,000, or 13.30% of revenue. The Company incurred expenditures to open a
new Dallas office ($250,000), the PSMI integration costs ($683,000), the closure
of certain offices (Boise, Memphis, Orlando, and Orem, UT [$150,000]), and
additional IT consulting and programming capacity to expand the Company's
processing capabilities as it continued to integrate new books of business and
open new offices during the 2002 fiscal year. Difficulties associated with
previous accounting software platforms along with the implementation challenges
associated with the Company's new platform caused the Company to file its third
quarter 10-Q late and to incur some additional expenses. This resulted in
additional expenses of approximately $300,000. The Company implemented a new
accounting platform to help prevent this from occurring in the future.

Depreciation and amortization was $2,808,000 in fiscal year 2001 primarily due
to amortization of goodwill from the acquisitions of TEAM America in December
2000 and PSMI in March 2001, offset by a reduction in depreciation expense from
assets that were fully depreciated in fiscal 2001.

In conjunction with the integration of the TEAM America acquisition, the Company
incurred $1,834,000 of restructuring charges. The charges related primarily to
exit costs associated with the on-line business center, including the relocation
of certain key executives, employee severance and the write-down of impaired
assets. Total restructuring costs were 3.22% of revenues.

Interest expense in fiscal year 2001 was $1,051,000 as the Company's
indebtedness reached $9,049,000. Including letters of credit with regards to the
Company's workers' compensation programs in Ohio and with the Hartford Insurance
Company, the Company's total indebtedness was approximately $11,000,000.

Income tax expense for fiscal year 2001 was $35,000. The Company has substantial
net operating losses carried forward from Mucho.com that, while limited in the
amount that can be used in one individual year by Internal Revenue Code
provisions, will permit the Company to reduce its tax expense in the future
based upon the Company generating operating income.

Net loss for fiscal year 2001 was $4,190,000. The Company's 2001 fiscal year was
characterized by a downturn in the economic climate, the tragic events of
September 11th and the aftermath of a hardening insurance market. These market
dynamics provided management with challenges as it undertook plans to transition
the TEAM America book of business to a lower risk profile. The Company's
workers' compensation manual rate dropped from $3.20 to $2.84 per $100 of
payroll year over year. This reduction, as well as the introduction of a new
pricing structure, allowed the Company to increase its gross margin from $1,186
to $1,404 per worksite employee, representing an increase of approximately 18%.
Historically, the number of worksite employees is positively correlated to
changes in the employment rate. This suggests that as the percentage of the
country or region's available workforce becomes employed increases then the
Company's number of worksite employees will increase as well. This important
factor will be a good indicator of the change in the Company's revenue and
worksite employee count in the future.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $3,452,000 for the fiscal year ended
December 28, 2002 compared to net cash provided by operating activities of
$664,000 for the fiscal year ended December 29, 2001. This decrease in cash flow
from operations of $4,116,000 is primarily due to an increase in accounts
receivable of $3,036,000 and increases in prepaid expenses and other assets of
$1,122,000, offset by an increase in accounts payable and other liabilities of
$1,451,000. The increase in accounts receivable is due to changes in the mode of
payments by clients. In connection with the Company entering into the Omnibus
Forbearance Agreement with its lenders, the Company agreed to reduce the number
of clients that pay via Automated Clearinghouse transactions. While the Company
converted many of its larger clients to payment by wire, this method of payment
is uneconomical for many of the Company's smaller clients. Accordingly, a
substantial number of smaller clients are now paying via check which has caused
accounts receivable to increase due to the timing of deposits of such checks.
Additionally, for fiscal year 2001, the Company received $1,490,000 of
prepayments related to client payrolls after year-end, which reduced the
unbilled receivables. For fiscal year 2002, the corresponding amount was
$756,000. This difference is due to month-end payrolls (December 31) being on
the Monday following the December 29, 2001 year-end but not being until Tuesday
for the year ended December 28, 2002. As such, a substantial portion of those
payrolls were paid prior to year-end in fiscal 2001. The increase in prepaid
expenses and other assets is due to payments made related to the Company's
workers' compensation programs. Deposits made for future claims payment under
the Company's loss sensitive workers' compensation program for the program years
1999 - 2002 increased by $1,008,000 during fiscal year 2002. Additionally, as a
result of the Company's transition from loss sensitive workers' compensation
programs to fully insured

                                       21
<PAGE>

programs for fiscal 2003, the Company made substantial deposit and prepayments
in order to participate in such programs. These deposits and prepayments were
$810,000 as of December 28, 2002. No such corresponding deposit or prepayments
were required at December 29, 2001.

Net cash used in investing activities was $765,000 for the fiscal year ended
December 28, 2002 compared to $5,688,000 for the fiscal year ended December 29,
2001. The primary use of cash for investing activities for fiscal year 2002 was
$300,000 for the acquisition of customer relationship rights from SSMI and a
related non-compete agreement and $250,000 for the acquisition of certain assets
of Inovis. During fiscal year 2001, the Company used $4,250,000 related to the
acquisition of PSMI. Property and equipment additions were $215,000 during
fiscal 2002 and $1,438,000 during fiscal year 2001. Other equipment additions
during 2002 were funded primarily through capital leases.

Net cash provided by financing activities in 2002 was $2,770,000 compared to net
cash used in financing activities in 2001 of $4,454,000. The net cash provided
by financing activities during fiscal year 2002 was $1,696,000 from checks drawn
in excess of bank balances, $750,000 from borrowing under the Company's Bank
Credit Facility, $1,500,000 from a Bridge Loan and $500,000 from the issuance of
common stock. The sources of cash were offset by financing uses of cash of
$900,000 of payments on bank debt, $320,000 payments on capital leases and
$456,000 payment of financing costs. The checks drawn in excess of bank balances
is primarily a timing function related to the Company's cash inflows from
clients being distributed between electronic payments and cash payments and the
majority of the Company's cash outflows for worksite employees payrolls and tax
remittances being paid electronically. The $750,000 borrowed under the Company's
Bank Credit Facility was used in connection with the SSMI acquisition. The
proceeds of the $1,500,000 bridge loan and the $500,000 from the issuance of
common stock were used for working capital purposes. The net cash flow used in
financing activities for fiscal year 2001 was primarily the payment of
$11,622,000 related to a stock repurchase in connection with the TEAM America
and Mucho.com reverse merger transaction and $755,000 in financing costs
associated with the same transaction. During 2001 the Company made two draws
totaling $8,250,000 under its Credit Facility. The Company borrowed $4,000,000
in January 2001 under this facility in connection with the TEAM America and
Mucho.com merger. In March 2001, an additional $4,250,000 was borrowed in
connection with the Company's acquisition of PSMI.

In connection with the borrowing of $750,000 in March 2002, the Company and its
lenders agreed to temporarily reduce the Credit Facility from $18,000,000 to
$14,000,000. As of December 28, 2002, the Company had outstanding loans against
the Credit Facility of $8,728,000 and outstanding letters of credit of $914,000.

As a result of the SSMI transaction completed March 1, 2002, and the Inovis
transaction completed May 1, 2002, the Company has added incremental gross
margin to its operations, which contributes to cash flow from operations. In
addition to the incremental gross margin from these transactions, the Company is
continually evaluating its operating expenses and is in the process of
implementing various cost-saving measures, including the active restructuring of
corporate payroll costs.

On April 9, 2002, the Company entered into a Bridge Agreement and Common Stock
Purchase Agreement with one of its 2000 Class A Preferred Shareholders (the
"Purchaser"). Under the terms of these agreements, the Purchaser acquired
166,667 shares of common stock for $500,000. In addition, the Purchaser provided
a short-term bridge note of $1,500,000 to the Company, which was due August 9,
2002, and bore interest at 15% per annum.

Effective September 30, 2002, the Company and its senior lenders entered into an
Omnibus Forbearance and Modification Agreement (the "Forbearance"), which ends
on the earlier of March 31, 2003 or the date of Forbearance Default, as defined
in the Forbearance (the "Forbearance Period"). Under the terms of the
Forbearance, the senior lenders forbear from exercising any other rights or
remedies available to them with regards to the covenant violations under the
Credit Facility. In connection with the Forbearance, the Company is obligated to
pay interest only on a monthly basis as required under the terms of the Credit
Facility. All unpaid principal and interest is due and payable on April 1, 2003.
During the Forbearance Period, interest will accrue at the default rate of prime
plus four (8.25% at December 28, 2002), but the Company is only required to pay
interest monthly at a rate of prime plus one (5.25% at December 28, 2002). In
addition to the payment of principal and interest, the Company is required to
pay a $100,000 Forbearance Fee at the end of the Forbearance Period. The terms
of the Forbearance include monthly financial covenants that must be maintained
by the Company, the most stringent being the maintenance of minimum monthly
Earnings Before Interest, Taxes, Depreciation and Amortization. At December 28,
2002, the Company was in compliance with these covenants.

The Forbearance also precludes the Company from (i) making any distributions
with respect to its preferred and/or common shares; (ii) making any payments
with respect to indebtedness that has been subordinated to the Credit Facility;
(iii) making any pay increases or loans to executive officers; and (iv) making
any payment not in the ordinary course of business. Additionally, the Company
may not make any acquisitions that require capital outlays during the
Forbearance Period without


                                       22
<PAGE>

lenders approval. The Company is required to engage a financial consultant to
conduct an analysis of the Company's cash flow projections and to provide a
written report to the lenders regarding such analysis.

As a result of the default and Forbearance, the Company's debt outstanding under
the senior credit facility is classified in the Company's balance sheet as a
current liability at December 28, 2002.

Under the terms of the Company's Series A Preferred Securities Purchase
Agreement, should the Company be declared in default under the terms of its
Credit Facility and fail to cure such default during the cure period, the
Company would then be in default of its Series A Preferred Securities Purchase
Agreement. As a result, the holders of these preferred shares would have certain
rights under this agreement, including the right to put the shares back to the
Company.

Additionally, should the Company be in default of the Series A Preferred
Securities Purchase Agreement, the dividend rate on the 2000 Class A Preferred
Shares would be increased to 20% thereafter, and the holders of such shares
would be entitled to an extraordinary special dividend in an amount equal to
what would have been recorded had all previously declared dividends at 9.75%
been accrued at 20%. Under the terms of the Forbearance, the Company is
currently in a cure period; accordingly, the preferred shares are not deemed to
be in default. On March 28, 2003, the Company entered into certain agreements
with its bank group, which are described below, and have in effect terminated
the Forbearance. See below "Restructuring of Bank Debt and Preferred Stock."

In addition to the above, the $1,500,000 Bridge Note was due on August 9, 2002.
In accordance with the terms of the agreement, this note can only be paid out of
an equity financing occurring prior to August 9, 2002. Since no such financing
occurred, the note has been classified as mezzanine equity in the accompanying
balance sheet. Ongoing discussions with the Related Party as to the ultimate
disposition of this note may result in a reclassification of this financial
instrument in the Company's balance sheet.

The Company's future contractual cash commitments are as follows:
<TABLE>
<CAPTION>

                                                 Less Than 1
Contractual Obligations            Total             Year           1-3 Years         4-5 Years     After 5 Years
-----------------------            -----             ----           ---------         ---------     -------------
<S>                             <C>               <C>               <C>               <C>               <C>
Bank Debt                       $ 8,899,000       $   771,000       $ 8,128,000       $      --         $ --
Capital Lease Obligations           862,000           357,000           471,000            34,000         --
Other Long-Term Payments          1,484,000           960,000           524,000              --           --
                                -----------       -----------       -----------       -----------       ------
Total Contractual Cash
    Obligations                 $11,245,000       $ 2,088,000       $ 9,123,000       $    34,000       $ --
                                ===========       ===========       ===========       ===========       ======
</TABLE>

Other Long-Term Payments includes estimated amounts due to the former owners of
Inovis Corporation and amounts due under a separation agreement to a former
executive of the Company.

Restructuring of Bank Debt and Preferred Stock

On March 28, 2003, the Company entered into certain agreements with its bank
group and its 2000 Class A Preferred Shareholders. The Company entered into a
Third Amendment and Waivers to its Senior Credit Facility (the "Bank Agreement")
and a Memorandum of Understanding (the "Preferred Agreement") with its 2000
Class A Preferred Shareholders.

Bank Agreement

The Company and its senior lenders agreed to amend the Senior Credit Facility as
follows:

-    The outstanding amounts under the Senior Credit Facility of $8,728,000 were
     restructured into three separate tranches. Tranche A representing a
     $6,000,000 Term Loan, Tranche B representing a $2,728,000 Balloon Loan and
     Tranche C representing $914,000 of outstanding letters of credit.

-    The Senior Credit Facility is senior to the $1,500,000 subordinated note
     issued in satisfaction of the Bridge Note.

-    The maturity of the Senior Credit Facility is January 5, 2004.



                                       23
<PAGE>

-    The interest rate on each tranche is: Tranche A - the Provident Bank Prime
     Commercial Lending Rate plus two percent (6.25% at March 28, 2003);
     Tranche B - 12%, eight percent payable in cash and four percent
     payable in kind and Tranche C (if drawn) - the Provident Bank's
     Prime Lending Rate plus five percent (9.25% at March 28, 2003).

-    Tranche A requires principal payments of $100,000 per month beginning July
     2003, Tranche B is due at maturity and Tranche C is due immediately upon
     any draw under the letters of credit.

In addition to the above terms, the Company issued to the banks 1,080,000
warrants to purchase common stock of the Company at a price of $0.50 per share.
These warrants expire in seven years. The Bank Agreement states that no new
indebtedness may be incurred under the facility and that any future acquisitions
are subject to consent of the banks.

The Senior Credit Facility is collateralized by all of the assets of the
Company.

Preferred Agreement

The Company and its 2000 Class A Preferred Shareholders agreed to restructure
the preferred shareholders' investment in the Company as follows:

-    The $1,500,000 Bridge Note that was to be paid from proceeds of an equity
     financing that would occur prior to August 9, 2002, will be converted into
     subordinated debt with an interest rate accruing at 14%, which shall be
     subordinated to the Senior Credit Facility (the "Subordinated Debt").
     The Subordinated Debt will be due June 30, 2006 along with all accrued
     interest.

-    The 2000 Class A Preferred Shares will be exchanged by the holders for:

     -    $2,500,000 Class B Series 2003 Preferred Shares which will have a
          dividend rate of 14% and be non-voting shares. This dividend will be
          accrued and paid-in-kind. These shares will maintain a liquidation
          preference equal to par value plus accrued and unpaid dividends. The
          holders of these shares may, at any time, after the third anniversary
          of the issuance of such shares and with the consent of holders of no
          fewer than two-thirds of the shares, may require the Company to redeem
          all and any portion of such shares at par value plus accrued and
          unpaid dividends;

     -    Warrants to purchase 2,400,000 common shares of the Company at an
          exercise price of $0.50 per share. These warrants expire in 10 years;
          and

     -    4,800,000 common shares of the Company.

The following table shows the pro forma capitalization of the Company as of
December 28, 2002 assuming the above transactions were consummated as of that
date:


                                       24
<PAGE>


<CAPTION>
<TABLE>
                                               YEAR ENDED
                                               DECEMBER 28,            PRO FORMA
                                                  2002               ADJUSTMENTS         PRO FORMA
                                                  ----               -----------         ---------
                                                                      (UNAUDITED)       (UNAUDITED)
<S>                                         <C>                   <C>                  <C>
Bank debt...............................    $           600       $            -       $          600
Other current liabilities...............             29,132                    -               29,132
                                            ---------------                            --------------
         Total Current Liabilities......             29,732                    -               29,732

Bank debt, non-current..................              8,128               (8,128) (a)  $            -
Bank debt, Term Loan A..................                  -                5,400  (a)           5,400
Bank debt - Term Loan B.................                  -                2,728  (a)           2,728
Other non-current liabilities...........              4,748                    -                4,748
                                            ---------------                            --------------
         Total Non-Current Liabilities..             12,876                                    12,876

Subordinated debt.......................                  -                1,500  (c)           1,500
Series 2003 Preferred Sock..............                  -                2,500  (d)           2,500

Preferred stock.........................              9,552               (9,552) (d)               -
Bridge note.............................              1,500               (1,500) (c)               -
Other - common..........................                  -                    -                    -

Shareholders' equity....................              9,603                  270  (b)               -
                                                                             700  (d)               -
                                                          -                6,352  (d)          16,925
                                            ---------------                            --------------
Total Liabilities and Shareholders'
   Equity...............................    $        63,263                            $       63,533
                                            ===============                            ==============
</TABLE>

(a)  Exchange existing Bank Credit Facility for Term Loan A and Term Loan B

(b)  Issue warrants to bank (1,080,000 at an assumed fair value of $0.25 per
     share)

(c)  Exchange Bridge Note for Subordinated Debt

(d)  Exchange existing preferred for $2,500,000 new preferred; 4,800,000 common
     shares; 2,800,000 warrants (assumed fair value of $0.25 per share)

Management believes that as a result of continued restructuring during 2002 and
additional cost containment strategies implemented during 2003, including
closing smaller service centers and focusing resources in five operating
centers, moving the Company's corporate headquarters to a smaller location,
other real estate rationalizations and continued focus on reduction of corporate
employees and other overhead reduction, that cash generated from operations will
be sufficient to operate the Company through 2003.

Management continues to believe that in order to provide a platform for growth,
whether internally generated growth or through acquisitions, the Company must
continue to pursue additional sources of capital as well as other strategic
alternatives. The Company has been exploring opportunities to raise capital for
the past 12 months. Management believes that as a result of the Company's
continued quarterly improvement in operating results, its continued focus on
cost reduction and containment, as well as its restructuring of its Credit
Facility and Preferred Stock Agreements, that additional opportunities to raise
capital may be available. Management is in active discussions and negotiations
with respect to such capital infusions and/or potential merger partners.
Management will continue to pursue these discussions.

The Company continues to evaluate strategic alternatives. These alternatives
include the potential disposition of non-core markets, as well as alternative
ways to further reduce operating costs, including outsourcing key tasks to low
cost providers.

Failure by the Company to continue to rationalize costs may have a significant
negative impact on the Company's ability to generate sufficient cash from
operations during 2003. Accordingly, additional capital sources may be required
to fund operations. Failure to raise such capital, if required, or complete
other strategic alternatives may result in a material adverse affect on the
future financial condition and the future results of operations of the Company.

INFLATION

Inflation and changing prices have not had a material effect on the Company's
net revenues and results of operations in the last three fiscal years, as the
Company has been able to modify its prices and cost structure to respond to
inflation and changing prices.



                                       25
<PAGE>


IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs and is effective for the fiscal years beginning after June 15, 2002.
Management does not expect the impact of SFAS No. 143 to be material to the
Company's consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting to the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and establishes a single accounting model for the impairment or
disposal of long-lived assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. Adoption of this statement had no impact on
the Company's results of operations or financial condition.

On May 1, 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 is effective for the Company's fiscal year beginning December 29,
2002. The Company is in the process of evaluating what impact, if any, this
standard will have on the Company's financial statements.

On July 30, 2002, the FASB issued Statement of Financial Account Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," that is
applicable to exit or disposal activities initiated after December 31, 2002.
This standard requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. This standard does not apply where SFAS
144 is applicable. The Company plans to adopt this statement in its first
quarter 2003. Management does not anticipate that this statement will have a
significant impact on the Company's results of operations or financial
condition.

RISK FACTORS

IF GOVERNMENT REGULATIONS REGARDING PEOs ARE IMPLEMENTED, OR IF CURRENT
REGULATIONS ARE CHANGED, THE COMPANY'S BUSINESS COULD BE HARMED.

Many of the laws related to the employment relationship were enacted prior to
the development of professional employer organizations and other staffing
businesses and many of these laws do not specifically address the obligations
and responsibilities of non-traditional employers. The Company's operations are
affected by numerous federal, state and local laws and regulations relating to
labor, tax, insurance and employment matters. By entering into an employment
relationship with employees who work at client locations, the Company assumes
some obligations and responsibilities of an employer under these laws.
Uncertainties arising under the Internal Revenue Code of 1986, include, but are
not limited to, the qualified tax status and favorable tax status of certain
benefit plans provided by the Company and other alternative employers. The
unfavorable resolution of these unsettled issues could have a material adverse
effect on the Company's results of operations and financial condition.

While many states do not explicitly regulate PEOs, approximately 21 of the
states, but not Ohio, have enacted laws that have licensing or registration
requirements for PEOs, and several additional states, including Ohio, are
considering such laws. Such laws vary from state to state but generally provide
for the monitoring of the fiscal responsibility of PEOs and specify the employer
responsibilities assumed by PEOs. There can be no assurance that the Company
will be able to comply with any such regulations that may be imposed upon it in
the future, and the Company's inability to comply with any such regulations
could have a material adverse effect on its results of operations and financial
condition.

In addition, there can be no assurance that existing laws and regulations not
currently applicable to the Company will not be interpreted more broadly in the
future to apply to its existing activities or that new laws and regulations will
not be enacted with respect to its activities. Either of these changes could
have a material adverse effect on the Company's business, financial condition,
results of operations and liquidity.

IF THE IRS DETERMINES THAT THE COMPANY IS NOT AN "EMPLOYER," ITS 401(K) PLAN
COULD BE REVOKED AND ITS CAFETERIA PLAN MAY LOSE FAVORABLE TAX TREATMENT.

If the IRS concludes that PEOs are not "employers" of certain worksite employees
for purposes of the Internal Revenue Code, then the tax qualified status of the
Company's 401(k) plan could be revoked and its cafeteria plan may lose its
favorable tax


                                       26
<PAGE>

status. The loss of qualified status for the 401(k) plan and the cafeteria plan
could increase the Company's administrative expenses, increase client
dissatisfaction and adversely affect its ability to attract and retain clients
and worksite employees, and, thereby, materially adversely affect the Company's
financial condition and results of operations. The Company is unable to predict
the impact that the foregoing could have on its administrative expenses, and
whether its resulting liability exposure, if any, will relate to past or future
operations. Accordingly, the Company is unable to make a meaningful estimate of
the amount, if any, of such liability exposure.

THE COMPANY INTENDS TO GROW ITS EXISTING BUSINESS, AND, IF IT IS UNABLE TO
MANAGE THIS GROWTH, THE COMPANY'S BUSINESS AND RESULTS OF OPERATIONS COULD BE
HARMED.

The Company intends to pursue its internal growth and acquisition strategy. Such
growth may place a significant strain on the Company's management, financial,
operating and technical resources. Growth through acquisition involves
substantial risks, including the risk of improper valuation of the acquired
business and the risks inherent in integrating businesses with the Company's
operations. There can be no assurance that suitable acquisition candidates will
be available, that the Company will be able to acquire or profitably manage such
additional companies, or that future acquisitions will produce returns that
justify the investment. In addition, the Company may compete for acquisition and
expansion opportunities with companies that have significantly greater
resources. There can be no assurance that management skills and systems
currently in place will be adequate to implement a strategy of growth through
acquisitions and through increased market penetration. The Company's failure to
manage growth effectively, or to implement its strategy, could have a material
adverse effect on its results of operations and financial condition.

THE COMPANY BEARS THE RISK OF NONPAYMENT FROM ITS CLIENTS.

To the extent that any client experiences financial difficulty, or is otherwise
unable to meet its obligations as they become due, the Company's financial
condition and results of operations could be adversely affected. Although the
Company historically has not incurred significant bad debt expense, in each
payroll period, the Company has a nominal number of clients who fail to make
timely payment prior to delivery of the payroll.

IF THE COMPANY'S WORKERS' COMPENSATION AND UNEMPLOYMENT COSTS RISE, ITS RESULTS
OF OPERATIONS AND BUSINESS MAY SUFFER.

The Company's workers' compensation and unemployment costs could increase as a
result of many factors, including increases in the rates charged by the
applicable states and private insurance companies and changes in the applicable
laws and regulations. Although the Company believes that historically it
profited from such services, its results of operations and financial condition
could be materially adversely affected in the event that the Company's actual
workers' compensation and unemployment costs exceed those billed to its clients.
Although, the Company has the right to pass onto its clients rate increases for
those costs, it may be unable to do so to the full extent of the increases, or
client terminations may occur if such increases are made.

THE COMPANY'S CLIENT AGREEMENTS ARE SHORT TERM IN NATURE, AND, IF A SIGNIFICANT
NUMBER OF CLIENTS DO NOT RENEW THEIR CONTRACTS, ITS BUSINESS MAY SUFFER.

The Company's standard client agreement provides for successive one-year terms,
subject to termination by the Company or by the client at any time after one
year and upon 30 days' prior written notice. A significant number of
terminations by clients could have a material adverse effect on the Company's
financial condition, results of operations and liquidity.

THE COMPANY MAY BE LIABLE FOR ACTIONS OF WORKSITE EMPLOYEES OR CLIENTS, AND ITS
INSURANCE POLICIES MAY NOT BE SUFFICIENT TO COVER THESE LIABILITIES.

The Company's client agreement establishes a contractual division of
responsibilities between the Company and each client for various human resource
matters, including compliance with and liability under various governmental laws
and regulations. However, the Company may be subject to liability for violations
of these or other laws despite these contractual provisions, even if the Company
does not participate in such violations. Although such client agreements
generally provide that the client indemnify the Company for any liability
attributable to the client's failure to comply with its contractual obligations
and to the requirements imposed by law, the Company may not be able to collect
on such a contractual indemnification claim, and thus may be responsible for
satisfying these liabilities. In addition, worksite employees may be deemed to
be the Company's agents, subjecting the Company to liability for the actions of
the worksite employees.


                                       27
<PAGE>

As an employer, the Company, from time to time, may be subject in the ordinary
course of business to a wide variety of employment-related claims such as claims
for injuries, wrongful death, harassment, discrimination, wage and hours
violations and other matters. Although the Company carries $2 million of general
liability insurance, with a $2,500 deductible and with a $5 million commercial
umbrella policy, and carries employment practices liability insurance in the
amount of $10 million, with a $50,000 deductible, there can be no assurance that
any of the insurance carried by the Company or its providers will be sufficient
to cover any judgments, settlements or costs relating to any present or future
claims, suits or complaints. There also can be no assurance that sufficient
insurance will be available to the Company's providers or to the Company in the
future and, if available, on satisfactory terms. If the insurance carried by the
Company or its providers is not sufficient to cover any judgments, settlements
or costs relating to any present or future claims, suits or complaints, then the
Company's business and financial condition could be materially adversely
affected.

COMPETITIVE PRESSURES THE COMPANY FACES MAY HAVE A MATERIAL ADVERSE EFFECT.

The PEO industry is highly fragmented. Many of the PEOs have limited operations
and fewer than 1,000 worksite employees, but there are several industry
participants that are comparable in size to the Company. The Company also
encounters competition from fee for service companies such as payroll processing
firms, insurance companies and human resource consultants. In addition, several
of the Company's PEO competitors have recently been acquired by large business
services companies, such as Automatic Data Processing, Inc. Such companies have
substantially greater resources and provide a broader range of services than the
Company. Accordingly, the PEO divisions of such companies may be able to provide
more services at more competitive prices than may be offered by the Company.
Moreover, the Company expects that as the PEO industry grows and its regulatory
framework becomes better established, well-organized competition with greater
resources than the Company may enter the PEO market, possibly including large
fee for service companies currently providing a more limited range of services.

THE COMPANY'S PRINCIPAL SHAREHOLDERS, OFFICERS AND DIRECTORS OWN A CONTROLLING
INTEREST IN ITS VOTING STOCK.

The Company's officers, directors and shareholders with greater than 5%
holdings, in the aggregate, beneficially own approximately 5,489,000 shares, or
66.8% of its outstanding common stock as of March 25, 2003. The holders of the
preferred shares have the right to acquire beneficial ownership of an additional
1,792,593 shares through the exercise of stock warrants. The holders of the
preferred shares also have the right to convert their preferred shares to an
additional 1,973,926 shares of common stock. As a result, these shareholders,
acting together, may have the ability to determine the outcome of substantially
all matters submitted to the Company's shareholders for approval, including:

     -    election of the board of directors;

     -    removal of any of the directors;

     -    amendment of the articles of incorporation or code of regulations; and

     -    adoption of measures that could delay or prevent a change in control
          or impede a merger, takeover or other business combination involving
          the Company.

These shareholders will have substantial influence over the Company's management
and affairs. Accordingly, this concentration of ownership may have the effect of
impeding a merger, consolidation, takeover or other business consolidation
involving the Company, or discouraging a potential acquirer from making a tender
offer for the Company's shares would prevent shareholders from realizing the
benefits of the transaction, such as a purchase price premium or significant
increase in stock price.

The Company has designated 125,000 of the Class A Voting Preferred Shares,
without par value, as the "Series 2000 9.75% Cumulative Convertible Redeemable
Class A Preferred Shares" (the "2000 Class A Preferred Shares"). These shares
were initially issued with a mandatory redemption feature. Effective January 1,
2001, the preferred shareholders and the Company agreed to eliminate the
mandatory redemption feature. In connection with the elimination of the
mandatory redemption feature, the preferred stock purchase agreement was amended
such that the Company is committed to complete a secondary offering of common
stock, in which the preferred shareholders may participate, prior to June 28,
2004. In the event that the Company fails to complete the secondary offering,
the Company will be in default of its obligations to the preferred shareholders
and the preferred shareholders will be entitled to liquidated damages.


                                       28
<PAGE>


The Company has entered into a Put Option Agreement with the preferred
shareholders. Under the terms of this agreement, the preferred shareholders may,
under certain conditions, have the right to put these shares back to the
Company.

If the Company fails to complete the secondary offering of common stock or if
the conditions are met that would allow the 2000 Class A Preferred Shareholders
to put their shares to the Company, such events could have a material adverse
affect on the financial condition of the Company.

Other significant terms of the 2000 Class A Shares include the following:

     -    Annual cumulative dividends in an amount equal to 9.75%, payable
          quarterly in cash, beginning January 1, 2003, and payable in-kind
          prior to that date.

     -    In the event of liquidation or winding up of the Company, a
          liquidation preference over the common stock.

     -    The right to convert, in whole or in part, at any time, into the
          number of shares of common stock of the Company (1,973,926 at December
          28, 2002) determined by dividing the aggregate liquidation amount (as
          defined in the Preferred Stock Agreement, but $13,324,000 as of
          December 28, 2002) by the conversion price (as defined in the
          Preferred Stock Agreement, but $6.75 as of December 28, 2002).

     -    The right to designate two members of the Board of Directors of the
          Company.

The 2000 Class A Preferred Shares referred to in this risk factor are subject to
the Company's planned restructuring under the Preferred Agreement referred to
elsewhere in this document.

ANTI-TAKEOVER PROVISIONS IN THE COMPANY'S ARTICLES OF INCORPORATION AND CODE OF
REGULATIONS MAKE A CHANGE IN CONTROL MORE DIFFICULT.

The provisions of the Company's articles of incorporation and code of
regulations and of the Ohio Revised Code, together or separately, could
discourage potential acquisition proposals, delay or prevent a change in control
and limit the price that certain investors might be willing to pay in the future
for the Company's common stock. Among other things, these provisions:

     -    require certain supermajority votes;

     -    establish certain advance notice procedures for nomination of
          candidates for election as directors and for shareholders proposals to
          be considered at shareholders' meetings; and

     -    divide the board of directors into two classes of directors serving
          staggered two-year terms.


Pursuant to the Company's articles of incorporation, the board of directors has
authority to issue up to 5,000,000 preferred shares without further shareholder
approval. Such preferred shares could have dividend, liquidation, conversion,
voting and other rights and privileges that are superior or senior to the
Company's common stock. Issuance of preferred shares could result in the
dilution of the voting power of the Company's common stock, adversely affecting
holders of common stock in the event of the Company's liquidation or delay, and
defer or prevent a change in control. In certain circumstances, such issuance
could have the effect of decreasing the market price of the Company's common
stock.

In addition, the Ohio Revised Code contains provisions that require shareholder
approval of any proposed "control share acquisition" of any Ohio corporation at
any of three ownership thresholds: 20%, 33 1/3% and 50%. The Ohio Revised Code
also contains provisions that restrict certain business combinations and other
transactions between an Ohio corporation and interested shareholders.

THE COMPANY'S QUARTERLY OPERATING RESULTS FLUCTUATE AND MAY NOT ACCURATELY
PREDICT FUTURE PERFORMANCE.

The Company's quarterly results of operations have varied significantly and
probably will continue to do so in the future as a result of a variety of
factors, many of which are outside the Company's control. These factors include:

     -    changes in pricing policies or those of competitors;

     -    timing and number of new client agreements and existing client
          terminations;


                                       29
<PAGE>

     -    seasonal patterns in revenue and expenses; and

     -    other changes in levels of operating expenses, personnel and general
          economic conditions.

As a result, management believes that period-to-period comparisons of its
operating results are not necessarily meaningful, and should not be relied on as
an indication of future performance. In addition, operating results in a future
quarter or quarters may fall below expectations of securities analysts or
investors and, as a result, the price of the Company's common stock may
fluctuate.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company has not entered into any transactions using derivative financial
instruments or derivative commodity instruments and believes that its exposure
to market risk associated with other financial instruments is not material.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA



                                       30
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders
     of TEAM America, Inc. and Subsidiaries
Worthington, Ohio

We have audited the accompanying consolidated balance sheet of TEAM America,
Inc. and Subsidiaries as of December 28, 2002 and the related consolidated
statements of operations, shareholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated 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 2002 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of TEAM
America, Inc. and Subsidiaries as of December 28, 2002, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

As explained in Note 3 to the financial statements, effective December 30, 2001,
the Company adopted Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets.

The consolidated financial statements of TEAM America, Inc. and Subsidiaries as
of December 29, 2001 and December 31, 2000 and for the years then ended, before
the restatement described in Note 4 and the reclassifications of revenue
described in Note 2, were audited by other auditors who have ceased operations
and whose report dated March 27, 2002 expressed an unqualified opinion on those
statements. We audited the adjustments described in Note 4 and the
reclassification described in Note 2 that were applied to restate the 2001 and
2000 and reclassify the 2001 consolidated financial statements, respectively,
and in our opinion, such adjustments and reclassifications are appropriate and
have been properly applied. However, we were not engaged to audit or apply any
procedures to the 2001 or 2000 consolidated financial statements of the Company,
other than with respect to such adjustments and reclassifications and,
accordingly, we do not express an opinion or any other form of assurance on the
2001 or 2000 consolidated financial statements taken as a whole.

/s/ SCHNEIDER DOWNS & CO., INC.


Columbus, Ohio
March 21, 2003, except for Note 17 for which the date is March 28, 2003


                                       31
<PAGE>



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors of TEAM Mucho, Inc. and subsidiaries:

We have audited the accompanying consolidated balance sheets of TEAM Mucho, Inc.
(an Ohio corporation) and subsidiaries as of December 29, 2001 and December 31,
2000, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits. The financial statements of TEAM Mucho, Inc.
(then doing business as Mucho.com) as of December 31, 1999 and for the period
from inception (July 8, 1999) to December 31, 1999 were audited by other
auditors whose report dated July 26, 2000, expressed an unqualified opinion on
those financial statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TEAM Mucho, Inc. and
subsidiaries, as of December 29, 2001 and December 31, 2000, and the results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States.

/s/ ARTHUR ANDERSEN LLP



Columbus, Ohio
March 27, 2002

THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY FILED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THE TEAM MUCHO, INC. FILING ON FORM 10-K FOR THE YEAR ENDED
DECEMBER 29, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN
LLP IN CONNECTION WITH THIS FILING ON FORM 10-K.



                                       32
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                  AS OF DECEMBER 28, 2002 AND DECEMBER 29, 2001
                    (000'S OMITTED, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                                                                  2002          2001
                                                                                                  ----          ----
<S>                                                                                           <C>             <C>
ASSETS
CURRENT ASSETS:
   Cash....................................................................................   $         -     $    1,447
   Receivables:
      Trade, net of allowance for doubtful accounts of $142 and $392, respectively.........         2,127          1,036
      Unbilled receivables.................................................................        12,813          9,893
      Other receivables....................................................................           185          1,404
      Income tax receivable................................................................         1,207              -
                                                                                              -----------     ----------
   Total receivables.......................................................................        16,332         12,333
                                                                                              -----------     ----------
   Prepaid expenses........................................................................         2,002            600
   Workers' compensation deposits - current................................................         1,120          1,283
   Deferred income tax asset...............................................................         1,037          1,497
                                                                                              -----------     ----------
Total current assets.......................................................................        20,491         17,160
                                                                                              -----------     ----------

PROPERTY AND EQUIPMENT, NET................................................................         1,994          2,580
                                                                                              -----------     ----------

OTHER ASSETS:
   Goodwill, net (see Note 3)..............................................................        36,014         35,238
   Other intangible assets, net............................................................           945            150
   Deferred income tax asset...............................................................           275            784
   Workers' compensation deposits - noncurrent.............................................         2,686          1,515
   Other...................................................................................           858          1,417
                                                                                              -----------     ----------
        Total other assets.................................................................        40,778         39,104
                                                                                              -----------     ----------
Total assets   ...........................................................................    $    63,263     $   58,844
                                                                                              ===========     ==========
</TABLE>

(Continued on next page)



                                       33
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                     CONSOLIDATED BALANCE SHEETS (CONTINUED)
                  AS OF DECEMBER 28, 2002 AND DECEMBER 29, 2001
                    (000'S OMITTED, EXCEPT FOR SHARE AMOUNTS)
<CAPTION>
<TABLE>

                                                                                                  2002          2001
                                                                                                  ----          ----

<S>                                                                                           <C>             <C>
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
   Trade accounts payable..................................................................   $     2,545     $    2,325
   Checks drawn in excess of bank balances.................................................         1,696              -
   Capital lease obligations...............................................................           303            296
   Bank debt   ............................................................................           771          1,250
   Accrued compensation....................................................................        12,203         10,338
   Accrued payroll taxes and insurance.....................................................         6,564          6,475
   Accrued workers' compensation liability.................................................         2,252          1,750
   Other accrued expenses..................................................................         3,398          2,948
                                                                                              -----------     ----------
        Total current liabilities..........................................................        29,732         25,382

LONG-TERM LIABILITIES:
   Bank debt, less current portion.........................................................         8,128          7,631
   Capital lease obligations, less current portion.........................................           463            547
   Accrued workers' compensation liability, less current portion...........................         2,241          2,879
   Client deposits and other liabilities...................................................         2,044          1,987
                                                                                              -----------     ----------
               Total liabilities...........................................................        42,608         38,426
                                                                                              -----------     ----------
CONVERTIBLE PREFERRED STOCK, face amount of $11 million ...................................         9,552          8,354
BRIDGE NOTE    ............................................................................         1,500              -

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
   Common stock, no par value:
      45,000,000 shares authorized; 10,955,410 and 10,788,743 issued
      at December 28, 2002 and December 29, 2001, respectively.............................        44,552         43,947
Deferred compensation......................................................................           (11)           (20)
Accumulated deficit........................................................................       (20,162)       (17,087)
                                                                                              -------------   -----------
                                                                                                   24,379         26,840
Less -Treasury stock, 2,739,782 common shares, at cost,
      at December 28, 2002 and December 29, 2001...........................................       (14,776)       (14,776)
                                                                                              ------------    -----------
        Total shareholders' equity.........................................................         9,603         12,064
                                                                                              -----------     ----------
        Total liabilities and shareholders' equity.........................................   $    63,263     $   58,844
                                                                                              ===========     ==========
</TABLE>


The accompanying notes to consolidated financial statements are an integral part
                     of these consolidated balance sheets.



                                       34
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
 FOR THE YEARS ENDED DECEMBER 28, 2002, DECEMBER 29, 2001 AND DECEMBER 31, 2000
             (000'S OMITTED EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>

                                                                      YEAR ENDED         YEAR ENDED          YEAR ENDED
                                                                      DECEMBER 28,      DECEMBER 29,        DECEMBER 31,
                                                                         2002               2001                2000
                                                                         ----               ----                ----
                                                                                        (See Notes 2       (See Note 4)
                                                                                            and 4)
<S>                                                                   <C>               <C>                <C>
REVENUES .....................................................        $    58,939        $    57,036        $        51
                                                                      -----------        -----------        -----------

COST OF SERVICES ..............................................            38,334             37,167               --
                                                                      -----------        -----------        -----------

GROSS PROFIT ..................................................            20,605             19,869                 51
                                                                      -----------        -----------        -----------

OPERATING EXPENSES:
   Administrative salaries ....................................            11,377             10,743              5,651
   Other selling, general and administrative expenses .........             7,925              7,588              2,468
   Depreciation and amortization (See Note 3)..................             1,414              2,808                262
   Restructuring charges ......................................               738              1,834                654
   Systems and operations development costs ...................               312               --                 --
                                                                      -----------        -----------        -----------
      Total operating expenses ................................            21,766             22,973              9,035
                                                                      -----------        -----------        -----------
OPERATING LOSS ................................................            (1,161)            (3,104)            (8,984)

   Interest expense, net ......................................            (1,565)              (863)              (512)
   Fair value loss on derivative instruments ..................              (107)              (188)              --
                                                                      -----------        -----------        -----------
LOSS BEFORE INCOME TAXES ......................................            (2,833)            (4,155)            (9,496)

   Income tax benefit (expense) ...............................               982                (35)              --
                                                                      -----------        -----------        -----------
NET LOSS ......................................................            (1,851)            (4,190)            (9,496)

Deemed dividend ...............................................              --                 --               (1,047)
Preferred stock dividends .....................................            (1,224)            (1,100)              --
                                                                      -----------        -----------        -----------
NET LOSS ATTRIBUTABLE TO COMMON
   SHAREHOLDERS ...............................................       $    (3,075)       $    (5,290)       $   (10,543)
                                                                      ===========        ===========        ===========
NET LOSS PER SHARE:
   Basic ......................................................       $     (0.38)       $     (0.72)       $     (3.74)
   Diluted ....................................................       $     (0.38)       $     (0.72)       $     (3.74)

WEIGHTED AVERAGE SHARES OUTSTANDING:
   Basic ......................................................         8,169,382          7,342,508          2,816,501
   Diluted ....................................................         8,169,382          7,342,508          2,816,501
</TABLE>



   The accompanying notes to consolidated financial statements are an integral
                     part of these consolidated statements.



                                       35
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
 FOR THE YEARS ENDED DECEMBER 28, 2002, DECEMBER 29, 2001 AND DECEMBER 31, 2000
                    (000'S OMITTED, EXCEPT FOR SHARE AMOUNTS)
<TABLE>
<CAPTION>
                                           COMMON STOCK ISSUED
                                        ------------------------      DEFERRED      TREASURY     ACCUMULATED   SHAREHOLDERS'
                                           NUMBER       STOCK       COMPENSATION     STOCK        DEFICIT         EQUITY
                                        ------------   ---------     ---------      --------     ----------    ------------
<S>                                      <C>          <C>          <C>          <C>           <C>            <C>
Balance, December 31, 1999............     1,976,393    $    451     $       -    $        -    $   (1,254)    $      (803)
   Issuance of common stock...........     1,086,597       5,553             -             -             -           5,553
   Issuance of common stock
      for services....................       606,219       1,212             -             -             -           1,212
   Conversion of debt to equity.......       349,500       1,077             -             -             -           1,077
   Issuance of warrants...............             -         127             -             -             -             127
   Grant of qualified and non-
      Qualified options...............             -         710           (28)            -             -             682
   Acquisition of TEAM America
      Corporation.....................     4,984,849      30,352             -       (14,747)            -          15,605
   Issuance of common stock and
      warrants related to preferred
      stock offering..................       600,000       3,064             -             -             -           3,064
   Discount on preferred stock
      attributable to beneficial
      conversion feature..............             -       1,047             -             -        (1,047)              -
   Net loss...........................             -           -             -             -        (9,496)         (9,496)
                                        ------------    --------     ---------      --------   ------------    ------------
Balance, December 31, 2000............     9,603,558      43,593           (28)      (14,747)      (11,797)         17,021
   Issuance of common stock
      in connection with the
      acquisition of assets...........        74,074         241             -             -             -             241
   Release of contingent common
      shares, treated as stock
      dividend........................     1,111,111           -             -             -             -               -
   Issuance of common stock warrants..             -         113             -             -             -             113
   Amortization of deferred
      compensation....................             -           -             8             -             -               8
   Acquisition of treasury stock......             -           -                         (29)            -             (29)
   Convertible preferred stock
      dividend........................             -           -             -             -        (1,100)         (1,100)
   Net loss...........................             -           -             -             -        (4,190)         (4,190)
                                        ------------    --------     ---------      --------   ------------    ------------
Balance, December 29, 2001............    10,788,743      43,947           (20)      (14,776)      (17,087)         12,064
   Issuance of common stock...........       166,667         500                                                       500
   Issuance of common stock warrants..                       105                                                       105
   Amortization of deferred
      compensation....................                                       9                                           9
   Convertible preferred stock
      dividend........................                                                              (1,224)         (1,224)
   Net loss...........................                                                              (1,851)         (1,851)
                                        ------------   ---------     ---------      --------     ----------    ------------
Balance, December 28, 2002............    10,955,410   $  44,552     $     (11)    $(14,776)    $  (20,162)    $     9,603
                                        ============   =========     ==========    =========    ===========    ============
</TABLE>

The accompanying notes to consolidated financial statements are an integral part
                       of these consolidated statements.



                                       36
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
 FOR THE YEARS ENDED DECEMBER 28, 2002, DECEMBER 29, 2001 AND DECEMBER 31, 2000
                                 (000'S OMITTED)
<TABLE>
<CAPTION>

                                                                      YEAR ENDED     YEAR ENDED      YEAR ENDED
                                                                      DECEMBER 28,   DECEMBER 29,    DECEMBER 31,
                                                                         2002          2001             2000
                                                                         ----          ----             ----
<S>                                                                   <C>            <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................       $ (1,851)       $ (4,190)       $ (9,496)
Adjustments to reconcile net loss to net cash (used in) provided
   by operating activities:
      Depreciation and amortization ............................          1,414           2,808             262
      Write-down of property and equipment related to
         restructuring .........................................           --               261             477
      Amortization of financing costs ..........................            542             127            --
      Bad debt expense .........................................            240             368            --
      Compensation expense on grant of stock options and other
         non cash compensation .................................              9               8             682
      Loss on derivative .......................................            108             188            --
      Changes in assets and liabilities, excluding the impact of
         acquisitions:
      Income tax receivable ....................................         (1,207)           --              --
      Accounts receivable ......................................         (3,036)           (518)             (1)
      Prepaid expenses and other assets ........................         (1,122)            679             (93)
      Accounts payable .........................................             94             371           1,523
      Accrued liabilities ......................................          1,357             562             596
                                                                       --------        --------        --------
       Net cash provided by (used in) operating activities .....         (3,452)            664          (6,050)
                                                                       --------        --------        --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .............................           (215)         (1,438)           (766)
Acquisitions, net of cash acquired .............................           (550)         (4,250)          2,364
                                                                       --------        --------        --------
       Net cash (used in) provided by investing activities .....           (765)         (5,688)          1,598
                                                                       --------        --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Checks drawn in excess of bank balances ........................          1,696            --              --
Proceeds from bank debt ........................................            750           8,250            --
Payments on bank debt ..........................................           (900)           (201)           --
Proceeds from Bridge Note ......................................          1,500            --              --
Stock repurchase ...............................................           --           (11,622)           --
Purchase of treasury stock .....................................           --               (29)           --
Proceeds from issuance of common stock .........................            500              38           5,553
Proceeds from issuance of common stock and preferred stock
   and detachable warrants .....................................           --              --             9,425
Proceeds from loans payable to related party ...................           --              --               955
Payment of loans payable to related party ......................           --              --              (561)
Payment of financing costs .....................................           (456)           (755)           --
Payment on capital lease obligations ...........................           (320)           (135)            (69)
                                                                       --------        --------        --------
       Net cash provided by (used in) financing activities .....          2,770          (4,454)         15,303
                                                                       --------        --------        --------
Net (decrease) increase in cash ................................         (1,447)         (9,478)         10,851
CASH, beginning of period ......................................          1,447          10,925              74
                                                                       --------        --------        --------
CASH, end of period ............................................       $   --          $  1,447        $ 10,925
                                                                       ========        ========        ========
</TABLE>

(Continued on next page)



                                       37
<PAGE>


                       TEAM AMERICA, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
 FOR THE YEARS ENDED DECEMBER 28, 2002, DECEMBER 29, 2001 AND DECEMBER 31, 2000
                                 (000'S OMITTED)

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
<CAPTION>
<TABLE>
                                                                             2002               2001            2000
                                                                             ----               ----            ----
<S>                                                                      <C>               <C>               <C>
Interest paid.........................................................   $          931    $          777    $         54
                                                                         ==============    ==============    ============

Income taxes paid (refunded), net.....................................   $         (978)   $          194    $          -
                                                                         ===============   ==============    ============
</TABLE>


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES

During 2002, the Company acquired certain assets of Inovis Corporation. In
connection with this transaction, the Company recorded $104,000 of property and
equipment, $605,000 of other intangible assets, $491,000 of goodwill and assumed
liabilities of $50,000.

The Company acquired certain assets of PSMI on March 13, 2001. Included in the
purchase price was $1,000,000 of seller financing. See Note 5 for further
discussion.

During 2002 and 2001, the Company declared $1,224,000 and $1,100,000,
respectively, of dividends in-kind to holders of convertible preferred stock.

In 2000, in connection with the issuance of common stock and preferred stock
with detachable warrants, the Company recorded a deemed dividend to preferred
shareholders of $1,047,000.

During 2000, the Company acquired TEAM America Corporation in a transaction
accounted for as a reverse acquisition. As a result of this transaction, the
Company acquired the outstanding common stock of TEAM America Corporation for
$15,605,000. See Note 5 for additional information.

During 2002, 2001 and 2000, the Company acquired $243,000, $748,000 and
$207,000, respectively, of property and equipment under capital leases.

During 2000, the Company satisfied accrued interest through the issuance of
warrants valued at $249,000.

During 2000, the Company satisfied accounts payable for services performed
through the issuance of common stock valued at $1,212,000.

In December 2000, in conjunction with the acquisition of TEAM America
Corporation, $955,000 of debt was converted to equity.

   The accompanying notes to consolidated financial statements are an integral
                     part of these consolidated statements.



                                       38
<PAGE>


(1)      NATURE AND SCOPE OF BUSINESS

TEAM America, Inc. (the "Company"), (formerly known as TEAM Mucho, Inc.), an
Ohio corporation, is a Business Process Outsourcing ("BPO") Company specializing
in human resources. TEAM America is a leading provider of Professional
Employment Organization ("PEO") services throughout the United States. The
Company, through its subsidiaries, offers its services to small to medium-sized
businesses. These services include payroll, benefits administration, on-site and
online employee and employer communications and self-service, employment
practices and human resources risk management, and workforce compliance
administration.

The Company was formed by the December 28, 2000 merger of TEAM America
Corporation and Mucho.com, Inc. in a transaction accounted for under the
purchase method of accounting as a reverse acquisition. Mucho.com, Inc. was
treated as the acquiring company for accounting purposes because its
shareholders controlled more than 50% of the post transaction combined company.
The historical earnings per share and share amounts of the Company have been
retroactively restated for all periods presented in these consolidated financial
statements to give effect to the conversion ratio utilized in the merger with
TEAM America Corporation. As a result, all share amounts and losses per share
are presented in TEAM America Corporation equivalent shares.

(2)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The Company's financial statements are prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include TEAM America, Inc. and its
wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

USE OF 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. The Company's most significant
estimates relate to the reserve for workers' compensation claims and estimates
used in testing for potential goodwill impairment.

REVENUE RECOGNITION

The Company bills its clients on each payroll date for (i) the actual gross
salaries and wages, related employment taxes and employee benefits of the
Company's worksite employees, (ii) actual advertising costs associated with
recruitment, (iii) workers' compensation and unemployment service fees and (iv)
an administrative fee. The Company's administrative fee is computed based upon
either a fixed fee per worksite employee or an established percentage of gross
salaries and wages (subject to a guaranteed minimum fee per worksite employee),
negotiated at the time the client service agreement is executed. The Company's
administrative fee varies by client based primarily upon the nature and size of
the client's business and the Company's assessment of the costs and risks
associated with the employment of the client's worksite employees. Accordingly,
the Company's administrative fee income will fluctuate based on the number and
gross salaries and wages of worksite employees, and the mix of client fee income
will fluctuate based on the mix of total client fee arrangements and terms.
Although most contracts are for one year and renew automatically, the Company
and its clients generally have the ability to terminate the relationship with 30
days' notice.

The Company bills its clients for workers' compensation and unemployment costs
at rates that vary by client based upon the client's claims and rate history.
The amount billed is intended (i) to cover payments made by the Company for
insurance premiums and unemployment taxes, (ii) to cover the Company's cost of
contesting workers' compensation and unemployment claims, and other related
administrative costs and (iii) to compensate the Company for providing such
services. The Company has an incentive to minimize its workers' compensation and
unemployment costs because the Company bears the risk that its actual costs will
exceed those billed to its clients, and conversely, the Company profits in the
event that it effectively manages such


                                       39
<PAGE>

costs. The Company believes that this risk is mitigated by the fact that its
standard client agreement provides that the Company, at its discretion, may
adjust the amount billed to the client to reflect changes in the Company's
direct costs, including without limitation, statutory increases in employment
taxes and insurance. Any such adjustment that relates to changes in direct costs
is effective as of the date of the changes, and all changes require 30 days'
prior notice.

In accordance with Emerging Issues Task Force (EITF) Issue No. 99-19, "Reporting
Revenue Gross as a Principal versus Net as an Agent," the Company recognizes
amounts billed to clients for administrative fees, health insurance, workers'
compensation and unemployment insurance as revenues as the Company acts as a
principal with regards to these matters. Amounts billed for gross payrolls (less
employee health insurance contributions), employer taxes and 401(k) matching are
recorded net as the Company is deemed to act only as an agent in these
transactions. The Company recognizes in its balance sheet the entire amounts
billed to clients for gross payroll and related taxes, health insurance,
workers' compensation, unemployment insurance and administrative fees as
unbilled receivables. The related gross payroll and related taxes and costs of
health insurance, workers' compensation and unemployment insurance are recorded
as accrued compensation at the end of an accounting period.

As a result of the application of EITF 99-19, the amounts previously reported
for 2001 have been reclassified to conform to the current year presentation. As
a result of this reclassification, revenues and cost of services for 2001 were
each reduced by amounts previously recorded gross for worksite employee payroll,
wages and related payroll taxes of $394,026,000.

Because the acquisition of TEAM America Corporation occurred on December 28,
2000, the Company recognized no revenue or expenses related to the PEO business
segment prior to 2001. Unbilled revenues on the balance sheet at December 31,
2000 represent amounts generated by TEAM America Corporation prior to the
acquisition and billed to clients after the acquisition.

SEGMENT INFORMATION

During 2000, the Company operated entirely in the online business segment. As a
result, the consolidated statements of operations are composed entirely of the
results of this business segment. With the acquisition of TEAM America
Corporation, the Company entered the PEO business segment. During 2001, the
Company wound down and merged the operations of its online business into the
operations of its PEO business. Accordingly, the Company operates in a single
segment providing PEO services to small and mid-sized businesses.

CONCENTRATIONS OF CREDIT RISK

Financial instruments, which potentially subject the Company to a concentration
of credit risk, consist principally of accounts receivable. The Company provides
its services to its clients based upon an evaluation of each client's financial
condition. Exposure to losses on receivables is primarily dependent on each
client's financial condition. The Company mitigates such exposure by requiring
certain clients to make deposits and/or provide letters-of-credit or by
obtaining personal guarantees from the principals of certain of its clients.
Exposure to credit losses is monitored by the Company, and allowances for
anticipated losses are established when necessary.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and is depreciated over the estimated
useful lives of the related assets primarily using the straight-line method.
Additions and betterments for property and equipment over certain minimum dollar
amounts are capitalized. Repair and maintenance costs are expensed as incurred.
The estimated useful lives of property and equipment for purposes of computing
depreciation are as follows:

              Computer hardware and software...............  3-5 years
              Software development costs...................    3 years
              Furniture, fixtures and equipment............  5-7 years




                                       40
<PAGE>


Property and equipment and related accumulated depreciation as of December 28,
2002 and December 29, 2001 are as follows (000's omitted):
<TABLE>
<CAPTION>

                                                                                              2002             2001
                                                                                              ----             ----
<S>                                                                                    <C>               <C>
         Computer hardware and software...........................................     $        3,273    $       2,918
         Furniture, fixtures and equipment........................................                625              509
         Leasehold improvements...................................................                 95              127
                                                                                       --------------    -------------
                                                                                                3,993            3,554
         Less:  accumulated depreciation and amortization.........................             (1,999)            (974)
                                                                                       ---------------   --------------
                                                                                       $        1,994    $       2,580
                                                                                       ==============    =============
</TABLE>

Leasehold improvements and capital leases are depreciated or amortized over the
shorter of the lease term or their estimated useful lives.

Software development costs relate primarily to the Company's internet-based
enhancements to its proprietary software, TEAM Direct, and are accounted for in
accordance with Statement of Position ("SOP") 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." During 2002 and 2001,
the Company capitalized $58,000 and $869,000, respectively, related to these
enhancements. In the fourth quarter of 2001, the Company decided to exit the
online business center and in doing so evaluated the future use of certain
assets and determined that certain items would not be integrated with TEAM
Direct. Accordingly, $231,000 of previously capitalized costs was written off
as a restructuring charge.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amount of current assets and liabilities, bank debt and capital
lease obligations approximate their fair value because of the immediate or
short-term maturity of these financial instruments. There is no quoted market
price for the Company's preferred stock; however, based on the December 28, 2002
trading price of the Company's common stock, on an as-converted basis, the
preferred stock would have had a value of approximately $831,000.

INCOME TAXES

Income taxes are accounted for using the asset and liability approach for
financial reporting. The Company recognizes deferred tax liabilities and assets
for the expected future tax consequences of temporary differences between the
financial statement carrying amount and the tax bases of assets and liabilities.

Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

STOCK-BASED COMPENSATION AND AWARDS

The Company has adopted the provisions of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation ("SFAS 123") for all
stock-based compensation to employees and directors. Under the provisions of
this standard, employee and director stock-based compensation expense is
measured using either the intrinsic-value method as prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
("APB 25"), or the fair value method described in SFAS 123. Companies choosing
the intrinsic-value method are required to disclose the pro forma impact of the
fair value method on net income.

The Company has elected to account for stock-based compensation and awards under
the provisions of APB 25. Under APB 25, compensation cost for stock options is
measured as the excess, if any, of the fair value of the underlying common stock
on the date of grant over the exercise price of the option. The Company is
required to implement the provisions of SFAS 123 for stock-based awards to those
other than employees and directors. Stock-based compensation and award expense
for all equity instruments is recognized based on the related vesting periods.

ADVERTISING

The Company expenses advertising costs as incurred. Advertising expense for the
years ended December 28, 2002, December 29, 2001 and December 31, 2000 was
approximately $100,000, $88,000 and $32,000, respectively.



                                       41
<PAGE>

LOSS PER SHARE

For the years ended December 28, 2002, December 29, 2001 and December 31, 2000,
1,736,000, 1,796,000 and 1,818,000 options, and 1,737,000, 1,705,000 and
1,501,000 warrants, with a weighted average price of $4.55, $4.37 and $5.99 for
the options, and $6.54, $6.75 and $6.75 for the warrants, respectively, are
excluded from the calculation of diluted loss per share because their effect is
anti-dilutive. Additionally, preferred stock convertible into approximately
1,481,000 shares of common stock was excluded from the calculation of diluted
loss per share because its effect is anti-dilutive. As a result, no
reconciliation between weighted average shares used for the calculation of basic
loss per share and weighted average shares used for the calculation of diluted
loss per share is necessary.

FISCAL YEAR

During 2001, the Company changed its year-end from a calendar year to a fiscal
year ending on the Saturday closest to December 31. As prior periods reflect
only the results of Mucho.com, Inc., this change did not have a material effect
on the comparability of results.

RECLASSIFICATIONS

Certain reclassifications have been made to the 2001 and 2000 consolidated
financial statements to conform to the 2002 financial statement presentation.
See "Revenue Recognition" discussion within this footnote.

NEW ACCOUNTING STANDARDS

In June 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
143, "Accounting for Asset Retirement Obligations." SFAS No. 143 addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs and is effective for the fiscal years beginning after June 15, 2002.
Management does not expect the impact of SFAS No. 143 to be material to the
Company's consolidated financial statements.

In August 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." SFAS No. 144 supersedes SFAS No. 121,
"Accounting to the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," and establishes a single accounting model for the impairment or
disposal of long-lived assets. SFAS No. 144 is effective for fiscal years
beginning after December 15, 2001. Adoption of this statement had no impact on
the Company's results of operations or financial condition.

On May 1, 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS No. 145 is effective for the Company's fiscal year beginning December 29,
2002. The Company is in the process of evaluating what impact, if any, this
standard will have on the Company's financial statements.

On July 30, 2002, the FASB issued Statement of Financial Account Standards No.
146, "Accounting for Costs Associated with Exit or Disposal Activities," that is
applicable to exit or disposal activities initiated after December 31, 2002.
This standard requires companies to recognize costs associated with exit or
disposal activities when they are incurred rather than at the date of a
commitment to an exit or disposal plan. This standard does not apply where SFAS
No. 144 is applicable. The Company plans to adopt this statement in its first
quarter 2003. Management does not anticipate that this statement will have a
significant impact on the Company's results of operations or financial
condition.

(3)      GOODWILL

Effective December 30, 2001, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets." Under SFAS No. 142, the Company no longer amortizes
goodwill, but is required to test for impairment on an annual basis and at
interim periods if certain factors are present that may indicate that the
carrying value of the reporting unit is greater than its fair value. The Company
has determined that it operates as a single reporting unit, therefore, any
potential goodwill impairment is measured at the corporate level.

In connection with the adoption of SFAS No. 142, management, in determining its
methodology for measuring fair value, assessed that its market price may not be
reflective of fair value due to various factors, including that the Company's
officers,


                                       42
<PAGE>
directors and significant shareholders own a controlling interest in the
Company's common shares and, as a result, that the market may be illiquid at
times with regard to the remaining shares as such shares are thinly traded.
Accordingly, in order to assess fair value of the Company, management determined
that a number of measures should be considered, including but not limited to,
market capitalization of the Company, market capitalization of the Company plus
a "control" premium, discounted projected earnings before interest, depreciation
and amortization (EBITDA), multiples of sales and EBITDA as compared to other
industry participants and comparison of historical transactions.

SFAS No. 142 required that the Company adopt an annual date at which it would
test for impairment of goodwill. In connection with the adoption of this
statement, the Company chose the end of the third quarter as its date to test
for such impairment. At the end of the third quarter of fiscal year 2002,
management determined that no impairment existed using the following
calculations and assumptions:

     -    The common shareholders' equity of the Company at the end of the third
          quarter of 2002 was $9,481,000.

     -    Calculations and assumptions used in the determination of fair value
          included the following:

               -    Market capitalization of the Company based on the closing
                    price of the Company's common shares on September 27, 2002
                    was $0.70 per share. Using this market price, the Company's
                    market capitalization at the end of the third quarter of
                    fiscal year 2002 was approximately $5,751,000.

               -    Market capitalization plus a "control" premium assumed to be
                    20% was approximately $6,901,000.

               -    The Company prepared a discounted EBITDA analysis based upon
                    the Company's forecast EBITDA (before restructuring charges)
                    for 2002 and applying certain growth factors for 2003
                    through 2007. The significant assumptions used in these
                    calculations included:

                     -   Fiscal year 2003 EBITDA was estimated assuming a gross
                         margin similar to 2002 certain changes in the Company's
                         business, including the impact of 2002 restructuring.

                     -   Management assumed the following annual growth rates in
                         gross margin: 2004-10%, 2005-8%,2006-6%, 2007-4%.
                         Corporate payroll and selling, general and
                         administrative expenses were assumed to remain at
                         similar levels relative to gross margin.

                     -   A 20% discount rate was used as well as a 20% "control"
                         premium.

                     -   Using the above assumptions, the discounted EBITDA was
                         calculated to be approximately $35,760,000. In order to
                         arrive at a value attributable to the common shares,
                         management reduced this amount by the Company's
                         outstanding senior debt of $8,744,000 and the amount
                         for preferred shareholders of $9,235,000. The residual
                         amount of $17,781,000 was used as the estimate of fair
                         value of the Company under this methodology.


In assessing the Company's fair value at the end of the third quarter of 2002,
management determined that the Company's market capitalization was not
reflective of fair value as the common stock price dropped precipitously
immediately following a NASDAQ required press release describing NASDAQ's
initial determination that the Company was not in compliance with NASDAQ listing
requirements and was therefore subject to delisting. These events were caused by
the Company's filing of its second quarter Form 10-Q without an independent
auditor's review, due to the demise of Arthur Andersen LLP, and the Company's
related restatement of its 2001 and 2000 financial statements as described in
Note 4. In accordance with this process, the NASDAQ appended an "E" to the
Company's trading symbol, noting the failure to comply with continued listing
requirements and potential delisting. Following the Company's press release, the
Company's common stock price dropped from $1.36 to $0.45 per share. For the
period from July 1, 2002 up to the date of the press release, the common stock
had traded in the range of $1.36 to $2.50. Accordingly, in management's
judgment, the drop in the stock price is a temporary event related to the
potential delisting and not due to fundamental changes in the business.
Management believes that shortly following a timely filing of this 10-K, the
appended "E" will be removed.



                                       43
<PAGE>


Based upon management's determination that the market capitalization was not
necessarily reflective of fair value, the other measurement factors were heavily
considered in this analysis, the most significant being the discounted EBITDA
model that yielded a value of approximately $17,781,000. In order to reconcile
this back to the market capitalization, management assessed the market price
($1.36) immediately prior to the press release regarding delisting and the
average market price ($1.54) for the quarter. Based on each of these measures,
the market capitalization of the Company would have been $11,173,000 using the
market price of $1.36 per share and $12,652,000 using the average price of $1.54
per share for the third quarter of 2002.

After assessing all of the information regarding fair value as outlined above,
management determined that as of the end of the third quarter, no impairment
charge of goodwill was required. Had the Company used only the market
capitalization of the Company as a measure of fair value, an impairment charge
would have been required. Management estimates that the minimum required
charge under this market capitalization methodology would have been
approximately $3,484,000.

During the fourth quarter of 2002, management, as required by SFAS No. 142,
assessed whether or not events or circumstances had occurred subsequent to the
Company's annual measurement date that would more likely than not reduce the
fair value of the Company below its carrying amount. Based upon its assessment,
management determined that there were no factors subsequent to the third quarter
that would more likely than not reduce the fair value of the Company. Management
believes that during the fourth quarter positive developments occurred,
including improvement in EBITDA and the signing of a Forbearance Agreement with
its banks. Moreover, management assessed that the stock price had continued to
trade in a range of approximately $0.40 per share to $0.70 per share subsequent
to the third quarter. Consistent with their conclusions at the end of the third
quarter, management determined that the market price was not reflective of fair
value due to the appended "E" denoting potential delisting of its common shares
and, therefore, was not an indicator that potential impairment may exist.

Management will continue to assess the potential indicators of impairment,
including the Company's common stock price during 2003. If after removal of the
appended "E" to the Company's trading symbol, the common stock price does not
positively change, management believes that the declined stock price may then be
an indicator of potential impairment and will perform an interim test at that
time. Should the market price of the Company's common stock not improve,
management believes that this test may be performed as early as the second
quarter of 2003. Had management performed the same test of fair value as of the
end of the year that was applied at the end of the third quarter, management
believes that the results would have been similar to those described above for
the third quarter. Accordingly, management does not believe that this test would
have resulted in an impairment charge. Had an interim impairment test been
required and had management used only the market capitalization of the Company
to measure fair value at December 28, 2002, an impairment charge would have been
required. Management estimates that the minimum required charge under this
market capitalization methodology would have been approximately $5,413,000.

There can be no assurance that future goodwill impairment tests, including
interim tests as may be required, will not result in a charge to future
operations.

Further, there can be no assurance that the Staff of the United States
Securities and Exchange Commission will not have different views in respect to
whether the Company's stock price is reflective of an active market and that the
use of only market price should have been used in the valuation of goodwill. As
previously stated, the use of quoted market price to determine any goodwill
impairment would have resulted in a minimum impairment charge of approximately
$5,413,000 at December 28, 2002.

During 2001, the Company recognized $1,783,000 of amortization expense related
to goodwill. Had the Company adopted SFAS No. 142 as of the beginning of 2001,
$1,783,000 of amortization expense would not have been recognized and net loss
would have decreased by $1,783,000 and loss per share attributable to common
shareholders would have decreased by $0.24 per share.

(4)      RESTATEMENT

In accordance with EITF Nos. 98-5 "Accounting For Convertible Securities with
Beneficial Conversion Features or Contingently Adjustable Conversion Ratios" and
00-27 "Application of EITF Issue 98-5, Accounting For Convertible Securities
with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios
to Convertible Instruments" and related standards, when a company issues
convertible preferred stock with a beneficial conversion feature ("BCF"), the
value of the beneficial conversion feature must be accounted for as a deemed
dividend. The beneficial conversion feature is computed as the intrinsic value
of the spread between the quoted market price of the common stock and the
implicit conversion price of the preferred stock.

As described in Note 6, in connection with the reverse acquisition of Team
America Corporation by Mucho.com on December 28, 2000, the Company issued
100,000 2000 Class A Preferred Shares with detachable warrants to purchase
1,481,481 common shares and 600,000 common shares for total net proceeds of
$9,425,000. The proceeds of this issuance were originally assigned to the common
shares based upon the quoted market price on the date of the transaction, the
warrants based upon their estimated fair value and the residual amount, net of
expenses to the preferred stock. At the time of issuance, the Company concluded
that there was no beneficial conversion feature associated with the preferred
stock and accordingly no deemed dividend was recorded. This was based on the
belief by management, that the quoted market price of the common


                                       44
<PAGE>

shares was artificially inflated due to a concurrent tender offer at $6.75 per
share.

Recently, the Company has become aware that the United States Securities and
Exchange Commission ("SEC") has insisted that the quoted market price be used in
determining the value of a beneficial conversion feature. As a result, the
Company has reassessed its conclusion regarding the treatment of this
transaction in 2000 and is restating its 2000 and 2001 financial statements to
reflect the required changes. During the process of recalculating the fair value
of the issued securities, the Company noted an error in its original calculation
of the fair value of the associated warrants and is correcting the allocation of
the net proceeds based upon the restated relative fair values of the securities
issued. As a result of the corrections, the allocation of the net proceeds based
upon the restated relative fair values, and the calculation of the beneficial
conversion feature, the Company has determined that a deemed dividend of
$1,047,000 should have been recorded in the period ended December 31, 2000. As a
result of recording the beneficial conversion feature the following table
summarizes the restatement of the Company's Statement of Operations for the year
ended December 31, 2000 (000's omitted, except per share amounts):
<TABLE>

<S>                                                                              <C>
              Net loss, as originally reported ...........................       $ (9,496)
              Deemed dividend ............................................         (1,047)

              Net loss attributable to common shareholders, as restated ..       $(10,543)

              Net loss per share, as originally reported .................       $  (3.37)
              Net loss attributable to common shareholders, as restated ..          (3.74)
</TABLE>

In addition to the change in loss attributable to common shareholders, the
reallocation of the net proceeds resulted in reclassification of amounts from
Common Stock to Preferred Stock. These changes are summarized in the following
table (000's omitted):

                                           AS ORIGINALLY
ALLOCATION OF NET PROCEEDS                    REPORTED     AS RESTATED
                                           --------------  -----------
Preferred stock, face amount $10 million       $3,625       $6,361
Common stock ...........................        3,000        2,175
Warrants ...............................        2,800          889
                                               ------       ------
     Total .............................       $9,425       $9,425
                                               ======       ======

As a result of the reallocation of net proceeds and the recording of a deemed
dividend the Company has restated its December 29, 2001 and December 31, 2000
balance sheets as follows (000's omitted):



                                       45
<PAGE>


                                           AS ORIGINALLY
                                              REPORTED       AS RESTATED
                                              --------       -----------
DECEMBER 29, 2001 BALANCE SHEET IMPACT:
Preferred Stock .......................       $  5,618        $  8,354

Common Stock ..........................       $ 45,636        $ 43,947
Deferred Compensation .................            (20)            (20)
Accumulated Deficit ...................        (16,040)        (17,087)
                                              --------        --------
                                                29,576          26,840
Less:  Treasury Stock .................        (14,776)        (14,776)
                                              --------        --------
Total Shareholders' Equity ............       $ 14,800        $ 12,064
                                              ========        ========
DECEMBER 31, 2000 BALANCE SHEET IMPACT:
Preferred Stock .......................       $  3,625        $  6,361

Common Stock ..........................       $ 45,282        $ 43,593
Deferred Compensation .................            (28)            (28)
Accumulated Deficit ...................        (10,750)        (11,797)
                                              --------        --------
                                                34,504          31,768
Less:  Treasury Stock .................        (14,747)        (14,747)
                                              --------        --------
Total Shareholders' Equity ............       $ 19,757        $ 17,021
                                              ========        ========

No changes were required to the Statement of Operations for the year ended
December 29, 2001.

(5)      ACQUISITIONS

On March 1, 2002, the Company acquired certain assets and assumed certain
liabilities of Strategic Staff Management, Inc. (SSMI). The purchase price of
$476,000 included cash of $300,000, the assumption of customer deposits of
$172,000 and other costs of $4,000. The purchase price was allocated to the
assets acquired based on their relative fair values. In connection with this
transaction, the Company recorded $426,000 of intangible assets related to
customer relationships, which is being amortized over seven years, the estimated
useful life of such relationships, and $50,000 in a non-compete agreement, which
is being amortized over five years, the term of the agreement.

On May 1, 2002, the Company purchased certain assets of Inovis. Under the terms
of this transaction, the Company is required to pay the greater of $1,150,000
(the "Minimum Price") or a factor of gross profits generated by the Inovis
business over the 24 months beginning May 2002 and ending April 2004.
Additionally, the Company agreed to assume $50,000 of liabilities. Inovis is
based in Atlanta, Georgia and has clients throughout the United States, but
primarily concentrated in Georgia.

The Company paid $250,000 at closing and recorded an account payable to Inovis
of $950,000, $700,000 of this amount is classified as a current liability and
included in other accrued expenses on the accompanying balance sheet. The
remaining $250,000 is classified as a non-current liability. In connection with
this transaction, the Company recorded $104,000 of property and equipment,
$605,000 of customer contracts/relationships and $491,000 of goodwill. The
customer contracts/relationships are included in other intangibles in the
accompanying balance sheet and are being amortized over the estimated useful
life of the contracts/relationship of seven years. The amortization expense is
being recorded based on the relative amounts of estimated annual cash flows over
the life of the contracts/relationships.

On March 13, 2001, the Company acquired certain assets and assumed certain
liabilities of Professional Staff Management, Inc. (PSMI). The acquisition was
accounted for using the purchase method of accounting.



                                       46
<PAGE>


Total cash and stock consideration for this acquisition was (000's omitted,
except for share amounts):

Cash ............................................       $4,250
Seller financing ................................        1,000
Common shares of TEAM Mucho, Inc.
  (74,074 shares)................................          241
Convertible preferred stock (10,000 shares) .....          925
Warrants (148,148 common shares) ................           75
Direct expenses of the acquisition ..............           84
                                                        ------
                                                        $6,575

The purchase price including net liabilities assumed of $89,000 was allocated to
the assets acquired based on their relative fair market values with the excess
allocated to goodwill. Goodwill of $6,664,000 was recorded related to this
transaction and was being amortized over 20 years during 2001.

On December 28, 2000, the Company completed the acquisition of TEAM America
Corporation, a professional employer organization. The acquisition was accounted
for under the purchase method of accounting as a reverse acquisition, whereby
the legal target (Mucho.com, Inc.), was treated as the acquiring company for
accounting purposes because its shareholders controlled more than 50% of the
post transaction combined company. The historical earnings per share and share
amounts of the Company have been retroactively restated for all periods
presented in these consolidated financial statements to give effect to the
conversion ratio utilized in the merger with TEAM America Corporation. As a
result, all share amounts and earnings per share are presented in TEAM America
Corporation equivalent shares.

No results of operations of TEAM America Corporation are included in the 2000
statement of operations as the acquisition of TEAM America Corporation occurred
on December 28, 2000.

Total consideration paid for this acquisition was (000's omitted, except for
share and per share amounts):
<CAPTION>
<TABLE>
                                                                                              NUMBER OF
                                                                                              SHARES OR
                                                                                               OPTIONS           VALUE
                                                                                               -------           -----
<S>                                                                                             <C>          <C>
   TEAM America Corporation common stock owned by Mucho.com, Inc.  control group
      prior to date of acquisition at historical cost of $6.34 per share...............         1,296,044    $       8,221
   Other TEAM America Corporation common stock outstanding at fair market value of
      $5 per share.....................................................................         1,341,439            6,707
   TEAM America stock options acquired at fair market value............................           850,637              677
   Direct expenses related to acquisition..............................................                 -            1,664
                                                                                           --------------    -------------
   Total purchase price................................................................         3,488,120    $      17,269
                                                                                           ==============    =============
</TABLE>

The purchase price was allocated to the assets acquired based on the preliminary
evaluation of relative fair market values with the excess allocated to goodwill.
Original goodwill of $26,732,000 was recorded as a result of the initial
purchase price allocation and was amortized using the straight-line method over
20 years. During 2001, final purchase accounting was completed requiring
additional goodwill of $3,625,000 to be recorded. At December 31, 2000,
1,111,111 shares of TEAM Mucho, Inc. common stock were contingently issuable
related to this acquisition and were not included in total shares outstanding.
Upon action of the Company's Board of Directors, these shares were released from
escrow to the Mucho.com, Inc. shareholders on July 27, 2001. Because this
transaction was accounted for as a reverse acquisition, these shares were
accounted for as a stock dividend.

Concurrent with the acquisition of TEAM America Corporation by the Company, TEAM
America Corporation made a tender offer to its shareholders to purchase up to
50% of the outstanding TEAM America Corporation common shares at $6.75 per
share. A total of approximately 1,722,000 shares were tendered for a total cost
of approximately $11,622,000. This liability was shown on the December 31, 2000
consolidated balance sheet as "stock repurchase obligation" in current
liabilities. In January 2001 this obligation was settled. Tendered shares, plus
shares held in treasury stock by TEAM America Corporation prior to the
acquisition, are reflected as treasury stock on the post acquisition
consolidated balance sheets.

The following table presents unaudited condensed pro forma operating results as
if TEAM America Corporation, PSMI, SSMI and Inovis Corporation had been acquired
as of January 1, 2000. These results are not necessarily an indication of
operating


                                       47
<PAGE>

results that would have occurred had the Company actually operated the
business during the periods indicated (000's omitted except for per share
amounts):
<TABLE>
<CAPTION>
                                                     2002            2001            2000
                                                   --------        --------        --------
                                                  (UNAUDITED)     (UNAUDITED)     (UNAUDITED)
<S>                                                <C>             <C>             <C>
Revenue ....................................       $ 62,728        $ 73,725        $ 83,325
Net loss ...................................         (1,862)         (3,941)         (7,584)
Net loss attributable to common
  shareholders..............................         (3,086)         (5,061)         (9,704)
Loss per share:
Basic ......................................       $  (0.38)       $  (0.68)       $  (1.24)
Diluted ....................................       $  (0.38)       $  (0.68)       $  (1.24)
</TABLE>

The pro forma net loss attributable to common shareholders includes pro forma
preferred dividends of approximately $1,073,000 in 2000.

(6)      WORKERS' COMPENSATION

The Company has maintained a self-insured workers' compensation program for its
Ohio employees since July 1999 and has a high retention workers' compensation
policy covering most of its non-Ohio employees. The Company records workers'
compensation expense based on the estimated total cost of each claim, plus an
estimate for incurred but not reported (IBNR) claims. Under the Ohio
Self-Insurance Program, the Company is self-funded up to $250,000 per occurrence
and purchases private insurance for individual claims in excess of that amount.

Under its insured program for non-Ohio employees, the Company has a per claim
retention limit of $250,000 per occurrence and maintains an aggregate maximum
claims limit. For the insurance program covering the period October 1, 2000
through December 31, 2001, the aggregate cap was $4,950,000 and for the period
January 1, 2002 through December 31, 2002, approximately $9,000,000.

In addition to providing the claims expense under the AOS programs, as described
above, the Company is required to "pre-fund" a portion of the estimated claims.
The amounts "pre-funded" are used by the insurance carrier to pay claims. The
amount "pre-funded" is measured at various periods in the insurance contract to
determine, based upon paid and incurred claims history, whether the Company is
due a refund or owes additional funding. As of December 28, 2002 and December
29, 2001, the Company has recorded in its consolidated balance sheets the
following related to workers' compensation insurance reserves (000's omitted):
<TABLE>
<CAPTION>

                                                                                              2002             2001
                                                                                              ----             ----
<S>                                                                                    <C>               <C>
         Ohio workers' compensation reserves, net of claims paid..................     $          323    $         469
         Non-Ohio workers' compensation reserves, net of claims paid..............              3,038            3,850
                                                                                       --------------    -------------
                                                                                                3,361            4,319
         Less:  long-term portion.................................................             (2,241)          (2,879)
                                                                                       ---------------   --------------
         Workers' compensation reserves, current..................................     $        1,120            1,440
                                                                                       ==============    =============
         Total amount pre-funded..................................................     $        3,806    $       2,798
                                                                                       ==============    =============
         Receivable from insurance carrier........................................     $            -    $         628
                                                                                       ==============    =============
</TABLE>

In connection with these workers' compensation programs, the Company is required
to post certain collateral with the insurance carrier. As of December 28, 2002,
certain of these requirements were fulfilled by letters of credit drawn under
the Company's existing credit facility. Letters of credit in the amount of
$500,000 and $414,000 were available to be drawn as collateral for the non-Ohio
October 2000 through December 31, 2001 programs and the Ohio program,
respectively. In addition to these, a letter of credit in the amount of
$2,000,000 has been posted with respect to the 2002 AOS program. This letter of
credit was secured by certain shareholders of the Company and is collateralized
by shares of common stock of the Company owned by such shareholders (see Note
12).



                                       48
<PAGE>

(7) SHAREHOLDERS' EQUITY

The Company is authorized to issue 50,000,000 shares, consisting of 45,000,000
common shares, without par value, 2,500,000 Class A Voting Preferred Shares, and
2,500,000 Class B Nonvoting Preferred Shares. The Board of Directors is
authorized to fix the terms of the Class A and Class B Preferred Stock prior to
the issuance of each such series.

As part of its master lease agreement with a lessor of its capital equipment,
the Company issued warrants to purchase up to approximately 7,000 shares of
common stock for $7.09 per share, which was the market value of the stock when
the agreement was executed. The warrants will be issued quarterly in arrears
based on the dollar amount of equipment leased to the Company. At December 31,
2000, warrants to purchase 2,853 shares had been earned and issued. The warrants
were exercisable for one year from the date of issuance.

The Company has designated 125,000 of the Class A Voting Preferred Shares,
without par value, as the "Series 2000 9.75% Cumulative Convertible Redeemable
Class A Preferred Shares" (the "Series A Shares"). These shares were initially
issued with a mandatory redemption feature. Effective January 1, 2001, the
preferred shareholders and the Company agreed to eliminate the mandatory
redemption feature. In connection with the elimination of the mandatory
redemption feature, the preferred stock purchase agreement was amended such that
the Company is committed to complete a secondary offering of common stock, in
which the preferred shareholders may participate, prior to June 28, 2004. In the
event that the Company fails to complete the secondary offering, the Company
will be in default of its obligations to the preferred shareholders and the
preferred shareholders will be entitled to liquidated damages.

The Company has entered into a Put Option Agreement with the preferred
shareholders. Under the terms of this agreement, the preferred shareholders may,
under certain conditions, have the right to put these shares back to the
Company.

Other significant terms of the Series A Shares include the following:

          -    Annual cumulative dividends in an amount equal to 9.75%, payable
               quarterly in cash, beginning January 1, 2003, and payable in-kind
               prior to that date.

          -    In the event of liquidation or winding up of the Company, a
               liquidation preference over the common stock.

          -    The right to convert, in whole or in part, at any time, into the
               number of shares of common stock of the Company (1,973,926 at
               December 28, 2002) determined by dividing the aggregate
               liquidation amount (as defined in the Preferred Stock Agreement,
               but $13,324,000 as of December 28, 2002) by the conversion price
               (as defined in the Preferred Stock Agreement, but $6.75 as of
               December 28, 2002).

          -    The right to designate two members of the Board of Directors of
               the Company.

On December 28, 2000, in connection with the acquisition of TEAM America
Corporation (see note 3), the Company issued 100,000 Series A Preferred Shares,
warrants to purchase 1,481,481 shares of common stock of the Company at $6.75
per share, which expire December 28, 2010 and 600,000 shares of common stock for
total net proceeds of $9,425,000. The proceeds of this issuance were partially
used to fund the stock repurchase obligation. The net proceeds were allocated to
the preferred stock, common stock and warrants, based on their relative fair
values as follows (000's omitted):
<TABLE>
<CAPTION>
<S>                                                                                                        <C>
                   Preferred Stock with face amount of $10 million....................................     $   6,361
                   Warrants...........................................................................           889
                   Common Stock.......................................................................         2,175
                                                                                                           ---------
                      Total...........................................................................     $   9,425
                                                                                                           =========
</TABLE>

In March 2001, the Company issued an additional 10,000 Series A Shares and
warrants to purchase 148,148 shares of common stock of the Company at $6.75 per
share, which expire December 28, 2010, for $1,000,000 in connection with the
acquisition of the assets of PSMI. The proceeds were allocated $75,000 to
warrants and $925,000 to preferred stock, based on their relative fair values.

At December 28, 2002 and December 29, 2001, the Company had accrued preferred
stock dividends payable in-kind equivalent to $2,324,000 and $1,100,000,
respectively. Also during 2001, the Company incurred $32,000 of costs to amend
the terms of the preferred stock agreement.


                                       49
<PAGE>

In the year ended December 31, 2000, the Company recorded a deemed dividend to
preferred shareholders of $1,047,000.

Concurrent with the acquisition of TEAM America Corporation by the Company, TEAM
America Corporation made a tender offer to purchase up to 50% of the outstanding
TEAM America Corporation common shares at $6.75 per share. A total of
approximately 1,722,000 shares were tendered for a total cost of approximately
$11,622,000. This obligation was settled in January 2001. These shares are
reflected as treasury stock in the Company's balance sheet.

(8)      COMMITMENTS

The Company leases office facilities and certain office equipment under
long-term agreements expiring through 2007, which are accounted for as operating
leases. The future minimum lease payments as of December 28, 2002 are as follows
(000's omitted):
<TABLE>
<S>                                                                                                     <C>
                   2003...............................................................................     $     1,171
                   2004...............................................................................             893
                   2005...............................................................................             683
                   2006...............................................................................             632
                   2007 and thereafter................................................................             564
                                                                                                           -----------
                                                                                                           $     3,943
                                                                                                           ===========
</TABLE>

Rent expense under all operating leases was $1,255,000, $1,141,000 and $139,000
for the years ended December 28, 2002, December 29, 2001 and December 31, 2000,
respectively. Included in the above table are amounts that have been accrued
through the Company's restructuring reserve. See Note 14.

The Company leases certain equipment under capital leases. The cost of assets
under capital leases was $1,308,000 and $1,065,000 at December 28, 2002 and
December 29, 2001, respectively. Accumulated depreciation on these assets was
$557,000 and $229,000 at December 28, 2002 and December 29, 2001, respectively.

Future minimum commitments under capital leases as of December 28, 2002 are as
follows (000's omitted):
<TABLE>
<S>                                                                                                    <C>
                 2003................................................................................     $      357
                 2004................................................................................            302
                 2005................................................................................            169
                 2006................................................................................             34
                 2007 and thereafter.................................................................              -
                                                                                                          ----------
                 Total minimum lease payments........................................................            862
                 Less: amount representing interest..................................................            (96)
                                                                                                          -----------
                                                                                                                 766
                 Less: current portion...............................................................           (303)
                                                                                                          -----------
                                                                                                          $      463
                                                                                                          ===========

</TABLE>

(9)      CREDIT FACILITY AND DEBT OBLIGATIONS

Term debt at December 28, 2002 and December 29, 2001 consists of the following
(000's omitted):
<TABLE>
<CAPTION>
                                                                                              2002             2001
                                                                                              ----             ----
<S>                                                                                <C>               <C>
         Borrowings under the Credit Agreement (due through 2006).................     $        8,728    $       7,799
         Seller financing.........................................................                  -              800
         Amounts due finance company, unsecured, interest rate 6.2%,
             due through 2002.....................................................                171              282
                                                                                       --------------    -------------
                                                                                                8,899            8,881
         Less:  current portion...................................................               (771)          (1,250)
                                                                                       ---------------   --------------
         Non-current portion......................................................     $        8,128    $       7,631
                                                                                       ==============    =============
</TABLE>


                                       50
<PAGE>
The bank debt has been classified in accordance with the Third Amendment to the
Credit Agreement that was executed at March 28, 2003 (see Note 17).

Concurrent with the acquisition of TEAM America Corporation, the Company entered
into a credit agreement (the "Credit Agreement") which originally provided up to
$18,000,000 as a senior revolving credit facility. The Credit Agreement provided
for an initial advance of $4,000,000 which was made to the Company on January 3,
2001. The Credit Agreement also provided for acquisition loans up to an
aggregate of $14,000,000 and for the issuance of letters of credit of up to
$2,000,000. The total credit under the facility including aggregate borrowings
and letters of credit was not to exceed $18,000,000.

In March 2001, the Company made a $4,250,000 draw against the acquisition loan
in connection with the PSMI acquisition. As part of the PSMI acquisition, seller
financing was supported with a $1,000,000 letter of credit that expired July 13,
2002.

In March 2002, the Company made a $750,000 draw against this Credit Facility in
connection with the SSMI acquisition.

At September 28, 2002, the Company was in default under its Credit Facility
related to two financial covenants. As of September 30, 2002, the Company and
its senior lenders entered into an Omnibus Forbearance and Modification
Agreement (the "Forbearance"), which ends on the earlier of March 31, 2003 or
the date of Forbearance Default, as defined in the Forbearance (the "Forbearance
Period"). Under the terms of the Forbearance, the senior lenders forbear from
exercising any other rights or remedies available to them with regards to the
covenant violations under the credit agreement. In connection with the
Forbearance, the Company is obligated to pay interest only on a monthly basis as
required under the terms of the credit agreement. All unpaid principal and
interest is due and payable on April 1, 2003. During the Forbearance Period,
interest will accrue at the default rate of prime plus four (8.25% at December
28, 2002), but the Company is only required to pay interest monthly at a rate of
prime plus one (5.25% at December 28, 2002). In addition to the payment of
principal and interest, the Company is required to pay a $100,000 Forbearance
Fee at the end of the Forbearance Period. The terms of the Forbearance include
monthly financial covenants that must be maintained by the Company, the most
stringent being the maintenance of minimum monthly Earnings Before Interest,
Taxes, Depreciation and Amortization.

The Forbearance also precludes the Company from (i) making any distributions
with respect to its preferred and/or common shares; (ii) making any payments
with respect to indebtedness which has been subordinated to the Credit Facility;
(iii) making any pay increases or loans to executive officers; and (iv) making
any payment not in the ordinary course of business. Additionally, the Company
may not make any acquisitions that require capital outlays during the
Forbearance Period without lenders approval. The Company is required to engage a
financial consultant to conduct an analysis of the Company's cash flow
projections and to provide a written report to the lenders regarding such
analysis.

As a result of the default and Forbearance, the Company's debt outstanding under
the Credit Facility is classified in the Company's balance sheet as a
current liability at December 28, 2002.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments and hedging activities. SFAS No.
133, as amended, requires that the Company recognize all derivatives as either
assets or liabilities in the statement of financial position and measure those
instruments at fair value.

In July 2001, the Company entered into an interest rate swap. The following is a
summary of the fair value gain/(loss) of the Company's swap, based upon the
estimated amount that the Company would receive (or pay) to terminate the
contracts as of December 29, 2001. The fair values are based on quoted market
prices for the same or similar instruments. The Company has not met all the
conditions to make the interest rate swap an effective hedge for accounting
purposes. Accordingly, the change in the fair value of the swap is recorded in
the consolidated statement of operations.

                                            NOTIONAL        FAIR VALUE
                                             AMOUNT         GAIN/(LOSS)
                                            --------        -----------

         Interest rate swaps.......... $    5,327,000    $    (296,000)

In August 2000, the Company issued a convertible note for $955,000 which bore
interest at the rate of 9% per annum with all principal and interest due on the
earlier of December 31, 2000 or the closing of the acquisition of TEAM America
Corporation. Prior to December 31, 2000, the holder of the note converted the
note and all accrued but unpaid interest into 349,500 shares of common stock of
the Company.


                                       51
<PAGE>

The holder of the convertible note was also issued a warrant to purchase up to
13,401 shares of common stock at $7.09 per share, which was the then-estimated
fair market value of the stock. The warrant was exercisable for one year from
the date of issuance. The fair value of the warrant was estimated to be $100,000
at the date of grant. The warrant was exchanged for stock in 2000. The Company
incurred debt issuance costs of approximately $723,000 related to the Credit
Agreement, which are being amortized over the term of the Credit Agreement.

(10)     EMPLOYEE BENEFIT PROGRAMS

The following plans were assumed as part of the acquisition of TEAM America:

CAFETERIA PLANS

The Company sponsors Section 125 cafeteria plans that include a fully insured
health, dental, vision and prescription card program. The plans are offered to
full-time employees. Entrance to the plan is the first day of the month
following 30 days of service.

401(k) RETIREMENT PLANS

The Company sponsors 401(k) retirement plans that cover all corporate full-time
employees. Entrance to the plan is the first day of the month following ninety
days of service. During the years ended December 28, 2002 and December 29, 2001,
the Company provided matching contributions under its 401(k) plan at a rate of
25% of the employees' contribution, up to a maximum of 6%. Total contributions
to this plan were $56,000 and $32,000 for the years ended December 28, 2002 and
December 29, 2001, respectively.

OTHER PROGRAMS

Other available employee benefit programs include health, life, accidental death
and dismemberment insurance, disability insurance, and medical and dependent
care reimbursement programs. Benefits under such programs are funded by the
Company's employees and clients.

(11)     STOCK OPTION PLANS

The Company established the 2000 Stock Plan in January 2000 and assumed the TEAM
America Corporation Incentive Stock Plan upon acquisition of TEAM America
Corporation. The TEAM America Corporation Stock Plan was established on December
10, 1996. These plans are collectively referred to as "the Plans." The Plans
provide for the granting, at the discretion of the Board of Directors of: (a)
options that are intended to qualify as incentive stock options, within the
meaning of Section 422 of the Internal Revenue Code of 1986 (the "Code"), as
amended, to employees, officers and directors and (b) options not intended to so
qualify to employees, officers, consultants and directors.

Options granted to employees and officers generally vest 20% per year over five
years; options granted to directors fully vest after one year. Options generally
have a ten-year exercise period and are issued with an exercise price equal to
the fair market value of Company common stock on the date of grant.

The Company has granted non-qualified options in connection with acquisitions
and employment agreements with key executives of the acquired businesses and to
officers and key employees of the Company. During 2000, non-qualified options
were granted to employees under the Plans to purchase shares at $0.47, which was
below the fair market value at the date of grant. In connection with these
grants, compensation expense of $9,000, $8,000 and $7,000 has been recorded for
fiscal 2002, 2001 and 2000, respectively, and $11,000 remains at December 28,
2002 to be amortized over the remaining vesting period. Also during 2000,
non-qualified options were granted to an officer of the Company to purchase up
to 600,000 shares at $3.875, which was below the fair market value at the date
of grant. The options vested upon grant. The $675,000 difference between the
grant price and the fair market value was recorded as compensation expense.



                                       52
<PAGE>


A summary of changes in the stock option plans for the periods ended December
28, 2002 and December 29, 2001 is as follows:
<TABLE>
<CAPTION>
                                                                 NUMBER OF OPTIONS              WEIGHTED-AVERAGE PRICE
                                                                 -----------------              ----------------------
                                                               2002              2001            2002           2001
                                                            ----------        ----------        --------       --------
<S>                                                          <C>               <C>              <C>            <C>
Options outstanding, beginning of year ..............        1,896,089         1,868,368        $   4.37       $   5.99
Options granted .....................................          120,000           450,000            1.52           4.18
Options exercised ...................................               --              (727)             --           0.47
Options cancelled/surrendered .......................         (279,359)         (421,552)           4.35       $   7.04
                                                            ----------        ----------        --------       --------
Options outstanding, end of year ....................        1,736,730         1,896,089        $   4.55       $   4.37
                                                            ==========        ==========        ========       ========
Options exercisable, end of year ....................        1,289,022         1,224,870        $   5.93       $   7.04
                                                            ==========        ==========        ========       ========
Shares available for future grant, end of year ......          522,618           586,770
                                                            ==========         =========
Shares reserved for issuance under stock option plans        1,811,640         1,811,640
                                                            ==========         =========
Weighted average fair value of options granted
   during the year ..................................                                           $   0.68       $   1.80
                                                                                                ========       ========
</TABLE>

The following table summarizes information concerning outstanding and
exercisable options as of December 28, 2002:
<TABLE>
<CAPTION>

                                                                                                     EXERCISABLE AT
                                                                          EXPIRATION DATES            DECEMBER 28,
         EXERCISE PRICE RANGE                   NUMBER OF SHARES                RANGE                     2002
         --------------------                   ----------------                -----                     ----
<S>                                                 <C>                <C>                             <C>
         $9.35 to $10.50                                58,936             05/05 - 01/08                     56,125
         $6.75 to $8.50                                307,807             09/07 - 10/11                    254,607
         $3.03 to $5.38                              1,087,000             12/08 - 09/11                    795,700
         $3.00 and less                                282,987             02/05 - 11/12                    182,590
                                                 -------------                                          -----------
                                                     1,736,730                                            1,289,022
                                                 =============                                          ===========
</TABLE>

At December 28, 2002, the weighted average remaining contractual life of all
options outstanding under the Plans was approximately 7.5 years.

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its stock-based compensation arrangements because, as
discussed below, the alternative fair value accounting provided for under SFAS
No. 123, "Accounting for Stock-Based Compensation," requires use of option
valuation models in valuing employee stock options. Under APB 25, no
compensation expense has been recognized because the exercise price of the
Company's employee stock options has equaled the market price of the underlying
stock on the date of grant.

Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, which also requires that the information be determined as if the
Company had accounted for its employee stock options under the fair value method
prescribed by SFAS No. 123. The fair value for these options was estimated at
the date of grant using a Black-Scholes option pricing model with the following
assumptions:

                                                  2002          2001
                                                ------        ------

Risk-free interest rate .................          2.5%          4.0%
Expected dividend yield .................          0.0%          0.0%
Expected volatility .....................         30.0%         31.0%
Weighted average expected life (in years)           10            10

For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. The Company's pro
forma information, as if the Company had accounted for its employee stock
options granted under the fair value method prescribed by SFAS No. 123, follows:



                                       53
<PAGE>

<TABLE>
<CAPTION>
                                                                                              2002             2001
                                                                                              ----             ----
<S>                                                                                   <C>                <C>
         Pro forma net loss attributable to common shareholders (000's omitted)...       $   (3,207)        $   (5,369)
         Pro forma net loss per share attributable to common shareholders.........       $    (0.39)        $    (0.73)
</TABLE>

(12)     RELATED PARTY TRANSACTIONS

In November 2002, the Company retained an investment bank of which a significant
shareholder and member of the Board of Directors is a principal. During 2002,
the Company paid the investment bank $50,000. Additionally, this party will earn
a success fee upon the occurrence of certain events.

On April 3, 2002, the Company posted, outside of its Credit Facility discussed
in Note 9, a $2,000,000 Letter of Credit as collateral relating to its 2002
Workers' Compensation Program for non-Ohio employees. In connection with this
transaction, certain officers and shareholders of the Company pledged shares of
Company common stock as collateral with the lending institution for the letters
of credit. The Company paid a $60,000 fee to the officers and shareholders in
connection with this transaction. The decline in market value of the shares of
the Company's common stock collateralizing the letter of credit caused a default
on the letter of credit. The letter of credit agreement is also subject to the
Forbearance Agreement.

On April 9, 2002, the Company entered into a Bridge Agreement and Common Stock
Purchase with one of its Series A Preferred Shareholders (the "Purchaser").
Under the terms of these agreements, the Purchaser acquired 166,667 shares of
common stock of the Company at $3.00 per share for a total purchase price of
$500,000. In addition, the Purchaser provided a short-term bridge note of
$1,500,000 to the Company which was due August 9, 2002 and bears interest of 15%
per annum. In connection with this transaction, the Company issued a warrant to
the Purchaser to purchase 100,000 shares of common stock at $3.00 per share. In
accordance with the terms of the agreement, this note can only be paid out of
financing occurring before August 9, 2002. Since no such financing occurred,
this note has been classified as mezzanine equity in the accompanying balance
sheet. Ongoing discussions with the Purchaser as to the ultimate disposition of
this note may result in a reclassification of this financial instrument in the
Company's balance sheet. Certain officers and shareholders of the Company have
guaranteed the repayment of $500,000 of this note.

The Company has clients that are owned by members of the Board of Directors. The
Company also has paid professional fees, office rent and other services to
entities owned or controlled by officers or members of the Board of Directors.

During 2002 and 2001, the Company contracted with firms, whose principals were
members of the Board of Directors, for legal services and for tax preparation
and advice. The costs incurred for these services were $165,000 and $386,000 in
2002 and 2001, respectively. The Company had accounts payable of $17,000 and
$77,000 to related parties at December 28, 2002 and December 29, 2001,
respectively.

In 1999, a shareholder made a loan of $500,000 to the Company, which accrued
interest at 9% per annum. In relation to the loan, the Company issued a warrant
to the shareholder to acquire up to 50,000 shares of the Company's stock at no
cost. Interest expense of $61,000 was recorded for the period ended December 31,
1999 in connection with the warrant. In March 2000, the Company paid $277,000 in
cash to the shareholder, issued approximately 116,000 shares of its common stock
valued at approximately $3.80 per share in exchange for the note and the
warrant, and recorded interest expense of $127,000.

In 1999, a shareholder made a demand loan to the Company. In March 2000, as
additional consideration for the loan, the Company issued two warrants to
acquire up to 16,000 shares of common stock at a price of $3.80 per share, which
were exercisable within a ten-year period. In July 2000, the Company issued at
no cost 2,400 shares of its common stock valued at approximately $7.10 per share
in exchange for one warrant to purchase 4,000 shares. In December 2000, the
Company issued at no cost 7,300 shares of its common stock valued at
approximately $7.10 per share in exchange for the other warrant for the
remaining 12,000 shares. For the year ended December 31, 2000, the Company had
recorded interest expense of $34,500 for the conversion of these two warrants.

During the year ended December 31, 2000, the Company recorded interest expense
of $57,000 to provide for the cost of the conversion of the warrant for 4,000
shares and the eventual conversion of the warrant for the remaining 12,000
shares of common stock.

Certain officers and members of the Board of Directors of the Company are
shareholders or principals of firms from which the Company contracted for legal
services, and of TEAM America Corporation, which provided the co-employment of
essentially all


                                       54
<PAGE>

the staff of the Company during 2000. During the year ended December 31, 2000,
the Company incurred charges for legal services of $46,000.

At December 31, 2000, the Company had an account receivable of $117,000 from a
partnership, which is partially owned by an officer of the Company. During 2001,
the partnership filed bankruptcy and accordingly this receivable was written off
as uncollectible.

(13)     INCOME TAXES

Deferred income tax assets and liabilities represent amounts taxable or
deductible in the future. These taxable or deductible amounts are based on
enacted tax laws and rates applicable to the periods in which the differences
are expected to affect taxable income. Income tax expense is the tax payable or
refundable amount for the period plus or minus the change during the period in
deferred tax assets and liabilities. The income tax benefit recorded for 2002 is
primarily attributable to net operating loss carrybacks and a related reversal
of valuation allowance. No federal provision for income taxes for fiscal years
2001 and 2000 has been provided due to operating losses in the two periods. The
provision recorded in 2001 represents state income taxes. Deferred tax assets
and liabilities are as follows (000's omitted):

                                                    2002           2001
                                                   -------        -------

Deferred income tax assets (liabilities):
   Depreciation and amortization ...........       $  (621)       $   549
   Workers' compensation ...................           896          1,152
   Other ...................................            --             28
   Net operating loss carryforward .........         4,052          3,962
                                                   -------        -------
     Total long-term deferred tax asset              4,327          5,691
     Valuation allowance ...................        (4,052)        (4,907)
                                                   -------        -------
Total long-term deferred tax assets, net....       $   275        $   784
                                                   =======        =======
Workers' compensation ......................       $   448            576
Allowance for doubtful accounts ............            61            157
Severance ..................................           197            306
Restructuring costs ........................           124             --
Other accrued liabilities ..................           207            646
                                                   -------        -------
   Total short-term deferred tax assets ....         1,037          1,685
   Valuation allowance .....................            --           (188)
                                                   -------        -------
Total short-term deferred tax assets, net ..       $ 1,037        $ 1,497
                                                   =======        =======

The Company has considered the realizability of its deferred tax assets and
liabilities and has recorded valuation allowances, as appropriate, to reduce its
deferred tax assets to an amount that, in the opinion of management, is more
likely than not to be realized. At December 28, 2002, the Company has net
operating loss carryforwards available for federal tax purposes of approximately
$12,000,000, which begin to expire in 2019. The use of these net operating loss
carryforwards is limited on an annual basis, according to Internal Revenue Code
guidelines.

The following table reconciles the federal tax provision:
<TABLE>
<CAPTION>
                                                           2002           2001           2000
                                                          -------        -------        -------
<S>                                                       <C>            <C>            <C>
Tax benefit - federal .............................       $  (963)       $(1,413)       $(3,229)
State tax expense (benefit), net of federal benefit            85           (197)          (570)
Permanent differences, net ........................           500            603            171
Prior year revision of deferred taxes .............           439             --             --
Valuation allowance ...............................        (1,043)         1,042          3,628
                                                          -------        -------        -------
     Tax provision ................................       $  (982)       $    35        $    --
                                                          =======        =======        =======
</TABLE>



                                       55
<PAGE>

(14) RESTRUCTURING CHARGES

During the last quarter of 2000, the Company began to restructure in
contemplation of its acquisition of TEAM America Corporation. The primary
purpose of this restructuring was to position the Company to focus on the
opportunities to be derived from integrating the Company's internet technology
with TEAM America Corporation's PEO business and the opportunities for
cross-promotion between TEAM America Corporation's client and worksite employee
base and the Company's online business center. As a result of this shift,
certain assets utilized in the online business segment were determined to be
impaired. Additionally, certain exit costs were accrued related to leased office
space no longer being utilized, employee severance, and costs to break
contractual agreements with vendors.

During the year ended December 29, 2001, the Company incurred additional
restructuring costs, in conjunction with the TEAM America Corporation
acquisition, primarily related to relocation of certain key executives in
connection with exiting its headquarters in California, employee severance, the
write-down of impaired assets and other asset write-offs. These relocations were
made in order to allow the Company to focus on its PEO business and to exit its
online business center business. All such costs were expensed when incurred.

During 2002, the Company continued to restructure its operations in order to
obtain necessary efficiencies throughout the organization. This restructuring
included office closures, reducing corporate headcount and relocating several
key individuals to its Columbus, Ohio headquarters.

A summary of expenses included in the restructuring costs line item of the
consolidated statement of operations are as follows (000's omitted):
<TABLE>
<CAPTION>
                                                                             2002               2001            2000
                                                                             ----               ----            ----
<S>                                                                      <C>               <C>               <C>
         Relocation costs.............................................   $          199    $          533    $          -
         Employee severance...........................................              158               973              49
         Write-down of impaired assets................................                -               261             477
         Costs to exit contractual agreements.........................              381                 -             100
         Other........................................................                -                67              28
                                                                         --------------    --------------    ------------
                                                                         $          738    $        1,834    $        654
                                                                         ==============    ==============    ============
</TABLE>

(15)     CONTINGENCIES

The Internal Revenue Service ("IRS") has been conducting a Market Segment Study
since 1994, focusing on selected PEOs (not including the Company), in order to
examine the relationships among PEOs, worksite employees and owners of client
companies. The Company has limited knowledge of the nature, scope and status of
the Market Segment Study because it is not a part thereof, and the IRS has not
publicly released any information regarding the study to date. In addition, TEAM
America's 401(k) retirement plan (the "Plan") was audited for the year ended
December 31, 1992, and, as part of that audit the IRS regional office has asked
the IRS national office to issue a Technical Advice Memorandum ("TAM") regarding
whether or not the Company is the employer for benefit plan purposes. The
Company has stated its position in a filing with the IRS that it is the employer
for benefit plan purposes.

On May 13, 2002, the IRS released guidance applicable solely to the
tax-qualified status of defined contribution retirement plans maintained by
PEOs. In that guidance, the IRS declared that it would not assert a violation of
the exclusive benefit rule under Section 401(a) of the Internal Revenue Code if
a PEO that maintains a single employer defined contribution retirement plan for
worksite employees takes certain remedial action by the last day of the first
plan year beginning on or after January 1, 2003. The Company maintains a frozen
single employer defined contribution retirement plan benefiting certain worksite
employees and intends to take remedial action to qualify for the relief provided
under the IRS guidance within the applicable deadline.

At December 28, 2002, the Company has recorded a $482,000 reserve for certain
tax contingencies. The estimated amount of possible loss in excess of these
reserves is $218,000.

The Company has ongoing litigation matters pertaining to worksite employees and
other legal matters that have arisen in the ordinary course of business. The
Company provides reserves for estimated future costs to defend the Company
and/or the estimated amount to be paid if the award or payment is probable and
estimable. Management believes these claims will not have a material adverse
effect on the results of operations or financial condition of the Company.


                                       56
<PAGE>
(16) QUARTERLY FINANCIAL INFORMATION (Unaudited, 000'S OMITTED, EXCEPT PER SHARE
     AMOUNTS)

The quarterly revenues for all periods have been reclassified to conform to the
Company's 2002 presentation. The 2001 and 2000 information has been restated as
described in Note 4.
<TABLE>
<CAPTION>
                                                                  MARCH 30         JUNE 29      SEPTEMBER 28     DECEMBER 28
                                                                  --------         -------      ------------     -----------
<S>                                                              <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 28, 2002:
Revenues .................................................       $ 13,549        $ 15,142        $ 15,332        $ 14,916
Gross profit .............................................       $  4,622        $  5,159        $  5,269        $  5,555
Operating income (loss) ..................................       $ (1,010)       $   (246)       $    221        $   (126)
Net income (loss) available/attributable for/to common
   shareholders ..........................................       $ (1,517)       $ (1,123)       $   (555)       $    437
Basic net income (loss) per share available/attributable
   for/to common shareholders ............................       $  (0.19)       $  (0.14)       $  (0.07)       $   0.01
Diluted net income/(loss) per share available/attributable
   for/to common shareholders ............................       $  (0.19)       $  (0.14)       $  (0.07)       $   0.01
</TABLE>
<TABLE>
<CAPTION>

                                                                  MARCH 31         JUNE 30      SEPTEMBER 30     DECEMBER 31
                                                                  --------         -------      ------------     -----------
<S>                                                              <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 29, 2001:
Revenues .................................................       $ 14,115        $ 15,071        $ 13,776        $ 14,074
Gross profit .............................................       $  4,029        $  5,261        $  5,511        $  5,068
Operating income (loss) ..................................       $    (98)       $     68        $   (235)       $ (2,839)
Net income (loss) available/attributable for/to
   common shareholders ...................................       $   (508)       $   (478)       $ (1,011)       $ (3,293)
Basic net income (loss) per share available/attributable
   for/to common shareholders ............................       $  (0.07)       $  (0.07)       $  (0.14)       $  (0.41)
Diluted net income (loss) per share available/attributable
   for/to common shareholders ............................       $  (0.07)       $  (0.07)       $  (0.14)       $  (0.41)
</Table>
<TABLE>
<CAPTION>

                                                                  MARCH 31         JUNE 30      SEPTEMBER 30     DECEMBER 31
                                                                  --------         -------      ------------     -----------
<S>                                                              <C>             <C>             <C>             <C>
YEAR ENDED DECEMBER 31, 2000:
Revenues .................................................       $      --        $      --        $    41        $    10
Gross profit .............................................       $      --        $      --        $    41        $    10
Operating (loss) .........................................       $  (2,135)       $  (2,456)       $(1,761)       $(2,632)
Net income (loss) available/attributable for/to common
   shareholders ..........................................       $  (2,276)       $  (2,510)       $(1,818)       $(3,939)
Basic net income (loss) per share available/attributable
   for/to common shareholders ............................       $   (0.89)       $   (0.86)       $ (0.64)       $ (1.54)
Diluted net income (loss) per share available/attributable
   for/to common shareholders ............................       $   (0.89)       $   (0.86)       $ (0.64)       $ (1.54)
</TABLE>

The Company incurred restructuring costs during the years ended December 28,
2002 and December 29, 2001 that impact the above quarterly information. The
costs were charged to operations in each of the years as follows:
<TABLE>
<CAPTION>
                                                               MARCH 30         JUNE 29     SEPTEMBER 28      DECEMBER 28
                                                               --------         -------     ------------      -----------
<S>                                                         <C>             <C>             <C>              <C>
YEAR ENDED DECEMBER 28, 2002:
Restructuring costs.....................................    $         -     $        241    $        29      $       468
</Table>
<TABLE>
<CAPTION>
                                                               MARCH 31         JUNE 30     SEPTEMBER 30       DECEMBER 31
                                                               --------         -------     ------------      -----------
<S>                                                         <C>             <C>             <C>              <C>
YEAR ENDED DECEMBER 29, 2001:
Restructuring costs.....................................    $        41     $         34    $       309      $     1,450
</TABLE>




                                       57
<PAGE>


(17) SUBSEQUENT EVENTS

Restructuring of Bank Debt and Preferred Stock

On March 28, 2003, the Company entered into certain agreements with its bank
group and its 2000 Class A Preferred Shareholders. The Company entered into a
Third Amendment and Waivers to its Senior Credit Facility (the "Bank Agreement")
and a Memorandum of Understanding (the "Preferred Agreement") with its 2000
Class A Preferred Shareholders.

Bank Agreement

The Company and its senior lenders agreed to amend the Senior Credit Facility as
follows:

-    The outstanding amounts under the Senior Credit Facility of $8,728,000 were
     restructured into three separate tranches. Tranche A representing a
     $6,000,000 Term Loan, Tranche B representing a $2,728,000 Balloon Loan and
     Tranche C representing $914,000 of outstanding letter of credit.

-    The Senior Credit Facility is senior to the $1,500,000 subordinated note
     issued in satisfaction of the Bridge Note (discussed below under Preferred
     Agreement).

-    The maturity of the Senior Credit Facility is January 5, 2004.

-    The interest rate on each tranche is: Tranche A - the Provident Bank Prime
     Commercial Lending Rate plus two percent 6.25% at March 28, 2003);
     Tranche B - 12%, eight percent payable in cash and four percent
     payable in kind and Tranche C (if drawn) - the Provident Bank's
     Prime Lending Rate plus five percent (9.25% at March 28, 2003).

-    Tranche A requires principal payments of $100,000 per month beginning July
     2003, Tranche B is due at maturity and Tranche C is due immediately upon
     any draw under the letters of credit.

In addition to the above terms, the Company issued to the banks 1,080,000
warrants to purchase common stock of the Company at a price of $0.50 per share.
These warrants expire in seven years. The Bank Agreements states that no new
indebtedness may be incurred under the facility and that any future acquisitions
are subject to consent of the banks.

The Senior Credit Facility is collateralized by all of the assets of the
Company.

Preferred Agreement

The Company and its 2000 Class A Preferred Shareholders agreed to restructure
the preferred shareholders' investment in the Company as follows:

-    The $1,500,000 Bridge Note that was to be paid from proceeds of an equity
     financing that would occur prior to August 9, 2002, will be converted into
     subordinated debt with an interest rate accruing at 14%, which shall be
     subordinated to the Credit Facility (the "Subordinated Debt"). The
     Subordinated Debt will be due June 30, 2006 along with all accrued
     interest.

-    The 2000 Class A Preferred Shares will be exchanged by the holders for:

     -    $2,500,000 Class B Series 2003 Preferred Shares which will have a
          dividend rate of 14% and be non-voting shares. This dividend will be
          accrued and paid-in-kind. These shares will maintain a liquidation
          preference equal to par value plus accrued and unpaid dividends. The
          holders of these shares may, at any time, after the third anniversary
          of the issuance of such shares and with the consent of holders of no
          fewer than two-thirds of the shares, may require the Company to
          redeem all or any portion of such shares at par value plus accrued
          and unpaid dividends;

     -    Warrants to purchase 2,400,000 common shares of the Company at an
          exercise price of $0.50 per share. These warrants expire in 10 years;
          and

     -    4,800,000 common shares of the Company.

The following table show the pro forma capitalization of the Company as of
December 28, 2002 assuming the above transactions were consummated as of that
date:



                                       58
<PAGE>
<Table>
<Caption>

                                               YEAR ENDED
                                               DECEMBER 28,               PRO FORMA
                                                  2002                   ADJUSTMENTS      PRO FORMA
                                                  ----                   -----------      ---------
                                                                         (UNAUDITED)     (UNAUDITED)
<S>                                         <C>                   <C>                  <C>
Bank debt...............................    $           600       $            -       $          600
Other current liabilities...............             29,132                    -               29,132
                                            ---------------                            --------------
         Total Current Liabilities......             29,732                    -               29,732

Bank debt, non-current..................              8,128               (8,128) (a)  $            -
Bank debt, Term Loan A..................                  -                5,400  (a)           5,400
Bank debt - Term Loan B.................                  -                2,728  (a)           2,728
Other non-current liabilities...........              4,748                    -                4,748
                                            ---------------                            --------------
         Total Non-Current Liabilities..             12,876                                    12,876

Subordinated debt.......................                  -                1,500  (c)           1,500
Series 2003 Preferred Sock..............                  -                2,500  (d)           2,500

Preferred stock.........................              9,552               (9,552) (d)               -
Bridge note.............................              1,500               (1,500) (c)               -
Other - common..........................                  -                    -                    -

Shareholders' equity....................              9,603                  270  (b)               -
                                                                             700  (d)               -
                                                          -                6,352  (d)          16,925
                                            ---------------                            --------------
Total Liabilities and Shareholders'
   Equity...............................    $        63,263                            $       63,533
                                            ===============                            ==============
</TABLE>

     (a)  Exchange existing Bank Credit Facility for Term Loan A and Term Loan B

     (b)  Issue warrants to bank (1,080,000 at an assumed fair value of $0.25
          per share)

     (c)  Exchange Bridge Note for Subordinated Debt

     (d)  Exchange existing preferred for $2,500,000 new preferred; 4,800,000
          common shares; 2,800,000 warrants (assumed fair value of $0.25 per
          share)

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

None.



                                       59
<PAGE>


                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this item is incorporated by reference to the
information set forth in the Company's Proxy Statement for its 2003 Annual
Meeting of Shareholders to be filed under the captions Proposal with the
Securities and Exchange Commission within 120 days following fiscal year end
2002 (the TEAM America Proxy Statement).

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the
information set forth in the Company's Proxy Statement for its 2003 Annual
Meeting of Shareholders to be filed under the captions Proposal with the
Securities and Exchange Commission within 120 days following fiscal year end
2002 (the TEAM America Proxy Statement).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the
information set forth in the Company's Proxy Statement for its 2003 Annual
Meeting of Shareholders to be filed under the captions Proposal with the
Securities and Exchange Commission within 120 days following fiscal year end
2002 (the TEAM America Proxy Statement).

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this item is incorporated by reference to the
information set forth in the Company's Proxy Statement for its 2003 Annual
Meeting of Shareholders to be filed under the captions Proposal with the
Securities and Exchange Commission within 120 days following fiscal year end
2002 (the TEAM America Proxy Statement).

ITEM 14. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

(a)  Our management, under the supervision and with the participation of our
     Chief Executive Officer and Chief Financial Officer, conducted an
     evaluation of our "disclosure controls and procedures" (as defined in the
     Securities Exchange Act of 1934 Rules 13a-14(c) within 90 days of the
     filing date of this Annual Report on Form 10-K (the "Evaluation Date").
     Based on their evaluation, our Chief Executive Officer and Chief Financial
     Officer have concluded that as of the Evaluation Date, our disclosure
     controls and procedures are effective to ensure that all material
     information required to be filed in this Annual Report on Form 10-K has
     been made known to them.

(b)  There were no significant changes in the Company's internal controls or in
     other factors that could significantly affect those controls subsequent to
     the Evaluation Date.

                                       60
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors
    of TEAM America, Inc. and subsidiaries:
Worthington, Ohio

We have audited in accordance with auditing standards generally accepted in the
United States the consolidated financial statements of TEAM America, Inc. and
Subsidiaries included in this Form 10-K, and have issued our report thereon
dated March 21, 2003 except for Note 17 for which the date is March 28, 2003.
Our audit was made for the purposes of forming an opinion on those statements
taken as a whole. The schedule listed in the index is the responsibility of the
Company's management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

/s/ SCHNEIDER DOWNS & CO., INC.


Columbus, Ohio
March 21, 2003



                                       61
<PAGE>


TEAM AMERICA, INC. AND SUBSIDIARIES

VALUATION AND QUALIFYING ACCOUNTS
AS OF DECEMBER 28, 2002
<TABLE>
<CAPTION>

                                                     BEGINNING                                              ENDING
                                                      BALANCE         ADDITIONS      DEDUCTIONS             BALANCE
                                                      -------         ---------      ----------             -------
<S>                                                 <C>            <C>               <C>                  <C>
December 28, 2002
  Allowance for doubtful accounts
    Accounts receivable - trade.................    $  392,000     $     240,000     $   (490,000)        $   142,000

Restructuring reserve
  Other accrued expenses........................    $1,023,000     $     738,000     $   (895,000)        $   866,000
</TABLE>


VALUATION AND QUALIFYING ACCOUNTS
AS OF DECEMBER 29, 2001
<TABLE>
<CAPTION>

                                                     BEGINNING                                              ENDING
                                                      BALANCE         ADDITIONS      DEDUCTIONS             BALANCE
                                                      -------         ---------      ----------             -------
<S>                                                 <C>            <C>               <C>                  <C>
December 29, 2001
  Allowance for doubtful accounts
    Accounts receivable - trade.................    $  200,000     $     368,000     $   (176,000)        $   392,000

Restructuring reserve
  Other accrued expenses........................    $  654,000     $   1,834,000     $ (1,465,000)        $ 1,023,000
</TABLE>





                                       62
<PAGE>


                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a)  The following financial statements are included in this Annual Report on
     Form 10-K:

     (1)  The following financial statements of the Company are included in Item
          8 of this report:

          Consolidated Balance Sheets as of December 28, 2002 and December 29,
          2001

          Consolidated Statements of Operations for the years ended December 28,
          2002 and December 29, 2001 and December 31, 2000.

          Consolidated Statements of Shareholders' Equity for the years ended
          December 28, 2002 and December 29, 2001 and December 31, 2000.

          Consolidated Statements of Cash Flows for the years ended December 28,
          2002 and December 29, 2001 and December 31, 2000.

          Notes to Consolidated Financial Statements for the years ended
          December 28, 2002 and December 29, 2001

     (2)  The following financial statement schedules for the Company are filed
          as part of this report:

          Schedule II - Valuation and Qualifying Accounts

          All other schedules are omitted because the required information is
          either presented in the financial statements or notes thereto, or is
          not applicable, required or material.

     (3)  Exhibits:

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

2.1      Agreement and Plan of Merger, dated as of June 16, 2000, among the
         Company, TEAM Merger Corporation and Mucho.com, Inc. (Attached as
         Appendix A to the Registration Statement on Form S-4, Reg. No.
         333-43630, filed with the Securities and Exchange Commission on
         November 27, 2000 and incorporated herein by reference.)

3.1      Third Amended and Restated Articles of Incorporation of the Company
         (Attached as Appendix B to the Definitive Proxy Statement for the
         Meeting of Shareholders held on September 20, 2001, filed with the
         Securities and Exchange Commission on August 21, 2001, and incorporated
         herein by reference.)

3.2      Second Amended and Restated Code of Regulations of the Company
         (Attached as Appendix E to the Registration Statement on Form S-4, Reg.
         No. 333-43630, filed with the Securities and Exchange Commission on
         November 27, 2000, and incorporated herein by reference.)

*10.1    Company's 1996 Incentive Stock Plan (Attached as Exhibit 10.1 to the
         Registration Statement on Form S-1, as amended, Reg. No. 333-13913, and
         incorporated herein by reference.)



                                       63
<PAGE>


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

10.2     Lease for Cascade Corporate Center dated June 22, 1990 between
         EastGroup Properties and the Company, as amended (Attached as Exhibit
         10.4 to the Registration Statement on Form S-1, as amended, Reg. No.
         333-13913, and incorporated herein by reference)

10.3     Securities Purchase Agreement, dated as of December 28, 2000, by and
         among TEAM Mucho, Inc., Stonehenge Opportunity Fund, LLC and Provident
         Financial Group, Inc. (Attached as Exhibit 10.5 to the Annual Report on
         Form 10-K/A, File No. 0-21533, filed with the SEC on April 2, 2001, and
         incorporated herein by reference)

10.4     Credit Agreement, dated as of December 28, 2000, by and among TEAM
         Mucho, Inc. and Mucho.com, Inc. and The Provident Bank (attached as
         Exhibit 10.6 to the Annual Report on Form 10-K/A, File No. 0-21533,
         filed with the SEC on April 2, 2001, and incorporated herein by
         reference)

10.5     Registration Rights Agreement, dated as of December 28, 2000, by and
         among TEAM Mucho, Inc., Stonehenge Opportunity Fund, LLC and The
         Provident Bank (Attached as Exhibit 10.7 to the Annual Report on Form
         10-K/A, File No. 0-21533, filed with the SEC on April 2, 2001, and
         incorporated herein by reference)

*10.6    Company's 2000 Stock Option Plan (1)

*10.7    Executive employment agreement dated December 28, 2000 between the
         Company and Jose C. Blanco (1)

*10.8    Executive employment agreement dated December 28, 2000 between the
         Company and Jay R. Strauss (1)

*10.9    Executive Employment Agreement dated February 19, 2001 between the
         Company and Jay Whitehead (1)

*10.10   Agreement dated December 28, 2001 between the Company and Kevin T.
         Costello (1)

*10.11   Executive Employment Agreement dated September 23, 2002 between the
         Company and Ted A. Crawford (2)

*10.12   Executive Employment Agreement dated September 23, 2002 between the
         Company and Andrew H. Johnson (2)

*10.13   Executive Employment Agreement dated December 1, 2002 between the
         Company and S. Cash Nickerson (2)

21.1     Subsidiaries of the Registrant (1)

23.1     Consent (2)

24.1     Power of Attorney (2)

99.1     CEO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
         Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

99.2     CFO Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
         Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


(1)      Attached to the Annual Report on Form 10-K, File No. 0-21533, filed
         with the SEC on March 29, 2002, and incorporated herein by reference.

(2)      Filed herewith.

* Management contract or compensation plan or arrangement.



                                       64
<PAGE>

(b)      Reports on Form 8-K

         We filed the following Current Reports on Form 8-K since September 28,
         2002:

         (i)      Current Report on Form 8-K/A No. 2, dated January 2, 2003,
                  filed with the Securities and Exchange Commission on January
                  2, 2003.

         (ii)     Current Report on Form 8-K, dated January 10, 2003, filed with
                  the Securities and Exchange Commission on January 10, 2003.

         (iii)    Correspondence filing dated February 14, 2003, filed with the
                  Securities and Exchange Commission on February 14, 2003.

(c)      Exhibits

         The exhibits to this report follow the Signature Page

(d)      Financial Statement Schedules

         The financial statement schedule and the independent auditors' report
         thereon are included in Item 8 to this Annual Report on Form 10-K.




                                       65
<PAGE>
                                   SIGNATURES

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

                                       TEAM America, Inc.


Date: March 28, 2003                   By: /s/ S. CASH NICKERSON
                                           ------------------------------------
                                       S. Cash Nickerson, Chairman and
                                       Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE                                   TITLE                                                           DATE
---------                                   -----                                                           ----
<S>                                         <C>                                                   <C>
/s/ S. CASH NICKERSON                       Chairman and Chief Executive Officer                     March  28, 2003
---------------------------------------     (Principal Executive Officer)
S. Cash Nickerson

 /s/ ANDREW H. JOHNSON *                    Chief Financial Officer and Director                     March 28, 2003
 --------------------------------------     (Principal Accounting Officer)
Andrew H. Johnson

/s/ JAY R. STRAUSS                          Chief Legal Officer and Director                         March 28, 2003
---------------------------------------
Jay R. Strauss

/s/ CRYSTAL FAULKNER *                      Director                                                 March 28, 2003
---------------------------------------
Crystal Faulkner

/s/ DANIEL J. JESSEE *                      Director                                                 March 28, 2003
---------------------------------------
Daniel J. Jessee

/s/ ROBERT G. McCREARY III *                Director                                                 March 28, 2003
---------------------------------------
Robert G. McCreary III

/s/ JOSEPH MANCUSO *                        Director                                                 March 28, 2003
---------------------------------------
Joseph Mancuso

/s/ JAMES D. ROBBINS *                      Director                                                 March 28, 2003
---------------------------------------
James D. Robbins

/s/ THEODORE R. TETZLAFF                    Director                                                 March 28, 2003
---------------------------------------
Theodore R. Tetzlaff

/s/ MICHAEL H. THOMAS *                     Director                                                 March 28, 2003
---------------------------------------
Michael H. Thomas

*By: /s/ S. CASH NICKERSON
     ----------------------------------
S. Cash Nickerson, attorney-in-fact
for each of the persons indicated
</Table>


                                       66
<PAGE>
                                  CERTIFICATION

I, S. Cash Nickerson, certify that:

1.   I have reviewed this annual report on Form 10-K of TEAM America, Inc.;

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

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

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

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

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

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

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

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


                                       67


<PAGE>

6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    March 28, 2003

                                                 /s/ S. Cash Nickerson
                                                 ---------------------
                                                 S. Cash Nickerson
                                                 Chief Executive Officer


                                       68

<PAGE>



                                  CERTIFICATION

I, Andrew H. Johnson, certify that:

1.   I have reviewed this annual report on Form 10-K of TEAM America, Inc.;

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

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

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

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

     b)   evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c)   presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

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

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

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



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6.   The registrant's other certifying officers and I have indicated in this
     annual report whether there were significant changes in internal controls
     or in other factors that could significantly affect internal controls
     subsequent to the date of our most recent evaluation, including any
     corrective actions with regard to significant deficiencies and material
     weaknesses.

Date:    March 28, 2003


                                                      /s/ Andrew H. Johnson
                                                      ---------------------
                                                      Andrew H. Johnson
                                                      Chief Financial Officer


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