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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

(Mark One)

For the fiscal year ended January 2, 2005.

OR

For the transition period from                      to                     .

Commission file number: 000-27792

COMSYS IT Partners, Inc.

(Exact name of Registrant as specified in its charter)

4400 Post Oak Parkway, Suite 1800

Houston, Texas 77027

(Address of principal executive offices)

(Zip code)

Registrant’s telephone number including area code:

(713) 386-1400

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

None

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

Common Stock, par value $0.01 per share

(Title of class)

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

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.  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The aggregate market value of the voting common stock held by non-affiliates of the Registrant as of June 27, 2004 (the last business day of the Registrant’s most recently completed second fiscal quarter) was approximately $18,548,600. For the purpose of calculating this amount only, all stockholders with more than 10% of the total voting power, all directors and all executive officers have been treated as affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes. The Registrant does not have any non-voting common stock. The number of shares of the Registrant’s common stock outstanding as of March 28, 2005, was 15,532,155.

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the definitive proxy statement for the Registrant’s 2005 annual meeting of stockholders are incorporated by reference into Part III of this Form 10-K.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our disclosure and analysis in this report, including information incorporated by reference, may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the Private Securities Litigation Reform Act of 1995, that are subject to risks and uncertainties. Forward-looking statements give our current expectations and projections relating to the financial condition, results of operations, plans, objectives, future performance and business of COMSYS IT Partners, Inc. (formerly Venturi Partners, Inc.) and its subsidiaries, as well as those relating to the merger on September 30, 2004 of VTP, Inc., a subsidiary of Venturi Partners, Inc., and COMSYS Holding, Inc., also referred to as the merger. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and other words and terms of similar meaning in connection with any discussion of the timing or nature of future operating or financial performance or other events. All statements other than statements of historical facts included in, or incorporated into, this report that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements.

These forward-looking statements are largely based on our expectations and beliefs concerning future events, which reflect estimates and assumptions made by our management. These estimates and assumptions reflect our best judgment based on currently known market conditions and other factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, including:

Although we believe our estimates and assumptions to be reasonable, they are inherently uncertain and involve a number of risks and uncertainties that are beyond our control. In addition, management’s assumptions about future events may prove to be inaccurate. Management cautions all readers that the forward-looking statements contained in this report are not guarantees of future performance, and we cannot assure any reader that those statements will be realized or the forward-looking events and circumstances will occur. Actual results may differ materially from those anticipated or implied in the forward-looking statements due to the factors listed in this section, the “Risk Factors” section and elsewhere in this report. All forward-looking statements speak only as of the date of this report. We do not intend to publicly update or revise any forward-looking statements as a result of new information, future events or otherwise, except as required by law. These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

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PART I

Unless otherwise indicated or the context otherwise requires, all references in this report to “COMSYS,” the “Company,” “us,” “our” or “we” are to COMSYS IT Partners, Inc., a Delaware corporation formed in July 1995, and its consolidated subsidiaries. Except as otherwise specified, references to “Old COMSYS” are to COMSYS Holding, Inc., its subsidiaries and their respective predecessors prior to its merger with VTP, Inc., a wholly owned subsidiary of Venturi Partners, Inc., on September 30, 2004, which we refer to as the merger. In connection with the merger, Venturi Partners, Inc. changed its name to “COMSYS IT Partners, Inc.” Since former Old COMSYS stockholders owned a majority of our common stock upon consummation of the merger, Old COMSYS is deemed the acquirer of Venturi for accounting and financial reporting purposes. References to “Venturi” are to Venturi Partners, Inc., its subsidiaries and their respective predecessors prior to the merger, excluding those subsidiaries relating to Venturi’s commercial staffing business which were sold on September 30, 2004.

Company Overview

We are a leading information technology, or IT, staffing services company that provides a full range of specialized staffing and project implementation services and products. The staffing services we provide allow our clients to focus their resources on their core businesses rather than on recruiting, training and managing IT professionals. In using our staffing services, our clients benefit from:

We contract with our customers to provide both short- and long-term IT staffing services at client locations throughout the U.S. Our consultants possess a wide range of skills and experience, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. Our IT staffing services accounted for approximately 91% of our revenues for 2004.

In addition to our core IT staffing business, we also offer our customers services that complement our staffing activities, such as:

These additional services provide us opportunities to build relationships with new clients and enhance our service offerings to our existing clients.

We currently engage approximately 4,900 consultants, many of whom have over eight years of IT industry experience. We recruit our consultants through our internal proprietary database that contains information about more than 300,000 candidates, and also through the Internet, local and national advertising and trade shows. We have a specialized selection, review and reference process for our IT consultant candidates that is an integral part of maintaining the delivery of high quality service to our clients.

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We provide our IT staffing services to over 400 customers, including some of the largest users of IT services in the U.S. We serve a broad and diversified customer base with clients in the financial services, telecommunications, manufacturing, information technology, government, pharmaceutical, transportation and health care sectors. Our customer base includes approximately 30% of the Fortune 500 companies and approximately 66% of the Fortune 50 companies. We have long-standing relationships with many of our clients. We believe our diverse customer base limits the risk associated with customer concentration.

We have a coast-to-coast presence in the United States, with 41 offices in 23 states. We believe we are one of the largest service providers in the markets served by our nine offices where we have more than 200 consultants each, including our Washington, D.C. office, where we have approximately 500 consultants. In nine additional offices we have more than 100 consultants each, giving us a significant presence in those markets. Each of our other offices has between 25 and 95 consultants. This coverage allows us to meet the needs of our clients on a national basis and provides us with a competitive advantage over regional and local IT staffing providers. In addition, we have one office in the United Kingdom through which we provide services to certain key U.S.-based clients.

Our management team has significant experience in the staffing industry. This team is headed by Mike Willis, our Chairman, Chief Executive Officer and President. Mr. Willis has over 30 years of industry experience and is one of the leaders in the consolidation of the staffing industry. He has participated in the acquisition and integration of over 60 companies during his career.

Our History

We completed the merger of Venturi and Old COMSYS on September 30, 2004, combining the eighth and ninth largest companies in the IT staffing industry to create the fourth largest IT staffing company based on revenue data for 2003. The combined company has achieved, and is expected to continue to achieve, cost savings by reducing corporate overhead and other expenses. The combined company also enjoys the benefits of a broader geographic footprint and offers an expanded range of technology service offerings that we expect will make us more competitive. We believe these factors will enable us to secure new and expand existing relationships with Fortune 500 clients.

Prior to the merger, Old COMSYS was one of the largest providers of IT staffing services in the United States, and its consultants provided services to a diverse customer base that included commercial clients and federal and state governmental entities. Headquartered in Houston, it operated a network of 30 offices in 20 states. Prior to the merger, Venturi was a leading provider of technology and commercial staffing services to businesses and professional and government organizations. It operated through 27 offices in 20 states. Venturi’s IT service offerings, which were similar to those offered by Old COMSYS, included technology consulting, IT staffing, IT permanent placement and vendor management services.

In connection with the merger, we changed the name of our corporation from “Venturi Partners, Inc.” to “COMSYS IT Partners, Inc.” Concurrent with the merger, we also completed the sale of Venturi’s commercial staffing services division, Venturi Staffing Partners, Inc., to CBS Personnel Services, Inc. (formerly known as Compass CS Inc.) for approximately $30.3 million in cash and the assumption of approximately $700,000 in liabilities.

Services

Our core business is providing IT staffing services, which accounted for approximately 91% of our revenues for 2004. We also strive to differentiate ourselves from our competitors by offering additional services that complement our IT staffing services, including vendor management, project solutions and permanent placement of IT professionals.

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IT Staffing Services

We provide a wide range of IT staffing services to companies in diversified vertical markets, including financial services, telecommunications, manufacturing, information technology, federal, state and local government, pharmaceutical, transportation and health care. We deliver qualified consultants and project managers for contract assignments and full-time employment across most technology disciplines. In light of the time and location sensitive nature of our core IT staffing services, offshore application development and maintenance centers have not proven critical to our operations or our competitive position.

Our staffing services are generally provided on a time-and-materials basis, meaning that we bill our clients for the number of hours worked in providing services to the client. Hourly bill rates are typically determined based on the level of skill and experience of the consultants assigned and the supply and demand in the current market for those qualifications. Alternatively, the bill rates for some assignments are based on a mark-up over compensation and other direct and indirect costs. Assignments can range from 30 days to over a year, with an average duration of five months. Certain of our contracts are awarded on the basis of competitive proposals, which can be periodically re-bid by the client.

We maintain a variable cost model in which we compensate most of our consultants only for those hours that we bill to our clients. The consultants who perform IT services for our clients consist of our consultant employees as well as independent contractors and subcontractors. With respect to our consultant employees, we are responsible for all employment-related costs, including medical and health care costs, workers’ compensation and federal social security and state unemployment taxes.

Vendor Management Services

Vendor management services, or VMS, are services that allow our clients to manage their procurement of and expenditures for temporary IT, clerical, finance and accounting, and light industrial personnel. Contracted services are often provided to a large client by hundreds of companies. VMS provides a mechanism for clients to reduce their expenditures for temporary personnel services by standardizing pay rates for similar positions and reducing the number of suppliers providing these services. VMS gives our clients the ability to leverage their purchasing power for these temporary personnel services by standardizing their requisition, contract and procurement processes. Clients also benefit from contracting with only one supplier, receiving a consolidated invoice and having a single point of contact while retaining access to a full range of resources offered by a diverse portfolio of suppliers.

We operate VMS under the brand name vWorx^SM. Our VMS provides a structured approach consisting of process management and a web-based software tool to quantify, rationalize and monitor the expenditures that a client makes for its contracted services. We use third party software products and a proprietary software program to provide our VMS. Our VMS implementation processes have been ISO 9001:2000 certified, which means that our processes comply with a comprehensive set of international quality standards. We believe that we are one of the few companies in our industry providing vendor management services to have this ISO certification.

Project Solutions

As an extension of our underlying core competency in IT staffing, we offer our clients specialized project services that include project managers, project teams and turn-key deliverable-based solutions in the application development, application integration and re-engineering, application maintenance and application testing practice areas. We provide these solutions through a defined IT implementation methodology. We deliver these solutions through teams deployed on-site, offsite at development centers located in Kalamazoo, Michigan, Richmond, Virginia, Somerset, New Jersey and Portland, Oregon and, through a strategic alliance, offshore at technology centers located in India. These services are generally contracted on a time-and-materials basis, with some

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services provided on a fixed-price basis. We have a number of specialty practice areas, including statistical analysis applications (SAS), enterprise resource applications (ERP), network integration, business intelligence and translation and localization services.

Permanent Placement

We also assist our clients in locating IT professionals for full-time positions within their organizations. We assist in recruitment efforts and screening potential hires. If a customer hires our candidate, we are generally compensated based on a percentage of the candidate’s first year cash compensation. Billing is contingent on our filling the position.

Industry Overview

We believe that the demand for IT staffing is highly correlated to economic conditions and overall employment trends and that demand will increase with an improving economy. After contraction in the IT staffing industry from late 2000 to 2002 caused by corporate overspending on IT initiatives during the late 1990s and subsequent poor economic conditions, the industry has recently shown signs of growth. Staffing Industry Analysts, Inc., or SIA, an independent, industry-recognized research group, noted in its March 2005 report that it expects the IT staffing industry to grow from $15.8 billion in 2004 to $17.4 billion in 2005 and $19.2 billion in 2006, an increase of approximately 10% in each of 2005 and 2006. In addition, vendor management services are expected to grow at a much faster pace, with SIA projecting that 29% of large companies will use vendor management services in 2005, compared to 8% in 2003.

The IT staffing industry is fragmented and highly competitive. Based on SIA data for 2004, no one company accounted for more than 9% of total IT staffing industry revenues, and the top five companies accounted for approximately 27% of total industry revenues. Many believe that further consolidation of the industry will continue and that the large competitors in the industry are better positioned to increase their respective market share. A number of large companies maintain preferred supplier lists of service providers that satisfy specified criteria and from which they generally source their IT staffing and service needs. The criteria typically include the service provider’s geographic coverage relative to the client’s locations, its size and market share, typically measured by its total revenues, its recruiting process and database of potential candidates, and its pricing structure, including discounts and rebates.

We believe that key elements of successfully competing in the industry include maintaining a strong base of qualified IT professionals to enable quick responses to client requests (often within 48 hours) and ensuring that the candidates are an appropriate fit with the cultural and technical requirements of the assignments. Other key success factors include accurate evaluation of candidates’ technical skills, strong account management to develop and maintain client relationships and efficient and consistent administrative processes to assist in the delivery of quality services.

Competitive Strengths

We believe that our competitive strengths differentiate us from our competitors and have allowed us to successfully create a sustainable and scalable national IT staffing services business. Our competitive strengths include:

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Business Strategy

Our business strategy is to become the leading provider of IT staffing services in the United States. Among our immediate peer group, we are the only staffing provider focused exclusively on the IT sector. We intend to continue implementing our business strategy through a combination of internal growth and strategic acquisitions that complement or enhance our business. The key components of our internal growth strategy include:

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In addition to focusing on internal growth, we intend to continue evaluating potential acquisitions as a component of our business strategy. We look for acquisition targets that provide us the opportunity to:

Our management has significant experience in acquiring and successfully integrating new businesses. Additionally, we have a scalable infrastructure that includes our single site, shared services operations for our back office functions. We believe this platform allows us to provide high quality service to our customers and enables us to integrate acquisitions rapidly while reducing corporate overhead and other expenses. As an example of our integration capabilities, we have made substantial progress toward the integration of the businesses of Old COMSYS and Venturi in the few months since completion of the merger, including:

Sales and Marketing

We employ a centralized sales and marketing strategy that focuses on both national and local accounts. The marketing strategy is implemented on both a national and local level through each of our branch offices. At the national level, we focus on attaining preferred supplier status with Fortune 500 companies, a status that would make us one of a few approved service providers to those companies. An integral part of our marketing strategy at the national level is the use of our account management professionals who generally have over five years of experience in our industry. Their industry experience makes them capable of understanding our clients’ business strategies and IT staffing requirements. We are also supported by:

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All of these assist in the development of responses to requests for proposals from large accounts and support our efforts in new client development activity.

Local accounts are targeted through account managers at the branch office level, permitting us to capitalize on the established local expertise and relationships of our branch office employees. These accounts are solicited through personal sales presentations, telephone and e-mail marketing, direct mail solicitation, referrals and advertising in a variety of local and national media. Although local offices retain flexibility with regard to local customer and employee issues, these offices adhere to company-wide policies and procedures and a set of best practices designed to ensure quality standards throughout the organization. Local employees are encouraged to be active in civic organizations and industry trade groups to facilitate the development of new customer relationships and develop local contacts with technology user groups for referral of specific technology skills.

Local office employees report to a managing director who is responsible for day-to-day operations and the profitability of the office. Managing directors report to regional vice presidents. Regional vice presidents have substantial autonomy in making decisions regarding the operations in their respective regions, although sales activities directed toward strategic accounts are coordinated at a national level.

Our company-wide compensation program for account managers and recruiters, which was implemented on January 1, 2005, is intended to provide incentives for higher margin business. A significant component of compensation for account managers and recruiters is commissions, which increase significantly for placements with higher gross profit contribution.

Employees and Consultants

Of our 4,911 consultants on assignment as of January 2, 2005, approximately 70% were employee consultants and approximately 30% were subcontractors and independent contractors. Many of our consultants have over eight years of IT experience. In addition, as of January 2, 2005, we had 754 permanent staff employees consisting primarily of management, administrative staff, account managers and recruiters. None of our employees are covered by collective bargaining agreements, and management believes that its relationships with its employees are good.

We recruit our consultants through both centralized and decentralized recruiting programs. Our recruiters use our internal proprietary database (FOX), the Internet, local and national advertisements and trade shows. FOX is an integrated, web-based sales and recruiting application we developed. The interactive system maintains a current database containing information about more than 300,000 candidates, including their skills, education, desired work location and other employment-related information. The system enables us to scan, process and store thousands of resumes, making it easier for recruiters to identify, qualify and place consultants in a timely manner. FOX also allows billable consultants to electronically review and apply for job openings. In addition, we use our national recruiting center in Houston, Texas and, through a subcontractor, an offshore recruiting center in India for sourcing IT professionals located in the U.S. Both of these centers enhance our local recruitment effort

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by providing additional resources to meet clients’ critical timeframes and broadening our capability to deliver resources in areas of the country where no local office exists. We also recruit qualified candidates through our candidate referral program, which pays a referral fee to eligible individuals responsible for attracting new recruits that are successfully placed by us on an assignment.

We have a specialized selection, review and reference process for our IT consultant candidates that is an integral part of maintaining the delivery of high quality service to our clients. This process includes interviewing each candidate to allow us to assess whether that individual will be an appropriate match for a client’s business culture and performing reference checks. We also conduct a technical competency review of each candidate to determine whether the consultant candidate has the technical capabilities to successfully complete the client assignment. Our technical assessment will often include a formal technology skills assessment through an automated software product. We also undertake additional reviews, including more detailed background checks, at the request of our clients.

In an effort to attract a broad spectrum of qualified billable consultants, we offer a wide variety of employment options and training programs. Through our training and development department, we offer an online training platform to our consultants. This program includes over 900 self-paced IT and business-related courses and eight technical certification paths in course areas such as software development, enterprise data systems, Internet and network technologies, web design, project management, operating systems, server technologies and business-related skills. We believe that these training initiatives improve consultant recruitment and retention, increase the technical skills of our personnel and result in better service for our clients.

Competition

We operate in a highly competitive and fragmented industry. There are relatively few barriers to entry into our markets, and the IT staffing industry is served by thousands of competitors, many of which are small, local operations. There are also numerous large national and international competitors that directly compete with us, including TEKsystems, Inc., Ajilon Consulting, MPS Group, Inc., Kforce Inc., Spherion Corporation, CDI Corp., Computer Horizons Corp. and Analysts International Corp. Some of our competitors may have greater marketing and financial resources than us.

The competitive factors in obtaining and retaining clients include, among others, an understanding of client-specific job requirements, the ability to provide appropriately skilled information technology consultants in a timely manner, the monitoring of job performance quality and the price of services. The primary competitive factors in obtaining qualified candidates for temporary IT assignments are wages, the technologies that will be utilized, the challenges that an assignment presents and the types of clients and industries that will be serviced. We believe that our nationwide presence, strength in recruiting and account management and the broad range of customers and industries to which we provide services make us highly competitive in obtaining and retaining clients and recruiting highly qualified consultants.

Regulation

IT staffing firms are generally subject to one or more of the following types of government regulation: (1) regulation of the employer/employee relationship between a firm and its employees, including tax withholding or reporting, social security or retirement, benefits, workplace compliance, wage and hour, anti-discrimination, immigration and workers’ compensation; (2) registration, licensing, record keeping and reporting requirements; and (3) federal contractor compliance.

Trademarks

We believe that the COMSYS^® name is extremely valuable and important to our business. We endeavor to protect our intellectual property rights and maintain certain trademarks, trade names, service marks and other

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intellectual property rights, including vWorx^SM. We also license certain other proprietary rights in connection with our businesses. We are not currently aware of any infringing uses or other conditions that would be reasonably likely to materially and adversely affect our use of our proprietary rights.

Seasonality

Our business can be affected by the seasonal fluctuations in corporate IT expenditures. Generally, expenditures are lowest during the first quarter of the year when our clients are finalizing their IT budgets. In addition, our quarterly results may fluctuate depending on, among other things, the number of billing days in a quarter and the seasonality of our clients’ businesses. Our business is also affected by the timing of holidays and seasonal vacation patterns, generally resulting in lower revenues and gross margins in the fourth quarter of each year. Extreme weather conditions may also affect demand in the first and fourth quarters of the year as certain of our clients’ facilities are located in geographic areas subject to closure or reduced hours due to inclement weather. In addition, we experience an increase in our cost of sales and a corresponding decrease in gross profit and gross margin in the first fiscal quarter of each year as a result of resetting certain state and federal employment tax salary limitations.

Available Information

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are made available free of charge on the Investor Relations page of our website at www.COMSYS.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Information contained on our website, or on other websites that may be linked to our website, is not incorporated by reference into this annual report on Form 10-K and should not be considered part of this report or any other filing that we make with the SEC.

EXECUTIVE OFFICERS

Information regarding the executive officers of COMSYS is as follows:

Michael T. Willis. Mr. Willis has served as our Chairman of the Board, Chief Executive Officer and President since the completion of the merger in September 2004. Prior to the merger, Mr. Willis had served as President and Chief Executive Officer of Old COMSYS since September 1999. From 1993 through September 1999, Mr. Willis served as President and Chief Executive Officer of Metamor Worldwide, Inc., formerly COREStaff, Inc. In 1999, Old COMSYS was purchased from Metamor Worldwide by the management of Old COMSYS and certain institutional investors, including Wachovia Capital Partners (then known as First Union Capital Partners). Mr. Willis is one of the leading integrators in the IT staffing industry and has gained extensive experience managing both public and private companies in the sector for more than 30 years. In addition to COREStaff, he founded the national firm of Talent Tree Personnel Services in 1976. Mr. Willis also founded the regional firms of Willis & Associates (in 1971), Med-Staff (in 1982), PPI Seahawk (in 1989) and Professional Healthcare Providers (in 1992).

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Michael H. Barker. Mr. Barker has served as our Executive Vice President—Field Operations since the completion of the merger in September 2004. Prior to the merger, Mr. Barker had served as the President of Division Operations of Venturi since January 2003. From January 2001 through January 2003, Mr. Barker served as President of Venturi’s Technology Division. Prior to that time, Mr. Barker served as President of Divisional Operations of Venturi from October 1999 to January 2001 and as President of the Staffing Services Division from January 1998 until October 1999. Prior to joining Venturi, from 1995 to 1997 Mr. Barker served as the Chief Operations Officer for the Computer Group Division of IKON Technology Services, a diversified technology company. Mr. Barker received an electrical engineering degree from the University of North Carolina at Charlotte.

David L. Kerr. Mr. Kerr has served as our Senior Vice President – Corporate Development since the completion of the merger in September 2004. Prior to the merger, Mr. Kerr had served as Senior Vice President—Corporate Development of Old COMSYS since July 2004. Mr. Kerr joined Old COMSYS in October 1999 and served as its Chief Financial Officer and a Senior Vice President until December 2001. Old COMSYS retained Mr. Kerr as an independent consultant from January 2002 to July 2004, during which time Old COMSYS sought his advice and counsel on a number of business matters related to the IT staffing industry including corporate development, mergers and acquisitions, divestitures, sales operations and financial transactions. Prior to joining Old COMSYS, Mr. Kerr was the Founder, Principal Officer, Shareholder and Managing Director of Omni Ventures LLC and Omni Securities LLC. Mr. Kerr was previously a partner with KPMG where he specialized in merger and acquisition transactions. Mr. Kerr received a Bachelor of Science degree from Mississippi State University.

Margaret G. Reed. Ms. Reed has served as our Senior Vice President, General Counsel and Corporate Secretary since the completion of the merger in September 2004. Prior to the merger, Ms. Reed had served as Senior Vice President, General Counsel and Secretary of Old COMSYS since June 2001. Ms. Reed joined Metamor Worldwide, Inc. as Associate General Counsel in February 1996 and served as Senior Vice President, General Counsel and Corporate Secretary for Metamor Worldwide through September 2000. Ms. Reed was previously an associate with Akin Gump Strauss Hauer & Feld LLP where she practiced corporate and securities law. Ms. Reed received a Bachelor of Arts degree from Rice University and received a doctorate of jurisprudence from the University of Houston.

Joseph C. Tusa, Jr. Mr. Tusa has served as our Senior Vice President and Chief Financial Officer since the completion of the merger in September 2004. Prior to the merger, Mr. Tusa had served as Senior Vice President and Chief Financial Officer of Old COMSYS since December 2001. Mr. Tusa joined Old COMSYS in May 2001 as Senior Vice President of Finance and Administration. Mr. Tusa served as a consultant to Old COMSYS from March 2001 to May 2001. Prior to joining Old COMSYS, Mr. Tusa was a Vice President and Corporate Controller of Metamor Worldwide from February 1997 through October 1997 and served as Senior Vice President from October 1997 through January 2001. Mr. Tusa received a Bachelor’s Degree of Business Administration from Southwest Texas State University and a Masters in Business Administration from Louisiana State University. Mr. Tusa is a certified public accountant.

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RISK FACTORS

In addition to the other information included in this report, the following risk factors should be considered in evaluating our business and future prospects. The risk factors described below are not necessarily exhaustive and you are encouraged to perform your own investigation with respect to us and our business. You should also read the other information included in this report, including our financial statements and the related notes.

Risks Related to Our Business

We compete in a highly competitive market with limited barriers to entry and significant pricing pressures. There can be no assurance that we will continue to successfully compete.

The U.S. staffing services market is highly competitive and fragmented. We compete in national, regional and local markets with full-service and specialized staffing agencies, systems integrators, computer systems consultants, search firms and other providers of staffing services. Although the majority of our competitors are significantly smaller than we are, a number of competitors have greater marketing and financial resources than us. In addition, there are relatively few barriers to entry into our markets and we have faced, and expect to continue to face, competition from new entrants into our markets. We expect that the level of competition will remain high in the future, which could limit our ability to maintain or increase our market share or maintain or increase gross margins, either of which could have a material adverse effect on our financial condition and results of operations. In addition, from time to time we experience significant pressure from our clients to reduce price levels. During these periods, we may face increased competitive pricing pressures and we may not be able to recruit the personnel necessary to fill our clients’ needs. We also face the risk that certain of our current and prospective clients will decide to provide similar services internally. There can be no assurance that we will continue to successfully compete.

Any economic downturn may cause our revenues to decline and may adversely affect our results of operations and financial condition.

Our results of operations are affected by the level of business activity of our clients, which in turn is affected by local, regional and global economic conditions. Since demand for personnel services is sensitive to changes in the level of economic activity, our business may suffer during economic downturns. As economic activity slows down, companies tend to reduce their use of temporary employees and permanent placement services before undertaking layoffs of their regular employees, resulting in decreased demand for personnel services. Also, as businesses reduce their hiring of permanent employees, revenue from our permanent placement services is adversely affected. As a result, any significant economic downturn could reduce our revenues and adversely affect our results of operations and financial condition.

In addition, the economic slowdown during the last few years significantly affected the willingness and ability of businesses to invest capital in upgrading or replacing their technology systems and platforms. Many of our clients canceled, reduced or deferred expenditures for technology services during the economic downturn. If capital investment is constrained by a slow economic environment, or by other factors that we can neither control nor predict, then our existing and prospective clients may increasingly defer or cancel installation of new or upgraded technology systems and platforms. As a result, revenues from our technology services business may not regain former levels in the near term and may in fact decline.

Our profitability will suffer if we are not able to maintain current levels of billable hours and bill rates and control our costs.

Our profit margin, and therefore our profitability, is largely dependent on the following factors: the number of hours billed for our services, the rates we charge for these services and the pay rate of our consultants.

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Accordingly, if we are unable to maintain these amounts at current levels, our profit margin and our profitability will suffer. The rates we charge for our services are affected by a number of considerations, including:

The number of billable hours is affected by various factors, including the following:

Our pay rates are affected primarily by the supply of and demand for skilled U.S.-based consultants. During periods when demand for consultants exceeds the supply, pay rates may increase.

Some of our costs, such as office rents, are fixed in the short term, which limits our ability to reduce costs in periods of declining revenues. Our current and future cost-management initiatives may not be sufficient to maintain our margins as our level of revenue varies.

We may be unable to attract and retain qualified billable consultants, which could have an adverse effect on our business, financial condition and results of operations.

Our operations depend on our ability to attract and retain the services of qualified billable consultants who possess the technical skills and experience necessary to meet our clients’ specific needs. We are required to continually evaluate, upgrade and supplement our staff in each of our markets to keep pace with changing client needs and technologies and to fill new positions. The IT staffing industry in particular has high turnover rates and is affected by the supply of and demand for IT professionals. This has resulted in intense competition for IT professionals, and we expect such competition to continue. In addition, our consultants’ loyalty to us may have been harmed by our decreasing pay rates in order to preserve our profit margin in the previous market downturn, which may adversely affect our competitive position. Certain of our IT operations recruit consultants who require H-1B visas, and U.S. immigration policy currently restricts the number of new H-1B petitions that may be granted in each fiscal year. Our failure to attract and retain the services of personnel, or an increase in the turnover rate among our employees, could have a material adverse effect on our business, operating results or financial condition. If a supply of qualified consultants, particularly IT professionals, is not available to us in sufficient numbers or on economic terms that are, or will continue to be, acceptable to us, our business, operating results or financial condition could be materially adversely affected.

We depend on key personnel, and the loss of the services of one or more of our senior management or a significant portion of our local management personnel could weaken our management team and our ability to deliver quality services and could adversely affect our business.

Our operations historically have been, and continue to be, dependent on the efforts of our executive officers and senior management, including Mike Willis, our Chairman, Chief Executive Officer and President. In addition, we are dependent on the performance and productivity of our respective regional operations executives, local managing directors and field personnel. The loss of one or more of these employees could have an adverse

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effect on our operations, including our ability to maintain existing client relationships and attract new clients in the context of changing economic or competitive conditions. Our ability to attract and retain business is significantly affected by local relationships and the quality of service rendered by branch managerial personnel. If we are unable to attract and retain key employees to perform these services, our business, financial condition and results of operations could be materially adversely affected.

Our dependence on large customers and the risks we assume under our contracts with them could have a material adverse effect on our revenues.

We depend on several large customers for a significant portion of our revenues. Generally, we do not provide services to our customers under long-term contracts. If one or more of our large customers terminated an existing contract or substantially reduced the services they purchase from us, our revenues and profitability would be adversely affected. In addition, large customers, including those with preferred supplier arrangements, increasingly have been seeking pricing discounts in exchange for higher volumes of business. Furthermore, because of the size of our large customers, we may be required to accept less favorable terms regarding risk allocation to retain their business.

We have substantial debt obligations that could restrict our operations and adversely affect our business and financial condition.

We have substantial indebtedness. In connection with the consummation of the merger, we entered into a credit agreement providing for a two-year term loan of $15 million and a five-year revolving credit facility of up to $100 million. In addition, we also entered into an agreement providing for a second lien term loan of $70 million. As of January 2, 2005, our outstanding debt was approximately $140 million.

Our substantial indebtedness could have adverse consequences, including:

In addition, our outstanding debt bears interest at a variable rate, subjecting us to interest rate risk. In the event economic conditions result in higher interest rates, our debt service requirements on our outstanding debt will also increase. Our debt service requirements require the use of a substantial portion of our operating cash flow to pay interest on our debt instead of other corporate purposes. If our cash flow and capital resources are insufficient to fund our debt obligations, we may be forced to sell assets, seek additional equity or debt capital or restructure our debt. We cannot assure you that our cash flow and capital resources will be sufficient for payment of interest on and principal of our debt in the future, or that any such alternative measures would be successful or would permit us to meet scheduled debt service obligations. Any failure to meet our debt obligations could harm our business and financial condition.

Restrictive financing covenants limit the discretion of our management and may inhibit our operating flexibility.

Our credit facilities contain a number of covenants that limit the discretion of our management with respect to certain business matters. Our credit facilities contain covenants that, among other things, restrict our ability to:

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In addition, under our credit facilities, we are required to satisfy a minimum EBITDA, minimum fixed charge coverage ratio and a maximum total leverage ratio. A breach of any covenants governing our debt would permit the acceleration of the related debt and potentially other indebtedness under cross-default provisions, which could harm our business and financial condition. These restrictions may place us at a disadvantage compared to our competitors that are not required to operate under such restrictions or that are subject to less stringent restrictive covenants.

Factors beyond our control may affect our ability to successfully execute our acquisition strategy, which may have an adverse impact on our growth strategy.

Our business strategy includes increasing our market share and presence in the IT staffing industry through strategic acquisitions of companies that complement or enhance our business. We expect to face competition for acquisition opportunities, and some of our competitors may have greater financial resources or access to financing on more favorable terms than us. This competition may limit our acquisition opportunities and our ability to grow through acquisitions or could raise the prices of acquisitions and make them less accretive or possibly non-accretive to us.

We regularly evaluate opportunities to acquire staffing companies that complement or enhance our business and frequently have preliminary acquisition discussions with some of these companies. These acquisitions involve numerous risks, including:

These acquisitions may also involve significant cash expenditures, debt incurrence and integration expenses. Any acquisition may ultimately have a negative impact on our business, financial condition and results of operations.

We may suffer losses due to the conduct of our employees or our clients during staffing assignments.

We employ and place people generally in the workplaces of other businesses. Attendant risks of this activity include possible claims of discrimination and harassment, employment of illegal aliens, violations of wage and hour requirements, errors and omissions of temporary employees, particularly of professionals, misuse of client proprietary information, misappropriation of funds, other criminal activity or torts and other similar claims. In some instances we have agreed to indemnify our clients against some or all of the foregoing matters. We will be responsible for these indemnification obligations, to the extent they remain in effect, and may in the future agree to provide similar indemnities to some of our prospective clients. In certain circumstances, we may be held responsible for the actions at a workplace of persons not under our direct control. Although historically we have not had any significant problems in this area, there can be no assurance that we will not experience such problems in the future or that our insurance, if any, will be sufficient in amount or scope to cover any such liability. The failure of any of our employees or personnel to observe our policies and guidelines, relevant client

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policies and guidelines, or applicable federal, state or local laws, rules and regulations, and other circumstances that cannot be predicted, could have a material adverse effect on our business, operating results and financial condition.

Additional government regulation and rising health care and unemployment insurance costs and taxes could have a material adverse effect on our business, operating results and financial condition.

We are required to pay a number of federal, state and local payroll and related costs, including unemployment taxes and insurance, workers’ compensation, FICA and Medicare, among others, for our employees. We also provide various benefits to our employees, including health insurance. Significant increases in the effective rates of any payroll-related costs would likely have a material adverse effect on our results of operations unless we can pass them along to our customers. Our costs could also increase if health care reforms expand the scope of mandated benefits or employee coverage or if regulators impose additional requirements and restrictions related to the placement of personnel.

We generally seek to increase fees charged to our clients to cover increases in health care, unemployment and other direct costs of services, but our ability to pass these costs to our clients over the last several years has diminished. There can be no assurance that we will be able to increase the fees charged to our clients in a timely manner and in a sufficient amount if these expenses continue to rise. There is also no assurance that we will be able to adapt to future regulatory changes made by the Internal Revenue Service, the Department of Labor or other state and federal regulatory agencies. Our inability to increase our fees or adapt to future regulatory changes could have a material adverse effect on our business, operating results and financial condition.

We will be subject to the requirements of Section 404 of the Sarbanes-Oxley Act. If we are unable to timely comply with Section 404 or if the costs related to compliance are significant, our profitability, stock price and results of operations and financial condition could be materially adversely affected.

We will be required to comply with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002. Section 404 requires that we document and test our internal controls and certify that we are responsible for maintaining an adequate system of internal control procedures. This section also requires that our independent registered public accounting firm opine on those internal controls and management’s assessment of those controls. We are currently evaluating our existing controls against the standards adopted by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). During the course of our ongoing evaluation and integration of the internal controls of our business, we may identify areas requiring improvement, and we may have to design enhanced processes and controls to address issues identified through this review.

We believe that the out-of-pocket costs, the diversion of management’s attention from running the day-to-day operations and operational changes caused by the need to comply with the requirements of Section 404 of the Sarbanes-Oxley Act could be significant. If the time and costs associated with such compliance exceed our current expectations, our results of operations could be adversely affected.

We cannot be certain at this time that we will be able to successfully complete the procedures, certification and attestation requirements of Section 404 or that our auditors will not have to report a material weakness in connection with the presentation of our financial statements. If we fail to comply with the requirements of Section 404 or if our auditors report such material weakness, the accuracy and timeliness of the filing of our annual report may be materially adversely affected and could cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common stock. In addition, a material weakness in the effectiveness of our internal controls over financial reporting could result in an increased chance of fraud and the loss of customers, reduce our ability to obtain financing and require additional expenditures to comply with these requirements, each of which could have a material adverse effect on our business, results of operations and financial condition.

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We do not own an offshore outsourcing facility, which may put us at a disadvantage compared to our competitors that have their own offshore outsourcing centers.

In the past few years, more companies are using, or are considering using, low cost “offshore” outsourcing centers, particularly in India, to perform technology related work and projects. This trend has contributed to the decline in domestic IT staff augmentation revenue as well as on-site solutions oriented projects. We compete for this business through a strategic alliance relationship with a company in India rather than owning an offshore program directly. As a result, we may be disadvantaged in competing for the business of large customers who prefer to deal with a single provider with its own offshore outsourcing centers.

We have had substantial intangible assets and have incurred significant impairment charges, and may incur further charges if there are significant adverse changes to our outlook.

Our intangible assets consist principally of goodwill and customer base intangibles resulting from the acquisition of businesses from unrelated third parties for cash and other consideration. We have accounted for these acquisitions using the purchase method of accounting, with the assets and liabilities of the businesses acquired recorded at their estimated fair values as of the dates of the acquisitions. Goodwill in an amount equal to the excess of cost over fair value of the net assets acquired has been recorded at historical cost. Our other intangible assets consist mainly of covenants not to compete, the value of our customer base and certain prepayments made under multiple year consultant supply contracts.

We have adopted Statement of Financial Standards No. 142, which prohibits the amortization of goodwill for indefinite-lived intangible assets and requires that goodwill and indefinite-lived intangible assets be tested annually for impairment. We perform these tests on an annual basis, and any significant adverse changes in our expected future operating results or outlook would likely result in impairment of the affected intangible assets.

Adverse results in tax audits could require significant cash expenditures or expose us to unforeseen liabilities.

We are subject to periodic federal, state and local income tax audits for various tax years. Although we attempt to comply with all taxing authority regulations, adverse findings or assessments made by the taxing authorities as the result of an audit could have a material adverse affect on our business and financial condition.

We may be subject to lawsuits and claims, which could have a material adverse effect on our financial condition and results of operations.

A number of lawsuits and claims are pending against us, and additional claims and lawsuits may arise in the future. Litigation is inherently uncertain and may be costly and time consuming to resolve, and may have a material adverse effect on our financial condition and results of operations.

Concentration of services in the Washington, D.C. area may adversely affect our revenues in the event of extraordinary events.

A significant portion of our revenues is derived from services provided in the Washington, D.C. area. A terrorist attack, such as that of September 11, 2001, or other extraordinary events in the Washington, D.C. area could have a material adverse effect on our revenues and results of operations.

We depend on the proper functioning of our information systems.

We are dependent on the proper functioning of information systems in operating our business. Critical information systems are used in every aspect of our daily operations, most significantly, in the identification and matching of staffing resources to client assignments and in the customer billing and consultant payment functions. Our systems are vulnerable to natural disasters, fire, terrorist acts, power loss, telecommunications

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failures, physical or software break-ins, computer viruses and other similar events. If our critical information systems fail or are otherwise unavailable, we would have to accomplish these functions manually, which could temporarily impact our ability to identify business opportunities quickly, to maintain billing and client records reliably, and to bill for services efficiently. In addition, we depend on third party vendors for certain functions whose future performance and reliability we cannot control.

Our certificate of incorporation contains certain provisions that could discourage an acquisition or change in control of COMSYS.

Our certificate of incorporation authorizes the issuance of preferred stock without stockholder approval. Our board of directors has the power to determine the price and terms of any preferred stock. The ability of our board of directors to issue one or more series of preferred stock without stockholder approval could deter or delay unsolicited changes of control by discouraging open market purchases of new common stock or a non-negotiated tender or exchange offer for our common stock. Discouraging open market purchases may be disadvantageous to our stockholders who may otherwise desire to participate in a transaction in which they would receive a premium for their shares.

In addition, some provisions of our certificate of incorporation and bylaws may also discourage a change of control by means of a tender offer, open market purchase, proxy contest or otherwise. These provisions include:

In addition, we have entered into a voting agreement giving Wachovia Investors, Inc. the right to designate nominees for election to our board of directors, which may have the effect of preventing, or making more difficult, changes in control of our company.

Risks Related to the Merger and the Sale of Our Commercial Staffing Business

Integration of the operations of Venturi and Old COMSYS following the merger presents significant challenges that may keep COMSYS from realizing the anticipated benefits of the merger.

We completed the merger of our wholly owned subsidiary, VTP, Inc., with and into Old COMSYS on September 30, 2004. The success of the merger depends, in part, on our ability to realize the anticipated synergies, cost savings and growth opportunities expected to result from integrating Venturi’s IT staffing business with the business of Old COMSYS. Our ability to realize these benefits on a timely basis depends upon the successful integration of the combined operations. The integration of two independent companies is a complex, costly and time-consuming process that presents significant challenges, including:

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The primary remaining integration components include the final transition of all back office functions to the COMSYS shared services center located in Phoenix, Arizona and continued marketing and client development as a combined company. The process of combining the organization may yet cause an interruption in our business, which could adversely affect our revenues and results of operations.

Our estimates of cost savings and cost saving components as a result of the merger are inherently uncertain and there can be no assurance as to the accuracy of these estimates.

The estimated cost savings expected to result from the merger are based on a number of assumptions, including our successful implementation within a defined period of necessary cost saving programs, such as the elimination of duplicative management costs and administrative programs and the implementation of tax planning strategies. The cost savings estimates also assume that we will be able to realize merger efficiencies such as marketing synergies, economies of scale and interest expense savings. If we fail to achieve the anticipated cost savings of the merger, our financial condition and results of operations could be materially adversely affected.

We may be subject to liabilities arising from the sale of our commercial staffing services subsidiary, which could have a material adverse effect on our business, operating results and financial condition.

In connection with the sale of our commercial staffing services subsidiary, Venturi Staffing Partners, Inc., on September 30, 2004, we agreed to indemnify CBS Personnel Services, Inc. (formerly Compass CS Inc.) and its affiliates for any losses, damages or expenses they incur in connection with the following:

In general, we are liable for indemnification only if CBS Personnel Services notifies us of a claim within one year of the closing date of the sale. Our liability extends, however, through the applicable statute of limitations for any breach of our representation regarding tax matters, and there is no time limit on claims brought in connection with any breach of our representations regarding authorization of the transactions, corporate power and authority, absence of conflicts with our organizational documents or board resolutions, capitalization of Venturi Staffing Partners, Inc. and absence of brokerage commissions due and claims based on our failure to fulfill our obligations under the non-qualified profit-sharing plan.

Subject to the same exceptions listed in the preceding paragraph, we are not liable for any claims until the aggregate amount of the claims exceeds $200,000, and then we are liable only for the amount of damages in excess of $100,000. Under our agreement with CBS Personnel Services, our indemnification obligations cannot exceed $5 million, except for liabilities relating to taxes and certain unemployment and unclaimed property taxes. We placed $2.5 million in escrow at closing to secure our obligations relating to these unemployment and unclaimed property taxes. Liability incurred by us pursuant to these indemnification obligations could have a material adverse effect on our business, operating results and financial condition.

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Risks Related to Our Common Stock

The market price and marketability of our shares may from time to time be significantly affected by numerous factors beyond our control, which may adversely affect our ability to raise capital through future equity financings.

The market price of our shares may fluctuate significantly. Many factors that are beyond our control may significantly affect the market price and marketability of our shares and may adversely affect our ability to raise capital through equity financings. These factors include the following:

Ownership of our common stock is concentrated among a small number of major stockholders that have the ability to exercise significant control over us, and whose interests may differ from the interests of other stockholders.

As of March 15, 2005, Wachovia Investors, Inc. beneficially owned 47.1% of our outstanding common stock, MatlinPatterson Global Opportunities Partners, L.P. beneficially owned 9.4% of our outstanding common stock and Inland Partners, L.P. and Links Partners, L.P. collectively beneficially owned 9.5% of our outstanding common stock. In addition, pursuant to the terms of a voting agreement entered into in connection with the merger, our principal stockholder, Wachovia Investors, has the right to recommend to the nominating committee of our board four to six nominees to be elected to our board of directors, depending on the size of the board, during the first three years after the merger, and each stockholder party to the voting agreement is required to vote its shares of our common stock in favor of such nominees. The voting agreement may have the effect of delaying or preventing a change in our management or voting control. As a practical matter, Wachovia Investors acting alone or these stockholders collectively will be able to exert significant influence over, or determine, the direction taken by our company and the outcome of future matters submitted to our stockholders, including the terms of any proposal to acquire our company, subject to some limited protections afforded to minority stockholders under our charter. These protections include special approval requirements during the first three years after the merger for fundamental corporate transactions, some related-party transactions and amendments to our charter and to certain provisions of our bylaws.

Concentrated ownership of large blocks of our common stock may affect the value of shares held by others and our ability to access public equity markets.

Our current degree of share ownership concentration may reduce the market value of common stock held by other investors for several reasons, including the perception of a “market overhang,” which is the existence of a large block of shares readily available for sale that could lead the market to discount the value of shares held by other investors.

We may need to access the public equity markets to secure additional capital to pursue our acquisition strategy and meet other financial needs. Our registration obligations to our significant stockholders could limit our ability or make it more difficult for us to raise funds through common stock offerings upon desirable terms or when required. Our failure to raise additional capital when required could:

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We do not intend to pay cash dividends on our common stock in the foreseeable future, and therefore only appreciation of the price of our common stock will provide a return to our stockholders.

We have never declared or paid dividends on our common stock, and we currently anticipate that we will retain all future earnings, if any, to finance the growth and development of our business. We do not intend to pay cash dividends in the foreseeable future. Any payment of cash dividends will depend upon our financial condition, capital requirements, earnings and other factors deemed relevant by our board of directors. In addition, the terms of our credit facilities prohibit us from paying dividends and making other distributions. As a result, only appreciation of the price of our common stock, which may not occur, will provide a return to our stockholders.

We are headquartered in Houston, Texas and maintain 41 offices in 23 states and one in the United Kingdom. We generally lease our office space under leases with initial terms of five to seven years. These leases typically contain such terms and conditions that are customary in each geographic market. Our offices are usually in office or industrial buildings, and occasionally in retail buildings, and our headquarters facilities and regional offices are in similar facilities. We believe that our offices are well maintained and suitable for their intended purpose.

From time to time we are involved in certain disputes and litigation relating to claims arising out of our operations in the ordinary course of business. Further, we are periodically subject to government audits and inspections. In the opinion of our management, matters presently pending will not, individually or in the aggregate, have a material adverse effect on our results of operations or financial condition.

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PART II

Price Range of Common Stock

Our common stock is listed and traded on the Nasdaq National Market under the symbol “CITP.” From May 13, 2004 until the merger, our common stock had traded on the Nasdaq National Market under the symbol “VENP.” From November 21, 2002 until May 13, 2004, our common stock traded on the OTC Bulletin Board maintained by the National Association of Securities Dealers, which we refer to as the OTC Bulletin Board. Prior to November 21, 2002, our common stock traded on the New York Stock Exchange, or NYSE. The NYSE delisted our common stock in February 2003.

The following table sets forth:

As of March 28, 2005, the closing price of our common stock was $13.00, there were 15,532,155 shares of our common stock outstanding and there were 1,464 holders of record of our common stock.

Dividend Policy

Because our policy has been to retain earnings for use in our business, we have not historically paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation and expansion of our business. In addition, our credit facility currently prohibits the payment of cash dividends. In the future, our board of directors will determine whether to pay cash dividends based on conditions then existing, including our earnings, financial condition, capital requirements, financing arrangements, the terms of our credit agreements and other contractual obligations and any other factors our board of directors deems relevant.

Recent Sales of Unregistered Securities

We previously disclosed in a current report on Form 8-K filed with the SEC on October 6, 2004, that, in connection with the consummation of the merger of Venturi and Old COMSYS on September 30, 2004, we

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issued a total of approximately 9.372 million shares of common stock to the Old COMSYS stockholders in the merger representing 55.4% of our outstanding common stock on a fully diluted basis. In addition, Wachovia Investors, Inc., the holder of COMSYS’ subordinated debt, exchanged approximately $22.4 million of such debt for approximately 22,400 shares of our new Series A-1 preferred stock. In connection with these issuances, we relied upon the exemption from registration available under Rule 506 of Regulation D and Section 4(2) of the Securities Act of 1933, as amended. The transaction did not involve any public offering and was otherwise in compliance with the requirements of Rule 506.

You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes appearing elsewhere in this report.

For accounting purposes, the merger of Old COMSYS with Venturi was treated as a reverse merger in which Old COMSYS was deemed to be the acquirer. The selected financial data for all periods prior to the merger on September 30, 2004 reflect the historical results of Old COMSYS. The selected financial data for periods subsequent to September 30, 2004 reflect financial results of COMSYS after giving effect to the merger and include Venturi’s results of operations from the effective date of the merger.

The consolidated statements of operations data for the fiscal years ended January 2, 2005 and December 31, 2003 and 2002 and the consolidated balance sheet data at January 2, 2005 and December 31, 2003 are derived from the audited consolidated financial statements appearing elsewhere in this report. The consolidated statements of operations data for the fiscal years ended December 31, 2001 and 2000 and the consolidated balance sheet data at December 31, 2002, 2001 and 2000 are derived from Old COMSYS’ audited consolidated financial statements that are not included in this report. In light of the merger of Old COMSYS and Venturi, the historical data presented below is not indicative of future results.

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The following discussion and analysis should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report. This discussion contains forward-looking statements reflecting our current expectations and estimates and assumptions concerning events and financial trends that may affect our future operating results or financial position. Actual results and the timing of events may differ materially from those contained in these forward-looking statements due to a number of factors, including those discussed in the section entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” appearing elsewhere in this report. For accounting purposes, the merger of Old COMSYS with Venturi was treated as a reverse merger in which Old COMSYS was deemed to be the acquirer. The financial data and discussion and analysis set forth below relating to all periods prior to the merger on September 30, 2004 reflect the historical results of Old COMSYS. The financial data and discussion and analysis set forth below relating to periods subsequent to September 30, 2004 reflect the financial results of COMSYS after giving effect to the merger and include Venturi’s results of operations from the effective date of the merger. In light of the merger of Old COMSYS and Venturi, the historical data presented below is not indicative of future results.

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Introduction

We are a leading information technology, or IT, staffing services company that provides a full range of specialized staffing and project implementation services and products. The staffing services we provide allow our clients to focus their resources on their core businesses rather than on recruiting, training and managing IT professionals. In using our staffing services, our clients benefit from:

We contract with our customers to provide both short- and long-term IT staffing services at client locations throughout the U.S. Our consultants possess a wide range of skills and experience, including website development and integration, application programming and development, client/server development, systems software architecture and design, systems engineering and systems integration. Our IT staffing services accounted for approximately 91% of our revenues for 2004, 96% of our revenues for 2003 and 97% of our revenues for 2002.

In addition to our core IT staffing business, we also offer our customers services that complement our staffing activities, such as:

These additional services provide us opportunities to build relationships with new clients and enhance our service offerings to our existing clients.

Overview

Our business strategy is to become the leading provider of IT staffing services in the United States. Among our immediate peer group, we are the only staffing provider focused exclusively on the IT sector. We intend to continue implementing our business strategy through a combination of internal growth and strategic acquisitions that complement or enhance our business.

Industry trends that affect our business include:

Beginning in the second half of 2000, the overall growth of the United States economy began to slow. While this slowdown negatively affected most industry segments, its greatest impact was on the telecommunications

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and Internet sectors. The combination of the slowdown in the economy, which also resulted in business failures, and the uncertainty as to when an economic recovery would take place led many companies to postpone or cancel IT projects. As a result, our business declined as evidenced by a 46% reduction in billable consultants from January 2001 through June 2003. During the economic downturn, we took steps to strengthen our operations and better position us to grow our business. The steps we took included diversifying our client base, implementing consistent business practices across our organization and improving our front office and back office infrastructure.

We believe that a continuation of the recent economic recovery will drive a renewed need for IT investments and initiatives by corporate clients. We expect this increase in IT spending, combined with the need to maintain financial flexibility by using variable workforce strategies, to result in increased demand for our services.

Since the beginning of the third quarter of 2003, headcount numbers have been trending upward, reflecting an increase in the commencement of new projects and a decline in project postponements and cancellations. Our billable consultant headcount increased from approximately 2,500 for Old COMSYS at June 30, 2003 to approximately 3,000 for Old COMSYS prior to the merger on September 30, 2004 to 4,911 for our operations at January 2, 2005. We expect consultant headcount to increase through 2005.

We anticipate that our growth will be primarily generated from greater penetration of our service offerings with our current clients, introducing new service offerings to our customers and obtaining new clients. Our strategy for achieving this growth includes expanding our geographic presence, cross-selling our VMS and project solutions services to existing IT staffing customers, aggressively marketing our services to new clients, expanding our range of value-added services, enhancing brand recognition and making strategic acquisitions.

The success of our business depends primarily on the volume of assignments we secure, the bill rates for those assignments, the costs of the consultants that provide the services and the quality and efficiency of our recruiting, sales and marketing and administrative functions. Our brand name, our proven track record, our recruiting and candidate screening processes, our strong account management team and our efficient and consistent administrative processes are factors that we believe are key to the success of our business. Factors outside of our control, such as the demand for IT services, general economic conditions and the supply of qualified IT professionals, will also affect our success.

Our revenue is primarily driven by bill rates and billable hours. Most of our billings for our staffing and project solutions services are on a time-and-materials basis, which means that we bill our customers based on pre-agreed bill rates for the number of hours that each of our consultants works on an assignment. We also generate fee income by providing vendor management and permanent placement services. Hourly bill rates are typically determined based on the level of skill and experience of the consultants assigned and the supply and demand in the current market for those qualifications. General economic conditions, macro IT expenditure trends and competition may create pressure on our pricing. Increasingly, large customers, including those with preferred supplier arrangements, have been seeking pricing discounts in exchange for higher volumes of business. Billable hours are affected by numerous factors, such as the quality and scope of our service offerings and competition at the national and local levels.

Our principal operating expenses are cost of services and selling, general and administrative expenses. Cost of services is comprised primarily of the costs of consultant labor, including employees, subcontractors and independent contractors, and related employee benefits. Approximately 70% of our consultants are employees, and the remainder are subcontractors and independent contractors. We compensate most of our consultants only for the hours that we bill to our clients, which allows us to better match our labor costs with our revenue generation. With respect to our consultant employees, we are responsible for employment-related taxes, medical and health care costs, and workers’ compensation. Labor costs are sensitive to shifts in the supply and demand of IT professionals, as well as increases in the costs of benefits and taxes.

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The principal components of selling, general and administrative expenses are salaries, selling commissions, advertising, lead generation and other marketing costs and branch office expenses. Our branch office network allows us to leverage certain selling, general and administrative expenses, such as advertising and back-office functions.

Our infrastructure includes a shared services operation in Phoenix, Arizona for our back-office functions, including payroll, billing, accounts payable, collections and financial reporting. This single site, shared services operation is the platform for providing high quality service to our customers and enables us to integrate acquisitions rapidly while reducing corporate overhead and other expenses. We also have a proprietary, web-enabled front-office system (FOX) that facilitates the identification, qualification and placement of consultants in a timely manner. We also maintain a national recruiting center, a centralized call center for setting sales appointments and a centralized proposals and contract services department. We expect that this scalable infrastructure will facilitate our internal growth strategy and allow us to integrate acquisitions rapidly.

The Merger

On September 30, 2004, Old COMSYS completed a merger transaction with Venturi, a publicly traded IT and commercial staffing company, in which COMSYS Holding, Inc. was merged with a wholly owned subsidiary of Venturi. Concurrent with the merger, we sold Venturi’s commercial staffing business for $30.3 million in cash and the assumption of approximately $700,000 in liabilities. At the effective time of the merger, we changed our name to COMSYS IT Partners, Inc. and issued new shares of our common stock to the stockholders of Old COMSYS, resulting in such stockholders owning approximately 55.4% of our outstanding common stock on a fully diluted basis. Since former Old COMSYS stockholders owned a majority of our outstanding common stock as a result of the merger, Old COMSYS is deemed the acquiring company for accounting and financial reporting purposes.

The key elements of the integration of the legacy businesses of Old COMSYS and Venturi have been completed on or ahead of the original schedule. We believe this diminishes the business risks associated with the integration and accelerates the recognition of cost savings. Further, we have created a corporate infrastructure capable of supporting our internal growth strategy and future acquisitions. During the few months since the merger was completed, we have made substantial progress toward the integration of the businesses of Old COMSYS and Venturi, including:

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Results of Operations

The following table sets forth the percentage relationship to revenues of certain items included in our consolidated statements of operations:

Year Ended January 2, 2005 Versus Year Ended December 31, 2003

We recorded a loss from operations of $5.7 million and a net loss of $55.2 million in 2004 compared to operating income of $744,000 and a net loss of $37.3 million in 2003. The operating loss was due primarily to increased restructuring and integration costs of $9.5 million and increased stock based compensation expense of $7.0 million, partially offset by approximately $4.5 million of operating income generated by the IT staffing business of Venturi since the merger, which is included in our 2004 operating results. Net interest expense increased $13.6 million from 2003 to 2004 due primarily to higher dividends on mandatorily redeemable preferred stock. Loss on early extinguishment debt increased $3.0 million due to the write-off of unamortized deferred financing costs and a $1.2 million prepayment penalty arising from the refinancing of Old COMSYS’ debt in the third quarter of 2004. Income tax expense decreased $6.2 million due primarily to a $5.4 million tax refund received in 2004.

Revenues. Revenues for 2004 and 2003 were $437.0 million and $332.9 million, respectively, representing an increase of 31.3%. Revenue for 2004 includes $66.1 million attributable to Venturi’s operations subsequent to the merger on September 30, 2004. Old COMSYS’ billable headcount increased from 2,867 at December 31, 2003 to 3,066 at January 2, 2005, reflecting improved economic conditions that resulted in increased demand for Old COMSYS’ IT services and stabilization of project deferrals and cancellations. In addition, vendor management related fee revenue for Old COMSYS increased 26.7% from $5.4 million in 2003 to $6.8 million in 2004 due to the expansion and implementation of vendor management programs in response to increasing demand for such programs among major companies. These increases were slightly offset by a 0.5% decrease in Old COMSYS’ average bill rate, which was $64.63 per hour in 2004 compared to $64.97 per hour in the prior year. The decrease in the full year average bill rate compared to 2003 was due entirely to lower year-over-year

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bill rates in the first half of 2004. In the second half of 2004, average bill rates were approximately 2% higher than the same period of 2003 reflecting the easing of bill rate pressures as economic conditions continued to improve. Old COMSYS’ revenue growth was primarily attributable to its clients in the financial services and telecommunications industry sectors. Revenues from the financial services sector for Old COMSYS increased by $28.1 million, or 25.6%, in 2004 compared to 2003 and accounted for 37.2% of Old COMSYS’ revenues in 2004. Revenues from the telecommunications sector increased over these same periods by $19.5 million, or 33.1%, and represented 21.1% of Old COMSYS’ 2004 revenues.

Cost of Services. Cost of services for 2004 and 2003 were $331.5 million and $251.5 million, respectively, representing an increase of 31.8%. Cost of services for 2004 includes $49.6 million attributable to Venturi’s operations subsequent to the merger on September 30, 2004. Cost of services as a percentage of revenue increased slightly from 75.6% in 2003 to 75.8% in 2004. The increase in cost of services as a percentage of revenue was primarily due to increases in state unemployment taxes and health care expenses.

Selling, General and Administrative Expenses. Selling, general and administrative expenses in 2004 and 2003 were $79.4 million and $63.9 million, respectively, representing an increase of 24.3%. Selling, general and administrative expenses in 2004 include $10.9 million attributable to Venturi’s operations subsequent to the merger on September 30, 2004. In addition to the effect of the merger, the increase was due to higher commissions and other performance-related incentives resulting from increases in revenues and operating income and the addition of certain field operations employees. This increase was partially offset by a decrease in bad debt expense resulting from the collection of $1.8 million of accounts receivable from a customer that emerged from bankruptcy; these receivables had been fully reserved. As a percentage of revenue, selling, general and administrative expenses decreased from 19.2% in 2003 to 18.6% (excluding the $1.8 million credit to bad debt expense) in 2004. The decrease as a percentage of revenue was due to our ability to leverage fixed overhead costs over an expanding revenue base.

Restructuring and Integration Costs. Restructuring and integration costs amounted to $10.3 million in 2004 compared to $0.9 million in 2003. The 2004 expenses represent integration, restructuring and transition costs associated with the merger with Venturi, comprised primarily of expenses related to duplicative leases, redundant headcount, severance arrangements, asset write-offs and integration services provided by third parties. Restructuring and integration costs for 2003 represented severance payments in connection with a workforce reduction plan implemented in August 2003.

The following is an analysis of the restructuring reserve for the year ended January 2, 2005 (in thousands):

Stock Based Compensation. Stock based compensation expense in 2004 was $7.0 million. In connection with the merger, all the outstanding shares of Old COMSYS Class D redeemable preferred stock, which were issued under the Old COMSYS 2004 Management Incentive Plan, were exchanged for 1.4 million shares of Venturi common stock. Of these shares, 468,615 shares were vested at the closing of the merger, resulting in the recognition of $5.3 million of stock based compensation expense. This compensation expense is based on a

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weighted average value of $11.20 per share of Venturi common stock. On January 1, 2005, 156,205 additional shares vested, resulting in the recognition of an additional $1.7 million in stock based compensation expense in fiscal 2004. This expense amount was also based on a per share value of $11.20. On January 1, 2006, 156,205 shares will vest, and another 156,205 shares will vest on January 1, 2007. We will be required to record compensation expense of $1.7 million in each of fiscal 2005 and 2006 when these unvested shares fully vest. The remaining 468,614 shares will vest if certain performance based criteria specified in the 2004 Management Incentive Plan are met. To the extent any of these shares vest, stock based compensation expense will be recognized in accordance with SFAS No. 123(R), Share-Based Payment, a revision of SFAS No. 123, Accounting for Stock-Based Compensation. The vesting of all unvested shares will be accelerated upon the occurrence of certain events as specified in the 2004 Management Incentive Plan, and the associated stock based compensation expense will be recognized at the time of such accelerated vesting. See Note 11 to the consolidated financial statements appearing elsewhere in this report.

Depreciation and Amortization. Depreciation and amortization expense consists primarily of depreciation of our fixed assets and amortization of our customer base and contract cost intangible assets. For 2004 and 2003, depreciation and amortization expense was $14.6 million and $15.9 million, respectively, representing a decrease of 8.2%. The decline was entirely due to lower amortization expense related to the customer base intangible asset recorded as part of the acquisition of COMSYS Information Technology Services, Inc. on September 30, 1999, which became fully amortized as of September 30, 2004.

Interest Expense. Interest expense was $50.8 million and $37.2 million in 2004 and 2003, respectively, an increase of $13.6 million which was entirely due to increased dividends on mandatorily redeemable preferred stock. On July 1, 2003, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 150, which requires that dividends on mandatorily redeemable preferred stock be recorded as interest expense. See “Recent Accounting Pronouncements.” SFAS No. 150 applies to Old COMSYS’ redeemable preferred stock and, as a result, interest expense includes dividends in the amount of $33.6 million in 2004 and $20.6 million in 2003. The increase from 2003 is due to the application of SFAS No. 150 for a full year in 2004 as compared to only the last six months of 2003, partially offset by the reduction in the amount of mandatorily redeemable preferred stock outstanding upon completion of the merger with Venturi. Net interest expense on borrowings under our credit facilities of $15.1 million in 2004 was essentially unchanged from 2003 as increased borrowings outstanding under the new senior credit facility entered into with Merrill Lynch Capital in conjunction with the merger with Venturi and the increase in the interest rate on the senior subordinated notes outstanding prior to the merger with Venturi were offset by the more favorable interest rates on the new senior credit facility. See “Liquidity and Capital Resources—Overview.”

Provision for Income Taxes. As of January 2, 2005, we had net operating loss carryforwards of approximately $252 million and had recorded a reserve against the assets for net operating loss carryforwards due to the uncertainty related to the realization of these amounts. In 2004, we received a $5.4 million income tax refund related to the carryback of 2001 net operating losses. As a result, the valuation allowance for deferred tax assets was reduced and a $5.4 million income tax benefit was recognized in the 2004 statement of operations. No other federal tax provision or benefit was recorded in 2004. Net operating loss carryforwards from prior years will offset any tax provision generated during the current year. Income tax expense in 2003 was $760,000, which represents an increase in the valuation allowance for deferred tax assets.

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

Old COMSYS recorded operating income of $744,000 in 2003 compared to an operating loss of $1.8 million in 2002. Net losses for the years ended December 31, 2003 and 2002 were $37.3 million and $158.0 million, respectively. Net loss for 2003 included dividends on mandatorily redeemable preferred stock, as described below (see “—Interest Expense”). Net loss for 2002 included goodwill impairment charges totaling $152.7 million, as described below.

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Revenues. Revenues for 2003 were $332.9 million, a decline of $54.1 million, or 14.0%, from 2002 revenues of $386.9 million. This decline in revenue was primarily the result of Old COMSYS’ customers deferring or canceling IT projects due to the general slowdown in the United States economy which continued through the first half of 2003. Billable headcount decreased from 2,781 at December 31, 2002 to 2,497 at June 30, 2003. In the second half of 2003, billable headcount increased to 2,867 by the end of the year. Reflecting a market-driven shift away from higher bill rate development work and pricing pressures driven by the economic downturn, average bill rates decreased from $65.65 in 2002 to $64.97 in 2003.

The telecommunications industry was particularly affected by the economic slowdown in recent years. From 2002 to 2003, revenues generated by Old COMSYS’ telecommunications sector clients decreased by $48.1 million or 45.0%. For the years ended December 31, 2003 and 2002, the telecommunications sector represented 17.7% and 27.1%, respectively, of Old COMSYS’ revenues. Revenues from the manufacturing sector also decreased during this time period, from 17.9% of revenues in 2002 to 15.9% of revenues in 2003. Concurrent with the declines in revenue from telecommunications and manufacturing clients, Old COMSYS recorded increased revenues from the financial services sector, which represented 33.0% of its revenues in 2003 compared to 24.2% in 2002.

Cost of Services. Cost of services for 2003 and 2002 amounted to $251.5 million and $292.3 million, respectively. Cost of services consists primarily of the cost of labor and related benefits, and the year-over-year decrease was due to the decline in billable headcount, as described above. Cost of services as a percentage of revenues in 2003 was 75.6%, a slight increase from 75.5% in 2002. The downward bill rate and margin pressures experienced during the economic downturn began to ease in the second half of 2003 as economic conditions improved. In addition, Old COMSYS has been able to minimize the impact of pricing pressure by successfully passing pricing concessions on to subcontractors and certain consultants employed by Old COMSYS. As a result, cost of services as a percentage of revenues in 2003 was relatively unchanged on a year-over-year basis.

Selling, General and Administrative Expenses. Selling, general and administrative expenses for 2003 and 2002 amounted to $63.9 million and $69.9 million, respectively. The decrease in 2003 compared to 2002 was due primarily to a $5.1 million reduction in bad debt expense and a $1.9 million decline in compensation and related expense. Old COMSYS increased its bad debt reserves in 2002 as a result of bankruptcies and increased credit risk associated with certain of its clients following the economic downturn. The decrease in compensation and related expense and decreases in various other expense categories resulted from Old COMSYS’ cost containment efforts. See “—Restructuring and Integration Costs.” Selling, general and administrative expenses as a percentage of revenue for 2003 and 2002 were 19.2% and 18.1%, respectively. The increase in percentage of revenue from 2002 to 2003 was due primarily to Old COMSYS’ investment in vendor management programs.

Restructuring and Integration Costs. Restructuring and integration costs for the year ended December 31, 2002 were $875,000 and were the result of Old COMSYS’ continuing expense reduction plan. These costs represented an accrual for severance payments. Restructuring and integration costs for the year ended December 31, 2003 were $854,000 and represented an accrual for additional severance payments in connection with Old COMSYS’ continuing expense reduction plan.

The following is an analysis of the restructuring reserves for the year ended December 31, 2003 (in thousands):

Goodwill Impairment Losses. Effective January 1, 2002, Old COMSYS adopted SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 made significant changes to the methods and criteria used to

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amortize goodwill and intangible assets. Under SFAS No. 142, goodwill and certain intangibles with indefinite lives are not amortized but instead are reviewed for impairment at least annually. Remaining intangibles with finite useful lives continue to be amortized. In accordance with SFAS No. 142, assembled workforce intangibles of Old COMSYS are combined with goodwill in the consolidated balance sheets.

Upon adopting SFAS No. 142, Old COMSYS performed an initial test of impairment on goodwill effective January 1, 2002, which resulted in the recording of an impairment loss amounting to $141.5 million. This loss is presented as the cumulative effect of an accounting change in the consolidated statement of operations.

Old COMSYS’ operating profits and cash flows were lower than expected in the second half of 2002 due to the continued economic downturn in the United States, which caused many of its clients to cancel or postpone IT initiatives. Old COMSYS’ management revised its earnings forecast for the subsequent five years based on then-current trends, resulting in an additional goodwill impairment loss of $11.2 million being recorded in the fourth quarter of 2002. This impairment loss is presented in the consolidated statement of operations as part of operating costs and expenses. The fair value of goodwill was estimated using the expected present value of future cash flows and market multiples.

Old COMSYS performed its annual impairment analysis in the fourth quarter of 2003 and determined that there was no additional impairment at that time.

Depreciation and Amortization. For 2003 and 2002, depreciation and amortization expense amounted to approximately $15.9 million and $14.6 million, respectively. The increase from 2002 to 2003 was due to increases in depreciation expense and amortization of contract cost intangibles.

Interest Expense. Interest expense, which includes the amortization of deferred debt issuance costs, was $37.2 million and $14.6 million in 2003 and 2002, respectively. Interest expense increased from 2002 to 2003 due primarily to the adoption of SFAS No. 150 by Old COMSYS on July 1, 2003, which requires that dividends on mandatorily redeemable preferred stock be recorded as interest expense. See “Recent Accounting Pronouncements.” SFAS No. 150 applies to Old COMSYS’ redeemable preferred stock and, as a result, interest expense for 2003 includes dividends, amortization of deferred stock issuance costs and an increase in the common stock warrant liability in the aggregate amount of $21.2 million. The remaining increase in interest expense was due to scheduled increases in the interest rate on the senior subordinated notes and the compounding effect of accrued interest not paid in cash. See “Liquidity and Capital Resources—Debt Compliance.”

Provision for Income Taxes. For both 2003 and 2002, Old COMSYS had net operating losses for income tax purposes. Old COMSYS recorded a reserve against the assets arising from net operating loss carryforwards due to the uncertainty related to the realization of these amounts. Therefore, no income tax benefit was recorded in the statements of operations. For the year ended December 31, 2003, income tax expense was $760,000, which represents an increase in the valuation allowance for deferred tax assets.

Summary of Unaudited Quarterly Statement of Operations Data

The following tables set forth selected unaudited consolidated quarterly statement of operations data for the eight quarters ended January 2, 2005. In management’s opinion, this unaudited information has been prepared on substantially the same basis as the consolidated financial statements appearing elsewhere in this report and includes all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the unaudited consolidated quarterly data. The unaudited consolidated quarterly data should be read together with the consolidated financial statements and related notes included elsewhere in this report. The results for any quarter are not necessarily indicative of results for any future period, and you should not rely on them as such. Our quarterly financial results may fluctuate in the future based on a number of factors, many of which are beyond

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our control. These factors include general economic conditions, competition, demand for services and seasonal fluctuations. The fourth quarter of 2004 reflects the consolidated financial results of Old COMSYS and Venturi from the effective date of the merger.

Liquidity and Capital Resources

Overview

Old COMSYS has historically financed its operations through internally generated funds, the issuance of preferred stock and borrowings under its credit facilities.

At January 2, 2005, we had net positive working capital of $19.1 million compared to a net working capital deficit for Old COMSYS of $50.3 million at December 31, 2003. The 2003 deficit was primarily due to the current portion of long-term debt and interest payable, which were $46.9 million and $14.0 million, respectively, at December 31, 2003. As of December 31, 2003, Old COMSYS classified its borrowings of $39.4 million under the Old COMSYS credit facility and $8.0 million under a deferred interest note issued in September 2001 as current because these instruments were due to mature in September 2004.

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On August 18, 2004, Old COMSYS entered into a credit facility with Merrill Lynch Capital and a syndicate of lenders that included up to $65.0 million in revolving loans and a $5.0 million term loan. The proceeds from this credit facility were used to repay in full the current maturities of long-term debt outstanding on that date, including borrowings under the Old COMSYS credit facility and the deferred interest note, and to pay $2.0 million of accrued interest payable on senior subordinated debt.

On September 30, 2004, in conjunction with the merger with Venturi, we issued $22.4 million of mandatorily redeemable preferred stock and entered into a new senior credit facility with Merrill Lynch Capital and a syndicate of lenders (the “senior credit agreement”) that replaced the agreement entered into on August 18, 2004. The senior credit agreement provides for borrowings of up to $100.0 million under a revolving line of credit (the “revolver”) and a $15.0 million term loan payable in eight quarterly installments (the “senior term loan”). At the same time, we borrowed $70.0 million under a second lien term loan credit agreement with Merrill Lynch Capital, Heritage Bank, SSB and a syndicate of lenders (the “second lien term loan”). The total amount initially borrowed under the revolver, the senior term loan and the second lien term loan was $135.2 million and was used as follows at the merger date (in thousands):

Borrowings under the revolver are limited to 85% of eligible accounts receivable, as defined, reduced by the amount of outstanding letters of credit and designated reserves. At September 30, 2004, these designated reserves were a minimum availability reserve of $5.0 million and a restructuring reserve of $22.9 million intended to fund certain liabilities of Venturi as of September 30, 2004, purchase accounting reserves established in connection with the merger and the estimated cash outlays related to restructuring and transition costs associated with the merger that were not eligible for accrual in the purchase price allocation (comprised primarily of expenses related to duplicative leases, redundant headcount, severance arrangements, asset write-offs and integration services provided by third parties). Interest on the revolver and senior term loan is based on LIBOR plus a margin, which on the revolver is 2.25% or 2.50%, depending upon our ratio of total debt to adjusted EBITDA, as defined in the senior credit agreement, and which is 3.00% for the senior term loan. At our election, interest on the revolver and senior term loan may be based on the prime rate plus a margin, which on the revolver is 1.25% or 1.50%, depending upon our ratio of total debt to adjusted EBITDA, and which is 2.00% for the senior term loan. The senior credit agreement is secured by a pledge of the stock of our subsidiaries and a lien on the assets of our subsidiaries and expires in September 2009. At January 2, 2005, we had outstanding borrowings of $57.0 million under the revolver at interest rates ranging from 4.81% to 6.75% per annum (weighted average rate of 5.01%) and borrowing availability under the revolver of $29.3 million for general corporate purposes and an additional $5.5 million for merger integration costs. The principal balance of the senior term loan on that date was $13.1 million with tranches bearing interest rates ranging from 5.31% to 7.25% per annum (weighted average rate of 5.49%). We anticipate that our borrowing availability for general corporate purposes under the revolver will be approximately $20.0 million at the end of the first quarter of 2005. This reduction is due to delayed billings to customers that occurred in February 2005 as a result of the transition of the Old COMSYS back office functions to Venturi’s PeopleSoft system. Our customer billings returned to normal cycles in March 2005. We believe that borrowing availability will return to year-end 2004 levels during the second quarter of 2005.

The second lien term loan bears interest at the prime rate plus a margin of 6.50% or, at our election, LIBOR plus a margin of 7.50%. The principal balance of the second lien term loan was $70.0 million as of January 2, 2005, and the interest rate on the loan was 10.0%. The second lien term loan is secured by a second lien position in the stock and assets of our subsidiaries and matures on April 30, 2010. Prepayment of principal will be required under the senior term loan, the revolver and the second lien term loan in certain circumstances.

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We pay a fee on outstanding letters of credit equal to the LIBOR margin then applicable to the revolver. As of January 2, 2005, our outstanding letters of credit totaled $3.2 million and the fee was 2.50% annually. We also pay commitment fees of 0.50% per annum on the unused portion of the revolver.

The following table summarizes our cash flow activity for 2004, 2003 and 2002 (in thousands):

Cash used in operating activities in 2004 was $14.4 million compared to cash provided by operating activities of $21.5 million in 2003. Cash used in operating activities in 2004 included interest paid on senior subordinated notes of $18.1 million and integration and restructuring costs of $17.4 million, offset in part by a federal income tax refund of $5.4 million and our receipt of $1.8 million of receivables previously written off. Cash flows from operating activities are affected by the timing of cash receipts and disbursements and working capital requirements related to the growth in revenue.

Cash provided by operating activities in 2002 was $49.2 million, which was $27.8 million greater than in 2003 due primarily to improvements in the collection of accounts receivable in 2002 compared to previous years.

Cash used in investing activities in 2004 was $3.9 million compared to $3.3 million in 2003. The increase was due to $1.1 million of expenditures in 2004 associated with the merger with Venturi, net of a decrease in cash paid for fixed assets and other noncurrent assets. Cash used in investing activities amounted to $7.0 million in 2002, comprised of capital expenditures of $4.4 million, contract costs of $1.5 million and the purchase from our chief executive officer of a $1.0 million option to purchase certain real property.

Cash provided by financing activities was $18.3 million in 2004, representing primarily net borrowings of long term debt of $26.9 million to fund operating and investing activities and to pay financing costs of $6.9 million associated with the senior and term loan credit agreements. In 2003, net cash used in financing activities was $32.4 million as all cash on hand at the beginning of the year and net cash provided by operating and investing activities were used to pay down debt outstanding on the credit facilities in place at that time. Cash used in financing activities in 2002 amounted to $28.0 million, which included advances to stockholders and redemption of preferred and common stock in the aggregate amount of $2.2 million and a net reduction in outstanding borrowings of $25.8 million.

Capital expenditure requirements, primarily for software upgrades for our PeopleSoft System, hardware for our internal information systems and leasehold improvements, are currently expected to be approximately $6.5 million in 2005. In addition, we expect to incur an additional $5.5 million in expenditures for merger integration costs in 2005. We anticipate that our capital requirements for at least the next 12 months will be satisfied through a combination of cash flow from operations and borrowings under our revolver.

Pursuant to the terms of the revolver, we maintain a zero balance in our cash accounts. Any excess cash in our accounts is swept on a daily basis and applied to repay borrowings under the revolver, and any cash needs are satisfied through borrowings under the revolver.

Debt Compliance

Our ability to continue operating is largely dependent upon our ability to maintain compliance with the financial covenants of our credit facilities. Both the senior credit agreement and second lien term loan contain

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customary covenants and events of default, including the maintenance of fixed charge coverage ratios, total debt to adjusted EBITDA ratios and minimum levels of EBITDA, all as defined. As of January 2, 2005, we were in compliance with all covenant requirements under our indebtedness, and we believe we will be able to comply with these covenants in fiscal year 2005. As of December 31, 2003, Old COMSYS was in compliance with all covenant requirements under its indebtedness.

At December 31, 2002, Old COMSYS was not in compliance with the leverage ratio and EBITDA requirements of the Old COMSYS credit facility. Effective June 24, 2003, that credit facility and Old COMSYS’ senior subordinated notes were amended to modify the covenant requirements and the lenders’ commitment under the revolving line of credit was reduced from $105.0 million to $75.0 million.

Contractual and Commercial Commitments

The following table summarizes our contractual obligations and commercial commitments at January 2, 2005 (in thousands):