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Yeso Yeso Yesþ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (ss.229.405 of this chapter) 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.þ registrant’s most recently completed second fiscal quarter (March 31, 2009): $4,586,028. Executive Drive, Suite 130, Somerset, New Jersey 08873 where its telephone number is (877) 523-9897. TeamStaff 1 who possess the necessary experience, expertise, and dedication required to meet contract specifications. TeamStaff 2 Defense requirements, and more specifically Defense Logistics Agency, in having the ability to draw from our human resources and account administration expertise. In particular, TeamStaff GS is experienced in providing personnel with supply chain distribution as well as inventory and warehouse management expertise. TeamStaff GS is moving forward to expand its service offering, especially within the Department of Defense. DVA facilities through vertical expansion of previously awarded contracts. The 3 Marketing Carolina. plan in an effort to attract allied medical and nurse travelers. During the year, we Employee pension and welfare benefit plans are also governed by ERISA. ERISA defines ” 5 6 $2.0 million. As of September 30, financial condition may be materially and adversely affected due to any of the following risks. The risks described below are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations. The trading price of our common stock could decline due to any of these risks. In assessing these risks, you should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K, including our consolidated financial statements and related notes. 7 We are heavily dependent upon the U.S. Government as the primary customer to our 8 Our contract costs are subject to audits and investigations by U.S. Government Further, an audit of our work, including an audit of work performed by companies we have acquired or may acquire, or subcontractors we have hired or may hire, could force us to refund previously recognized revenues. Similarly, we are from time to time subject to inquiries and investigations of our business practices by the U.S. Government due to our participation in government contracts. We cannot assure you that any such inquiry or investigation will not have a material adverse effect on our results of operations and financial condition. 9 10 United States. 11 Accordingly, we have a specific sensitivity to adverse economic conditions in these geographic markets. and structure our benefit contracts to 12 We may be held liable for the actions of our 13 14 15 condition. 16 lenders may prohibit us from paying dividends without its prior consent. Therefore, holders of our common stock may not receive any dividends on their investment in us. Earnings, if any, will be retained and used to finance the development and expansion of our business. 17 In addition, forward-looking statements depend upon assumptions, estimates and dates that may not be correct or precise and involve known or unknown risks, uncertainties and other factors. Accordingly, a forward-looking statement in this report is not a prediction of future events or circumstances and those future events or circumstances may not occur. Given these uncertainties and risks, you are warned not to rely on the forward-looking statements. A forward-looking statement is usually identified by our use of certain terminology including $422,000. 19 its subsidiaries or employees in connection with the Federal investigation of contract practices at various government owned/contractor operated facilities. TeamStaff remains committed to cooperate with the DOJ’s continued investigation of other parties. 2009. TeamStaff believes the liability insurance is reasonable under the circumstances to protect it from liability for such claims, there can be no assurance that such insurance will be adequate to cover all potential claims. PART II The above quotations, reported by Nasdaq, represent prices between dealers and do not include retail mark-ups, markdowns or commissions. Such quotations do not necessarily represent actual transactions. On As of 22 implied by such forward-looking statements. We based these forward-looking statements on our current expectations and best estimates and projections about future events. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. The following factors (among others) could cause our actual results to differ materially from those implied by the forward-looking statements in this Annual Critical Accounting Policies and Estimates
SECURITIES AND EXCHANGE COMMISSION þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended September 30, 2007 o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934For the transition period from TO IssuerRegistrant as Specified in Its Charter)New Jersey 22-1899798 (State or other jurisdiction of
incorporation or organization)(I.R.S. Employer
Identification No.)
(Address of principal executive offices) (Zip Code)12(b)12(b) of the Exchange Act NAME OF EACH EXCHANGE ONName of Each Exchange onTITLE OF EACH CLASSCommon Stock, par valueTitle of Each ClassWhich Registered COMMON STOCK, PAR VALUE $.001 per sharePER SHAREWHICH REGISTEREDThe Nasdaq Stock Market,THE NASDAQ STOCK MARKET, LLC12(g)12(g) of the Securities
Exchange Act: NONE No þNo þNo ois a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definitionhas submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of ‘‘accelerated filerRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and large accelerated filer’’ in Rule 12b-2 of the Securities Exchange Act. (check one):Large accelerated filer Accelerated filer Non-accelerated filer Large accelerated filero Accelerated filero Non-accelerated filero Smaller reporting companyþ (do not check if a smaller reporting company) No þAt the close of our fiscal year, September 30, 2007,stock of TeamStaff, Inc. (consisting ofand non-voting common stock, $.001 par value per share)equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the Registrant was approximately $13,248,374 based uponlast business day of the closing sales price of $0.83 for such common stock on said date as reported on the Nasdaq National Market.14, 20085, 2010 there were 19,403,3664,940,982 shares outstanding of common stock of the Registrant.NonePART ITHIS ANNUAL REPORT ON FORM 10-K, INCLUDING ITEM 1. BUSINESS (‘‘BUSINESS’’) AND ITEM 7 (‘‘MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS’’), CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 (‘‘SECURITIES ACT’’) AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934 (‘‘EXCHANGE ACT’’). WHEN USED IN THIS REPORT, THE WORDS ‘‘BELIEVE,’’ ‘‘ANTICIPATE,’’ ‘‘THINK,’’ ‘‘INTEND,’’ ‘‘PLAN,’’ ‘‘WILL BE,’’ ‘‘EXPECT’’, AND SIMILAR EXPRESSIONS IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS REGARDING FUTURE EVENTS AND/OR OUR FUTURE FINANCIAL PERFORMANCE ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD CAUS E ACTUAL EVENTS OR OUR ACTUAL FUTURE RESULTS TO DIFFER MATERIALLY FROM ANY FORWARD-LOOKING STATEMENT. SUCH RISKS AND UNCERTAINTIES INCLUDE, AMONG OTHER THINGS, RISKS ASSOCIATED WITH MARKET ACCEPTANCE OF OUR PRODUCTS AND SERVICES, OUR ABILITY TO IMPLEMENT OUR BUSINESS PLAN, COMPETITION, MANAGEMENT OF GROWTH, TECHNOLOGICAL CHANGES, PERSONNEL, THE AVAILABILITY OF ANY NEEDED FINANCING AND OTHER RISKS AND UNCERTAINTIES THAT MAY BE DETAILED FROM TIME TO TIME IN OUR REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (‘‘SEC’’). IN LIGHT OF THE SIGNIFICANT RISKS AND UNCERTAINTIES INHERENT IN THE FORWARD-LOOKING STATEMENTS INCLUDED HEREIN INCLUDING BUT NOT LIMITED TO THE ITEMS DISCUSSED IN ‘‘RISK FACTORS’’ IN ITEM 1A OF THIS REPORT, THE INCLUSION OF SUCH STATEMENTS SHOULD NOT BE REGARDED AS A REPRESENTATION BY US OR ANY OTHER PERSON THAT OUR OBJECTIVES AND PLANS WILL BE ACHIEVED. TEAMSTAFF ASSUMES NO OBLIGATION AND DOES NOT INTEND TO UPDATE THESE FORWARD LOOKING S TATEMENTS.ITEM 1. BUSINESSINTRODUCTION (‘‘TeamStaff’’ or the ‘‘Company’’), was founded in 1969 as a payroll service company and evolved into a national provider of payroll and temporarycontract and permanent medical and administrative staffing services. Effective October 23, 2007, TeamStaff’s corporate headquarters isIts principal operations are conducted through its subsidiary, TeamStaff Government Solutions, (“TeamStaff GS”), a wholly-owned subsidiary of TeamStaff, Inc. TeamStaff GS changed its name from RS Staffing Services, Inc on February 12, 2008 to reflect the subsidiary’s expanding service offerings.Somerset, New Jersey. Previously, the Company’s corporate headquarters was located in Atlanta, Georgia.greater detail below, on December 28, 2009, TeamStaff has offices located in Clearwater, Florida; Memphis, Tennessee; Monroe, Georgia; Atlanta, Georgia; and Somerset, New Jersey.When we use the term ‘‘TeamStaff,’’ or the ‘‘Company’’ we mean TeamStaff and its subsidiaries. Currently, we operate only through the parent corporation, TeamStaff, Inc., and TeamStaff Rx, Inc. (‘‘(“TeamStaff Rx’’) and RS Staffing Services, Inc. (‘‘RS Staffing Services’’Rx”), twoour wholly-owned subsidiariessubsidiary, entered into a definitive Asset Purchase Agreement with Advantage RN, LLC, an Ohio limited liability company (“Advantage RN”), providing for the sale of substantially all of the operating assets of TeamStaff Inc. Rx related to TeamStaff Rx’s business of providing travel nurse and allied healthcare professionals for temporary assignments to Advantage RN. The closing of this transaction occurred on January 4, 2010. The Asset Purchase Agreement provides that the purchased assets were acquired by Advantage RN for a purchase price of up to $425,000, of which (i) $350,000 in cash was paid at the closing, and (ii) $75,000 is subject to an escrowed holdback as described in the Asset Purchase Agreement. Additionally, Advantage RN will make rent subsidy payments to TeamStaff Rx totaling $125,000, consisting of (i) $25,000 payable at closing, and (ii) an additional $100,000 payable in 10 equal monthly installments beginning on March 1, 2010. Under the terms of the Asset Purchase Agreement, Advantage RN did not assume any debts, obligations or liabilities of TeamStaff Rx nor did it purchase any accounts receivable outstanding as of the closing date.(‘‘PEO’’) business in fiscal year 2004 and other Company business changes, these ‘‘other’’ subsi diaries“other” subsidiaries are not actively operating. Referencesthis filing to ‘‘TeamStaff,’’ the ‘‘Company,’’ ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer togovernmental staffing segment. TeamStaff, Inc. and its wholly owned subsidiaries.Effective May 31, 2006, TeamStaff exited the payroll processing business it operated for more than 25 years through its DSI Payroll Services division (‘‘DSI’’) when it sold substantially all of the assets of DSI to CompuPay, Inc. for $9.0 million.provides specialized medical, nursing and administrativeGS subsidiary, is a staffing services. TeamStaff provides allied healthcare and nursing professionals and administrative personnel through two staffingTable of Contentssubsidiaries. The Company’s TeamStaff Rx subsidiary operates throughout the United States and specializesprovider specializing in providing travel allied medical employees and nurses (typically on a thirteen-week assignment basis), as well as permanent placement services. Allied medical staff includes MRI technicians, mammographers, dosimetrists, ultrasound staff and physicists. TeamStaff Rx places temporary employees for over 250 client facilities. The Company’s RS Staffing Services subsidiary specializes in providing medicalhealthcare, logistical, information technology and office administration/technical professionalsadministration personnel to U.S. government entities. The staffing services offered by TeamStaff GS are provided through independent Federal Supply Schedule (‘‘FSS’’(“FSS”) contracts with boththrough the United States General Services Administration (‘‘GSA’’(“GSA”). The provision of logistical and United Statesadministrative personnel is accomplished through the Logistics Worldwide Schedule and medical personnel are supplied through the Professional and Allied Healthcare Staffing Services Schedule. TeamStaff also provides its staffing services to federal government agencies through competitively bid contracts and has a GSA schedule contract to provide information technology professional services. TeamStaff provides these services to the DVA, the US Department of Veterans Affairs (‘‘DVA’’). RS Staffing Services places temporaryDefense and other US governmental agencies and placed contract employees at over 70 facilities. 40 facilities during the 2009 fiscal year.Rx Nursing Innovations division, discontinuedthrough its TeamStaff GS subsidiary, is a staffing provider specializing in 2007, provides per diem nursing. This nursing unit places per die mhealthcare, logistical, information technology and office administration personnel that has been serving the Federal Government for over a decade. Providing quality staffing solutions and facility management services, TeamStaff GS is committed to providing on-time delivery of multi-disciplined employees at over 20 client facilities.was organized underGS’ vision is to become the lawspreferred partner of the State of New Jersey on November 25, 1969 and maintains its principal executive office at 1 Executive Drive, Suite 130, Somerset, New Jersey 08873 where its telephone number is (877) 523-9897.RECENT DEVELOPMENTSDiscontinued operationsBased on an analysis of historical and forecasted results and the Company’s strategic initiative to focus on core business, in the fourth quarter of fiscal 2007, the Company approved and committed to a formal plan to divest the operations of the Nursing Innovations per diem nursing business (‘‘Per Diem’’), based at its Memphis, Tennessee location. In evaluating the facets of Per Diem’s operations, management concluded that this business component meets the definition of a discontinued operation (as defined in SFAS 144, ‘‘Accounting for the Impairment or Disposal of Long-Lived Assets’’). Accordingly, the results of operations, cash flows and related assets and liabilities of Per Diem have been reclassified in the accompanying financial statements from those of continuing businesses.TeamStaff has received confidential letters of intent from interested third parties to purchase certain assets, including accounts receivable, fixed assets and all Nursing Innovations intangibles, and assume defined liabilities of Per Diem. Based on the values and terms of these conditional offers, the Company believes that an objective indication of fair value now exists and, accordingly, has reduced the carrying value of related assets held for sale to fair value (adjusted for estimated disposal costs) as of September 30, 2007. There are a number of uncertainties inherent in the Company’s ability to find a suitable buyer, negotiate an acceptable sale and satisfy closing conditions in a timely manner. Although no assurances can be provided, the Company expects to complete the sale of this business in the second fiscal quarter of 2008 and that the ultimate gain or loss on a formal disposal will not be material to the Company’s future f inancial condition, results of operations or cash flows. Per Diem’s results of operations from October 1, 2007 through a closing date will be recognized, as incurred, as a loss from discontinued operations. Such operating losses are not expected to be material.SERVICESAs a part of its continuing operations, TeamStaff provides staffing services through its wholly-owned subsidiaries, TeamStaff Rx and RS Staffing Services.Staffing ServicesTeamStaff provides allied healthcare and nursing professionals and administrative staffing through two staffing subsidiaries. The Company’s TeamStaff Rx subsidiary operates throughout the United States and specializes in the supply of travel allied medical employees and nurses, (typically on thirteen-week assignments), as well as permanent placement services. Allied medical staff includes MRI technicians, mammographers, dosimetrists, ultrasound staff and physicists. The Nursing Innovations unit of TeamStaff Rx provides per diem nursing. TeamStaff’s RS Staffing Services subsidiary specializes in providing medical and office administration/technical professionals through FSS contracts with both the GSA and DVA, among other customers.Table of ContentsTeamStaff Rx has more than 25 years of experience in placing temporary and permanent employees with specialized skills and talents to regional and national medical facilities. Temporary medical staffing enables clients to attain management and productivity goals by matching highly trained professional and technical personnel to specific staffing requirements. During the fiscal year ended September 30, 2007, this unit generated $22.0 million of revenue.TeamStaff Rx focuses its allied health staffing services in all national markets, and seeks to place employees on temporary long-term assignments or on a permanent basis. TeamStaff Rx employs allied health professionals such as radiological technologists, MRI techs, CT techs, diagnostic sonographers, cardiovascular technologists, radiation therapists, dosimetrists, and physicists and places these professionals in hospitals, clinics and therapy centers throughout the United States. TeamStaff Rx also provides travel nursing, temporary-to-permanent nursing and permanent nursing placement services. The continued shortage of nurses combined with an increasing demand for clinical healthcare services in hospitals, is creating a need forfederal government facilities to turn to agency nurses as a means to fill open positions. TeamStaff Rx provides a full complement of specialized nurses to fill the needs of its clients. Clients whose staff requirements vary dramatically depending on patie nt census and in-house turnover levels are therefore able to secure the services of qualified individuals on an interim basis, while better managing ‘‘cost-to-hire’’ and ‘‘time-to-hire’’ criteria. Hiring travel nurses plays a key role in the facilities plan to meet their core and long-term staffing needs.TeamStaff Rx’s clients are dependent on temporary staffing to supplement various internal departments for staffing shortages due to vacations, medical leaves, core vacancies and other causes. Our Company’s operating units fill our clients’ needs by providing reliable services and qualified personnel on a weekly, monthly, quarterly or longer basis, depending upon a client’s particular staffing objectives.that deliver exceptional results. TeamStaff Rx alsoGS provides targeted recruitingnationwide service and placement for clients for permanent employees. Additionally, if an employee on temporary assignment is hired byhas several remote offices and branches across the client on a permanent basis, continental United States.Rx usually receives a recruitment fee from that client.RS Staffing Services’GS’s primary client has been the United States Government and its various agencies. RS Staffing ServicesTeamStaff GS provides contract staffing solutions for government agencies in the categories of medical, professional, office administration, general services support, facility management and logistics support. Through its FSS contracts with both the GSA and the DVA, RS Staffing ServicesTeamStaff GS offers the ease of ordering directly through one of its multiple-award contracts and through multiple procurement vehicles and schedules. These procurement vehicles include the Logistics World schedule, and the Professional and Allied Healthcare and Information Technology schedules, as well as the ability to order through the GSA’s e-Buy system. RS Staffing ServicesTeamStaff GS also provides technology for online timesheets, reporting, ordering and invoicing as well as a provision of qualified personnel which can be based on any term assignment or contract. RS Staffing also generates revenue opportunities through the use of ‘teaming partners’ that provide personnel to fill positions secured by RS Staffing Services. During the fiscal year ended September 30, 2007,2009, this subsidiary generated $46.0 million in revenues.generated $44.9 millionlevel to systems command/headquarters program office experience. More recently, TeamStaff GS has entered into several teaming agreements with Service Disabled Veteran Owned Small Businesses. These agreements allow the Company to aid these companies, which typically support Department of revenue.provide clients the ability to ‘‘right size;’’ that is, to expand or reduce their workforces in response to changing business conditions. The Company believes that these services provideprovides numerous benefits to its clients, such as saving the costs of salary and benefits of a permanent employee whose services are not needed throughout the year. The clients also avoid the costs, uncertainty and delays associated with searches for qualified interim employees.customers in managing their workforces. TeamStaff’s temporarycontract staffing services also allow a client to avoid administrative responsibility for payroll, payroll taxes, workers’ compensation, unemployment and medical benefits for interim employees.temporarycontract staffing services provide a client with an increased pool of qualified personnel. Since TeamStaff’s temporarycontract staffing employees have access to a wide array of benefits, such as paid time off, health and life insurance and Section 125 premium conversion plans and 401(k) retirement savings plans, TeamStaff believes it is able to attract a sufficient pool of qualified personnel to grow this business. These benefits provide temporarycontract employees with the motivation of permanent workers without additional benefit and administrative costs to the client.TableTeamStaff GS has achieved positive results in expanding its penetration of Contentscurrent shortage in the availability of certain allied health and nursing personnel, along with the advent of certain patient protection measures, has, in management’s opinion, created an improving market opportunity for TeamStaff Rx. TeamStaff Rx believes that itCompany is in a pivotal position to increasealso expanding its market share based on its reputation and experience in the temporary medical staffing industry. RS Staffing Services continues to seek further opportunities inreach within the government sector. RS Staffing Services has recently expanded its reach and started to bidsector beyond VA opportunities by bidding on Department of Defense (“DOD”) staffing contracts.contracts afforded to large businesses and the GSA’se-Buyportal, an electronic Request for Quote (RFQ) / Request for Proposal (RFP) system, which is designed to allow Federal buyers to request information, find sources, and prepare RFQs/RFPs, online, for various services offered through GSA’s Multiple Award Schedule. Additionally, TeamStaff GS is evaluating opportunities to satisfy the staffing needs of other government agencies in addition to the DVA and DOD as a means of horizontal expansion of its client base.RS Staffing ServicesTeamStaff GS subsidiary. Many of the U.S. Government programs in which we participate as a contractor or subcontractor may extend for several years. However, such programs are normally funded on an annual basis. All U.S. Government contracts and subcontracts may be modified, curtailed or terminated at the convenience of the government for any reason, including if program requirements or budgetary constraints change. If a contract is terminated for convenience, we would generally be reimbursed for our allowable costs through the date of termination and would be paid a proportionate amount of the stipulated profit or fee attributable to the work actually performed. Although contract and program modifications, curtailments or terminations have not had a material adverse effect on the business of RS Staffing ServicesTeamStaff GS in the past, no assurance can be given that such modifications, curtailments or terminations will not have a material adverse effect on our financial condition or results of operations in the future. In addition, the U.S. Government may terminate a contract for default. Although the U.S. Government has never terminated any of RS Staffing Service’sTeamStaff GS’s contracts for default, such a termination could have a significant impact on our business. If a contract is terminated for default, we may be unable to recover amounts billed or billable under the contract and may be liable for other costs and damages. The U.S. Government contract bid process is complex and sometimes lengthy. Once a bid is won and a contract awarded, there still is the possibility of a bid protest or numerous delays in implementation. There can be no assurance that such protest process or implementation delays will not have a material adverse effect on our financial condition, results of operations or cash flows in the future.CUSTOMERSAs of September 30, 2007, TeamStaff’s combined customer base consisted of over 340 staffing clients. All of the customers of our TeamStaff Rx subsidiary are engaged in the healthcare industry. Substantially all of the business of our RS Staffing Services subsidiary is accomplished through contracts with various agencies of the United States Government. In fiscal 2007, RS Staffing Services has two customers who each individually comprise more than 10% of the Company’s overall consolidated revenuefour customers who each individually comprise more than 10% of the subsidiary’s revenue. In fiscal 2007, TeamStaff Rx had one client who individually comprises greater than 5% of the subsidiary’s revenue. In fiscal 2007, RS Staffing Services had six clients who each individually comprise greater than 5% of the subsidiary’s revenue.SALES AND MARKETINGClearwater, Florida; Monroe,Loganville, Georgia; Hines, Illinois; Leavenworth, Kansas; Boston, Massachusetts; Biloxi, Mississippi; Muskogee, Oklahoma; Memphis Tennessee; Murfreesboro, Tennessee; and Charleston, South Carolina; and Washington, DC.business units,operating subsidiary, TeamStaff continues to build sales through both telemarketing effortsthe GSA’se-Buy portal, an electronic system designed to allow Federal buyers to request information, find sources, and prepare RFQs/RFPs, online and face-to-face client interactions. Communicating with our clients on a regular basis allows us to form a trusted, working relationship which enables us to better serve and deliver the most qualified candidates. The acquisition of RS Staffing Services in June 2005 offered TeamStaff the opportunity to use RS Staffing Services accounts and on site locations as well as nearby RS Staffing Services offices for the further marketing of its general and government services offerings.Recent effortsEfforts to build marketing presence include revising our website,the launching of new TeamStaff GS and corporate websites, implementing an aggressivea print advertisement campaign, and revising our strategic marketing communications plan. AdditionallyTable of Contentshavealso added several marketing events to our tradeshow calendar in order to increase our brand recognition and participation in both the commercial and government sectors.recognition. This added exposure is allowing us to introduce our suite of offerings to an expanded market.TeamStaff implemented quarterly We continue to focus on our sales and services meetingsmarketing efforts in order to align supplyincrease our contact with current and prospective clients. During fiscal 2008 we completed a corporate branding campaign. TeamStaff GS gives us a strong presence in the government sector and provides us with an opportunity to demand and to enable faster communication of sales focus. We have implemented new software enabling our sales force to share information across the company. We also have expanded our sales efforts to cover more territories and be more nationally focused.COMPETITIONThebid on awards for large multi-year contracts with favorable operating margins.ourgovernment staffing business are AMN Healthcare Services,solutions include Top Echelon Management, Inc., Cross Country Healthcare, Inc., CHG Healthcare Services,Total Management, Inc., Medical Staffing Network Holdings, Inc., Nursefinders,Kforce, Inc. and Maxim Healthcare Services, Inc. TeamStaff competes with these companies by offering customized products, personalized service, competitive prices and specialized personnel to satisfy a client’s particular requirements. Many of these companies have greater name-recognition and financial resources than we do. The Company believes that its broad scope of services and its commitment to quality service differentiate it from its competition. Further, the Company believes that RS Staffing Services’TeamStaff GS’s knowledge and processes with respect to government contract bidding represents a competitive advantage. In addition, we may face additional competition from other larger staffing companies that do not focus on the government staffing sector.INDUSTRY/GOVERNMENT REGULATION4Introductiontemporarycontract staffing employees. There are essentially three types of federal employment tax obligations: (i) withholding of income tax requirements; (ii) obligations under the Federal Insurance Contribution Act (‘‘FICA’’(“FICA”); and, (iii) obligations under the Federal Unemployment Tax Act. Under these statutes, employers have the obligation to withhold and remit the employer portion and, where applicable, the employee portion of these taxes.employees and temporary staffingcorporate (non-worksite) employees. These plans include a 401(k) Plan (a profit-sharing plan with a cash or deferred arrangement, or ‘‘CODA’’“CODA”), under Internal Revenue Code (‘‘IRC’’(“IRC”) Section 401(k)), a Section 125 plan, group health plans, group dental insurance, vision insurance, a group life insurance plan and a group disability insurance plan. Contract staffing employees are offered various employee benefit plans that include a Section 125 plan, group health plans, group dental insurance and group life insurance. Generally, employee benefit plans are subject to provisions of both the Code and the Employee Retirement Income Security Act (‘‘ERISA’’of 1974 (“ERISA”). TeamStaff also makes a variety of voluntary insurance products available to its employees, which its employees may purchase through payroll deductions.Table of Contents‘‘employer’’“employer” as ‘‘any“any person acting directly as an employer, or indirectly in the interest of an employer, in relation to an employee benefit plan.’’” ERISA defines the term ‘‘employee’’“employee” as ‘‘any“any individual employed by an employer.’’temporarycontract medical staffing and permanent placement business. These license and registration requirements generally provide for an evaluation of the operator’s background and integrity and periodic or ongoing monitoring of the medical staffing firm’s policies and practices. As required by state regulation, TeamStaff Rx is licensed or registered for its temporary allied healthcare staffing services in the following jurisdictions: Florida, Massachusetts, North Carolina and Rhode Island and has a license application pending in Illinois. TeamStaff Rx is licensed or registered for its temporary nursing business in California, Kentucky, Maine, Maryland, Massachusetts Minnesota, New Jersey, North Carolina and Washington. TeamStaff Rx is licensed or registered for its permanent placement business in the District of Columbia and New Jersey. The Company continues to review applicable statutes and regulations and prepare appropriate applications for filing.During2007,the Company has made technology related strategic improvements. Previously, the infrastructure and IT support at TeamStaff GS’s Loganville, GA headquarters was outsourced. In an effort to reduce cost and increase network response time, the Company has moved all aspects of IT in house; improving overall support, while reducing the Company’s primary IT objectiveIT-related expenditures by approximately $75,000 per year.consolidationpurchase of the purchased assets by Advantage RN for a purchase price of up to $425,000, of which (i) $350,000 in cash was paid at the closing, and (ii) $75,000 is subject to an escrowed holdback under certain terms and conditions as described in the Asset Purchase Agreement. The holdback consists of (i) $50,000 that will be held back subject to the number of travel nurses and allied healthcare professionals associated with and working in the business on a full-time basis for the week ending January 24, 2010, and (ii) $25,000 that will be held back until appropriate releases have been obtained from certain third parties by TeamStaff Rx and no encumbrances on the purchased assets remain outstanding. As described in greater detail in Note 4 to the Company’s consolidated financial statements, management anticipates that the Company will (i) report a net loss from discontinued operations through the effective date of the sale to Advantage RN, which will include an estimated charge of $0.2 million for severance to certain TeamStaff Rx employees and (ii) incur a loss on the disposal of TeamStaff Rx approximating $0.3 million principally from recognition of the remaining unfunded operating lease payments.travel staffing systems, which was successfully completed on September 30, 2007. Our new platform providesTeamStaff Rx subsidiary, Dale West, ceased her employment with TeamStaff. Ms. West will receive severance payments and benefits as provided for in the employment agreement we entered into with her in December 2008. See the discussion of these payments and benefits under the section of this annual report captioned “Employment Agreements with Named Executive Officers”.more cohesive view intodivision of Sovereign Bank (“Sovereign” or “Lender”). Effective April 1, 2008, BACC changed its name to Sovereign Business Capital. Under the activitiesLoan Agreement, the Lender agreed to provide a revolving credit facility to the Company in an aggregate amount of up to $3,000,000, subject to the further terms and conditions of the alliedLoan Agreement. The loan is secured by a first priority lien on all of the Company’s assets. Previously in 2005, the Company and nursing businesses, which we believe will position usPNC Bank, National Association (“PNC”) had entered into an $8,000,000 revolving credit facility (“PNC Loan Facility”). Pursuant to serve our clientsthe Loan Agreement, the Lender (i) acquired by assignment from PNC all right, title and travelers fasterinterest of PNC under the PNC Loan Facility, the PNC note and more efficiently.related loan documentation, and (ii) restructured the PNC Loan Facility into a $3,000,000 revolving credit facility with a 3 year term. The new system also includes integrated email and calendar functions, giving us theCompany’s ability to associate all electronic communicationsrequest loan advances under the Loan Agreement is subject to computation of the Company’s advance limit and compliance with the appropriate employee or client contact. Sincecovenants and conditions of the new platformloan. The facility is entirely Web-basedfor a term of 36 months and hosted bymatures on March 31, 2011. Interest on amounts due accrues on the daily unpaid balance of the loan advances at a third-party,per annum rate of 0.25% percentage point above the Prime Rate in effect from time to time, but not less than 5.5% per annum.havewere required to obtain the consent of Sovereign. On January 12, 2010 we received such consent. As a condition to such consent, however, Sovereign reduced the effect of any emergency situation which would impact our Clearwater, Florida office.Throughout the year, we also addressed some older portions of our infrastructure by upgrading our office servers and employees’ workstations, as well as replacing an outdated mail server with the aforementioned new platform. For fiscal year 2008, we will focus on improving our business processesmaximum amount available under such loan facility from $3.0 million to take full advantage of the updated technologies, and roll out new versions of our staffing-related web sites that reflect our updated branding. For regulatory reasons, we still maintain equipment that supported past lines of business, but over the next two years we will begin the decommissioning process, which will let us reduce associated operating costs without impacting ongoing business.Employees2007,2009, there was no debt outstanding under the Loan Agreement and unused availability (as defined) totaled $1.7 million, net of required collateral reserves per the Loan Agreement for certain payroll and tax liabilities. As of September 30, 2009, TeamStaff had working capital of $0.9 million. Accordingly, management does not believe that the reduction in the availability under the Loan Agreement will have a material adverse impact on the Company’s operations and financial condition.9845 corporate (non worksite) employees, both full-time and part-time, including executive officers, a decrease from 12264 during the previous fiscal year. As of September 30, 2007,2009, TeamStaff also employed approximately 1,290 temporary911 contract employees on client assignments. TeamStaff believes its relationship with its current employees is satisfactory. None of TeamStaff’s employees are covered by a collective bargaining agreement.RISK FACTORSItem 1A. Risk Factors (‘‘(“1995 Reform Act’’Act”), we wish to caution shareholders and investors that the following important factors, among others discussed throughout this Annual Report on Form 10-K for the fiscal year ended September 30, 2007,2009, have affected, and in some cases could affect, our actual results of operation and cause our results to differ materially from those anticipated in forward looking statements made herein. Our business, results of operations andTable of Contents‘‘forward-looking statements’’“forward-looking statements” within the meaning of the 1995 Reform Act. TeamStaff desires to avail itself of certain ‘‘safe harbor’’“safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable it to do so. Forward-looking statements included in this Report on Form 10-K for fiscal year ended September 30, 20072009 involve known and unknown risks, uncertainties, and other factors which could cause TeamStaff’s actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are based upon management’s best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, the risks identified below.If we fail to execute our acquisitions or investments, our business could suffer.We have supplemented our internal growth through acquisitions and may do so in the future through acquisitions, investments or joint ventures. We evaluate potential acquisitions, investments and joint ventures on an ongoing basis. Our acquisitions and investments pose many risks, including:• We may not be able to compete successfully for available acquisition candidates, complete future acquisitions or investments or accurately estimate their financial effect on our business;• Future acquisitions, investments or joint ventures may require us to issue additional common stock, spend significant cash amounts or decrease our operating income;• We may have trouble integrating the acquired business and retaining its personnel;• Acquisitions, investments or joint ventures may disrupt our business and distract our management from other responsibilities; and• If our acquisitions or investments fail, our business could be harmed.We may acquire additional companies, which may result in adverse effects on our earnings.We may at times become involved in discussions with potential acquisition candidates. Any acquisition that we may consummate may have an adverse effect on our liquidity and earnings and may be dilutive to our earnings. In the event that we consummate an acquisition or obtain additional capital through the sale of debt or equity to finance an acquisition, our shareholders may experience dilution in their equity. We have previously obtained growth through acquisitions of other companies andTable of Contentsbusinesses. Under Statements of Financial Accounting Standards No.141, Business Combinations (SFAS No.141) and No. 142 Goodwill and Other Intangible Assets (SFAS No. 142) implemented in June 2001, weTeamStaff GS’s revenue are required to periodically review goodwill and indefinite life intangible assets for possible impairment. In the event that we are required to write down the value of any assets under these pronouncements, it may materially and adversely affect our earnings. See the more detailed discussion appearing as part of our Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 herein.Our management may be unable to effectively integrate acquisitions and to manage our growth, and we may be unable to fully realize any anticipated benefits of these acquisitions.Our business strategy includes growth through both acquisitions and internal development. We are subject to various risks associated with our growth strategy, including the risk that we will be unable to identify and recruit suitable acquisition candidates in the future or to integrate and manage the acquired companies. Acquired companies’ histories, geographical locations, business models and business cultures can be different from our own in many respects. Our directors and senior management may face significant challenges in their efforts to integrate our businesses and the business of the acquired companies or assets, and to effectively manage our continued growth. There can be no assurance that our efforts to integrate the operations of any acquired assets or companies acquired in the future will be successful, that we can manage our growth or that the anticipated benefits of these proposed acquisitions will be fully realized. The dedication of manage ment resources to these efforts may detract attention from our day-to-day business. There can be no assurance that there will not be substantial costs associated with these activities or of the success of our integration efforts, either of which could have a material adverse effect on our operating results.A substantial percentage of RS Staffing Services’ revenue isderived from U.S. Government customers.RS Staffing ServicesTeamStaff GS subsidiary from the U.S. Government as a prime contractor or a subcontractor. Revenues from the U.S. Government represented approximately 95%98% of the total revenues of RS Staffing ServicesTeamStaff GS for each of the 2009 and 2008 fiscal years. Further, in fiscal year 2007, 92%2009, through its FSS contracts primarily with the DVA, TeamStaff GS had independent task-orders with four DVA-related facilities that comprised 31%, 23%, 12% and 11% of the Company’s overall consolidated revenue, or 77% in fiscal year 2006 and 94% in fiscal year 2005. Ourthe aggregate. Accordingly, our consolidated revenues could be materially adversely impacted by a reduction in the overall level of U.S. Government spending and by changes in its spending priorities from year to year.RS Staffing ServicesTeamStaff GS subsidiary. In light of the recent disposition of our TeamStaff Rx business, our dependence on the results of operations of TeamStaff is significantly increased as compared to prior periods. Our future success and revenue growth will depend in part upon our ability to continue to expand our customer base.The U.S. Government may modify, curtail or terminate our contracts.Modification,Due to our increasing dependence on these relationships, the modification, curtailment or termination of our major programs or contracts couldwould have a material adverse effect on our results of operations and financial condition.Our business is subject to potential U.S. Government inquiries and investigations. We are from time to time subject to certain U.S. Government inquiries and investigations of our business practices due to our participation in government contracts. We cannot assure you that any such inquiry or investigation will not have a material adverse effect on our results of operations and financial condition.Table of Contentsagencies.agencies and unfavorable government audit results could force us to refund previously recognized revenues and could subject us to a variety of penalties and sanctions.Other than withCurrently, our CEO, we generally doCFO and the President of TeamStaff GS are under employment contracts. The Company does not have long-term employment contracts with our key personnel, nor do we maintain ‘‘key person’’“key person” life insurance policies on any of our key personnel.medicalcurrent President and Chief Executive Officer intends to resign from such positions at the end of January 2010. If we do not employ a new President and Chief Executive Officer by the time of his departure, we will not have an executive officer to perform important managerial and oversight functions.business mayservices could be adverselysignificantly affected if there is a renewalby the general level of the past economic downturnactivity and unemployment or by factors beyond our control (i.e.; hurricanes, weather conditions, acts of war, etc.) in the healthcare industry.Our medical staffing business is concentrated entirely in the healthcare industry. The economic downturn in the last four years caused a reduction in our clients’ utilization of our services. Any continued, concentrated or renewed economic weakness generally, or in the healthcare industry specifically, could have an adverse impact on our results of operations.Unfavorable economic conditions could harm our business.California, Florida, Georgia and Tennessee with respect to allied healthcare and nurse staffing with respect to TeamStaff Rx, and Illinois, Kansas, South Carolina and Tennessee with respect to RS Staffing Services.the government staffing services provided by TeamStaff GS. While we believe that our market diversification will eventually lessen this risk in addition to generating significant revenue growth, we may not be able to duplicate in other markets the revenue growth and operating results experienced in the listed markets.Table of Contentsprovidesprovide as much cost stability as possible, we may not be able to prevent increases in claim activity, accurately estimate our claims expenses or pass the cost of such increases on to our clients. Since our ability to incorporate such increases into our fees to our clients is constrained by contractual arrangements with our clients, a delay could occur before such increases could be reflected in our fees, which may reduce our profit margin. As a result, such increases could have a material adverse effect on our financial condition, results of operations, cash flows and liquidity.temporarycontract employees. If this experience is unfavorable, the premiums that are payable by us will increase or coverage may become unavailable altogether. We may not be able to pass such increases onto our clients, which may reduce our profit margins. Increasing health care and workers’ compensation premiums could also place us at a disadvantage in competing for new clients. In addition, periodic reassessments of workers’ compensation claims of prior periods (when TeamStaff was covered under large deductible-type plans) may require an increase or decrease to our reserves, and therefore may also affect our present and future financial condition.temporarycontract and permanent staffing are implemented, or if current regulations are changed, our business could be harmed.temporarycontract health care or nursing services as well as those offering permanent placement services. There can be no assurance that we will be able to comply with any such regulations, which may be imposed upon us now or in the future, and our inability to comply with any such regulations could have a material adverse effect on our results of operations and financial condition. In addition, there can be no assurance that existing laws and regulations which are not currently applicable to us will not be interpreted more broadly in the future to apply to our existing activities or that new laws and regulations will not be enacted with respect to our activities. Either of these changes could have a material adverse effect on our business, financial condition, results of operations and liquidity. extensively regulate the temporary medical staffing and permanent placement industry and some states require us to satisfy operating, licensing or certification requirements. If we are unable to obtain or maintain all of the required licenses or certifications that we need, we could experience material adverse effects to our results of operations, financial condition and liquidity.We bear the risk of nonpayment from our clients and the possible effects of bankruptcy filings by clients.To the extent that any particular client experiences financial difficulty, or is otherwise unable to meet its obligations as they become due, our financial condition and results of operations could be adverselyTable of Contentsaffected. For work performed prior to the termination of a client agreement, we may be obligated, as an employer, to pay the gross salaries and wages of our temporary medical employees and the related employment taxes and workers’ compensation costs, whether or not our client pays us on a timely basis, or at all. A significant increase in our uncollected account receivables may have a material adverse effect on our earnings, cash flows and financial condition.temporarycontract employees and therefore incur unforeseen liabilities.temporarycontract staffing firms, their clients and temporarycontract employees remain unresolved. These issues include who bears the ultimate liability for violations of employment and discrimination laws. As a result of our employer status, we may be liable for violations of these or other laws despite contractual protections. While our client service agreements generally provide that the client is to indemnify us for any liability caused by the client’s failure to comply with its contractual obligations and the requirements imposed by law, we may not be able to collect on such a contractual indemnification claim and may then be responsible for satisfying such liabilities. In addition, temporarycontract employees may be deemed to be our agents, which could make us liable for their actions. TeamStaff Rx and RS Staffing Services subsidiaries, we engage in the business of providing temporarycontract healthcare professionals. The placement of such employees increases our potential liability for negligence and professional malpractice of those employees. Although we are covered by professional malpractice liability insurance in the aggregate amount of $5,000,000$5.0 million with a $2,000,000$2.0 million per occurrence limit, which we deem reasonable under the circumstances, not all of the potential liability we face may be fully covered by insurance. Any significant adverse claim, which is not covered by insurance, may have a material adverse effect on us.temporarycontract healthcare employees, our business would be adversely impacted.temporarycontract healthcare employees is a significant part of our business. If we were unable to secure renewal of contracts for such plans or the renewal of such plans with favorable rates and with competitive benefits, our business would be adversely affected. The current health and workers’ compensation contracts are provided by vendors with whom we have an established relationship and on terms that we believe to be favorable. While we believe that renewal contracts could be secured on competitive terms without causing significant disruption to our business, there can be no assurance in this regard.business will suffer if our services areprimary competitors in government staffing solutions include Top Echelon Management, Inc., Total Management, Inc., Medical Staffing Network Holdings, Inc., Kforce, Inc. and Maxim Healthcare Services, Inc. In addition, other large staffing companies that do not competitive.The temporary employee placement industry is characterized by vigorous competition.currently provide government staffing solutions may seek to enter into this space. These companies may have greater name recognition and financial and marketing resources than us. Since we compete with numerous entities that have greater resources than us, in each of our business lines, our business will suffer if we are not competitive with respect to each of the services we provide. OurTable of Contentsmajor competitors with respect to temporary medical staffing resources include, but are not limited to, AMN Healthcare Services, Inc., Cross Country Healthcare, Inc., CHG Healthcare Services, Inc., Medical Staffing Network Holdings, Inc., Nursefinders, Inc. and Maxim Healthcare Services Inc. These companies may have greater financial and marketing resources than we.Our failure to remain competitive could harm our business.Our business is highly competitive. We compete with larger companies that have greater name recognition, financial resources and larger staffs. We also compete with smaller, more specialized entities whowhich are able to concentrate their resources on particular areas. Insegment,entities, we also compete with the U.S. Government’s own in-house capabilities and the U.S. Government’s ability to hire permanent staff. To remain competitive, we must provide superior service and performance on a cost-effective basis to our customers. Any failure to do so could have a material adverse effect on our business.cannot obtain sufficient levels of temporary employees,are unable to attract qualified nurses and allied health professionals for our healthcare staffing business, or other contract personnel for our staffing business, our business may be negatively affected.TeamStaff Rxtemporary employment agency, whichshortage of qualified nurses in most areas of the United States and competition for nursing personnel is increasing. We may be unable to continue to increase the number of healthcare professionals that we recruit, thereby decreasing the potential for growing our business. Our ability to attract and retain healthcare professionals depends on several factors, including our ability to provide healthcare professionals with assignments that they view as attractive and to provide them with competitive benefits and wages. The cost of attracting healthcare professionals and providing them with attractive benefits packages may be higher than we anticipate and, as a result, if we are unable to pass these costs on to our hospital and healthcare facility clients, our profitability could decline. Moreover, if we are unable to attract and retain healthcare professionals, the quality of our services to our hospital and healthcare facility clients may decline and, as a result, we could lose clients.temporary employeespersons willing to accept assignments for our clients. ItsOur business is materially dependent upon the continued availability of such qualified medical temporary personnel. Our inability to secure temporary medicalqualified personnel would have a material adverse effect on our business.over the last few years to conductpredominantly from our various lines of business.former Professional Employer Organization discontinued operations. The IRS has made claims that, if we were required to pay in full, could materially adversely affect our financial condition.condition and cash flows. We are contesting these notices because we believe all material payroll-related taxes have been paid. We further believe that once all tax payments are applied appropriately, all material penalties and interest should be abated. We have retained the services of Ernst & Young, LLP to assist us in this regard. However, there can be no assurance that we will be successful in our efforts. In settling various years for specific subsidiaries with the IRS, the Company has received refunds for those specific periods; however, as the process of settling and concluding on other periods and subsidiaries is not yet completed and the potential exists for related penalties and interest, such amounts havethe remaining liability ($1.1 million at September 30, 2009) has been recorded in accounts payable in the accompanying balance sheets. In fiscal 2009, the Company paid $1.1 million, related to this matter. Based on an assessment of periods settled and the status of open periods under review by the IRS, management reduced its estimated liability by $0.7 million in 2008. Such amount, accounted for as a change in estimate, is included as a component of other income (expense) in the accompanying 2008 statement of operations. Management believes that the ultimate resolution of these remaining payroll tax matters will not have a significant adverse effect on its financial position or future results of operations.not be successful in seekinghave the effect of decreasing our earnings or increasing our losses.setoff legal feesperiodically review goodwill and indefinite life intangible assets for possible impairment. In the event that have been incurred in connection withwe are required to write down the investigationvalue of RS Staffing Services.As described in greater detail in ‘‘Legal Proceedings’’, we were served with a federal subpoena relating toany assets under these pronouncements, it may materially and adversely affect our subsidiary, RS Staffing Services, requesting production of certain documents in connection with an investigation of possible violations of Federal criminal laws and related crimes concerning procurement activities. Asearnings. See the more detailed discussion appearing as part of our Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 herein.subsidiary,fair value of the net assets acquired. At such date, goodwill represented approximately 32% of our total assets. As permitted, we issueddo not amortize goodwill or intangible assets deemed to have an indefinite useful life. Impairment, for goodwill and intangible assets deemed to have an indefinite life, exists if the net book value of the goodwill or intangible asset equals or exceeds its fair value. As required, we performed our annual review for impairment during the fourth quarter of fiscal year 2009 by performing a fair value analysis of each reporting unit. The fair value analysis was completed with the assistance of outside valuation professionals. The carrying values of the intangibles associated with our continuing TeamStaff GS business were supported by the results of this valuation, However, as a result of the decision to divest TeamStaff Rx, the Company recognized an impairment charge of $2.3 million to reduce the carrying value of long lived assets (tradename — $0.7 million and goodwill — $1.6 million) to estimated fair value. The estimated fair value was derived from the terms of the sale of these assets to Advantage RN. The impairment charge is included in the 2009 loss from discontinued operations. Contributing to this 2009 impairment charge was the reduction in our projected growth rates (compared to prior projections), management’s current assessment of the healthcare staffing industry and the significant decrease in the enterprise value of the unit. Additional impairment analyses may be performed to determine if indicators of impairment are present, and if so, such amount will be determined and the associated charge will be recorded to the former ownersconsolidated statement of RS Staffing Services a $3.0 million promissory note,operations. Although it does not affect our cash flow, an impairment charge to earnings has the effect of which $1.5 million was paid in June 2006. On May 31, 2007decreasing our earnings or increasing our losses, as the Company sent a notice of indemnification claimcase may be. If we are required to the former owners for costs that have been incurred in connection with the investigation. At September 30, 2007, the amount had not been settled. The Company recognized expenses related to legal representation and costs incurred in connection with the investigation in the amount of $1.486 million during the fiscal year ended Septemb er 30, 2007, as a component of other income (expense). We haverecord additional impairment charges, our stock price could also notified the former owners or RS Staffing Services that it is the Company’s intention to exercise its right to setoff the payment of such expenses against the remaining principal and accrued interest dueTable of Contentsto the former owners of RS Staffing Services. The Company will pursue the recovery as a right of offset in future periods. Although, management and its counsel have a good faith belief that the Company will recover such amounts, no assurances can be given that the former owners of RS Staffing Services would not pursue action against us or that the Company will be successful in the offset of such amounts against the outstanding debt. Accordingly, the Company has expensed costs related to the investigation at September 30, 2007.adversely affected.$7.0$3.0 million revolving credit facility by PNCSovereign Business Capital (formerly known as Business Alliance Capital Company), a division of Sovereign Bank, effective on June 8, 2005. Effective February 13, 2006, TeamStaff entered into an amendment to the revolving credit note, increasing the revolving credit facility to $8.0 million.March 28, 2008. Revolving credit advances bear interest at either the per annum rate of Prime Rate plus 25 basis points, or LIBOR plus 275 basis points, whichever is higher.but not less than 5.5% per annum. The facility has a three-year life and contains term and line of credit borrowing options. In connection with the disposition of the assets of our TeamStaff Rx subsidiary, we were required to obtain the consent of the lender under our Loan Agreement, Sovereign. On January 12, 2010 we were granted such consent. As a condition to such consent, however, Sovereign reduced the maximum amount available under such loan facility from $3.0 million to $2.0 million. As of September 30, 2009, there was no debt outstanding under the Loan Agreement and unused availability (as defined) totaled $1.7 million, net of required collateral reserves per the Loan Agreement for certain payroll and tax liabilities. As of September 30, 2009, we had working capital of $0.9 million. Accordingly, management does not believe that the reduction in the availability under the Loan Agreement will have a material adverse impact on our operations and financial condition.combined cashdebt service coverage ratio and line availability.restrictions on the Company’s ability to, among other things, dispose of certain assets, engage in certain transactions, incur indebtedness and pay dividends. In addition, the line of credit is secured by a lien on substantially all of our assets. Due to these covenants and restrictions, our operations may be affected in several ways. For instance, a portion of our cash flow from operations will be dedicated to the payment of the principal and interest on our indebtedness and as referenced above, our ability to enter into certain transactions, incur additional indebtedness and dispose of certain assets may be limited. The facility is subject to acceleration upon non-payment or various other standard default clauses. Material increases in the Prime or LIBOR rate could have a material adverse effect on our results of operations, the status of the revolving credit facility, as well as interest costs. Failure to pay revolving credit advances or any failure to comply with applicable restrictive covenants would have a material adverse effect on our business in that we could be required to repay the outstanding balance in advance or sell assets in order to repay the outstanding amount. In addition, the Lender could seize the collateral securing the loan facility.RS Staffing ServicesTeamStaff GS are required to execute ‘‘Acknowledgements“Acknowledgements of Assignment.’’” There can be no assurance that every RS Staffing ServicesTeamStaff GS government account will execute the documentation to effectuate the assignment and secure availability. The failure of government third parties to sign the required documentation could result in a decrease in availability under the line of credit, which would materially affect the Company’s business.facility expiresLoan Agreement provides that following an event of default, Sovereign may, among other remedies provided for in June 2008the Loan Agreement, accelerate the amounts outstanding under the Loan Agreement, take such actions as it deems necessary to protect its security interest in the collateral, and terminate the Loan Agreement. In connection with its consent to the sale of the TeamStaff Rx assets and loan modification, on January 12, 2010, Sovereign waived such non-compliance for the period ending September 30, 2009. The Lender, however, reserved its rights under the Loan Agreement with respect to any future non-compliance with the debt service coverage ratio for any future period or any other provision of the Loan Agreement. If covenant violations were to occur in the future and the Company will be seekinglender does not agree to replacemodify the facility with PNC Bankcovenants or another financial institution; shouldwaive such violations, it could result in the Company be unable to obtain an extension or a replacement credit facility on acceptable terms, thereacceleration of the maturity date of all of our debt under this loan facility. In both of these circumstances it could behave a material adverse effectimpact on our business and financial position, interest expense and cash flows. If the facility is replaced or modified prior to June 2008, the Company will incur a non cash write off of the then unamortized capitalized financing fees. Unamortized fees at September 30, 2007 approximated $34,000.GlobalCapital Market under the symbol ‘‘TSTF.’’“TSTF”. On December 31, 2007,2009, the closing bid price of our common stock was $0.70.$0.80. If we fail to meet any of the continued listing standards of The Nasdaq GlobalCapital Market, our common stock will be delisted from The Nasdaq GlobalCapital Market. These continued listing standards include specifically enumerated criteria, such as a $1.00 minimum closing bid price.July 6, 2007,December 17, 2009, we received a Nasdaq Staff Deficiency Letterstaff deficiency letter from The Nasdaq Stock Market notifying usthe Company that for the past 30 consecutive business days, the closing bid price per share of ourits common stock was below the $1.00 minimum bid price requirement for 30 consecutive trading days and that, as a result, we no longer meet Thecontinued listing on the Nasdaq Stock Market’s minimum bid price requirement for continued listingCapital Market set forth in MarketplaceNasdaq Listing Rule 4450(a)(5)5550(a)(2). As a result, the Company was notified by Nasdaq that it is not in compliance with the Listing Rule. Nasdaq has provided usthe Company with 180 calendar days, or until January 2, 2008,June 15, 2010, to regain compliance. To regain compliance with the minimum bid price requirement, the closing bid price of our common stock must remain above $1.00 for a minimum of ten consecutive trading days during the 180-day compliance period. If this occurs, Nasdaq will provide us with written notification of compliance. However, if we do not regain compliance by January 2, 2008during this grace period, our common stock will be delistedsubject to delisting from The Nasdaq Global Market. As of January 2, 200 8 we did not regain compliance and onTable of ContentsJanuary 4, 2008, we received a notice that our common stock will be delisted. Nasdaq rules permit us to appeal any delisting determination by the Nasdaq staff to a Nasdaq Listings Qualifications Panel and we intend to appeal such determination. Our appeal will stay the suspension and delisting of our common stock pending a decision by a Nasdaq Listing Qualifications Panel. In addition, our board of directors has authorized the approval of a reverse stock split in order to facilitate our ability to regain compliance with the continuing listing standards of the Nasdaq Global Market. In the event that such a delisting determination was based solely on non-compliance with the minimum bid price rule, we may be permitted to transfer the listing of our common stock to The Nasdaq Capital Market if we satisfy all criteria for initial inclusion on such market other than compliance with the minimum bid price requirement. In the event of such a transfer, the Nasdaq Marketplace Rules provide that we would be gr anted an additional 180 calendar days to comply with the minimum bid price rule while on The Nasdaq Capital Market. The 180-day compliance period relates exclusively to our bid price deficiency. We may be delisted during the 180-day period for failure to maintain compliance with any other listing requirement which occurs during this period. the Pink Sheets or the OTC Bulletin Board. Such trading will reduce the market liquidity of our common stock. As a result, an investor would find it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock. If our common stock is delisted from The Nasdaq Capital Market and the trading price remains below $5.00 per share, trading in our common stock might also become subject to the requirements of certain rules promulgated under the Exchange Act, which require additional disclosure by broker-dealers in connection with any trade involving a stock defined as a ‘‘penny stock’’“penny stock” (generally, any equity security not listed on a national securities exchange or quoted on Na sdaqNasdaq that has a market price of less than $5.00 per share, subject to certain exceptions). Many brokerage firms are reluctant to recommend low-priced stocks to their clients. Moreover, various regulations and policies restrict the ability of shareholders to borrow against or ‘‘margin’’“margin” low-priced stocks, and declines in the stock price below certain levels may trigger unexpected margin calls. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher priced stocks, the current price of the common stock can result in an individual shareholder paying transaction costs that represent a higher percentage of total share value than would be the case if our share price were higher. This factor may also limit the willingness of institutions to purchase our common stock. Finally, the additional burdens imposed upon broker-dealers by these requirements could discourage broker-dealers from facilitati ngfacilitating trades in our common stock, which could severely limit the market liquidity of the stock and the ability of investors to trade our common stock.• the impact of acquisitions, investments, joint ventures and divestitures that we may undertake; • the impact of the volatility of the market value of comparable public companies that are considered in our valuation process and any publicly traded securities we may own; • the impact of litigation, government investigations or other customer disputes on our operating performance and future prospects; and • the mix of our commercial and international business as a proportion of our overall business and the volatility associated with companies in those business areas Table of Contents‘‘blank check’’“blank check” preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, which would adversely affect the voting power or other rights of the holders of our common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company, which could have the effect of discouraging bids for our Company and thereby prevent stockholders from receiving the maximum value for their shares. Although we have no present intention to issue any shares of our preferred stock, in order to discourage or delay a change of control of our Company, we may do so in the future. In addition, we may determine to issue preferred stock in connection with capital raising efforts and the terms of the stock so issued could have special voting rights or rights related to the composition of our Board.— require certain supermajority votes; —• establish certain advance notice procedures for nomination of candidates for election as directors and for shareholders’ proposals to be considered at shareholders’ meetings; and —• divide the board of directors into three classes of directors serving staggered three-year terms. Forward-Looking Statement RisksTable of Contents‘‘believes,’’ ‘‘expects,’’ ‘‘may,’’ ‘‘will,’’ ‘‘should,’’ ‘‘seeks,’’ ‘‘pro“believes,” “expects,” “may,” “will,” “should,” “seeks,” “pro forma,’’ ‘‘anticipates’’” “anticipates” or ‘‘intends,’’“intends,” or by discussions of strategies or intentions. We are not undertaking any obligation to update t hesethese factors or to publicly announce the results of any changes to our forward-looking statements due to future events or developments.ITEM 1B. UNRESOLVED STAFF COMMENTS ITEM 1B. UNRESOLVED STAFF COMMENTS18None.ITEM 2. PROPERTIESOperationITEM 2. PROPERTIES Monroe,Loganville, Georgia. The facilities provide sufficient capacity to meet demands for the foreseeable future. In the fiscal year ended September 30, 2007,2009, TeamStaff’s total lease expense for continuing operations was approximately $533,000.2007:APPROXIMATE EXPIRATION MONTHLY LOCATION APPROXIMATE
SQUARE FEETEXPIRATION
DATEMONTHLY
TERMSCorporate Headquarters 1 Executive DriveSuite 130Somerset, NJ2,670 8/31/2012 $ 4,005 9/2007 – 8/2008$4,125 9/2008 – 8/2008$4,248 9/10/2009 – 8/20101 Executive Drive $ 4,376 9/2010 – 8/2011 Suite 130 $ 4,507 9/2011 – 8/2012 Somerset, NJ 1545 Peachtree Street, NENE*Suite 340Atlanta, GA2,998 6/30/2011 $ 6,246 7/2006 – 1/2007$6,433 2/2007 – 1/2008$6,626 2/2008 – 1/2009$6,825 2/10/2009 – 1/2010Suite 340 $ 7,030 2/2010 – 1/2011 Atlanta, GA $ 7,241 2/2011 – 6/2011 18167 US 19 NorthNorth**Suite 400Clearwater, FL15,177 2/28/2011 $ 23,446 9/2006 – 8/2007$24,144 9/2007 – 8/2008$24,865 9/2008 – 8/2009$25,624 9/10/2009 – 8/2010Suite 400 $ 26,395 9/2010 – 2/2011 Clearwater, FL 6555 Quince RoadRoad***Suite 303Memphis, TN1,894 1/31/2010 $ 2,841 2/2007 – 1/2008$2,898 2/2008 – 1/2009$2,956 2/10/2009 – 1/2010533 Plaza Drive *Suite 303Monroe, GA 30655Memphis, TN2,5006/30/20083525 Highway 81 South 6,200 5/31/2015 $ 3,800 per month6.250 10/2009 – 5/2010 Loganville, GA $ 6,500 6/2010 – 5/2011 $ 6,750 6/2011 – 5/2012 $ 7,000 6/2012 – 5/2013 $ 7,250 6/2013 – 5/2014 $ 7,500 6/2014 – 5/2015 * As parta result of the transactionrelocation of the Company’s corporate headquarters, the Atlanta, GA office space was vacated and has been subleased effective January 15, 2008 through the end of the lease term.** In connection with RS Staffing Services,sale of the operating assets of TeamStaff agreedRx, Advantage RN will have the right to accept an assignment or subleaseuse these premises and is obligated to make rent subsidy payments to us totaling $125,000, beginning on March 1, 2010.*** As a result of this lease effective asthe sale of June 4, 2005.the Nursing Innovations per diem business, the Memphis, TN office space was vacated and is currently unoccupied.ITEM 3. LEGAL PROCEEDINGS Table of ContentsITEM 3. LEGAL PROCEEDINGSStaffing.Staffing Services. The subpoena stated that it iswas issued in connection with an investigation of possible violations of Federal criminal laws and related crimes concerning procurement at the DVA. According to the cover letter accompanying the subpoena, the U.S. Department of Justice, Antitrust Division (“DOJ”), along with the DVA, Office of the Inspector General, are responsible for the current criminal investigation. RS Staffing Services provides temporarycontract staffing at certain DVA hospitals that may be part of the investigation. The return date for documents called for by the subpoena was May 17, 2007. In connection with the same investigation, agents with the DVA, Office of Inspector General, executed a search warrant at the Monroe, Georgia offices of RS Staffing Services. The Company is cooperating fully with the Department of Justice investigation.based on all the information known to date, the Company is not a target of the government’s investigation and that the governmentDOJ has no intentionintent to charge TeamStaff or any of indicting TeamStaff.MayJune 2005. As part of the purchase price of the subsidiary,acquisition, the Company issued to the former owners of RS Staffing Services a $3.0 million promissory note, of which $1.5 million and interest of $150,000 was paid in June 2006. On May 31, 2007, the Company sent a notice of indemnification claim to the former owners for costs that have been incurred in connection with the investigation. Effective June 1, 2007, the Company and former owners of RS Staffing Services reached an agreement to extend the due date from June 8, 2007 to September 1,December 31, 2008 with respect to the remaining $1.5 million note payable and accrued interest payable on June 8, 2007. Atpayable. Such agreement has been extended to February 28, 2010. As of September 30 2007,2009, the amount has not been settled. The Company recognized expenses related to legal representation and costs incurred in connection with the investigation in the amount of $1.486 millio n$21,000 and $219,000 during the fiscal year ended September 30, 2007,2009 and 2008, respectively, as a component of other income (expense). Legal counsel for the Company has reviewedCumulative costs related to this matter approximate $1.7 million. Pursuant to the acquisition contract and based on their analysis of the Company’s rights,agreement with RS Staffing Services, the Company has notified the former owners of RS Staffing Services that it is the Company’s intention to exercise its right to setoff the payment of such expenses against the remaining principal and accrued interest due to the former owners of RS Staffing Services.and its counsel havehas a good faith belief that the Company will recover such amounts; however, generally accepted accounting principles preclude the Company from recording an offset to the note payable to the former owners of RS Staffing Services until the final amount of the claim is settled and determinable. At present, no assurances can be given that the former owners of RS Staffing Services would not pursue action against us or that the Company will be successful in the offset of such amounts against the outstanding debt.debt and accrued interest from notice date forward, if any. Accordingly, the Company has expensed costs incurred related to the investigation atthrough September 30, 2007.temporarycontract medical employees. The professional liability insurance policy provides up to $5,000,000 aggregate coverage with a $2,000,000 per occurrence limit. AlthoughTable of ContentsITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS20On August 21, 2007, TeamStaff held its Annual Meeting of Shareholders. The record date for shareholders eligible to vote was July 13, 2007. As of the record date there were 19,283,366 shares of common stock issued and outstanding. Voting of the shares of common stock was on a non-cumulative basis. 15,294,025 shares were voted at the Annual Meeting.The only matter before the shareholders was the election of three persons as Class II directors for a term of three years. The persons nominated for election were Karl W. Dieckmann, Frederick G. Wasserman and William H. Alderman. All three nominees were elected to the Board of Directors. The results of the vote were:Nominees Votes
Cast ForWithheld
Authority to
VoteKarl W. Dieckmann 14,764,437 529,588 Frederick G. Wasserman 14,848,317 445,708 William H. Alderman 14,848,317 445,708 Table of ContentsITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES A. GlobalCapital Market System under the symbol ‘‘TSTF.’’“TSTF”. TeamStaff started trading on The Nasdaq GlobalCapital Market in June 2001. Prior to that date, TeamStaffNovember 25, 2009. Previously, TeamStaff’s common stock was listed for trading on The Nasdaq Global Market. As previously announced, on September 15, 2009, we received a letter from the Nasdaq Stock Market advising that we had not maintained a minimum market value of publicly held shares of common stock of $5,000,000, as required by the continued listing requirements of the Nasdaq Global Market set forth in Nasdaq Listing Rule 5450(b)(1)(C). Subsequently, the Company elected to apply to transfer the listing of its common stock to the Nasdaq Capital Market. On November 23, 2009, Nasdaq approved the transfer application.System.set forth in Nasdaq Listing Rule 5550(a)(2). As a result, the Company was notified by Nasdaq that it is not in compliance with the Listing Rule. Nasdaq has provided the Company with 180 calendar days, or until June 15, 2010, to regain compliance. See Item 1A-Risk Factors-Risks Relating to Our Stock.B. closing sales prices for TeamStaff’s common stock for the periods indicated below are:FISCAL YEAR 2005 HIGH LOW 1st Quarter 2.50 1.71 2nd Quarter 2.02 1.20 3rd Quarter 1.80 0.92 4th Quarter 1.75 1.24 FISCAL YEAR 2009 HIGH LOW 1st Quarter $ 2.57 $ 1.64 $ 2.25 $ 1.03 3rd Quarter $ 2.65 $ 1.23 4th Quarter $ 1.98 $ 1.32 FISCAL YEAR 2006 HIGH LOW 1st Quarter 1.41 1.17 2nd Quarter 1.74 1.24 3rd Quarter 1.75 1.32 4th Quarter 1.38 1.22 FISCAL YEAR 2008 HIGH LOW 1st Quarter $ 4.16 $ 2.36 2nd Quarter $ 3.24 $ 2.40 3rd Quarter $ 2.80 $ 1.83 4th Quarter $ 3.30 $ 1.85 FISCAL YEAR 2007 HIGH LOW 1st Quarter 1.35 1.22 2nd Quarter 1.28 1.02 3rd Quarter 1.18 0.90 4th Quarter 0.99 0.72 January 11, 2008,December 31, 2009, TeamStaff’s common stock had a closing price of $0.68$0.80 per share.C. Dividends21D. 8,216,5222,054,130 shares of its common stock in exchange for all of the outstanding capital stock of BrightLane. As of January 14, 2008,December 31, 2009, not all of the BrightLane shareholders had submitted their capital stock for exchange into shares of common stock; however such shares are classified as outstanding.In connection with the acquisition of RS Staffing Services, TeamStaff issued to the shareholders of RS Staffing Services an aggregate of 1,206,896 shares of its common stock. The shares are restricted securities and may be sold only pursuant to Rule 144. TeamStaff relied upon the exemption from registration provided by Section 4(2) of the Securities Act in issuing the shares.Table of ContentsJanuary 14, 2008,December 31, 2009, there were 19,403,3664,940,982 shares of common stock outstanding held of record by 290267 persons. TeamStaff believes it has approximately 1,4261,315 beneficial owners of its common stock.E. Forquarter ended September 30, 2007, weperiod covered by this report, the Company did not issue any sharessecurities that were not registered under the Securities Act of 1933, as amended, except as has been reported in previous filings with the SEC or as set forth herein. Following the end our common stock to our non-executive directors. However,2009 fiscal year, on October 3, 2007,13, 2009, we issuedgranted an aggregate of 120,000 restricted42,500 shares of our commonrestricted stock to our non-executive directors, pursuant toconsistent with our 2006 Long Term Incentive Plancompensation policy for non-executive directors. These shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act.F. Act of 1933, as amended.(‘‘(“2000 Employee Plan’’Plan”)(‘‘(“2000 Non-Executive Director Plan’’Plan”)(‘‘(“2006 Long Term Incentive Plan’’Plan”)Equity Compensation Plan Information (*) Equity Compensation Plan Information (*) Equity Compensation Plan Information (*) (b) Weighted Average (c) (a) exercise price of Number of securities Number of Securities outstanding remaining available for to be issued upon options, warrants future issuances under exercise of and rights (or fair equity compensation plans outstanding options, value at date of (excluding securities reflected in Plan Category (a)
Number of
Securities to be issued
upon exercise of
outstanding options,
warrants and rights(b)
Weighed Average
exercise price of
outstanding options,
warrants and rights
(or fair value at
date of grant)(c)
Number of securities remaining
available for future issuances
under equity compensation plans
(excluding securities reflected in
column (a)) warrants and rights grant) column (a)) Equity Compensation Plans Approved by Security Holders: 2000 Employee Stock Option Plan 149,000 $ 2.30 1,561,687 4,500 $ 7.84 1,706,187 2000 Non-Executive Director Stock Option Plan (1) 87,500 $ 2.01 — 10,625 $ 5.35 — 2006 Long Term Incentive Plan 220,000 $ 1.33 4,740,000 391,250 $ 1.96 4,454,222 *Does not include grants made pursuant to these plans subsequent to the September 30, 2007 balance sheet date. On October 3, 2007, 120,000 shares of restricted stock were issued to non-executive members of the Board of Directors in accordance with the Director compensation policy effective January 19, 2007.(1) 5,000 shares per year per non-executive director are granted under the 2000 Non-Executive Director Plan for a full year’s service and prorated for less than a full year’s service. Effective January 19, 2007, this Plan was suspended due to a change in the compensation terms for non-employee Board members. For additional information regarding our director compensation policy, see below under the caption ‘‘Director Compensation’’“Director Compensation” in Item 11 —– Executive Compensation.G. yearyears ended September 30, 2007.
2009.Table of ContentsH. Stock Performance GraphThe following performance graph shall not be deemed ‘‘filed’’ for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any filing of TeamStaff under the Securities Act or the Exchange Act.Set forth herein is a line graph comparing the total returns (assuming reinvestment of dividends) of TeamStaff’s common stock, the Standard and Poor’s Industrial Average, and an industry composite consisting of a group of five peer issuers selected in good faith by TeamStaff. TeamStaff’s common stock is listed for trading in The Nasdaq Global Market and is traded under the symbol ‘‘TSTF’’.
NOTES(1)Assumes that the value of the investment in TeamStaff’s common stock and each index was $100 on September 30, 2002 and that dividends were reinvested at years ended September 30th.(2)Industry composite for ‘‘Peer Group includes Cross Country Healthcare, Medical Staffing Network Holdings, On Assignment, ATC Healthcare and AMN Healthcare Services. The industry composite has been determined in good faith by management to represent entities that compete with TeamStaff in certain of its significant business segments.Table of ContentsITEM 6. SELECTED FINANCIAL DATA (AMOUNTS IN THOUSANDS) For the Years Ended September 30, 2007 2006 2005 2004 2003 Revenues $ 66,882 $ 71,644 $ 47,275 $ 32,856 $ 58,119 Direct expenses $ 55,852 $ 59,859 $ 39,053 $ 26,880 $ 48,909 Gross profit $ 11,030 $ 11,785 $ 8,222 $ 5,976 $ 9,210 Selling, general and administrative expenses (includes depreciation and amortization) $ 13,063 $ 14,193 $ 13,180 $ 10,600 $ 13,427 Loss from operations $ (2,033 ) $ (2,408 ) $ (4,958 ) $ (4,624 ) $ (4,217 ) Loss from continuing operations $ (3,374 ) $ (18,537 ) $ (3,065 ) $ (2,749 ) $ (2,411 ) Discontinued operations net of tax $ (1,319 ) $ 5,290 $ 576 $ (1,330 ) $ (26,474 ) Net loss $ (4,693 ) $ (13,247 ) $ (2,489 ) $ (4,079 ) $ (28,885 ) Earnings per share – Basic and diluted Loss from continuing operations $ (0.17 ) $ (0.96 ) $ (0.17 ) $ (0.18 ) $ (0.15 ) (Loss) income from discontinued operations $ (0.07 ) $ 0.27 $ 0.03 $ (0.08 ) $ (1.69 ) Net loss $ (0.24 ) $ (0.69 ) $ (0.14 ) $ (0.26 ) $ (1.84 ) Weighted average shares outstanding: Basic 19,288 19,278 18,206 15,714 15,732 Diluted 19,288 19,278 18,206 15,714 15,732 BALANCE SHEET DATA: Assets from continuing operations $ 25,678 $ 28,596 $ 46,606 $ 36,574 $ 37,410 Assets from discontinued operations $ 490 $ 2,180 $ 3,448 $ 855 $ 23,207 Total assets $ 26,168 $ 30,776 $ 50,054 $ 37,429 $ 60,617 Long-term liabilities from continuing operations $ 404 $ 779 $ 2,150 $ 864 $ 1,042 Liabilities from continuing operations $ 9,311 $ 9,070 $ 14,979 $ 5,349 $ 9,054 Liabilites from discontinued operations $ 263 $ 502 $ 763 $ 1,087 $ 16,453 Total liabilities $ 9,574 $ 9,572 $ 15,742 $ 6,436 $ 25,507 Working capital $ 1,074 $ 4,223 $ (11 ) $ 5,149 $ 4,368 Shareholders’ equity $ 16,594 $ 21,204 $ 34,312 $ 30,993 $ 35,110 Certain prior period amounts have been reclassifiedWe are a “smaller reporting company” as defined by Regulation S-K and as such, are not required to reflectprovide the Nursing Innovations per diem business unit as a discontinued operation.ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ‘‘forward-looking statements’’“forward-looking statements” within the meaning of the 1995 Reform Act, Section 27A of the Securities Act and Section 21E of the Exchange Act. TeamStaff desires to avail itself of certain ‘‘safe harbor’’“safe harbor” provisions of the 1995 Reform Act and is therefore including this special note to enable TeamStaff to do so. Forward-looking statements are identified by words such as ‘‘believe,’’ ‘‘anticipate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘plan,’’ ‘‘will,’’ ‘‘may’’“believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “may” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Forward-looking statements included in this report involve known and unk nownunknown risks, uncertainties and other factors which could cause TeamStaff’s actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed orTable of ContentsReport:Report on Form 10-K: our ability to continue to recruit qualified temporarycontract and permanent healthcare professionals and administrative staff at reasonable costs; our ability to retain qualified temporarycontract healthcare professionals and administrative staff for multiple assignments at reasonable costs; our ability to attract and retain sales and operational personnel; our ability to enter into contracts with hospitals, healthcare facility clients, affiliated healthcare networks, physician practice groups and the United States Government facilities on terms attractive to us and to secure orders related to those contracts; our ability to demonstrate the value of our services to our healthcare and other facility clients; changes in the timing of hospital, healthcare facility clients’, physician practice groups’ and U.S. Government orders for and our placement of temporarycontract and permanent healthcare professionals and administrative staff; the general level of patient occupancy at our hospital, healthcare facility clients’ and physician practice groups’ facilities; the overall level of demand for services offered by temporarycontract and permanent healthcare staffing providers; the ability of our hospital, healthcare facility and physician practice group clients to retain and increase the productivity of their permanent staff; the variation in pricing of the healthcare facility contracts under which we place temporarycontract and permanent healthcare professionals; our ability to successfully implement our strategic growth, acquisition and integration strategies; our ability to successfully integrate co mpleted acquisitions into our current operations; our ability to manage growth effectively; our ability to leverage our cost structure; the performance of our management information and communication systems; the effect of existing or future government legislation and regulation; our ability to grow and operate our business in compliance with these legislation and regulations; the impact of medical malpractice and other claims asserted against us; the disruption or adverse impact to our business as a result of a terrorist attack; our ability to carry out our business strategy; the loss of key officers, and management personnel that could adversely affect our ability to remain competitive; the effect of recognition by us of an impairment to goodwill and intangible assets; other tax and regulatory issues and developments; and the effect of adjustments by us to accruals for self-insured retentions.Overview23Management and Board ChangesEffective January 5, 2007, Mr. Robert P. Traficanti resigned as General Manager of the Nursing Innovations division of TeamStaff Rx. Effective January 8, 2007, Mr. T. Kent Smith left the Company having served as President, Chief Executive Officer and a Member of the Board of Directors. Mr. James L. Donahue left the Company having served as its Vice President of Sales and President of the Company’s TeamStaff Rx subsidiary. In addition, Mr. Peter Rosen left the Company having served as its Vice President of Human Resources. Effective January 10, 2007, Mr. Rick J. Filippelli, the Company’s Chief Financial Officer was appointed President and Chief Executive Officer. Effective January 18, 2007, Mr. James D. Houston, the Company’s General Counsel, Vice President of Business and Legal Affairs and Corporate Secretary was appointe d Chief Operating Officer. Effective April 30, 2007, Mr. Houston’s employment with the Company was terminated. Effective January 16, 2007, Mr. Ben Dyer resigned from the Company’s Board of Directors. Effective January 23, 2007, Mr. Ronald R. Aldrich resigned from the Company’s Board of Directors. Effective March 2, 2007, Mr. Timothy Nieman left the Company having served as President of RS Staffing Services.Effective January 19, 2007, the Company’s Board of Directors elected Mr. Rick Filippelli, the Company’s President, Chief Executive Officer and Chief Financial Officer to the Board of Directors. Effective January 19, 2007, the Company’s Board of Directors elected Mr. William H. Alderman and Mr. Frederick Wasserman to the Company’s Board of Directors to fill vacancies in accordance with the Company’s by-laws. Ms. Julie Thompson was concurrently rehired on a consultant basis to assist at RS Staffing Services. As part of the Company’s initiative on sales and marketing in its allied andTable of Contentsnursing staffing division, Mr. Terry Merlin was hired as Director of Sales and Marketing for TeamStaff Rx, the Company’s allied and nursing staffing subsidiary and commenced employment on March 15, 2007. As part of the Company’s initiative on sales and contract procurement in the government sector, Mr. Kevin Wilson was hired as Director of Sales for RS Staffing Services, the Company’s subsidiary that specializes in staffing through FSS contracts with both the GSA and DVA. Mr. Wilson commenced employment on June 18, 2007.th esethese estimates and actual results, our financial condition, or results of operations and cash flow will be affected.F-9F-8 of the notes to our Consolidated Financial Statements contained elsewhere in this Annual Report on Form 10-K.EITF 99-19, ACS 605-45,Reporting Revenues Gross as a Principal Versus Net as an Agent,and SAB 104, Revenue Recognition. TeamStaff recognizes all amounts billed to its temporarycontract staffing customers as gross revenue because, among other things, TeamStaff is the primary obligor in the temporarycontract staffing arrangement; TeamStaff has pricing latitude; TeamStaff selects temporarycontract employees for a given assignment from a broad pool of individuals; TeamStaff is at risk for the payment of its direct costs; and TeamStaff assumes a significant amount of other risks and liabilities as an employer of its temporarycontract employees, and therefore, is deemed to be a principal in regard to these services. TeamStaff also recognizes as gross revenue and as unbilled receivables, on an accrual basis, any such amounts that relate to services performed by temporarycontract employees which have not yet been billed to the customer as of the end of the accounting period.temporarycontract employees, plus an estimate to coverfor overhead expenses and a profit margin. Additionally, commissions from permanent placements are included in revenue as placements are made. Commissions from permanent placements result from the successful placement of a medical staffing employee to a customer’s workforce as a permanent employee. The Company also reviews the status of such placements to assess the Company’s future performance obligations under such contracts.In connection with the Company’s DSI discontinued payroll services operation, payroll services revenue was recognized as service was rendered and consisted primarily of administrative service fees charged to clients for the processing of paychecks as well as the preparation of quarterly and annual payroll related reports. These amounts are reflected as part of income (loss) from discontinued operations in the consolidated financial statements.24