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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2011	Sep. 30, 2010
CURRENT ASSETS:
Cash and cash equivalents	$ 763	$ 1,187
Accounts receivable, net of allowance for doubtful accounts of $0 as of September 30, 2011 and 2010	11,112	11,324
Prepaid workers' compensation	513	512
Other current assets	184	344
Total current assets	12,572	13,367
EQUIPMENT AND IMPROVEMENTS:
Furniture and equipment	177	2,259
Computer equipment	102	215
Computer software	260	960
Leasehold improvements	21	12
Equipment and improvements, gross	560	3,446
Less accumulated depreciation and amortization	(346)	(3,112)
Equipment and improvements, net	214	334
TRADENAMES		2,583
GOODWILL	8,595	8,595
OTHER ASSETS
Deferred financing costs, net	26
Other assets	510	360
Total other assets	536	360
TOTAL ASSETS	21,917	25,239
CURRENT LIABILITIES:
Bank loan payable	740	362
Notes payable	711	1,500
Current portion of capital lease obligations	8	18
Accrued payroll	10,318	10,910
Accounts payable	1,983	1,887
Accrued expenses and other current liabilities	2,134	1,872
Liabilities from discontinued operation	235	289
Total current liabilities	16,129	16,838
LONG TERM LIABILITIES
Capital lease obligations, net of current portion		8
Convertible debentures, net	46
Financial instruments, at fair value	182
Other long term liability	6	5
Total long term liabilities	234	13
Total liabilities	16,363	16,851
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock, $.10 par value; authorized 5,000 shares; none issued and outstanding
Common stock, $.001 par value; authorized 40,000 shares; issued 6,023 at September 30, 2011 and 5,105 at September 30, 2010, outstanding 6,021 at September 30, 2011 and 5,103 at September 30, 2010	6	5
Additional paid-in capital	70,988	69,503
Accumulated deficit	(65,416)	(61,096)
Treasury stock, 2 shares at cost at September 30, 2011 and 2010	(24)	(24)
Total shareholders' equity	5,554	8,388
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 21,917	$ 25,239

CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Sep. 30, 2011	Sep. 30, 2010
CONSOLIDATED BALANCE SHEETS
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 0	$ 0
Preferred stock, par value (in dollars per share)	$ 0.10	$ 0.10
Preferred stock, authorized shares	5,000	5,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized shares	40,000	40,000
Common stock, issued shares	6,023	5,105
Common stock, outstanding shares	6,021	5,103
Treasury stock, shares	2	2

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
REVENUES	$ 41,923	$ 40,874
DIRECT EXPENSES	36,025	36,067
GROSS PROFIT	5,898	4,807
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES	7,425	7,375
OFFICER SEVERANCE		310
IMPAIRMENT CHARGE - INTANGIBLE ASSETS	2,583	1,341
DEPRECIATION AND AMORTIZATION	113	118
Loss from operations	(4,223)	(4,337)
OTHER INCOME (EXPENSE)
Interest income	8	13
Interest expense	(291)	(174)
Other expense	(56)
Change in fair value of financial instruments	107
Loss on retirement of assets	(45)
Other income, net	6	13
Legal expense related to pre-acquisition activity of acquired company	(96)	(113)
Total other income (expenses)	(367)	(261)
Loss from continuing operations before income taxes	(4,590)	(4,598)
INCOME TAX EXPENSE	0
Loss from continuing operations	(4,590)	(4,598)
GAIN (LOSS) FROM DISCONTINUED OPERATION
Other income	270
Loss from disposal		(349)
Loss from operations		(860)
Gain (loss) from discontinued operation	270	(1,209)
NET LOSS	$ (4,320)	$ (5,807)
NET GAIN (LOSS) PER SHARE - BASIC AND DILUTED
Loss from continuing operations (in dollars per share)	$ (0.84)	$ (0.91)
Gain (loss) from discontinued operation (in dollars per share)	0.05	(0.24)
Net loss per share (in dollars per share)	$ (0.79)	$ (1.15)
WEIGHTED AVERAGE BASIC SHARES OUTSTANDING (in shares)	5,460	5,033
WEIGHTED AVERAGE DILUTED SHARES OUTSTANDING (in shares)	5,460	5,033

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Treasury Stock
BALANCE at Sep. 30, 2009	$ 13,816	$ 5	$ 69,124	$ (55,289)	$ (24)
BALANCE (in shares) at Sep. 30, 2009		4,898			2
Increase (Decrease) in Stockholders' Equity
Director restricted stock grants	57		57
Director restricted stock grants (in shares)		43
Expense related to employee stock option grants	144		144
Expense related to employee restricted stock grants	178		178
Expense related to employee restricted stock grants (in shares)		162
Net loss	(5,807)			(5,807)
BALANCE at Sep. 30, 2010	$ 8,388	$ 5	69,503	(61,096)	$ (24)
BALANCE (in shares) at Sep. 30, 2010	5,103	5,103			2
Increase (Decrease) in Stockholders' Equity
Director restricted stock grants	$ 20		20
Director restricted stock grants (in shares)		35
Exercise of stock options	30		30
Exercise of stock options (in shares)		30
Proceeds and non cash considerations from sale of common stock	162	$ 1	161
Proceeds and non cash considerations from sale of common stock (in shares)		459
Issuance of shares for services	25		25
Issuance of shares for services (in shares)		51
Expense related to employee stock option grants	398		398
Issuance of common shares in settlement of notes payable	795		795
Issuance of common shares in settlement of notes payable (in shares)		300
Warrants issued on convertible debentures	42		42
Expense related to employee restricted stock grants	14		14
Expense related to employee restricted stock grants (in shares)		43
Net loss	(4,320)			(4,320)
BALANCE at Sep. 30, 2011	$ 5,554	$ 6	$ 70,988	$ (65,416)	$ (24)
BALANCE (in shares) at Sep. 30, 2011	6,021	6,021			2

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (4,320)	$ (5,807)
Adjustments to reconcile net loss to net cash used in operating activities, net of divested business:
Depreciation and amortization including debt costs	146	118
Impairment charge - intangible assets	2,583	1,341
Change in fair value of derivative financial instruments	(107)
Compensation expense related to employee stock option grants	398	144
Compensation expense related to employee restricted stock grants	14	179
Compensation expense related to director restricted stock grants	20	57
Other non cash compensation	12
Loss on retirement of equipment	45	1
Changes in operating assets and liabilities, net of divested business:
Accounts receivable	212	103
Other current assets	160	(83)
Other assets	(150)	(93)
Accounts payable, accrued payroll, accrued expenses and other current liabilities	(1)	845
Other long term liabilities	1	(8)
Cash flows from discontinued operation		959
Net cash used in operating activities	(987)	(2,244)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash flows from discontinued operation		375
Purchase of equipment, leasehold improvements and software	(37)	(194)
Net cash provided by (used in) investing activities	(37)	181
CASH FLOWS FROM FINANCING ACTIVITIES
Net advances on revolving line of credit	378	362
Settlement of notes payable	(200)
Repayments on capital lease obligations	(18)	(21)
Issuance of convertible debentures, net of direct costs of $32	318
Proceeeds from exercise of stock options	30
Proceeds from sale of common stock, net of direct costs of $4	146
Cash flows from discontinued operation	(54)	(83)
Net cash provided by financing activities	600	258
Net decrease in cash and cash equivalents	(424)	(1,805)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	1,187	2,992
CASH AND CASH EQUIVALENTS AT END OF PERIOD	763	1,187
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest	229	46
Cash paid during the period for income taxes	$ 17	$ 86

CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - USD ($) $ in Thousands	12 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
CONSOLIDATED STATEMENTS OF CASH FLOWS
Issuance of convertible debentures, net of direct costs	$ 32	$ 0
Proceeds from sale of common stock, net of direct costs	$ 4	$ 0

ORGANIZATION AND BUSINESS:

12 Months Ended

Sep. 30, 2011

ORGANIZATION AND BUSINESS:

ORGANIZATION AND BUSINESS:

(1) ORGANIZATION AND BUSINESS:

TeamStaff, Inc. (together with its subsidiaries "TeamStaff" or the "Company" and also referred to as "we," "us" and "our") is a full-service provider of healthcare delivery solutions, logistics and technical services, and contingency/staff augmentation services to government agencies including the Department of Veteran Affairs ("DVA"), the Department of Defense, and other clients in the United States. The Company principally operates through its wholly-owned subsidiary DLH Solutions, Inc. ("DLH Solutions" formerly operating as TeamStaff Government Solutions, Inc.). TeamStaff's primary operations are located in Loganville, Georgia and its principal executive office is located at 1776 Peachtree Street, NW, Atlanta, Georgia 30309 where its telephone number is (866) 952-1647.

Company History

TeamStaff is a New Jersey corporation that was founded in 1969 as a payroll service company. Through several acquisitions over recent decades the Company has evolved considerably. In early 2010, TeamStaff Inc. divested its commercial temporary staffing business and made the strategic decision to build the Company around its government services entity, then known as TeamStaff Government Solutions, Inc. ("TeamStaff GS") based in Loganville, Georgia. The Company is now completely focused on government services both as a prime contractor as well as partnering with other government contractors. During its 2011 fiscal year, the Company's Board of Directors approved management's proposal to re-brand the Company to better align with its strategic market focus, enhance brand-equity, and maximize long-term value (see Note 2- Intangible Assets). In September 2011, TeamStaff GS changed its corporate name and is now DLH Solutions.

In addition, the Company's Board has approved a plan to change the corporate name of parent company TeamStaff, Inc. to DLH Holdings Corp and, in early 2012, plans to convene a meeting of its shareholders to approve the re-naming of TeamStaff, Inc. to DLH Holdings Corp.

In connection with the evolution of the Company, on December 28, 2009, TeamStaff and TeamStaff Rx, Inc. ("TeamStaff Rx"), a wholly-owned subsidiary, entered into a definitive Asset Purchase Agreement with Advantage RN, LLC, for the sale of substantially all of the operating assets of TeamStaff Rx related to the business of providing travel nurse and allied healthcare professionals for temporary assignments. The closing of this transaction occurred on January 4, 2010. As discussed in Note 4 to these consolidated financial statements, where additional information about this transaction is provided, the results of operations, cash flows and related assets and liabilities of TeamStaff Rx are presented as a discontinued operation in the accompanying consolidated financial statements.

TeamStaff's other wholly-owned subsidiaries include TeamStaff Rx, DSI Staff ConnXions Northeast, Inc., DSI Staff ConnXions Southwest, Inc., TeamStaff Solutions, Inc., TeamStaff I, Inc., TeamStaff II, Inc., TeamStaff III, Inc., TeamStaff IV, Inc., TeamStaff VIII, Inc., TeamStaff IX, Inc., Digital Insurance Services, Inc., HR2, Inc. and BrightLane.com, Inc. As a result of the sale of our Professional Employer Organization business in fiscal year 2004 and other Company business changes, these "other" subsidiaries are not actively operating.

LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

12 Months Ended

Sep. 30, 2011

LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(2) LIQUIDITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Liquidity

At September 30, 2011, the Company had a net working capital deficit of approximately $3.6 million and an accumulated deficit of approximately $65.4 million. For the year ended September 30, 2011, the Company incurred an operating loss and net loss of approximately $4.2 million and $4.3 million, respectively. The Company has a limited amount of cash and cash equivalents at September 30, 2011 and will be required to rely on operating cash flow and periodic funding, to the extent available, from its line of credit to sustain the operations of the Company unless it elects to pursue and is successful in obtaining additional debt or equity funding, as discussed below, or otherwise.

In an effort to improve the Company's cash flows and financial position, in fiscal 2011 the Company completed measures to enhance its liquidity by approximately $1,000,000 as a result of increasing the maximum availability of its credit facility and receiving funding of and/or commitments for additional equity and/or debt financing. In that regard, our largest shareholder, Wynnefield Capital, Inc., and certain of our directors and executive officers collectively provided $500,000 of additional capital to the Company. As described in Notes 6 and 10, $150,000 of such capital was provided on March 31, 2011 and $350,000 of such capital was provided in July, 2011. In addition, as described in Note 6, on February 9, 2011, the Company entered into an amendment of its Loan and Security Agreement with Presidential Financial Corporation, pursuant to which they agreed to increase the maximum availability under the Loan and Security Agreement by an additional $500,000 and provide an unbilled receivable facility within the limits of the Loan and Security Agreement. Following this increase, the maximum availability under this loan facility is $3,000,000; subject to eligible accounts receivable. At September 30, 2011 the amount available was $316,000. In addition, as described in greater detail below, the parties agreed to amend certain other provisions of the Loan Agreement, including an extension of the term of the Loan Agreement for an additional year and the Lender agreed not to seek to terminate the Loan Agreement without cause until after February 29, 2012, which date has subsequently been amended to December 31, 2012. In addition, pursuant to its current credit facility, the financial institution also has the ability to terminate the Company's line of credit immediately upon the occurrence of a defined event of default, including among others, a material adverse change in the Company's circumstances or if the financial institution deems itself to be insecure in the ability of the Company to repay its obligations or, as to the sufficiency of the collateral. At present, the Company has not experienced and the financial institution has not declared an event of default.

Management believes, at present, that: (a) cash and cash equivalents of approximately $0.8 million as of September 30, 2011; (b) the amounts available under its line of credit (which, in turn, is limited by a portion of the amount of eligible assets); (c) forecasted operating cash flow including timely collection of the retrospective billings; (d) the ultimate non-payment of certain liabilities and recorded guarantees currently contested by the Company or not expected to be settled in cash (See Note 6) (classified as current at September 30, 2011) in fiscal 2012, or the applicable portion of fiscal 2013 and (e) effects of cost reduction programs and initiatives should be sufficient to support the Company's operations for twelve months from the date of these financial statements. However, should any of these factors not occur substantially as currently expected, there could be a material adverse effect on the Company's ability to access the level of liquidity necessary for it to sustain operations at current levels for the next twelve months. In such an event, management may be forced to make further reductions in spending or to further extend payment terms with suppliers, liquidate assets where possible, and/or to suspend or curtail planned programs. Any of these actions could materially harm the Company's business, financial position, results of operations and future prospects. Due to the foregoing there could be a future need for additional capital and the Company may pursue equity, equity-based and/or debt financing alternatives or other financing in order to raise any needed funds. If the Company raises additional funds by selling shares of common stock or convertible securities, the ownership of its existing shareholders would be diluted.

Presently, the Company derives all of its of revenue from agencies of the Federal government and the Company has derived a substantial portion of its revenues through various contracts awarded by the DVA as further discussed below and in Note 13—Economic Dependency.

In May 2011, DLH Solutions was awarded a competitively awarded Blanket Purchase Agreement contract with the DVA for pharmaceutical services which retains and expands work that accounted for approximately 45% of revenues for fiscal 2011. Work under the new contract began on November 1, 2011, and is expected to continue for up to 5 years and generate revenue of up to approximately $145 million (unaudited). The Company also won a contract in September 2011 to provide other medical services to the DVA of up to approximately $10 million over five years. In addition, the Company also provides further services to the DVA under contracts which accounted for approximately 50% of revenues for fiscal 2011 currently expiring on December 31, 2011, in respect of which no request for proposals have yet been invited. Accordingly, the Company has in the past and anticipates in the future receiving sole source extensions of this work for an additional period of time. While the Company believes it is well positioned to continue its relationship with the DVA, no assurances can be given that the DVA would further extend our current orders for the provision of services, that we would be successful in any bid for new contracts to provide such services or that if we are granted subsequent orders, that such orders would be of a scope comparable to the services that we have provided to date. If the DVA does not further extend our current service contracts or we are not successful in our efforts to obtain contract awards pursuant to either the current or new solicitations for the provision of such services, our results of operations, cash flows and financial condition would be materially adversely affected. However, in such circumstances, the Company may be able to avail itself of a right to continue for an additional period beyond the expiration date as part of any protest filed by an interested party.

Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of TeamStaff, Inc. and its subsidiaries, all of which are wholly owned. All intercompany balances and transactions have been eliminated in the consolidated financial statements.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill, expected settlement amounts of accounts receivable, measurement of prepaid workers' compensation, valuation allowances established against accounts receivable and deferred tax assets and measurement of payroll tax contingencies, accounts payable, workers' compensation claims and accrued expenses and the valuation of financial instruments associated with debt agreements. Actual results could differ from those estimates. In particular, a material reduction in the fair value of goodwill would have a material adverse effect on the Company's financial position and results of operations.

Revenue Recognition

TeamStaff's revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration ("GSA") and the DVA at fixed unit rates or hourly arrangements. We generally operate as a prime contractor, but have also entered into fixed price or fixed unit price contracts as a subcontractor. The recognition of revenue from fixed rates is based upon objective criteria that generally do not require significant estimates that may change over time. Other types of US Government contracts may include fixed price or flexibly priced contracts requiring estimates based on percentage-of-completion methods of recognizing revenue and profit. These contracting vehicles do not, at this time, represent a significant portion of our revenue nor require estimating techniques that would materially impact our revenue reported herein. TeamStaff recognizes and records revenue on DVA contracts when it is realized, or realizable, and earned. TeamStaff considers these requirements met when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectability is reasonably assured.

Revenues related to retroactive billings in 2008 (see Note 9) from an agency of the Federal government were recognized when: (1) the Company developed and calculated an amount for such prior period services and had a contractual right to bill for such amounts under its arrangements, (2) there were no remaining unfulfilled conditions for approval of such billings and (3) collectability is reasonably assured based on historical practices with the DVA. The related direct costs, principally comprised of salaries and benefits, are recognized to match the recognized reimbursements from the Federal agency; upon approval, wages will be processed for payment to the employees.

During the year ended September 30, 2008, TeamStaff recognized revenues of $10.8 million and direct costs of $10.1 million related to these non-recurring arrangements. At September 30, 2011 and 2010, the amount of the remaining accounts receivable with the DVA approximated $9.3 million and accrued liabilities for salaries to employees and related benefits totaled $8.7 million. The $9.3 million in accounts receivable was unbilled to the DVA at September 30, 2011 and 2010. Although the timing cannot be guaranteed, at present the Company expects to bill and collect such amounts during the first half of fiscal 2012 based on current discussions with the DVA and collection efforts.

Concentrations of Credit Risks

Financial instruments that potentially subject TeamStaff to concentrations of credit risk consist principally of cash and accounts receivable. TeamStaff maintains substantially all its cash balances in a limited number of financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to $250,000 in respect of interest bearing accounts and without limit for other accounts. At times the deposits in banks may exceed the amount of insurance provided on such deposits. TeamStaff monitors the financial health of these banking institutions. At September 30, 2011, the Company's uninsured cash balances approximated $0.3 million. Historically, the Company has not experienced any losses on deposits.

TeamStaff provides services to the DVA, the US Department of Defense and other US governmental agencies and operated at over 40 facilities during fiscal 2011 year. Substantially all of the business of DLH Solutions is accomplished through Federal Supply Schedule contracts with the GSA and DVA. Credit, when given, is generally granted on an unsecured basis.

The Company's policy is to maintain an allowance for doubtful accounts, if any, for estimated losses resulting from the inability of its customers to pay. However, if the financial condition of TeamStaff's customers were to deteriorate rapidly, resulting in nonpayment, TeamStaff could be required to provide for additional allowances, which would decrease operating results in the period that such determination was made.

Cash Equivalents

For purposes of the Consolidated Statements of Cash Flows, TeamStaff considers all liquid investments purchased with a maturity of three months or less to be cash equivalents.

Allowance for Doubtful Accounts

Accounts receivable are unsecured and carried at fair value, which is net of an allowance for doubtful accounts. The allowance for doubtful accounts is determined based on a specific identification methodology. Generally an account receivable is deemed uncollectible based upon the aging of the receivable and/or specific identification. Interest is not typically charged on past due accounts and the specific identification method takes into account the Company's assessment of the default risk based upon recent events in the customer's business, economic status and changes in credit status. With respect to receivables owed by agencies of the U.S. Government, the Company believes that the risk of loss on these accounts is minimal (See Note 13).

Before accounts are deemed uncollectible, demand letters are sent and, if that does not result in payment, the receivable is placed for collection with a collection agency. The Company's last attempt at collection would be legal action, depending upon the customer's financial situation. If the Company is unsuccessful at collection after these steps, the receivable is written-off.

Fair Value

TeamStaff has financial instruments, principally accounts receivable, accounts payable, loan payable, notes payable and accrued expenses. TeamStaff estimates that the fair value of these financial instruments at September 30, 2011 and 2010 does not differ materially from the aggregate carrying values of these financial instruments recorded in the accompanying consolidated balance sheets. However, because the Company presents certain common stock warrants and embedded conversion features (associated with Convertible Debentures—See Note 6) and accounts for such derivative financial instruments at fair value, such derivatives are materially impacted by the market value of the Company's stock and therefore subject to a high degree of volatility. The Company's future results may be materially impacted by changes in the Company's closing stock price as of the date it prepares future periodic financial statements.

In accordance with authoritative guidance the Company categorized its assets and liabilities based on the priority of the inputs to the valuation technique into a three-level fair value hierarchy as set forth below. The three levels of the hierarchy are defined as follows:

        Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities. The Company currently does not have any Level 1 financial assets or liabilities.

        Level 2—Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets, and inputs other than quoted prices that are observable for substantially the full term of the asset or liability. The Company currently does not have any Level 2 financial assets or liabilities.

        Level 3—Unobservable inputs reflecting management's own assumptions about the input used in pricing the asset or liability.

The following table presents the Company's September 30, 2011 and 2010 assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (all Level 3):

	September 30,

	2011		2010
Asset:
Tradenames	$	0	$	2,583

Liability:
Financial Instruments	$	182	$	0

The following is a summary of activity as of and for the years ended September 30, 2011 and 2010 for these assets and liabilities measured at fair value on a recurring basis:


Asset: Tradenames
Balance, October 1, 2009	$	3,924
Impairment loss included in results of operations		(1,341	)

Balance, September 30, 2010		2,583
Impairment loss included in results of operations		(2,583	)

Balance, September 30, 2011	$	0

Liability: Fair Value of Financial Instruments
Balance, October 1, 2010	$	-0-
Fair value of instrument at inception of agreement		(289	)
Change in fair value included in results of operations		107

Balance, September 30, 2011	$	(182	)

The major assumptions used in determining the associated fair values using level 3 inputs (unobservable) are discussed in Notes 2 and 6. The aforementioned impairment losses included in the results of operations are discussed below.

Equipment and Improvements

Equipment and improvements are stated at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 to 5 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are charged to expense as incurred.

Advertising Costs

The Company's advertising expenses consist primarily of online advertising, professional trade magazines and various other print media, promotional material and direct mail marketing. The Company expenses advertising costs as they are incurred. Total advertising costs for continuing operations were $5,000 and $26,000 for the fiscal years ended September 30, 2011 and 2010, respectively.

Occupancy Lease Commitments

The Company has occupancy leases with various payment terms to include a fixed payment schedule over the lease term, variable payment schedule over the lease term, or a lease that may have rent escalations, an abatement or "rent holiday" periods. The Company records occupancy expense using the straight-line method over the lease term, regardless of actual payment terms.

Goodwill

In accordance with applicable accounting standards, TeamStaff does not amortize goodwill. TeamStaff continues to review its goodwill for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. At September 30, 2011, we performed a goodwill impairment analysis. For the purposes of this analysis, our estimates of fair value are based on the income approach, which estimates the fair value of the DLH Solutions unit based on the future discounted cash flows. Based on the results of the work performed, the Company has concluded that no impairment loss on goodwill was warranted at September 30, 2011. Major assumptions in the valuation study were the estimates of probability weighted future cash flows, the estimated terminal value of the company and the discount factor applied to the estimated future cash flows and terminal value. Estimates of future cash flows were developed by management having regard to current expectations and potential future opportunities. A terminal value for the forecast period was estimated based upon data of public companies that management believes to be similar with respect to the Company's economics, products and markets. The discount factor used was a cost of capital estimate obtained from a leading third party data provider. The resulting estimated fair value of goodwill exceeded the carrying value at September 30, 2011 by more than 100%, resulting in no impairment charge being taken against goodwill. However, a non-renewal of a major contract (see Note 2—Liquidity and Note 13) or other substantial changes in the assumptions used in the valuation study could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods' results of operations.

If an impairment write off of all the goodwill became necessary in future periods, a charge of up to $8.6 million would be expensed in the Consolidated Statement of Operations. All remaining goodwill is attributable to the DLH Solutions reporting unit. TeamStaff has concluded, at present, that there is not any required write off of goodwill.

Intangible Assets

As required by applicable accounting standards, TeamStaff did not amortize its tradenames, an indefinite life intangible asset. TeamStaff reviewed its indefinite life intangible assets for possible impairment or loss of value at least annually or more frequently upon the occurrence of an event or when circumstances indicated that an asset's carrying amount was greater than its fair value. On September 15, 2011, the Board of Directors of TeamStaff approved the change of the corporate name of TeamStaff GS to DLH Solutions and also approved a plan to change the corporate name of the Company to DLH Holdings Corp. In connection with these actions, the Company will cease further use of the TeamStaff trademark and implement new marketing and branding initiatives associated with the new corporate identity being adopted by the Company. As a result of the corporate name change, abandoning the use of the TeamStaff name and associated rebranding efforts being implemented by the Company, the Company concluded that it is required to record a non-cash impairment charge with respect to the value of the "TeamStaff" trademark of $2.6 million to fully write-off the value of this trademark.

Income Taxes

TeamStaff accounts for income taxes in accordance with the "liability" method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheet when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. At September 30, 2011 and 2010, the Company recorded a 100% valuation allowance against its net deferred tax assets (See Note 5).

The Financial Accounting Standards Board ("FASB") has issued authoritative guidance that clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has been met. This interpretation also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosures. The Company conducts business solely in the U.S. and, as a result, also files income taxes in various states and other jurisdictions. Given the substantial net operating losses and the related valuation allowance established against such amounts, the Company has concluded that it does not have any uncertain tax positions. There have been no income tax related interest or penalties for the periods presented in these consolidated financial statements. In the normal course of business, the Company and its subsidiaries are subject to examination by Federal and state taxing authorities. The Company's income tax returns for years subsequent to fiscal 2007 are currently open, by statute, for review by authorities. However, there are no examinations currently in progress and the Company is not aware of any pending audits.

Stock-Based Compensation

Compensation costs for the portion of equity awards (for which the requisite service has not been rendered) that are outstanding are recognized as the requisite service is rendered. The compensation cost for that portion of awards shall be based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. As of September 30, 2011, there is $0.3 million remaining unrecognized compensation expense related to non-vested stock based awards to be recognized in future periods.

For options that vest based on the Company's common stock achieving and maintaining defined market prices, the Company values these awards using a binomial valuation model that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation cost is recognized over the derived service period determined in the valuation.

From time to time, the Company grants restricted stock awards to non-employee directors and employees under existing plans. The Company recognizes non cash compensation expense over the various vesting periods.

Stock compensation expense totaled $0.4 million for all awards for both the years ended September 30, 2011 and 2010. Certain awards vest upon satisfaction of certain performance criteria. As permitted, the Company will not recognize expense on the performance based shares until it is probable that these conditions will be achieved. Such charges could be material in future periods.

Warrants are issued from time-to-time to non-employee third parties in order to induce then to enter in certain transactions with the Company. The Company recognizes non-cash expense related to such activity over the estimated period of performance.

Earnings (Loss) Per Share

Basic earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings (loss) per share is calculated by dividing income (loss) available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities.

The respective determination of weighted average shares used in the computation of earnings (loss) per share is as follows (amounts in thousands);



Basic:
Loss from continuing operations	5,460	5,033
Gain (loss) from discontinued operation	5,460	5,033
Diluted:
Loss from continuing operations	5,460	5,033
Gain (loss) from discontinued operation	5,460	5,033

The effects of common stock equivalents of 1,643,846 are anti-dilutive for fiscal 2011. The effects of common stock equivalents of approximately 817,500 are anti-dilutive for fiscal 2010.

RECENT ACCOUNTING STANDARDS:

12 Months Ended

Sep. 30, 2011

RECENT ACCOUNTING STANDARDS:

RECENT ACCOUNTING STANDARDS:

(3) RECENT ACCOUNTING STANDARDS:

In October 2009, the FASB issued a standard addressing the recognition of revenue in multiple-deliverable revenue arrangements. This standard establishes a new selling price hierarchy to use when allocating the revenue of a multiple element arrangement between delivered and undelivered elements. This standard generally results in revenue recognition for more delivered elements than under previous rules. The Company was required to adopt this guidance prospectively for new or materially modified agreements entered into on or after October 1, 2010. The Company's adoption of this standard did not have a material effect on our financial position or results of operations.

In January 2010, the FASB issued a standard addressing fair value measurements and disclosures, which amends previously released guidance on fair value measurements and disclosures. The amendment requires additional disclosures about fair value measurements including transfers in and out of Levels 1 and 2 and more disaggregation for the different types of financial instruments. This standard is effective for annual and interim reporting periods beginning after December 15, 2009 for most of the new disclosures and for periods beginning after December 15, 2010 for the new Level 3 disclosures. Comparative disclosures are not required in the first year the disclosures are required. The adoption of this standard had no effect on the Company's financial statements. The Company has evaluated the nonrecurring fair value tabular disclosure requirements related to the impairment valuation of the tradenames, which are considered to be Level 3. Such valuation was based on probability weighted cash flow models, as discussed earlier in Note 2–Long-Lived Assets. Such disclosures were not considered significant to the Company's consolidated financial statements.

In May 2011, the FASB amended existing guidance on fair value measurements to clarify certain disclosure requirements and improve consistency with international reporting standards. This amendment is to be applied prospectively and is effective for the Company's fiscal quarter ending March 31, 2012. The Company, at present, does not expect its adoption to have a material effect on prospective financial statements.

The FASB amended existing guidance on reporting comprehensive income in June 2011 to require entities to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendment does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income under current accounting principles generally accepted in the United States of America. This guidance is effective for the Company's fiscal quarter ending March 31, 2012. The Company, at present, does not expect its adoption to have a material effect on prospective financial statements.

In August 2011, the FASB approved a revised accounting standard to simplify the testing of goodwill for impairment. The guidance permits an entity to first assess defined qualitative factors in determining whether it is necessary to perform the goodwill impairment test. The guidance is effective for annual and interim goodwill impairment tests for the Company's fiscal year ending September 30, 2013. The Company is currently evaluating the prospective effects, if any, of adopting this guidance.

- Definition

The entire disclosure for reporting accounting changes and error corrections. It includes the conveyance of information necessary for a user of the Company's financial information to understand all aspects and required disclosure information concerning all changes and error corrections reported in the Company's financial statements for the period.

+ References + Details

DISCONTINUED OPERATION:

12 Months Ended

Sep. 30, 2011

DISCONTINUED OPERATION:

DISCONTINUED OPERATION:

(4) DISCONTINUED OPERATION:

Non-Recurring Gain

A non-recurring gain from discontinued operations for fiscal year ended September 30, 2011 was $270,000. During this fiscal year, the State of Florida determined that approximately $270,000 of escheated funds it was holding was the property of the Company and ordered that such funds be paid to the Company. The Company's right to the funds arose in connection with the Company's former PEO operations that were accounted for as a discontinued operation in fiscal 2003 and, accordingly, the Company has recognized the amounts as income from discontinued operation in the current period after concluding that the amount involved was not material to the results of operations in the year of discontinuance.

Sale of TeamStaff Rx

Based 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 2009, the Company approved and committed to a formal plan to divest the operations of TeamStaff Rx, our wholly-owned subsidiary, based at its Clearwater, Florida location. In evaluating the facets of TeamStaff Rx's operations, management concluded that this business component meets the definition of a discontinued operation. Accordingly, the results of operations, cash flows and related assets and liabilities of TeamStaff Rx for all periods presented have been reclassified in the accompanying consolidated financial statements from those of our continuing business.

Effective December 28, 2009, TeamStaff and TeamStaff Rx entered into a definitive Asset Purchase Agreement with Advantage RN, providing for the sale of substantially all of the operating assets of TeamStaff 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 provided 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 was subject to an escrowed holdback as described in the Asset Purchase Agreement. On March 25, 2010, the Company and Advantage RN completed the analysis related to escrow release conditions and reached an agreement as to the final purchase price. Of the $75,000 held in escrow, $25,000 was returned to the Company and $50,000 was released to Advantage RN, resulting in a final purchase price of $375,000. Additionally, Advantage RN was obligated to make rent subsidy payments to TeamStaff Rx totaling $125,000, consisting of: (i) $25,000 paid at closing, and (ii) an additional $100,000 payable in 10 equal monthly installments beginning on March 1, 2010. The last rent payment received from Advantage RN was in July 2010. They have since vacated the premises and ceased making installment payments. The Company is pursuing a claim against Advantage RN for all amounts owed. The Company has provided an allowance for their estimate of uncollectible sub-lease funding of $50,000. 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.

Condensed Financial Information

Condensed financial statement information and results of the discontinued operation are as follows:

		Year Ended

(amounts in thousands)		September 30, 2011		September 30, 2011
Revenues		$	—	$	1,418
Direct expenses			—		(1,254	)
Selling, general and administrative expenses			—		(1,022	)
Other expense, net			—		(2	)

Loss from operations			—		(860	)
Loss from disposal			—		(349	)
	Other income		270		—

Net gain (loss)		$	270	$	(1,209	)

There were no tax benefits associated with the gains or losses from this discontinued operation. Included in fiscal 2010's selling, general and administrative expense from discontinued operations is a charge of $0.1 million for severance to certain TeamStaff Rx employees and $0.3 million in various accrued expenses related to the sale and shut down of the business. The loss on the disposal of TeamStaff Rx approximating $0.3 million principally relates from recognition of the remaining unfunded operating lease payments as the facility was abandoned.

The following chart details liabilities from the discontinued operation (amounts in thousands):

Liabilities	September 30, 2011		September 30, 2010

Accrued expenses and other current liabilities	$	235	$	289

Total liabilities	$	235	$	289

The fiscal 2011 decrease in the liability arises from lease payments.

- Definition

The entire disclosure for the facts and circumstances leading to the completed or expected disposal, manner and timing of disposal, the gain (loss) recognized in the income statement and the income statement caption that includes that gain (loss), amounts of revenues and pretax profit or loss reported in discontinued operations, the segment in which the disposal group was reported, and the classification (whether sold or classified as held for sale) and carrying value of the assets and liabilities comprising the disposal group. Includes all disposal groups, including those classified as components of the entity (discontinued operations).

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 144
-Paragraph 43-48
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

INCOME TAXES:

12 Months Ended

Sep. 30, 2011

INCOME TAXES:

INCOME TAXES:

(5) INCOME TAXES:

TeamStaff accounts for income taxes in accordance with the "liability" method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the balance sheet when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized.

After an assessment of all available evidence (including historical and forecasted operating results), management has concluded that realization of the Company's net operating loss carryforwards (which included those amounts acquired in previous years' business combinations, collectively "NOLs"), tax credits and other deferred tax assets, could not be considered more likely than not. Accordingly, for the fiscal years ended September 30, 2011 and 2010, the Company did not record a tax benefit for NOLs and other deferred tax assets.

Based on similar assessments, the Company increased the valuation allowance established on deferred tax assets by approximately $1.0 million and $1.2 million in 2011 and 2010, respectively. The increase in the valuation allowance is primarily due to increased Federal and state NOLs and stock based compensation expense (current not deductible) for the fiscal year ended September 30, 2011. The increase in the valuation allowance for the fiscal ended September 30, 2010 was principally due to increased Federal and state NOLs.

In prospective periods, there may be reductions to the valuation allowance to the extent that the Company concludes that it is more likely than not that all or a portion of the deferred tax assets can be utilized (subject to annual limitations and prior to the expiration of such NOLs), to offset future periods' taxable income.

In the fiscal years ended September 30, 2011 and 2010, the Company did not recognize a tax expense or benefit.

At September 30, 2011 the Company had net operating losses of approximately $38.2 million and $26.2 million for U.S. and state tax return purposes, respectively, and unutilized tax credits of approximately $1.1 million. As a result of previous business combinations and changes in its ownership, there is a substantial amount of NOLs that are subject to annual limitations on utilization. The U.S. NOLs begin to expire in 2021 and continue to expire through 2031.

An analysis of TeamStaff's deferred tax asset and liability (including those related to TeamStaff Rx) is as follows (amounts in thousands):

	Years Ended September 30,

	2011			2010
Deferred income tax asset (liability):
Net operating loss carry forwards and tax credits	$	15,669		$	14,872
Prepaid workers' compensation		55			(115	)
Deferred rent		4			3
Accrued liabilities		445			470
Stock based compensation		372			164
Fixed and intangible assets		(1,276	)		(1,117	)
Other items, net		(11	)		4
Valuation allowance		(15,258	)		(14,281	)

	$	—		$	—

The significant components of the expense (benefit) for income taxes from continuing operations are summarized as follows:

		Years Ended September 30,

(amounts in thousands)		2011		2010
Current expense (benefit)		$	—	$	—
Deferred expense (benefit)			—		—

	Total expense (benefit)	$	—	$	—

The following table indicates the significant differences between the Federal statutory rate and TeamStaff's effective tax rate for continuing operations:

	Years Ended September 30,

(amounts in thousands)	2011			2010
Federal statutory rate	$	(1,561	)	$	(1,563	)
State taxes, net		—			—
Tradename impairment		878			456
Other permanent items		18			—
Valuation allowance		665			1,107

	$	—		$	—

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

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-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
-Section 08
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-Article 4

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-Paragraph 136, 172
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+ Details

DEBT AND CAPITAL LEASES:

12 Months Ended

Sep. 30, 2011

DEBT AND CAPITAL LEASES:

DEBT AND CAPITAL LEASES:

(6) DEBT AND CAPITAL LEASES:

Predecessor Bank Loan Facility

On April 7, 2010, TeamStaff notified Sovereign Business Capital ("Sovereign") that it was terminating, effective immediately, the Amended and Restated Loan and Security Agreement dated as of March 28, 2008, as amended by that certain Modification Agreement dated as of January 8, 2010 (together, the "Sovereign Agreement"), by and between the Company and Sovereign. Pursuant to the Sovereign Agreement, Sovereign had provided the Company with a three-year secured revolving credit line with an initial borrowing availability of up to $3 million; however, effective in January 2010, Sovereign reduced the borrowing availability to $2 million in connection with providing its consent to the Company's disposition of the operating assets of its TeamStaff Rx subsidiary (see Note 4) and, as the Company previously reported, on February 12, 2010, the Company determined that as of December 31, 2009, it was not in compliance with the debt service coverage ratio covenant of the Sovereign Agreement and was in discussions with Sovereign regarding obtaining a waiver of its default. The credit provided by Sovereign under the Sovereign Agreement was secured by a first priority lien on all of the Company's assets. In the third quarter of fiscal 2010, the Company recognized a charge of $44,000 (included as a component of interest expense) related to the write off of unamortized financing costs associated with the Sovereign Agreement.

Current Bank Loan Facility (See Note 9—Government Assignments of Contracts)

On July 29, 2010, DLH Solutions entered into a Loan and Security Agreement (the "Loan Agreement") with Presidential Financial Corporation (the "Lender"). Under the Loan Agreement, the Lender initially agreed to provide a two (2) year loan and security facility to DLH Solutions in an aggregate amount of up to $1.5 million, subject to the terms and conditions of the Loan Agreement. In November 2010, the Lender agreed, by means of an amendment to the Loan Agreement, to increase the maximum amount available under the facility from $1.5 million to $2.5 million. In February 2011, the Company and Lender further increased the maximum availability under the Loan Agreement by an additional $500,000 to $3.0 million and provided an unbilled receivable facility within the limits of the Loan Agreement. An interest rate premium of 2% is payable in respect of any advances secured by unbilled accounts receivable, which are subject to a sub-facility limit of $500,000 and an advance rate of 75%. The loan is secured by a security interest and lien on all of DLH Solutions' cash accounts, account deposits, letters of credit and investment property, chattel paper, furniture, fixtures and equipment, instruments, investment property, general intangibles, deposit accounts, inventory, other property, all proceeds and products of the foregoing (including proceeds of any insurance policies and claims against third parties for loss of any of the foregoing) and all books and records related thereto. DLH Solutions' ability to request loan advances under the Loan Agreement is subject to: (i) computation of DLH Solutions' advance availability limit based on "eligible accounts receivables" (as defined in the Loan Agreement) multiplied by the "Accounts Advance Rate" established by the Lender which initially shall be 85% and may be increased or decreased by the Lender in exercise of its discretion; and (ii) compliance with the covenants and conditions of the loan. The loan was initially for a term of 24 months and after giving effect to the February 2011 amendment, which also extended the term of the Loan Agreement by 12 months, will mature on July 29, 2013.

Interest on the loan accrues on the daily-unpaid balance of the loan advances secured by billed receivables. Following the February 2011 amendment to the Loan Agreement, the interest rate under the Loan and Security Agreement is the greater of: (a) 3.25% or (b)(i) 1.95% above the Wall Street Journal Prime rate on the accounts receivable portion of the credit line and (ii) 3.95% above the Wall Street Journal Prime rate on the unbilled accounts portion. The interest rate at September 30, 2011 and 2010 was 5.2% and 5.5%, respectively. In addition, DLH Solutions will pay certain other related fees and expense reimbursements including a monthly service charge of 0.65% based on the average daily loan balance which shall accrue daily and be due and payable on the last day of each month so long as the Loan Agreement is outstanding. At September 30, 2011, the amount of the unused availability under the line was $316,000. The amount outstanding as of September 30, 2011 and 2010 was $740,000 and $362,000, respectively.

The Loan Agreement requires compliance with customary covenants and contains restrictions on the Company's ability to engage in certain transactions. Among other matters, under the loan agreement we may not, without consent of the Lender, (i) merge or consolidate with another entity, form any new subsidiary or acquire any interest in a third party; (ii) acquire any assets except in the ordinary course of business; (iii) enter into any transaction outside the ordinary course of business; (iv) sell or transfer collateral; (v) make any loans to, or investments in, any affiliate or enter into any transaction with an affiliate other than on an arms-length basis; (vi) incur any debt outside the ordinary course of business; (vii) pay or declare any dividends or other distributions; or (viii) redeem, retire or purchase any of our equity interests exceeding $50,000. In addition, the Loan Agreement requires DLH Solutions, Inc. to maintain a minimum tangible net worth of at least $1,000,000 on a trailing 12-month basis. Further, without the consent of the Lender, the Company is also restricted from making any payments in respect of other outstanding indebtedness. The Lender may terminate the Loan Agreement at any time upon 60 days written notice after February 29, 2012, which date has subsequently been amended to December 31, 2012, and the Loan Agreement provides for customary events of default following which the Lender may, at its option, terminate the loan agreement and accelerate the repayment of any amount outstanding. The defined events of default include, among other things, a material adverse change in the Company's circumstances, or if the Lender deems itself insecure in the ability of the Company to repay its obligations, or as to the sufficiency of the collateral. As of September 30, 2011 and 2010, the Company was in compliance with the covenants set out in the Loan Agreement.

As part of the February 2011 amendment, the Lender also agreed to waive the Company's non-compliance with the covenant under the Loan Agreement to furnish them with a copy of DLH Solutions' financial statements within 90 days after the end of its fiscal year. In addition to granting this waiver, the Lender also agreed to modify this covenant to require that the Company provide them, within 90 days after the end of each fiscal year, audited consolidated financial statements of the Company and its subsidiaries as of the end of such fiscal year and, in addition, at the same time, furnish consolidating income statement and balance sheet schedules, including a reconciliation with DLH Solutions' financial information.

TeamStaff has concurrently executed a Corporate Guaranty Agreement with Lender pursuant to which it has guaranteed all of the obligations of DLH Solutions under the Loan Agreement.

Notes Payable

TeamStaff, Inc. and DLH Solutions entered into a settlement agreement dated as of July 22, 2011 (the "Agreement") with Roger Staggs and E. Barry Durham, the former principals of RS Staffing Services, Inc. (together, the "Sellers"). The Sellers are the holders of certain promissory notes issued by TeamStaff, Inc. in the aggregate principal amount of $1,500,000 (the "Notes"). The claims resolved by the Settlement Agreement concerned TeamStaff's claim of indemnification of approximately $1,800,000 arising out of the acquisition by TeamStaff, Inc. of RS Staffing Services, Inc. in June 2005 and certain counterclaims by the Sellers against TeamStaff, including payment under the Notes. Pursuant to the Agreement, the Company paid $200,000 in cash to the Sellers, and issued them an aggregate of 300,000 shares of common stock of TeamStaff, Inc., valued at $795,000, the fair value of the stock at July 22, 2011. The Company also agreed to permit the Sellers to resell an aggregate of 201,724 other shares of common stock of TeamStaff, Inc. presently held by them, against which the Company had previously placed a stop order to prevent their resale. The Sellers agreed to orderly sale limitations with respect to their ability to resell all their shares of common stock of TeamStaff, Inc. In accordance with these limits, during the 90 day period commencing on the effective date of the Agreement, neither Seller will resell in excess of 33,000 shares of TeamStaff common stock previously held by them during any 30 day period without the consent of TeamStaff. With respect to the new shares of TeamStaff common stock issued pursuant to the Agreement, commencing on the six month anniversary of the effective date of the Agreement, neither will resell in excess of 25,000 shares during any 30 day period without the consent of TeamStaff. In addition, TeamStaff provided guarantees to the Sellers that the net proceeds to be received by them from the resale of all of the shares of common stock of TeamStaff, Inc. sold by them pursuant to the Agreement would not be less than certain minimum guarantees. With respect to the shares of common stock of TeamStaff, Inc. owned by them prior to the effective date of the Agreement (the "Old TeamStaff Shares"), TeamStaff guaranteed to each Seller net proceeds of $100,000, and with respect to the shares of common stock of TeamStaff, Inc. issued under the Agreement (the "New TeamStaff Shares"), TeamStaff guaranteed net proceeds of $375,000 to each. The guarantees in respect of the Old TeamStaff Shares were satisfied in full as of September 30, 2011.

The payments of all amounts under the Agreement are secured by the Notes. Upon receipt by the Sellers of: (i) the payment of $200,000 made by TeamStaff and (ii) the proceeds realized from the sale of the Old TeamStaff Shares and New TeamStaff Shares, or the guarantees, the Notes shall be deemed satisfied in full. In addition, the parties agreed to release each other from any further claims that either may have against the other, except to enforce the Agreement. At September 30, 2011, the maximum remaining contingent liability under the agreement could potentially reach $750,000.

The remaining liability under the Agreement does not accrue interest. The Company has evaluated the status of the Agreement, including the amount of consideration that is contingently owed to the Sellers, as well as the uncertainties inherent in predicting future market conditions and whether the Sellers are able to realize sufficient proceeds on sales of New TeamStaff Shares to satisfy the Company's guarantee. Based on such analysis, the Company has concluded at September 30, 2011 that the $711,000 recorded obligation (which approximated the maximum amount of the guarantee) remaining after issuance of the 300,000 New TeamStaff Shares at a total fair value of $795,000 and the cash payment of $200,000 is reasonable. Although no assurances can be given, should the Sellers be able to individually realize proceeds through future sales of New TeamStaff Shares, the Company may reduce the recorded liability in future periods and recognize a gain. There was no gain recognized in fiscal 2011.

The Company recognized expenses related to legal representation and costs incurred in connection with the investigation and settlement in the amount of $96,000 and $113,000 during fiscal 2011 and 2010, respectively, as a component of other income (expense).

Convertible Debentures

On June 1, 2011, the Company entered into a debenture purchase agreement (the "Debenture Purchase Agreement") with entities affiliated with Wynnefield Capital, Inc. (the "Debenture Purchasers"), providing for a standby commitment pursuant to which the Debenture Purchasers agreed to purchase convertible debentures (the "Convertible Debentures") in an aggregate principal amount of up to $350,000 (the "Total Commitment Amount"). In addition, the Company issued the Debenture Purchasers warrants to purchase an aggregate of 53,846 shares of common stock (the "Warrants") in consideration of their agreement to provide the Total Commitment Amount. On July 28, 2011, the Company drew down the entire amount of the Total Commitment amount available under the Debenture Purchase Agreement, of which $200,000 was used for the initial payments under the Debenture Purchase Agreement relating to the settlement with the former owners of RS Staffing, and on such date the Company issued the Convertible Debentures in the aggregate principal amount of $350,000 to the Debenture Purchasers, and received such funds.

The Convertible Debentures will mature on the 27-month anniversary of issuance and bear interest at the rate of the greater of the prime rate plus 5%, or 10% per annum, payable at maturity or upon redemption of such Convertible Debentures. The interest rate at September 30, 2011 was 10%. The Convertible Debentures are convertible into shares of the Company's common stock at an initial conversion price of $1.30 per share, which was in excess of the fair market value of the Company's common stock at that date. The initial conversion rate is subject to adjustment to account for certain customary events and also includes weighted-average anti-dilution protection for future issuances by the Company, subject to certain exclusions. The Company can also redeem the outstanding Convertible Debentures at any time at 120% of the remaining principal amount, plus accrued but unpaid interest. The Warrants will be exercisable for five years at an initial exercise price equal to $1.00. The initial exercise price of the Warrants is subject to adjustment for certain customary events and includes weighted average anti-dilution protection for future issuances by the Company, subject to certain exclusions. In connection with the parties' entry into the Debenture Purchase Agreement, the Company, DLH Solutions, the Debenture Purchasers and Presidential Financial Corporation entered into subordination agreements concerning the terms of the subordination of the Convertible Debentures to the secured loan facility provided by Presidential Financial Corporation. Under the subordination agreements, the Company may not make payments to the Debenture Purchasers under the Convertible Debentures unless before and following such payments, no "Event of Default" exists under the secured loan facility.

The Debenture Purchasers are entities affiliated with Wynnefield Capital, Inc., the Company's largest shareholder. Mr. Peter Black, a member of the Company's Board of Directors, is an employee of Wynnefield Capital. The Convertible Debentures and Warrants will be restricted securities issued in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended (the "Securities Act").

Direct costs associated with the Debenture Purchase Agreement totaled $32,000. These costs have been and will be capitalized as deferred financing costs and amortized over the period that such debentures are outstanding or the Debenture Agreement is effective. In addition, an initial value of $42,000 was ascribed to the warrants and it was determined that at July 28, 2011, because of appreciation in the Company's stock price, the embedded conversion feature included in the Convertible Debentures had a fair value of $289,000 at the time of issuance of the Convertible Debentures; such amount is also being expensed over the life of the Convertible Debentures and the unamortized amounts have been deducted from the value of the Convertible Debentures as noted below.

At September 30, 2011, there were 53,846 warrants outstanding and the Debenture Purchasers have the right to convert the principal amount of the Convertible Debentures into 269,230 shares of common stock under the terms of the conversion feature embedded in the Convertible Debentures. Because the warrants and the conversion feature embedded in the Convertible Debenture have a weighted average anti-dilution feature that in certain circumstances could provide the holders with protection against changes in the market value of the Company's common stock, they are required under applicable accounting standards to be recorded at fair value as of the balance sheet date. At September 30, 2011, the Company evaluated the fair value of the Warrants and the embedded conversion feature of the Convertible Debentures using a binomial valuation model and recorded income of $107,000 to reflect the net difference between their initial carrying values (July 28, 2011) and their fair values as of September 30, 2011.

Assumptions used in valuing the warrants and the embedded conversion features at September 30, 2011 included the following:

	Warrants	Embedded Conversions Features

Risk free interest rate	1.60%	0.42%
Contractual term	5 years	27 months
Dividend yield	0%	0%
Expected lives	5 years	27 months
Expected volatility	70.9%	71.8%
Fair value per warrants per share or per $1.30 of debt	$1.01	$0.63

At September 30, 2011, the carrying value of the Convertible Debentures is as follows (amounts in thousands):


Principal amount of Convertible Debentures	$	350
Less:
Value of financial instruments to Convertible Debentures purchasers		(268	)
Value of warrants issued to Convertible Debentures purchasers		(36	)

Carrying Value	$	46

The payment of the entire $350,000 principal amount of the Convertible Debentures is contractually due in the fiscal year ending September 30, 2014. The Company has evaluated the likelihood of satisfying the liability associated with the financial instruments in fiscal 2012 and has concluded that the classification of this liability is non- current at September 30, 2011.

Capital Leases:

The Company leases certain office equipment under a non-cancelable capital lease agreement that expires in fiscal year 2012. The interest rate is 8.8%. At September 30, 2011 and 2010, the Company has recorded $0.1 million and $0.4 million, respectively, in gross capital leases and accumulated depreciation of $0.1 million and $0.4 million, respectively.

The Company's remaining lease obligation of $8,000 is payable in the year ending September 30, 2012.

OTHER CURRENT ASSETS:

12 Months Ended

Sep. 30, 2011

OTHER CURRENT ASSETS:

OTHER CURRENT ASSETS:

(7) OTHER CURRENT ASSETS:

Other current assets at September 30, 2011 and 2010 consist of the following (amounts in thousands):

	2011		2010

Miscellaneous receivables	$	77	$	148
Prepaid insurance		48		70
Miscellaneous prepaid expense		59		45
Security deposits		0		2
Prepaid income taxes		0		50
Other		0		29

	$	184	$	344

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

12 Months Ended

Sep. 30, 2011

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

(8) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

Accrued expenses and other current liabilities at September 30, 2011 and 2010 consist of the following (amounts in thousands):

	2011		2010

Accrued benefits and incentives	$	523	$	404
Accrued bonus		357		155
Accrued interest		0		150
Accrued occupancy		0		25
Accrued payroll taxes		3		27
Accrued professional fees		439		327
Accrued workers' compensation		429		585
Other		383		199

	$	2,134	$	1,872

COMMITMENTS AND CONTINGENCIES:

12 Months Ended

Sep. 30, 2011

COMMITMENTS AND CONTINGENCIES:

COMMITMENTS AND CONTINGENCIES:

(9) COMMITMENTS AND CONTINGENCIES (See Also Note 13):

Potential Contractual Billing Adjustments

DLH Solutions is currently seeking approval from the Federal government for gross profit on retroactive billing rate increases associated with certain government contracts at which it had employees. These adjustments are due to changes in the contracted wage determination rates for these employees. A wage determination is the listing of wage rates and fringe benefit rates for each classification of laborers whom the Administrator of the Wage and Hour Division of the U.S. Department of Labor ("DOL") has determined to be prevailing in a given locality. Contractors performing services for the Federal government under certain contracts are required to pay service employees in various classes no less than the wage rates and fringe benefits determined to be prevailing in these localities. An audit by the DOL in fiscal 2008 at one of the facilities revealed that notification, as required by contract, was not provided to DLH Solutions in order to effectuate the wage increases in a timely manner. Wages for employees on assignment at the time have been adjusted prospectively to the prevailing rate and hourly billing rates to the DVA have been increased accordingly. During the fiscal year ended September 30, 2008, TeamStaff recognized nonrecurring revenues of $10.8 million and direct costs of $10.1 million, based on amounts that are contractually due under its arrangements with the Federal agencies. At September 30, 2011, the amount of the remaining accounts receivable with the DVA approximates $9.3 million. The Company has been and continues to be in discussions with representatives of the DVA regarding the matter and anticipates resolution during fiscal 2012. The Company is currently in the process of negotiating a final amount related to indirect cost and fees applied to these amounts. As such, there may be additional revenues recognized in future periods once the approval for such additional amounts is obtained. The ranges of indirect costs and fees are estimated to be between $0.4 million and $0.6 million. At present, the Company expects to collect such amounts during the first half of fiscal 2012 based on current discussions with the DVA and collection efforts. Because these amounts are subject to government review, no assurances can be given that we will receive any additional amounts from our government contracts or that if additional amounts are received, that the amount will be within the range specified above.

Leases

Minimum payments, assuming no expected sublease payments, under non-cancelable operating lease obligations at September 30, 2011 are as follows (amounts in thousands):

Years Ending September 30,

2012	$	176
2013		163
2014		169
2015		143
2016		152

	$	803

Rent expense, net of sublease income, under all operating leases in fiscal year ended September 30, 2011, was $155,000. Rent expense, net of sublease income, under all operating leases in fiscal year ended September 30, 2010, was $551,000, of which $151,000 is attributed to continuing operations and $400,000 is attributed to discontinued operations.

As discussed in Note 4, as part of the sale of TeamStaff Rx, Advantage RN had the right to use, through February 28, 2011, the premises located in Clearwater, Florida that was used by TeamStaff Rx for its principal executive offices. In connection with such use, Advantage RN was obligated to make rent subsidy payments to TeamStaff Rx totaling $125,000, consisting of (i) $25,000 payable at the closing and (ii) an additional $100,000 payable in 10 equal monthly installments of $10,000 payable on the first day of each calendar month beginning on March 1, 2010 until December 1, 2010. Advantage RN has since vacated the premises and ceased making installment payments. The Company is pursuing a claim against Advantage RN for all amounts owed. The Company has provided an allowance of $50,000 for their estimate of uncollectible sub-lease funding.

Prepaid Workers' Compensation

As part of the Company's discontinued PEO operations, TeamStaff had a workers' compensation program with Zurich American Insurance Company ("Zurich") which covered the period from March 22, 2002 through November 16, 2003, inclusive. Payments for the policy were made to a trust monthly based on projected claims for the policy period. Interest on all assets held in the trust is credited to TeamStaff. Payments for claims and claims expenses are made from the trust. From time-to-time, trust assets have been refunded to the Company based on Zurich's and managers' overall assessment of claims experience and historical and projected settlements. The final amount of trust funds that could be refunded to the Company is subject to a number of uncertainties (e.g. claim settlements and experience, health care costs, the extended statutory filing periods for such claims); however, based on a third party's study of claims experience, TeamStaff estimates that at September 30, 2011, the remaining prepaid asset of $0.3 million will be received within the next twelve to thirty-six months. This amount is reflected on TeamStaff's balance sheet as of September 30, 2011 as a current asset, in addition to approximately $0.2 million related to other policy deposits.

Workers' Compensation Insurance

From November 17, 2003 through April 14, 2009, inclusive, TeamStaff's workers' compensation insurance program was provided by Zurich. This program covered TeamStaff's temporary, contract and corporate employees. This program was a fully insured, guaranteed cost program that contained no deductible or retention feature. The premium for the program was paid monthly based upon actual payroll and is subject to a policy year-end audit. Effective April 15, 2009, TeamStaff entered into a partially self-funded workers' compensation insurance program with a national insurance carrier for the premium year April 15, 2009 through April 14, 2010 and has been renewed through April 14, 2012. The Company pays a base premium plus actual losses incurred, not to exceed certain stop-loss limits. The Company is insured for losses above these limits, both per occurrence and in the aggregate.

As of September 30, 2011 and 2010, the adequacy of the workers' compensation reserves (including those periods' amounts that are offset against the trust fund balances in prepaid assets) was determined, in management's opinion, to be reasonable. In determining our reserves, we rely in part upon information regarding loss data received from our workers' compensation insurance carriers that may include loss data for claims incurred during prior policy periods. In addition, these reserves are for claims that have not been sufficiently developed and such variables as timing of payments and investment returns thereon are uncertain or unknown, therefore actual results may vary from current estimates. TeamStaff will continue to monitor the development of these reserves, the actual payments made against the claims incurred, the timing of these payments, the interest accumulated in TeamStaff's prepayments and adjust the related reserves as deemed appropriate.

Payroll Taxes

TeamStaff has received notices from the Internal Revenue Service ("IRS") claiming taxes, interest and penalties due related to payroll taxes predominantly from its former PEO operations which were sold in fiscal 2003. TeamStaff has also received notices from the IRS reporting overpayments of taxes. Management believes that these notices are predominantly the result of misapplication of payroll tax payments between its legal entities. If not resolved favorably, the Company may incur interest and penalties. Until the sale of certain assets related to the former PEO operations, TeamStaff operated through 17 subsidiaries, and management believes that the IRS has not correctly identified payments made through the different entities, therefore leading to the notices. TeamStaff has been working with the IRS to resolve these discrepancies and has had certain interest and penalty claims abated. TeamStaff has also received notices from the Social Security Administration claiming variances in wage reporting compared to IRS transcripts. TeamStaff believes the notices from the Social Security Administration are directly related to the IRS notices received. TeamStaff had retained the services of Ernst & Young LLP as a consultant to assist in resolving certain of these matters with the IRS and Social Security Administration. TeamStaff believes that after the IRS applies all the funds correctly, any significant interest and penalties will be abated; however, there can be no assurance that each of these matters will be resolved favorably. 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, the potential exists for related penalties and interest and the remaining liability ($1.3 million at September 30, 2011) has been recorded in accounts payable and includes estimated penalties and interest currently sought by the IRS totaling approximately $500,000.

The Company believes it has accrued for the entire estimated remaining liability, inclusive of interest and penalties through the date of the financial statements. The Company will incur additional interest and may incur possible additional penalties through the future date that this obligation is settled, however, it is not currently possible to estimate what, if any, additional amount(s) may be claimed in future, given the uncertain timing and nature of any future settlement negotiations. No payments were made in fiscal 2010 and fiscal 2011. 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. The Company's intention is that it will in due course seek to negotiate a mutually satisfactory payment plan with the IRS, but there is no assurance that it would be successful in doing so and the Company's future cash flows and liquidity could therefore be materially affected by this matter.

Legal Proceedings

As a commercial enterprise and employer, we are subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, employment-relations issues, workers' compensation, tax, payroll and employee-related matters and inquiries and investigations by governmental agencies regarding our employment practices or other matters. We are not aware of any pending or threatened litigation that we believe is reasonably likely to have a material adverse effect on our results of operations, financial position or cash flows.

In connection with its healthcare business, TeamStaff is exposed to potential liability for the acts, errors or omissions of its healthcare employees. The professional liability insurance policy provides up to $5,000,000 aggregate coverage with a $2,000,000 per occurrence limit. Although 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.

TeamStaff is engaged in no other litigation, the effect of which is expected to have a material adverse impact on TeamStaff's results of operations, financial position or cash flows.

Employment Agreements

From time-to-time, we enter into employment agreements with certain key executives which provide for fixed compensation, criterion for earning bonuses and other incentives and, in certain instances, issuance of share based equity grants. These agreements generally continue until terminated by the employee or the Board of Directors or, upon the occurrence of defined certain events or circumstances (including a defined change in control), and provide for salary continuance for specified periods of generally no more than a year and or lump sum payments in the event of a change of control of up to 150% of annual salary.

During the fiscal year ended September 30, 2010, the Company terminated certain executives, management and staff personnel, and as a result, incurred severance related expenses of approximately $0.3 million in staff personnel severance (included in selling, general and administrative expense within results of discontinued operations) and $0.3 million in officer severance. At September 30, 2011 and 2010, the remaining liability from these arrangements was $0 and approximately $0.1 million, respectively, which was included in accrued expenses. With respect to the termination of the Company's former Chief Executive Officer and President, the Company entered into a separation agreement with him in February 2010, which sets forth the terms of his departure from the Company.

Government Assignment of Contracts

Availability of funds under the Presidential Financial line of credit is directly related to the successful assignment of certain accounts receivable. Certain government accounts of DLH Solutions are required to execute "Acknowledgements of Assignment." There can be no assurance that every DLH Solutions 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 existing line of credit.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name FASB Interpretation (FIN)
-Number 14
-Paragraph 3
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 5
-Paragraph 9, 10, 11, 12
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.25)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 4: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 450
-SubTopic 20
-Section 50
-Paragraph 4
-URI http://asc.fasb.org/extlink&oid=6952336&loc=d3e14435-108349

Reference 5: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 460
-SubTopic 10
-Section 50
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=6398077&loc=d3e12565-110249

Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 440
-SubTopic 10
-Section 50
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=6394976&loc=d3e25287-109308

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 825
-SubTopic 20
-Section 50
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6449706&loc=d3e16207-108621

+ Details

SHAREHOLDERS' EQUITY:

12 Months Ended

Sep. 30, 2011

SHAREHOLDERS' EQUITY:

SHAREHOLDERS' EQUITY:

(10) SHAREHOLDERS' EQUITY:

On March 31, 2011, the Company entered into a Securities Purchase Agreement (the "Purchase Agreement") with a limited number of accredited investors pursuant to which the Company sold an aggregate of 459,181 shares of its Common Stock for $225,000 to such persons in a private transaction (the "Equity Investment"). The purchasers participating in the transaction are members of the Company's Board of Directors and management team (the "Purchasers"). The transaction closed on March 31, 2011. Of this amount, the Company received $150,000 in total cash proceeds for the purchase of the shares of Common Stock and three of the purchasers agreed with the Company to pay the purchase price for the shares of Common Stock by granting an offsetting credit to the Company for an amount equal to the purchase price and authorizing the Company to apply such credit against any obligation of the Company to such person within twelve months of the closing date, except for base salary. The shares to which the credit relates are to be held by the Company until the credit is applied and will be cancelled upon the one-year anniversary to the extent the credit is not applied. The aggregate amount of such credits totaled $75,000. Through September 30, 2011, $12,000 of such rights of offset were exercised by the Company in respect of 26,789 shares and $63,000 of such rights of offset remain to be applied. The Company has used these cash proceeds for general working capital. The value ascribed to the Equity Investment was based on the fair value of the Company's stock on March 31, 2011. On May 18, 2011, the Company issued 51,020 shares of Common Stock to its counsel in connection with an arrangement to settle $25,000 of outstanding fees. The direct costs of the equity raise were $4,000 and were accounted for as an offset to additional paid-in-capital.

As discussed in Note 6, in connection with certain Convertible Debentures issued during fiscal 2011, at September 30, 2011 there were 53,846 warrants (valued at $42,000) outstanding and the Debenture Purchasers have the right to convert the principal amount of the Convertible Debentures into 269,231 shares of common stock under the terms of the conversion feature embedded in the Convertible Debentures. Because the warrants and the conversion feature embedded in the Convertible Debentures have a weighted average anti-dilution feature that in certain circumstances could provide the holders with protection against changes in the market value of the Company's common stock, they are required under applicable accounting standards to be carried at fair value as of the balance sheet date. At September 30, 2011, the Company evaluated the fair value of the Warrants and the embedded conversion feature of the Convertible Debentures using a binomial valuation model and recorded other income of $107,000 to reflect the net difference between their initial fair values and their fair values as at September 30, 2011.

Stock Option Plans

2000 Employee Stock Option Plan

During 2000, the Board of Directors and shareholders approved the adoption of the 2000 Employees Stock Option Plan (the "2000 Plan") to provide for the grant of options to purchase up to 1,714,286 shares of TeamStaff's common stock to all employees, including senior management. The 2000 Plan replaced the 1990 Employee Plan and Senior Management Plans, both of which expired. Under the terms of the 2000 Plan, options granted thereunder were be designated as options which qualify for incentive stock option treatment ("ISOs") under Section 422A of the Code, or options which do not so qualify. As of September 30, 2011 and 2010, there were no options outstanding under the 2000 Plan. The 2000 Employee Plan expired in January 2010 and no further awards may be made under such plan.

Non-Executive Director Plan

In fiscal year 2000, the Board of Directors and stockholders approved the adoption of the 2000 Non-Executive Director Stock Option Plan (the "2000 Director Plan") to provide for the grant of options to non-employee directors of TeamStaff. Under the terms of the 2000 Director Plan, each non-executive director was automatically granted an option to purchase 5,000 shares upon joining the Board and each September lst, pro rata, based on the time the director has served in such capacity during the previous year. However, the granting of options to non-employee directors was suspended for fiscal 2007 through 2010. The 2000 Director Plan also provided that directors, upon joining the Board, and for one (1) year thereafter, will be entitled to purchase restricted stock from TeamStaff at a price equal to 80% of the closing bid price on the date of purchase up to an aggregate purchase price of $50,000. For fiscal years 2005 through 2010, there were no purchases of discounted restricted stock. As of September 30, 2011 and 2010, there were no options outstanding and 5,000 options outstanding, respectively, held by directors. The 2000 Non-Executive Director Plan expired in January 2010 and no further awards may be made under such plan.

2006 Long Term Incentive Plan ("2006 Plan")

The Board of Directors adopted the 2006 Plan on January 17, 2006. The shareholders approved the 2006 Plan at the annual meeting on April 27, 2006 and the Company initially reserved an aggregate of 1,250,000 shares of common stock for issuance under the 2006 Plan. In August 2011, the Company's shareholders approved amendments to the 2006 Plan pursuant to which the maximum number of shares eligible for issuance pursuant to awards granted under the 2006 Plan was increased to an initial reserve of 3,001,625 shares of common stock. The maximum number of shares of common stock that may be delivered to participants under the 2006 Plan as amended equals the sum of: (a) 2,750,000 shares of common stock under the 2006 Plan; (b) 251,625 shares subject to awards granted under the 2000 Plan and the 2000 Director Plan (collectively, the "2000 Plans"), which were forfeited, expired, canceled or settled in cash without delivery of such shares to the participant or otherwise is terminated without a share issuance; (c) any shares tendered by participants or withheld in payment of the exercise price of options or to satisfy withholding taxes under the 2000 Plans; and (d) any shares repurchased with the proceeds of options exercised under the 2000 Plans. Shares that are subject to issuance upon exercise of an award granted under the 2006 Plan but which cease to be subject to such award (other than due to the exercise of such award), and shares that are subject to an award that is granted under the 2006 Plan but is subsequently forfeited, or that are subject to an award that terminates without shares being issued, will again be available for grant and issuance under the 2006 Plan.

Administration. The 2006 Plan is administered by the Management Resources and Compensation Committee of the Board of Directors (the "Compensation Committee"). The 2006 Plan authorizes the Compensation Committee to select those participants to whom awards may be granted, to determine whether and to what extent awards are granted, to determine the number of shares of common stock or other considerations to be covered by each award, to determine the terms and conditions of awards, to amend the terms of outstanding awards, and to take any other action consistent with the terms of the 2006 Plan as the Compensation Committee deems appropriate. The Compensation Committee may grant awards subject to vesting schedules or restrictions and contingencies in the Company's favor. However, the awards may be subject to acceleration such that they become fully vested, exercisable and released from any restrictions or contingencies upon the occurrence of a change of control (as defined in the 2006 Plan).

Terms and Conditions of Awards. The Compensation Committee is authorized to make any type of award to a participant that is consistent with the provisions of the Plan. Awards may consist of options, stock appreciation rights, restricted stock, restricted stock units, performance shares, cash awards or any combination of these types of awards. Options may be determined to be an "incentive stock option" ("ISO") or a non-qualified stock option. An option designated as an ISO is intended to qualify as such under Section 422 of the Internal Revenue Code.

Subject to the terms of the 2006 Plan, the Compensation Committee determines the provisions, terms and conditions of each award. The Compensation Committee may grant awards subject to vesting schedules or restrictions and contingencies in the Company's favor. However, the awards may be subject to acceleration such that they become fully vested, exercisable and released from any restrictions or contingencies upon the occurrence of a change of control (as defined in the 2006 Plan). The Compensation Committee may provide that stock-based awards earn dividends or dividend equivalents, which may be paid in cash or shares or may be credited to an account designated in the name of the participants. Participants may also be required or permitted to defer the issuance of shares or cash settlements under awards including under other deferred compensation arrangements of the Company. Each option granted under the 2006 Plan will be designated as either an incentive stock option or a non-statutory stock option. No option or stock appreciation right may be granted with a term of more than 10 years from the date of grant.

Performance shares or cash awards will depend on achievement of performance goals based on one or more performance measures determined by the Compensation Committee over a performance period as prescribed by the Compensation Committee of not less than one year and not more than five years. Performance goals may be established on a corporate-wide basis or as to one or more business units, divisions or subsidiaries, and may be in either absolute terms or relative to the performance of one or more comparable companies on an index covering multiple companies. "Performance measures" means criteria established by the Compensation Committee from time to time prior to granting the performance shares or cash awards.

Exercise Price. The 2006 Plan authorizes the Compensation Committee to grant options and stock appreciation rights at an exercise price of not less than 100% of the fair market value of the shares on the date of grant. The Compensation Committee has the right to provide post-grant reduction in exercise price to reflect any floating index as specified in an award agreement. The exercise price is generally payable in cash, check, surrender of pre-owned shares of common stock, broker-dealer exercise and sale, or by such other means determined by the Compensation Committee.

Option Repricing Prohibited. The exercise price for any outstanding option or stock appreciation right may not be decreased after the date of grant, nor may any outstanding option or stock appreciation right be surrendered as consideration for the grant of a new option or stock appreciation right with a lower exercise price.

Duration, Amendment and Termination. Except as specified in the previous paragraph, the 2006 Plan became effective upon its approval by the Company's shareholders in April 2006 and will terminate on the tenth anniversary of its effective date, unless sooner terminated by the Board of Directors. In addition to the power to terminate the 2006 Plan at any time, the Board of Directors also has the power to amend the 2006 Plan; provided, no amendment to the 2006 Plan may be made without stockholder approval if such approval is required by law or agreement, or if such change would: (i) expand the classes of persons to whom awards may be made under the 2006 Plan; (ii) increase the number of shares of Common Stock authorized for grant under the 2006 Plan; (iii) increase the number of shares which may be granted under awards to any one participant under the 2006 Plan; (iv) allow the creation of additional types of awards; or (v) decrease performance award criteria except to the extent permitted under the 2006 Plan.

Eligibility. The 2006 Plan, as amended, provides that awards may be granted to employees, non-employee directors and consultants of the Company as the Compensation Committee may determine.

Option Activity Table

The following table summarizes the activity in TeamStaff's various stock option plans for the years ended September 30, 2011 and 2010:

			Weighted Average Exercise Price			Aggregate Pretax Intrinsic Value

Options outstanding, September 30, 2009	15,125		$	6.30	1.6	$	0
Granted	755,000		$	0.94
Exercised	—			—
Cancelled	(47,625	)	$	2.23

Options outstanding, September 30, 2010	722,500		$	1.13	9.4	$	0
Granted	850,000		$	1.42
Exercised	(30,000	)	$	1.00
Cancelled	(5,000	)	$	5.16

Options outstanding, September 30, 2011	1,537,500		$	1.19	9.3	$	743,745

As of September 30, 2011, 662,500 options outstanding were vested and 875,000 options were unvested. As of September 30, 2010, 172,500 options outstanding were vested and 550,000 options were unvested. As of September 30, 2009 all options outstanding had vested and were exercisable. As of September 30, 2011, approximately $141,000 of unrecognized compensation costs related to non-vested option awards are expected to be recognized in future periods.

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company's closing stock price on the last trading day of the fiscal year and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount changes based on the fair market value of the Company's stock.

During fiscal 2011 and fiscal 2010, the Company issued 472,000 and 550,000 options, respectively, that vest to the recipients when the market value of the Company's stock achieves and maintains defined levels. The Company used a binomial valuation model and various probability factors in establishing the fair value of the options.

Weighted average assumptions used in the valuation of all option awards were as follows:

	2011	2010

Risk free interest rate	.95%	2.69%
Contractual lives	10 years	10 years
Dividend yield	0%	0%
Expected lives (in years)	10 years	10 years
Expected volatility	70.9%	67.45%
Fair Value per Option	$0.56	$.38

Stock compensation related to option grants totaled $398,000 and $144,000 in 2011 and 2010, respectively; such amounts are included in Selling General and Administrative expenses.

Pre-Vesting Forfeitures. Estimates of pre-vesting option forfeitures are based on Company experience. The Company will adjust its estimate of forfeitures over the requisite service period based on the extent to which actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of compensation expense to be recognized in future periods.

Restricted Stock Grants

A summary of activity in restricted stock is as follows:

			Weighted Average Fair Value Grant-Date

Restricted stock outstanding, September 30, 2009	391,250		$	1.96
Granted	42,500			1.34
Issued	(205,000	)		1.63
Cancelled	(133,750	)		1.96

Restricted stock outstanding, September 30, 2010	95,000			2.42
Granted	35,000			0.56
Issued	(77,500	)		1.29
Cancelled	—			1.96

Restricted stock outstanding, September 30, 2011	52,500			2.85

During the year ended September 30, 2011, TeamStaff granted an aggregate of 35,000 restricted shares to non-employee directors at the closing price on the award date. Of this award, 35,000 shares vested immediately, resulting in a charge of approximately $20,000. In addition, $14,000 related to prior periods' grants to employees was recognized as an expense. As of September 30, 2011, approximately $150,000 of unrecognized compensation costs related to non-vested non-performance based restricted stock awards is expected to be recognized in future periods.

During the year ended September 30, 2010, TeamStaff granted awards of restricted stock under its 2006 Plan. An aggregate of 42,500 restricted shares were awarded to non-employee directors at the closing price on the award dates. Of this award, 42,500 shares vested immediately, resulting in a charge of approximately $57,000.

At September 30, 2011 and 2010 the number of unvested shares under this program totaled 52,500 and 95,000, respectively. At September 30, 2011 the Company had reserved 772,097 shares of common stock for issuance under various option, shares and warrant plans and arrangements.

As discussed in Note 15, subsequent to September 30, 2011, the Company granted an aggregate of 53,750 shares of restricted stock to our non-executive directors, consistent with our compensation policy for non-executive directors and warrants to purchase 20,000 shares of common stock to a consultant for services, which warrants will expire in October 2016. These warrants have an exercise price of $2.28 per share and vest in two equal annual installments.

- Definition

The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 12
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Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
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-Article 3

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Regulation S-X (SX)
-Number 210
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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-Name Accounting Research Bulletin (ARB)
-Number 43
-Chapter 1
-Section B
-Paragraph 7, 11A
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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-Name Statement of Financial Accounting Standard (FAS)
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Reference 9: http://www.xbrl.org/2003/role/presentationRef
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+ Details

QUARTERLY FINANCIAL DATA (UNAUDITED):

12 Months Ended

Sep. 30, 2011

QUARTERLY FINANCIAL DATA (UNAUDITED):

QUARTERLY FINANCIAL DATA (UNAUDITED):

(11) QUARTERLY FINANCIAL DATA (UNAUDITED):

(Amounts in thousands, except per share data)

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter

Fiscal Year 2011
	Net revenues	$	10,575		$	10,444		$	10,579		$	10,325
	Gross profit		1,318			1,508			1,513			1,559
	Loss from operations(1)(2)		(275	)		(81	)		(275	)		(3,592	)
	Loss from continuing operations(1)(2)		(337	)		(183	)		(410	)		(3,660	)
	Gain from discontinued operations		—			—			270			—
	Net loss		(337	)		(183	)		(140	)		(3,660	)
	Basic and diluted loss per share from continuing operations(3)	$	(0.07	)	$	(0.04	)	$	(0.07	)	$	(0.62	)
	Net gain (loss) per share—Basic and diluted(3)	$	(0.07	)	$	(0.04	)	$	(0.02	)	$	(0.62	)

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter

Fiscal Year 2010
	Net revenues	$	10,793		$	9,795		$	10,079		$	10,207
	Gross profit		1,362			969			1,339			1,137
	Income (loss) from operations(2)		(631	)		(890	)		(478	)		(2,338	)
	Income (loss) from continuing operations(2)		(651	)		(983	)		(576	)		(2,388	)
	Loss from discontinued operations(4)		(1,134	)		(25	)		—			(50	)
	Net loss		(1,785	)		(1,008	)		(576	)		(2,438	)
	Basic and diluted loss per share from continuing operations	$	(0.13	)	$	(0.20	)	$	(0.11	)	$	(0.47	)
	Net loss per share—Basic and diluted	$	(0.36	)	$	(0.20	)	$	(0.11	)	$	(0.48	)

(1): Reflects impairment charges in the fourth quarters of fiscal 2011 and 2010 on tradename intangible assets of $2.6 million and $1.3 million, respectively.

(2): Includes strategic legal fees in the fourth quarter of fiscal 2011 of $0.6 million not expected to regularly reoccur at a similar magnitude. Fiscal 2011 also includes $0.4 million of non cash stock option expense of which $0.3 occurred in the fourth quarter.
(3): Note that the sum of the quarterly net loss per share amounts does not equal the full fiscal year net loss per share amount due to the effect of changes during the year in the number of shares outstanding.
(4): Includes loss on disposal in the first quarter of fiscal 2010 of $0.3 million, principally related to the accrual of remaining lease obligations for the TeamStaff Rx abandoned facility.

- Definition

The entire disclosure for the quarterly financial data in the annual financial statements. The disclosure may include a tabular presentation of financial information for each fiscal quarter for the current and previous year, including revenues, gross profit, income or loss before extraordinary items and earnings per share data. It also includes an indication if the information in the note is unaudited, comments on the aggregate effect of year-end adjustments, and an explanation of matters or transactions that affect comparability or are pertinent to an understanding of the information furnished.

+ References + Details

EMPLOYEE BENEFIT PLANS:

12 Months Ended

Sep. 30, 2011

EMPLOYEE BENEFIT PLANS:

EMPLOYEE BENEFIT PLANS:

(12) EMPLOYEE BENEFIT PLANS:

As of September 30, 2011, TeamStaff and its subsidiaries maintain a defined contribution and a supplemental pension plan.

As of January 1, 2004, TeamStaff adopted the TeamStaff 401(k) Plan (the "401(k) Plan") for the benefit of its eligible employees. Any TeamStaff corporate (non worksite) employee is immediately eligible upon hire for participation in the 401(k) Plan. TeamStaff may provide a discretionary matching contribution of 25% of each of the first 4% of a participant's elective contributions under the 401 (k) Plan. TeamStaff recorded related expense of $7,000 in fiscal 2011 and 2010. A participant is always fully vested in his or her elective contributions and vests in Company matching contributions over a four year period.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
-Paragraph 5
-Subparagraph a
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 132R
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Reference 4: http://www.xbrl.org/2003/role/presentationRef
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Reference 5: http://www.xbrl.org/2003/role/presentationRef
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Reference 6: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 7: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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-Paragraph 264
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 8: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 9: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
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Reference 10: http://www.xbrl.org/2003/role/presentationRef
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Reference 11: http://www.xbrl.org/2003/role/presentationRef
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Reference 12: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
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Reference 13: http://www.xbrl.org/2003/role/presentationRef
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+ Details

ECONOMIC DEPENDENCY:

12 Months Ended

Sep. 30, 2011

ECONOMIC DEPENDENCY:

ECONOMIC DEPENDENCY:

(13) ECONOMIC DEPENDENCY:

A major customer is defined as a customer from which the Company derives at least 10% of its revenues. For the fiscal years ended September 30, 2011 and 2010, revenue from the U.S. Government accounted, either directly or in-directly, for 100% and 98%, respectively, of total revenue. No single service or contract accounted for more than 50% of the total revenue during fiscal 2011, with logistics services being the largest at 50%. Within the U.S. Government, our largest customer in fiscal 2011 continued to be the DVA, accounting for 94% of revenue in fiscal 2011 and 95% in fiscal 2010, with whom the Company held over a dozen contracts and/or task orders for logistics, pharmaceutical, and medical services, all subject to the Federal Acquisition Regulations. As further discussed below, during fiscal 2011, the Company was awarded work totaling up to approximately $150 million (unaudited) for pharmaceutical and other medical services during a period of up to five years (increased subsequently to up to approximately $155 million (unaudited)) which will both retain and expand its business with the DVA. Accordingly, DLH Solutions remains particularly dependent on the continuation of its relationship with the DVA.

The largest component of the awards discussed above comprised the award in May 2011 to DLH Solutions of a competitively bid Blanket Purchase Agreement contract with the DVA for pharmaceutical services which retains and expands work that accounted for approximately 45% of revenues for fiscal 2011. Work under the new contract began on November 1, 2011 and is expected to continue for up to 5 years and generate revenue of up to approximately $145 million (unaudited). The Company also was awarded a contract in September 2011 to provide other medical services to the DVA of up to approximately $10 million (unaudited) over five years. In addition, the Company also provides further services to the DVA under contracts which accounted for approximately 50% of revenues for fiscal 2011, which currently expire on December 31, 2011, in respect of which no request for proposals have yet been invited. Accordingly, the Company has in the past, and anticipates in the future, receiving sole source extensions of this work for an additional period of time. While the Company believes it is well positioned to continue its relationship with the DVA, no assurances can be given that the DVA would further extend our current orders for the provision of services, that we would be successful in any bid for new contracts to provide such services or that if we are granted subsequent orders, that such orders would be of a scope comparable to the services that we have provided to date. If the DVA does not further extend our current service contracts or we are not successful in our efforts to obtain contract awards pursuant to either the current or new solicitations for the provision of such services, our results of operations, cash flows and financial condition would be materially adversely affected. However, in such circumstances, the Company may be able to avail itself of a right to continue for an additional period beyond the expiration date as part of any protest filed by an interested party.

Accounts receivable from agencies of the United States Government totaled $11.1 million and $11.3 million at September 30, 2011 and 2010, respectively, of which $1.2 million and $1.0 million was unbilled at September 30, 2011 and 2010, respectively. In addition, as discussed in Note 9, included in revenue derived from the Federal government in 2008 were retroactive adjustments that totaled $10.8 million; $9.3 million of this amount is included in accounts receivable (unbilled) at September 30, 2011 and 2010. Such revenue is not expected to recur in future periods.

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

12 Months Ended

Sep. 30, 2011

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

(14) SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

Non-cash activity during the year ended September 30, 2011 included the following matters:

•

Reduction of accounts payable and an increase of additional paid-in-capital by $25,000 to reflect the issuance of stock to settle a liability;

•

Reduction of notes payable and an increase of additional paid-in-capital by $795,000 to reflect the issuance of stock in a settlement;

•

The issuance of warrants resulted in an increase in paid-in capital by $42,000 and the carrying value of the Convertible Debentures was reduced at the date such proceeds were received.

SUBSEQUENT EVENTS:

12 Months Ended

Sep. 30, 2011

SUBSEQUENT EVENTS:

SUBSEQUENT EVENTS:

(15) SUBSEQUENT EVENTS:

Management evaluated subsequent events through the date that the Company's financial statements were issued. Based on this evaluation, the Company has determined that no subsequent events have occurred which require disclosure through the date that these financial statements were issued other than the following:

Effective as of October 13, 2011, the Company granted an aggregate of 53,750 shares of restricted stock to our non-executive directors, consistent with our compensation policy for non-executive directors. These shares were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1933, as amended.

In October 2011, we granted warrants to purchase 20,000 shares of common stock to a consultant for services, which warrants will expire in October 2016. These warrants have an exercise price of $2.28 per share and vest in two equal annual installments commencing on the first anniversary of the grant date. These warrants were issued pursuant to the exemption from registration provided by Section 4(2) of the Securities Act of 1993, as amended.

On November 30, 2011, the Company entered into an amendment of its Loan and Security Agreement with Presidential Financial Corporation, pursuant to which they agreed to not seek to terminate the Loan Agreement without cause until after December 31, 2012.

Document and Entity Information - USD ($)	12 Months Ended
Document and Entity Information - USD ($)	Sep. 30, 2011	Nov. 22, 2011	Mar. 31, 2011
Document and Entity Information
Entity Registrant Name	TEAMSTAFF INC
Entity Central Index Key	0000785557
Document Type	10-K
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Current Fiscal Year End Date	--09-30
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 2,500,706
Entity Common Stock, Shares Outstanding		6,074,933
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	FY