104.41% of manual premium or $15.6 million. The premium for the program was paid monthly based upon estimated payroll for the year and is subject to a policy year-end audit. The renewal program was collateralized by a letter of credit inuring to the benefit of Zurich, and cash held in a trust account with a third party. A letter of credit for $3.5 million was secured through Fleet, as part of TeamStaff's line of credit. However, effective March 31, 2004, Zurich agreed to a reduction in the amount of the letter of credit to $1.8 million. As a result, on March 31, 2004, TeamStaff secured a new letter of credit in the amount of $1.8 million with SunTrust Bank. Payments were made to the trust monthly based on projected claims for the year. Interest on all assets held in the trust is credited to TeamStaff. Payments for claims and claims expenses are made from the trust. Assets in the trust may be adjusted from time to time based on program experience. Claims handling services for the program are provided by GAB Robins, a third party administrator. At March 31, 2004, TeamStaff has a prepaid current asset of $5.0 million for the premiums and the prepayments made to the trust for both years of the Zurich plan.

In conjunction with the sale of its PEO assets to GevityHR, Inc., TeamStaff requested a pro rata cancellation of this policy effective as of November 17, 2003. TeamStaff entered into a new workers' compensation program with Zurich covering TeamStaff's temporary employees and, as of January 1, 2004, its corporate employees. The program is managed by Cedar Hill and claims handling services for the program are provided by GAB Robins. This program is a fully-insured, guaranteed cost program that contains no deductible or retention feature. This policy terminated April 1, 2004. Effective April 1, 2004, TeamStaff entered into a new workers' compensation program with Zurich, covering the period from April 1, 2004 through March 31, 2005, with the same terms as the previous policy.

(3)    DISCONTINUED OPERATIONS:

Effective November 17, 2003, TeamStaff sold certain of the assets of the subsidiaries through which it operated its PEO business to Gevity HR, Inc. for the sum of $9.5 million in cash, $2.5 million of which had been placed in escrow. Under the terms of the asset sale the escrowed payment was scheduled to be determined approximately 90 days from the November 17, 2003, closing, but was subject to downward adjustment based on any reduction in annualized administrative fees payable by the former TeamStaff PEO clients. Any such downward adjustment could be offset by annualized administrative fees of certain clients produced by former TeamStaff sales representatives during the 90-day period. The assets consisted primarily of client contracts, marketing agreements and internally developed software for use in reconciling certain benefit provider monthly invoices. As part of the transaction, Gevity HR, Inc. agreed, among other things, to hire certain former TeamStaff employees assigned to the PEO division and assume certain of TeamStaff's lease obligations.

On April 23, 2004, subsequent to the balance sheet date, TeamStaff and Gevity agreed that TeamStaff's share of the $2.5 million placed in escrow was $2.25 million, and that amount has been released from escrow for TeamStaff's benefit. When added to the $7.0 million already paid by Gevity, this results in a total purchase price of $9.25 million. Concurrently, TeamStaff settled obligations to Gevity related to payroll for TeamStaff's internal employees under a co-employment arrangement of $1.2 million, and settled obligations predominantly related to PEO client payments received by TeamStaff during the period following the sale, offset in part by invoices paid by TeamStaff on Gevity's behalf, totaling $1.1 million. The cash required to settle this obligation of $1.1 million is included in assets held for sale.

Goodwill is assigned to specific reporting units and, in accordance with SFAS 142, is reviewed for possible impairment at least annually or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount may be greater than its fair value. As of the fiscal quarter ended December 31, 2002, TeamStaff carried a total of $27.2 million in goodwill. During the fiscal quarter ended March 31, 2003, TeamStaff determined that the carrying amount of the PEO reporting segment exceeded its fair value, which was estimated based on the present value of expected future cash inflows and the market approach which compares TeamStaff to other comparable entities. The decision to test for impairment was based on a variety of factors, including, but not limited to, the overall downturn in the nation's economy, the relatively recent substantial decrease in the number of TeamStaff PEO worksite employees, the performance of the Wachovia marketing

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relationship, the reduced valuations of individual PEOs by various market analysts and the associated market downgrade in the PEO industry generally. Accordingly, a goodwill impairment loss of $20.4 million, as indicated by an independent outside valuation, was recognized in the PEO reporting unit for the fiscal quarter ended March 31, 2003. As a result of the sale of the PEO business, TeamStaff has written off the remaining goodwill related to the PEO business of $5.4 million in the first fiscal quarter of 2004.

Intangible assets that are subject to amortization are reviewed for potential impairment whenever events or circumstances indicate that carrying amounts may not be recoverable. Assets not subject to amortization are tested for impairment at least annually. As part of its acquisition of BrightLane, completed in August 2001, TeamStaff entered into a two-year, extendable marketing relationship with First Union Corporation (renamed Wachovia). The Wachovia relationship was intended to provide TeamStaff with the ability to market its PEO services to Wachovia's small business customers through Wachovia's network of small business bankers. The relationship did not produce the anticipated number of PEO clients or worksite employees. During the fiscal quarter ended March 31, 2003, TeamStaff determined that, based on estimated future cash flows, the carrying amount of the Wachovia marketing relationship, which was assigned to TeamStaff's PEO reporting segment, exceeded its fair value by $5.7 million; accordingly, an impairment loss of that amount, as indicated by an independent outside valuation, was recognized and was included in impairment of intangible assets. TeamStaff later received written notice from Wachovia terminating the current agreement effective as of October 14, 2003. TeamStaff therefore wrote-off the full remaining value of the Wachovia relationship, $1.2 million, during the third fiscal quarter 2003. The impairment of these intangible assets were included in discontinued operations in the appropriate periods.

As of March 31, 2004, TeamStaff has accounted for the discontinued operation in accordance with SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", within the consolidated financial statements and notes to consolidated financial statements included in this Form 10-Q filing.

The following chart details assets and liabilities held for sale:

ASSETS				March 31, 2004				September 30, 2003
				(amounts in thousands)
Cash				$	1,091			$	—
Accounts Receivable					—				14,191
Other current assets					—				353
Total current assets					1,091				14,544
Fixed assets					—				4,874
Accumulated depreciation					—				(2,547	)
Net fixed assets					—				2,327
Goodwill					—				5,390
Intangible assets					—				10
Other assets					—				178
Total assets				$	1,091			$	22,449
LIABILITIES
Accounts payable				$	1,091			$	1,199
Accrued payroll					211				13,905
Accrued expenses and other current liabilities					1,170				859
Total current liabilities					2,472				15,963
Client security deposits					—				421
Total liabilities				$	2,472			$	16,384

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Cash and accounts payable in the above chart includes obligations to GevityHR, Inc., predominantly related to PEO client payments received by TeamStaff during the period immediately following the sale of TeamStaff's PEO-related assets to Gevity, offset in part by invoices paid by TeamStaff for Gevity's share of certain costs such as medical insurance premiums and rent.

Net revenues for the PEO segment for the six months ended March 31, 2004 and 2003 were $11.6 million and $45.5 million, respectively.

TeamStaff's loss, net of tax, from discontinued operations is $0.3 million for the second fiscal quarter of 2004 and $1.6 million for the first six months of fiscal year 2004. TeamStaff's loss, net of tax, from disposal is negligible for the second fiscal quarter of 2004 and $0.8 million for the first six months of fiscal year 2004. The loss on disposal is based on the selling price of $9.25 million, $7.0 million at closing and $2.25 million to be paid from the escrow account, offset by expenses including the writedown of goodwill and fixed assets, salary, severance and stay bonus payouts to affected employees, accruals for losses from lease obligations in offices no longer used by TeamStaff's continuing operations offset by estimated sublease of unoccupied office space, investment banking fees and other expenses required to dispose of the PEO business.

In determining the loss from the sale of the PEO assets, TeamStaff incurred the following disposal costs:

Disposal Cost:				Total Amount Accrued				Amount Accrued Current Quarter
				(amounts in thousands)
Termination benefits				$	599			$	76
Lease obligations (net of estimated sublease income)					1,355				408
Fixed asset write-offs					2,028				—
Goodwill write-offs					5,390				—
Investment banking fees					271				—
All other					891				272
Total				$	10,534			$	756

The increase in expenses this quarter resulted from additional severance cost beyond our estimate at December 31, 2003, lower estimated sublease income from offices no longer used by TeamStaff, and additional amounts transferred to Gevity for client benefits.

Liability Balances				12/31/2003 Balance				Expensed This Quarter				Paid This Quarter				3/31/2004 Balance
				(amounts in thousands)
Accounts payable				$	969			$	272			$	(150	)		$	1,091
Accrued payroll					506				76				(371	)			211
Accrued expenses and other current liabilities					1,197				408				(435	)			1,170
Total				$	2,672			$	756			$	(956	)		$	2,472

(4)    DEBT:

On April 9, 2002, TeamStaff entered into a revolving loan facility with Fleet National Bank ("Fleet"). The total outstanding loan amount could not exceed at any one time the lesser of $7.0 million or the sum of 85% of qualified accounts receivable, less an amount reserved by Fleet to support direct debit processing exposure. The annual interest rate was either the Fleet prime rate or LIBOR, at the discretion of TeamStaff. The facility was collateralized by substantially all of the assets of TeamStaff, including its accounts receivable. The facility was subject to certain covenants including, but not limited to, interest rate coverage of 2.0 to 1.0, total liabilities to tangible net worth ratio of 2.0 to 1.0, and minimum working capital of $10.0 million.

Effective March 21, 2003, the Company and Fleet agreed to a renewal of the revolving loan facility, which expired on March 31, 2004. The terms of the facility were substantially as described above,

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except that the total outstanding loan amount at any one time could not exceed the lesser of $6.0 million or the sum of 85% of the qualified accounts receivable less an amount reserved by Fleet. TeamStaff used this loan agreement as collateral for a letter of credit in the amount of $3.5 million issued with respect to TeamStaff's workers' compensation program with Zurich effective April 1, 2003 described above. In connection with the sale of certain PEO assets to Gevity HR, Inc., TeamStaff was required to obtain the consent of Fleet to the transaction. As part of its agreement to the sale of PEO assets (which served as collateral for the loan) Fleet required that TeamStaff provide substitution collateral in the form of a $3.5 million cash deposit at Fleet. The revolving loan facility and the letter of credit expired on March 31, 2004. As a result, the $3.5 million cash deposit was released by Fleet.

Effective March 31, 2004, Zurich reduced the amount of the letter of credit collateralization requirement for the workers' compensation program to $1.8 million. TeamStaff has secured a letter of credit in that amount from SunTrust Bank. The letter of credit is collateralized by a certificate of deposit for $1.8 million deposited at SunTrust.

(5)    SUPPLEMENTAL RETIREMENT PLAN:

Effective October 1, 2000, TeamStaff adopted a non-qualified Supplemental Retirement Plan (SERP) covering certain TeamStaff corporate officers. TeamStaff's former President and Chief Executive Officer and its former Chief Financial Officer were the only SERP participants. SERP participants also were provided with a split dollar life insurance policy, insuring the life of the participant. Each participant collaterally assigned his policy to TeamStaff to secure repayment of policy premiums. In connection with the change in their employment status, TeamStaff engaged in negotiations with its former President and Chief Executive Officer and the former Chief Financial Officer regarding the payment of certain severance benefits and the satisfaction of TeamStaff's obligations to each of them under the SERP and the split dollar life insurance arrangements. On December 31, 2003, TeamStaff executed an agreement with its former President and Chief Executive Officer pursuant to which TeamStaff agreed to, among other things, release the collateral assignment of the split dollar life insurance policy as of December 31, 2003 and to accelerate the payment of certain agreed upon payments under the SERP in complete satisfaction of TeamStaff's obligations under the SERP. TeamStaff entered into a similar agreement with its former Chief Financial Officer effective as of December 30, 2003. That agreement also provided for the payment of severance and other benefits over time in satisfaction of TeamStaff's obligations to its former Chief Financial Officer under his severance agreement effective May 22, 2002. The effect of these settlements with the former President and Chief Executive Officer and former Chief Financial Officer in fiscal year 2004 will be $0.4 million of additional expense related to the SERP. Cash payments of $1.5 million have been made to the former President and Chief Executive Officer and the former Chief Financial Officer in the first six months of fiscal year 2004.

Components of Net Periodic Benefit Cost:

				Three Months Ended March 31,								Six Months Ended March 31,
				2004				2003				2004				2003
				(amounts in thousands)
Service cost				$	—			$	—			$	—			$	17
Interest cost					21				23				41				45
Amortization of prior service cost					—				15				—				30
Amortization of net (gain)/loss					15				5				30				7
Curtailment charges					—				254				—				254
Settlement charges					119				—				188				—
Total pension cost				$	155			$	297			$	259			$	353

Employer Contributions to Pension Plan

For the six months ended March 31, 2004, TeamStaff has contributed $274,000. TeamStaff anticipates contributing an additional $155,000 in fiscal 2004 for a total of $429,000.

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(6)    STOCK OPTIONS:

During the quarter ended March 31, 2004, TeamStaff did not grant any options, 89,311 options expired or were cancelled unexercised, 21,428 warrants expired unexercised, and no options were exercised. During the six months ended March 31, 2004, TeamStaff granted 50,000 options at an average price of $2.08 per share, 225,935 options expired or were cancelled unexercised, 21,428 warrants expired unexercised, and no options were exercised. During the quarter ended March 31, 2003, TeamStaff granted 10,000 options at an average price of $3.03 per share, 33,015 options expired or were cancelled unexercised, and no options were exercised. During the six months ended March 31, 2003, TeamStaff granted 83,000 options at an average price of $3.00 per share, 68,131 options expired or were cancelled unexercised, and no options were exercised.

(7)    SEGMENT REPORTING:

As a part of continuing operations, TeamStaff operates two different lines of business: medical staffing and payroll services.

TeamStaff currently provides temporary and permanent staffing for allied healthcare professionals and nurses with hospitals, clinics and therapy centers. Medical staffing enables clients to attain management and productivity goals by matching highly trained professionals and technical personnel to specific project requirements.

Through its Payroll Services business segment, TeamStaff provides basic payroll services to its clients, approximately 75% of which are in the construction industry. Services provided include the preparation of payroll checks, filing of payroll taxes, government reports, W-2's, remote processing directly to the client's offices and certified payrolls.

All corporate expenses, interest expense, as well as depreciation on corporate assets and miscellaneous charges, are reflected in a separate unit called Corporate.

The accounting policies of the segments are the same as those described in the summary of significant accounting policies. TeamStaff evaluates the performance of its business lines based on pre-tax income.

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The following table represents the financial results for each of TeamStaff's segments:

For the three months ended March 31, 2004				Medical Staffing				Payroll Services				Corporate				Consolidated
				(Amounts in thousands)
Revenues				$	7,784			$	1,014			$	—			$	8,798
Income/(loss) from operations before income taxes				$	245			$	331			$	(1,628	)		$	(1,052	)

For the three months ended March 31, 2003				Medical Staffing				Payroll Services				Corporate				Consolidated
Revenues				$	15,244			$	1,134			$	—			$	16,378
Income/(loss) from operations before income taxes				$	1,176			$	321			$	(2,649	)		$	(1,152	)

For the six months ended March 31, 2004				Medical Staffing				Payroll Services				Corporate				Consolidated
Revenues				$	16,237			$	2,300			$	—			$	18,537
Income/(loss) from operations before income taxes				$	371			$	959			$	(3,251	)		$	(1,921	)

For the six months ended March 31, 2003				Medical Staffing				Payroll Services				Corporate				Consolidated
Revenues				$	32,277			$	2,558			$	—			$	34,835
Income/(loss) from operations before income taxes				$	2,316			$	905			$	(3,872	)		$	(651	)

TeamStaff has no revenue derived from outside the United States.

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ITEM 2:	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward Looking and Cautionary Statements

Certain statements contained herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "1995 Reform Act"). TeamStaff, Inc. desires to avail itself of certain "safe harbor" provisions of the 1995 Reform Act and is therefore including this special note to enable TeamStaff to do so. Forward-looking statements included in this report involve known and unknown risks, uncertainties, and other factors which could cause TeamStaff's actual results, performance (financial or operating) or achievements to differ from the future results, performance (financial or operating) or achievements expressed or implied by such forward-looking statements. Such future results are management's best estimates based upon current conditions and the most recent results of operations. These risks include, but are not limited to, risks associated with risks undertaken in connection with acquisitions, risks from potential workers' compensation claims and required payments, risks from employer/employee suits such as discrimination or wrongful termination, risks associated with payroll and employee related taxes which may require unanticipated payments by TeamStaff, liabilities associated with TeamStaff's status under certain federal and state employment laws as a co-employer, effects of competition, TeamStaff's ability to implement its internet based business and technological changes and dependence upon key personnel. These and other risks are stated in detail in our Report on Form 10-K for the fiscal year ended September 30, 2003 and other reports and filings made by TeamStaff.

Critical Accounting Policies and Estimates

TeamStaff believes its significant critical accounting policies have not changed since fiscal year end September 30, 2003. See Note 2 of TeamStaff's 2003 annual report on Form 10-K as well as "Critical Accounting Policies" contained therein for a detailed discussion on the application of these and other accounting policies.

Revenue Recognition

TeamStaff accounts for its revenues in accordance with EITF 99-19, Reporting Revenues Gross as a Principal Versus Net as an Agent and SAB 104, Revenue Recognition. TeamStaff recognizes all amounts billed to its temporary staffing customers as gross revenue because, among other things, TeamStaff is the primary obligor in the temporary staffing arrangement, TeamStaff has pricing latitude, TeamStaff selects temporary employees for a given assignment from a broad pool of individuals, TeamStaff is at risk for the payment of its direct costs, and TeamStaff assumes a significant amount of other risks and liabilities as an employer of its temporary employees, and therefore, is deemed to be a principal in regard to these services. TeamStaff also recognizes as gross revenue and as unbilled receivables, on an accrual basis, any such amounts that relate to services performed by temporary employees which have not yet been billed to the customer as of the end of the accounting period.

The Medical Staffing revenue is recognized as service is rendered. TeamStaff bills its clients based on an hourly rate. The hourly rate is intended to cover TeamStaff's direct labor costs of the temporary employees, plus an estimate to cover overhead expenses and a profit margin. Additionally, included in revenue related to medical staffing are commissions from permanent placements. Commissions from permanent placements result from the successful placement of a medical staffing employee to a customer's workforce as a permanent employee.

The Payroll services revenue is recognized as service is rendered and consists primarily of administrative service fees charged to clients for the processing of paychecks as well as preparing quarterly and annual payroll related reports.

Workers' Compensation

TeamStaff's current workers' compensation insurance provider is Zurich American Insurance Company. The program is managed by Cedar Hill Insurance Agency, Inc., whose duties include underwriting analysis, loss control services, and other program management services.

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The Zurich program originally covered the period from March 22, 2002 through March 31, 2003, inclusive. On March 28, 2003, TeamStaff renewed its workers' compensation program with Zurich for the period from April 1, 2003, through March 31, 2004, inclusive. (See Note 3 to the consolidated financial statements) The renewal program contained a large deductible feature of $0.5 million for each claim, with a maximum liability cap of the greater of 104.41% of manual premium or $15.6 million. The premium for the program was paid monthly based upon estimated payroll for the year and is subject to a policy year-end audit. The renewal program was collateralized by a letter of credit inuring to the benefit of Zurich, and cash held in a trust account with a third party. A letter of credit for $3.5 million was secured through Fleet, as part of TeamStaff's line of credit. However, effective March 31, 2004, Zurich agreed to a reduction in the amount of the letter of credit to $1.8 million. As a result, on March 31, 2004, TeamStaff secured a new letter of credit in the amount of $1.8 million with SunTrust Bank. Payments were made to the trust monthly based on projected claims for the year. Interest on all assets held in the trust is credited to TeamStaff. Payments for claims and claims expenses are made from the trust. Assets in the trust may be adjusted from time to time based on program experience. Claims handling services for the program are provided by GAB Robins, a third party administrator. At March 31, 2004, TeamStaff has a prepaid current asset of $5.0 million for the premiums and the prepayments made to the trust for both years of the Zurich plan.

In conjunction with the sale of its PEO assets to GevityHR, Inc., TeamStaff requested a pro rata cancellation of this policy effective as of November 17, 2003. TeamStaff entered into a new workers' compensation program with Zurich covering TeamStaff's temporary employees and, as of January 1, 2004, its corporate employees. The program is managed by Cedar Hill and claims handling services for the program are provided by GAB Robins. This program is a fully-insured, guaranteed cost program that contains no deductible or retention feature. This policy terminated April 1, 2004. Effective April 1, 2004, TeamStaff entered into a new workers' compensation program with Zurich, covering the period from April 1, 2004 through March 31, 2005, with the same terms as the previous policy.

As of March 31, 2004, the adequacy of the workers' compensation reserves 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 which may include loss data for claims incurred during prior policy periods. As disclosed in our Form 10-K for the fiscal year ended September 30, 2003, TeamStaff has encountered difficulties in receiving timely reporting of claims from CNA for the workers' compensation programs covering January 22, 2001, through March 22, 2001. As previously disclosed, TeamStaff is disputing certain amounts that CNA claims is due as part those programs and filed a complaint with the New Jersey Division of Insurance, which referred the matter to the New Jersey Compensation Rating and Inspection Bureau. Although the New Jersey Compensation Rating and Inspection Bureau investigated the complaint and proposed a fine against CNA as well as a refund of $0.2 million in policy issuance costs to TeamStaff, the matter remains unresolved between the parties. In the future, similar problems from our insurance carriers may result in adjustments to our reserves. In addition, these reserves are for claims that have not been sufficiently developed due to their relatively young age, and such variables as timing of payments and investment returns thereon are uncertain or unknown, 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 reserves as deemed appropriate.

Deferred Taxes

TeamStaff accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes." Under SFAS No. 109, 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.

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Results of Continuing Operations

TeamStaff's revenues for the three months ended March 31, 2004 and 2003 were $8.8 million and $16.4 million respectively, which represents a decrease of $7.6 million or 46% from second fiscal quarter 2003 to second fiscal quarter 2004. The decline is attributable, in part, to the decrease in demand for temporary medical staffing workers. We believe this relates to current economic conditions in that hospitals have experienced lower census levels and have placed greater reliance on existing full time staff. This, in turn, has led to less demand for temporary health care professionals. Longer term, we believe the demand for temporary medical personnel will increase, driven, in part, by an aging population and an improving economy. Additionally, we are substantially expanding our sales and marketing efforts in order to increase our contact with current and prospective clients. TeamStaff's revenues for the six months ended March 31, 2004 and 2003 were $18.5 million and $34.8 million respectively, which represents a decrease of $16.3 million or 47% from 2003 to 2004. The decline is attributable to the same reasons as stated above for the second quarter.

Direct expenses were $6.9 million for the three months ended March 31, 2004 and $13.2 million for the comparable quarter last year, representing a decrease of $6.3 million or 48%. For the six months ended March 31 2004 and 2003, direct expenses were $14.4 million and $28.1 million, respectively, representing a decrease of $13.7 million or 49%. These decreases are a direct result of the lower revenues.

Gross profits were $1.9 million and $3.2 million for the quarters ended March 31, 2004 and 2003, respectively, representing a decrease of $1.3 million or 39%. This decrease is attributed to the reduction in our Medical Staffing business as discussed above. Gross profits, as a percentage of revenue, were 21.9% and 19.3 % for the quarters ended March 31, 2004 and 2003, respectively. For the six months ended March 31, 2004 and 2003, gross profits were $4.2 million and $6.7 million respectively, representing a decrease of $2.5 million or 38%. Gross profits as a percent of revenue were 22.4% and 19.2% for the six months ended March 31, 2004 and 2003, respectively. The higher gross margin Payroll Services division represented 35.4% of total gross profit for the first six months of fiscal 2004 vs. 24.5% in the first six months of fiscal 2003, increasing TeamStaff's total gross margin percentage.

Operating expenses for the quarters ended March 31, 2004 and 2003 were $2.9 million and $4.3 million, respectively, representing a decrease of $1.4 million or 32%. This decrease resulted from lower SERP and severance cost related to TeamStaff's former Chief Executive Officer and Chief Financial Officer, and reduced expenses in the Medical Staffing business. For the six months ended March 31, 2004 and 2003, operating expenses were $6.0 million and $7.4 million, respectively, representing a decrease of $1.4 million or 19%, for the same reasons as stated above. Operating expenses as a percentage of revenue were 32.2% and 21.1% for the six months ended March 31, 2004 and 2003, respectively, as revenue declined at a higher rate than operating expenses. Operating expenses for the first six months of 2004 were lower in each reporting segment than the first six months of 2003. Additionally, while our Medical Staffing division has reduced overall operating expenses, we are increasing our product development, sales and marketing efforts in that division, which has partially offset reductions in general expenses.

Depreciation and amortization for the quarters ended March 31, 2004 and 2003 were $0.1 million. Depreciation and amortization for the six months ended March 31, 2004 and 2003 were $0.2 million.

Other income for the three months ended March 31, 2004 and 2003 was negligible. Other income decreased $0.1 million from $0.2 million in the first six months of fiscal year 2003 to $0.1million in the first six months of 2004. These decreases are attributable to the reduction in late payment fees received by our Medical Staffing division partially offset by lower interest expense.

Income tax benefit for the quarter ended March 31, 2004 was $0.4 million, unchanged from 2003. These tax benefits are a result of losses from operations. Income tax benefit for the six months ended March 31, 2004 was $0.7 million versus $0.2 million for the six months ended March 31, 2003. Again, these tax benefits are a result of losses from operations.

Loss from continuing operations for the quarter ended March 31, 2004 was $0.7 million or $(0.04) per fully diluted share, as compared to $0.8 million or $(0.05) per fully diluted share for the same period

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last year. This decreased loss is due to the lower SERP and severance cost related to TeamStaff's former Chief Executive Officer and Chief Financial Officer offset by the decreased performance of TeamStaff's Medical Staffing division. Loss from continuing operations for the six months ended March 31, 2004 was $1.2 million or $(0.08) per fully diluted share, as compared to $0.5 million or $(0.03) per fully diluted share for the same period last year. This decrease is due to the decreased performance of our Medical Staffing division, offset partially by decreased cost related to TeamStaff's former Chief Executive Officer and Chief Financial Officer.

Losses from discontinued operations, net of tax, for the quarters ended March 31, 2004 and 2003 were $0.3 million and $25.2 million, respectively. The loss in 2003 resulted primarily from the write-down of goodwill and intangible assets from the PEO business. Losses from discontinued operations, net of tax, for the six months ended March 31, 2004 and 2003 were $1.6 million and $25.4 million, respectively. Loss from operations from the discontinued business unit, net of tax, for the six months ended March 31, 2004 and 2003 were $0.9 million and $25.4 million respectively. TeamStaff generated revenue from the PEO business for only six weeks in the first six months of 2004 while certain costs associated with the operation of that business unit continued for the full six months. The loss in 2003 resulted primarily from the write-down of goodwill and intangible assets from the PEO business. Losses on disposal, net of tax, are $0.8 million for the six months ended March 31, 2003. The loss is based on the selling price of $9.25 million, $7.0 million at closing and $2.25 million to be paid from the escrow account, offset by expenses including the writedown of goodwill and fixed assets, salary, severance and stay bonus payouts to affected employees, accruals for losses from lease obligations in offices no longer used by TeamStaff's continuing operations offset by estimated sublease of unoccupied office space, investment banking fees and other expenses required to dispose of the PEO business.

Net loss for the quarter ended March 31, 2004 was $1.0 million or $(0.06) per fully diluted share, as compared to $26.0 million or $(1.65) per fully diluted share for the same period last year. Net loss for the six months ended March 31, 2004 was $2.8 million or $(0.18) per fully diluted share, as compared to $25.9 million or $(1.64) per fully diluted share for the same period last year. The losses for fiscal year 2004 are the result of the decline in Medical Staffing revenues described above and the loss from discontinued operations. For fiscal year 2003, the losses are primarily from the writedowns of goodwill and intangible assets from our discontinued PEO business and SERP and severance cost related to TeamStaff's former Chief Executive Officer and Chief Financial Officer.

Liquidity and Capital Resources

Net cash used in operating activities in the first six months of fiscal 2004 were $0.9 million compared to $5.0 million used in the same period of fiscal 2003. As part of the sale of the PEO business, TeamStaff received $7.0 million in cash. Use of cash during the first six months of 2004 included increased other current assets related to the receivable for the escrow balance from Gevity in connection with the sale of the PEO business and workers' compensation payments, increased other assets related to increases in TeamStaff's deferred tax asset, additional cash classified as restricted cash related to our letter of credit provided by SunTrust in connection with our Zurich workers' compensation program and losses from continuing and discontinued operations.

Cash used in investing activities was virtually unchanged during the first six months of fiscal year 2004 as opposed to $0.2 million in the first six months of fiscal year 2003.

Cash used in financing activities was virtually unchanged during the first six months of fiscal year 2004 as opposed to $0.8 million in the first six months of fiscal year 2003. Last year's spending was for the repurchase of 216,512 shares of TeamStaff stock.

As of March 31, 2004, TeamStaff had unrestricted cash and cash equivalents of $3.4 million and net accounts receivable of $3.2 million.

As of March 31, 2004, TeamStaff had working capital of $10.6 million.

Management of TeamStaff believes that its existing cash will be sufficient to support cash needs for at least the next twelve months.

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On July 22, 1999, the Board of Directors authorized the repurchase up to 3% of the outstanding shares of TeamStaff's common stock. On November 19, 2002, the Board of Directors authorized an additional repurchase of up to $1,000,000 in common stock. Since inception through March 31, 2004, we have repurchased 581,470 shares at an average cost of $4.18 per share for a total cost of $2,430,000. No treasury stock has been repurchased during the six months ended March 31, 2004. As of March 31, 2004, 574,470 shares of treasury stock (the result of the prior stock repurchases) have been retired.

Effects of Inflation

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

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

TeamStaff does not undertake trading practices in securities or other financial instruments and therefore does not have any material exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk or other similar risks, which might otherwise result from such practices. TeamStaff has no material interest rate risk, except with respect to our workers' compensation programs, and is not materially subject to fluctuations in foreign exchange rates, commodity prices or other market rates or prices from market sensitive instruments. In connection with TeamStaff's workers' compensation programs, prepayments of future claims are deposited into trust funds for possible future payments of these claims in accordance with the policies. The interest income resulting from these prepayments is for the benefit of TeamStaff, and is used to offset workers' compensation expense. If interest rates in these periods' decreases, TeamStaff's workers' compensation expense would increase because TeamStaff would be entitled to less interest income on the deposited funds.

ITEM 4.    CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

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

Changes in Internal Controls:

There have been no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date set forth above.

Part II – OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

TeamStaff's subsidiary, BrightLane, is party to a suit brought by one of its former shareholders (Atomic Fusion, Inc. v. BrightLane.com, Inc. Civil Action No ONS02246OE, Fulton County State Court, Georgia). The plaintiff seeks damages for alleged unpaid contractual services provided to BrightLane, alleging that the shares (both in number and value) of BrightLane stock provided to the plaintiff in payment of services were inadequate to pay for the alleged agreed upon value of services. TeamStaff and BrightLane intend to defend themselves vigorously in this matter and believes that they have meritorious and valid defenses to plaintiff's claims. In addition, the former shareholders of

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BrightLane have placed approximately 158,000 shares in escrow to provide indemnification for any claims made by TeamStaff under the acquisition agreement, subject to a $0.3 million threshold. Some or all of these shares may be canceled in an amount equal to the amount of any claim or expense in excess of the threshold. Under the terms of the agreements between TeamStaff and BrightLane, the value of the shares held in escrow is $8.10/share. It is possible that an award in favor of Atomic Fusion would result in monetary damages against TeamStaff, which could not be recovered under the indemnification provisions because cancellation of the shares in escrow is the sole method of satisfying these indemnification obligations. On November 20, 2003, the Fulton County Superior Court (to which the action was transferred) awarded summary judgment in BrightLane's favor on all counts of Atomic Fusion's complaint except for a beach of contract claim. A trial on this matter is scheduled to commence on May 10, 2004.

As a commercial enterprise and employer and with respect to its employment-related businesses in particular, TeamStaff is engaged in litigation from time to time during the ordinary course of business in connection with employment-relations issues, workers' compensation and other matters. Generally, TeamStaff is entitled to indemnification or repayment from its former PEO clients for claims brought by worksite employees related to their employment. However, there can be no assurance that the client employer will have funds or insurance in amounts to cover any damages or awards, and as co-employer, TeamStaff may be subject to liability.

TeamStaff is engaged in no other litigation, the effect of which would be anticipated to have a material adverse impact on TeamStaff's financial conditions or results of operations.

ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

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

None.

ITEM 5.    OTHER INFORMATION

As discussed earlier, as part of the sale of the assets of TeamStaff's PEO division to Gevity, TeamStaff and Gevity agreed that $2.5 million of the $9.5 million purchase price would be placed in escrow. The escrowed amount was subject to downward adjustment based on any reduction in annualized administrative fees payable by the former TeamStaff PEO clients. Any such downward adjustment could be offset by annualized administrative fees of certain clients produced by former TeamStaff sales representatives during the 90-day period following the closing of the transaction on November 17, 2003. On April 23, 2004, TeamStaff and Gevity agreed that TeamStaff's share of the $2.5 million placed in escrow was $2.25 million, and that amount is being released by the escrow agent for TeamStaff's benefit.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

(a)	Exhibits

31.1	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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(b)	Reports on Form 8-K

The following reports were filed during the quarter ended March 31, 2004.

Date of Report				Item Reported
February 18, 2004				Item 7 Financial Statements and Exhibits/Item 12 Results of Operations and Financial Condition (in connection with TeamStaff's earnings release for the fiscal quarter ended December 31, 2003)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TEAMSTAFF, INC. (Registrant)

/s/ T. Kent Smith

T. Kent Smith President and Chief Executive Officer

/s/ Rick Filippelli

Rick Filippelli Vice President Finance and Chief Financial Officer

Date: April 30, 2004

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EXHIBIT 31.1

CERTIFICATIONS

I, T. Kent Smith, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of TeamStaff, Inc.;

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

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

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

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

b)	[RESERVED]

c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

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

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2004

/s/ T. Kent Smith T. Kent Smith President and Chief Executive Officer

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EXHIBIT 31.2

CERTIFICATIONS

I, Rick J. Filippelli, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of TeamStaff, Inc.;

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

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

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

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

b)	[RESERVED]

c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and

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

a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 30, 2004

/s/ Rick J. Filippelli Rick J. Filippelli Vice President Finance and Chief Financial Officer

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of TeamStaff, Inc (the Company) on Form 10-Q for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, being, T. Kent Smith, Chief Executive Officer of the Company, and Rick J. Filippelli, Chief Financial Officer of the Company, respectfully, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Dated: April 30, 2004

/s/ T. Kent Smith				/s/ Rick J. Filippelli
Chief Executive Officer				Chief Financial Officer

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