<SEC-DOCUMENT>0000950123-11-036822.txt : 20110826
<SEC-HEADER>0000950123-11-036822.hdr.sgml : 20110826
<ACCEPTANCE-DATETIME>20110419163131
<PRIVATE-TO-PUBLIC>
ACCESSION NUMBER:		0000950123-11-036822
CONFORMED SUBMISSION TYPE:	CORRESP
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20110419

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			TEAMSTAFF INC
		CENTRAL INDEX KEY:			0000785557
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-HELP SUPPLY SERVICES [7363]
		IRS NUMBER:				221899798
		STATE OF INCORPORATION:			NJ
		FISCAL YEAR END:			0930

	FILING VALUES:
		FORM TYPE:		CORRESP

	BUSINESS ADDRESS:	
		STREET 1:		300 ATRIUM DRIVE
		CITY:			SOUTH PLAINFIELD
		STATE:			NJ
		ZIP:			08873
		BUSINESS PHONE:		7327481700

	MAIL ADDRESS:	
		STREET 1:		300 ATRIUM DRIVE
		CITY:			SOUTH PLAINFIELD
		STATE:			NJ
		ZIP:			08873

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	DIGITAL SOLUTIONS INC
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>CORRESP
<SEQUENCE>1
<FILENAME>filename1.htm
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<HEAD>
<TITLE>Correspondence</TITLE>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">April&nbsp;19, 2011</TD>
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<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Filed via EDGAR and</B><BR><B>
Delivered via Facsimile (703)&nbsp;813-6986</B>
</DIV>
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<TR valign="bottom">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Ms. Sharon Virga
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Ms. Ivette Leon</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Senior Staff Accountant
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Assistant Chief Accountant</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Securities and Exchange Commission
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Securities and Exchange Commission</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Division of Corporation Finance
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Division of Corporation Finance</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">100 F Street, N.E.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">100 F Street, N.E.</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">Washington, D.C. 20549
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Washington, D.C. 20549</TD>
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    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><B>Re:</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">TeamStaff, Inc.<BR>
Form&nbsp;10-K for the fiscal year ended September&nbsp;30, 2010<BR>
Filed February&nbsp;14, 2011<BR>
Form&nbsp;10-Q for the quarter ended December&nbsp;31, 2010<BR>
<U>File No.&nbsp;0-18492</U></TD>
</TR>
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</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">Dear Ms Virga and Ms.&nbsp;Leon:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">We are counsel to TeamStaff, Inc. (&#147;<U>TeamStaff</U>&#148; or the &#147;<U>Company</U>&#148;) and are in
receipt of your letter dated March&nbsp;31, 2011 concerning comments to the above-referenced filings of
the Company. This letter sets forth the Company&#146;s responses to the Staff&#148;s comments as set forth in
such letter. In presenting this response, we have followed the enumerated comments and section
headings as set forth in your letter. For your convenience, we have repeated each of the comments
set forth in the Staff&#146;s letter and followed each comment with the Company&#146;s response.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company&#146;s responses are as follows:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U><B>Form&nbsp;10-K for the Year Ended September&nbsp;30, 2010</B></U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Report of Independent Registered Public Accounting Firm, page F-2</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 1. </B><I>In light of the disclosures in the filing, please tell us why your independent
registered public accounting firm did not include a going concern paragraph in their report. It
appears that you have disclosed management&#146;s plan for dealing with the potential going concern
issue.</I>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 2
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>As part of their audit of the Company&#146;s consolidated financial statements, the Company&#146;s
independent registered public accounting firm performed, pursuant to AU Section&nbsp;341, certain
procedures in order to determine whether they should add an explanatory paragraph in their
report, raising substantial doubt about the Company&#146;s ability to continue as a going concern.
After a discussion between the Company and its auditors regarding your comment, we advise you
that they concurred with management&#146;s decision that a liquidity disclosure in the financial
statements was more appropriate than a substantial doubt disclosure in their report and
related notes to the financial statements for the following reasons:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">a.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company advised its auditors during their audit that it obtained an
increase to the Company&#146;s line of credit with Presidential Financial Corporation to
increase the maximum available line under this facility from $2.5&nbsp;million to $3&nbsp;million
in 2011, subject to eligible accounts receivable. With respect to this line of credit,
it should be noted that the Company expects that its normal operating accounts
receivable generated in the ordinary course of business will be eligible under the line
of credit, since such receivables are typically due from U.S. government agencies.
Further, with respect to this line of credit, we obtained a commitment from the lender
that such line of credit would not be terminated without cause prior to February&nbsp;29,
2012.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">b.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company advised its auditors of commitments from its largest shareholder
and certain officers and directors, whereby these parties agreed to invest (or lend) up
to $500,000 to the Company. This commitment remains available through February&nbsp;29,
2012. If the funding is advanced in the form of a debt arrangement, the repayment date
would not occur before February&nbsp;29, 2012. The Company and its auditors further received
representations from the parties that they understood that this funding and the related
length of the commitment were significant factors in the auditor&#146;s conclusion that a
liquidity paragraph in the notes to the financial statements was more appropriate than
a substantial doubt paragraph in their report.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">c.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company provided its auditors with forecasted results and cash flows from
operations, which supported the Company&#146;s ability to continue as a going concern
through September&nbsp;30, 2011 in accordance with professional standards. With respect to
these forecasted operating results and cash flows, the auditors reviewed: (a)&nbsp;the
assumptions used in these projections, which included the performance of certain
contemporaneous procedures on revenue levels and results for the quarterly period
ended December&nbsp;31, 2010, (b)&nbsp;effects of implemented cost reduction initiatives, (c)
relationship with the Company&#146;s lender, (d)&nbsp;the aforementioned commitments of additional
funding and (d)&nbsp;the status of major customer arrangements.</TD>
</TR>


</TABLE>
</DIV>
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 3
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Critical accounting policies, page 29</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 0pt"><U>Goodwill and Intangible assets, page 30</U>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 2. </B><I>Refer to your disclosure on this page 30 and on page F-12. We note that you combined
your accounting policy on goodwill impairment with your accounting policy on impairment of
indefinite intangible assets. Please revise to disclose your policies on impairment of each of
these assets separately.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">With the Staff&#146;s concurrence, the Company will separately disclose its accounting policy on
impairment of goodwill from its accounting policy on impairment of indefinite intangible assets in
future filings, commencing with our Quarterly Report on Form 10-Q for the period ended March&nbsp;31,
2011.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 3. </B><I>We note that goodwill represents approximately 34% of your total assets as of September
30, 2010. Based on your disclosures it appears that you have one operating subsidiary and one
reporting unit and that all the goodwill is attributable to TeamStaff GS reporting unit. In light
of the consistent net losses and other negative disclosures in the filing, explain to us in detail
how your goodwill balance is not impaired or partially impaired as of September&nbsp;30, 2010 and why
you did not perform an impairment test as of December&nbsp;31, 2010.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">In connection with its goodwill and intangible asset impairment analysis as of September&nbsp;30,
2010, the Company obtained a valuation report from an independent, accredited third party appraisal
firm which indicated that the goodwill balance was not impaired. Further details are provided in
the response at paragraph 4 of this response, below. An interim impairment test was considered, but
not performed, as of December&nbsp;31, 2010 as nothing had come to the Company&#146;s attention to indicate
that the assumptions underlying the goodwill impairment analysis as of September&nbsp;30, 2010 no longer
remained appropriate or that additional negative indicators arose in the intervening period. The
Company had also updated the forecast used in the September&nbsp;30, 2010 valuation report with the most
recent operating data available through December&nbsp;31, 2010
in an effort to utilize enhanced, current data. In an effort to provide near-term risk
disclosures to readers of the financial statements, the Company also disclosed (in Note 2 &#151;
Liquidity): &#147;A decrease in revenue or other adverse change in the assumptions underlying the
valuation of the Company&#146;s goodwill and intangible assets may also result in an impairment loss in
the value of the Company&#146;s goodwill and/or intangible assets in future periods.&#148; Through the filing
dates of the Company&#146;s Annual Report on Form 10-K and its Quarterly Report on Form 10-Q for the
quarter ended December&nbsp;31, 2010, no such matters were evident.
</DIV>
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 4
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 4. </B><I>To help us understand your conclusions, please describe your goodwill impairment test to
us in detail, including at a minimum: 1) the reporting units you identified and how they were
identified, 2) how you determined the fair value of your reporting units and why you believe that
methodology is appropriate, 3) a description of key assumptions used and how the key assumptions
were determined, and 4) the percentage by which fair value exceeded carrying value as of the most
recent step one test. Tell us the cash flows that management used and how they were developed as
well as the disclosure in your filing that supports management&#146;s conclusions. Refer to your basis
in the accounting literature.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">As noted in paragraph 3 above, the Company retained an independent, accredited third party
appraisal firm to value the Company&#146;s goodwill and intangible assets as of September&nbsp;30, 2010. In
regard to the specific questions that the Staff raises in this comment, the Company&#146;s responses are
as follows:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The reporting unit in regard to goodwill was determined to be the
Company&#146;s primary operating subsidiary, TeamStaff Government Solutions, Inc.
(&#147;TeamStaff GS&#148;). All of the goodwill being tested arose from the acquisition of
this legal entity, which constitutes a reporting unit for which discrete, separate
financial information is maintained and regularly reviewed by management. The
Company&#146;s other continuing reporting unit for which separate financial information
is maintained and regularly reviewed by management is its Corporate Administration
unit. As noted in paragraph 5a below, a third reporting unit, TeamStaff Rx, was
considered a discontinued operation in the prior fiscal year culminating in the
sale of substantially all of its assets in January&nbsp;2010.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the reporting units was determined with assistance
from an independent third party appraisal firm. As disclosed in the financial
statements,
the estimate of fair value was based on the income approach, which estimated the
fair value of the TeamStaff GS unit based on the projected future discounted cash
flows. The discounted cash flow approach was considered appropriate because it:
requires a direct mapping of expected earnings to the asset being valued; bases
underlying enterprise value on an asset&#146;s forecasted cash flow; and incorporates the
non-linear, time value of money.
</TD>
</TR>
</TABLE>
</DIV>
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 5
</DIV>


<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Key assumptions in the valuation study were the estimates of
probability weighted future cash flows, the estimated terminal value of the
reporting unit and a discount factor applied to the estimated future cash flows and
terminal value assuming a hypothetical sale of TeamStaff GS in 2016. Estimates of
future probability weighted cash flows (which included revenue from existing
arrangements) were developed by management having regard to current expectations
and potential future opportunities. Forecasted gross profit and operating expenses
were consistent with the Company&#146;s historical and projected experience. A terminal
value for the reporting unit was estimated based upon data of public companies that
management believes to be similar with respect to the Company&#146;s economics, services
and markets. The discount factor used (12.11%) was a cost of capital estimate
obtained from a leading third party data provider that was deemed appropriate by
the independent appraisal firm.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The fair value of the TeamStaff GS reporting unit as of September&nbsp;30,
2010 exceeded the carrying value of goodwill by more than 42%.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt">As noted above, the estimates of future cash flows were developed by management having regard to
current expectations and potential future opportunities and were probability weighted in regard to
likelihood of occurrence. As required by ASC 350 35-31, <I>Intangible Assets Other Than Goodwill</I>, the
intangible assets other than goodwill (i.e. tradenames) being tested at the same time as goodwill
were tested for impairment prior to testing goodwill. On a consolidated basis, with the inclusion
of the Corporate Administration reporting unit in addition to the TeamStaff GS reporting unit, it
was determined that a write down of $1.3&nbsp;million in other intangible assets was appropriate, as the
fair value of the intangible assets on a consolidated basis was less than their combined carrying
value by that amount. This conclusion was disclosed in Note 2 &#151; Long Lived Assets and was further
discussed on pages 19 and 30 of the Company&#146;s filing. Note 2 &#151; Long Lived Assets stated in part:
&#147;At September&nbsp;30, 2010, we performed a goodwill and intangible asset 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 TeamStaff GS unit based on the future discounted cash flows. Based
on the results of the work
performed, the Company has concluded that an impairment loss of $1.3&nbsp;million is warranted at
September&nbsp;30, 2010. ...The resulting estimated fair value of tradenames was less than the carrying
value at September&nbsp;30, 2010 by approximately $1.3&nbsp;million, resulting in an impairment charge of
that amount being taken against the tradenames.&#148; The separate disclosure proposed in response to
Staff Comment 2 above in respect of the accounting policies for intangible asset and goodwill
impairment will provide additional clarity in regard to the conclusions reached.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 5. </B><I>We note that for purposes of your valuation allowance, you have determined that it is
more likely than not that no portion of the valuation allowance attributable to NOLs will be
utilized during the carryforward period. We also note the expiration of your task order with DVA
disclosed on page 32. Please explain any discrepancies in assumptions between your accounting for
income taxes and your assessment of impairment.</I>
</DIV>
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<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 6
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">With respect to the Staff&#146;s request to explain any discrepancies in assumptions between the
accounting for income taxes (specifically as it relates to the adjustment of a valuation allowance
for deferred income tax assets) and the assessment of impairment for goodwill and identified
intangibles, the Company advises Staff of the following:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Company performed an evaluation, pursuant to ASC 740, to assess whether it
was appropriate to reverse either a portion or all of a 100% valuation allowance of
deferred income tax assets. The result of that evaluation was that projected taxable
income for the next five years was not sufficient to utilize any significant net
operating loss carry-forwards or future deductible amounts. Therefore, the 100%
deferred tax valuation allowance was not reduced.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with ASC 350, the Company performed a fair value assessment of
the indefinite lived intangible asset (tradenames). This fair value assessment
indicated that the tradenames asset was impaired by approximately $1.341&nbsp;million. This
impairment charge was recorded in the September&nbsp;30, 2010 consolidated financial
statements.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(c)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>In accordance with ASC 350, the Company performed a &#147;Step 1&#148; impairment test
related to its recorded goodwill. The results of this test indicated that the fair
value
exceeded its carrying value and no &#147;Step 2&#148; test of impairment of the Company&#146;s goodwill
was required.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(d)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>With respect to the Staff&#146;s specific question regarding discrepancies between
the evaluation of the deferred income tax valuation allowance and the Step 1 impairment
test for goodwill, please note the following:</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The assessment of the valuation allowance did
not contemplate the sale of the reporting unit (i.e. terminal value).</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The assessment of the valuation allowance
considered the Company&#146;s ability to generate future consolidated
taxable income, while the Step 1 goodwill impairment test evaluated
future operating cash flows.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="12%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3.</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Step 1 impairment test operating cash flows
considered only those cash flows of TeamStaff GS, while the deferred
income tax valuation assessment considered the consolidated results of
operations for Federal and states&#146; income tax purposes for the Company
and its subsidiaries as a whole.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="margin-top: 10pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">


</TABLE>
</DIV>

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 7
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Notes to Consolidated Financial Statements</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>(4)&nbsp;Discontinued Operations, page F-15</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 5a. </B><I>Tell us in detail, citing the accounting literature upon which you have relied, why
you believe that the sale of TeamStaff Rx qualified as discontinued operations. We note the
disclosure of your continuing involvement here and on page F-21, including making claims for the
amounts of rent subsidies that have not been paid by the purchaser, Advantage RN.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company concluded that the operations and sale of TeamStaff Rx qualified as a discontinued
operation in accordance with ASC 205 20-45 in that this was a separate discrete reporting unit
which was disposed of in fiscal 2010 with no continuing involvement. In connection with the Asset
Purchase Agreement, the purchaser, Advantage RN, agreed to provide rent subsidies for a defined
period. The Company&#146;s continuing involvement is limited to enforcing the terms of this agreement
and the Company has not assumed or retained any other administrative or operational
responsibilities for TeamStaff Rx. The treatment of the disputed
claims, for the amounts of rent subsidies that have not yet been paid by Advantage RN, has
been accounted for in the results of discontinued operations, which is consistent with the
interpretive guidance outlined in SAB Topic 5.Z.5 at ASC 205 20 S99-2 in that this involves a
reduction of an anticipated off-set to the liability for rent payments through the lease term for
facilities that the Company has abandoned.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>(6)&nbsp;Debt</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Current Facility (See Note 10 &#151; Government Assignment of Contracts), page F-19</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 6. </B><I>We note the disclosure regarding the conditions of the note in the last paragraph on
page F-19. In your next filing, please provide the details of all the conditions. Please provide us
your proposed disclosure.</I>
</DIV>

<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 8
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To address the Staff&#146;s comment, the Company intends to expand its disclosure in future
filings, beginning with its Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31, 2011, to
disclose additional information in the financial statement footnotes regarding the Company&#146;s
secured loan agreement with Presidential Financial Corp. The Company proposes to revise the
paragraph discussing the covenants and conditions that was included in its Form 10-K and replace it
with the following disclosure within the relevant footnote to the Company&#146;s financial statements:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Loan Agreement requires compliance with customary covenants and contains
restrictions on the Company&#146;s ability to engage in certain transactions.
Among other matters, under the loan agreement we may not, without consent of
the Lender, (i)&nbsp;merge or consolidate with another entity, form any new
subsidiary or acquire any interest in a third party; (ii)&nbsp;acquire any assets
except in the ordinary course of business; (iii)&nbsp;enter into any transaction
outside the ordinary course of business; (iv)&nbsp;sell or transfer collateral;
(v)&nbsp;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)&nbsp;incur
any debt outside the ordinary course of business; (vii)&nbsp;pay or declare any
dividends or other distributions; or (viii)&nbsp;redeem, retire or purchase any
of our equity interests exceeding $50,000. In addition, the Loan Agreement
requires TeamStaff GS 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&nbsp;days written notice
after February&nbsp;29, 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&#146;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.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>(10)&nbsp;Commitments and Contingencies</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Potential Contractual Billing Adjustments, page F-21</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 7. </B><I>We note that you have billed the Federal government in excess of contractual rates.
Please provide us with your rationale under the accounting literature for recognizing revenue at
unapproved rates. Please refer to each of the conditions listed in the last paragraph on page 29
and explain in detail how you have met them.</I>
</DIV>

<P align="center" style="font-size: 10pt">&nbsp;

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 9
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company recognized revenue in accordance with SAB Topic 13.A.1 (see below) after it became
apparent in a prior fiscal year that certain determinations issued by the Department of Labor
(&#147;DOL&#148;) in regard to prevailing wages at certain locations where the Company supplies services to
the Federal Government (&#147;wage determinations&#148;) had not been notified to the Company in a timely
manner and appropriately implemented by the Federal government into contracts with the Company. As
a result of these events, the following were considered in the Company&#146;s conclusion (numbers that
follow, as requested, reference the corresponding statements on page 29 of our Annual Report on
Form 10-K): (1)&nbsp;the Company is entitled to &#147;equitable adjustment&#148; in accordance with the Federal
Acquisition Regulations; (2)&nbsp;the amounts due have been calculated and agreed in principle with the
Department of Labor and have been submitted to the Department of Veterans Affairs (&#147;DVA&#148;); and (3)
the historical payments from the DVA for certain sites have included the amounts considered
contractually due the Company, which serves as the basis for our recorded accounts receivable. The
balance is expected to be forthcoming in due course in respect of the remaining locations. The
Company specifically considered and believes that the criteria set out in SAB Topic 13.A.1 in
regard to revenue recognition were achieved, namely:
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Persuasive evidence of arrangements existed; in the form of the
Company&#146;s contracts with the Federal Government and the Federal Acquisition
Regulations incorporated therein.</TD>
</TR>

<TR style="font-size: 8pt">
    <TD>&nbsp;</TD>
</TR> <TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The services involved had been rendered in full.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The amounts involved were fixed and determinable, based on
correspondence with the DOL regarding the Company&#146;s calculation of the amounts
involved for the &#147;wage determinations&#148;.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="8%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Collectability was considered reasonably assured, consistent with the
Customer&#146;s past practices and the Company&#146;s current discussions and collection
efforts.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Workers&#146; Compensation Insurance, page F-22</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 8. </B><I>Please tell us in detail how management determined the adequacy of workers&#146; compensation
reserves as of September&nbsp;30, 2009 and 2010. Tell us how the loss data for claims incurred during
prior policy periods was utilized to determine the reserves for the periods presented. Please show
us how your actual historical experience compares to your estimated losses. Please explain your
statement that 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. Tell us all the assumptions that you have utilized
that are uncertain. Please provide us with a sensitivity analysis.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company accrues for workers compensation expense on a claims incurred basis, with an
additional reserve for claims that have been Incurred But Not Reported (&#147;IBNR&#148;). Reserves in
respect of total anticipated losses on all incurred claims that have been reported are established
by the Company&#146;s third party administrator/stop loss insurance carrier based on the facts of the
claims and amounts are funded at each reporting period by the Company to the third party
administrator/stop loss insurer on a claims incurred, rather than a claims paid, basis. That is to
say that the third party administrator/stop loss insurer holds funds sufficient to cover the full
amount it currently anticipates having to pay out on the Company&#146;s behalf in respect of each claim
incurred. Given the funding arrangement with the administrator, the effects of investment returns
are insignificant. The Company also reviews subsequent period&#146;s claims&#146; activity prior to the
issuance of its financial statements to perform a retrospective analysis of the reasonableness of
its prior period estimates and the related impact on its current period accrual in the financial
statements to be issued. Additional reserves for IBNR are established by the Company using industry
standard loss development factors supplied by the Company&#146;s insurance
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 10
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt">advisors that take into account the magnitude (including extraordinary claims) and maturity of the incurred
claims and therefore the likelihood of further losses developing over time. Traditionally, third
party administrators/stop loss insurers estimate incurred claims conservatively as they would be
liable for any shortfall unfunded by the Company for any reason, but additional exposure may
develop in respect of individual claims as employees receive additional medical treatment and/or
additional compensable lost time occurs that was not originally expected when the claim was first
established. The IBNR reserves are established to cover this exposure, although it may be many
years before a claim is finally settled, if at all, or the stop loss coverage limit is reached.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company does not believe that it would be meaningful to provide information to show how
actual historical experience compares to estimated losses given the Company has had a number of
significant changes in the types of job duties and the related exposures its employees have faced
in recent years, as well as the variety of different fully and partially insured programs that have
been used to address the exposures, as disclosed in Note 10 to the consolidated financial
statements. The Company&#146;s management believes that the greatest uncertainty faced by the Company is
the extent to which the current total claims exposures estimated by its third party administrator/
stop loss insurance carrier may change. As of September&nbsp;30, 2010, the Company had only one full
year of claims&#146; development for the current, partially self insured program (that began effective
April&nbsp;15, 2009) and thus, minimal actual experience is available at this time. A lesser uncertainty
is any extent to which funds held by the third party administrator/stop loss insurance carrier for
claims incurred but not yet paid may be enhanced by any investment returns. Given the
insignificance of interest rate risk to the Company&#146;s estimation of its worker compensation claims
reserve, it does not believe that a sensitivity analysis will be meaningful.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Prepaid Workers&#146; Compensation, page F-22</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 9. </B><I>We note that the amount of a projected refund from Zurich reflected on your balance
sheets as a receivable and current policy deposit has not yet been determined. Please tell us your
authority under the accounting literature for booking assets that are not fixed and determinable.</I>
</DIV>
<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 11
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Referencing the explanation in paragraph 8 above, the assets held by Zurich consist of monies
provided to Zurich by the Company to fund old (prior to November&nbsp;16, 2003) workers&#146; compensation
insurance programs where there continue to exist a minimal level of on-going open claims that
Zurich estimates will ultimately cost less than the total amounts paid to date by
the Company to Zurich. Zurich holds such funds on behalf of the Company, pending the ultimate
settlement of the open claims. The asset is fixed and determinable, but is subject to offsets (open
workers compensation claims) that are still estimated. The Company has used the incurred claims
estimates provided by Zurich and industry standard loss development factors supplied by its
insurance advisors to estimate the final offset amounts. To date, the Company has received a number
of repayments from Zurich in prior periods with further amounts expected to be received in due
course as claims continue to be settled or reach stop loss limits and Zurich&#146;s confidence increases
that the assets it holds on behalf of the Company will not be needed to pay the remaining open
claims.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><U>Form&nbsp;10-Q for the Quarterly Period Ended December&nbsp;31, 2010</U>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Comment 10. </B><I>Please address the comments issued regarding Form&nbsp;10K for the fiscal year ended
September&nbsp;30, 2010, as appropriate.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>Response</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">To address your comment, the Company intends to expand its disclosure in future filings,
beginning with its Quarterly Report on Form 10-Q for the quarter ended March&nbsp;31, 2011, in a manner
consistent with the Company&#146;s responses to the comments set forth by the Staff in its
correspondence to the Company.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt"><B>General</B>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 10pt; margin-left: 4%">The Company acknowledges that:
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;the Company is responsible for the adequacy and accuracy of the disclosure in the filings;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;staff comments or changes to disclosure in response to staff comments in the Company&#146;s
filings reviewed by the staff do not foreclose the Commission from taking any action with respect
to the filing; and
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%"><B>&#149;</B>&nbsp;the Company may not assert staff comments as a defense in any proceeding initiated by the
Commission or any person under the federal securities laws of the United States.
</DIV>
<P align="center" style="font-size: 10pt; text-indent: 4%">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif; margin-left: .25in; width: 7.50in">

<DIV align="right" style="font-size: 10pt; margin-top: 10pt">Securities &#038; Exchange Commission<BR>
April&nbsp;19, 2011<BR>
Page 12
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">The Company understands that the Division of Enforcement has access to all information that
the Company provides to the staff of the Division of Corporation Finance in the staff&#146;s review of
the Company&#146;s filings or in response to the staff&#146;s comment on the Company&#146;s filings.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 10pt; text-indent: 4%">Thank you for your assistance in this matter. We appreciate the opportunity to reply to your
comments. Should you have any further comments please do not hesitate to contact the undersigned.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head --><TR valign="bottom">
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="45%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Sincerely yours,</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="3" valign="top" align="left">Becker &#038; Poliakoff, LLP</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px"><!-- Blank Space -->
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom" style="padding-top: 1px">
    <TD valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">By:
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>/s/ Michael A. Goldstein
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV></I>
Michael A. Goldstein
</TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top"><I>&nbsp;</I></TD>
</TR>
<!-- End Table Body --></TABLE>
</DIV>


<DIV align="left" style="margin-top: 10pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; background: transparent; color: #000000">
<TR>
    <TD width="7%"></TD>
    <TD width="1%"></TD>
    <TD></TD>
</TR>
<TR valign="top">
    <TD nowrap align="left">cc:</TD>
    <TD>&nbsp;</TD>
    <TD>Z. Parker (TeamStaff)<BR>J. Kahn (TeamStaff)</TD>
</TR>
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt">&nbsp;

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
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