931911--1/27/2006--WESTAFF

related topics

{operation, international, foreign}

{financial, litigation, operation}

{capital, credit, financial}

{personnel, key, retain}

{stock, price, operating}

{system, service, information}

{condition, economic, financial}

{product, market, service}

Price competition in the staffing industry continues to be intense and pricing pressures from both competitors and customers may result in reduced sales and margins to the Company. Any significant recurrent economic downturn could result in the Company s customers using fewer temporary employees, which could materially adversely affect the Company. Unemployment insurance premiums and workers compensation costs and collateral for Westaff s temporary employees may continue to rise and reduce Westaff s margins and liquidity. Westaff s success depends upon its ability to attract and retain qualified temporary personnel. Westaff s information technology systems are critical to its daily operations and the Company initiated a process to replace these systems beginning in fiscal 2005. Westaff has significant working capital requirements and is heavily dependent upon its ability to borrow money to meet these working capital requirements. Westaff may be exposed to employment-related claims and costs that could materially adversely affect its business. Westaff s Founder and Chairman controls a significant amount of the Company s outstanding stock thus allowing him to exert significant influence on the Company s management and affairs. The market for Westaff s stock may be limited and the stock price may continue to be extremely volatile. Westaff s business may suffer if it loses its key personnel. Westaff derives a significant portion of its revenue from franchise agent operations. Westaff is subject to business risks associated with international operations and fluctuating exchange rates. Westaff is a defendant in a variety of litigation and other actions from time to time, which may have a material adverse effect on the Company s business, financial condition and results of operations. The Company is subject to the risk of new regulations which could harm the Company s business.

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931911--1/27/2006--WESTAFF_INC