UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
     PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
         DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 2, 2006

                                 TeamStaff, Inc.
                                 ---------------
             (Exact name of registrant as specified in its charter)

                         COMMISSION FILE NUMBER: 0-18492

               New Jersey                              22-1899798
    (State or other jurisdiction of       (I.R.S. Employer Identification No.)
     incorporation or organization)

                                300 Atrium Drive
                               Somerset, NJ 08873
                               ------------------
              (Address and zip code of principal executive offices)

                                 (732) 748-1700
                                 --------------
              (Registrant's telephone number, including area code)

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Item 1.01   Entry Into a Material Definitive Agreement

      On June 2, 2006, TeamStaff, Inc., and its wholly owned subsidiary,
BrightLane, Inc., executed a material definitive settlement agreement (the
"Settlement Agreement"), effective June 2, 2006 (the "Execution Date"), to
settle that certain legal action entitled Atomic Fusion, Inc. v. BrightLane,
Inc. pending in Fulton County, Georgia. Atomic Fusion filed a Complaint against
BrightLane.com in the Superior Court of Fulton, alleging claims arising out of a
vendor relationship between Atomic Fusion and BrightLane.com and Atomic Fusion's
subsequent status as a shareholder of BrightLane.com (hereinafter the
"Lawsuit"). On August 27, 2004, the court in the Lawsuit entered a Final
Judgment against BrightLane, which awarded Atomic Fusion $534,246.00 in damages
and $116,849.00 in attorneys' fees on its breach of contract claim (the
"Judgment"). The parties filed appeals, and the Atomic Fusion appeal is still
pending. BrightLane denied and continues to deny that it has any liability to
Atomic Fusion. TeamStaff, Inc. acquired BrightLane in a stock purchase
transaction in 2001 and has denied and continues to deny that it has any
liability to Atomic Fusion. TeamStaff believes that the Settlement Agreement is
in the best interests of its shareholders as it ends the on-going litigation
with certainty, and releases the Company from the obligations to continue to pay
ongoing and expensive legal fees. The Settlement Agreement fully and finally
settles the Judgment, the claims, allegations, appeals, charges, complaints or
potential legal action between and among Atomic Fusion, BrightLane and
TeamStaff. All charges related to the Settlement will be reflected as a charge
against discontinued operations.

The general terms of the Settlement are as follows:

1. Dismissal of Claims. Contemporaneously with payment of the Initial Payment
provided for in the Settlement Agreement (described below), Atomic fusion will
file a Dismissal with Prejudice in the Lawsuit and in the Georgia Court of
Appeals. The Dismissal will (a) Dismiss the Lawsuit, with prejudice; and (b)
dismiss all appeals by Plaintiff related to the Lawsuit, with prejudice.

2. Payment. TeamStaff shall pay to Atomic Fusion the aggregate sum of $550,000
(the "Settlement Proceeds") as follows: (a) Payment of $250,000.00 upon
execution (the "Initial Payment"); (b) Two equal payments of $150,000.00 (each,
a "Payment"), the first due on June 4, 2007 (the "2007 Payment Date") and the
second due on June 2, 2008 (the "2008 Payment Date") (hereinafter referred to as
the "Payments" or singularly with particularity, the "2007 Payment" and the
"2008 Payment"); (c) Atomic Fusion is granted contingent title to, and
possession of, 150,000 shares of TeamStaff stock (the "Shares") at $1.74 per
Share (the "Issue Price") to secure the unpaid portion of the Settlement
Proceeds of $300,000.00. TeamStaff will deliver the Shares within a reasonable
time following the Effective Date. Since the Shares must be released from
escrow, it is contemplated that the Shares will be delivered within forty-five
(45) days of the Execution Date; (d) At each Payment Date, Atomic Fusion has the
option to retain 75,000 Shares at the Issue Price (TeamStaff liable for the
difference of $19,500, in cash payable on each Payment Date), or to request that
TeamStaff make the respective Payment, whereupon Atomic Fusion will convey the
Shares back to TeamStaff (each, an "Election"); (e) The amount of Shares to
which the 2007 Payment Election applies is 75,000 Shares. The amount of Shares
to which the 2008 Payment Election applies is 75,000 Shares. Atomic Fusion must
give notice of intention at least ten (10) days prior to each Payment Date
whether Atomic Fusion will retain the Shares, or request the Payment and
repurchase of the Shares by TeamStaff. If no notice is given, Atomic Fusion will
be deemed to have elected the Payment, whereupon TeamStaff will make, and Atomic
Fusion will receive, the Payment, and Atomic Fusion will immediately convey the
Shares to TeamStaff. Once made, the Election is irrevocable; (f) The Shares are
subject to a stock purchase agreement and a lockup agreement and will not be
tradable during the Restricted Period (as defined in the Lock-Up Agreement)
unless there is a default in Payment of the Settlement Proceeds (a "Default").
If there is a Default, Atomic Fusion can, with seventy-two (72) business hours
notice and opportunity to cure, accelerate the entire indebtedness (without
further proceeding) and take all right, title and interest in and to the Shares
at the then-current market price, subject to SEC Rule 144. In the event of such
a Default and Atomic Fusion taking the stock upon the occurrence of such a
Default, TeamStaff shall be liable for any deficiency between the then-current
market price and any Payment due (giving full credit for any Payment made and/or
consideration reflected by retention of Shares at the Issue Price); (g) Atomic
Fusion agrees to be bound under the provisions of SEC Rule 144 (as to time
restrictions as well as volume




restrictions on sale). The SEC Rule 144 holding period will commence when the
Lock-Up Agreement expires; and (h) The Parties will obtain written consent of
their respective Boards of Directors. The Initial Payment is due within
seventy-two (72) business hours after both Parties exchange executed Board
resolutions, provided, however, that the Initial Payment will not be made later
than June 12, 2006. The Shares referred to above were placed in escrow by the
former shareholders of BrightLane for the purposes of indemnification, and were
part of the consideration given to the BrightLane Shareholders pursuant to the
original merger agreement with TeamStaff, effective August 31, 2001.

A copy of the form of Settlement Agreement and all Exhibits (including the Stock
Purchase Agreement and Lock-Up Agreement) is attached as Exhibit 10.1 to this
filing.

References in this filing to "TeamStaff" the "Company," "we," "us" and "our"
refer to TeamStaff, Inc. and its wholly owned subsidiaries. This Current Report
on Form 8-K includes "forward-looking statements" as defined by the Federal
Securities Laws. Forward-looking statements are identified by words such as
"believe," "anticipate," "expect," "intend," "plan," "will," "may" and other
similar expressions. In addition, any statements that refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. Forward-looking statements included in this report
involve known and 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. We based these forward-looking statements on our current
expectations and best estimates and projections about future events. Our actual
results could differ materially from those discussed in, or implied by, these
forward-looking statements. The following factors (among others) could cause our
actual results to differ materially from those implied by the forward-looking
statements in this Current Report on Form 8-K: our ability to continue to
recruit qualified temporary and permanent healthcare professionals and
administrative staff at reasonable costs; our ability to retain qualified
temporary healthcare professionals and administrative staff for multiple
assignments at reasonable costs; our ability to attract and retain sales and
operational personnel; our ability to enter into contracts with hospitals,
healthcare facility clients, affiliated healthcare networks, physician practice
groups and the United States government on terms attractive to us and to secure
orders related to those contracts; our ability to demonstrate the value of our
services to our healthcare and other facility clients; changes in the timing of
hospital, healthcare facility clients', physician practice groups' and U.S.
Government orders for and our placement of temporary and permanent healthcare
professionals and administrative staff; the general level of patient occupancy
at our clients' facilities; the overall level of demand for services offered by
temporary and permanent healthcare staffing providers; the variation in pricing
of the healthcare facility contracts under which we place temporary and
permanent healthcare professionals; our ability to successfully implement our
strategic growth, acquisition and integration strategies; the potential adverse
effects on our earnings of completed acquisitions; our ability to successfully
integrate completed acquisitions into our current operations; our ability to
manage growth effectively; our ability to leverage our cost structure; the
performance of our management information and communication systems; the effect
of existing or future government legislation and regulation; our ability to grow
and operate our business in compliance with these legislation and regulations;
the impact of medical malpractice and other claims asserted against us; the
disruption or adverse impact to our business as a result of a terrorist attack;
our ability to carry out our business strategy; the loss of key officers, and
management personnel that could adversely affect our ability to remain
competitive; the effect of recognition by us of an impairment to goodwill; risks
related to our revolving line of credit; risks associated with our health and
worker's compensation claims experience; competition risks; the effect of
adjustments by us to accruals for self-insured retentions and other general
risks related to our business, industry and stock.. Other factors that could
cause actual results to differ from those implied by the forward-looking
statements in this Current Report on Form 8-K are set forth in our Annual Report
on Form 10-K for the year ended September 30, 2005, our 10-Q for the quarter
ending December 31, 2005 and our other previously filed Current Reports on Form
8-K. We undertake no obligation to update the forward-looking statements in this
filing.




Item 9.01:  Financial Statements and Exhibits.

        (a) Financial Statements.

            None

        (b) Pro Forma Financial Information

            None

        (c) Shell Company Transactions

            None

        (d) Exhibits.

          10.1 Form of Settlement Agreement and Exhibits (Stock Purchase
Agreement and Lock-Up Agreement).


                                    SIGNATURE

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, hereunto duly authorized.

                             TeamStaff, Inc.

                             By: /s/ James D. Houston
                                ---------------------
                             Name: James D. Houston
                             Title: Vice President of Business and Legal
                             Affairs/General Counsel
                             Date: June 6, 2006