---

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|                                                                                           
|-------------------------------------------------------------------------------------------
|UNITED STATES                                                                              
|SECURITIES AND EXCHANGE COMMISSION                                                         
|Washington, D.C. 20549                                                                     
|                                                                                           
|FORM 10-Q                                                                                  
|                                                                                           
|(Mark One)                                                                                 
|                                                                                           
|x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
 1934       
|For the quarterly period ended MARCH 31, 2009                                              
|                                                                                           
|o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
 ACT OF 1934
|For the Transition Period from ________ to ___________                                     
|                                                                                           
|Commission File No.: 1-33110                                                               

| |                                                        | 
| | ------------------------------------------------------ | 
| | DEBT
RESOLVE, INC.                                     | 
| |                                                        | 
| | (Exact name of registrant as specified in its charter) | 

| |                                  |  |                                       | 
| | -------------------------------- |  | ------------------------------------- | 
| | Delaware                         |  | 33-0889197                            | 
| |                                  |  |                                       | 
| | (State or
 other jurisdiction of |  | (I.R.S.
 Employer Identification No.) | 
| | incorporation
 or organization)  |  |                                       | 

|                            |                                           |  |            | 
|--------------------------- | ----------------------------------------- |  | ---------- | 
|                            | 150 White Plains Road, Suite 108          |  |            | 
|                            | Tarrytown, New York                       |  | 10591      | 
|                            |                                           |  |            | 
|                            | (Address of
 principal executive offices) |  | (Zip Code) | 
|                            |                                           |  |            | 
|(914) 949-5500             
|                           
|(Issuers telephone number)

Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes o No x

Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.

| |                            |                             
| | -------------------------- | ----------------------------
| | Large
 accelerated filer o | Accelerated
 filer o        
| | Non-accelerated
 filer o   | Smaller
 reporting company x

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12 b-2
of the Exchange Act). Yes o No x

APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:


Indicate by
check mark whether the registrant has filed all documents and reports required
to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
o
Yes o No


As of August
18, 2009, 10,061,865 shares of the issuers Common Stock were outstanding.

---

---



DEBT
RESOLVE, INC. AND SUBSIDIARIES
TABLE OF CONTENTS

|                              |                                                                                                |                                                                                                                         |    |   |     
|----------------------------- | ---------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | -- | - | ----
|                              |                                                                                                |                                                                                                                         |    |   | Page
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              |                                                                                                |                                                                                                                        
|PART I. Financial Information |                                                                                                |                                                                                                                        
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              | Item 1. Financial Statements                                                                   |                                                                                                                         |   
|                              |                                                                                                |                                                                                                                         |    |  
|                              |                                                                                                | Condensed
 Consolidated Balance Sheets at March 31, 2009 (unaudited) and December 31,
 2008                             |    | 3
|                              |                                                                                                |                                                                                                                         |    |  
|                              |                                                                                                | Condensed
 Consolidated Statements of Operations for the Three Months Ended March 31,
 2009 and 2008 (unaudited)        |    | 4
|                              |                                                                                                |                                                                                                                         |    |  
|                              |                                                                                                | Condensed
 Consolidated Statements of Cash Flows for the Three Months Ended March 31,
 2009 and 2008 (unaudited)        |    | 5
|                              |                                                                                                |                                                                                                                         |    |  
|                              |                                                                                                | Condensed
 Consolidated Statements of Stockholders Deficiency from January 1, 2009
 through March 31, 2009 (unaudited) |    | 6
|                              |                                                                                                |                                                                                                                         |    |  
|                              |                                                                                                | Notes to Condensed Consolidated Financial
 Statements (unaudited)                                                       |    | 7
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              | Item 2. Managements Discussion and
 Analysis of Financial Condition and Results of Operations |                                                                                                                         | 30
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 3. Quantitative and Qualitative
 Disclosures about Market Risk                            |                                                                                                                         | 37
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 4T. Controls and Procedures                                                               |                                                                                                                         | 37
|                              |                                                                                                |                                                                                                                         |   
|PART II. Other
 Information   |                                                                                                |                                                                                                                        
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              | Item 1. Legal Proceedings                                                                      |                                                                                                                         | 38
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 1A. Risk Factors                                                                          |                                                                                                                         | 39
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              | Item 2. Unregistered Sales of Equity
 Securities and Use of Proceeds                           |                                                                                                                         | 39
|                              |                                                                                                |                                                                                                                         |    |   |     
|                              | Item 3. Defaults Upon Senior Securities                                                        |                                                                                                                         | 39
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 4. Submission of Matters to a Vote of
 Security Holders                                   |                                                                                                                         | 39
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 5. Other Information                                                                      |                                                                                                                         | 40
|                              |                                                                                                |                                                                                                                         |   
|                              | Item 6. Exhibits                                                                               |                                                                                                                         | 40
|                              |                                                                                                |                                                                                                                         |   
|                              | Signature                                                                                      |                                                                                                                         | 41
|                              |                                                                                                |                                                                                                                         |   
|                              | Certifications                                                                                 |                                                                                                                         | 42
|                              |                                                                                                |                                                                                                                         |   
|                             
|2                            

---



DEBT RESOLVE, INC. AND
SUBSIDIARIESCondensed Consolidated Balance Sheets

|                                                                                                                                                                |  |                |             |                   |   |             |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- | ----------- | ----------------- | - | ----------- | -
|                                                                                                                                                                |  | March 31, 2009 |             | December 31, 2008 |  
|                                                                                                                                                                |  |                |             |                   |  
|                                                                                                                                                                |  | (Unaudited)    |             |                   |  
|ASSETS                                                                                                                                                         
|Current assets:                                                                                                                                                 |  |                |             |                   |   |             |  
|Cash                                                                                                                                                            |  | $              | 433         |                   | $ | 32,551      |  
|Accounts receivable                                                                                                                                             |  |                | 16,563      |                   |   | 11,582      |  
|Prepaid expenses and other current assets                                                                                                                       |  |                | 40,482      |                   |   | 77,220      |  
|Current assets of discontinued operations                                                                                                                       |  |                | 4,511       |                   |   | 5,582       |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total current assets                                                                                                                                            |  |                | 61,989      |                   |   | 126,935     |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Fixed assets, net                                                                                                                                               |  |                | 71,992      |                   |   | 84,271      |  
|Deposits and other assets                                                                                                                                       |  |                | 15,055      |                   |   | 94,855      |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total assets                                                                                                                                                    |  | $              | 149,036     |                   | $ | 306,061     |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|LIABILITIES AND STOCKHOLDERS DEFICIENCY                                                                                                                       
|Current liabilities:                                                                                                                                            |  |                |             |                   |   |             |  
|Accounts payable and accrued liabilities                                                                                                                        |  | $              | 3,717,131   |                   | $ | 3,525,849   |  
|Convertible debentures (net of deferred
 debt discount of $0 and $159,562 as of March 31, 2009 and December 31, 2008,
 respectively)                            |  |                | 351,000     |                   |   | 191,438     |  
|Short-term notes                                                                                                                                                |  |                | 577,500     |                   |   | 487,000     |  
|Current maturities of long-term debt (net
 of deferred debt discount of $41,689 and $69,556 as of March 31, 2009 and
 December 31, 2008, respectively)          |  |                | 781,311     |                   |   | 753,444     |  
|Lines of credit  related parties                                                                                                                               |  |                | 1,203,623   |                   |   | 1,203,623   |  
|Derivative liability                                                                                                                                            |  |                | 362,859     |                   |   | 331,268     |  
|Current liabilities of discontinued
 operations                                                                                                                 |  |                | 2,330,152   |                   |   | 2,330,912   |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total current liabilities                                                                                                                                       |  |                | 9,323,575   |                   |   | 8,823,534   |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total liabilities                                                                                                                                               |  |                | 9,323,575   |                   |   | 8,823,534   |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Commitments and contingencies                                                                                                                                   |  |                |             |                   |   |             |  
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Stockholders deficiency:                                                                                                                                       |  |                |             |                   |   |             |  
|Preferred stock, 10,000,000 shares
 authorized, $0.001 par value, none issued and outstanding as of March
 31, 2009 and December 31, 2008                       |  |                |            |                   |   |            |  
|Common stock, 100,000,000 shares
 authorized, $0.001 par value, 10,511,865 shares issued and 10,061,865
 outstanding as of March 31, 2009 and December 31, 2008 |  |                | 10,512      |                   |   | 10,512      |  
|Additional paid-in capital                                                                                                                                      |  |                | 47,265,278  |                   |   | 47,207,568  |  
|Shares held under escrow (450,000 shares)                                                                                                                       |  |                | (450        | )                 |   | (450        | )
|Accumulated deficit                                                                                                                                             |  |                | (56,449,879 | )                 |   | (55,735,103 | )
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total stockholders deficiency                                                                                                                                  |  |                | (9,174,539  | )                 |   | (8,517,473  | )
|                                                                                                                                                                |  |                |             |                   |   |             |  
|Total liabilities and stockholders
 deficiency                                                                                                                 |  | $              | 149,036     |                   | $ | 306,061     |  
|                                                                                                                                                                |  |                |             |                   |   |             |  

|                                                                                                             
|-------------------------------------------------------------------------------------------------------------
|The
 accompanying notes are an integral part of these unaudited condensed
 consolidated financial statements.
|                                                                                                             
|                                                                                                             
|3                                                                                                            

---



DEBT RESOLVE, INC. AND
SUBSIDIARIESCondensed Consolidated
Statements of Operations(Unaudited)

|                                                                                     |  |                              |            |      |   |            |  
|------------------------------------------------------------------------------------ |  | ---------------------------- | ---------- | ---- | - | ---------- | -
|                                                                                     |  | Three Months Ended March 31, |           
|                                                                                     |  |                              |           
|                                                                                     |  |                              |            |      |  
|                                                                                     |  | 2009                         |            | 2008 |  
|                                                                                     |  |                              |            |      |  
|                                                                                     |  |                              |            |      |   |            |  
|Revenues                                                                             |  | $                            | 24,495     |      | $ | 84,178     |  
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Costs and expenses:                                                                  |  |                              |            |      |   |            |  
|Payroll and related expenses                                                         |  |                              | 192,241    |      |   | 1,360,996  |  
|General and administrative expenses                                                  |  |                              | 177,973    |      |   | 515,464    |  
|Depreciation and amortization expense                                                |  |                              | 12,279     |      |   | 14,537     |  
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Total expenses                                                                       |  |                              | 382,493    |      |   | 1,890,997  |  
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Loss from operations                                                                 |  |                              | (357,998   | )    |   | (1,806,819 | )
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Other (expense) income:                                                              |  |                              |            |      |   |            |  
|Interest income                                                                      |  |                              |           |      |   | 190        |  
|Interest expense                                                                     |  |                              | (56,934    | )    |   | (25,194    | )
|Interest expense  related party                                                     |  |                              | (35,614    | )    |   | (30,937    | )
|Amortization of deferred debt discount                                               |  |                              | (232,638   | )    |   | (501,674   | )
|Loss on derivative liability                                                         |  |                              | (31,591    | )    |   |           |  
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Total other (expense)                                                                |  |                              | (356,777   | )    |   | (557,615   | )
|                                                                                     |  |                              |            |      |   |            |  
|Loss from continuing operations                                                      |  |                              | (714,775   | )    |   | (2,364,434 | )
|Loss from discontinued operations                                                    |  |                              |           |      |   | (507,802   | )
|                                                                                     |  |                              |            |      |   |            |  
|Net loss                                                                             |  | $                            | (714,775   | )    | $ | (2,872,236 | )
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Net loss per common share:                                                           |  |                              |            |      |   |            |  
|basic and diluted (See Note 2)                                                       |  |                              |            |      |   |            |  
|Continuing operations                                                                |  | $                            | (0.06      | )    | $ | (0.27      | )
|Discontinued operations                                                              |  | $                            |           |      | $ | (0.06      | )
|                                                                                     |  |                              |            |      |   |            |  
|Total                                                                                |  | $                            | (0.06      | )    | $ | (0.33      | )
|                                                                                     |  |                              |            |      |   |            |  
|                                                                                     |  |                              |            |      |   |            |  
|Basic and diluted weighted average number of common shares outstanding
 (See Note 2) |  |                              | 11,487,026 |      |   | 8,689,803  |  
|                                                                                     |  |                              |            |      |   |            |  

The accompanying notes are an integral part
of these unaudited condensed consolidated financial statements.

| 
|-
| 
|4

---



DEBT RESOLVE, INC. AND
SUBSIDIARIESCondensed Consolidated Statements of Cash Flows
(Unaudited)

|                                                                             |  |                              |          |      |   |            |  
|---------------------------------------------------------------------------- |  | ---------------------------- | -------- | ---- | - | ---------- | -
|                                                                             |  | Three months ended March 31, |         
|                                                                             |  |                              |         
|                                                                             |  | 2009                         |          | 2008 |  
|                                                                             |  |                              |          |      |  
|Cash flows
 from continuing operating activities:                            |  |                              |          |      |   |            |  
|Net loss                                                                     |  | $                            | (714,775 | )    | $ | (2,364,435 | )
|Adjustments to reconcile net loss to net cash used in operating
 activities: |  |                              |          |      |   |            |  
|Non cash stock based compensation                                            |  |                              | 12,500   |      |   | 1,127,369  |  
|Derivative liability                                                         |  |                              | 31,591   |      |   |           |  
|Amortization of deferred debt discount                                       |  |                              | 232,638  |      |   | 501,674    |  
|Interest paid directly from short term notes
proceeds                        |  |                              | 15,500   |      |   |           |  
|Legal fees paid directly from short term notes
proceeds                      |  |                              | 5,000    |      |   |           |  
|Depreciation and amortization                                                |  |                              | 12,279   |      |   | 14,537     |  
|Changes in operating assets & liabilities                                    |  |                              |          |      |   |            |  
|Accounts receivable                                                          |  |                              | (4,981   | )    |   | (64,076    | )
|Prepaid expenses and other current assets                                    |  |                              | 36,738   |      |   | 11,451     |  
|Deposits and other assets                                                    |  |                              | 79,800   |      |   |           |  
|Accounts payable and accrued expenses                                        |  |                              | 190,521  |      |   | 386,697    |  
|                                                                             |  |                              |          |      |   |            |  
|Net cash used in continuing operating
activities                             |  |                              | (103,189 | )    |   | (386,783   | )
|                                                                             |  |                              |          |      |   |            |  
|Cash flows
 from continuing investing activities:                            |  |                              |          |      |   |            |  
|Investment in subsidiaries                                                   |  |                              |         |      |   | (348,258   | )
|                                                                             |  |                              |          |      |   |            |  
|                                                                             |  |                              |          |      |   |            |  
|Cash flows
 from continuing financing activities:                            |  |                              |          |      |   |            |  
|Proceeds from other receivable                                               |  |                              |         |      |   | 200,000    |  
|Proceeds from long term loans                                                |  |                              |         |      |   | 300,000    |  
|Proceeds from issuance of short term notes                                   |  |                              |         |      |   | 205,000    |  
|Proceeds from (Repayment of) short term
notes                                |  |                              | 70,000   |      |   | (45,000    | )
|Proceeds from lines of credit                                                |  |                              |          |      |   | 80,000     |  
|Repayment of lines of credit                                                 |  |                              |         |      |   | (5,000     | )
|Proceeds from exercise of warrants                                           |  |                              |         |      |   | 42         |  
|                                                                             |  |                              |          |      |   |            |  
|Net cash provided by (used in) continuing financing
activities               |  |                              | 70,000   |      |   | 735,042    |  
|                                                                             |  |                              |          |      |   |            |  
|                                                                             |  |                              |          |      |   |            |  
|Cash flows
 used in discontinued operations:                                 |  |                              |          |      |   |            |  
|Net cash used in operating activities                                        |  |                              | (1,071   | )    |   |           |  
|                                                                             |  |                              |          |      |   |            |  
|Net cash used in discontinued operations                                     |  |                              | (1,071   | )    |   |           |  
|                                                                             |  |                              |          |      |   |            |  
|                                                                             |  |                              |          |      |   |            |  
|Net decrease in cash and cash equivalents                                    |  |                              | (32,118  | )    |   |           |  
|                                                                             |  |                              |          |      |   |            |  
|Cash and cash equivalents at beginning of period                             |  |                              | 32,551   |      |   |           |  
|                                                                             |  |                              |          |      |   |            |  
|                                                                             |  |                              |          |      |   |            |  
|Cash and cash equivalents at end of period  continuing
operations           |  | $                            | 433      |      | $ |           |  
|                                                                             |  |                              |          |      |   |            |  
|                                                                             |  |                              |          |     
|SUPPLEMENTAL DISCLOSURES:                                                    |  |                              |          |      |   |            |  
|Interest paid                                                                |  | $                            |         |      | $ |           |  
|Income taxes paid                                                            |  | $                            |         |      | $ |           |  
|Interest paid directly from short term notes proceeds                        |  | $                            | 15,500   |      | $ |           |  
|Legal fees paid directly from short term notes proceeds                      |  | $                            | 5,000    |      | $ |           |  

The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

| 
|-
| 
|5

---



DEBT RESOLVE,
INC. and SUBSIDIARIES
Condensed Consolidated Statement of Stockholders Deficiency
For the Three Months Ended March 31, 2009(Unaudited)

|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|---------------------------------------------------------------- |  | --------------- |  | ------------ | - | --------------- | ---------- | ------ | - | ------------------------ |  | -------------------------- | ---------- | -------------------- | - | ----- | - | - | ----------- | - | - | ---------- | -
|                                                                 |  | Preferred Stock |  | Common Stock |   |                 |            |        |   |                          |  |                            |           
|                                                                 |  | Number ofShares |  | Amount       |   | Number ofShares |            | Amount |   | AdditionalPaid inCapital |  | Shares Held
 Under
 Escrow |            | Accumulated
 Deficit |   | Total |  
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |  
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|Balance at December 31, 2008                                     |  |                |  | $            |  |                 | 10,061,865 |        | $ | 10,512                   |  | $                          | 47,207,568 |                      | $ | (450  | ) | $ | (55,735,103 | ) | $ | (8,517,473 | )
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|Capital contributed from the grant of stock options to
employees |  |                 |  |              |   |                 |            |        |   |                          |  |                            | 12,500     |                      |   |       |   |   |             |   |   | 12,500     |  
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|Capital contributed from the deferred debt discount of
notes     |  |                 |  |              |   |                 |            |        |   |                          |  |                            | 45,210     |                      |   |       |   |   |             |   |   | 45,210     |  
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|Net loss                                                         |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   | (714,775    | ) |   | (714,775   | )
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  
|Balance at March 31, 2009                                        |  |                |  | $            |  |                 | 10,061,865 |        | $ | 10,512                   |  |                            | 47,265,278 |                      | $ | (450  | ) | $ | (56,449,878 | ) | $ | (9,174,538 | )
|                                                                 |  |                 |  |              |   |                 |            |        |   |                          |  |                            |            |                      |   |       |   |   |             |   |   |            |  

The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.

| 
|-
| 
|6

---



DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                                                         
|------- | --------------------------------------------------------
|NOTE 1. | BASIS OF
 PRESENTATION AND MANAGEMENTS LIQUIDITY PLANS:

The
accompanying unaudited condensed consolidated financial statements of Debt
Resolve Inc. and subsidiaries (the Company or Debt Resolve, we, us,
our) have been prepared in accordance with accounting principles generally
accepted in the United States of America (GAAP) for interim financial
information. In the opinion of management, such statements include all
adjustments (consisting only of normal recurring adjustments) necessary for the
fair presentation of the Companys financial position, results of operations
and cash flows at the dates and for the periods indicated. Pursuant to the
requirements of the Securities and Exchange Commission (the SEC) applicable
to quarterly reports on Form 10-Q, the accompanying unaudited condensed
consolidated financial statements do not include all the disclosures required
by GAAP for annual financial statements. While the Company believes that the
disclosures presented are adequate to make the information not misleading,
these unaudited interim condensed consolidated financial statements should be
read in conjunction with the consolidated financial statements and related
notes included in the Companys Annual Report on Form 10-K for the year ended
December 31, 2008. Operating results for the three months ended March 31, 2009
are not necessarily indicative of the results that may be expected for the
fiscal year ending December 31, 2009, or any other interim period.

The
accompanying unaudited condensed consolidated financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which contemplate continuation of the Company as a
going concern and the realization of assets and the satisfaction of liabilities
in the normal course of business. The carrying amounts of assets and
liabilities presented in the financial statements do not purport to represent
realizable or settlement values. The Company has suffered significant recurring
operating losses, has a working capital deficiency and needs to raise
additional capital in order to be able to accomplish its business plan
objectives. These conditions raise substantial doubt about the Companys
ability to continue as a going concern. These unaudited condensed consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

The
accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
audited condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classification of asset amounts
or the classification of liabilities that might be necessary should the Company
be unable to continue as a going concern. For the three months ended March 31,
2009, the Company had inadequate revenues and incurred a net loss of $714,775
from continuing operations. Cash used in operating and investing activities of
continuing operations was $33,189 for the three months ended March 31, 2009. In
addition, the Company had a working capital deficiency of $6,935,947 on
continuing operations as of March 31, 2009. Based upon projected operating
expenses, the Company believes that its working capital as of the date of this
report is not sufficient to fund its plan of operations for the next twelve
months. The aforementioned factors raise substantial doubt about the Companys
ability to continue as a going concern.

The
Company needs to raise additional capital in order to be able to accomplish its
business plan objectives. The Company has historically satisfied its capital
needs primarily from the sale of debt and equity securities. Management of the
Company is continuing its efforts to secure additional funds through debt
and/or equity instruments. Management believes that it will be successful in
obtaining additional financing; however, no assurance can be provided that the
Company will be able to do so. There is no assurance that these funds will be
sufficient to enable the Company to attain profitable operations or continue as
a going concern. To the extent that the Company is unsuccessful, the Company
may need to curtail its operations and implement a plan to extend payables and
reduce overhead until sufficient additional capital is raised to support
further operations. There can be no assurance that such a plan will be
successful. In the alternative, the Company may be required to file for
bankruptcy. These unaudited condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

| 
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|7

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                                             
|------- | --------------------------------------------
|NOTE 2. | SUMMARY OF
 SIGNIFICANT ACCOUNTING POLICIES:

Principles
of Consolidation

The
accompanying unaudited condensed consolidated financial statements include the
accounts of First Performance Corporation, a wholly-owned subsidiary, together
with its wholly-owned subsidiary, First Performance Recovery Corporation, and
DRV Capital LLC, a wholly-owned subsidiary (DRV Capital), together with its
wholly-owned subsidiary, EAR Capital, LLC (EAR). The results of all
subsidiaries, including DRV Capital, EAR, First Performance and First
Performance Recovery are shown as discontinued operations in the financial
statements. All material inter-company balances and transactions have been
eliminated in consolidation.

Reclassifications

Certain
accounts in the prior period financial statements have been reclassified for
comparison purposes to conform to the presentation of the current period
financial statements. These reclassifications had no effect on the previously
reported loss.

Revenue
Recognition

To
date, we have earned revenue from collection agencies, collection law firms and
lenders that implemented our online system. Our current contracts provide for
revenue based on a percentage of the amount of debt collected, a flat fee per
settlement from accounts submitted on the DebtResolve system or through a flat
monthly license fee. Although other revenue models have been proposed, most
revenue earned to date has been determined using these methods, and such
revenue is recognized when the settlement amount of debt is collected by the
client or at the beginning of the month for a license fee. For the early
adopters of our product, we waived set-up fees and other transactional fees
that we anticipate charging in the future. While the percent of debt collected
will continue to be a revenue recognition method going forward, other payment
models are also being offered to clients and may possibly become our preferred
revenue model. Dependent upon the structure of future contracts, revenue may be
derived from a combination of set up fees or monthly licensing fees with
transaction fees upon debt settlement.

In
recognition of the principles expressed in Staff Accounting Bulletin (SAB)
104 (SAB 104), that revenue should not be recognized until it is realized or
realizable and earned, and given the element of doubt associated with
collectability of an agreed settlement on past due debt, at this time we
uniformly postpone recognition of all contingent revenue until our client receives
payment from the debtor. As is required by SAB 104, revenues are considered to
have been earned when we have substantially accomplished the agreed-upon
deliverables to be entitled to payment by the client. For most current active
clients, these deliverables consist of the successful collection of past due
debts using our system and/or, for clients under a licensing arrangement, the
successful availability of our system to its customers.

In
addition, in accordance with Emerging Issues Task Force (EITF) Issue 00-21,
revenue is recognized and identified according to the deliverable provided.
Set-up fees, percentage contingent collection fees, fixed settlement fees,
monthly license fees, etc. are identified separately.

Cash
and cash equivalents

For
purposes of the consolidated statements of cash flows, the Company considers
all highly liquid debt instruments with original maturities of three months or
less to be cash equivalents. Cash equivalents consist of money market funds and
demand deposits. From time to time, the Company has balances in excess of the
federally insured limit.

| 
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|8

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                                                         
|------- | --------------------------------------------------------
|NOTE 2. | SUMMARY OF SIGNIFICANT
 ACCOUNTING POLICIES (CONTINUED):

Accounts
Receivable

We
extend credit to large, mid-size and small companies for collection services.
We have a concentration of credit risk as 100% of the balance of accounts
receivable at March 31, 2009 and 100% of the revenues for the three months then ended consist of only one customer. We do not generally
require collateral or other security to support customer receivables. Accounts
receivable are carried at their estimated collectible amounts. Accounts
receivable are periodically evaluated for collectibility and the allowance for
doubtful accounts is adjusted accordingly. Our management determines
collectibility based on their experience and knowledge of the customers, as of
March 31, 2009 no allowance for doubtful accounts has been booked.

Accounts
Payable and Accrued Liabilities

Included
in accounts payable and accrued liabilities as of March 31, 2009 are accrued
professional fees of $1,213,739 and accrued closing costs for First Performance
of $1,350,931. The Company owed 32 vendors a total of $2,779,633 at March 31,
2009, each of whom was individually owed in excess of 10% of total Company
assets.

Derivative
Financial Instruments

The
Companys derivative financial instruments consist of embedded derivatives
related to Convertible Debentures. These embedded derivatives include certain
conversion features. The accounting treatment of derivative financial
instruments requires that the Company records the derivatives and related
warrants at their fair values as of the inception date of the Convertible
Debenture Agreement and at fair value as of each subsequent balance sheet date.
In addition, under the provisions of EITF Issue No. 00-19, Accounting for
Derivative Financial Instruments Indexed to, and Potentially Settled in, a
Companys Own Stock, as a result of entering into the Debentures, the Company
is required to classify all other non-employee stock options and warrants as
derivative liabilities and mark them to market at each reporting date. Any change
in fair value inclusive of modifications of terms will be recorded as
non-operating, non-cash income or expense at each reporting date. If the fair
value of the derivatives is higher at the subsequent balance sheet date, the
Company will record a non-operating, non-cash charge. If the fair value of the
derivatives is lower at the subsequent balance sheet date, the Company will
record non-operating, non-cash income. Conversion-related derivatives and the
warrants were valued using the Black Scholes Option Pricing Model with the
following assumptions: dividend yield of 0%; annual volatility of 286%; and
risk free interest rate from 0.43% to 2.28%. The derivatives are classified as
short term liabilities.

Stock-based
compensation

The
Company accounts for stock options issued under the recognition and measurement
principles of Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment (SFAS 123(R)). Under the provisions of SFAS
123(R), the Company is required to measure the cost of services received in
exchange for an award of equity instruments based on the fair value of the
award. For employees and directors, the award is measured on the grant date and
for non-employees, the award is generally re-measured on interim financial
reporting dates until the service period is complete, in accordance with EITF
Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other
Than Employees for Acquiring, or in Conjunction with Selling, Goods or
Services. The fair value amount is then recognized over the period during
which services are required to be provided in exchange for the award, usually
the vesting period. As of March 31, 2009, total unrecognized compensation cost
amounted to $5,609, all of which is expected to be recognized in 2009. Total
stock-based compensation expense for the three months ended March 31, 2009 and
2008 amounted to $12,500 and $1,127,369, respectively.

| 
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|9

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                                                         
|------- | --------------------------------------------------------
|NOTE 2. | SUMMARY OF
 SIGNIFICANT ACCOUNTING POLICIES (CONTINUED):

Stock-based
compensation (continued)

The
fair value of share-based payment awards granted during the periods was
estimated using the Black-Scholes pricing model with the following assumptions
and weighted average fair values as follows:

|                              |  |                                |  |             | 
|----------------------------- |  | ------------------------------ |  | ----------- | 
|                              |  | Three
 months ended
 March 31, | 
|                              |  |                                | 
|                              |  | 2009                           |  | 2008        | 
|                              |  |                                |  |             | 
|Risk free interest rate range |  | NA                             |  | 2.10 -3.21% | 
|Dividend yield                |  | NA                             |  | 0 %         | 
|Expected volatility           |  | NA                             |  | 81.1 %      | 
|Expected life in years        |  | NA                             |  | 3 -7        | 

Until
such time as the Company had sufficient relevant trading history to compute the
historical volatility of its common stock, the Company utilized an expected
volatility figure derived from the historical volatilities of an index of
comparable public entities. The Company accounts for the expected life of share
options in accordance with the simplified method provisions of Securities and
Exchange Commission Staff Accounting Bulletin (SAB) No. 110 (December 2007),
which enables the use of the simplified method for plain vanilla share
options as defined in SAB No. 107.

Net
loss per share of common stock

Basic
net loss per share excludes dilution for potentially dilutive securities and is
computed by dividing net loss attributable to common stockholders by the
weighted average number of common shares outstanding during the period. Diluted
net loss per share reflects the potential dilution that could occur if
securities or other instruments to issue common stock were exercised or
converted into common stock. Potentially dilutive shares of common stock
realizable from the fulfillment of a share issuance commitment of 150,000 and
0, conversion of our convertible debentures of 36,695,108 and 0, and the
exercise of options and warrants aggregating 32,242,451 and 7,631,037,
respectively at March 31, 2009 and 2008, are excluded from the computation of
diluted net loss per share as their inclusion would be anti-dilutive.

The
Companys issued and outstanding common shares do not include the underlying
shares exercisable with respect to the issuance of 2,402,938 and 177,938
warrants, respectively, as of March 31, 2009 and 2008, exercisable at $0.01 per
share or less. In accordance with SFAS No. 128 Earnings Per Share, the
Company has given effect to the issuance of these warrants in computing basic
net loss per share. The Company excludes from the computation of basic net loss
per share 23,750,000 shares from a contingent warrant that is exercisable at
$0.00000004 per share in the event that the Company does not repay certain
notes payable upon maturity.

During
the year ended December 31, 2008, the Company issued 450,000 shares held in
escrow in conjunction with the issuance of the $300,000 convertible debenture
(See Note 4). The Company does not consider these shares as outstanding and as
such does not include them in the calculation of Earnings per Share.

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|10

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                
|------- | ---------------
|NOTE 3. | NOTES
 PAYABLE:

On
November 30, 2007, an unaffiliated investor loaned the Company $100,000 on a
90-day short term note. The note carries 12% interest per annum, with interest
payable monthly in cash. The principal balance outstanding will be due at any
time upon 30 days written notice, subject to mandatory prepayment (without
penalty) of principal and interest, in whole or in part, from the net cash
proceeds of any public or private, equity or debt financing made by the
Company. The note matured on February 28, 2008 and was extended to March 31,
2009 for aggregate extension fees of $65,000. In conjunction with the note the
Company also issued a warrant to purchase 100,000 shares of common stock at an
exercise price of $1.25 per share with an expiration date of November 30, 2012.
The note was recorded net of a debt discount of $44,100, based on the relative
fair value of the warrant under the Black-Scholes pricing model. The debt
discount was amortized over the initial term of the note. During the three
months ended March 31, 2009 and 2008, the Company recorded amortization of the
debt discount related to this note of $0 and $29,400, respectively. This note
is guaranteed by Mssrs. Mooney and Burchetta, two Directors of the Company.

On
December 21, 2007, an unaffiliated investor loaned the Company $125,000 on an
18-month note with a maturity date of June 21, 2009. The note has a provision
requiring repayment once the Company has raised an aggregate of $500,000
following issuance of this note. As a result, this note is currently in default
as it has not been repaid and the Company reached the $500,000 threshold in
September, 2008. The note carries interest at a rate of 12% per annum, with
interest accruing and payable at maturity. The note is secured by the assets of
the Company. In conjunction with the note, the Company granted to the investor
a warrant to purchase 37,500 shares of common stock at an exercise price of
$1.07 and an expiration date of December 21, 2012. The note was recorded net of
a deferred debt discount of $19,375, based on the relative fair value of the
warrant under the Black-Scholes pricing model. Such discount is being amortized
over the term of the note. During the three months ended March 31, 2009 and
2008, the Company recorded amortization of the debt discount related to this
note of $0 and $3,229, respectively. This note is guaranteed by Mr. Burchetta.

On
December 30, 2007, an unaffiliated investor loaned the Company $200,000 on an
18-month note with a maturity date of June 30, 2009. The note carries interest
at a rate of 12% per annum, with interest accruing and payable at maturity. The
note is secured by the assets of the Company. In conjunction with this note,
the Company also issued a warrant to purchase 100,000 shares of common stock at
an exercise price of $1.00 and an expiration date of December 30, 2012. The
note was recorded net of a deferred debt discount of $51,600, based on the
relative fair value of the warrant under the Black-Scholes pricing model. Such
discount is being amortized over the term of the note. During the three months
ended March 31, 2009 and 2008, the Company recorded amortization of the debt
discount related to this note of $8,600 and $8,600, respectively. This note is
guaranteed by Mr. Burchetta.

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|11

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                            
|------- | ---------------------------
|NOTE 3. | NOTES
 PAYABLE (CONTINUED):

On
January 25, 2008, an unaffiliated investor loaned the Company $100,000 on an
18-month note with a maturity date of July 25, 2009. The note carries interest
at a rate of 12% interest per annum, with interest accruing and payable at
maturity. The note is secured by the assets of the Company. In conjunction with
the note, the Company also issued a warrant to purchase 50,000 shares of common
stock at an exercise price of $1.00 and an expiration date of January 24, 2013.
The note was recorded net of a deferred debt discount of $20,300, based on the
relative fair value of the warrant under the Black-Scholes pricing model. Such
discount is being amortized over the term of the note. During the three months
ended March 31, 2009 and 2008, the Company recorded amortization of the debt
discount related to this note of $3,383 and $2,256, respectively.

Between
January 2008 and June 2009, an unaffiliated investor loaned the Company $79,000
on a short term basis. The interest rate is 12% per annum, and the loan is
repayable on demand. As of March 31, 2009, the remaining outstanding balance on
the loan is $30,000.

On
February 26, 2008, an unaffiliated investor loaned the Company an additional
$100,000 on an 18-month note with a maturity date of August 26, 2009. The note
carries interest at a rate of 12% interest per annum, with interest accruing
and payable at maturity. Terms of the loan included a $20,000 service fee on
repayment or a $45,000 service fee if repayment occurs more than 31 days after
origination. The outstanding principal and interest may be repaid, in whole or
in part, at any time without prepayment penalty. Accordingly, since the loan
remains unpaid, the Company has accrued the service fee of $45,000 as of March
31, 2009. The note is secured by the assets of the Company. In conjunction with
the note, the Company also issued a warrant to purchase 175,000 shares of
common stock at an exercise price of $1.25 and an expiration date of February
26, 2013. The note was recorded net of a deferred debt discount of $57,400,
based on the relative fair value of the warrant under the Black-Scholes pricing
model. Such discount is being amortized over the term of the note. During the
three months ended March 31, 2009 and 2008, the Company recorded amortization
of the debt discount related to this note of $9,567 and $3,189, respectively.

On
March 7, 2008, the Company borrowed $100,000 from a bank at a variable rate
equal to the banks prime rate (currently 6%) for 30 days. On March 14, 2008,
the original loan was repaid, and the Company borrowed $150,000 at the prime
rate and due on April 7, 2008. On May 15, 2008, the loan was repaid and the
Company borrowed $250,000 at the prime rate and due on July 1, 2008. The note
was subsequently extended to January 1, 2009 and is outstanding as of March 31,
2009. The loan is secured by the assets of the Company and is personally
guaranteed by Mr. Montgomery and Mr. Mooney, an officer/director and a
director, respectively.

On
March 27, 2008, an unaffiliated investor loaned the Company $100,000 on an
18-month note with a maturity date of September 27, 2009. The note carries
interest at a rate of 12% interest per annum, with interest accruing and
payable at maturity. The outstanding principal and interest may be repaid, in
whole or in part, at any time without prepayment penalty. The note is secured
by the assets of the Company. In conjunction with the note, the Company also
issued a warrant to purchase 50,000 shares of common stock at an exercise price
of $1.95 and an expiration date of March 27, 2013. The note was recorded net of
a deferred debt discount of $37,900, based on the relative fair value of the
warrant under the Black-Scholes pricing model. Such discount is being amortized
over the term of the note. During the three months ended March 31, 2009 and
2008, the Company recorded amortization of the debt discount related to this
note of $6,317 and $0, respectively.

On
April 10, 2008, an unaffiliated investor loaned the Company an additional
$198,000 on an amendment of the prior note with a maturity date of June 21,
2009 for the entire balance of the first note plus the amendment ($323,000
total). The note carries interest at a rate of 12% per annum, with interest
accruing and payable at maturity. The outstanding principal and interest may be
repaid, in whole or in part, at any time without prepayment penalty. The note
is secured by the assets of the Company. In conjunction with the note, the
Company also issued a warrant to purchase 99,000 shares of common stock at an
exercise price of $2.45 and an expiration date of April 10, 2013. This warrant
has a cashless exercise feature. The note was recorded net of a deferred debt
discount of $88,110, based on the relative fair value of the warrant. The debt
discount is being amortized over the term of the note. During the year ended
December 31, 2008, the Company recorded amortization of the debt discount
related to this note of $88,110 due to the note being in default. This note is
guaranteed by Mr. Burchetta. The amended note maintains the provision requiring
repayment of the note upon raising gross proceeds of $500,000 subsequent the
issuance of the note. At December 31, 2008, the Company had raised in excess of
$500,000 subsequent to this

|  
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|12

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|        |                            
|------- | ---------------------------
|NOTE 3. | NOTES
 PAYABLE (CONTINUED):

amended note,
and as a result, this note is in default. The Company also issued 50,000 shares
of common stock valued at $122,130 in order to induce the investor to forbear on
the note, which is included in expenses. The note holder has requested
repayment of the note, but the note is still outstanding.

On
November 14, 2008, an unaffiliated investor loaned the Company $107,000 on
short term note with a maturity date of December 31, 2008 (the November
Note). The Company received net proceeds of $100,000, and the $7,000 was
treated as prepaid interest on the November Note to the original maturity date.
The maturity date was subsequently extended to March 31, 2009 for additional
interest on the note of $8,000, and the face amount of the November is now
$115,000 at maturity. On July 31, 2009, the maturity date was extended to
August 26, 2009. The November Note carries a default rate of interest of 22%
per annum after the maturity date. The Company has a thirty (30) day grace
period after the maturity date to repay the November Note with interest. The
outstanding principal and interest may be repaid, in whole or in part, at any
time without prepayment penalty. The November Note is secured by a first lien
on the assets of the Company as evidenced by a UCC-1 filing. Arisean Capital
subordinated its first lien position on its $576,000 outstanding loan to the
extent of the November Note. In conjunction with the November Note, the Company
issued a warrant to purchase 1,000,000 shares of common stock at an exercise
price of $0.12 and an expiration date of November 14, 2013. This warrant has a
cashless exercise feature. The November Note was recorded net of a deferred
debt discount of $50,504, based on the relative fair value of the warrant and
was fully amortized in 2008 over the term of the note. On February 13, 2009, the
warrant for 1,000,000 shares was cancelled and replaced by a new five year
warrant to purchase 25,750,000 shares of Company common stock at a total
exercise price of $1.00. Upon repayment of amounts borrowed from the investor
on or before maturity, as extended, the Company may reduce the warrant by
23,750,000 shares.

On
February 26, 2009, the holder of the November Note loaned the Company an
additional $82,500 with a maturity date of March 30, 2009 (the February
Note). The Company received net proceeds of $70,000, and the $7,500 was
treated as prepaid interest on the February Note and the $5,000 was expensed as
attorneys fees. Through a series of amendments, the maturity date of the
November Note and the February Note was extended to August 26, 2009 for
additional interest of $12,500, with the face amount of the February Note is
now $95,000 at maturity. The holder received the right, in the event of a
Company default on either Note, to return to the Company any of the holders
2,000,000 warrants not yet exercised in exchange for the Companys cash payment
equal to $0.023 per warrant share. Interest applies at a default rate of 26%
interest per annum after maturity. The February Note is secured by a first lien
on the assets of the Company as evidenced by a UCC-1 filing. Arisean Capital
further subordinated its first lien position on its $576,000 outstanding loan
to the extent of the November and February Notes.

|        |                         
|------- | ------------------------
|NOTE 4. | CONVERTIBLE
 DEBENTURES:

On
September 30, 2008, an unaffiliated investor loaned the Company $300,000 on a 6
month convertible debenture with a maturity date of March 31, 2009. This
convertible debenture replaced a note issued on July 31, 2008 in the same
amount of $300,000 with a maturity date of January 31, 2009. The debenture
carries interest at a rate of 15% per annum, with $22,500 (6 months) of
interest payable in advance from the proceeds of the original loan on July 31,
2008. Thereafter, interest is payable monthly in cash. The outstanding
principal and interest may be repaid, in whole or in part, at any time without
prepayment penalty. The Exchange Agreement calls for the lender to receive
150,000 shares of the common stock of the company in consideration for the
exchange of the original note for the convertible debenture. As of the date of
this report, the shares have not been issued. In accordance with EITF 96-19, the exchange was determined to be an extinguishment of debt, and
extinguishment accounting was applied. A loss on extinguishment of $60,000 was booked to general and administrative expense. The debenture is secured by an
escrow of 450,000 shares of the common stock of the Company, which is held in
escrow at the lenders attorneys office. At any time on or after the Issue
Date and prior to the time the Debenture is paid in full in accordance with its
terms (including, without limitation, after the occurrence of an Event of
Default, or, if the Debenture is not fully paid or converted after the Maturity
Date), the Holder of this Debenture is entitled, at its option to convert this
Debenture at any time into shares of Common Stock, $0.001 par value (Common
Stock), of the Company at the Conversion Price. Conversion Price means the
(i) the average VWAP for the 20 Trading Days ending on the Trading Day
immediately before the relevant Conversion Date, multiplied by (ii) fifty
percent (50%).

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|13

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)

|        |                                     
|------- | ------------------------------------
|NOTE 4. | CONVERTIBLE
 DEBENTURES (CONTINUED):

The
debenture was recorded net of a beneficial conversion feature of $300,000, based
on the relative fair value of the conversion feature. The beneficial conversion
feature is being amortized over the term of the debenture. During the three
months ended March 31, 2009, the Company recorded amortization of the
beneficial conversion feature related to this debenture of $150,000. At the
date of this report, the debenture is in default, and the Company is working
with the lender to restructure the debenture.

On
July 31, 2008, the Company agreed to give the attorney who arranged the above
financing 50,000 shares of stock in the Company for introducing the investor.
Because of a delinquent payable with the Companys stock transfer agent, the
shares were converted to a 6 month loan of $50,000 with a maturity date of
January 31, 2009. The note carried interest at a rate of 12% per annum, payable
monthly in arrears in cash. At September 30, 2008, due to the inability of the
Company to pay the interest on the note, the note was exchanged for a
convertible debenture with the same maturity date of January 31, 2009 in the
amount of $51,000. The debenture carries interest at a rate of 12% per annum,
with interest payable monthly in arrears in cash. The outstanding principal and
interest may be repaid, in whole or in part, at any time without prepayment
penalty. At any time on or after the Issue Date and prior to the time the
Debenture is paid in full in accordance with its terms (including, without
limitation, after the occurrence of an Event of Default, or, if the Debenture
is not fully paid or converted after the Maturity Date), the Holder of this
Debenture is entitled, at its option to convert this Debenture at any time into
shares of Common Stock, $0.001 par value (Common Stock), of the Company at
the Conversion Price. Conversion Price means the (i) the average VWAP for the
20 Trading Days ending on the Trading Day immediately before the relevant
Conversion Date, multiplied by (ii) fifty percent (50%). The debenture was
recorded net of a beneficial conversion feature of $38,250, based on the
relative fair value of the conversion feature. The beneficial conversion
feature is being amortized over the term of the debenture. During the three
months ended March 31, 2009, the Company recorded amortization of the
beneficial conversion feature related to this debenture of $9,562. As a result
of the default on this debenture, the Company negotiated a settlement with the
attorney to discharge the debenture, its accrued interest and old outstanding
legal bills to the attorney for $75,000 paid $5,000 per month beginning August
1, 2009.

The
embedded conversion option related to the Convertible Debentures is accounted
for under EITF issue No. 00-19 Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Companys Own Stock. We have
determined that the embedded conversion option is a derivative liability.
Accordingly, the embedded conversion option will be marked to market through
earnings at the end of each reporting period. The conversion option is valued using
the Black-Scholes valuation model. For the three months ended March 31, 2009,
the Company reflected a loss of $31,591 representing the change in the value of
the embedded conversion option.

|  
|--
|  
|14

---



DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)

|        |                                    
|------- | -----------------------------------
|NOTE 5. | LINES OF
 CREDIT  RELATED PARTIES:

On
May 31, 2007, the Company entered into a line of credit agreement with Arisean
Capital, Ltd. (Arisean), pursuant to which the Company may borrow from time
to time up to $500,000 from Arisean to be used by the Company to fund its
working capital needs. Borrowings under the line of credit are secured by the
assets of the Company, subject to a subordination agreement and bear interest
at a rate of 12% per annum, with interest payable monthly in cash. The
principal balance outstanding will be due at any time upon 30 days written
notice, subject to mandatory prepayment (without penalty) of principal and
interest, in whole or in part, from the net cash proceeds of any public or
private, equity or debt financing completed by the Company. Ariseans
obligation to lend such funds to the Company is subject to a number of
conditions, including review by Arisean of the proposed use of such funds by
the Company. Arisean is controlled by Charles S. Brofman, the Co-Founder of the
Company and a member of its Board of Directors. As of March 31, 2009, the
outstanding balance on this line of credit was $576,000. On February 8, 2008,
in consideration of the line of credit not being repaid with the later loan
proceeds secured subsequent to the date of the agreement, the Company granted
options to purchase 350,000 shares of the common stock of the Company at $1.25
per share to Mr. Brofman. The term of the options is three years and vest
immediately. The option expense of $227,500 was treated as deferred debt
discount in association with Mr. Brofmans financing during 2008 and was
expensed immediately.

On
August 10, 2007, the Company entered into a line of credit agreement with James
D. Burchetta, Debt Resolves Chairman and Founder, for up to $100,000 to be
used to fund the working capital needs of Debt Resolve and First Performance.
Borrowings under the line of credit are secured by the assets of the Company
and bear interest at a rate of 12% per annum, with interest payable monthly in
cash. The principal balance outstanding will be due at any time upon 30 days
written notice, subject to mandatory prepayment (without penalty) of principal
and interest, in whole or in part, from the net cash proceeds of any public or
private, equity or debt financing made by Debt Resolve. As of March 31, 2009,
the outstanding balance on this line of credit was $119,000.

On
October 17, 2007, the Company entered into a line of credit agreement with
William M. Mooney, a Director of Debt Resolve, for up to $275,000 to be used
primarily to fund the working capital needs of First Performance. Borrowings
under the line of credit bear interest at 12% per annum, with interest payable
monthly in cash. The principal balance outstanding will be due at any time upon
30 days written notice, subject to mandatory prepayment (without penalty) of
principal and interest, in whole or in part, from the net cash proceeds of any public
or private, equity or debt financing made by Debt Resolve. In conjunction with
this line of credit, the Company also issued a warrant to purchase 137,500
shares of common stock at an exercise price of $2.00 per share with an
expiration date of October 17, 2012. The liability for borrowings under the
line of credit was recorded net of a deferred debt discount of $117,700, based
on the relative fair value of the warrant under the Black-Scholes pricing
model. The debt discount was fully amortized during the year ended December 31,
2007. As of March 31, 2009, the Company had $350,421 in outstanding borrowings
under this line of credit. Borrowings under this line of credit are guaranteed
by Mr. Burchetta and Mr. Brofman. On February 8, 2008, in consideration of the
line of credit not being repaid with the later loan proceeds secured subsequent
to the date of the agreement, the Company granted Mr. Mooney 350,000 options to
purchase common stock at $1.25 per share. This option has a term of three years
and vests immediately. The grant was valued at $227,500 under the Black-Scholes
pricing model and was expensed immediately as amortization of the deferred debt
discount.

On
July 1, 2008, the Company entered into a line of credit agreement with Kenneth
H. Montgomery, a former Chief Executive Officer and Director of Debt Resolve,
for up to $315,000 to be used to fund the working capital needs of Debt
Resolve. Borrowings under the line of credit will bear interest at 12% per
annum, with interest payable monthly in cash. The principal balance outstanding
will be due at any time upon 30 days written notice, subject to mandatory
prepayment (without penalty) of principal and interest, in whole or in part,
from the net cash proceeds of any public or private, equity or debt financing
made by Debt Resolve. In conjunction with this line of credit, the Company also
issued an option to purchase 350,000 shares of common stock at an exercise
price of $1.00 per share on July 15, 2008 with an expiration date of July 15, 2015.
The note was recorded net of a deferred debt discount of $262,500, based on the
relative fair value of the option. The debt discount was amortized over the
term of the note. As of March 31, 2009, the Company has borrowed $158,202 under
this line of credit plus $185,681 of Company expenses paid directly by Mr.
Montgomery for a total borrowed of $343,883. The Company accrued $18,147 in
interest related to this line of credit, including $4,681 during the three
months ended March 31, 2009.

|  
|--
|  
|15

---



DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)

|        |                                                    
|------- | ---------------------------------------------------
|NOTE 6. | FIRST
 PERFORMANCE CORP.  DISCONTINUED OPERATIONS:

On
October 15, 2007, the Company ceased operations of DRV Capital, and EAR. On
June 30, 2008, the Company closed First Performance and First Performance
Recovery.

In
accordance with SFAS 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144), the Company has reported these subsidiaries results
as of March 31, 2009 and December 31, 2008 and for the three months ended March
31, 2009 and 2008 as discontinued operations because the operations and cash
flows have been eliminated from the Companys continuing operations.

The
liabilities of DRV Capital and EAR are as follows:

|                   |  |                       |   |                          |   |   | 
|------------------ |  | --------------------- | - | ------------------------ | - | - | 
|                   |  | As of March 31,
 2009 |   | As of December 31,
 2008 |  
|                   |  |                       |   |                          |  
|                   |  | (unaudited)           |   |                          |  
|Liabilities:       |  |                       |   |                          |   |   | 
|
|Accounts payable   |  | $                     |  |                          | $ |  | 
|                   |  |                       |   |                          |   |   | 
|Total
 liabilities |  | $                     |  |                          | $ |  | 
|                   |  |                       |   |                          |   |   | 
|                   |  |                       |   |                          |   |   | 
|                   |  |                      

The
assets and liabilities of First Performance and First Performance Recovery
are as follows:

|                                      |  |                       |           |                          |   |           | 
|------------------------------------- |  | --------------------- | --------- | ------------------------ | - | --------- | 
|                                      |  | As of March 31,
 2009 |           | As of December 31,
 2008 |  
|                                      |  |                       |           |                          |  
|                                      |  | (unaudited)           |           |                          |  
|                                     
|Assets:                               |  |                       |           |                          |   |           | 
|Cash                                  |  | $                     | 230       |                          | $ | 1,301     | 
|Prepaid expenses and other            |  |                       | 4,281     |                          |   | 4,281     | 
|                                      |  |                       |           |                          |   |           | 
|Total current assets                  |  | $                     | 4,511     |                          | $ | 5,582     | 
|                                      |  |                       |           |                          |   |          
|                                      |  |                       |           |                          |   |           | 
|Liabilities:                          |  |                       |           |                          |   |           | 
|Current liabilities:                  |  |                       |           |                          |   |           | 
|Accounts payable and accrued expenses |  | $                     | 2,330,151 |                          | $ | 2,330,912 | 
|                                      |  |                       |           |                          |   |          
|Total current liabilities             |  | $                     | 2,330,151 |                          | $ | 2,330,912 | 

|  
|--
|  
|16

---



DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)

|        |                                                                
|------- | ---------------------------------------------------------------
|NOTE 6. | FIRST
 PERFORMANCE CORP.  DISCONTINUED OPERATIONS (CONTINUED):

Components
of discontinued operations for First Performance and First Performance Recovery
are as follows:

|                                     |  |                    |   |                |   |          |  
|------------------------------------ |  | ------------------ | - | -------------- | - | -------- | -
|                                     |  | Three months ended |  
|                                     |  | March 31, 2009     |   | March 31, 2008 |  
|                                     |  |                    |   |                |  
|                                     |  |                    |   |                |   |          |  
|Revenue                              |  | $                  |  |                | $ | 148,970  |  
|                                     |  |                    |   |                |   |          |  
|General and
 administrative expenses |  |                    |  |                |   | 618,686  |  
|Depreciation
 and amortization       |  |                    |  |                |   | 35,976   |  
|                                     |  |                    |   |                |   |          |  
|Total
 expenses                      |  |                    |  |                |   | 654,662  |  
|                                     |  |                    |   |                |   |          |  
|Loss from
 operations                |  |                    |  |                |   | (505,692 | )
|                                     |  |                    |   |                |   |          |  
|                                     |  |                    |   |                |   |          |  
|Interest
 expense                    |  |                    |  |                |   | (3,687   | )
|Other income                         |  |                    |  |                |   | 1,577    |  
|                                     |  |                    |   |                |   |          |  
|                                     |  |                    |   |                |   |          |  
|Loss from
 discontinued operations   |  | $                  |  |                | $ | (507,802 | )
|                                     |  |                    |   |                |   |          |  

Components
of discontinued operations for DRV Capital and EAR are as follows:

|                                     |  |                    |   |                |   |   | 
|------------------------------------ |  | ------------------ | - | -------------- | - | - | 
|                                     |  | Three months ended |  
|                                     |  | March 31, 2009     |   | March 31, 2008 |  
|                                     |  |                    |   |                |  
|                                     |  |                    |   |                |   |   | 
|Revenue                              |  | $                  |  |                | $ |  | 
|                                     |  |                    |   |                |   |   | 
|General and
 administrative expenses |  |                    |  |                |   |  | 
|Depreciation
 and amortization       |  |                    |  |                |   |  | 
|                                     |  |                    |   |                |   |   | 
|Total
 expenses                      |  |                    |  |                |   |  | 
|                                     |  |                    |   |                |   |   | 
|Loss from
 operations                |  |                    |  |                |   |  | 
|                                     |  |                    |   |                |   |   | 
|                                     |  |                    |   |                |   |   | 
|Interest
 expense                    |  |                    |  |                |   |  | 
|Other income                         |  |                    |  |                |   |  | 
|                                     |  |                    |   |                |   |   | 
|                                     |  |                    |   |                |   |   | 
|Loss from
 discontinued operations   |  | $                  |  |                | $ |  | 
|                                     |  |                    |   |                |   |   | 

|  
|--
|  
|17

---



DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009
(Unaudited)

|        |                
|------- | ---------------
|NOTE 7. | STOCK
 OPTIONS:

As
of March 31, 2009, the Company has one qualified stock-based employee
compensation plan. The 2005 Incentive Compensation Plan (the 2005 Plan) was
approved by the stockholders on June 14, 2005 and provides for the issuance of
options and restricted stock grants to officers, directors, key employees and
consultants of the Company to purchase up to 900,000 shares of common stock.

A
summary of option activity within the 2005 Plan during the three months ended
March 31, 2009 is presented below:

|                                |  |         |         |                                    |   |                                                 |  |                             |           |  |   |   | 
|------------------------------- |  | ------- | ------- | ---------------------------------- | - | ----------------------------------------------- |  | --------------------------- | --------- |  | - | - | 
|                                |  | Options |         | Weighted
 Average
 Exercise
 Price |   | Weighted
 Average
 Remaining
 Contractual
 Term |  | Aggregate
 Intrinsic
 Value |          
|                                |  |         |         |                                    |   |                                                 |  |                             |          
|Outstanding
 at January 1, 2009 |  |         | 865,000 |                                    | $ | 2.99                                            |  |                             | 4.3 Years |  | $ |  | 
|Granted                         |  |         |        |                                    |   |                                                |  |                             |          |  | $ |  | 
|Exercised                       |  |         |        |                                    |   |                                                |  |                             |          |  | $ |  | 
|Forfeited or
 expired           |  |         |        |                                    |   |                                                |  |                             |          |  | $ |  | 
|                                |  |         |         |                                    |   |                                                 |  |                             |           |  |   |   | 
|Outstanding
 at March 31, 2009  |  |         | 865,000 |                                    | $ | 2.99                                            |  |                             | 4.3 Years |  | $ |  | 
|                                |  |         |         |                                    |   |                                                 |  |                             |           |  |   |   | 
|Exercisable
 at March 31, 2009  |  |         | 755,000 |                                    | $ | 3.22                                            |  |                             | 4.1 Years |  | $ |  | 
|                                |  |         |         |                                    |   |                                                 |  |                             |           |  |   |   | 

As
of March 31, 2009, the Company had 110,000 unvested options within the 2005
Plan.

A summary of
non-qualified stock option activity outside the 2005 Plan during the three
months ended March 31, 2009 is presented below:

|                                |  |         |           |                                    |   |                                                 |  |                             |           |  |   |   | 
|------------------------------- |  | ------- | --------- | ---------------------------------- | - | ----------------------------------------------- |  | --------------------------- | --------- |  | - | - | 
|                                |  | Options |           | Weighted
 Average
 Exercise
 Price |   | Weighted
 Average
 Remaining
 Contractual
 Term |  | Aggregate
 Intrinsic
 Value |          
|                                |  |         |           |                                    |   |                                                 |  |                             |          
|Outstanding
 at January 1, 2009 |  |         | 5,189,934 |                                    | $ | 2.89                                            |  |                             | 5.3 Years |  | $ |  | 
|Granted                         |  |         |          |                                    |   |                                                |  |                             |          |  | $ |  | 
|Exercised                       |  |         |          |                                    |   |                                                |  |                             |          |  | $ |  | 
|Forfeited or
 Expired           |  |         |          |                                    |   |                                                |  |                             |          |  | $ |  | 
|                                |  |         |           |                                    |   |                                                 |  |                             |           |  |   |   | 
|Outstanding
 at March 31, 2009  |  |         | 5,189,934 |                                    | $ | 2.89                                            |  |                             | 5.1 Years |  | $ |  | 
|                                |  |         |           |                                    |   |                                                 |  |                             |           |  |   |   | 
|Exercisable
 at March 31, 2009  |  |         | 5,189,934 |                                    | $ | 2.89                                            |  |                             | 5.1 Years |  | $ |  | 
|                                |  |         |           |                                    |   |                                                 |  |                             |           |  |   |   | 

As
of March 31, 2009, the Company had no unvested stock options outside the 2005
Plan.

The
Company recorded stock based compensation expense representing the amortized
amount of the fair value of options granted in prior periods in the amount of
$12,500 during the three months ended March 31, 2009.

Stock
based compensation for the three months ended March 31, 2009 and 2008 was
recorded in the consolidated statements of operations as follows:

|                                     |  |                              |        |      |   |           | 
|------------------------------------ |  | ---------------------------- | ------ | ---- | - | --------- | 
|                                     |  | Three months ended March 31, |       
|                                     |  | 2009                         |        | 2008 |  
|                                     |  |                              |        |      |  
|                                     |  |                              |        |      |   |           | 
|Payroll and
 related expenses        |  | $                            | 12,500 |      | $ | 1,044,719 | 
|                                     |  |                              |        |      |   |           | 
|General and
 administrative expenses |  | $                            |       |      | $ | 82,650    | 
|                                     |  |                              |        |      |   |           | 

|  
|--
|  
|18

---



DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|        |          
|------- | ---------
|NOTE 8. | WARRANTS:

A
summary of warrant outstanding as of January 1, 2009 and changes during the
three months ended March 31, 2009 is presented below:

|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|------------------------------ |  | -------- | ---------- | ---------------------------------- | - | ----------------------------------------------- |  | --------------------------- | --------- |  | - | - | 
|                               |  | Warrants |            | Weighted
 Average
 Exercise
 Price |   | Weighted
 Average
 Remaining
 Contractual
 Term |  | Aggregate
 Intrinsic
 Value |          
|                               |  |          |            |                                    |   |                                                 |  |                             |          
|Outstanding at January 1, 2009 |  |          | 3,840,455  |                                    | $ | 1.23                                            |  |                             | 3.7 Years |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|Granted                        |  |          | 25,750,000 |                                    | $ | 0.00000004                                      |  |                             | 4.9 Years |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|Exercised                      |  |          |           |                                    |   |                                                |  |                             |          |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|Forfeited or Expired           |  |          | (1,000,000 | )                                  | $ | 0.12                                            |  |                             | 4.8 Years |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|Outstanding at March 31, 2009  |  |          | 28,590,455 |                                    | $ | 0.16                                            |  |                             | 4.7 Years |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 
|Exercisable at March 31, 2009  |  |          | 4,840,455  |                                    | $ | 1.08                                            |  |                             | 4.7 Years |  | $ |  | 
|                               |  |          |            |                                    |   |                                                 |  |                             |           |  |   |   | 

As
of March 31, 2009, there were no unvested warrants to purchase shares of common
stock.

In
conjunction with the November Note, the Company issued a warrant to purchase
1,000,000 shares of common stock at an exercise price of $0.12 and an
expiration date of November 14, 2013. On February 13, 2009, the warrant for
1,000,000 shares was cancelled and replaced by a new five year warrant to
purchase 25,750,000 shares of Company common stock at a total exercise price of
$1.00. Upon repayment of the November and February Notes on or before maturity,
as extended to August 26, 2009, the Company may reduce the warrant by
23,750,000 shares. The warrant holder received the right, in the event of a
Company default on either Note, to return to the Company any of the holders
2,000,000 warrants not yet exercised in exchange for the Companys cash payment
equal to $0.023 per warrant share.

|        |                           
|------- | --------------------------
|NOTE 9. | ISSUANCE OF
 COMMON STOCK:

In
connection with the Companys sale of a $300,000 convertible debenture on July
30, 2008, the Company issued 450,000 common shares as restricted stock and
granted a security interest in the shares to the debenture holder. The Company
excludes the restricted shares from the number of outstanding shares used to
determine its net loss per share.

Also
in connection, with the Companys sale of a $300,000 convertible debenture on
September 30, 2008, the Company was to issue 150,000 shares in compensation for
the agreement exchanging the original note dated July 31, 2008 for the
convertible debenture dated September 30, 2008. As of the date of this report,
the shares have not been issued.

Preferred
Stock

At
March 31, 2009 and December 31, 2008, the Company has authorized 10,000,000
shares of preferred stock, par value $0.001, of which none are issued and
outstanding.

Common
stock

At
March 31, 2009 and December 31, 2008, the Company has authorized 100,000,000
shares of common stock, par value $0.001, of which 10,511,865 are issued and
outstanding with 450,000 held as restricted shares.

|  
|--
|  
|19

---



DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|         |                                
|-------- | -------------------------------
|NOTE 10. | COMMITMENTS
 AND CONTINGENCIES:

Lawsuits
from vendors

On
July 17, 2008, Dreier LLP, a law firm, filed a complaint in the Supreme Court
of New York, County of New York, seeking damages of $311,023 plus interest for
legal services allegedly rendered to us. The complaint was answered on August
14, 2008 raising various affirmative defenses. On December 16, 2008, Dreier LLP
filed for bankruptcy in the U.S. Bankruptcy Court for the Southern District of
New York. The case has been on hold since the bankruptcy filing. On March 18,
2009, the Company filed a counterclaim in the bankruptcy court for legal
malpractice and the defenses raised in the previously filed answer. The entire
balance in dispute is in the accounts payable of the Company.

On
September 17, 2008, Computer Task Group, a vendor, filed a complaint in the
Supreme Court of New York, County of Erie, seeking damages of $24,546.plus
interest for consulting services rendered to us. On December 3, 2008, judgment
was entered in favor of Computer Task Group for $24,546 plus $2,539 in interest
and $651 in costs, or a total of $27,735. A restraining order was served on the
Companys bank account for the amount of the judgment. On March 10, 2009, a
total of $12,839 was removed from our account in partial satisfaction of the
judgment, leaving a current total now due of $14,896. This balance payable is
in the accounts payable of the Company.

On
December 1, 2008, AT&T, a vendor, filed a complaint in the Supreme Court of
New York, County of New York, seeking damages of $62,383 plus interest for
services allegedly rendered to us. The complaint was answered on February 23,
2009 raising various affirmative defenses. The action is currently in the
discovery phase. The entire amount in dispute is in the accounts payable of the
Company.

Lawsuits
from landlords

On
May 7, 2008, the Company received a three-day demand for rent due in the amount
of $72,932 for the period December 1, 2007 through May 1, 2008. On May 20,
2008, a petition for hearing was filed in the White Plains New York City Court,
County of Westchester demanding payment of $88,497. On May 27, 2008, the
Company signed a stipulation of settlement in the amount of $88,747, including
attorneys fees, with equal payments of this amount due on June 13, 2008 and
June 30, 2008. On June 11, 2008, the Company signed an amended stipulation of
settlement in the amount of $101,000, with a payment of $56,626 due on June 20,
2008 and a payment of $44,373 due on June 30, 2008. On July 16, 2008, the
Company received a five day notice to pay the agreed payments or face eviction.
On October 1, 2008, the Company was evicted from its leased premises. On
December 29, 2008, a complaint was filed in the Supreme Court of New York,
County of Nassau seeking an additional $58,346 plus interest and attorneys
fees for rent for the period August 1 to December 1, 2008, which was not part
of the previous stipulation and judgment. On December 16, 2008, a restraining
order was served on the Companys bank account for the amount of the judgment
original judgment of $101,000. On March 12, 2009, the Company signed a new
stipulation of settlement settling the matter upon completion of three events.
First, the Company immediately forfeited its security deposit of $79,800 plus
interest. Second, the Company must make an additional payment of $50,000 by
April 15, 2009. Third, the Company must then remove all of its furniture by
April 22, 2009. An amended stipulation of settlement was signed on April 15,
2009, changing the due date of the payment to May 15, 2009 and increasing the
payment by $10,000 to $60,000. The Company must then remove the furniture
within seven days of making the payment. If all three conditions are met, the
parties fully release each other from any further claims. If all three of these
conditions are not met, judgment is entered for $135,356, the amount of rent
due for the period July 1, 2008 to May 1, 2009, which is in addition to the previous
judgment for rent of $101,000 for the period December 1, 2007 to June 1, 2008.
At December 31, 2008, the Company accrued the balance of its obligation under
the lease in the amount of $227,787 on the balance sheet. On May 18, 2009, the
Company paid the required $60,000 payment. The Company subsequently removed its
furniture from the premises. On June 4, 2009, the Company received a
Satisfaction of Judgment and Release from any further liability in this matter,
and it is now settled. The accrual will be reversed in the second quarter
reflecting the settlement.

|  
|--
|  
|20

---



DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|         |                                            
|-------- | -------------------------------------------
|NOTE 10. | COMMITMENTS
 AND CONTINGENCIES (CONTINUED):

Lawsuits
from landlords

On
February 2, 2009, a complaint was filed in the District Court of Clark County,
Nevada against Debt Resolve, First Performance Corp. and the former owners of
First Performance, Pacific USA Holdings and Clearlight Mortgage Corp., seeking
$315,917 for unpaid rent due as of January 31, 2009. First Performance had
vacated the premises as of June 30, 2008 with the closing of its business. Debt
Resolve has been dismissed from the suit at this time, as it was not a
signatory to the lease or guarantor of the lease. The case continues against
First Performance Corp. and its former owners, with an answer due by First
Performance shortly. The entire amount of the amount in dispute is accrued on
the books of First Performance.

Lawsuits
from former employees

On
April 18, 2007, the Company received a letter from a law firm stating that a
claim with the EEOC and a lawsuit would be filed charging sexual discrimination
in the wrongful termination of a manager of the First Performance Florida
facility. The facility was subsequently closed on June 30, 2007 as a cost
reduction measure. The First Performance employment practices insurance carrier
defended the matter against the U.S. EEOC and the Broward County Civil Rights
Division. On March 18, 2008, a settlement was reached in the amount of $24,500.
However, due to First Performances financial problems which led to its closure
on June 30, 2008, the settlement was not paid. Because of the non-payment,
final judgment was entered against First Performance Recovery Corp. in the
amount of $103,005 plus $5,293 in attorneys fees on October 11, 2008. On
December 17, 2008, final judgment was entered against First Performance Corp.
and Debt Resolve in the amount of $35,287. On April 13, 2009, agreement was
reached to settle the case for $15,000 if payment is made by May 15, 2009. On
May 19, 2009, the Company made the required payment under the settlement and
received a Satisfaction of Judgment and Release on this matter, which is now
closed.

Lawsuit
related to financing

On
December 24, 2008, the Company negotiated a settlement of pending litigation
with Compass Bank in Texas, from whom the Company had received a fraudulent
wire transfer letter in connection with the Harmonie International investment
that was never funded by the investor. The Company received a cash payment of
$50,000 to settle all claims against Compass Bank that was credited to legal
expense. The Company has also referred all of the matters surrounding the
Harmonie transaction to the appropriate authorities.

From
time to time, the Company is involved in various litigation matters in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Companys financial position or results of operations.

Operating
leases

On
August 1, 2005, the Company entered into a five year lease for its corporate
headquarters which includes annual escalations in rent. In accordance with SFAS
No. 13, Accounting for Leases, (SFAS 13) the Company accounts for rent
expense using the straight line method of accounting, accruing the difference
between actual rent due and the straight line amount. On October 1, 2008, the
Company was evicted from its office for non-payment of rent. An amended
stipulation of settlement has been signed to resolve the balance of the lease.
At December 31, 2008, the Company accrued the balance of its obligation under
the lease in the amount of $227,787 on the balance sheet. On May 18, 2009, the
Company paid a required $60,000 payment. On June 4, 2009, the Company received
a Satisfaction of Judgment and Release from any further liability in this
matter, and it is now settled. The accrual will be reversed in the second
quarter reflecting the settlement. (See Lawsuits from Landlords above).

The
Company also leased an office in Las Vegas, Nevada under a non-cancelable
operating lease that expires July 31, 2014 and calls for annual escalations in
rent of $19,225. On June 30, 2008, First Performance was closed, and the
premises were abandoned. A complaint has been filed against First Performance
in Clark County, Nevada court. (See Lawsuits from Landlords above).

|  
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|  
|21

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DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|         |                                            
|-------- | -------------------------------------------
|NOTE 10. | COMMITMENTS
 AND CONTINGENCIES (CONTINUED):

Operating
leases

Rent
expense for the three months ended March 31, 2009 and 2008 was $0 and $103,521,
respectively.

Employment
Agreements

The
Company has entered into an employment agreement with James D. Burchetta under
which he will devote substantially all of his business and professional time to
us and our business development. The employment agreement with Mr. Burchetta is
effective until January 13, 2013. The agreement provided Mr. Burchetta with an
initial annual base salary of $240,000 and contains provisions for minimum
annual increases based on changes in an applicable cost-of-living index. The
employment agreement with Mr. Burchetta contains provisions under which his
annual salary may increase to $600,000 if we achieve specified operating
milestones and also provides for additional compensation based on the value of
a transaction that results in a change of control, as that term is defined in
the agreement. In the event of a change of control, Mr. Burchetta would be
entitled to receive 25% of the sum of $250,000 plus 2.5% of the transaction
value, as that term is defined in the agreement, between $5,000,000 and
$15,000,000 plus 1% of the transaction value above $15,000,000. Compensation
expense under the agreement with Mr. Burchetta totaled $135,417 and $250,000
for the years ended December 31, 2008 and 2007, respectively.

The
Company amended the employment agreement with Mr. Burchetta in February 2004,
agreeing to modify his level of compensation, subject to its meeting specified
financial and performance milestones. The employment agreement, as amended,
provided that the base salary for Mr. Burchetta will be as follows: (1) if at
the date of any salary payment, the aggregate amount of our net cash on hand
provided from operating activities and net cash and/or investments on hand
provided from financing activities is sufficient to cover our projected cash
flow requirements (as established by our board of directors in good faith from
time to time) for the following 12 months (the projected cash requirement),
the annual base salary will be $150,000; and (2) if at the date of any salary
payment, our net cash on hand provided from operating activities is sufficient
to cover our projected cash requirement, the annual base salary will be
$250,000, and increased to $450,000 upon the date upon which we complete the
sale or license of our Debt Resolve system with respect to 400,000 consumer
credit accounts. Under the terms of the amended employment agreement, no salary
payments were made to Mr. Burchetta during 2004. The Company recorded
compensation expense and a capital contribution totaling $150,000 in 2004,
representing an imputed compensation expense for the minimum base salary
amounts under the agreement with Mr. Burchetta, as if we had met the condition
for paying his salary.

The
Company amended the employment agreement with Mr. Burchetta again in June 2005,
agreeing that (1) as of April 1, 2005 we will pay Mr. Burchetta an annual base
salary of $250,000 per year, and thereafter his base salary will continue at that
level, subject to adjustments approved by the compensation committee of our
board of directors, and (2) the employment term will extend for five years
after the final closing of our June/September 2005 private financing.

On
July 15, 2008, the employment agreement was converted to a consulting agreement
with all terms otherwise unchanged, as Mr. Burchetta became non-executive
Chairman on February 16, 2008. One additional term added was that the Chairman
shall always make $25,000 more than the Chief Executive Officer and have
comparable benefits. The Board affirmed the effectiveness of the agreement to
January 13, 2013. As of March 31, 2009, the Company owes $278,583 under the
agreement.

|  
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|  
|22

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DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|         |                                            
|-------- | -------------------------------------------
|NOTE 10. | COMMITMENTS
 AND CONTINGENCIES (CONTINUED):

Employment
Agreements

On
May 1, 2007, David M. Rainey joined our company as Chief Financial Officer and
Treasurer on the planned retirement of Katherine A. Dering. Mr. Rainey also
became Secretary of the Company in November 2007, President of the Company in
January 2008 and Interim Chief Executive Officer on July 15, 2009. Mr. Rainey
has a one year contract that renews automatically unless 90 days notice of
intention not to renew is given by the Company. Mr. Raineys base salary is
$200,000, subject to annual increases at the discretion of the board of
directors. Mr. Rainey also received a grant of 75,000 options to purchase the
common stock of the Company, one third of which vest on the first, second and
third anniversaries of the start of employment with the Company. Mr. Rainey is
also eligible for a bonus of up to 50% of salary based on performance objectives
set by the Chairman and the Board of Directors. Mr. Raineys contract provides
for 12 months of severance for any termination without cause with benefits.
Upon a change in control, Mr. Rainey receives two years severance and bonus
with benefits and immediate vesting of all stock options then outstanding. As
of March 31, 2009, the Company owes $154,000 in salary under the agreement.

On
February 16, 2008, the Company entered into an employment agreement with Mr.
Kenneth H. Montgomery to serve as its Chief Executive Officer. The agreement
has a one year, automatically renewable term unless the Company provides 90
days written notice of its intention not to renew prior to the anniversary
date. Mr. Montgomerys salary is $225,000 annually, with a bonus of up to 75%
of salary based on performance of objectives set by the Chairman and the Board
of Directors. Mr. Montgomery also received 50,000 shares of restricted stock
and 350,000 options to purchase the common stock of the Company at an exercise
price of $0.80, the closing price on his date of approval by the Board. Mr.
Montgomerys employment ceased on July 1, 2009. As of March 31, 2009, the
Company owes $206,250 in salary under the agreement.

Each
of the employment agreements with Mr. Burchetta and Mr. Rainey also contain
covenants (a) restricting the employee from engaging in any activities
competitive with our business during the term of their employment agreements,
(b) prohibiting the employee from disclosure of our confidential information
and (c) confirming that all intellectual property developed by the employee and
relating to our business constitutes our sole property. In addition, Mr.
Raineys contract provides for a one year non-compete during the term of his
severance.

|         |                                   
|-------- | ----------------------------------
|NOTE 11. | RECENT
 ACCOUNTING PRONOUNCEMENTS:

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159) including an amendment
of FASB Statement No. 115. SFAS 159 permits companies to choose to measure
certain financial instruments and certain other items at fair value. The
standard requires that unrealized gains and losses on items for which the fair
value option has been elected be reported in earnings. The Company adopted SFAS
159 beginning in the first quarter of 2008, without material effect on the
Companys consolidated financial position or results of operations.

In
December 2007, the FASB issued SFAS No. 141(R),Business Combinations (SFAS
No. 141(R)), which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets
acquired, the liabilities assumed, and any noncontrolling interest in an
acquiree, including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141(R) is effective as of the beginning of the
first fiscal year beginning on or after December 15, 2008. SFAS 141R would only
have an impact on accounting for any businesses acquired after the effective
date of this pronouncement

|  
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|  
|23

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DEBT RESOLVE, INC. AND SUBSIDIARIES 
Notes to Condensed Consolidated Financial Statements 
March 31, 2009 
(Unaudited)

|         |                                               
|-------- | ----------------------------------------------
|NOTE 11. | RECENT
 ACCOUNTING PRONOUNCEMENTS (CONTINUED):

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, which is an amendment of Accounting
Research Bulletin (ARB) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated income
statement is presented, thus requiring consolidated net income to be reported
at amounts that include the amounts attributable to both parent and the
noncontrolling interest. We adopted SFAS No. 160 effective January 1, 2009 and
the statement had no impact on the Companys consolidated financial position,
results of operations or cash flows.

In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 defines
collaborative arrangements and requires collaborators to present the result of
activities for which they act as the principal on a gross basis and report any
payments received from (made to) the other collaborators based on other
applicable authoritative accounting literature, and in the absence of other
applicable authoritative literature, on a reasonable, rational and consistent
accounting policy is to be elected. EITF 07-1 also provides for disclosures
regarding the nature and purpose of the arrangement, the entitys rights and
obligations, the accounting policy for the arrangement and the income statement
classification and amounts arising from the agreement. EITF No. 07-1 is
effective for collaborative arrangements that exist on January 1, 2009 and
application is retrospective. We adopted EITF No. 07-1 effective January 1,
2009 and the adoption had no material effect on our financial position or
results of operations.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
This Statement changes the disclosure requirements for derivative instruments
and hedging activities. Entities are required to provide enhanced disclosures
about (a) how and why an entity uses derivative instruments, (b) how derivative
instruments and related hedged items are accounted for under Statement 133 and
its related interpretations, and (c) how derivative instruments and related
hedged items affect an entitys financial position, financial performance, and
cash flows. We adopted SFAS No. 161 effective January 1, 2009 and addressed the
relevant disclosures accordingly.

In
April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful
Life of Intangible Assets. This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, Goodwill and
Other Intangible Assets. The Company is required to adopt FSP 142-3 on January
1, 2009. The guidance in FSP 142-3 for determining the useful life of a
recognized intangible asset shall be applied prospectively to intangible assets
acquired after adoption, and the disclosure requirements shall be applied
prospectively to all intangible assets recognized as of, and subsequent to,
adoption. The adoption of FSP 142-3 is not expected to have a material impact
on the Companys consolidated financial position, results of operations or cash
flows.

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement will not have an impact
on the Companys financial statements.

In
May 2008, the FASB issued FSP Accounting Principles Board (APB) 14-1
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuers non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis. The adoption of FSP APB 14-1 is not expected to have a material impact
on the Companys consolidated financial position, results of operations or cash
flows.

|  
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|  
|24

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|         |                                               
|-------- | ----------------------------------------------
|NOTE 11. | RECENT
 ACCOUNTING PRONOUNCEMENTS (CONTINUED):

In
June 2008, the FASB ratified EITF No. 07-5, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF
No. 07-5). EITF No. 07-5 provides that an entity should use a two-step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instruments
contingent exercise and settlement provisions. It also clarifies the impact of
foreign currency denominated strike prices and market-based employee stock
option valuation instruments on the evaluation. We adopted EITF No. 07-5 effective
on January 1, 2009 and the adoption had no material effect on our
consolidated financial position, results of operations or cash flows.

Recently
Issued Accounting Standards

In
January 2009, the FASB issued Financial Statement of Position (FSP) Issue
No. EITF No. 99-20-1, Amendments to the Impairment Guidance of EITF
Issue No. 99-20 (FSP EITF No. 99-20-1). FSP EITF No. 99-20-1
amends the impairment guidance in EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests that Continue to be Held by a Transferor in Securitized Financial
Assets to achieve more consistent determination of whether an
other-than-temporary impairment has occurred. The Company adopted FSP EITF
No. 99-20-1 and it did not have a material impact on the unaudited
condensed consolidated financial statements.

In
April 2009, the Financial Accounting Standards Board (FASB) issued the
following new accounting standards:

FSP
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly, provides guidelines for making fair value measurements
more consistent with the principles presented in FASB Statement No. 157
(SFAS 157),  Fair Value Measurements. FSP FAS 157-4 reaffirms what
SFAS 157 states is the objective of fair value measurement, to reflect how much
an asset would be sold for in an orderly transaction at the date of the
financial statements under current market conditions. Specifically, it
reaffirms the need to use judgment to ascertain if a formerly active market has
become inactive and in determining fair values when markets have become
inactive. The Company does not expect this pronouncement to have a material
impact on its consolidated results of operations, financial position, or cash
flows

FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, enhances consistency in financial reporting by increasing the
frequency of fair value disclosures. This relates to fair value disclosures for
any financial instruments that are not currently reflected on the consolidated
balance sheet at fair value. FSP FAS 107-1 and APB 28-1 now require that fair
value disclosures be made on a quarterly basis, providing qualitative and
quantitative information about fair value estimates for all those financial
instruments not measured on the balance sheet at fair value. The Company does
not expect this pronouncement to have a material impact on its consolidated
results of operations, financial position, or cash flows.

|  
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|  
|25

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|         |                                               
|-------- | ----------------------------------------------
|NOTE 11. | RECENT
 ACCOUNTING PRONOUNCEMENTS (CONTINUED):

FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments, provides additional guidance designed to create greater clarity
and consistency in accounting for and presenting impairment losses on
securities. This FSP is intended to bring greater consistency to the timing of
impairment recognition and to provide greater clarity to investors about the
credit and noncredit components of impaired debt securities that are not
expected to be sold. This FSP also requires increased and timelier disclosures
sought by investors regarding expected cash flows, credit losses, and an aging
of securities with unrealized losses. The Company does not expect this
pronouncement to have a material impact on its consolidated results of
operations, financial position, or cash flows.

These
standards are effective for periods ending after June 15, 2009. We are
evaluating the impact that these standards will have on our consolidated
financial statements.

In
May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165),
which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The Company is required to adopt
SFAS 165 prospectively to both interim and annual financial periods ending
after June 15, 2009. Adoption of SFAS 165 did not have a material
impact on the Companys consolidated financial position, results of operations
or cash flows.

In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles (SFAS
168). SFAS 168 establishes the FASB Accounting Standards
Codification, (Codification) as the single source of
authoritative GAAP to be applied by nongovernmental entities, except for
the rules and interpretive releases of the SEC under authority of federal
securities laws, which are sources of authoritative GAAP for SEC
registrants. All guidance contained in the Codification carries an equal
level of authority. SFAS 168 is effective for interim and annual periods
ending after September 15, 2009. Adoption of SFAS 168 is not expected to have a
material impact on the Companys consolidated financial position, results of
operations or cash flows.

Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Companys present or future
consolidated financial statements.

|         |                             
|-------- | ----------------------------
|NOTE 12. | RELATED
 PARTY TRANSACTIONS:

During
the year ended December 31, 2008, an entity owned by a former Director
performed consulting services for the Company in the amount of $25,984. Such
amount is reflected in Accounts Payable and Accrued Liabilities as of March 31,
2009.

Certain
Company directors and a former officer personally guarantee the Companys notes
payable and its bank loan (Note 3).

|         |                         
|-------- | ------------------------
|NOTE 13. | FAIR VALUE
 MEASUREMENT:

The
Company adopted the provisions of SFAS No. 157, Fair Value Measurements on
January 1, 2008. SFAS No. 157 defines fair value as the price that would
be received from selling an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. When
determining the fair value measurements for assets and liabilities required or
permitted to be recorded at fair value, the Company considers the principal or
most advantageous market in which it would transact and considers assumptions
that market participants would use when pricing the asset or liability, such as
inherent risk, transfer restrictions, and risk of nonperformance. SFAS
No. 157 establishes a fair value hierarchy that requires an entity to
maximize the use of observable inputs and minimize the use of unobservable
inputs when measuring fair value. SFAS No. 157 establishes three levels of
inputs that may be used to measure fair value:

Level
1 - Quoted prices in active markets for identical assets or liabilities.

|  
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|  
|26

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|         |                                     
|-------- | ------------------------------------
|NOTE 13. | FAIR VALUE
 MEASUREMENT (CONTINUED):

Level
2 - Observable inputs other than Level 1 prices such as quoted prices for
similar assets or liabilities; quoted prices in markets with insufficient
volume or infrequent transactions (less active markets); or model-derived
valuations in which all significant inputs are observable or can be derived
principally from or corroborated by observable market data for substantially
the full term of the assets or liabilities.

Level
3 - Unobservable inputs to the valuation methodology that are significant to
the measurement of fair value of assets or liabilities.

To
the extent that valuation is based on models or inputs that are less observable
or unobservable in the market, the determination of fair value requires more
judgment. In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value
measurement is disclosed and is determined based on the lowest level input that
is significant to the fair value measurement.

Upon
adoption of SFAS No. 157, there was no cumulative effect adjustment to the
beginning retained earnings and no impact on the consolidated financial
statements.

The
carrying value of the Companys cash and cash equivalents, accounts receivable,
accounts payable, short-term borrowings (including convertible notes payable),
and other current assets and liabilities approximate fair value because of
their short-term maturity.  All other significant financial assets,
financial liabilities and equity instruments of the Company are either
recognized or disclosed in the consolidated financial statements together with
other information relevant for making a reasonable assessment of future cash
flows, interest rate risk and credit risk. Where practicable the fair values of
financial assets and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has been
disclosed.

The
following table sets forth the Companys short investments as of March 31, 2009
which are measured at fair value on a recurring basis by level within the fair
value hierarchy.  As required by SFAS No. 157, these are classified
based on the lowest level of input that is significant to the fair value
measurement:

|                                |  |                                                                         |  |                                                 |   |                                            |   |                       |          |   |               |  
|------------------------------- |  | ----------------------------------------------------------------------- |  | ----------------------------------------------- | - | ------------------------------------------ | - | --------------------- | -------- | - | ------------- | -
|                                |  | Quoted
 Prices in
 Active
 Markets for
 Identical
 Instruments
 Level 1 |  | Significant
 Other
 Observable
 Inputs
 Level 2 |   | Significant
 Unobservable
 Inputs
 Level 3 |   | Assets at
 Fair Value |         
|                                |  |                                                                         |  |                                                 |   |                                            |   |                       |         
|Liabilities:                    |  |                                                                         |  |                                                 |   |                                            |   |                       |          |   |               |  
|Derivative liability            |  | $                                                                       |  |                                                 | $ |                                            |   | $                     | (362,859 | ) | $    (362,859 | )
|Convertible debentures          |  | $                                                                       |  |                                                 | $ |                                            |   | $                     | (351,000 | ) | $    (351,000 | )
|Short-term notes                |  | $                                                                       |  |                                                 | $ | (487,000                                   | ) | $                     |          |   | $    (487,000 | )
|Long-term debt                  |  | $                                                                       |  |                                                 | $ | (823,000                                   | ) | $                     |          |   | $    (823,000 | )
|Lines of credit-related parties |  | $                                                                       |  |                                                 | $ | (1,203,623                                 | ) | $                     |          |   | $ (1,203,623  | )

At
March 31, 2009, the carrying amounts of the notes payable approximate fair
value because the entire note had been classified to current maturity.

|         |                    
|-------- | -------------------
|NOTE 14. | SUBSEQUENT
 EVENTS:

On
May 18, 2009, the Company made the required payment under the settlement and
received a Satisfaction of Judgment and Release on the matter regarding its
lease on its former corporate headquarters.

On
May 19, 2009, the Company made the required payment under the settlement and
received a Satisfaction of Judgment and Release on the former employee EEOC
matter, which is now closed.

|  
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|27

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|         |                                
|-------- | -------------------------------
|NOTE 14. | SUBSEQUENT
 EVENTS (CONTINUED):

On
May 29, 2009, an unaffiliated investor loaned the Company $100,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 1,000,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

The
employment of Mr. Kenneth H. Montgomery, the Companys former CEO, ceased July
1, 2009. Mr. David M. Rainey became
Interim Chief Executive Officer effective July 15, 2009.

On
July 22, 2009, an unaffiliated investor loaned the Company $75,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 750,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

On
July 29, 2009, an unaffiliated investor loaned the Company an additional
$25,000 on a three year Convertible Debenture with an interest rate of
14%. The interest accrues and is
payable at maturity. The conversion
price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the
investor received 250,000 warrants to purchase the common stock of the Company
at an exercise price of $1.00 per share.
The exercise period of the warrant is five years.

On
July 31, 2009, the maturity dates of the November and February Note were
extended to August 26, 2009.

On
August 4, 2009, an unaffiliated investor loaned the Company $100,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 1,000,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

On
August 7, 2009, the Board of Directors at its regular meeting awarded each of
the four Directors who were active as of December 31, 2008 restricted shares of
500,000 each at the closing price of trading on that day, which was $0.19. The shares were granted in recognition of
service from January 1, 2008 to June 30, 2009, for the Board members agreeing
to convert over $2 million of their notes, accrued interest and accrued payroll
to stock at a conversion rate of $0.15 per share, and for the considerable
risks and challenges which the Company faced during the period referenced
above. In addition, the Board awarded
the new Interim CEO 1,000,000 options to purchase the stock of the Company at
the same closing price of $0.19 per share.
The options were granted in recognition of the very demanding workload
placed in the past and in the future on the Interim CEO as the Company
restructures. The options have a seven
year exercise period. Finally, the
Board authorized the re-pricing of the options of all directors and employees
who were active as of December 31, 2008 to the closing price of the stock that
day, or $0.19. In total, seven employees
were affected. The re-pricing was done
due to the need by the Company to accrue most pay during the second half of
2008 and during 2009, a period during which the employees were largely not
getting paid.

On
August 7, 2009, an unaffiliated investor loaned the Company $5,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 50,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

On
August 7, 2009, an unaffiliated investor loaned the Company $12,500 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 125,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

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DEBT RESOLVE, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
March 31, 2009 
(Unaudited)

|         |                                
|-------- | -------------------------------
|NOTE 14. | SUBSEQUENT
 EVENTS (CONTINUED):

On
August 7, 2009, an unaffiliated investor loaned the Company $12,500 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 125,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

On
August 14, 2009, an unaffiliated investor loaned the Company $100,000 on a
three year Convertible Debenture with an interest rate of 14%. The interest accrues and is payable at
maturity. The conversion price is set
at $0.15 per share. The Debenture
carries a first lien security interest following the discharge of the $210,000
note above. In addition, the investor
received 1,000,000 warrants to purchase the common stock of the Company at an
exercise price of $1.00 per share. The
exercise period of the warrant is five years.

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Item 2.
Managements Discussion and Analysis or Plan of Operation

Overview

Prior
to January 19, 2007, we were a development stage company. On January 19, 2007, we acquired all of the
outstanding capital stock of First Performance Corporation, a Nevada
corporation (First Performance), and its wholly-owned subsidiary, First
Performance Recovery Corporation, pursuant to a Stock Purchase Agreement dated
January 19, 2007. As a result, we are
no longer considered a development stage entity.

Since
completing initial product development in early 2004, our primary business has
been providing a software solution to consumer lenders or those collecting on
those loans based on our proprietary Debt Resolve system, our Internet-based bidding
system that facilitates the settlement and collection of delinquent and
defaulted consumer debt via the Internet.
We have marketed our service primarily to consumer credit card issuers,
collection agencies, collection law firms and the buyers of defaulted debt in
the United States and Europe. We intend
to market our service to other segments served by the collections industry
worldwide. For example, we believe that
our system will be especially valuable for the collection of low balance debt,
such as that held by utility companies and online service providers, where the
cost of traditionally labor intensive collection efforts may exceed the value
collected. We also intend to pursue
past-due Internet-related debt, such as that held by sellers of sales and
services online. We believe that
consumers who incurred their debt over the Internet will be likely to respond
favorably to an Internet-based collection solution. In addition, creditors of Internet-related debt usually have
access to debtors e-mail addresses, facilitating the contact of debtors
directly by e-mail. In addition, there
are significant opportunities for us in healthcare with hospitals and large
provider groups. We believe that
expanding to more recently past-due portfolios of such debt will result in
higher settlement volumes, improving our clients profitability by increasing
their collections while reducing their cost of collections. We do not anticipate any material
incremental costs associated with developing our capabilities and marketing to
these creditors, as our existing Debt Resolve system can already handle this
type of debt, and we make contact with these creditors in our normal course of
business.

We
have prepared for our entry into the European marketplace by reviewing our mode
of business and modifying our contracts to comply with appropriate European
privacy, debtor protection and other applicable regulations. We expect that initially, our expense
associated with servicing our United Kingdom and other potential European
clients will be minimal, consisting primarily of travel expense to meet with
those clients and additional legal fees, as our European contracts, although
already written to conform to European regulations, may require customization. We have begun investigation of, and
negotiations with, companies who may provide local, outsourced European
customer service support for us on an as needed basis, the expense of which
will be variable with the level of business activity. We may incur additional costs, which we cannot anticipate at this
time, if we expand into Canada and other countries.

Our
revenues to date have been insufficient to fund our operations. We have financed our activities to date
through our managements contributions of cash, the forgiveness of royalty and
consulting fees, the proceeds from sales of our common stock in private
placement financings, the proceeds of our convertible promissory notes in four
private financings, short-term borrowings from previous investors or related
parties and the proceeds from the sale of our common stock in our initial
public offering. In connection with our
marketing and client support goals, we expect our operating expenses to grow as
we employ additional technicians, sales people and client support
representatives. We expect that
salaries and other compensation expenses will continue to be our largest
category of expense, while travel, legal, audit and other sales and marketing
expenses will grow as we expand our sales, marketing and support
capabilities. Effective utilization of
our system will require a change in thinking on the part of the collection
industry, but we believe the effort will result in new collection benchmarks. We intend to provide detailed advice and
hands-on assistance to clients to help them make the transition to our
system.

Our
current and former contracts provide that we will earn revenue based on a
percentage of the amount of debt collected from accounts submitted on our
DebtResolve system, from flat fees per settlement achieved or a flat monthly
fee. Although other revenue models have
been proposed, most revenue earned to date has been determined using these
methods, and such revenue is recognized when the settlement amount of debt is
collected by our client or at the beginning of each month. For the early adopters of our system, we
waived set-up fees and other transactional fees that we anticipate charging on
a going-forward basis. While the
percent of debt collected will continue to be a revenue recognition method
going forward, other payment models are also being offered to clients and may
possibly become our preferred revenue model.
Most contracts currently in process include provisions for set up fees
and base revenue on a monthly fee, in the aggregate or per account, with some
contracts having a small transaction fee on debt settlement as well. In addition, with respect to our DR Prevent
 module expected to be completed in 2009, which settles consumer debt at
earlier stages, we expect that a fee per account on our system, and/or the
hybrid revenue model which will include both fees per account and transaction
fees at settlement, may become the preferred revenue methods. As we expand our knowledge of the industry,
we have become aware that different revenue models may be

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more
appropriate for the individual circumstances of our potential clients, and our
expanded choice of revenue models reflects that knowledge.

In
January 2007, we purchased the outstanding common stock of First Performance
Corporation and, as a result, we are no longer in the development stage as of
the date of the acquisition. First
Performance Corporation and its subsidiary, First Performance Recovery Corp.,
were collection agencies that represented both regional and national credit
grantors from such diverse industries as retail, bankcard, oil cards, mortgage
and auto. By entering this business directly,
we signaled our intention to become a significant player in the accounts
receivable management industry. We
believed that through a mixture of both traditional and our innovative,
technologically-driven collection methods, we could achieve superior
returns. Due to the loss of four major
clients at First Performance during the first nine months of 2007, we performed
two interim impairment analyses in accordance with SFAS 142. As a result of these analyses, we recorded
impairment charges aggregating $1,206,335 during the year ended December 31,
2007. We also recorded a charge for the
disposal of the Florida fixed assets of $68,329 upon the closure of the Florida
office during the year ended December 31, 2007.

Revenue
streams associated with this business included contingency fee revenue on
recovery of past due consumer debt and non-sufficient funds fees on returned
checks. On June 30, 2008, we closed the
remaining operations of First Performance in order to focus on our core
internet business and to mitigate the continuing losses from First
Performance. At that time, we took
charges for the disposal of the remaining fixed assets of $87,402 and for the
impairment of the remaining intangible assets of $176,545. The results of operations for First
Performance have been treated as discontinued operations in the financial
statements for the years ending December 31, 2008 and 2007.

For
the year ending December 31, 2008, we had inadequate revenues and incurred
a net loss of $7,712,170 from continuing operations.  Cash used in
operating and investing activities of continuing operations was $886,045 and
$835,951, respectively for the year ended December 31, 2008. Based upon projected operating expenses, we
believe that our working capital as of the date of this report may not be
sufficient to fund our plan of operations for the next twelve months.  The
aforementioned factors raise substantial doubt about our ability to continue as
a going concern.

The
Company needs to raise additional capital in order to be able to accomplish its
business plan objectives.  The Company has historically satisfied its
capital needs primarily from the sale of debt and equity securities.
 Management of the Company is continuing its efforts to secure additional
funds through debt and/or equity instruments.
Management believes that it will be successful in obtaining additional
financing; however, no assurance can be provided that the Company will be able
to do so. There is no assurance that
these funds will be sufficient to enable the Company to attain profitable
operations or continue as a going concern.  To the extent that the Company
is unsuccessful, the Company may need to curtail its operations and implement a
plan to extend payables and reduce overhead until sufficient additional capital
is raised to support further operations.
In the alternative, the Company may be forced to seek bankruptcy
protection from its creditors. There
can be no assurance that efforts to secure additional funding will be
successful. These consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Subsequent
to March 31, 2009, the Company has secured $430,000 in additional financing.

| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Results
 of Operations for the Three Months Ended March 31, 2009 Compared to the Three
 Months Ended March 31, 2008

Revenues

Revenues
totaled $24,495 and $84,178 for the three months ended March 31, 2009 and 2007,
respectively. We earned revenue during
the three months ended March 31, 2009 from contingency fee income, based on a percent of debt
collected. We earned revenue during the
three months ended March 31, 2008 from contingency fee income, based on a
percent of debt collected, or fees per settlement.

Costs and Expenses

Payroll and
related expenses. Payroll and related
expenses amounted to $192,241 for the three months ended March 31, 2009, as
compared to $1,360,996 for the three months ended March 31, 2008, a decrease of
$1,168,755 or 86%. This decrease was
due to across the board further headcount reductions from 2008 and the absence
of option grants in the three months ended March 31, 2009. Salaries were $160,000 and $306,913 in the
three months ended March 31, 2009 and 2008, respectively. Employee benefits were $17,142 and $31,182
in the three months ended March 31, 2009 and 2008, respectively, due to lower
staffing levels and the suspension of the 401k match by the Company. Employee stock compensation expense was
reduced to $12,500 in the three months ended March 31, 2009 from $1,044,719 in
the three months ended March 31, 2008, as there were no grants in the

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2009 period.
Allocations were $0 and ($54,280), respectively, in the three months
ended March 31, 2009 and 2008 as all subsidiaries were closed in the 2009
period. Miscellaneous related expenses
were $2,598 and $31,460 during the three months ended March 31, 2009 and 2008.

General and
administrative expenses. General and
administrative expenses amounted to $177,973 for the three months ended March
31, 2009, as compared to $515,464 for the three months ended March 31, 2008, a
decrease of $337,491 or 65%. This
decrease was due to decreases in almost every expense category due to headcount
reductions, office space settlements and reductions, cost containment and a
$82,650 reduction in non-cash stock based compensation for consultants that was
$0 and $165,300 for the three months ended March 31, 2009 and 2008,
respectively. Occupancy was ($1,718)
and $33,669 for the three months ended March 31, 2009 and 2008,
respectively. The credit in 2009 was
the reversal of the accrual made on eviction from our offices upon settlement
and discharge of the lease on our former corporate office. Telecommunications was $20,161 and $19,466
for the three months ended March 31, 2009 and 2008, respectively, as there were
annual cost increases in 2009. Service
fees were $71,793 and $116,542 for the three months ended March 31, 2009 and 2008,
respectively, as we further reduced consultant use. Accounting was reduced to $0 for the three months ended March 31,
2009 from $50,000 for the three months ended March 31, 2008 due to the switch
in accounting firms. Travel, marketing,
insurance and legal were $966, $1,272, $27,783 and $33,265 in the three months
ended June 30, 2009 compared with $45,086, $19,435, $66,281 and $64,144 in the
three months ended March 31, 2008 due to ongoing cost control efforts. Allocations were $0 and ($48,970) in the
three months ended March 31, 2009 and 2008, respectively, as all subsidiaries
had been closed by 2009. Miscellaneous
general and administrative expenses were $24,143 and $67,160 for the three
months ended March 31, 2009 and 2008, respectively, due to cost savings efforts
in 2009.

Depreciation
and amortization expense. For the three months
ended March 31, 2009 and 2008, we recorded depreciation expense of $12,279 and
$14,537, respectively. Depreciation
expense for the three months ended March 31, 2009 is lower due to the disposal
of some assets at December 31, 2008.

Interest
income (expense). We recorded interest
income, interest expense and interest expense  related parties of $0, $56,934
and $35,614 for the three months ended March 31, 2009, respectively, compared
to interest income, interest expense and interest expense  related parties of
$190, $25,194 and $30,937, respectively, for the three months ended March 31,
2008. We incurred increased interest
expense for the three months ended March 31, 2009 as a result of carrying
higher levels of borrowings on our lines of credit, convertible debentures,
investor notes and bank loans and, in certain instances, higher interest rates.

Amortization
of deferred debt discount.Amortization expense of $232,638
and $501,674 was incurred for the three months ended March 31, 2009 and 2008,
respectively, for the amortization of the value of the deferred debt discount
associated with certain of our lines of credit and notes payable. Amortization expense decreased due to certain
debt discounts having been fully amortized prior to the three month period
ended March 31, 2009.

Loss on
derivative liability. We recorded a loss of
$31,591 for derivative liability on convertible notes, warrants and options
during the three months ended March 31, 2009 based on an increase in the fair
value of the liability. We had no derivative liabilities during the three
months ended March 31, 2008.

Liquidity and Capital Resources

As of March
31, 2009, we had a working capital deficiency in the amount of $6,935,947, on
continuing operations and cash and cash equivalents totaling $433. We incurred a net loss of $714,775 for
continuing operations for the three months ended March 31, 2009. Net cash used in operating activities for continuing
operations for the three months ended March 31, 2009 was $103,189, which
reflects our net loss that was partially offset by non-cash charges of $232,638
for amortization of debt discount, $31,591 loss on our derivative liability,
$12,500 of stock based compensation and $12,279 of depreciation and
amortization as well as a $190,521 increase in accounts payable and accrued
expenses, a $79,800 decrease in deposits and other assets and a $36,738
decrease in prepaid expenses and other current assets. Cash flow provided by investing and
financing activities for continuing operations was $0 and $70,000,
respectively, for the three months ended March 31, 2009. As of December 31, 2008, we had a working
capital deficiency in the amount of $6,371,269, on continuing operations and
cash and cash equivalents totaling $32,551.
We incurred a net loss of $7,712,170 for continuing operations for the
year ended December 31, 2008. Net cash
used in operating and investing activities for continuing operations was $886,046
and $835,951, respectively for the year ended December 31, 2008. Cash flow provided by financing activities
for continuing operations was $1,754,548 for the year ended December 31, 2008. Cash of $1,300 was provided by the
discontinued operations of our former subsidiary First Performance during
2008. Our working capital as of the
date of this report is negative

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and is not sufficient to fund our plan of
operations for the next year. The aforementioned factors raise substantial
doubt about our ability to continue as a going concern.

The
Company needs to raise additional capital in order to be able to accomplish its
business plan objectives. The Company has historically satisfied its capital
needs primarily from the sale of debt and equity securities. Management of the
Company is continuing its efforts to secure additional funds through debt
and/or equity instruments. We are also seeking to settle our liabilities
through issuances of our common stock and discounted lump sum payments.
Management believes that it will be successful in obtaining additional
financing and settling our liabilities; however, no assurance can be provided
that the Company will be able to do so. There is no assurance that these funds
will be sufficient to enable the Company to attain profitable operations or
continue as a going concern. To the extent that the Company is unsuccessful, the
Company may need to curtail its operations and implement a plan to extend
payables and reduce overhead until sufficient additional capital is raised to
support further operations. In the alternative, the Company may have to seek
protection from its creditors in bankruptcy. There can be no assurance that
efforts to raise adequate capital will be successful. These consolidated
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

On
May 29, 2009, an unaffiliated investor loaned the Company $100,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of an
outstanding $210,000 note. In addition, the investor received 1,000,000
warrants to purchase the common stock of the Company at an exercise price of
$1.00 per share. The exercise period of the warrant is five years.

On
July 22, 2009, an unaffiliated investor loaned the Company $75,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the investor received 750,000 warrants to
purchase the common stock of the Company at an exercise price of $1.00 per
share. The exercise period of the warrant is five years.

On
July 29, 2009, an unaffiliated investor loaned the Company an additional
$25,000 on a three year Convertible Debenture with an interest rate of 14%. The
interest accrues and is payable at maturity. The conversion price is set at
$0.15 per share. The Debenture carries a first lien security interest following
the discharge of the $210,000 note above. In addition, the investor received
250,000 warrants to purchase the common stock of the Company at an exercise price
of $1.00 per share. The exercise period of the warrant is five years.

On
August 4, 2009, an unaffiliated investor loaned the Company $100,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the investor received 1,000,000 warrants to
purchase the common stock of the Company at an exercise price of $1.00 per
share. The exercise period of the warrant is five years.

On
August 7, 2009, an unaffiliated investor loaned the Company $5,000 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the investor received 50,000 warrants to purchase
the common stock of the Company at an exercise price of $1.00 per share. The
exercise period of the warrant is five years.

On
August 7, 2009, an unaffiliated investor loaned the Company $12,500 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the investor received 125,000 warrants to
purchase the common stock of the Company at an exercise price of $1.00 per
share. The exercise period of the warrant is five years.

On
August 7, 2009, an unaffiliated investor loaned the Company $12,500 on a three
year Convertible Debenture with an interest rate of 14%. The interest accrues
and is payable at maturity. The conversion price is set at $0.15 per share. The
Debenture carries a first lien security interest following the discharge of the
$210,000 note above. In addition, the investor received 125,000 warrants to
purchase the common stock of the Company at an exercise price of $1.00 per
share. The exercise period of the warrant is five years.

On
August 14, 2009, an unaffiliated investor loaned the Company $100,000 on a
three year Convertible Debenture with an interest rate of 14%. The interest
accrues and is payable at maturity. The conversion price is set at $0.15 per
share. The Debenture carries a first lien security interest following the
discharge of the $210,000 note above. In addition, the investor received
1,000,000 warrants to purchase the common stock of the Company at an exercise
price of $1.00 per share. The exercise period of the warrant is five years.

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Critical Accounting Policies and Estimates

Use
of estimates

The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management to
make estimates and assumptions that affect the amounts reported in the
financial statements and the accompanying notes. These estimates and
assumptions are based on our managements judgment and available information
and, consequently, actual results could be different from these estimates.

Stock-based
compensation

The
Company accounts for stock options and warrants issued under stock-based
compensation plans under the recognition and measurement principles of SFAS No.
123(R) (Share Based Payment). Total stock-based compensation expense for the
three months ended March 31, 2009 and 2008 amounted to $12,500 and $1,127,369,
respectively.

The
fair value of each option and warrant granted to employees and non-employees is
estimated as of the grant date using the Black-Scholes pricing model. The
estimated fair value of the options granted is recognized as an expense over
the requisite service period of the award, which is generally the option
vesting period. As of March 31, 2009, total unrecognized compensation cost
amounted to $5,609, all of which is expected to be recognized in 2009.

The
Company accounts for the expected life of share options in accordance with the
simplified method provisions of Securities and Exchange Commission Staff
Accounting Bulletin (SAB) No. 110 (December 2007), which enables the use of
the simplified method for plain vanilla share options as defined in SAB No.
107.

Recent Accounting
Pronouncements

In
February 2007, the FASB issued SFAS No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities (SFAS 159) including an amendment
of FASB Statement No. 115. SFAS 159 permits companies to choose to measure
certain financial instruments and certain other items at fair value. The
standard requires that unrealized gains and losses on items for which the fair
value option has been elected be reported in earnings. The Company adopted SFAS
159 beginning in the first quarter of 2008, without material effect on the
Companys consolidated financial position or results of operations.

In
December 2007, the FASB issued SFAS No. 141(R),Business Combinations (SFAS
No. 141(R)), which establishes principles and requirements for how an acquirer
recognizes and measures in its financial statements the identifiable assets acquired,
the liabilities assumed, and any noncontrolling interest in an acquiree,
including the recognition and measurement of goodwill acquired in a
business combination. SFAS No. 141(R) is effective as of the beginning of
the first fiscal year beginning on or after December 15, 2008. SFAS 141R would
only have an impact on accounting for any businesses acquired after the
effective date of this pronouncement

In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements, which is an amendment of Accounting
Research Bulletin (ARB) No. 51. This statement clarifies that a
noncontrolling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. This statement changes the way the consolidated income
statement is presented, thus requiring consolidated net income to be reported
at amounts that include the amounts attributable to both parent and the
noncontrolling interest. We adopted SFAS No. 160 effective January 1, 2009
and the statement had no impact on the Companys consolidated financial
position, results of operations or cash flows.

In
December 2007, the FASB ratified the consensus in EITF Issue No. 07-1,
Accounting for Collaborative Arrangements (EITF 07-1). EITF 07-1 defines
collaborative arrangements and requires collaborators to present the result of
activities for which they act as the principal on a gross basis and report any
payments received from (made to) the other collaborators based on other
applicable authoritative accounting literature, and in the absence of other
applicable authoritative literature, on a reasonable, rational and consistent
accounting policy is to be elected. EITF 07-1 also provides for disclosures
regarding the nature and purpose of the arrangement, the entitys rights and
obligations, the accounting policy for the arrangement and the income statement
classification and amounts arising from the agreement. EITF No. 07-1 is
effective for collaborative arrangements that exist on January 1, 2009 and
application is retrospective. We adopted EITF No. 07-1 effective
January 1, 2009 and the adoption had no material effect on our financial
position or results of operations.

In
March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative
Instruments and Hedging Activities, an amendment of FASB Statement No. 133.
This Statement changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures about
(a) how and

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why an entity
uses derivative instruments, (b) how derivative instruments and related hedged
items are accounted for under Statement 133 and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entitys
financial position, financial performance, and cash flows. We adopted SFAS No.
161 effective January 1, 2009 and addressed the relevant disclosures
accordingly.

In
April 2008, the FASB issued FSP No. FAS 142-3, Determination of the Useful
Life of Intangible Assets. This FSP amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under SFAS No. 142, Goodwill and
Other Intangible Assets. The Company is required to adopt FSP 142-3 on January
1, 2009. The guidance in FSP 142-3 for determining the useful life of a
recognized intangible asset shall be applied prospectively to intangible assets
acquired after adoption, and the disclosure requirements shall be applied
prospectively to all intangible assets recognized as of, and subsequent to,
adoption. The adoption of FSP 142-3 is not expected to have a material impact
on the Companys consolidated financial position, results of operations or cash
flows.

In
May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted
Accounting Principles. This Statement identifies the sources of accounting
principles and the framework for selecting the principles to be used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy). This Statement will not have an impact
on the Companys consolidated financial statements.

In
May 2008, the FASB issued FSP Accounting Principles Board (APB) 14-1
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement) (FSP APB 14-1). FSP APB 14-1
requires the issuer of certain convertible debt instruments that may be settled
in cash (or other assets) on conversion to separately account for the liability
(debt) and equity (conversion option) components of the instrument in a manner
that reflects the issuers non-convertible debt borrowing rate. FSP APB 14-1 is
effective for fiscal years beginning after December 15, 2008 on a retroactive
basis. The adoption of FSP APB 14-1 is not expected to have a material impact
on the Companys consolidated financial position, results of operations or cash
flows.

In
June 2008, the FASB ratified EITF No. 07-5, Determining Whether an
Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock (EITF
No. 07-5). EITF No. 07-5 provides that an entity should use a two-step
approach to evaluate whether an equity-linked financial instrument (or embedded
feature) is indexed to its own stock, including evaluating the instruments
contingent exercise and settlement provisions. It also clarifies the impact of
foreign currency denominated strike prices and market-based employee stock
option valuation instruments on the evaluation. We adopted EITF No. 07-5
effective on January 1, 2009 and the adoption had no material effect on
our consolidated financial position, results of operations or cash flows.

Recently
Issued Accounting Standards

In
January 2009, the FASB issued Financial Statement of Position (FSP) Issue
No. EITF No. 99-20-1, Amendments to the Impairment Guidance of EITF
Issue No. 99-20 (FSP EITF No. 99-20-1). FSP EITF No. 99-20-1
amends the impairment guidance in EITF Issue No. 99-20, Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests that Continue to be Held by a Transferor in Securitized Financial
Assets to achieve more consistent determination of whether an
other-than-temporary impairment has occurred. The Company adopted FSP EITF
No. 99-20-1 and it did not have a material impact on the unaudited
condensed consolidated financial statements.

In
April 2009, the Financial Accounting Standards Board (FASB) issued the
following new accounting standards:

FSP
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions
That Are Not Orderly, provides guidelines for making fair value measurements
more consistent with the principles presented in FASB Statement No. 157
(SFAS

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157), Fair
Value Measurements. FSP FAS 157-4 reaffirms what SFAS 157 states is the
objective of fair value measurement, to reflect how much an asset would be sold
for in an orderly transaction at the date of the financial statements under
current market conditions. Specifically, it reaffirms the need to use judgment
to ascertain if a formerly active market has become inactive and in determining
fair values when markets have become inactive. The Company does not expect this
pronouncement to have a material impact on its consolidated results of
operations, financial position, or cash flows

FSP
FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments, enhances consistency in financial reporting by increasing the
frequency of fair value disclosures. This relates to fair value disclosures for
any financial instruments that are not currently reflected on the consolidated
balance sheet at fair value. FSP FAS 107-1 and APB 28-1 now require that fair
value disclosures be made on a quarterly basis, providing qualitative and
quantitative information about fair value estimates for all those financial
instruments not measured on the balance sheet at fair value. The Company does
not expect this pronouncement to have a material impact on its consolidated
results of operations, financial position, or cash flows.

FSP
FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary
Impairments, provides additional guidance designed to create greater clarity
and consistency in accounting for and presenting impairment losses on
securities. This FSP is intended to bring greater consistency to the timing of
impairment recognition and to provide greater clarity to investors about the
credit and noncredit components of impaired debt securities that are not
expected to be sold. This FSP also requires increased and timelier disclosures
sought by investors regarding expected cash flows, credit losses, and an aging
of securities with unrealized losses. The Company does not expect this
pronouncement to have a material impact on its consolidated results of
operations, financial position, or cash flows.

These
standards are effective for periods ending after June 15, 2009. We are evaluating
the impact that these standards will have on our consolidated financial
statements.

In
May 2009, the FASB issued SFAS No. 165, Subsequent Events (SFAS 165),
which establishes general standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. The Company is required to adopt
SFAS 165 prospectively to both interim and annual financial periods ending
after June 15, 2009. Adoption of SFAS 165 did not have a material
impact on the Companys consolidated financial position, results of operations
or cash flows.

In June
2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification
and the Hierarchy of Generally Accepted Accounting Principles (SFAS
168). SFAS 168 establishes the FASB Accounting Standards
Codification, (Codification) as the single source of
authoritative GAAP to be applied by nongovernmental entities, except for
the rules and interpretive releases of the SEC under authority of federal
securities laws, which are sources of authoritative GAAP for SEC
registrants. All guidance contained in the Codification carries an equal
level of authority. SFAS 168 is effective for interim and annual periods ending
after September 15, 2009. Adoption of SFAS 168 is not expected to have a
material impact on the Companys consolidated financial position, results of
operations or cash flows.

Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Companys present or future
consolidated financial statements.

Statement Relating to
Forward-Looking Statements

This
report contains forward-looking statements that are based on our beliefs as
well as assumptions and information currently available to us. When used in
this report, the words believe, expect, anticipate, estimate,
potential and similar expressions are intended to identify forward-looking
statements. These statements are subject to risks, uncertainties and
assumptions, including, without limitation, the risks and uncertainties
concerning our recent research and development activities; the risks and
uncertainties concerning acceptance of our services and products, if and when
fully developed, by our potential customers; our present financial condition
and the risks and uncertainties concerning the availability of additional
capital as and when required; the risks and uncertainties concerning the
Limited License Agreement with Messrs. Brofman and Burchetta; the risks and
uncertainties concerning our dependence on our key executives; the risks and
uncertainties concerning technological changes and the competition for our
services and products; the risks and uncertainties concerning general economic
conditions; and the
risks and uncertainties described in our Annual Report on Form 10-KSB for the
year ended December 31, 2007, filed on April 16, 2008, in the section labeled
Risk Factors.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results may vary

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materially from those anticipated, estimated,
or projected. We caution you not to place undue reliance on any forward-looking
statements, all of which speak only as of the date of this report.

Item 3. Quantitative and Qualitative
Disclosures About Market Risk

Not
applicable

Item 4T. Controls and Procedures

Disclosure
Controls and Procedures

We
evaluated the design and operation of our disclosure controls and procedures to
determine whether they are effective in ensuring that we disclose required
information in a timely manner and in accordance with the Securities Exchange
Act of 1934 (the Exchange Act) and the rules and regulations promulgated by
the SEC. The executive who serves as our Interim Chief Executive Officer,
President and Chief Financial Officer has participated in such evaluation. Management
concluded, based on such review, that our disclosure controls and procedures,
as defined by Exchange Act Rules 13a-15(e) and 15d-15(e), were not effective as
of the end of the period covered by this Quarterly Report on Form 10-Q. The
ineffectiveness of these disclosure controls is due to the matters described
below in Internal Control over Financial Reporting.

Limitations
on the Effectiveness of Controls

We
believe that a control system, no matter how well designed and operated, cannot
provide absolute assurance that the objectives of the control system are met,
and no evaluation of controls can provide absolute assurance that all control
issues and instances of fraud, if any, within a company have been detected. Our
disclosure controls and procedures are designed to provide a reasonable
assurance of achieving their objectives and our Interim Chief Executive
Officer, President and Chief Financial Officer has concluded that such controls
and procedures are not effective at the reasonable assurance level. The
ineffectiveness of these disclosure controls is due to the matters described
below in Internal Control over Financial Reporting.

Internal
Control over Financial Reporting

The
Companys independent registered public accounting firm has reported to our
audit committee certain matters involving internal controls that this firm
considered to be reportable conditions and a material weakness, under standards
established by the American Institute of Certified Public Accountants. The
reportable conditions and material weakness relate to a limited segregation of
duties at the Company. Segregation of duties within our company is limited due
to the small number of employees that are assigned to positions that involve
the processing of financial information. Specifically, certain key financial
accounting and reporting personnel had an expansive scope of duties that
allowed for the creation, review, approval and processing of financial data
without independent review and authorization for preparation of consolidation
schedules and resulting financial statements and related disclosures. We did
not maintain a sufficient depth of personnel with an appropriate level of
accounting knowledge, experience and training in the selection and application
of GAAP commensurate with financial reporting requirements. Accordingly, we
place undue reliance on the finance team at corporate headquarters,
specifically the executive who is our Interim Chief Executive Officer,
President and Chief Financial Officer. Accordingly, management has determined
that this control deficiency constitutes a material weakness. This material
weakness could result in material misstatements of significant accounts and
disclosures that would result in a material misstatement to our interim or
annual consolidated financial statements that would not be prevented or
detected. In addition, due to limited staffing, the Company is not always able
to detect minor errors or omissions in reporting.

Going
forward, management anticipates that additional staff will be necessary to
mitigate these weaknesses, as well as to implement other planned improvements.
Additional staff will enable us to document and apply transactional and
periodic controls procedures, permit a better review and approval process and
improve quality of financial reporting. However, the potential addition of new
staff is contingent on obtaining additional financing, and there is no
assurance that the Company will be able to do so.

Management
believes that its financial statements for the three ended March 31, 2009 and
2008, fairly present, in all material respects, its financial condition and
results of operations. During the three months ended March 31, 2009, there were
no changes to our internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Lawsuits
from vendors

On
July 17, 2008, Dreier LLP, a law firm, filed a complaint in the Supreme Court
of New York, County of New York, seeking damages of $311,023.32 plus interest
for legal services allegedly rendered to us. The complaint was answered on
August 14, 2008 raising various affirmative defenses. On December 16, 2008,
Dreier LLP filed for bankruptcy in the U.S. Bankruptcy Court for the Southern
District of New York. The case has been on hold since the bankruptcy filing. On
March 18, 2009, the Company filed a counterclaim in the bankruptcy court for
legal malpractice and the defenses raised in the previously filed answer. The entire balance in
dispute is in the accounts payable of the Company.

On
September 17, 2008, Computer Task Group, a vendor, filed a complaint in the
Supreme Court of New York, County of Erie, seeking damages of $24,545.69 plus
interest for consulting services rendered to us. On December 3, 2008, judgment
was entered in favor of Computer Task Group for $24,545.69 plus $2,538.54 in
interest and $651.00 in costs, or a total of $27,735.23. A restraining order
was served on the Companys bank account for the amount of the judgment. On
March 10, 2009, a total of $12,839.44 was removed from our account in partial
satisfaction of the judgment, leaving a current total now due of $14,895.79.
This balance payable is in the accounts payable of the Company.

On
December 1, 2008, AT&T, a vendor, filed a complaint in the Supreme Court of
New York, County of New York, seeking damages of $62,383.21 plus interest for
services allegedly rendered to us. The complaint was answered on February 23,
2009 raising various affirmative defenses. The action is currently in the
discovery phase. The entire amount in dispute is in the accounts payable of the Company.

Lawsuits
from landlords

On
February 2, 2009, a complaint was filed in the District Court of Clark County,
Nevada against Debt Resolve, First Performance Corp. and the former owners of
First Performance, Pacific USA Holdings and Clearlight Mortgage Corp., seeking
$315,917 for unpaid rent due as of January 31, 2009. First Performance had
vacated the premises as of June 30, 2008 with the closing of its business. Debt
Resolve has been dismissed from the suit at this time, as it was not a signatory
to the lease or guarantor of the lease. The case continues against First
Performance Corp. and its former owners, with an answer due by First
Performance shortly. The entire amount of the amount in dispute is accrued on
the books of First Performance.

Lawsuits
from former employees

On
April 18, 2007, the Company received a letter from a law firm stating that a
claim with the EEOC and a lawsuit would be filed charging sexual discrimination
in the wrongful termination of a manager of the First Performance Florida
facility. The facility was subsequently closed on June 30, 2007 as a cost
reduction measure. The First Performance employment practices insurance carrier
defended the matter against the U.S. EEOC and the Broward County Civil Rights
Division. On March 18, 2008, a settlement was reached in the amount of $24,500.
However, due to First Performances financial problems which led to its closure
on June 30, 2008, the settlement was not paid. Because of the non-payment,
final judgment was entered against First Performance Recovery Corp. in the
amount of $103,005 plus $5,293 in attorneys fees on October 11, 2008. On
December 17, 2008, final judgment was entered against First Performance Corp.
and Debt Resolve in the amount of $35,287. On April 13, 2009, agreement was
reached to settle the case for $15,000 if payment is made by May 15, 2009. On
May 19, 2009, the Company made the required payment under the settlement and
received a Satisfaction of Judgment and Release on this matter, which is now
closed.

Lawsuit
related to financing

On
December 24, 2008, the Company negotiated a settlement of pending litigation
with Compass Bank in Texas, from whom the Company had received a fraudulent
wire transfer letter in connection with the Harmonie International investment
that was never funded by the investor. The Company received a cash payment of
$50,000 to settle all claims against Compass Bank that was credited to legal
expense. The Company has also referred all of the matters surrounding the
Harmonie transaction to the appropriate authorities.

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From
time to time, the Company is involved in various litigation matters in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material adverse effect on the
Companys financial position or results of operations.

Item 1A. Risk Factors

As
a small reporting company as defined by Item 10 of Regulation S-K, we are not
required to provide information required by this item.

Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

On
December 21, 2007, an unaffiliated investor loaned the Company $125,000 on an
18-month note with a maturity date of June 21, 2009. The note has a provision
requiring repayment once the Company has raised an aggregate of $500,000
following issuance of this note. As a result, this note is currently in default
as it has not been repaid and the Company reached the $500,000 threshold in
September, 2008. The note is secured by the assets of the Company. On April 10,
2008, the investor loaned the Company an additional $198,000 on an amendment of
the prior note with a maturity date of June 21, 2009 for the entire balance of
the first note plus the amendment ($323,000 total). The note carries interest
at a rate of 12% per annum, with interest accruing and payable at maturity. The
outstanding principal and interest may be repaid, in whole or in part, at any
time without prepayment penalty. The note is secured by the assets of the
Company. This note is guaranteed by Mr. Burchetta. The amended note maintains
the provision requiring repayment of the note upon raising gross proceeds of
$500,000 subsequent the issuance of the note. At December 31, 2008, the Company
had raised in excess of $500,000 subsequent to this amended note, and as a
result, this note is in default. The Company also issued 50,000 shares of
common stock valued at $30,000 in order to induce the investor to forbear on
the note. The note holder has requested repayment of the note, but the note is
still outstanding.

On
September 30, 2008, an unaffiliated investor loaned the Company $300,000 on a 6
month convertible debenture with a maturity date of March 31, 2009. This
convertible debenture replaced a note issued on July 31, 2008 in the same
amount of $300,000 with a maturity date of January 31, 2009. The debenture is
secured by an escrow of 450,000 shares of the common stock of the Company,
which is held in escrow at the lenders attorneys office. At any time on or
after the Issue Date and prior to the time the Debenture is paid in full in
accordance with its terms (including, without limitation, after the occurrence
of an Event of Default, or, if the Debenture is not fully paid or converted
after the Maturity Date), the Holder of this Debenture is entitled, at its
option to convert this Debenture at any time into shares of Common Stock,
$0.001 par value (Common Stock), of the Company at the Conversion Price.
Conversion Price means the (i) the average VWAP for the 20 Trading Days ending
on the Trading Day immediately before the relevant Conversion Date, multiplied
by (ii) fifty percent (50%). At the date of this report, the debenture is in
default, and the Company is working with the lender to restructure the
debenture.

On
July 31, 2008, the Company agreed to give the attorney who arranged the above
financing 50,000 shares of stock in the Company for introducing the investor.
Because of a delinquent payable with the Companys stock transfer agent, the
shares were converted to a 6 month loan of $50,000 with a maturity date of
January 31, 2009. The note carried interest at a rate of 12% per annum, payable
monthly in arrears in cash. At September 30, 2008, due to the inability of the
Company to pay the interest on the note, the note was exchanged for a
convertible debenture with the same maturity date of January 31, 2009 in the
amount of $51,000. At any time on or after the Issue Date and prior to the time
the Debenture is paid in full in accordance with its terms (including, without
limitation, after the occurrence of an Event of Default, or, if the Debenture
is not fully paid or converted after the Maturity Date), the Holder of this
Debenture is entitled, at its option to convert this Debenture at any time into
shares of Common Stock, $0.001 par value (Common Stock), of the Company at
the Conversion Price. Conversion Price means the (i) the average VWAP for the
20 Trading Days ending on the Trading Day immediately before the relevant
Conversion Date, multiplied by (ii) fifty percent (50%). As a result of the
default on this debenture, the Company negotiated a settlement with the
attorney to discharge the debenture, its accrued interest and old outstanding
legal bills to the attorney for $75,000 paid $5,000 per month beginning August
1, 2009.

Item 4. Submission of Matters to a Vote of
Security Holders

None

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|                                         |                                                                         
|---------------------------------------- | ------------------------------------------------------------------------
|Item 5. Other Information               
|                                         |                                                                         
|None                                    
|                                         |                                                                         
|Item 6. Exhibits and Filings on Form 8-K
|                                         |                                                                         
|31.1                                     | Certification of Chief Executive Officer
 required by Rule 13(a)-14(a). 
|                                         |                                                                         
|31.2                                     | Certification of Chief Financial Officer
 required by Rule 13(a)-14(a). 
|                                         |                                                                         
|32.1                                     | Certifications required by Rule 13(a)-14(b)
 and 18 U.S.C. Section 1350.

Filing on Form
8-K dated July 20, 2009

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SIGNATURES

In
accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: August 18, 2009

| |                                                                                                |                    
| | ---------------------------------------------------------------------------------------------- | -------------------
| | DEBT
 RESOLVE, INC.                                                                           
| |                                                                                                |                    
| | By:                                                                                            | /s/ DAVID M. RAINEY
| |                                                                                                |                    
| | David M. Rainey                                                                               
| | Interim Chief Executive Officer, President,
 Chief
 Financial Officer, Treasurer and Secretary
| | (Principal executive and financial and
 accounting officer)                                   

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