**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549









FORM
      10-QSB/A





**(** **Amendment
      No** **.
      1)**




(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,
                2005




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.:  0-29525




**DEBT
                RESOLVE, INC.**(Name
                of small business issuer in its
                charter)





**Delaware**
            **33-0889197**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)**707
                Westchester Avenue, Suite L7****White
                Plains, New York**
            **10604**(Address
                of principal executive offices)
            (Zip
                Code)





**(914)
                949-5500**(Issuer’s
                telephone number)


Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 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 x No o





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




As
      of May
      10, 2005, 29,703,900 shares of the issuer’s Common Stock were issued and
      outstanding.




Transitional
      Small Business Disclosure Format (check one):  Yes o No x







**Table
        of Contents**





**DEBT
      RESOLVE, INC.**


(A
      Development Stage Company)




**TABLE
      OF CONTENTS**


PageExplanatory
                Note
            3Restatement
                of Financial Statements
            3**PART
                I. Financial Information**Item
                1. Condensed Financial Statements
                (Unaudited)Condensed
                Balance Sheet at March 31, 2005
            5Condensed
                Statements of Operations for the ThreeMonths Ended March 31, 2004 and 2005 andCumulative
                from Inception (April 21, 1997)to
                March 31, 2005
            6Condensed
                Statements of Cash Flows for the Three Months EndedMarch 31, 2004 and 2005 and Cumulative fromInception
                (April 21, 1997) to March 31, 2005
            7Notes
                to Condensed Financial Statements
            8Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            20Item
                3. Controls and Procedures
            25**PART
                II. Other Information**Item
                1. Legal Proceedings
            28Item
                2. Unregistered Sales of Equity
                Securities
            28Item
                3. Defaults Upon Senior Securities
            28Item
                4. Submission of Matters to a Vote of Security
                Holders
            28Item
                5. Other Information
            28Item
                6. Exhibits and Reports on Form 8-K
            28Signatures
            29Certifications
            30





-2-
 **Table
          of Contents**





**EXPLANATORY
      NOTE**




Debt
      Resolve, Inc. (“Debt Resolve” or the “Company”) is filing this Amendment No. 1
      to its Quarterly Report on Form 10-QSB for the quarterly period ended March
      31,
      2005 (the “Form 10-QSB”), which was originally filed on May 16, 2005, solely to
      amend and replace Items 1, 2 and 3 within Part I of the Form 10-QSB. In addition
      to the restatements noted below, the Company has updated certain disclosures
      in
      the financial statement footnotes, management’s discussion and analysis and
      controls and procedures.




**RESTATEMENT
      OF FINANCIAL STATEMENTS**




On
      August
      19, 2005, the Company filed a report on Form 8-K with the Securities and
      Exchange Commission disclosing that the Company would restate previously issued
      financial statements for the years ended December 31, 2003 and 2004 and the
      three months ended March 31, 2005. In conjunction with the re-audit of Debt
      Resolve’s financial statements for the years ended December 31, 2003 and
      December 31, 2004 and a review of the quarter ended March 31, 2005 by the
      Company’s independent registered public accounting firm, the Company determined
      that adjustments were necessary to recognize the cumulative impact of correcting
      its computation for stock-based compensation to consultants and advisory board
      members. Specifically, it was determined that the Company should have recorded
      an expense for stock-based compensation to consultants and advisory board
      members during those accounting periods. Accounting principles generally
      accepted in the United States require the Company to record compensation expense
      for options granted to consultants.  The Company had disclosed these
      costs
      on a pro forma basis, only. Based on the reclassification of employee and
      consultant status for stock-based compensation to these persons, Debt Resolve
      has restated the periods impacted by these adjustments. The restatement
      adjustments related to computation for stock-based compensation to consultants
      and advisory board members increased net loss by $213,383 since inception
      through March 31, 2005, including $109,491 during the year ended December 31,
      2003, $31,756 during the year ended December 31, 2004 (none during the quarter
      ended March 31, 2004) and $72,136 during the quarter ended March 31, 2005.
      In
      addition, the adjustment to an entry recording offering expenses increased
      net
      loss by $25,000 for the quarter ended March 31, 2005 and increased net loss
      by
      $25,000 to $238,383 since inception through March 31, 2005. The adjustments
      to
      the recording of expense for the issuance of options to consultants and
      recording of offering expenses increased net loss per share for the three months
      ended March 31, 2005 by $(0.01) to $ (0.02).




In
      addition, the Company made certain reclassifications to the Balance Sheet and
      to
      the Statements of Cash Flows. Within the Balance Sheet as of March 31, 2005,
      $126,122 of assets that were formerly classified as current were reclassified
      as
      long-term, including $106,723 of deferred offering expenses and $19,399 of
      deposits and other assets. Within the Statements of Cash Flows, certain items
      were reclassified between financing activities and operating activities, with
      the most significant being the reclassification of waived and imputed
      compensation and royalty fees from financing activities to an adjustment to
      reconcile net loss to net cash used in operating activities. The net effect
      was
      a reduction in the cash provided by financing activities, with a corresponding
      reduction in the cash used in operating activities, of $161,850 and $156,057
      for
      the quarters ending March 31, 2004 and 2005, and $2,079,906 since inception.
      Amounts reflected herein for the quarters ended March 31, 2004 and 2005
      represent the reclassified and restated financial information rather than
      financial information included in the original Forms 10-QSB which were filed
      with the SEC on May 17, 2004 and May 16, 2005.




The
      following summarizes the effect of these adjustments on the previously reported
      net loss and net loss per share:


Three
                months ended
              March
                31, 2005
            
            Cumulative
                from Inception
              (April 21,
                1997) to March 31, 2005Net
                lossNet
                loss
            
            per
                share
            
            Net
                lossAs
                reported
            
            $
            (419,807
            )
            $
            (0.01
            )
            $
            (4,859,142
            )Stock-based
                compensation ($72,136)Offering
                cost reimbursement ($25,000)Total
                changes
            
            
            (97,136
            )
            
            (0.01
            )
            
            (238,383
            )As
                restated
            
            $
            (516,943
            )
            $
            (0.02
            )
            $
            (5,097,525
            )







-3-
 **Table
          of Contents**






The
      adjustment to the Statements of Operations, Balance Sheet and Statement of
      Cash
      Flows, as a result of the above adjustments, is summarized on a condensed basis
      below. The amounts previously reported are derived from the Form 10-QSB for
      the
      quarter ended March 31, 2005 filed on May 16, 2005.




**Adjustments
      to the Condensed Statements of Operations**




Three
                months ended
              March
                31, 2005
            
            Cumulative
                from Inception
              (April 21,
                1997) to March 31, 2005Amounts
            
            
            
            Amountspreviously
            
            As
            
            previously
            
            Asreported
            
            Restated
            
            reported
            
            RestatedTotal
                revenues
            
            $
            1,661
            
            $
            1,661
            
            $
            4,448
            
            $
            4,448Total
                expenses
            
            
            (421,482
            )
            
            (518,618
            )
            
            (4,870,055
            )
            
            (5,110,810
            )Net
                interest income
            
            
            14
            
            
            14
            
            
            8,837
            
            
            8,837Income
                taxes
            
            
            –
            
            
            –
            
            
            2,372
            
            
            –Net
                loss
            
            $
            (419,807
            )
            $
            (516,943
            )
            $
            (4,859,142
            )
            $
            (5,097,525
            )Basic
                and diluted loss per share
            
            $
            (0.01
            )
            $
            (0.02
            )Basic
                and diluted weighted average common shares outstanding
            
            
            29,549,794
            
            
            29,549,794




**Adjustments
      to the Condensed Balance Sheet**




March
                31, 2005AmountsPreviously
            
            AsReported
            
            restatedCurrent
                assets
            
            $
            169,341
            
            $
            43,219Fixed
                assets
            
            
            55,030
            
            
            55,030Other
                assets
            
            
            –
            
            
            126,122Total
                assets
            
            $
            224,371
            
            $
            224,371Total
                liabilities
            
            
            450,954
            
            
            450,954Total
                stockholders’ deficiency
            
            
            (226,583
            )
            
            (226,583
            )Total
                liabilities and stockholders’ deficiency
            
            $
            224,371
            
            $
            224,371





**Adjustments
      to the Statements of Cash Flows**




Three
                Months Ended
              March
                31, 2004
            
            Three
                Months Ended
              March
                31, 2005
            
            Cumulative
                from inception
              (April
                21, 1997)
              to
                March 31, 2005Amounts
                previouslyreported
            
            As
              restated
            
            Amounts
                previouslyreported
            
            As
              restated
            
            Amounts
                previouslyreported
            
            As
              restatedNet
                cash used inoperating
                activities
            
            $
            (542,507
            )
            $
            (380,657
            )
            $
            (347,043
            )
            $
            (165,986
            )
            $
            (4,395,902
            )
            $
            (2,290,996
            )Net
                cash used ininvesting
                activities
            
            
            (8,691
            )
            
            (8,691
            )
            
            –
            
            
            –
            
            
            (114,377
            )
            
            (114,377
            )Net
                cash provided by(used
                in) financing activities
            
            
            121,500
            
            
            (40,350
            )
            
            323,568
            
            
            142,511
            
            
            4,521,551
            
            
            2,416,645







-4-
 **Table
          of Contents**


**PART
              I:**
            **FINANCIAL
                INFORMATION**




**Item
              1.**
            **Condensed
                Financial Statements
                (Unaudited)**







DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Condensed
      Balance Sheet


March
      31,
      2005


(Unaudited)


(restated)




ASSETSCurrent
                assets:Cash
            
            $
            11,272Accounts
                receivable, net
            
            
            2,880Prepaid
                expenses and other current assets
            
            
            29,067Total
                current assets
            
            
            43,219Fixed
                assets, net
            
            
            55,030Other
                assets:Deferred
                offering costs
            
            
            106,723Deposits
                and other assets
            
            
            19,399Total
                other assets
            
            
            126,122Total
                assets
            
            $
            224,371LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCYCurrent
                liabilities:Accounts
                payable
            
            $
            252,149Accrued
                compensation expenses
            
            
            95,667Accrued
                expenses
            
            
            68,138Loans
                payable to stockholders
            
            
            35,000Total
                liabilities
            
            
            450,954Commitments
                and contingenciesStockholders’
                deficiency:Preferred
                stock, 10,000,000 shares authorized, $.001 par value, none
                issued and
                outstanding
            
            
            –Common
                stock, 50,000,000 shares authorized, $.001 par value, 29,703,900
                shares
                issued and outstanding
            
            
            29,704Additional
                paid-in capital
            
            
            4,841,238Deficit
                accumulated during the development stage
            
            
            (5,097,525
            )Total
                stockholders’ deficiency
            
            
            (226,583
            )Total
                liabilities and stockholders’ deficiency
            
            $
            224,371The
                accompanying notes are an integral part of these condensed financial
                statements.





-5-
 **Table
          of Contents**




DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Condensed
      Statements of Operations


(Unaudited)


Three
                months
              ended
                March 31,
            
            Cumulative
                from
              Inception
              (April 21,
                1997) to
              March
                31,2004
            
            2005
            
            2005(restated)
            
            (restated)Revenues
            
            $
            –
            
            $
            1,661
            
            $
            4,448Costs
                and expenses:Payroll
                and related expenses
            
            
            197,504
            
            
            242,476
            
            
            1,891,758General
                and administrative expenses (1)
            
            
            249,140
            
            
            268,672
            
            
            2,060,381Waived
                royalty fees - related parties
            
            
            –
            
            
            –
            
            
            600,000Research
                and development expenses
            
            
            46,022
            
            
            –
            
            
            499,323Depreciation
                and amortization expenses
            
            
            10,589
            
            
            7,470
            
            
            59,348Total
                expenses
            
            
            503,255
            
            
            518,618
            
            
            5,110,810Loss
                from operations
            
            
            (503,255
            )
            
            (516,957
            )
            
            (5,106,362
            )Net
                interest income
            
            
            2,536
            
            
            14
            
            
            8,837Net
                loss
            
            $
            (500,719
            )
            $
            (516,943
            )
            $
            (5,097,525
            )Per
                share data:Basic
                and diluted net loss per common share
            
            $
            (0.02
            )
            $
            (0.02
            )Basic
                and diluted weighted average number of common shares
                outstanding
            
            
            29,020,890
            
            
            29,549,794





(1)
            Stock
                based compensation totaled $9,000 and $72,136 in the three months
                ended
                March 31, 2004 and 2005, respectively, and $411,265 since
                inception.





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






-6-
 **Table
          of Contents**





DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Condensed
      Statements of Cash Flows


(Unaudited)


Three
                months
              ended
                March 31,
            
            Cumulative
                from Inception (April 21, 1997) to March
                31,2004
            
            2005
            
            2005(restated)
            
            (restated)
            
            (restated)Cash
                flows from operating activities:Net
                loss
            
            $
            (500,719
            )
            $
            (516,943
            )
            $
            (5,097,525
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Non
                cash stock based compensation
            
            
            9,000
            
            
            72,136
            
            
            411,265Capital
                contribution from waived and imputed compensation and royalty
                fees
            
            
            112,500
            
            
            75,000
            
            
            1,946,309Depreciation
                and amortization
            
            
            10,589
            
            
            7,470
            
            
            59,348Changes
                in operating assets & liabilitiesAccounts
                receivable
            
            
            –
            
            
            (1,661
            )
            
            (2,880
            )Prepaid
                expenses and other current assets
            
            
            7,175
            
            
            26,884
            
            
            (4,067
            )Deposits
                and other assets
            
            
            –
            
            
            –
            
            
            (19,399
            )Accounts
                payable
            
            
            (44,695
            )
            
            172,128
            
            
            252,148Accrued
                expenses
            
            
            25,493
            
            
            (1,000
            )
            
            163,805Net
                cash used in operating activities
            
            
            (380,657
            )
            
            (165,986
            )
            
            (2,290,996
            )Cash
                flows from investing activities:Purchases
                of fixed assets
            
            
            (8,691
            )
            
            –
            
            
            (114,377
            )Net
                cash used in investing activities
            
            
            (8,691
            )
            
            –
            
            
            (114,377
            )Cash
                flows from financing activities:Proceeds
                from issuance of common stock, net of costs
            
            
            –
            
            
            180,694
            
            
            2,388,368Proceeds
                from stockholders’ loans
            
            
            –
            
            
            25,000
            
            
            135,000Stock
                offering costs
            
            
            (40,350
            )
            
            (63,183
            )
            
            (106,723
            )Net
                cash (used in) provided by financing activities
            
            
            (40,350
            )
            
            142,511
            
            
            2,416,645Net
                (decrease) increase in cash
            
            
            (429,698
            )
            
            (23,475
            )
            
            11,272Cash
                at beginning of period
            
            
            1,040,210
            
            
            34,747
            
            
            –Cash
                at end of period
            
            $
            610,512
            
            $
            11,272
            
            $
            11,272Non
                cash investing and financing activities:Conversion
                of stockholder’s loan to common stock
            
            $
            –
            
            $
            –
            
            $
            100,000Capital
                contribution from waived royalty fees
            
            $
            –
            
            $
            –
            
            $
            600,000Capital
                contribution from waived and imputed compensation
            
            $
            112,500
            
            $
            75,000
            
            $
            1,346,309The
                accompanying notes are an integral part of these condensed financial
                statements.





-7-
 **Table
          of Contents**





DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Notes
      to Condensed Financial Statements


March
      31,
      2005


(Unaudited)




NOTE
              1.
            DESCRIPTION
                OF BUSINESS, ORGANIZATION AND DEVELOPMENT STAGE
                ACTIVITIES:




Description
      of business




Debt
      Resolve, Inc. (“Debt Resolve” or the “Company”), is a Delaware corporation
      formed on April 21, 1997. The Company provides banks, lenders, credit card
      issuers, third party collection agencies and purchasers of charged-off debt
      an
      Internet-based online system (“the Debt Resolve system”) for the collection of
      past due consumer debt. The Company offers its service as an Application Service
      Provider (“ASP”) model, enabling clients to introduce this collection option
      with no modifications to their existing collections computer systems. Its
      products capitalize on using the Internet as a tool for communication,
      resolution, settlement and payment of delinquent debts. The Debt Resolve system
      features, at its core, a patented online bidding system.




Organization




Until
      February 24, 2003, the Company, formerly named Lombardia Acquisition Corp.,
      was
      inactive and had no significant assets, liabilities or operations. On February
      24, 2003, James D. Burchetta, Charles S. Brofman, and Michael S. Harris
      (collectively, the “Principal Stockholders”) purchased 22,500,000 newly-issued
      shares of the Company’s common stock, representing 84.6% of the then outstanding
      shares, pursuant to a Stock Purchase Agreement effective January 13, 2003
      between the Company and each of the Principal Stockholders. The Company received
      an aggregate cash payment of $22,500 in consideration for the sale of such
      shares to the Principal Stockholders. The Board of Directors was then
      reconstituted. On May 7, 2003, following approvals by the Board of Directors
      and
      holders of a majority of the Company’s common stock, the Company’s Certificate
      of Incorporation was amended to change the Company’s corporate name to Debt
      Resolve, Inc. and increase the number of the Company’s authorized shares of
      common stock from 20,000,000 to 50,000,000 shares.




Development
      stage activities




In
      accordance with Statement of Financial Accounting Standards No. 7, Accounting
      and Reporting by Development Stage Enterprises, the Company is considered to
      be
      in the development stage since it is devoting substantially all of its efforts
      to establishing a new business and its planned principal operations have not
      produced any significant revenues. Since February 24, 2003, the Company has
      devoted substantially all of its efforts to planning and budgeting, research
      and
      product development, and raising capital. In January 2004, the Company
      substantially completed the development of its online system for the settlement
      of credit card and other consumer debt and began marketing to banks, collection
      agencies, debt buyers and other creditors. In February 2004, the Company
      implemented its online system, on a test basis, with a collection agency and
      completed a successful systems test. Since that time, the Company has continued
      to devote substantial time and assets on marketing its product to credit card
      companies, collection agencies, and other holders of delinquent consumer debt.
      As of March 31, 2005, the Debt Resolve system was being used by two collection
      agencies, on certain limited portfolios, and has begun to generate some revenue
      for the Company.




NOTE
                2.
              SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES:




Going
      concern




The
      accompanying 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. As of March 31,
      2005, the Company’s working capital was not sufficient to fund its plan of
      operations beyond July 2005. In separate financing transactions in April and
      June/September of 2005, the Company received proceeds from the issuance of
      7%
      convertible promissory notes in the total aggregate principal amount of
      $2,695,000 (see Note 11a). In addition, the Company has entered into a
      non-binding letter of intent with an investment banking firm to explore the
      possibility of raising additional capital in the public equity markets and
      filed
      with the Securities and Exchange Commission on Form SB-2 on September 30, 2005
      with that intention (see Note 5). The Company has continued to experience
      losses, recording a loss of $516,943 for the three months ended March 31, 2005,
      an accumulated deficit from inception to March 31, 2005 of $5,097,525, and
      as of
      the date of this report has still not recorded any significant revenue. The
      Company’s working capital is not sufficient to fund its plan of operations
      beyond the end of December 2005. The Company is currently negotiating with
      current shareholders and other qualified investors to arrange a private debt
      financing. If the Company is unable to raise sufficient additional capital
      before the end of December 2005, it will have to develop 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 the Company
      will be able to raise sufficient additional capital as needed to execute its
      business plan. The aforementioned factors raise substantial doubt about the
      Company’s ability to continue as a going concern.




-8-
 **Table
          of Contents**




Interim
      periods




The
      accompanying unaudited condensed financial statements have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America for interim financial information. Accordingly, they do not include
      all
      of the information required by generally accepted accounting principles in
      the
      United States of America for complete financial statements. In the opinion
      of
      management, all adjustments (consisting of normal recurring adjustments)
      considered necessary for a fair presentation have been included. Operating
      results for the three months ended March 31, 2005 are not necessarily indicative
      of the results that may be expected for the year ending December 31, 2005 or
      for
      any other interim period. These statements should be read in conjunction with
      the Company’s audited financial statements and notes thereto for the year ended
      December 31, 2004 included in the Company’s Annual Report on Form 10-KSB/A filed
      with the Securities and Exchange Commission on December 8, 2005.




Reclassifications




Certain
      amounts in the financial statements for the three months ended March 31, 2004
      have been reclassified for comparative purposes to conform to the presentation
      in the financial statements for the three months ended March 31, 2005. These
      reclassifications had no effect on the previously reported net loss beyond
      the
      impact of the restatements, described above.




Cash




For
      purposes of the condensed statements of cash flows, the Company considers all
      highly liquid debt instruments with original maturities of three months or
      less
      to be cash equivalents. From time to time, the Company has balances in excess
      of
      federally insured limits.




Use
      of
      estimates




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires 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 management’s judgment and available information and, consequently, actual
      results could be different from these estimates.




Revenue
      recognition




The
      Company earned revenue during the three months ended March 31, 2005 from two
      collection agencies that have implemented the Company’s online system. The
      Company’s preliminary contracts provide for revenue based on a percentage of the
      amount of debt collected from accounts submitted on the DebtResolve system.
      Although other revenue models have been proposed, all revenue earned to date
      has
      been determined using this method, and such revenue is recognized when the
      settlement amount of debt is collected by the Company’s client. For the early
      adopters of the Company’s product, the Company waived set-up fees and other
      transactional fees that the Company anticipates 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 the Company’s preferred revenue model. Dependent on the
      structure of future contracts, revenue may be derived from set-up fees or
      monthly licensing fees with transaction fees upon debt settlement.




-9-
 **Table
          of Contents**




Imputed
      salary expense




Under
      the
      terms of employment agreements, the Company had with its Co-Chairman/CEO, Chief
      Operating Officer and General Counsel during the three months ended March 31,
      2004 and with its Co-Chairman/CEO and General Counsel during the three months
      ended March 31, 2005, the Company has not paid these officers a salary, due
      to
      certain conditions as specified in the agreements. The Company recorded
      compensation expense and a capital contribution in an amount equal to the salary
      that would have been paid during those periods, representing an imputed
      compensation expense for the minimum base salary amounts under the agreement
      with them, as if the Company had met the condition for paying their
      salaries.




Waived
      royalty fees




Under
      the
      terms of a license agreement that the Company has with its Co-Chairmen, royalty
      fees were due to Messrs. Burchetta and Brofman. However, these payments were
      not
      made since they were waived by the Co-Chairmen. The Company recorded royalty
      expense of $0 for the three months ended March 31, 2005 and 2004 and $600,000
      since inception and a capital contribution in an amount equal to the waived
      payments in the same periods.




Research
      and development




Research
      and development expenses in the three months ended March 31, 2004 consisted
      primarily of payroll and related expenses and consulting fees incurred in
      connection with employees and consultants involved in the development of the
      Company’s online software product. The Company follows the guidelines of
      Statement of Financial Accounting Standards No. 86, Accounting for the Costs
      of
      Computer Software to be Sold, Leased, or Otherwise Marketed, and Statement
      of
      Financial Accounting Standards No. 2, Accounting for Research and Development
      Costs. Since the Company intended and has begun to market its online product,
      these costs were charged to expense as incurred and classified as research
      and
      development expenses. In January 2004, the Company substantially completed
      the
      development of and began marketing its online product. Commencing February
      2004,
      and for the three ended March 31, 2005, costs incurred in connection with the
      operation, maintenance, modification, and customization of the Company’s product
      have been charged to expense as incurred, and are not classified as research
      and
      development expenses.




Fixed
      assets




Fixed
      assets are stated at cost, less accumulated depreciation. Depreciation is
      provided over the estimated useful life of each class of assets using the
      straight-line method. Expenditures for maintenance and repairs are charged
      to
      expense as incurred. Additions and betterments that substantially extend the
      useful life of the asset are capitalized. Upon the sale, retirement, or other
      disposition of property and equipment, the cost and related accumulated
      depreciation are removed from the balance sheet, and any gain or loss on the
      transaction is included in the statement of operations.




Income
      taxes




In
      accordance with Statement of Financial Accounting Standards No. 109, Accounting
      for Income Taxes, the Company uses an asset and liability approach for financial
      accounting and reporting for income taxes. The basic principles of accounting
      for income taxes are: (a) a current tax liability or asset is recognized for
      the
      estimated taxes payable or refundable on tax returns for the current year;
      (b) a
      deferred tax liability or asset is recognized for the estimated future tax
      effects attributable to temporary differences and carryforwards; (c) the
      measurement of current and deferred tax liabilities and assets is based on
      provisions of the enacted tax law and the effects of future changes in tax
      laws
      or rates are not anticipated; and (d) the measurement of deferred tax assets
      is
      reduced, if necessary, by the amount of any tax benefits that, based on
      available evidence, are not expected to be realized. The Company has had net
      losses since inception and the resulting deferred tax asset is offset by a
      corresponding valuation allowance.




-10-
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          of Contents**




Stock-based
      compensation




Stock
      options issued under stock-based compensation plans are accounted for under
      the
      recognition and measurement principles of Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and related interpretations.
      No stock-based employee compensation cost is reflected in the net loss, as
      all
      options granted under these plans had an exercise price equal to the market
      value of the underlying common stock, as determined by the Board of Directors,
      on the date of grant. Statement of Financial Accounting Standards No. 148,
      Accounting for Stock-Based Compensation-Transition and Disclosure — an Amendment
      of FASB Statement No. 123, requires the disclosure of the effect on net loss
      and
      loss per share had the Company applied the minimum value recognition provisions
      of FASB Statement No. 123, Accounting for Stock-Based Compensation, to
      stock-based employee compensation. The minimum value of each option granted
      is
      estimated as of the grant date using the Black-Scholes option pricing model
      with
      the following assumptions: dividend yield of 0%, expected volatility of 0%,
      risk-free interest rates for individual options ranging from 1.66% to 4.12%,
      and
      an expected life of each option, ranging from three to ten years. Since there
      is
      no public market for the Company’s stock, the Company does not consider
      volatility in estimating the value of each option; the Company follows the
      minimum value method. The estimated minimum value of the options granted is
      amortized to expense over the option vesting periods. As of March 31, 2005,
      the
      weighted average exercise price and the weighted average expected life of the
      stock options granted to employees were $0.67 and 4.35 years,
      respectively.




The
      following table illustrates the pro forma effects on net loss and net loss
      per
      common share for the three months ended March 31, 2004 and 2005 and the period
      cumulative from inception as if the Company had applied the fair value
      recognition provisions of FASB Statement No. 123 to stock-based
      compensation.




Three
                months ended
              March
                31,
            
            Cumulative
              from
                Inception(April 21, 1997)
              to
                March 31,2004
            
            2005
            
            2005(restated)
            
            (restated)
            
            (restated)Net
                loss - as reported
            
            $
            (500,719
            )
            $
            (516,943
            )
            $
            (5,097,525
            )Deduct:
                Stock based employee compensation determined under minimum
                value
                method
            
            
            63,840
            
            
            1,284
            
            
            588,661Net
                loss - pro forma
            
            $
            (564,559
            )
            $
            (518,227
            )
            $
            (5,686,186
            )Basic
                and diluted net loss per common share - as reported
            
            $
            (0.02
            )
            $
            (0.02
            )Basic
                and diluted net loss common share - pro forma
            
            $
            (0.02
            )
            $
            (0.02
            )





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 securities realizable from
      the
      exercise of options of 7,733,333 and 4,393,333, at March 31, 2005 and March
      31,
      2004, respectively, are excluded from the computation of diluted net loss per
      share as their inclusion would be antidilutive. The potentially dilutive
      securities noted above exclude options to be issued under the amended and
      restated licensing agreement (see Note 11c) or options relating to the
      non-binding anti dilution agreement (see Note 5).




-11-
 **Table
          of Contents**




NOTE
              3.
            RESTATEMENT
                OF PREVIOUSLY ISSUED FINANCIAL
                STATEMENTS




On
      August
      19, 2005, the Company filed a report on Form 8-K with the Securities and
      Exchange Commission disclosing that the Company would restate previously issued
      financial statements for the years ended December 31, 2003 and 2004 and the
      three months ended March 31, 2005. In conjunction with the re-audit of Debt
      Resolve’s financial statements for the years ended December 31, 2003 and
      December 31, 2004 and a review of the quarter ended March 31, 2005 by the
      Company’s independent registered public accounting firm, the Company determined
      that adjustments were necessary to recognize the cumulative impact of correcting
      its computation for stock-based compensation to consultants and advisory board
      members. Specifically, it was determined that Debt Resolve should have recorded
      an expense for stock-based compensation to consultants and advisory board
      members during those accounting periods. Accounting principles generally
      accepted in the United States of America require the Company to record
      compensation expense for options granted to consultants.  The Company
      had
      disclosed these costs on a pro forma basis, only. Based on the reclassification
      of employee and consultant status for stock-based compensation to these persons,
      Debt Resolve has restated the periods impacted by these adjustments. The
      restatement adjustments related to computation for stock-based compensation
      to
      consultants and advisory board members increased net loss by $213,383 since
      inception through March 31, 2005, including $109,491 during the year ended
      December 31, 2003, $31,756 during the year ended December 31, 2004 (none during
      the quarter ended March 31, 2004) and $72,136 during the quarter ended March
      31,
      2005. In addition, the adjustment to an entry recording offering expenses had
      no
      impact for the quarter ended March 31, 2004, increased net loss by $25,000
      for
      the quarter ended March 31, 2005 and increased net loss by $25,000 to $238,383
      since inception. The adjustments to the recording of expense for the issuance
      of
      options to consultants and recording of offering expense increased net loss
      per
      share for the three months ended March 31, 2005 by $0.01 to ($0.02).




In
      addition, the Company made certain reclassifications to the Balance Sheet and
      to
      the Statements of Cash Flows. Within the Balance Sheet as of March 31, 2005,
      $126,122 of assets that were formerly classified as current were reclassified
      as
      long-term, including $106,723 of deferred offering expenses and $19,399 of
      deposits and other assets. Within the Statements of Cash Flows, certain items
      were reclassified between financing activities and operating activities, with
      the most significant being the reclassification of waived and imputed
      compensation and royalty fees from financing activities to an adjustment to
      reconcile net loss to net cash used in operating activities. The net effect
      was
      a reduction in the cash provided by financing activities, with a corresponding
      reduction in the cash used in operating activities, of $161,850 and $181,057
      for
      the quarters ending March 31, 2004 and 2005, and $2,079,906 since inception.




Amounts
      reflected herein for the quarters ended March 31, 2004 and 2005 represent the
      reclassified and restated financial information rather than financial
      information included in the prior years’ Form 10-QSB which were filed with the
      SEC on May 17, 2004 and May 16, 2005. The following summarizes the effect of
      these adjustments on the previously reported net loss and net loss per
      share:




Three
                months ended
              March
                31, 2005
            
            Cumulative
                from
              Inception
              (April 21,
                1997) to
              March
                31, 2005Net
                lossNet
                loss
            
            per
                share
            
            Net
                lossAs
                reported
            
            $
            (419,807
            )
            $
            (0.01
            )
            $
            (4,859,142
            )Stock-based
                compensation ($72,136)Offering
                cost reimbursement ($25,000)Total
                changes
            
            
            (97,136
            )
            
            (0.01
            )
            
            (238,383
            )As
                restated
            
            $
            (516,943
            )
            $
            (0.02
            )
            $
            (5,097,525
            )





The
      impact on the Statements of Operations, Balance Sheet and Statement of Cash
      Flows, as a result of the above adjustments, is illustrated on a condensed
      basis
      below. The amounts previously reported are derived from the Form 10-QSB for
      the
      quarter ended March 31, 2005 as filed on May 16, 2005.




-12-
 **Table
          of Contents**




Adjustments
      to the Condensed Statements of Operations


Three
                months ended
              March
                31, 2005
            
            Cumulative
                from Inception
              (April 21,
                1997) to March 31, 2005Amounts
            
            
            
            Amountspreviously
            
            As
            
            previously
            
            Asreported
            
            restated
            
            reported
            
            restatedRevenues
            
            $
            1,661
            
            $
            1,661
            
            $
            4,448
            
            $
            4,448Cost
                and expensesPayroll
                and related expenses
            
            
            242,476
            
            
            242,476
            
            
            1,891,758
            
            
            1,891,758General
                and administrative expenses
            
            
            171,536
            
            
            268,672
            
            
            2,419,626
            
            
            2,060,381Waived
                royalties-related parties
            
            
            –
            
            
            –
            
            
            –
            
            
            600,000Research
                and development expenses
            
            
            –
            
            
            –
            
            
            499,323
            
            
            499,323Depreciation
                and amortization expense
            
            
            7,470
            
            
            7,470
            
            
            59,348
            
            
            59,348Total
                expenses
            
            
            (421,482
            )
            
            (518,618
            )
            
            (4,870,055
            )
            
            (5,110,810
            )Loss
                from operations
            
            
            (419,821
            )
            
            (516,957
            )
            
            (4,865,607
            )
            
            (5,106,362
            )Net
                interest income
            
            
            14
            
            
            14
            
            
            8,837
            
            
            8,837Loss
                before taxes
            
            
            (419,807
            )
            
            (516,943
            )
            
            (4,856,770
            )
            
            (5,097,525
            )Income
                taxes
            
            
            –
            
            
            –
            
            
            2,372
            
            
            –Net
                loss
            
            $
            (419,807
            )
            $
            (516,943
            )
            $
            (4,859,142
            )
            $
            (5,097,525
            )Basic
                and diluted loss per share
            
            $
            (0.01
            )
            $
            (0.02
            )Basic
                and diluted weighted average of common shares outstanding
            
            
            29,549,794
            
            
            29,549,794




Adjustments
      to the Condensed Balance Sheet


March
                31, 2005AmountsPreviously
            
            AsReported
            
            restatedASSETSCurrent
                assets
            
            $
            169,341
            
            $
            43,219Fixed
                assets, net
            
            
            55,030
            
            
            55,030Other
                assets
            
            
            –
            
            
            126,122Total
                assets
            
            $
            224,371
            
            $
            224,371LIABILITIES
                AND STOCKHOLDERS’ DEFICIENCYTotal
                liabilities
            
            $
            450,954
            
            $
            450,954Stockholders’
                deficiency:Common
                stock, 50,000,000 shares authorized, $.001 par value, 29,703,900
                shares
                issued and outstanding
            
            
            29,704
            
            
            29,704Additional
                paid-in capital
            
            
            4,602,855
            
            
            4,841,238Deficit
                accumulated during the development stage
            
            
            (4,859,142
            )
            
            (5,097,525
            )Total
                stockholders’ deficiency
            
            
            (226,583
            )
            
            (226,583
            )Total
                liabilities and stockholders’ deficiency
            
            $
            224,371
            
            $
            224,371







-13-
 **Table
          of Contents**


Adjustments
      to the Condensed Statements of Cash Flows




Three
                Months Ended
              March
                31, 2004
            
            Three
                Months Ended
              March
                31, 2005
            
            Cumulative
                from inception
              (April
                21, 1997)
              to
                March 31Amounts
                previouslyreported
            
            As
              restated
            
            Amounts
                previouslyreported
            
            As
              restated
            
            Amounts
                previouslyreported
            
            As
              restatedNet
                cash used inoperating
                activities
            
            $
            (542,507
            )
            $
            (380,657
            )
            $
            (347,043
            )
            $
            (165,986
            )
            $
            (4,395,902
            )
            $
            (2,290,996
            )Net
                cash used ininvesting
                activities
            
            
            (8,691
            )
            
            (8,691
            )
            
            –
            
            
            –
            
            
            (114,377
            )
            
            (114,377
            )Net
                cash provided by (used in) financing activities
            
            
            121,500
            
            
            (40,350
            )
            
            323,568
            
            
            142,511
            
            
            4,521,551
            
            
            2,416,645








NOTE
              4.
            FIXED
                ASSETS:




Fixed
      assets as of March 31, 2005 are summarized as follows:




Useful
                lifeComputer
                equipment
            
            
            3
                years
            
            $
            70,971Computer
                software
            
            
            3
                years
            
            
            1,919Office
                equipment
            
            
            3
                years
            
            
            2,192Furniture
                and fixtures
            
            
            5
                years
            
            
            24,250Leasehold
                improvements
            
            
            Lease
                term
            
            
            15,046114,378Less:
                accumulated depreciation
            
            
            
            
            
            (59,348
            )$
            55,030


Depreciation
      expense totaled $10,589 and $7,470 for the three months ended March 31, 2004
      and
      2005, respectively, and $59,348 since inception.




NOTE
              5.
            LETTER
                OF INTENT:




On
      March
      4, 2005, the Company entered into a non-binding letter of intent with an
      investment banking firm to explore the possibility of raising additional capital
      in the public equity markets. On September 30, 2005, the Company filed a
      Registration Statement on Form SB-2 with the Securities and Exchange Commission.
      The Company anticipates that it will issue from 2,400,000 to 3,000,000 shares
      of
      common stock in a proposed public offering. However, there can be no assurance
      that the Company will be able to raise additional capital in the public equity
      markets as a result of this letter of intent or any other agreements the Company
      may enter into. In connection with this proposed offering, the Company has
      incurred deferred offering costs of $106,723 as of March 31, 2005. Also, in
      connection with this proposed offering, and in the event of a decrease in
      stockholder value resulting from a lower per share offering price at the time
      of
      a public offering of the Company’s common stock, the Company intends to issue to
      investors who had participated in its private placement of stock at $1.00 per
      share in 2003 and 2004, warrants to purchase common stock in a quantity
      sufficient to restore some portion of their pre-offering value, and has entered
      into a non-binding agreement to that effect. The Company also intends to issue
      stock options to purchase common stock to certain employees and consultants
      of
      the Company for the same purpose. These “make-whole” warrants and stock options
      are anticipated to be exercisable from three to five years at the same price
      as
      the per share offering price at the time of a public offering.




NOTE
              6.
            STOCKHOLDERS’
                DEFICIENCY:




During
      the three months ended March 31, 2005, the Company issued 224,900 shares of
      common stock through a private placement for a total of $224,900 and incurred
      expenses of the private placement of $44,206. In connection with this private
      placement, the Company issued warrants to purchase 1,000,000 shares of common
      stock to an investor, exercisable at $0.425 per share. These warrants are
      exercisable for three years from the date of grant and vested upon
      issuance.




-14-
 **Table
          of Contents**




During
      the three months ended March 31, 2005, two stockholders reimbursed the Company
      for $25,000 of deferred offering costs. Such amount has been credited to
      additional paid-in capital.




During
      the three months ended March 31, 2005, the Company recorded imputed compensation
      expense of $75,000 related to salaries for the CEO and the General Counsel
      of
      the Company as if the Company had met the terms for the payment of their
      salaries as stipulated in their employment agreements, and recorded the waived
      salary as a contribution to additional paid-in capital.




During
      the three months ended March 31, 2005, the Company issued options to purchase
      600,000 shares of common stock, exercisable at $1.00 per share, to a board
      member as consideration for consulting services, valued at $66,000. These
      options are exercisable for three years from the date of grant and vested upon
      issuance.




During
      the three months ended March 31, 2005, the Company recorded compensation expense
      of $6,136 for options to purchase 200,000 shares of common stock, exercisable
      at
      $1.00 per share, granted to an advisory board member in 2004. These options
      are
      exercisable for three years from the date of grant, and 100,000 vested each
      on
      March 31, 2005 and June 30, 2005.




NOTE
              7.
            EMPLOYMENT
                AGREEMENT:




As
      of
      March 31, 2005, the Co-Chairman and Chief Executive Officer and the Company’s
      General Counsel had employment agreements with the Company, and under the terms
      of these employment agreements, no salary payments were made to them during
      the
      three months ended March 31, 2005 and 2004. The Company recorded compensation
      expense and a capital contribution totaling $112,500 in 2004 and $75,000 in
      2005, representing an imputed compensation expense for the minimum base salary
      amounts under the agreements with these officers, and in 2004, with a board
      member who formerly served as Chief Operating Officer, as if the Company had
      met
      the condition for paying their salaries. With respect to the Co-Chairman and
      Chief Executive Officer, pursuant to an audit committee vote April 8, 2005
      and
      following board approval, the Company agreed to begin paying the Co-Chairman
      and
      Chief Executive Officer’s salary at an annual rate of $250,000, effective from
      April 8, 2005 until such time as the Company completes a public offering. (See
      Note 11e for additional employment agreements).




NOTE
              8.
            OFFICE
                LEASE:




At
      March
      31, 2005, the Company leased office facilities under a non-cancelable operating
      lease through July 2005. Rent expense for the three months ended March 31,
      2004
      and 2005 was $15,119 for both periods. Rent expense has been $117,705 since
      inception. On August 1, 2005, the Company moved its operations to a larger
      space
      in the same building. (See Note 11f).




NOTE
              9.
            WEB
                HOSTING COMMITMENT:




On
      October 31, 2003, the Company entered into a web hosting agreement with AT&T
      Corporation. The agreement became effective in April, 2004, when the Company
      began to service their first customer, and provided for the purchase of certain
      equipment and start up charges at the time of the agreement and a combination
      of
      monthly variable expenses, dependent on volumes, going forward. Expenses for
      web
      hosting services totaled $975 and $51,655 for the three months ended March
      31,
      2004 and 2005, respectively, and $190,430 since inception. The agreement is
      in
      effect until April 2006, and based on current volumes, the Company expects
      to
      incur expenses of $15,000 to $18,000 per month.




-15-
 **Table
          of Contents**




NOTE
              10.
            RECENTLY
                ISSUED AND PROPOSED ACCOUNTING
                PRONOUNCEMENTS:




In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based
      Payment (“SFAS 123 -Revised”). SFAS 123 - Revised is a revision of SFAS 123,
      Accounting For Stock-Based Compensation (“SFAS 123”), and supersedes APB Opinion
      No. 25, Accounting For Stock Issued To Employees (“APB 25”), and its related
      implementation guidance. SFAS 123 — Revised establishes accounting standards for
      recording any transaction in which an entity exchanges its equity instrument
      for
      goods or services. It also addresses transactions in which an entity incurs
      liabilities in exchange for goods or services that are based on the fair value
      of the entity’s equity instruments or that may be settled by the issuance of
      those equity instruments. It does not change the accounting guidance for
      share-based payment transactions with parties other than employees provided
      in
      SFAS 123 as originally issued and 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. SFAS 123- Revised requires a public
      entity to measure the cost of employee services received in exchange for an
      award of equity instruments based on the grant-date fair value of the award.
      That cost will be recognized over the period during which an employee is
      required to provide service in exchange for the award (usually the vesting
      period). The grant-date fair value of employee share options and similar
      instruments will be estimated using option-pricing models adjusted for the
      unique characteristics of those instruments (unless observable market prices
      for
      the same or similar instruments are available). SFAS 123 - Revised eliminates
      the alternative to use APB 25’s intrinsic value method of accounting that was
      provided in SFAS 123 as originally issued. Under APB 25, issuing stock options
      to employees generally resulted in recognition of no compensation cost. SFAS
      123
      - Revised requires entities to recognize the cost of employee services received
      in exchange for awards of equity instruments based on the grant-date fair value
      of those awards. SFAS 123 - Revised is effective for public entities that file
      as small business issuers as of the beginning of the first interim or annual
      reporting period that begins after December 15, 2005.




Currently,
      the Company accounts for stock options issued under stock-based compensation
      plans under the recognition and measurement principles of APB 25. No stock-based
      employee compensation cost is reflected in the net loss, as all options granted
      under these plans had an exercise price equal to the market value of the
      underlying common stock, as determined by the board of directors, on the date
      of
      grant. Statement of Financial Accounting Standards No. 148, Accounting for
      Stock-Based Compensation- Transition and Disclosure - an Amendment of FASB
      Statement No. 123, requires the disclosure of the effect on net loss and loss
      per share had the Company applied the fair value recognition provisions of
      SFAS
      123 to stock-based employee compensation.




The
      Company will evaluate the requirements of SFAS 123 - Revised and plans to adopt
      its provisions as soon as practicable. The Company believes that the effect
      of
      implementing SFAS 123 - Revised will result in the recording of additional
      stock
      compensation expense.




In
      December 2004, the FASB issued Statement of Financial Accounting Standards
      No.
      153, Exchanges Of Nonmonetary Assets - An Amendment Of APB No. 29 (“SFAS 153”).
      SFAS 153 amends APB No. 29 to eliminate the exception of non-monetary exchanges
      of similar productive assets and replaces it with a general exception for
      exchanges of non-monetary assets that do not have commercial substance. A
      non-monetary exchange has commercial substance if the future cash flows of
      the
      entity are expect to change significantly as a result of the exchange. SFAS
      153
      and APB No. 29 do not apply to the acquisition of non-monetary assets or
      services on issuance of the capital stock of an entity. Currently, the Company
      has not had any exchanges of non-monetary assets within the meaning of SFAS
      153
      and adoption of SFAS 153 has had no effect on the Company’s financial position
      or results of operations.




In
      October 2004, the FASB ratified the consensus reached in EITF Issue No. 04-8,
      “The Effect of Contingently Convertible Instruments on Diluted Earnings per
      Share.” The EITF reached a consensus that contingently convertible instruments,
      such as contingently convertible debt, contingently convertible preferred stock,
      and other such securities should be included in diluted earnings per share
      (if
      dilutive) regardless of whether the market price trigger has been met. The
      consensus became effective for reporting periods ending after December 15,
      2004.
      The adoption of this pronouncement did not have a material effect on the
      Company’s financial statements.




In
      May
      2005, SFAS No. 154, “Accounting Changes and Error Corrections, a
      replacement of APB Opinion No. 20, Accounting Changes and FASB Statement
      No. 3” was issued which, among other things, changes the accounting and
      reporting requirements for a change in accounting principle and provides
      guidance on error corrections. SFAS No. 154 requires retrospective
      application to prior period financial statements of a voluntary change in
      accounting principle unless impracticable to determine the period-specific
      effects or cumulative effect of the change, and restatement with respect to
      the
      reporting of error corrections. SFAS No. 154 applies to all voluntary
      changes in accounting principles, and to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provisions. SFAS No. 154 also requires that a change
      in
      method of depreciation or amortization for long-lived, non-financial assets
      be
      accounted for as a change in accounting estimate that is effected by a change
      in
      accounting principle. SFAS No. 154 is effective for accounting changes
      and
      corrections of errors made in fiscal years beginning after December 15,
      2005. At this time, adoption of SFAS No. 154 is not expected to
      significantly impact the Company’s financial statements or future results of
      operations.




-16-
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          of Contents**




On
      September 28, 2005, the FASB ratified the following consensus reached in EITF
      Issue 05-8 (“Income Tax Consequences of Issuing Convertible Debt with a
      Beneficial Conversion Feature”):  a)  The issuance of convertible debt
      with a beneficial conversion feature results in a basis difference in applying
      FASB Statement of Financial Accounting Standards SFAS
      No.
      109 , *Accounting
      for Income Taxes* .
      Recognition of such a feature effectively creates a debt instrument and a
      separate equity instrument for book purposes, whereas the convertible debt
      is
      treated entirely as a debt instrument for income tax purposes.  b) 
      The resulting basis difference should be deemed a temporary difference because
      it will result in a taxable amount when the recorded amount of the liability
      is
      recovered or settled.  c)  Recognition of deferred taxes for
      the
      temporary difference should be reported as an adjustment to additional paid-in
      capital. This consensus is effective in the first interim or annual reporting
      period commencing after December 15, 2005, with early application permitted.
      The
      effect of applying the consensus should be accounted for retroactively to all
      debt instruments containing a beneficial conversion feature that are subject
      to EITF
      Issue 00-27 ,
      “Application of Issue No. 98-5 to Certain Convertible Debt Instruments” (and
      thus is applicable to debt instruments converted or extinguished in prior
      periods but which are still presented in the financial statements). The adoption of this pronouncement is not expected to have a material impact
      on the Company's financial statements.




NOTE
              11.
            SUBSEQUENT
                EVENTS:




a.
            CONVERTIBLE
                NOTES:




On
      April
      21, 2005, in a private financing that involved the issuance of 7% senior
      convertible promissory notes due one year from the date of issuance, the Company
      received proceeds of $800,000, initially convertible into 1,882,352 shares
      of
      common stock. As part of the private financing, the Company issued to the
      investors warrants to purchase 941,176 warrants to purchase common stock,
      exercisable for a period of three years at $0.425 per share.




On
      June
      28, 2005, the Company received proceeds from an additional private financing
      of
      7% senior convertible promissory notes in the aggregate principal amount of
      $1,250,000, due one year from the date of issuance, initially convertible into
      2,941,176 shares of common stock. As part of the private financing, the Company
      issued warrants to the investors to purchase 1,470,590 shares of common stock,
      exercisable for a period of five years at $0.425 per share. The terms of the
      notes and warrants issued in the June 2005 private financing were substantially
      identical to those issued in the April 2005 private financing, except with
      respect to the conversion provision for the notes and the exercise period of
      the
      warrants.




On
      September 6, 2005, the Company received proceeds from a further private
      financing of 7% senior convertible promissory notes in the aggregate principal
      amount of $645,000, due one year from the date of issuance, initially
      convertible into 1,517,649 shares of common stock. As part of this private
      financing, the Company issued to the investors warrants to purchase 758,827
      shares of common stock exercisable for a period of five years at $0.425 per
      share. The terms of the notes and warrants issued in the September 2005 private
      financing were identical to those issued in the June 2005 private financing.




The
      principal amount and accrued interest under the April and the June/September
      notes are convertible into shares of common stock at any time at the option
      of
      the holder, and automatically, in the case of a public offering of the Company’s
      common stock, in which case (i) for the June and September 2005 notes, 50%
      of
      the outstanding principal amount and accrued interest under the notes will
      be
      converted into shares of common stock, and the remaining 50% of the outstanding
      principal amount and accrued interest under the notes will be repaid to the
      holders from the proceeds of such public offering, and (ii) for the April 2005
      notes, all of the outstanding principal amount and accrued interest under the
      notes will be converted into shares of common stock.




-17-
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In
      accordance with Emerging Issues Task Force (“EITF”) 98-5 and EITF 00-27, the
      convertible notes are considered to have an embedded beneficial conversion
      feature because the conversion price is less than the fair market value at
      the
      issuance date and the contingent conversion price will be less than the initial
      public offering price. The Company has recorded a beneficial conversion feature
      and a deferred debt discount in connection with the value of the notes and
      related investor warrants of $1,235,887, and this amount will be amortized
      over
      the life of the notes.




Maxim
      Group LLC acted as the placement agent in the June/September 2005 private
      financing and received placement fees of $142,800 and non-accountable expenses
      of $53,550. In addition, Maxim Group received warrants to purchase 336,000
      shares of common stock, valued at $40,207, exercisable for a period of three
      years at $0.425 per share. Total cash fees associated with this offering were
      $219,350, including the above-mentioned fees paid to Maxim Group and also
      including other fees of $23,000, paid to underwriter’s attorneys and a stock
      transfer agent. The total of fees and the value of the warrants have been
      recorded as deferred financing cost and will be amortized over the life of
      the
      notes.




b.
            ACCRUED
                COMPENSATION EXPENSE AND LOANS PAYABLE TO
                STOCKHOLDERS:




As
      of
      June 30, 2005, the Company had reached an agreement to resolve an outstanding
      debt owed to a former employee. Danilo Cacciamatta, the Company’s former CFO,
      accepted payments of options to purchase 700,000 shares of common stock,
      exercisable at $0.425 per share, valued at $84,000, as well as cash payments
      of
      $38,400, as part of a package resolution of unpaid compensation of $95,667
      and a
      $10,000 loan, included in loans payable to stockholders as of March 31, 2005,
      plus interest owed on these balances. These options are exercisable for three
      years from the date of grant and vested upon issuance.




c.
            RELATED
                PARTY TRANSACTIONS:




(i)
            License
                Agreement




The
      Company originally entered into a license agreement in February 2003 with
      Messrs. Burchetta and Brofman for the licensed usage of the intellectual
      property rights relating to U.S. Patent No. 6,330,551 issued by the U.S. Patent
      and Trademark Office on December 11, 2001 for “Computerized Dispute and
      Resolution System and Method” worldwide. In June 2005, subsequent to an interim
      amendment in February 2004, the Company amended and restated the license
      agreement in its entirety. The licensed usage is limited to the creation of
      software and other code enabling an automated system used solely for the
      settlement and collection of credit card receivables and other consumer debt
      and
      specifically excludes the settlement and collection of insurance claims, tax
      and
      other municipal fees of all types. The license usage also includes the creation,
      distribution and sale of software products or solutions for the same aim as
      above and with the same exclusions. In lieu of cash royalty fees, Messrs.
      Burchetta and Brofman have agreed to accept stock options for the Company’s
      common stock as follows:




On
      June
      29, 2005, the Company granted to each of Messrs. Burchetta and Brofman a stock
      option for up to such number of shares of common stock such that the stock
      option, when added to the number of shares of common stock owned by each of
      Messrs. Burchetta and Brofman, and in combination with any shares owned by
      any
      of their respective immediate family members and affiliates, will equal 14.6%
      of
      the total number of outstanding shares of common stock on a fully-diluted basis
      as of the closing of a potential public offering of the Company’s common stock,
      assuming the exercise of such stock option. The value of these options will
      be
      recorded as a prepaid royalty and classified a contra-equity once the number
      of
      options has been determined, and will be amortized over the life of the
      underlying patent.




If,
      and
      upon, the Company reaching (in combination with any subsidiaries and other
      sub-licensees) $10,000,000, $15,000,000, and $20,000,000 in gross revenues
      derived from the licensed usage in any given fiscal year, the Company will
      grant
      each of Messrs. Burchetta and Brofman such additional number of stock options
      as
      will equal 1%, 1.5%, and 2%, respectively, of the total number of outstanding
      shares of common stock on a fully-diluted basis at such time.




-18-
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          of Contents**




The
      stock
      options granted to Messrs. Burchetta and Brofman pursuant to the license
      agreement will have an exercise price equal to the offering price per share
      in
      such potential public offering of the Company’s common stock and are exercisable
      for ten years from the date of grant.




The
      term
      of the license agreement extends until the expiration of the last-to-expire
      patents licensed thereunder and is not terminable by Messrs. Burchetta and
      Brofman, the licensors. The license agreement also provides that the Company
      will have the right to control the ability to enforce the patent rights licensed
      to the Company against infringers and defend against any third-party
      infringement actions brought with respect to the patent rights licensed to
      the
      Company, subject, in the case of pleadings and settlements, to the reasonable
      consent of Messrs. Burchetta and Brofman.




(ii)
            Sublease




On
      August
      1, 2005, the Company entered into a sublease agreement with a company owned
      by
      the CEO and Co-Chairmen. The President of this company is the son of the CEO
      and
      Co-Chairman of Debt Resolve. The agreement calls for payments of $500 per month
      and requires the sublessee to supply its own equipment and utilities such as
      phone service. The agreement provides that Debt Resolve may cancel the sublease
      at anytime on 30 days notice.




d.
            STOCKHOLDERS’
                DEFICIENCY:




On
      April
      6, 2005, the Company issued options to purchase 200,000 shares of common stock,
      exercisable at $1.00 per share, to a consultant as consideration for services
      as
      an advisory board member valued at $19,000. These options are exercisable for
      three years from the date of grant and vested upon issuance.




Subsequent
      to March 31, 2005, the Company recorded imputed compensation expense of $37,500
      related to salaries for the General Counsel of the Company as if the Company
      had
      met the terms for the payment of his salary as stipulated in his employment
      agreement, and recorded the waived salary as a contribution to additional
      paid-in capital.




Subsequent
      to March 31, 2005, the Company recorded compensation expense
      of $2,586 for 200,000 options granted to an advisory board member in 2004,
      vesting during the period.




e.
            EMPLOYMENT
                AGREEMENTS:




On
      June
      6, 2005, at a meeting of the Board of Directors, the Company entered into a
      revised employment agreement with the Co-Chairman and Chief Executive Officer.
      The action modified an employment agreement which is effective through July
      2008. The agreement provides him with an initial annual compensation of $250,000
      and contains provisions for annual increases based on “cost-of-living” changes.
      The modification allowed him to begin receiving cash payments of his salary
      effective as of April 1, 2005. Prior to this date, the CEO’s salary was waived.
      The employment agreement also contains provisions under which his annual
      compensation may increase to $600,000 if the Company achieves 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
      addition to the agreements above, the Company has an employment agreement with
      the Senior Vice President and Chief Technology Officer that became effective
      December 1, 2003 and remains in effect until December 1, 2005. This employment
      agreement provides for annual compensation of $200,000 and other considerations.
      On August 1, 2005, the Company also entered into an employment agreement with
      the Chief Financial Officer, Treasurer and Secretary. This employment agreement
      provides for annual compensation of $150,000 and other considerations, and
      remains in effect until July 31, 2006. On September 28, 2005, effective as
      of
      the date the Company’s proposed public stock offering is declared effective and
      assuming a proposed 1-for-10 reverse stock split, the Company granted these
      officers options to purchase 230,000 and 100,000 shares, respectively, of
      Company common stock. These stock options are exercisable at $5.00 per share,
      will have a term of five years from their date of grant and will vest
      immediately with the proposed public stock offering. The initial number of
      shares and the exercise price per share thereof subject to each option assume
      that the Company completes a proposed 1-for-10 reverse stock split of its
      outstanding shares of common stock prior to the date of grant, and in the event
      the stock split actually effected by the Company is in a different ratio than
      1-for-10, the number of shares and the exercise price per share thereof subject
      to each option will automatically be adjusted accordingly. In the event the
      Company’s proposed public stock offering does not take place by March 31, 2006,
      the options terminate and become null and void.




f.
            LEASED
                FACILITIES:




On
      August
      1, 2005, the Company moved its headquarters to a larger space in the same
      building. The Company leases this office facility under a non-cancelable
      operating lease with an annual escalation clause through July 2010. Future
      aggregate minimum lease payments over the 60 months of the lease period total
      $616,456, of which $80,000 has been prepaid as a deposit.




g.
            SHORT
                TERM FINANCING:




On
      November 30, 2005 the Company borrowed $100,000 from a director and an existing
      stockholder of the Company for a term of three months at an annual interest
      rate
      of 10%.




-19-
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          of Contents**




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




The
      following discussion of the Company’s financial condition and results of
      operations has been revised to reflect the restatement and certain events
      occurring subsequent to the filing of the original Form 10-QSB. In addition,
      the
      Company updated its disclosure regarding critical accounting policies. The
      following discussion should be read in conjunction with the restated financial
      statements and notes thereto appearing elsewhere in this Amended Quarterly
      Report on Form 10-QSB/A as well as the Amended Annual Report on Form 10-KSB/A
      for the year ended December 31, 2004.




**Restatement
      of Previously Issued Financial Statements**




The
      Company restated its financial statements for the years ended December 31,
      2004
      and 2003 and the quarterly period ended March 31, 2005.




On
      August
      19, 2005, the Company filed a report on Form 8-K with the Securities and
      Exchange Commission disclosing that the Company would restate previously issued
      financial statements for the years ended December 31, 2003 and 2004 and the
      three months ended March 31, 2005. In conjunction with the re-audit of Debt
      Resolve’s financial statements for the years ended December 31, 2003 and
      December 31, 2004 and a review of the quarter ended March 31, 2005 by the
      Company’s independent registered public accounting firm, the Company determined
      that adjustments were necessary to recognize the cumulative impact of correcting
      its computation for stock-based compensation to consultants and advisory board
      members. Specifically, it was determined that the Company should have recorded
      an expense for stock-based compensation to consultants and advisory board
      members during those accounting periods. Accounting principles generally
      accepted in the United States require the Company to record compensation expense
      for options granted to consultants.  The Company had disclosed these
      costs
      on a pro forma basis, only. Based on the reclassification of employee and
      consultant status for stock-based compensation to these persons, Debt Resolve
      has restated the periods impacted by these adjustments. The restatement
      adjustments related to computation for stock-based compensation to consultants
      and advisory board members increased net loss by $213,383 since inception
      through March 31, 2005, including $109,491 during the year ended December 31,
      2003, $31,756 during the year ended December 31, 2004 (none during the quarter
      ended March 31, 2004) and $72,136 during the quarter ended March 31, 2005.
      In
      addition, the adjustment to an entry recording offering expenses increased
      net
      loss by $25,000 for the quarter ended March 31, 2005 and increased net loss
      by
      $25,000 to $238,383 since inception. The adjustments to the recording of expense
      for the issuance of options to consultants and recording of offering expense
      increased net loss per share for the three months ended March 31, 2005 by
      $(0.01) to $ (0.02).




In
      addition, the Company made certain reclassifications to the Balance Sheet and
      to
      the Statements of Cash Flows. Within the Balance Sheet as of March 31, 2005,
      $126,122 of assets that were formerly classified as current were reclassified
      as
      long-term, including $106,723 of deferred offering expenses and $19,399 of
      deposits and other assets. Within the Statements of Cash Flows, certain items
      were reclassified between financing activities and operating activities, with
      the most significant being the reclassification of waived and imputed
      compensation and royalty fees from financing activities to an adjustment to
      reconcile net loss to net cash used in operating activities. The net effect
      was
      a reduction in the cash provided by financing activities, with a corresponding
      reduction in the cash used in operating activities, of $161,850 and $181,057
      for
      the quarters ending March 31, 2004 and 2005, and $2,079,906 since inception.
      Amounts reflected herein for the quarters ended March 31, 2004 and 2005
      represent the reclassified and restated financial information rather than
      financial information included in the original Forms 10-QSB which were filed
      with the SEC on May 17, 2004 and May 16, 2005.




The
      following summarizes the effect of these adjustments on the previously reported
      net loss and net loss per share:




Three
                months ended
              March
                31, 2005
            
            Cumulative
                from Inception
              (April 21,
                1997) to
              March
                31, 2005Net
                lossNet
                loss
            
            per
                share
            
            Net
                lossAs
                reported
            
            $
            (419,807
            )
            $
            (0.01
            )
            $
            (4,859,142
            )Stock-based
                compensation ($72,136)Offering
                cost reimbursement ($25,000)Total
                changes
            
            
            (97,136
            )
            
            (0.01
            )
            
            (238,383
            )As
                restated
            
            $
            (516,943
            )
            $
            (0.02
            )
            $
            (5,097,525
            )






-20-
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          of Contents**




**Overview**




The
      Company a development stage company. Since its inception, the Company has
      devoted substantially all of its efforts to planning, research and development
      activities, and raising capital. In February 2004, the Company implemented
      the
      DebtResolve system on a test basis with a collection agency. In June and
      November 2004, the Company implemented its system with its second and third
      clients, respectively, and began generating nominal revenue based on a
      percentage of the amount of debt collected by these clients. As of the filing
      date of this amended report, the Company has eight clients under contract,
      five
      of which are operational.




Since
      completing initial product development in early 2004, the Company has marketed
      its service primarily to consumer credit card issuers, collection agencies
      and
      the buyers of defaulted debt in the United States and Europe. The Company has
      prepared for its entry into the European marketplace by reviewing its mode
      of
      business and modifying its contracts to comply with appropriate European
      privacy, debtor protection and other applicable regulations. The Company expects
      that initially, its expense associated with servicing its 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. The Company has
      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. The
      Company intends to market its service to other segments served by the
      collections industry worldwide. For example, the Company believes that its
      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. The Company also intends to pursue past-due Internet-related debt,
      such as that held by sellers of sales and services online. The Company believes
      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. The Company
      believes that expanding to more recently past-due portfolios of such debt will
      result in higher settlement volumes, improving its clients’ profitability by
      increasing their collections while reducing their cost of collections.




The
      Company’s revenues to date have been insignificant. The Company has financed its
      activities to date through its management’s contributions of cash, the proceeds
      from sales of its common stock in private placement financings and the proceeds
      of our 7% convertible promissory notes in two private financings.




The
      Company’s current contracts provide that it will earn revenue based on a
      percentage of the amount of debt collected from accounts submitted on its
      DebtResolve system or based on recurring license fees coupled with success
      or
      other transaction fees. Although other revenue models have been proposed, all
      revenue earned to date has been determined using the “percent of debt collected”
      method, and such revenue is recognized when the settlement amount of debt is
      collected by the Company’s client. While the “percent of debt collected” model
      will continue to be a revenue recognition method going forward, other payment
      models are also being offered to clients and may possibly become the Company’s
      preferred revenue model.




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          of Contents**




**Liquidity
      and Capital Resources**





The
      Company’s financial statements were prepared using principles applicable to a
      going concern, which contemplates the realization of assets and liquidation
      of
      liabilities in the normal course of business. The Company had $11,272 in cash
      at
      March 31, 2005, but subsequently received $2,695,000 between April and
      June/September 2005 in
      proceeds from the issuance of 7% convertible promissory notes in the total
      aggregate principal amount of $2,695,000, and the Company borrowed $100,000
      on
      November 30, 2005 from a director and an existing shareholder of the Company
      for
      a term of three months at an annual interest rate of 10%. In addition, the
      Company has entered into a non-binding letter of intent with an investment
      banking firm to explore the possibility of raising additional capital in the
      public equity markets and filed with the Securities and Exchange Commission
      on
      Form SB-2 on September 30, 2005 with that intention. There can be no assurance
      that the Company will be able to raise sufficient additional capital as needed
      to execute its business plan. The Company’s working capital is not sufficient to
      fund its plan of operations beyond the end of December 2005. The Company is
      currently negotiating with current shareholders and other qualified investors
      to
      arrange a private debt financing. (With regards to any such debt financing,
      the
      securities offered thereby will not have been registered under the Securities
      Act and may not be sold in the United States absent registration or an
      applicable exemption from registration requirements.) There can be no assurance
      that such a plan will be successful. If the Company is unable to raise
      sufficient additional capital before the end of December 2005, it will have
      to
      develop and implement a plan to extend payables and reduce overhead until
      sufficient additional capital is raised to support further operations. These
      factors continue to raise substantial doubt about the Company’s ability to
      continue as a going concern.




**Results
      of Operations**




***Three
      Months ended March 31, 2005 Compared to Three Months ended March 31,
      2004***




**Revenues**




Revenue
      totaled $1,661 and $0 for the three months ended March 31, 2005 and 2004,
      respectively. The Company earned revenue during the three months ended March
      31,
      2005 from a collection agency that implemented the Company’s online system.
      Revenue was earned based on a percentage of the amount of debt collected from
      accounts placed on the Company’s online system.




**Costs
      and Expenses**




**Payroll
      and related expenses** .
      Payroll
      and related expenses totaled $242,476 for the three months ended March 31,
      2005,
      an increase of $44,972 over payroll and related expense of $197,504 for the
      three months ended March 31, 2004, due primarily to an increase in staffing,
      and
      to a change in accounting for salaries and related expenses of staff devoted
      to
      developing the Debt Resolve system, net of a reduction in imputed salary
      expense, due to the change in status of a key executive of the company to
      director status. For the three months ended March 31, 2005 and March 31, 2004,
      these expenses include $75,000 and $112,500, respectively, of imputed
      compensation expense for the minimum base salary amounts under the employment
      agreements with Messrs. Burchetta and Harris, and, in 2004, Mr. Silberstein,
      as
      if the Company had met the condition for paying their salaries. No salary
      payments were made to Messrs. Burchetta and Harris during the three months
      ended
      March 31, 2005 nor to Messrs. Burchetta, Harris and Silberstein during the
      three
      months ended March 31, 2004, and the Company recorded their imputed compensation
      as a capital contribution. During the month of January 2004, payroll and related
      expenses incurred in connection with employees involved in the development
      of
      the Company’s online product were classified as research and development
      expenses. Commencing February 2004, these expenses were no longer classified
      as
      research and development expenses and were included in payroll and related
      expenses.




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**General
      and administrative expenses** .
      General
      and administrative expenses totaled $268,672 for the three months ended March
      31, 2005, an increase of $19,532 over general and administrative expenses of
      $249,140 for the three months ended March 31, 2004, due primarily to higher
      non-cash stock based compensation expense net of lower legal and professional
      fees. For the three months ended March 31, 2005, these expenses consist of
      $72,136 for non-cash stock based consulting expense, $60,147 for
      telecommunication costs, including website hosting, $51,150 for service fees,
      including consulting, legal and accounting fees, $18,381 for travel related
      expense, $16,832 for marketing and promotion costs, $22,568 for insurance,
      $17,089 for occupancy costs, and $10,369 for other general expenses.. For the
      three months ended March 31, 2004, these expenses consist of $114,436 for
      professional fees incurred in connection with legal, accounting, computer and
      business advisory services, $32,164 in marketing expense, $26,152 in travel
      related expenses, $26,025 in website development expense not included in
      research and development, $11,333 of telecommunications costs and $39,030 for
      other general expenses, primarily consisting of occupancy costs and insurance.




**Research
      and development expenses** .
      Research and development expenses totaled $0 for the three months ended March
      31, 2005 and $46,022 for the three months ended March 31, 2004. In January
      2004,
      the Company substantially completed the development of and began marketing
      its
      online product. Commencing February 2004, costs incurred in connection with
      the
      operation, maintenance, modification, and customization of the Company’s online
      product have been charged to expense as incurred, but are not classified as
      research and development expenses. For the three months ended March 31, 2004,
      research and development expenses consist of payroll and related expenses and
      consulting fees incurred in connection with employees and consultants involved
      in the development of the Company’s software product.




**Critical
      Accounting Policies**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States requires 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
      management’s judgment and available information and, consequently, actual
      results could be different from these estimates. The significant accounting
      policies that the Company believes are the most critical to aid in fully
      understanding and evaluating its reported financial results are as
      follows:




Going
      concern




The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States, which contemplate
      continuation of the Company as a going concern. As of March 31, 2005 the
      Company’s working capital was not sufficient to fund its plan of operations
      beyond July 2005. In separate financing transactions in April and June/September
      of 2005, the Company received proceeds from the issuance of 7% convertible
      promissory notes in the total aggregate principal amount of $2,695,000. In
      addition, the Company has entered into a non-binding letter of intent with
      an
      investment banking firm to explore the possibility of raising additional capital
      in the public equity markets and filed with the Securities and Exchange
      Commission on Form SB-2 on September 30, 2005 with that intention. (Note: This
      report on Form 10Q-SB shall not constitute an offer to sell or the solicitation
      of an offer to buy nor shall there by any sale of these securities in any state
      in which such offer, solicitation or sale would be unlawful prior to
      registration or qualification under securities laws of any such state.) There
      can be no assurance that the Company will be able to raise sufficient additional
      capital as needed to execute its business plan. The Company’s working capital is
      not sufficient to fund its plan of operations beyond the end of December 2005.
      The Company is currently negotiating with current shareholders and other
      qualified investors to arrange a private debt financing. (With regards to any
      such debt financing, the securities offered thereby will not have been
      registered under the Securities Act and may not be sold in the United States
      absent registration or an applicable exemption from registration requirements.)
      There can be no assurance that such a plan will be successful. If the Company
      is
      unable to raise sufficient additional capital before the end of December 2005,
      it will have to develop and implement a plan to extend payables and reduce
      overhead until sufficient additional capital is raised to support further
      operations. These factors continue to raise substantial doubt about the
      Company’s ability to continue as a going concern.




-23-
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          of Contents**




Imputed
      salary expense




Under
      the
      terms of employment agreements the Company had with its Co-Chairman/CEO, Chief
      Operating Officer and General Counsel during the three months ended March 31,
      2004 and with its Co-Chairman/CEO and General Counsel during the three months
      ended March 31, 2005, the Company has not paid these officers a salary, due
      to
      certain conditions as specified in the agreements. The Company recorded
      compensation expense and a capital contribution in an amount equal to the salary
      that would have been paid during those periods, representing an imputed
      compensation expense for the minimum base salary amounts under the agreement
      with them, as if the Company had met the condition for paying their
      salaries.




Waived
      royalty fees




Under
      the
      terms of a license agreement that the Company has with its Co-Chairmen, royalty
      fees were due to Messrs. Burchetta and Brofman in 2003. However, these payments
      were not made since they were waived by the Co-Chairmen. The Company has
      recorded no royalty expense in 2004 or 2005, due to a modification in the
      agreement, but has recorded royalty expense and a capital contribution of
      $600,000 since inception.




Research
      and development




The
      Company follows the guidelines of Statement of Financial Accounting Standards
      No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or
      Otherwise Marketed, and Statement of Financial Accounting Standards No. 2,
      Accounting for Research and Development Costs. Research and development expenses
      in the three months ended March 31, 2004 and in the period since inception
      consisted primarily of payroll and related expenses and consulting fees incurred
      in connection with employees and consultants involved in the development of
      the
      Company’s online software product prior to establishing technological
      feasibility. In January 2004, the Company substantially completed the
      development of and began marketing its online product. In management’s opinion,
      the software became available for general release concurrent with the
      establishment of technological feasibility. As a result, no software development
      costs were capitalized. Commencing February 2004, including the three months
      ended March 31, 2004 and 2005, costs incurred in connection with the operation,
      maintenance, modification, and customization of the Company’s product have been
      charged to expense as incurred, and are neither capitalized nor classified
      as
      research and development expenses.




Fixed
      assets




Fixed
      assets are stated at cost, less accumulated depreciation. Depreciation is
      provided over the estimated useful life of each class of assets using the
      straight-line method. Expenditures for maintenance and repairs are charged
      to
      expense as incurred. Additions and betterments that substantially extend the
      useful life of the asset are capitalized. Upon the sale, retirement, or other
      disposition of property and equipment, the cost and related accumulated
      depreciation are removed from the balance sheet, and any gain or loss on the
      transaction is included in the statement of operations.




Income
      taxes




In
      accordance with Statement of Financial Accounting Standards No. 109, Accounting
      for Income Taxes, the Company uses an asset and liability approach for financial
      accounting and reporting for income taxes. The basic principles of accounting
      for income taxes are: (a) a current tax liability or asset is recognized for
      the
      estimated taxes payable or refundable on tax returns for the current year;
      (b) a
      deferred tax liability or asset is recognized for the estimated future tax
      effects attributable to temporary differences and carryforwards; (c) the
      measurement of current and deferred tax liabilities and assets is based on
      provisions of the enacted tax law and the effects of future changes in tax
      laws
      or rates are not anticipated; and (d) the measurement of deferred tax assets
      is
      reduced, if necessary, by the amount of any tax benefits that, based on
      available evidence, are not expected to be realized. The Company has had net
      losses since inception and the resulting deferred tax asset is offset by a
      corresponding valuation allowance.




-24-
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          of Contents**




Stock-based
      compensation




Stock
      options issued under stock-based compensation plans are accounted for under
      the
      recognition and measurement principles of Accounting Principles Board Opinion
      No. 25, Accounting for Stock Issued to Employees, and related interpretations.
      No stock-based employee compensation cost is reflected in the net loss, as
      all
      options granted under these plans had an exercise price equal to the market
      value of the underlying common stock, as determined by the Board of Directors,
      on the date of grant. Statement of Financial Accounting Standards No. 148,
      Accounting for Stock-Based Compensation-Transition and Disclosure — an Amendment
      of FASB Statement No. 123, requires the disclosure of the effect on net loss
      and
      loss per share had the Company applied the minimum value recognition provisions
      of FASB Statement No. 123, Accounting for Stock-Based Compensation, to
      stock-based employee compensation. The minimum value of each option granted
      is
      estimated as of the grant date using the Black-Scholes option pricing model
      with
      the following assumptions: dividend yield of 0%, expected volatility of 0%,
      risk-free interest rates for individual options ranging from 1.66% to 4.12%,
      and
      an expected life of each option, ranging from three to ten years. Since there
      is
      no public market for the Company’s stock, the Company does not consider
      volatility in estimating the value of each option; the Company follows the
      minimum value method. The estimated minimum value of the options granted is
      amortized to expense over the option vesting periods.




**Statement
      Relating to Forward-Looking Statements**




This
      report contains forward-looking statements that are based on the Company’s
      beliefs as well as assumptions and information currently available to it. 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 the Company’s recent research and
      development activities; the risks and uncertainties concerning acceptance of
      its
      services and products, if and when fully developed, by its potential customers;
      its 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 the Company’s dependence on
      its key executives; the risks and uncertainties concerning technological changes
      and the competition for its services and products; and the risks and
      uncertainties concerning general economic conditions. Should one or more of
      these risks or uncertainties materialize, or should underlying assumptions
      prove
      incorrect, actual results may vary materially from those anticipated, estimated,
      or projected. The Company cautions 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.**
            **Controls
                and
                Procedures**




**Evaluation
      of the Company’s Disclosure Controls and Procedures**




As
      of the
      end of the period covered by this report, the Company has evaluated the
      effectiveness of the design and operation of its disclosure controls and
      procedures (“disclosure controls”). This evaluation (the “controls evaluation”)
      was done under the supervision and participation of the Company’s management,
      including its Chief Executive Officer (the “CEO”), who is the Company’s
      principal executive officer, and its Chief Financial Officer (the “CFO”), who is
      the Company’s principal financial officer. Rules adopted by the Securities and
      Exchange Commission require  t hat
      in
      this section of the report the Company present the conclusions of its principal
      executive officer and principal financial officer about the effectiveness of
      the
      Company’s disclosure controls based on and as of the date of the controls
      evaluation.




**CEO
      and CFO Certifications**




Appearing
      as Exhibits 31.1 and 31.2 to this report are “Certifications” of the CEO and
      CFO. The certifications are required pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002 (the Section 302 Certifications”).




**Disclosure
      Controls**




Disclosure
      controls means controls and other procedures of the Company that are designed
      with the objective of ensuring that information required to be disclosed in
      the
      Company’s reports filed under the Securities Exchange Act, such as this report,
      is recorded, processed, summarized and reported within the time periods
      specified in the Securities and Exchange Commission’s rules and forms.
      Disclosure controls include, without limitation, controls and procedures
      designed to ensure that the information required to be disclosed by the Company
      in the reports that it files or submits under the Securities Exchange Act is
      accumulated and communicated to the Company’s management, including, without
      limitation, the CEO and CFO, as appropriate to allow timely decisions regarding
      required disclosure.




-25-
 **Table
          of Contents**




**Conclusions
      on the Effectiveness of Controls**




Based
      on
      their evaluations as of the end of the period covered in this report, the
      Company’s CEO and CFO concluded that the Company’s disclosure controls were not
      effective at the “reasonable assurance” level. The ineffectiveness of the
      Company’s disclosure controls is due to the matters described below in “Internal
      Control over Financial Reporting.”




The
      Company’s management, including, without limitation, the CEO and CFO, does not expect
      that the Company’s disclosure controls will prevent all error and fraud. A
      control system no matter how well conceived and operated can provide only
      reasonable, not absolute assurance that the objectives of the control system
      are
      met. Further, the design of a control system must reflect the fact that there
      are resource constraints and the benefits of controls must be considered
      relative to their costs. Because of the inherent limitations of all control
      systems, no evaluation of controls can provide absolute assurance that all
      control issues and instances of fraud, if any, within the Company have been
      detected.




**Scope
      of Evaluation**




The
      CEO/CFO evaluation of the Company’s disclosure controls included a review of the
      controls’ objective and design, the controls’ implementation by the Company and
      the effect of the controls on the information generated for use in this report.
      In the course of the controls evaluation, management sought to identify data
      errors, controls problems or acts of fraud and to confirm that appropriate corrective action, including process movements, were being
      undertaken. This type of evaluation will be done on a quarterly basis so that
      the conclusions concerning controls effectiveness can be reported in the
      Company’s quarterly reports on Form 10-QSB and annual report on Form 10-KSB. The
      overall goals of these various review and evaluation activities are to monitor
      the Company’s disclosure controls and to make modifications as necessary. In
      this regard, the Company’s intent is that the disclosure controls will be
      maintained as dynamic controls systems that change (including improvements
      and
      corrections) as conditions warrant.




**Internal
      Control over Financial Reporting**




The
      Company maintains a system of internal control over financial reporting, which
      is defined as a process designed by, or under the supervision of, the Company’s
      principal executive officer and principal financial officer, or persons
      performing similar functions, and effected by the Company’s board of directors,
      management and other personnel, to provide reasonable assurance regarding the
      reliability of financial reporting and the preparation of financial statements
      for external purposes in accordance with generally accepted accounting
      principles and includes those policies and procedures that: (1) pertain to
      the
      maintenance of records that in reasonable detail accurately and fairly reflect
      the transactions and dispositions of the assets of the Company, (2) provide
      reasonable assurance that transactions are recorded as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the Company are
      being made only in accordance with authorizations of management and directors
      of
      the Company, and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use or disposition of the Company’s
      assets that could have a material effect on the financial
      statements.




The
      Company maintains accounting records that in reasonable detail accurately and fairly reflect
      the
      transactions and dispositions of the Company’s assets.
      T he
      Company has
      also established policies and procedures, including access controls, to p rovide
      reasonable assurance that transactions are recorded only as necessary to permit
      preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures are made only in
      accordance with authorizations of management and directors. Access
      to
      assets is permitted only in accordance with management’s general or specific
      authorization. In addition, the recorded accountability for assets is compared
      with the existing assets at reasonable intervals and appropriate action is
      taken
      with respect to any differences.




-26-
 **Table
          of Contents**




As
      of the
      date of this report, t here
      have
      been certain positive changes in the Company’s internal control procedures that
      have improved those controls and related material weaknesses. Recently,
      the Company hired two additional, experienced accounting staff and enlisted
      the
      services of an experienced accounting consultant to assist with financial
      reporting issues. The Company has also begun to document and apply transactional
      and periodic controls procedures, including periodic closing check lists and
      sign-offs, permitting a better review and approval process and improved quality
      of accounting reports. The Company has also begun to prepare to meet the more
      rigid requirements of the Sarbanes-Oxley Act of 2002, performing research and
      analysis of the controls over expenditures and revenue recognition.




It
      is the
      responsibility of the Company’s management to establish and maintain adequate
      internal control over financial reporting. However, due to its small size and
      limited financial resources, the Company’s CEO and CFO have been the only
      employees principally involved in accounting and financial reporting. At the
      time of the material weakness noted below, both the bookkeeper and the CFO
      worked independently, from their homes and there was limited opportunity for
      a
      review and approval process. The Company’s audit committee has recognized that,
      as a result, there was inadequate segregation of duties within the accounting
      function, leaving most aspects of financial reporting in the hands of the CEO
      and CFO. Although the Company has recently hired two experienced employees
      to
      help with accounting duties, they are new to the Company and have taken on
      only
      limited duties. They provide some degree of segregation of duties over cash,
      however, and have begun to help write and implement documented control
      procedures. Combined with procedures already in place, and the information
      that,
      except for the items noted below, no other material errors or irregularities
      were noted during repeated re-reviews, the Company’s audit committee has
      confidence that there have been no irregularities in the Company’s financial
      reporting or in the protection of its assets.




The
      Company’s independent auditors reported to the Company’s audit committee certain
      matters involving internal controls that the Company’s independent auditors
      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 the March 31, 2005,
      December 31, 2004 and 2003 financial close process and inadequate reviews and
      approvals of transactions and accounting entries as well as errors, related
      primarily to the accounting for stock options granted to consultants and
      advisory board members in lieu of compensation, which resulted in financial
      reports that are being restated for these periods. During those time periods,
      only a part-time CFO and bookkeeper provided the bulk of accounting controls
      and
      reports, with inadequate review and advisement concerning advanced accounting
      topics. The combination of this absence of a review and approval process,
      combined with the reporting errors, were sufficient to be deemed a material
      weakness. The adjustments related to these matters have been made by the Company
      in connection with the restatement of the audited financial statements for
      the
      year ended December 31, 2004 and 2003 and the quarterly statement for the period
      ended March 31, 2005. Although management has demonstrated certain improvements
      in controls over the preparation of its financial reports, as described above,
      these reported conditions and material weaknesses still exist, as the additional
      staff has only recently been hired, and new review procedures are incomplete
      and
      not all have been fully implemented. Management expects that most issues will
      be
      resolved by the time of the financial close process related to the filing of
      the
      Company’s Report on Form 10-KSB for the year ended December 31,
      2005.




Given
      these reportable conditions and material weakness, the Company’s management has
      devoted additional resources to resolving questions that arose during the audit
      review described above. The Company’s management believes that the reportable
      conditions noted above stem from the Company’s operational growth, and has
      committed to work closely with the Company’s audit committee to develop improved
      internal controls. Beginning over the summer of 2005, management committed
      to
      working with its audit committee to develop improved internal controls,
      including hiring additional accounting staff and documenting accounting control
      procedures in writing. The Company has also begun to prepare to meet the more
      rigid requirements of the Sarbanes-Oxley Act of 2002, performing analysis of
      the
      controls over expenditures and revenue recognition. Going forward, management
      is
      confident that the changes already begun, as well as other anticipated
      improvements, will correct any material issues. The costs associated with these
      efforts, primarily salaries and consulting fees, while material now, are not
      anticipated to be material to the Company when it achieves its anticipated
      revenue volumes in the coming years. Recently the Company hired two additional
      accounting staff, and it has begun to document and apply transactional and
      periodic controls procedures, permitting a better review and approval process
      and improved quality of accounting reports. The Company’s management believes
      that this new infrastructure will assist in alleviating control weaknesses
      going
      forward. As a result, the Company is confident that its financial statements
      for
      the three months ended March 31, 2005 and 2004, fairly present, in all material
      respects, its financial condition and results of operations.




-27-
 **Table
          of Contents**




Commencing
      with the fiscal year ending December 31, 2007, the Company will be required
      to
      document and test its internal control procedures in order to satisfy the
      requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires
      annual management assessments of the effectiveness of the Company’s internal
      controls over financial reporting and a report by the Company’s independent
      registered public accounting firm addressing these assessments. The Company’s
      accounting staff is small, and although the Company recently begun to augment
      its internal controls procedures and expand its accounting staff, there is
      no
      guarantee that this effort will be adequate. During the course of its testing,
      the Company may identify deficiencies which it may not be able to remediate
      in
      time to meet the deadline imposed by the Sarbanes-Oxley Act for compliance
      with
      the requirements of Section 404. In addition, if the Company fails to maintain
      the adequacy of its internal accounting controls, as such standards are
      modified, supplemented or amended from time to time, it may not be able to
      ensure that it can conclude on an ongoing basis that it has effective internal
      controls over financial reporting in accordance with Section 404. Failure to
      achieve and maintain an effective internal control environment could also cause
      investors to lose confidence in the Company’s reported financial
      information.




**PART
      II. OTHER INFORMATION**




**Item
              1.**
            **Legal
                Proceedings**




None




**Item
              2.**
            **Unregistered
                Sales of Equity
                Securities**





During
      the three months ended March 31, 2005, the Company issued a total of 224,900
      shares of its common stock in private placement sales at a price of $1.00 per
      share. These issuances were exempt from registration pursuant to Section 4(2)
      of
      the Securities Act.




**Item
              3.**
            **Defaults
                upon Senior
                Securities**





None




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





None




**Item
              5.**
            **Other
                Information**





None




**Item
              6.**
            **Exhibits
                and Reports on Form
                8-K**





(a)
            Exhibits




31.1
              Certification
                  of Chief Executive Officer required by Rule13(a)-14(a).


31.2
              Certification
                  of Chief Financial Officer required by Rule13(a)-14(a).


32.1
            Certifications
                required by Rule 13(a)-14(b) and 18 U.S.C.Section 1350.





(b)
            Reports
                on Form 8-K






-28-
 **Table
          of Contents**




**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.




**DEBT
                RESOLVE, INC.**Dated: 
                December 8, 2005
              By:
              /s/ JAMES
                D.
                BURCHETTAJames
                  D. Burchetta
                Co-Chairman and Chief Executive Officer
                (principal executive
                  officer)
  By:
                /s/ KATHERINE
                  A. DERINGKatherine
                    A.
                    Dering
                  Chief Financial Officer, Treasurer and
                    Secretary
                  (principal financial and accounting
                    officer)


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