**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-QSB**









(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,
                2006




 ̈
            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  ̈





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





As
      of May
      15, 2006, 29,703,900 shares of the issuer’s Common Stock were issued and
      outstanding.




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


















**DEBT
      RESOLVE, INC.**


(A
      Development Stage Company)




**TABLE
      OF CONTENTS**










Page**PART
                I. Financial Information**Item
                1. Condensed Financial Statements (Unaudited)Condensed
                Balance Sheet at March 31, 2006
            3Condensed
                Statements of Operations for the ThreeMonths Ended March 31, 2005 and 2006 andCumulative
                from Inception (April 21, 1997)to
                March 31, 2006
            4Condensed
                Statements of Cash Flows for the Three Months EndedMarch 31, 2005 and 2006 and Cumulative fromInception
                (April 21, 1997) to March 31, 2006
            5Notes
                to Condensed Financial Statements
            6Item
                2. Management’s Discussion and Analysis or Plan of
                Operation
            12Item
                3. Controls and Procedures
            18**PART
                II. Other Information**Item
                1. Legal Proceedings
            21Item
                2. Unregistered Sales of Equity Securities and Use of
                Proceeds
            21Item
                3. Defaults Upon Senior Securities
            21Item
                4. Submission of Matters to a Vote of Security Holders
            21Item
                5. Other Information
            21Item
                6. Exhibits and Reports on Form 8-K
            21Signatures
            22Certifications
            23


2




**PART
      I: FINANCIAL INFORMATION**




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







DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Condensed
      Balance Sheet


March
      31,
      2006


(Unaudited)




ASSETSCurrent
                  assets:Cash
              
              $
              2,417Accounts
                  receivable, net
              
              
              23,725Prepaid
                  expenses
              
              
              41,128Total
                  current assets
              
              
              67,270Fixed
                  assets, net
              
              
              142,533Other
                  assets:Deferred
                  financing costs
              
              
              152,555Deposits
                  and other assets
              
              
              93,605Total
                  other assets
              
              
              246,160Total
                  assets
              
              $
              455,963LIABILITIES
                  AND STOCKHOLDERS’ DEFICIENCYCurrent
                  liabilities:Accounts
                  payable
              
              $
              861,871Accrued
                  expenses
              
              
              223,317Loans
                  payable to stockholders
              
              
              350,000Loans
                  payable - other
              
              
              525,000Convertible
                  notes, net of deferred debt discount of $648,841
              
              
              2,346,159Total
                  liabilities
              
              
              4,306,347Commitments
                  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
              
              
              9,085,400Deferred
                  compensation
              
              
              (131,744
              )Deficit
                  accumulated during the development stage
              
              
              (12,833,744
              )Total
                  stockholders’ deficiency
              
              
              (3,850,384
              )Total
                  liabilities and stockholders’ deficiency
              
              $
              455,963





The
          accompanying notes are an integral part of these condensed financial
          statements.
 3





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 31,2005
            
            2006
            
            2006Revenues
            
            $
            1,661
            
            $
            27,264
            
            $
            53,650Costs
                and expenses:Payroll
                and related expenses
            
            
            242,476
            
            
            616,462
            
            
            3,782,211General
                and administrative expenses (1)
            
            
            624,348
            
            
            570,297
            
            
            5,160,330Waived
                royalty fees - related parties
            
            
            --
            
            
            --
            
            
            600,000Research
                and development expenses
            
            
            --
            
            
            --
            
            
            499,323Depreciation
                and amortization expenses
            
            
            7,470
            
            
            13,618
            
            
            104,590Total
                expenses
            
            
            874,294
            
            
            1,200,377
            
            
            10,146,454Loss
                from operations
            
            
            (872,633
            )
            
            (1,173,113
            )
            
            (10,092,804
            )Other
                income (expense):Terminated
                offering costs
            
            
            --
            
            
            --
            
            
            (736,037
            )Net
                interest income (expense)
            
            
            14
            
            
            (75,817
            )
            
            (179,771
            )Amortization
                of deferred debt discount
            
            
            --
            
            
            (520,135
            )
            
            (1,599,087
            )Amortization
                of deferred financing costs
            
            
            --
            
            
            (81,830
            )
            
            (230,045
            )Other
                income
            
            
            --
            
            
            1,500
            
            
            4,000Total
                other income (expense)
            
            
            14
            
            
            (676,282
            )
            
            (2,740,940
            )Net
                loss
            
            $
            (872,619
            )
            $
            (1,849,395
            )
            $
            (12,833,744
            )Per
                share data:Basic
                and diluted net loss per common share
            
            $
            (0.03
            )
            $
            (0.06
            )Basic
                and diluted weighted average number of common shares
                outstanding
            
            
            29,549,794
            
            
            29,703,900





(1)
            Stock
                based compensation totaled $427,812 and $56,406 in the three months
                ended
                March 31, 2005 and 2006, respectively, and $2,030,004 since
                inception.







The
          accompanying notes are an integral part of these condensed financial
          statements.
 4


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
                31,2005
            
            2006
            
            2006**Cash
                flows from operating activities:**Net
                loss
            
            $
            (872,619
            )
            $
            (1,849,395
            )
            $
            (12,833,744
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Non
                cash stock based compensation
            
            
            427,812
            
            
            56,406
            
            
            2,030,004Waived
                and imputed compensation, royalty and consulting fees
            
            
            75,000
            
            
            --
            
            
            1,983,809Amortization
                of deferred debt discount
            
            
            --
            
            
            520,135
            
            
            1,599,088Amortization
                of deferred financing costs
            
            
            --
            
            
            81,830
            
            
            230,045Terminated
                offering costs
            
            
            --
            
            
            --
            
            
            736,037Depreciation
                and amortization
            
            
            7,470
            
            
            13,618
            
            
            104,590Loss
                on disposal of fixed assets
            
            
            --
            
            
            --
            
            
            14,954Changes
                in operating assets & liabilitiesAccounts
                receivable
            
            
            (1,661
            )
            
            (16,759
            )
            
            (23,725
            )Prepaid
                expenses
            
            
            1,884
            
            
            45,877
            
            
            2,412Deposits
                and other assets
            
            
            --
            
            
            --
            
            
            (93,605
            )Accounts
                payable
            
            
            172,128
            
            
            241,216
            
            
            861,870Accrued
                expenses
            
            
            (1,000
            )
            
            104,082
            
            
            307,316Net
                cash used in operating activities
            
            
            (190,986
            )
            
            (802,990
            )
            
            (5,080,949
            )**Cash
                flows from investing activities:**Purchases
                of fixed assets
            
            
            --
            
            
            (4,169
            )
            
            (262,075
            )**Cash
                flows from financing activities:**Proceeds
                from issuance of convertible notes
            
            
            --
            
            
            300,000
            
            
            2,995,000Proceeds
                from issuance of common stock
            
            
            224,900
            
            
            --
            
            
            2,432,574Proceeds
                from loans-other
            
            
            --
            
            
            525,000
            
            
            525,000Proceeds
                from stockholders’ loans
            
            
            25,000
            
            
            --
            
            
            510,000Repayments
                of stockholders’ loans
            
            
            --
            
            
            --
            
            
            (60,000
            )Stock
                offering costs
            
            
            (107,389
            )
            
            --
            
            
            (823,783
            )Reimbursement
                of stock offering costs
            
            
            25,000
            
            
            --
            
            
            25,000Deferred
                financing costs
            
            
            --
            
            
            (39,000
            )
            
            (258,350
            )Net
                cash provided by financing activities
            
            
            167,511
            
            
            786,000
            
            
            5,345,441Net
                (decrease) increase in cash
            
            
            (23,475
            )
            
            (21,159
            )
            
            2,417Cash
                at beginning of period
            
            
            34,747
            
            
            23,576
            
            
            --Cash
                at end of period
            
            $
            11,272
            
            $
            2,417
            
            $
            2,417Non
                cash investing and financing activities:Conversion
                of stockholder’s loan to common stock
            
            $
            --
            
            $
            --
            
            $
            100,000Issuance
                of common stock for accrued compensation
            
            $
            --
            
            $
            --
            
            $
            84,000Issuance
                of warrants for deferred financing fees
            
            $
            --
            
            $
            --
            
            $
            109,414Capital
                contribution from waived royalty fees
            
            $
            --
            
            
            
            
            $
            $600,000Capital
                contribution from waived and imputed compensation
            
            $
            75,000
            
            $
            --
            
            $
            1,383,809


The
          accompanying notes are an integral part of these condensed financial
          statements.
 5


DEBT
      RESOLVE, INC.


(A
      Development Stage Company)


Notes
      to
      Condensed Financial Statements


March
      31,
      2006


(Unaudited)




NOTE
      1.  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 DebtResolve 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 DebtResolve 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 (“SFAS”) 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 development activities, and raising capital. In January
      2004, the Company substantially completed the development of an online system
      for the settlement of credit card and other consumer debt and began marketing
      its product to banks and other creditors. In February 2004, the Company
      implemented its online system, on a test basis, with a collection agency. In
      July 2004, the Company implemented its online system with a second client and
      began generating revenue based on a percentage of the amount of debt collected
      by this client. By the end of March 2006, the Company had thirteen clients
      under
      contract, seven of which were operational, however the Company has not earned,
      nor did it expect to generate, significant revenues from these clients during
      the initial start-up periods.





NOTE
      2.  GOING
      CONCERN AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:




Going
      concern and management plans





The
      accompanying condensed 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, 2006, the Company had incurred an accumulated deficit of $12,833,744. The
      Company has still not recorded any significant revenue, and its working
      capital is not sufficient to fund its plan of operations for the next twelve
      months.




6







During
      the year ended December 31, 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. In separate financing
      transactions in April 2005 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 5). The notes from the April 2005
      financing transaction matured on April 21, 2006. However all existing April
      2005
      bridge note holders have agreed to extend their notes to October 31, 2006.
      In
      addition, in compliance with the requirements of the June/September 2005 bridge
      note documents, a majority of these note holders have approved the April 2006
      Private Placement and have agreed to extend their notes to October 31, 2006.




On
      September 30, 2005, the Company filed a Registration Statement on Form SB-2
      with
      the Securities and Exchange Commission (“SEC”). The Company withdrew that
      registration statement on February 10, 2006.




During
      the three months ended March 31, 2006, the Company raised $525,000 through
      the
      issuance of short term notes with an interest rate of 2-1/2% per month, and
      with
      original maturities from April 30, 2006 to May 17, 2006. Subsequent
      to March 31, 2006, an investor holding $100,000 of these notes has extended
      the
      note’s maturity date to June 30, 2006, investors holding $125,000 of these notes
      have extended their respective maturity dates to April 17, 2007 and all of
      these
      investors have expressed their intention for these notes to be converted to
      the
      April 2006 Private Placement. (See Note 5). The remaining notes are
      past due and are considered to be in default. The Company is currently in
      negotiations with the remaining note holders to extend their terms.




On
      January 20, 2006, the Company entered into an agreement with an investment
      banking firm, Capital Growth Financial, LLC (“CGF”), whereby CGF agreed to serve
      as placement agent for a private financing consisting of the issuance of the
      Company’s senior convertible promissory notes. As of March 31, 2006, the Company
      had raised $300,000 under this offering (“the March 2006 Private Placement”)
      (See Note 5). The Company is currently in negotiation with the March 2006
      Private Placement investors to modify the terms of their notes to conform to
      the
      terms of the April Private Placement Supplement, dated April 20, 2006 (“the
      April 2006 Private Placement”). **** Also
      subsequent to March 31, 2006, the Company has raised approximately $840,000
      under the April 2006 Private Placement. (See Notes 5 and 9a). There is no
      assurance that the Company will be able to raise sufficient additional capital
      as needed to execute its business plan. The Company still has not recorded
      any
      significant revenue, and its working capital is not sufficient to fund its
      plan
      of operations for the next twelve months. The aforementioned factors raise
      substantial doubt about the Company’s ability to continue as a going concern.




On
      March
      10, 2006, the Company entered into a non-binding letter of intent with a
      privately held collection agency to explore the possibility of purchasing this
      company. The Company has not entered into any definitive agreements to purchase
      this collection agency as a result of this letter of intent, but is exploring
      the possibility of doing so. (See Note 4).




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 accounting principles generally accepted 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, 2006 are not necessarily indicative
      of the results that may be expected for the year ending December 31, 2006 or
      for
      any other interim period. These financial statements should be read in
      conjunction with the Company’s annual report on Form 10-KSB for the year ended
      December 31, 2005 filed on April 14, 2006.




Prior
      period adjustments/restatement




Effective
      August 16, 2005, the Company corrected two errors, (1) relating to stock based
      compensation expense for options granted to consultants and advisory board
      members for which the Company did not record a compensation charge during fiscal
      2003 and 2004 and the three months ended March 31, 2005, and (2) relating to
      reimbursement for deferred offering costs which had been improperly credited
      against general and administrative expenses rather than additional paid in
      capital.  In addition, the Company made a number of reclassifications
      within the various statements. The Company subsequently corrected the
      methodology it used to calculate the value of non-employee options to include
      a
      volatility figure derived from an index of comparable companies in accordance
      with SFAS No. 123. Amounts reflected herein for the three months ended March
      31,
      2005 represent the restated quarterly financial information included in the
      Form
      10-KSB/A which was filed with the SEC on April 14, 2006.




7









Reclassifications




Certain
      amounts in the financial statements for the three months ended March 31, 2005
      have been reclassified for comparative purposes to conform to the presentation
      in the financial statements for the three months ended March 31, 2006.




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 2006 and since inception from several collection
      agencies and lenders that 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, most 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 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 a combination of set up fees or monthly
      licensing fees with transaction fees upon debt settlement.




Stock-based
      compensation




Prior
      to
      January 1, 2006, stock options issued under stock-based compensation plans
      were
      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 was reflected
      in the net loss for prior periods, 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, required
      the
      disclosure of the effect on net loss and loss per share had the Company applied
      the provisions of FASB Statement No. 123, Accounting for Stock-Based
      Compensation, to stock-based employee compensation. Since there is no public
      market for the Company’s stock, the Company did not consider volatility in
      estimating the value of each option; the Company followed the minimum value
      method. The minimum value of each option granted to employees was 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. The estimated
      minimum value of the options granted is amortized on a proforma basis over
      the
      option vesting periods. The Company accounted for stock-based compensation
      issued to non-employees using the fair value method.




Beginning
      on January 1, 2006, the Company accounts for stock options issued under
      stock-based compensation plans under the recognition and measurement principles
      of Statement of Financial Accounting Standards No. 123 - Revised. The Company
      has adopted the modified prospective transition method and therefore, has not
      restated prior periods’ results. Under this transition method, there was no
      impact to the condensed financial statements for the three months ended March
      31, 2006 on net loss or basic and diluted net loss per share, as all previously
      granted options vested prior to adoption and there were no new issuances during
      the period. The fair value of each option granted to employees and non-employees
      will be estimated as of the grant date using the Black-Scholes option pricing
      model. The estimated fair value of the options granted will be recognized as
      an
      expense over the requisite service period of the award, which is generally
      the
      option vesting period.




8







The
      following table illustrates the pro forma effects on net loss and net loss
      per
      common share for the three months ended March 31, 2005 and the period from
      inception (April 21, 1997 to March 31, 2006) as if the Company had implemented
      FASB Statement No. 123 and recorded an expense for stock-based compensation
      issued to employees.









Three
                months ended March 31, 2005
            
            Cumulative
                from inception (April 21, 1997) to March 31, 2006Net
                loss - as reported
            
            $
            (872,619
            )
            $
            (12,833,744
            )Deduct:
                Stock based employee compensation expense determined under minimum-value
                based methods for all awards
            
            
            1,356
            
            
            589,220Net
                loss - pro forma
            
            $
            (873,975
            )
            $
            (13,422,964
            )Basic
                and diluted net loss per common share - as reported
            
            $
            (0.03
            )Basic
                and diluted net loss per common share - pro forma
            
            $
            (0.03
            )Basic
                and diluted weighted average number of common shares
                outstanding
            
            
            29,549,794








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, warrants and convertible debentures of 8,533,333, 4,506,588
      and 7,242,078, respectively at March 31, 2006 and 7,533,333, 1,000,000 and
      -0-,
      respectively at March 31, 2005, are excluded from the computation of diluted
      net
      loss per share as their inclusion would be antidilutive. Potentially dilutive
      securities noted above exclude options to be issued under the amended and
      restated licensing agreement (see Note 3) and options relating to the anti
      dilution provision (see Note 3).




NOTE
      3.  LETTER
      OF
      INTENT AND REGISTRATION STATEMENT ON FORM SB-2:




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 January 20, 2006, the Company entered into
      an
      agreement with a second investment banking firm to be placement agent for a
      private debt financing. Subsequent to that date, this second firm has also
      indicated its intention to be co-underwriter for a potential initial public
      offering (“IPO”). The Company has not entered into any definitive agreements to
      raise capital in the public equity markets as a result of these agreements,
      but
      is exploring the possibility of doing so. On September 30, 2005, the Company
      filed a Registration Statement on Form SB-2 and on December 9, 2005 filed
      Amendment No. 1 to the Registration Statement on Form SB-2/A with the Securities
      and Exchange Commission. On February 10, 2006, the Company withdrew the
      Registration Statement on Form SB-2. Management of the Company has indicated
      that it intends to file a new registration statement at a future date that
      has
      not yet been determined. However, there can be no assurance that the Company
      will be able to raise additional capital in the public equity markets.




Also
      in
      connection with this potential public offering, 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 with an investor to that effect. Management of
      the
      Company has indicated that it intends to issue stock options to purchase common
      stock to certain employees and consultants of the Company in a quantity
      sufficient to restore some portion of their pre-offering value. 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.




9







Also
      in
      connection with this potential public offering, as well as in connection with
      a
      licensing agreement, the Co-Chairmen of the Company will be issued options
      sufficient to bring their ownership to a combined 29.2% of the total number
      of
      outstanding shares of common stock on a fully diluted basis as of the closing
      of
      a potential public offering, assuming the exercise of such options.




NOTE
      4.
      LETTER OF INTENT- POTENTIAL ACQUISITION:




On
      March
      10, 2006, the Company entered into a non-binding letter of intent with a
      privately held collection agency to explore the possibility purchasing this
      company. The tentative terms of the potential acquisition would include a
      purchase price of $13 million, with $10 million payable at the time of an IPO
      and the remaining $3 million to be paid with a note, payable at 12% interest
      with amortization of $500,000 every six months. The Company has not entered
      into
      any definitive agreements to purchase this collection agency as a result of
      this
      letter of intent, but is exploring the possibility of doing so.




NOTE
      5.  CONVERTIBLE
      NOTES:




In
      April
      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. The notes from the April 2005 financing transaction matured on April
      21,
      2006. However all existing April 2005 bridge note holders have agreed to extend
      their notes to October 31, 2006. The notes contain a provision that in the
      event
      the Company raises $4 million in equity financing, or debt financing convertible
      to equity, the holders of these notes will receive shares based on 115% of
      the
      balance of these notes, and the notes will be convertible into 2,164,706 shares
      of common stock.




In
      June
      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. In September 2005, the Company received
      proceeds from an additional 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. In compliance with the requirements of the June/September 2005 bridge
      note documents, a majority of these note holders have approved the April 2006
      Private Placement and have agreed to extend their notes to October 31, 2006.




On
      March
      15, 2006 the Company initiated the March 2006 Private Placement involving the
      issuance of 12% convertible promissory notes due one year from the date of
      issuance. As of March 31, 2006, the Company had raised $300,000 under this
      offering. These notes are convertible at any time at the option of the holder
      into shares of common stock at a price of $0.33 per share. If the Company raises
      the maximum $3,500,000 contemplated by this private financing (not including
      the
      $1,000,000 over allotment option), an aggregate of approximately 1,050,000
      shares of common stock will be issuable, upon the consummation of a potential
      public offering, at a conversion ratio equal to 66.67% of an assumed initial
      public offering price of $5.00 per share. The Company is currently in
      negotiation with the March 2006 Private Placement investors to modify the terms
      of their notes to conform to the terms of the April Private Placement
      Supplement, dated April 20, 2006 (“the April 2006 Private
      Placement”). **** (See
      Note
      9a).




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 is expected to be less than
      the initial public offering price. The Company recorded a beneficial conversion
      feature and a deferred debt discount in connection with the value of the April,
      June and September 2005 notes and related investor warrants in the amount of
      $2,097,478, using the fair value method. In addition, the Company has recorded
      a
      beneficial conversion feature in connection with the value of the March 2006
      notes in the amount of $150,451. These amounts are being amortized over the
      life
      of the respective notes. During the three months ended March 31, 2006, the
      Company recorded amortization of the beneficial conversion feature and debt
      discount in the amount of $520,135. Per the terms of the note agreements, the
      Company shall use its best efforts to register the underlying common stock
      and
      warrants in conjunction with a potential future IPO. In accordance with EITF
      00-19, “Accounting for Derivative Financial Instruments Indexed to and
      Potentially Settled in, a Company’s Own Stock,” there are no factors that would
      prohibit equity classification relating to the embedded conversion option or
      the
      warrants.




10







The
      Company incurred costs in conjunction with the April, June and September 2005
      notes and the March 2006 Private Placement. Total cash fees associated with
      the
      April, June and September 2005 notes were $219,350. In addition, the placement
      agent was issued warrants to purchase 336,000 shares of common stock valued
      at
      $109,414. Total cash fees associated with the March 2006 notes were $39,000.
      In
      addition, the Company accrued an expense of $14,836 for the value of placement
      agent warrants issued in connection with this financing. The total of fees
      and
      the value of the warrants have been recorded as deferred financing costs and
      are
      being amortized over the life of the notes. Amortization of deferred financing
      costs totaled $81,830 for the three months ended March 31, 2006 and $230,045
      since inception.




NOTE
      6.  LOANS
      PAYABLE - OTHER:





In
      order
      to provide for certain cash requirements, the Company borrowed $525,000 in
      the
      first quarter of 2006 from new investors and existing noteholders of the
      Company, at an interest rate of 2 1/2% per month, with maturity dates from
      April
      30, 2006 to May 17, 2006. Subsequent to March 31, 2006, an investor holding
      $100,000 of these notes has extended the note’s maturity date to June 30, 2006,
      investors holding $125,000 of these notes have extended their respective
      maturity dates to April 17, 2007 and all of these investors have expressed
      their
      intention for these notes to be converted to the April 2006 Private
      Placement.  (See Note 5). The remaining notes are past due and considered
      to be in default. The Company is currently in negotiations with the
      remaining note holders to extend their terms.




NOTE
      7.  STOCKHOLDERS’
      DEFICIENCY:




During
      the three months ended March 31, 2006, the Company recorded compensation expense
      of $56,406 representing the amortized amount of the fair value of options
      granted to advisory board members in 2003, 2004 and 2005.




NOTE
      8.  RECENTLY
      ISSUED ACCOUNTING PRONOUNCEMENTS:






In
      February 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement of Financial Accounting Standard 155 - Accounting for Certain Hybrid
      Financial Instruments (“SFAS 155”), which eliminates the exemption from applying
      SFAS 133 to interests in securitized financial assets so that similar
      instruments are accounted for similarly regardless of the form of the
      instruments. SFAS 155 also allows the election of fair value measurement at
      acquisition, at issuance, or when a previously recognized financial instrument
      is subject to a remeasurement event. Adoption is effective for all financial
      instruments acquired or issued after the beginning of the first fiscal year
      that
      begins after September 15, 2006. Early adoption is permitted. The adoption
      of SFAS 155 is not expected to have a material effect on the Company’s financial
      position, results of operations or cash flows.






In
      March 2006, the FASB issued Statement of Financial Accounting Standard 156
      - Accounting for Servicing of Financial Assets (“SFAS 156”), which requires all
      separately recognized servicing assets and servicing liabilities be initially
      measured at fair value. SFAS 156 permits, but does not require, the subsequent
      measurement of servicing assets and servicing liabilities at fair value.
      Adoption is required as of the beginning of the first fiscal year that begins
      after September 15, 2006. Early adoption is permitted. The adoption of SFAS
      156 is not expected to have a material effect on the Company’s financial
      position, results of operations or cash flows.




NOTE
      9.  SUBSEQUENT
      EVENTS:




a.  Convertible
      Note Offering Supplement




On
      April
      20, 2006, the Company initiated the April 2006 Private Placement involving
      the
      issuance of 15% Convertible Promissory notes due April 30, 2007 or upon closing
      of a potential IPO. If the Company raises the maximum $3,000,000 contemplated
      by
      this private financing (not including the $1,000,000 over allotment option),
      an
      aggregate of approximately 428,571 shares of common stock will be issuable,
      assuming a 1-for10 reverse stock split, upon the consummation of a potential
      public offering, of 50% of the note balance at a conversion ratio equal to
      70%
      of an assumed initial public offering price of $5.00 per share. In addition,
      for
      each dollar invested each investor is to be issued three, three-year warrants
      to
      purchase shares of the Company’s stock at $0.01 per share. Warrants to purchase
      up to 9,000,000 shares of the Company’s stock may be issued in this offering
      (not including warrants which may be issued for the over-allotment option).
      CGF
      acted as the placement agent in the March 2006 Private Placement and the April
      2006 Private Placement. CGF is entitled to cash fees of 13% of the gross
      proceeds raised and common stock warrants to purchase such number of shares
      as
      equals 10% of the equity underlying the notes. Subsequent to March 31, 2006,
      the
      Company has raised an additional $840,000 under this offering.




11







b.  Anti
      dilution provisions




As
      a
      result of the exercise price of the March 2006 Private Placement and the April
      2006 Private Placement, the anti-dilution provisions in the Company’s 7%
      convertible bridge offerings in April, June and September of 2005 will require
      that the Company reduce the conversion price of the earlier convertible note
      offerings to a price lower than the $4.25 originally specified. The exercise
      price of the warrants associated with those earlier notes will also be reduced.




c.  Authorized
      shares and reverse stock split




On
      April
      27, 2006, the Company’s board of directors and holders of a majority of the
      Company’s outstanding shares of common stock approved an amendment
      to the Company’s certificate of incorporation to increase the number of the
      Company’s authorized shares of common stock from 50,000,000 to 100,000,000
      shares.  This amendment will become effective upon filing with the Delaware
      Secretary of State following compliance with applicable filing and stockholder
      notification requirements pursuant to Delaware law and the Securities Exchange
      Act of 1934.  Also on April 27, 2006, the Company’s board of directors and
      holders of a majority of the Company’s outstanding shares of common stock
      approved a reverse stock split, which would become effective prior to the
      closing of a potential initial public offering (“IPO”).




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




**Overview**




The
      Company is 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. At March 31, 2006,
      the Company had thirteen clients under contract, seven of which were
      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.




12







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 debt offerings.




The
      Company’s preliminary contracts provide that it will earn revenue based on a
      percentage of the amount of debt collected from accounts submitted on its
      DebtResolve system. Revenue is earned and recognized when the settlement amount
      of debt is collected by its client. While the percent of debt collected will
      continue to be one revenue recognition method going forward, other payment
      models are also being offered to clients and may possibly become the Company’s
      preferred revenue model. Most contracts currently in process base revenue on
      a
      monthly licensing fee per account with a small transaction fee on settlement.




**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 $2,417 in cash
      at
      March 31, 2006. The Company’s working capital is not sufficient to fund its plan
      of operations for the next twelve months. 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. On February 10, 2006 the Company withdrew that filing.
      Although the Company intends to refile, there can be no assurance that it will
      be able to raise sufficient additional capital as needed to execute its business
      plan. In order to provide for certain cash requirements, the Company borrowed
      $525,000 in the first quarter of 2006 from new investors and existing
      noteholders of the Company, with an interest rate of 2-1/2% per month, with
      maturity dates from April 30, 2006 to May 17, 2006. Subsequent to March 31,
      2006, an investor holding $100,000 of these notes has extended the note’s
      maturity date to June 30, 2006, investors holding $125,000 of these notes have
      extended their respective maturity dates to April 17, 2007 and all of these
      investors have expressed their intention for these notes to be converted to
      the
      April 2006 Private Placement. The remaining notes are past due and are
      considered to be in default. The Company is currently in negotiations with
      the
      remaining note holders to extend their terms.





On
      January 20, 2006, the Company entered into an agreement with an investment
      banking firm, Capital Growth Financial, LLC (“CGF”), whereby CGF agreed to serve
      as placement agent for a private financing consisting of the issuance of the
      Company’s senior convertible promissory notes. As of March 31, 2006, the Company
      had raised $300,000 under this offering (“the March 2006 Private Placement”).
      The Company is currently in negotiation with the March 2006 Private Placement
      investors to modify the terms of their notes to conform to the terms of the
      April Private Placement Supplement, dated April 20, 2006 (“the April 2006
      Private Placement”). **** The
      April
      2006 Private Placement involves the issuance of 15% convertible promissory
      notes
      due April 30, 2007, or upon closing of a potential IPO. Subsequent to March
      31,
      2006, the Company has raised approximately $840,000 under the April 2006 Private
      Placement. If the Company raises the maximum $3,000,000 contemplated by the
      April 2006 Private Placement (not including the $1,000,000 over allotment
      option), an aggregate of approximately 428,571 shares of common stock will
      be
      issuable, assuming a 1-for-10 reverse stock split, upon the consummation of
      a
      potential public offering, of 50% of the note balance at a conversion ratio
      equal to 70% of an assumed initial public offering price of $5.00 per share.
      In
      addition, for each dollar invested each investor is to be issued three,
      three-year warrants to purchase shares of the Company’s stock at $0.01 per
      share. Warrants to purchase up to 9,000,000 shares of the Company’s stock may be
      issued in this offering, (not including warrants which may be issued for the
      over-allotment option). CGF acted as the placement agent in the March 2006
      Private Placement and the April 2006 Private Placement and CGF is entitled
      to
      cash fees of 13% of the gross proceeds raised and common stock warrants to
      purchase such number of shares as equals 10% of the equity underlying the notes.




There
      can
      be no assurance that the company’s private placements will be successful. If the
      Company is unable to raise sufficient additional capital, it will have to
      develop and implement a plan to eliminate staff and 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.




13







**Results
      of Operations**




***Three
      Months ended March 31, 2006 Compared to Three Months ended March 31,
      2005***




**Revenues**




Revenue
      totaled $27,264 and $1,661 for the three months ended March 31, 2006 and 2005,
      respectively. The Company earned revenue during the three months ended March
      31,
      2006 from collection agencies, a lender and a bank that implemented the
      Company’s online system. Revenue in 2006 was earned partly through licensing
      fees, some start-up fees and also based on a percentage of the amount of debt
      collected from accounts placed on the Company’s online system. Revenue in 2005
      was based solely 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 $616,462 for the three months ended March 31,
      2006,
      an increase of $373,986 over payroll and related expenses of $242,476 for the
      three months ended March 31, 2005, due primarily to an increase in staffing,
      net
      of a reduction in imputed salary expense, due to a change in the employment
      agreement with a key executive of the Company. For the three months ended March
      31, 2005, the imputed salary expenses were $112,500 for the minimum base salary
      amounts under the employment agreements with the Chief Executive Officer and
      the
      General Counsel. No salary payments were made to these executives during the
      three months ended March 31, 2005, and the Company recorded their imputed
      compensation as a capital contribution. In 2006, the Chief Executive Officer’s
      salary was paid and /or accrued. The General Counsel is no longer with the
      Company. The increase in staffing in 2006 compared to 2005 includes a Chief
      Financial Officer, a sales staff, additional programmers and client services
      staff, to accommodate the Company’s possible business growth. In addition, 2006
      expenses include higher social security taxes, relocation costs, 401(k) match
      expense and higher health insurance costs, associated with increased staffing
      levels.




**General
      and administrative expenses** .
      General
      and administrative expenses including stock-based compensation totaled $570,297
      for the three months ended March 31, 2006, a decrease of $54,051 compared to
      general and administrative expenses of $624,348 for the three months ended
      March
      31, 2005. The decrease in 2006 compared to 2005 is due primarily to the decrease
      in non-cash stock based compensation expense, which was $56,406 for the three
      months ended March 31, 2006, a decrease of $371,406 compared to such expenses
      of
      $427,812 during the three months ended March 31, 2005. The impact of this
      decrease was largely offset by higher expenses in most other general and
      administrative categories including legal expense of $141,973 for the three
      months ended March 31, 2006, which was $131,922 higher than legal fees of
      $10,051 for the three months ended March 31, 2005; travel related expense of
      $74,343 for the three months ended March 31, 2006, which was $55,655 higher
      than
      travel related expenses of $18,688 for the three months ended March 31, 2005
      due
      to a larger sales force; occupancy costs of $36,089 for the three months ended
      March 31, 2006, which was $19,308 higher than occupancy costs of $16,781 for
      the
      three months ended March 31, 2005 due to the move to a new office;
      telecommunication expenses of $70,932 for the three months ended March 31,
      2006,
      which was $10,786 higher than telecommunication expense of $60,146 for the
      three
      months ended March 31, 2005; and audit and accounting fees, which increased
      to
      $86,125 for the three months ended March 31, 2006, up $50,661 from $35,464
      of
      such fees for the three months ended March 31, 2005. Other expenses also
      increased by approximately $48,000.




**Interest
      Income (expense).** Interest
      expenses totaled $75,817 for the three months ended March 31, 2006, compared
      to
      interest income of $14 for the three months ended March 31, 2005. Interest
      expense for the three months ended March 31, 2006 includes interest accrued
      on
      the Company’s 7% convertible notes and 12% convertible notes, as well as
      interest accrued on $875,000 in other short term notes.




14







**Amortization
      of deferred debt discount.** Amortization
      expense of $520,135 was incurred for the three months ended March 31, 2006
      for
      the amortization of the value of the beneficial conversion feature and deferred
      debt discount associated with the Company’s convertible note offerings.




**Amortization
      of deferred financing costs.**  Amortization
      expense of $81,830 was incurred for the three months ended March 31, 2006 for
      the amortization of deferred financing costs associated with the Company’s
      convertible note offerings.




**Critical
      Accounting Policies and Estimates**





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
      our continuation as a going concern. As of March 31, 2006, we had incurred
      an
      accumulated deficit of $12,833,744 and our working capital was not sufficient
      to
      fund our plan of operations for the next twelve months. In separate financing
      transactions in April 2005 and June/September of 2005, we received  proceeds
      from the issuance of our 7% convertible promissory notes in the total aggregate
      principal amount of $2,695,000. The notes from the April 2005 financing
      transaction matured on April 21, 2006. However, all existing April 2005 bridge
      note holders have agreed to extend their notes to October 31, 2006. In addition,
      in compliance with the requirements of the June/September 2005 bridge note
      documents, a majority of these note holders have approved the April 2006 Private
      Placement and have agreed to extend their notes to October 31, 2006.




During
      the year ended December 31, 2005, we 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, we filed a
      Registration Statement on Form SB-2 with the Securities and Exchange Commission.
      We withdrew that registration statement on February 10, 2006, and we are
      currently seeking to complete a private financing consisting of the issuance
      of
      senior convertible promissory notes.




During
      the three months ended March 31, 2006, we raised $525,000 through the issuance
      of short term notes with an interest rate of 2-1/2% per month, and with original
      maturities from April 30, 2006 to May 17, 2006. Subsequent to March 31, 2006,
      an
      investor holding $100,000 of these notes has extended the note’s maturity date
      to June 30, 2006, investors holding $125,000 of these notes have extended their
      respective maturity dates to April 17, 2007 and all of these investors have
      expressed their intention for these notes to be converted to the April 2006
      Private Placement. The remaining notes are past due and are considered to
      be in default. We are currently in negotiations with the remaining note holders
      to extend their terms.




From
      November 2005 through March 2006, we have raised $1,225,000 through this and
      other private debt offerings, of which $400,000 was raised from existing
      stockholders. However, we cannot assure you that we will be able to raise
      sufficient additional capital as needed to execute our business plan. We still
      have not recorded any significant revenue, and our working capital is not
      sufficient to fund our plan of operations for the next twelve months.




On
      January 20, 2006, we entered into an agreement with CGF, whereby CGF agreed
      to
      serve as our placement agent for a private financing consisting of the issuance
      of senior convertible promissory notes. As of March 31, 2006, we have raised
      $300,000 under this offering. The Company is currently in negotiation with
      the
      March 2006 Private Placement investors to modify the terms of their notes to
      conform to the terms of the April Private Placement Supplement, dated April
      20,
      2006 (“the April 2006 Private Placement”). **** If
      the
      Company raises the maximum $3,000,000 contemplated by the April private
      financing (not including the $1,000,000 over allotment option), an aggregate
      of
      approximately 428,571 shares of common stock will be issuable, assuming a
      1-for-10 reverse stock split, upon the consummation of a potential public
      offering, of 50% of the note balance at a conversion ratio equal to 70% of
      an
      assumed initial public offering price of $5.00 per share. In addition, for
      each
      dollar invested each investor is to be issued three, three-year warrants to
      purchase shares of the Company’s stock at $0.01 per share. Warrants to purchase
      up to 9,000,000 shares of the Company’s stock may be issued in this offering,
      (not including warrants which may be issued for the over-allotment option).
      CGF
      acted as the placement agent in the March 2006 Private Placement and the April
      2006 Private Placement and CGF is entitled to cash fees of 13% of the gross
      proceeds raised and common stock warrants to purchase such number of shares
      as
      equals 10% of the equity underlying the notes.  Also
      subsequent to March 31, 2006, the Company has raised approximately $840,000
      under the April 2006 Private Placement.




15







If
      our
      private financing is unsuccessful, and if we are unable to raise sufficient
      additional capital, we will have to develop and implement a plan to extend
      payables and eliminate staff and overhead until sufficient additional capital
      is
      raised to support further operations. We cannot assure you that such a plan
      will
      be successful. These factors continue to raise substantial doubt about our
      ability to continue as a going concern.




Imputed
      salary expense




Under
      the
      terms of employment agreements we have had with our Co-Chairman and Chief
      Executive Officer and with our Executive Vice President, General Counsel and
      Secretary during the three months ended March 31, 2005, we did not pay these
      officers a salary, due to certain conditions as specified in the agreements.
      We
      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 we had met the condition for paying their salaries.
      During the three months ended March 31, 2006, the terms of these employment
      agreements had changed. Beginning April 1, 2005, the Co-Chairman and Chief
      Executive Officer began to draw a salary. The Executive Vice President, General
      Counsel and Secretary left our employ effective June 30, 2005.




Research
      and development




We
      follow
      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 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 our online software product prior to establishing technological
      feasibility. In January 2004, we substantially completed the development of
      and
      began marketing our online product. In our 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, 2005 and 2006, costs incurred in connection with the operation, maintenance,
      modification, and customization of our 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, we use 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.




16







Stock-based
      compensation




Prior
      to
      January 1, 2006, stock options issued under stock-based compensation plans
      were
      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 was reflected
      in the net loss for prior periods, 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, required
      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 to employees was 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
      our
      stock, we did not consider volatility in estimating the value of each option
      granted to employees; we followed the minimum value method. The estimated
      minimum value of the options granted is amortized on a proforma basis over
      the
      option vesting periods. The Company accounted for stock-based compensation
      issued to non-employees using the fair value method.




Beginning
      on January 1, 2006, we account for stock options issued under stock-based
      compensation plans under the recognition and measurement principles of Statement
      of Financial Accounting Standards No. 123 - Revised. We have adopted the
      modified prospective transition method and therefore, havenot restated prior
      periods’ results. Under this transition method, there was no impact to the
      condensed financial statements for the three months ended March 31, 2006 on
      net
      loss or basic and diluted net loss per share, as all previously granted options
      have vested prior to adoption and there were no new issuances during the period.
      The fair value of each option granted to employees and non-employees will be
      estimated as of the grant date using the Black-Scholes option pricing model.
      The
      estimated fair value of the options granted will be recognized as an expense
      over the requisite service period of the award, which is generally the option
      vesting period. The fair value of each option granted will be estimated as
      of
      the grant date using the Black-Scholes option pricing model with the following
      assumptions: dividend yield of 0%, expected volatility of 96.7%, risk-free
      interest rates for individual options in accordance with the accounting
      pronouncement and will expense that fair value over the vesting period of the
      options. Since there is no public market for our stock, we use a volatility
      measure based on an average volatility of the stock of five comparable companies
      during their first five years as a publicly traded company in estimating the
      value of each option.




**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.




17







**Item
      3. Controls and Procedures**




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




As
      of the
      conclusion of the three months ended March 31, 2006 ,
      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.




**Disclosure
      controls and procedures**




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




Based
      on
      their evaluations as of the conclusion
      of the three months ended March 31 ,
      2006, the
      CEO and CFO concluded that the Company’s disclosure controls were not effective at the
“reasonable assurance” level. The ineffectiveness of these disclosure controls
      is due to the matters described below in “Internal Control over Financial
      Reporting.”




Management,
      including the CEO and CFO, does not expect that our 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 a company have been
      detected.




The
      CEO’s and CFO’s evaluation of the Company’s disclosure controls included a
      review of the controls’ objective and design, the controls’ implementation and
      the effect of the controls on the information generated for use in this periodic
      SEC 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 quarterly
      reports on Form 10-QSB and annual reports on Form 10-KSB. The overall goals
      of
      these various review and evaluation activities are to monitor 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**





Effective
      internal controls are necessary to provide reliable financial reports and
      effectively prevent fraud. 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 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:




18





·
              pertain
                  to the maintenance of records that in reasonable detail accurately
                  and
                  fairly reflect the transactions and dispositions of the Company’s assets,
  ·
              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 are being
                  made
                  only in accordance with authorizations of our management and directors,
                  and
  ·
              provide
                  reasonable assurance regarding prevention or timely detection of
                  unauthorized acquisition, use or disposition of assets that could
                  have a
                  material effect on the financial statements.


The
      Company maintain s
      accounting records that in reasonable detail accurately and fairly reflect
      the
      transactions and dispositions of its  assets. The
      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
      the Company’s 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.




The
      Company independent registered public accounting firm has reported to our audit
      committee certain matters involving internal controls that this firm considered
      to be reportable conditions and a material weakness, under standards established
      by the American Institute of Certified Public Accountants. The reportable
      conditions and material weakness relate to 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 were restated
      for prior periods. The combination of an absence of an adequate 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
      years ended December 31, 2004 and 2003. Subsequently,
      during the year ended December 31, 2005, the Company further determined that
      it
      had improperly calculated and disclosed the expense of options granted to
      non-employees. It had used the minimum value method instead of the fair value
      method. Accordingly, it filed, on March 30, 2006, an amended report on Form
      10-KSB/A No. 2 for the year ended December 31, 2004 to report the corrected
      expense of these options for the years ended December 31, 2004 and 2003. In
      addition, this report includes amended data for the first three quarterly
      periods of the year ended December 31, 2005. Although
      management has demonstrated certain improvements in controls over the
      preparation of the Company’s financial reports, as described above, these
      reported conditions and material weaknesses still exist, as the accounting
      staff
      remains small and does not include the professional expertise to stay abreast
      of
      new accounting pronouncements. In
      addition, due to limited staffing, the Company is not always able to detect
      minor errors or omissions in reporting.




The
      Company believes it has begun to make changes in its internal control procedures
      that have improved those controls and related material weakness. Specifically,
      experienced accounting staff was hired, and the Company has 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 checklists and
      sign-offs, permitting a better review and approval process and improved quality
      of accounting reports. It has also begun to perform research and analysis of
      the
      controls over expenditures and revenue recognition. Based
      on procedures already in place and the fact that, except for the items noted
      below, no other material errors or irregularities were noted during repeated
      reviews, the Company’s audit committee has expressed its belief that there have
      been no irregularities in the company’s financial reporting or in the protection
      of its assets.




Management
      believes that the reportable conditions noted above stem from its operational
      growth. Beginning during the summer of 2005, management committed to working
      with the audit committee to develop improved internal controls, including hiring
      additional accounting staff and documenting written accounting control
      procedures. It has also begun to prepare to meet the more rigid requirements
      of
      Section 404 of the Sarbanes-Oxley Act of 2002, performing analysis of the
      controls over expenditures and revenue recognition. Going forward, management
      anticipates that the changes already begun, as well as other planned
      improvements, will correct any material issues. Recently, 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.
      Management believes that this new infrastructure will assist in alleviating
      control weaknesses going forward. As a result, management believes that its
      financial statements for the three months ended March 31, 2005 and 2006, fairly
      present, in all material respects, its financial condition and results of
      operations.




19







Commencing
      the 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 internal controls over financial reporting
      and a report by the independent registered public accounting firm addressing
      these assessments. The Company’s accounting staff is small, and although it
      recently begun to augment our internal controls procedures and expand its
      accounting staff, there is no guarantee that this effort will be adequate.
      During the course of its testing, management 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.




**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”).




20







**PART
      II. OTHER INFORMATION**




**Item
      1. Legal Proceedings**





None





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





None





**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)
            Exhibits31.1
            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





21





**SIGNATURES**




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







Dated:
      May 22, 2006


**DEBT
              RESOLVE, INC.**By:
              /s/ JAMESD.
              BURCHETTAJames
                D. Burchetta
              Co-Chairman
                and Chief Executive Officer
              (principal
                executive officer)




By: /s/ KATHERINEA.DERINGKatherine
                A. Dering
              Chief
                Financial Officer, Treasurer, and Secretary
              (principal
                financial and accounting officer)   22