**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


WASHINGTON,
      D.C. 20549





FORM
      10-QSB





(MARK
      ONE)





x
            QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006
                OR





o
            TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                ACT OF
                1934 FOR THE TRANSITION PERIOD FROM _________ TO
                __________





COMMISSION
      FILE NUMBER: 000-23889





_______________





**BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.**


(EXACT
      NAME OF REGISTRANT AS SPECIFIED IN CHARTER)





**DELAWARE**
            
            **76-0553110**(STATE
                OF OTHER JURISDICTION OF
            
            (I.R.S.
                EMPLOYERINCORPORATION
                OR ORGANIZATION) IDENTIFICATION
                NO.)




**6160
                STONERIDGE MALL ROAD, SUITE 250, PLEASANTON, CALIFORNIA 94588**(ADDRESS
                OF PRINCIPAL EXECUTIVE
                OFFICES)  (ZIP
                CODE)








REGISTRANT'S
      TELEPHONE NUMBER, INCLUDING AREA CODE: **(925) 251-0000**





_______________





Indicate
      by check mark whether the Registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      preceding 12 months (or for such shorter period that the Registrant was required
      to file such reports), and (2) has been subject to such filing requirements
      for
      the past 90 days. Yes x No o .





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





The
      number of shares of Common Stock of the Registrant, par value $.001 per share,
      outstanding at July 31, 2006 was 209,707,518.





Transitional
      Small business Disclosure Format (Check one): Yes o ;
      No x .










BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.


INDEX
      TO
      JUNE 30, 2006 FORM 10-QSB





Page**Part
                I - Financial Information**Item
                1 - Financial Statements (unaudited)Balance
                Sheet - June 30, 2006
            
            3Statements
                of Operations - For the three and six months ended June 30, 2006
                and June
                30, 2005
            
            4Statements
                of Cash Flows - For the six months ended June 30, 2006 and June 30,
                2005
            
            5Notes
                to Financial Statements
            
            6Item
                2 - Management's Discussion and Analysis of Results of Operations
                and
                Financial Condition
            
            11Item
                3 - Controls and Procedures
            
            14**Part
                II - Other Information**Item
                1 - Legal Proceedings
            
            15Item
                2 - Unregistered Sales of Equity Securities and Use of
                Proceeds
            
            15Item
                3 - Defaults Upon Senior Securities
            
            15Item
                4 - Submission of Matters to a Vote of Security Holders
            
            15Item
                5 - Other information
            
            15Item
                6 - Exhibits
            
            15Signature
                Page
            
            16


**“SAFE
      HARBOR” STATEMENT UNDER THE UNITED STATES PRIVATE**


**SECURITIES
      LITIGATION REFORM ACT OF 1995**


Statements
      that are not historical facts contained in this Quarterly Report on Form 10-QSB
      are forward looking statements that involve risk and uncertainties that could
      cause actual results to differ from projected results. The words “anticipate,”
“believe,” “estimate,” “expect,” “plan,” “intend” and similar expressions, as
      they relate to us, are intended to identify forward-looking statements. Such
      statements reflect our current views with respect to future events and are
      subject to certain risks, uncertainties and assumptions. We cannot assure you
      that any of our expectations will be realized. Factors that may cause actual
      results to differ materially from those contemplated by such forward-looking
      statements include, without limitation, the timing of development of the areas
      where we may sell our services, the market price of our services and products,
      changes in applicable statutory and regulatory requirements, costs of delivery
      of our products and services, the strength and financial resources of our
      competitors, our ability to find and retain skilled personnel, labor relations,
      the results of financing efforts and the ability to meet capital requirements,
      and general economic conditions.


2





PART
      1,
      ITEM 1. FINANCIAL STATEMENTS





BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.


UNAUDITED
      CONDENSED CONSOLIDATED BALANCE SHEET


($000'S,
      EXCEPT PER SHARE DATA)





**Unaudited****June
                  30,****2006**ASSETSCurrent
                  assets:Cash
              
              $
              25Trade
                  accounts receivable, net of allowancefor
                  doubtful accounts of $6
              
              
              410Prepaid
                  expenses and other
              
              
              93Total
                  current assets
              
              
              528Property
                  and equipment, net
              
              
              58Working
                  capital advance in connection with MPI acquisition
              
              
              300In-place
                  contracts
              
              
              989Customer
                  list
              
              
              809Other
                  intangible assets
              
              
              371Total
                  assets
              
              $
              3,055LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Line
                  of credit
              
              $
              60Accounts
                  payable
              
              
              96Accrued
                  salaries and other expenses
              
              
              207Payable
                  to affiliate
              
              
              872Deferred
                  revenue
              
              
              491Total
                  current liabilities
              
              
              1,726Convertible
                  notes payable to affiliate
              
              
              1,800Notes
                  payable to affiliate
              
              
              1,258Other
                  liabilities - payable to affiliate
              
              
              101Commitments
                  and contingencies
              
              
              -Stockholders'
                  equity:Preferred
                  stock, $0.001 par value; 3,000,000 shares
                  authorized;136,585
                  shares issued and outstanding in 2006
              
              
              -Common
                  stock, $0.001 par value; 747,000,000 shares
                  authorized;209,707,518
                  shares issued and outstanding in 2006
              
              
              210Additional
                  paid-in capital
              
              
              100,376Accumulated
                  deficit
              
              
              (102,416
              )Total
                  stockholders' equity
              
              
              (1,830
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              3,055







See
      notes
      to condensed consolidated financial statements.




3




BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.


UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


($000'S,
      EXCEPT PER SHARE DATA)





THREE
                  MONTHS ENDED
              
              SIX
                  MONTHS ENDEDJUNE
                  30,
              
              JUNE
                  30,2006
              
              2005
              
              2006
              
              2005Revenue
              
              $
              747
              
              $
              669
              
              $
              1,569
              
              $
              1,425Cost
                  of revenue
              
              
              526
              
              
              483
              
              
              1,041
              
              
              1,056Gross
                  profit
              
              
              221
              
              
              186
              
              
              528
              
              
              369Operating
                  expenses:Selling,
                  general and administrative
              
              
              444
              
              
              212
              
              
              891
              
              
              431Depreciation
                  and amortization
              
              
              89
              
              
              5
              
              
              179
              
              
              10Total
                  operating expenses
              
              
              533
              
              
              217
              
              
              1,070
              
              
              441Loss
                  from operations
              
              
              (312
              )
              
              (31
              )
              
              (542
              )
              
              (72
              )Interest
                  expense, net
              
              
              (72
              )
              
              (31
              )
              
              (145
              )
              
              (62
              )Loss
                  before tax provision
              
              
              (384
              )
              
              (62
              )
              
              (687
              )
              
              (134
              )Income
                  tax provision
              
              
              -
              
              
              -Net
                  loss
              
              $
              (384
              )
              $
              (62
              )
              $
              (687
              )
              $
              (134
              )Net
                  loss per share: basic and dilutedNet
                  loss per share
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.01
              )
              $
              (0.00
              )Average
                  shares outstanding:basic
                  and diluted
              
              
              189,850,375
              
              
              62,790,441
              
              
              130,608,070
              
              
              39,170,427




See
      notes
      to condensed consolidated financial statements.





4




BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.


UNAUDITED
      CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


($000'S,
      EXCEPT PER SHARE DATA)





SIX
                  MONTHS ENDEDJUNE
                  30,2006
              
              2005Operating
                  activities:Net
                  loss
              
              $
              (687
              )
              $
              (134
              )Adjustments
                  to reconcile net loss to netcash
                  provided (used) by operating activities:Depreciation
                  and amortization
              
              
              178
              
              
              11Changes
                  in operating assets and liabilitiesTrade
                  accounts receivable
              
              
              (124
              )
              
              170Unbilled
                  revenue
              
              
              -
              
              
              (17
              )Prepaid
                  expenses and other assets
              
              
              (58
              )
              
              (17
              )Accounts
                  payable
              
              
              77
              
              
              (62
              )Accrued
                  salaries and other expenses
              
              
              (18
              )
              
              (90
              )Deferred
                  revenue
              
              
              131
              
              
              -Other
                  liabilities
              
              
              -
              
              
              26Net
                  cash provided (used) by operating activities
              
              
              (501
              )
              
              (113
              )Investing
                  activities:Acquistions,
                  net
              
              
              (1,800
              )
              
              -Investment
              
              
              (300
              )
              
              -Net
                  cash used in investing activities
              
              
              (2,100
              )
              
              -Financing
                  activities:Proceeds
                  from sale of common stock
              
              
              -
              
              
              213Proceeds
                  from sale of preferred stock
              
              
              -
              
              
              137Net
                  borrowings (payments) under line of credit
              
              
              (91
              )
              
              (196
              )Net
                  borrowings (payments) from affiliate
              
              
              657Proceeds
                  from convertible notes payable
              
              
              1,800
              
              
              -Net
                  cash provided (used) by financing activities
              
              
              2,366
              
              
              154Net
                  decrease in cash
              
              
              (235
              )
              
              41Cash:Beginning
                  of period
              
              
              260
              
              
              43End
                  of period
              
              $
              25
              
              $
              84Supplemental
                  Disclosure:Interest
                  paid
              
              $
              7
              
              $
              7Non
                  cash acquisiton consideration
              
              $
              210
              
              $
              -





See
      notes
      to condensed consolidated financial statements.


5








BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.





NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


($000’S,
      EXCEPT SHARE AND PER SHARE DATA)










**1.**  **Basis
      of Presentation**






The
      balance sheet as of June 30, 2006, the statements of operations for the three
      and six months ended June 30, 2006 and June 30, 2005, respectively, and the
      statements of cash flows for the six months ended June 30, 2006 and June 30,
      2005 have been prepared by the Company and have not been audited. In the opinion
      of management, all adjustments, consisting only of normal recurring adjustments,
      necessary to present fairly the financial position, results of operations and
      cash flows at June 30, 2006 and for all periods presented have been
      appropriately made.






Certain
      information and footnote disclosures normally included in financial statements
      prepared in accordance with accounting principles generally accepted in the
      United States of America have been condensed or omitted. It is suggested that
      these financial statements be read in conjunction with the financial statements
      and notes thereto included in the Company's fiscal year 2005 Annual Report
      on
      Form 10-K. The results of operations for interim periods presented are not
      necessarily indicative of the operating results for the full year.






**2.
       Acquisitions**






In
      January 2006, the Company acquired all of the assets and operations of
      privately held Neulogic Media, LLC ("Neulogic"). Neulogic provides
      e-communication solutions which include website development and support, content
      distribution, e-mail marketing and back office integration to the philanthropic
      community. Neulogic was acquired to introduce new products and services to
      BrightStar customers. The Condensed Consolidated Financial Statements include
      the operating results of Neulogic from the date of acquisition.






The
      purchase price of approximately $2.0 million, consisting of cash of $1.8
      million and 139,000,000 shares of the Company’s common stock, preliminarily
      valued at $210, was accounted for as business combination and allocated to
      the
      acquired assets and other identified intangibles, as follows (in thousands):






Fair
                  value of assumed liabilities
              
              $
              (326
              )Identified
                  intangible assets acquired:In
                  place contracts and customer list
              
              
              1,936Tradename
              
              
              150Developed
                  software
              
              
              250Total
              
              $
              2,010






The
      value
      of $210 thousand was estimated based on the April 2005 purchase of the Company
      by Stellar McKim LLC, this amount could change during the allocation period
      based on independent valuation of the consideration given or the assets
      received. Management is presently evaluating the assets acquired and liabilities
      assumed and such amounts could change during the allocation period.






The
      valuation of in place contracts, customer list, trade name and developed
      software represent the fair value of these assets as determined by management
      based on a preliminary valuation which could change during the allocation
      period. The allocation period will end in December 2006. All intangible assets
      are being amortized on a straight-line basis over the estimated useful life
      of
      seven years.


6




Selected
      unaudited pro forma combined consolidated statement of operations, as if the
      transaction had occurred at the beginning of the periods reported:




Three
                  months ended
              
              Six
                  months endedJune
                  30,
              
              June
                  30,
              
              June
                  30,
              
              June
                  30,2006
              
              2005
              
              2006
              
              2005Revenues
              
              
              747
              
              
              915
              
              
              1,569
              
              
              1,871Gross
                  profit
              
              
              221
              
              
              404
              
              
              528
              
              
              751Gross
                  profit margin
              
              
              30
              %
              
              44
              %
              
              34
              %
              
              40
              %Net
                  loss
              
              
              (384
              )
              
              (63
              )
              
              (687
              )
              
              (202
              )Net
                  loss per share
              
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.00
              )
              $
              (0.00
              )Weighted
                  average number of shares
              
              
              209,707,518
              
              
              189,393,139
              
              
              208,939,564
              
              
              172,035,582






**3.     Intangible
      Assets**






In
      January 2006, the Company completed the acquisition of Neulogic (See
      Note 2) in the first quarter of 2006. Upon the integration of Neulogic,
      BrightStar created a separate division named Neulogic, Inc., and assigned all
      operations and assets to Neulogic, Inc.






The
      following is a summary of the Company's purchased intangible assets as of
      June 30, 2006 (in thousands):


EstimatedGross
              
              Useful
              
              
              
              NetCarrying
              
              Life
              
              Accumulated
              
              CarryingAmount
              
              (in
                  years)
              
              Amortization
              
              ValueIn
                  place contracts
              
              $
              1,065
              
              
              7
              
              $
              76
              
              $
              989Customer
                  list
              
              
              871
              
              
              7
              
              
              62
              
              
              809Tradename
              
              
              150
              
              
              7
              
              
              11
              
              
              139Developed
                  software
              
              
              250
              
              
              7
              
              
              18
              
              
              232$
              2,336
              
              
              
              
              $
              167
              
              $
              2,169









Estimated
      future amortization expense for purchased intangible assets as of June 30,
      2006 is as follows (in thousands):




2006
              
              $
              1652007
              
              
              3342008
              
              
              3342009
              
              
              3342010
              
              
              3342011
              
              
              3342012
              
              
              334$
              2,169




7




**4.
      Accrued Salaries and Other Expenses**







Accrued
      salaries and other expenses consist of the following:


June
                  30,2006Accrued
                  payroll and payroll taxes
              
              $
              64Accrued
                  professional fees
              
              
              138Other
                  accrued expenses
              
              
              5Total
                  accrued expenses
              
              $
              207




**5.**  **Related
      Party Transactions**







At June 30,
      2006, the Company had various balances due to Stellar McKim LLC, its majority
      shareholder, including notes payable, accrued interest and liabilities related
      to operating cash advances. Additionally, during 2006, members of Stellar’s
      management provided executive management services to the Company without
      charge.





At
      June 30, 2006, significant balances with Stellar were (in thousands):





**June
                    30,****2006**Accrued
                    liabilities due to Stellar, net
                
                $
                872Long
                    term notes payable to Stellar
                
                
                1,258Long
                    term other liabilities to Stellar
                
                
                101Convertible
                    note payable to Stellar
                
                
                1,800$
                4,031




**6.**  **Convertible
      Note Payable, net**




On
      January 4, 2006, the Company borrowed $1.8 million from Stellar McKim LLC,
      which
      owns 74.7% of the outstanding voting power of the Company. The loan was
      evidenced by a Promissory Note, dated as of January 4, 2006, and is payable
      on
      January 4, 2009.  Interest on the outstanding balance of the note accrues
      at the rate of 9% per annum and is payable annually commencing on the first
      anniversary of the date of the note.  All amounts due under the note are
      payable, at the option of the Company, in cash or in shares of BrightStar
      Stock.  In the event that we elect to pay amounts due under the note in
      shares of BrightStar Stock, the shares shall be valued at the average trading
      price of our common stock for the 20 days immediately preceding the date of
      payment.  No beneficial conversion feature has been recognized in
      connection with this borrowing, as the conversion price if the company elects
      to
      settle in stock is based on the fair value at conversion. All of the proceeds
      of
      the loan were paid to the principals of Neulogic.







**7.**
            **Net
                Loss Per Share**






Basic
      loss per share is based upon the weighted average number of common shares
      outstanding during the period. Diluted income loss per share is computed using
      the weighted average number of common shares and potentially dilutive securities
      outstanding during the period. Potentially dilutive securities include
      incremental common shares issuable upon the exercise of stock options and
      warrants and conversion of notes payable. Potentially dilutive securities are
      excluded from the computation if their effect is anti-dilutive.




The
      following table sets forth the computation of basic and diluted earnings per
      share:




8


**Three
                          Months Ended**
                      
                      **Six
                          Months Ended****June****30,**
                      **June****30,****2006**
                      
                      **2005**
                      
                      **2006**
                      
                      **2005**Numerator:Net
                          loss
                      
                      
                      
                      
                      $
                      (384
                      )
                      $
                      (62
                      )
                      $
                      (687
                      )
                      $
                      (134
                      )Denominator:Weighted-average
                          common shares outstanding
                      
                      
                      
                      
                      
                      189,850,375
                      
                      
                      50,393,139
                      
                      
                      130,608,070
                      
                      
                      33,035,582Total
                          shares, basic
                      
                      
                      
                      
                      
                      189,850,375
                      
                      
                      50,393,139
                      
                      
                      130,608,070
                      
                      
                      33,035,582Effect
                          of dilutive securities:Add:          
                          Dilutive
                          common stock equivalents (1)
                      
                      
                      
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -
                      
                      
                      -Total
                          shares, diluted
                      
                      
                      
                      
                      
                      189,850,375
                      
                      
                      50,393,139
                      
                      
                      130,608,070
                      
                      
                      33,035,582Basic
                          net loss per share
                      
                      
                      
                      
                      $
                      (0.00
                      )
                      $
                      (0.00
                      )
                      $
                      (0.01
                      )
                      $
                      (0.00
                      )Diluted
                          net loss per share
                      
                      
                      
                      
                      $
                      (0.00
                      )
                      $
                      (0.00
                      )
                      $
                      (0.01
                      )
                      $
                      (0.00
                      )





(1)  Diluted
      EPS for the three and six month period ended June 30, 2006 excludes the effect
      of approximately 483.7 million common shares potentially issuable upon the
      exercise of stock options and warrants and the conversion of notes payable,
      as
      their inclusion would be anti-dilutive.





**8.**
            **Significant
                Customers**




For
      the
      second quarter of 2006, the Company had a single customer that accounted
      for 23% of total revenue.  This customer also accounted for
      approximately 35% of the Company's total outstanding accounts receivable balance
      as of June 30, 2006. In addition, the Company had one other customer which
      accounted for 14% of the Company's total outstanding accounts receivable balance
      as of June 30, 2006.





For
      the
      second quarter of 2005, the Company had a single customer that accounted
      for 46% of total revenue.  This customer also accounted for
      approximately 23% of the Company's total outstanding accounts receivable balance
      as of June 30, 2005.  In addition, the Company had one customer that
      accounted for 20%, and another customer that each accounted for 12% of
      total revenue. These two customers accounted for 31% and 9%, respectively,
      of the Company’s total outstanding accounts receivable balance as of June 30,
      2005.





**9.**
            **Recently
                Issued Accounting
                Standards**





In
      February 2006 the Financial Accounting Standards Board issued Statement No.
      155
      (“SFAS No 155”), “Accounting for Certain Hybrid Instruments:  An Amendment
      of FASB Statements No. 133 and 140”.  Management does not believe that this
      statement will have a significant impact as the company does not use such
      instruments.





In
      March
      2006 the Financial Accounting Standards Board issued Statement No. 156 (“SFAS No
      156”), “Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities”.  Management does not believe that this
      statement will have a significant impact as the company does not use such
      instruments.





**10.**
            **Commitments
                and Contingencies**





The
      Company leases office space under an operating lease agreement that expires
      in
      September 2008. Minimum future commitments under this agreement for the years
      ending December 31 are: 2006, $23; 2007, $46; and 2008, $35.





**11.**
            **Subsequent
                Events**





On
      July
      25, 2006, the Company entered into a Stock Purchase Agreement (the "Agreement")
      with Harold Kraft, an individual, Pat Dane, an individual, and MyPublicInfo,
      Inc., a Delaware corporation (“MPI”). MPI engages in the business of providing
      background check information as well as other tools designed to prevent identity
      theft through its website, www.mypublicinfo.com (the “Business”). Pursuant to
      the Agreement, the Company is to exchange 1,984,273 shares of a new Series
      B
      Preferred Stock ("Series B Preferred Stock") in exchange for all of the issued
      and outstanding common stock of MPI.





9




In
      addition, the Company has agreed to negotiate in good faith employment
      agreements with principals of MPI and entered into a management and
      administrative services agreement with MPI. The Company is required to invest
      up
      to $5 million in MPI to be used for working capital and investment
      purposes.





On
      June
      9, 2006, the Company released the first $300 of the required investment to
      MPI.
      The $300 payment relates to an advance payment of the working capital funding
      of
      MPI, made in advance of the acquisition. The advance accrues interest at the
      prime rate and is payable on a quarterly basis. Upon closing of the acquisition,
      the advance shall be applied towards the $5 million required cash investment.


10





**Item
      2.** **** **Management’s
      Discussion and Analysis of Results of Operations and Financial
      Condition**





*FORWARD-LOOKING
      INFORMATION - Management's Discussion and Analysis of Financial Condition and
      Results of Operations ("MD&A") includes "forward-looking statements" within
      the meaning of Section 27A of the Securities Act of 1933 and Section 21E of
      the
      Securities Exchange Act of 1934. All statements, other than statements of
      historical facts, included in this MD&A regarding the Company's financial
      position, business strategy and plans and objectives of management of the
      Company for future operations are forward-looking statements. These
      forward-looking statements rely on a number of assumptions concerning future
      events and are subject to a number of uncertainties and other factors, many
      of
      which are outside of the Company's control, that could cause actual results
      to
      materially differ from such statements. While the Company believes that the
      assumptions concerning future events are reasonable, it cautions that there
      are
      inherent difficulties in predicting certain important factors, especially the
      timing and magnitude of technological advances; the prospects for future
      acquisitions; the possibility that a current customer could be acquired or
      otherwise be affected by a future event that would diminish their information
      technology requirements; the competition in the information technology industry
      and the impact of such competition on pricing, revenues and margins; the degree
      to which business entities continue to outsource information technology and
      business processes; uncertainties surrounding budget reductions or changes
      in
      funding priorities of existing government programs and the cost of attracting
      and retaining highly skilled personnel.*





**Overview**





BrightStar Information Technology Group, Inc. (“BrightStar” or “the Company”), founded in
      April 1998, provides information technology (“IT”) services for its customers.
      We help organizations maximize their competitive advantage through the
      implementation and /or support of leading edge enterprise-level packaged-systems
      applications and legacy software systems by focusing primarily on serving
      clients in government markets. BrightStar also provides software support and
      training services to major corporations and recently entered the philanthropic
      market with the acquisition of Neulogic. We have approximately 30 employees
      and
      contractors. The Company has its headquarters in the San Francisco Bay Area
      with
      a field office near Dallas, Texas and Columbus, Ohio. We also have other
      service-delivery locations throughout the United States, including Arizona,
      Arkansas, California, Florida and Texas.





We
      generate the vast majority of our revenue from two channels: (1) IT services
      provided to the commercial and (2) philanthropic markets. We derive most of
      our
      revenues from the sales of IT services in the United States, our domestic
      market.





*Acquisition
      of MyPublicInfo, Inc.* On
      July
      25, 2006, we
      entered into a Stock Purchase Agreement (the "Agreement") with Harold Kraft,
      an
      individual, Pat Dane, an individual, and MyPublicInfo, Inc., a Delaware
      corporation (“MPI”). MPI engages in the business of providing background check
      information as well as other tools designed to prevent identity theft through
      its website, www.mypublicinfo.com (the “Business”). Pursuant to the Agreement,
      we are to exchange 1,984,273 shares of a new Series B Preferred Stock ("Series
      B
      Preferred Stock") in exchange for all of the issued and outstanding common
      stock
      of MPI.





*Acquisition
      of Neulogic Media, LLC.* In
      January 2006, we acquired all of the assets and operations of privately
      held Neulogic Media, LLC ("Neulogic"). Neulogic provides e-communication
      solutions which include website development and support, content distribution,
      e-mail marketing and back office integration to the philanthropic community.
      Under the terms of the purchase agreement, we agreed to purchase Neulogic for
      approximately $2.0 million. The Consolidated Financial Statements include
      the operating results of Neulogic from the date of acquisition. See notes 2
      and 3 for further information.




*Financial
      highlights.* Net
      revenues for the three and six months ended June 30, 2006 were $0.8 million
      and $1.6 million, slightly higher than the three and six months ended
      June 30, 2005. While revenues increased slightly, they were driven by a
      reduction in the demand for our Enterprise Resource Planning (“ERP”) services
      offset revenues generated by our acquisition of Neulogic. Our operating expenses
      for the three and six months ended June 30, 2006 were $0.5 million and
      $1.1 million, compared to $0.2 million and $0.4 for the three and six
      months ended June 30, 2005. The increase in operating expenses primarily
      resulted from increases in sales and marketing expenses, as further described
      below. We expect our spending for the remainder of fiscal 2006 to increase
      as
      compared to 2005 as we expand our sales and marketing programs and invest in
      our
      organizational infrastructure.





**Results
      of Operations**





*Revenues.* The
      timing of revenues
      is difficult to forecast because our sales cycle can be relatively long and
      is
      subject to a number of uncertainties, including customers’ budgetary
      constraints, the timing of customers’ budget cycles, customers’ internal
      approval processes and general economic conditions. In addition, as is customary
      in the industry, our engagements generally can be changed or terminated without
      a significant customer penalty. Our revenue and results of operations may
      fluctuate significantly from quarter to quarter or year to year because of
      a
      number of factors, including, but not limited to, changes in demand for IT
      services, the effect of changes in estimates to complete fixed fee contracts,
      the rate of hiring and the productivity of revenue generating personnel, the
      availability of qualified IT professionals, the significance of customer
      engagements commenced and completed during a quarter, the number of business
      days in the quarter, changes in the relative mix of the Company's services,
      changes in the pricing of the Company's services, the timing and the rate of
      entrance into new geographic or IT specialty markets, departures or temporary
      absences of key revenue-generating personnel, the structure and timing of
      acquisitions, and general economic factors.





11




For
      the
      quarter and six months ended June 30, 2006, revenues were $0.7 million and
      $1.5
      million, consistent with the quarter and six months ended June 30, 2005.
      Decreases in our commercial IT services resulting from a reduced demand for
      our
      enterprise resource planning consulting services were offset by the acquisition
      of Neulogic and our entry into the philanthropic IT market place.





*Cost
      of revenues.* Cost
      of
      revenues consists primarily of salaries (including non-billable and training
      time) and benefits for consultants and employees. The Company generally strives
      to maintain its gross profit margins by offsetting increases in salaries and
      benefits with increases in billing rates, although this is subject to the market
      conditions at the time. In addition, the Company tries to increase or decrease
      the number of consultants used by the Company to provide its services, including
      third party contractors, as the amount of billable work (and resultant revenue)
      changes. In other words, the Company continually strives to minimize the amount
      of unbillable consulting resources or bench.





Gross
      profit as a percentage of revenue for the quarter ended June 30, 2006 increased
      from 28% to 30% compared to quarter ended June 30, 2005. Gross profit as a
      percentage of revenue for the six months ended June 30, 2006 increased from
      26%
      to 34% compared to six months ended June 30, 2005, primarily reflecting the
      inclusion of Neulogic’s operations and change
      in
      the mix of services provided to our clients.





*Selling,* *general* *and
      administrative expenses.* Selling, general and
      administrative expenses (SG&A) primarily consist of costs associated with
      (i) corporate overhead, (ii) sales and account management, (iii)
      telecommunications, (iv) human resources, (v) recruiting and training, and
      (vi)
      other administrative expenses.





Selling, general and
      administrative expenses for the
      quarter and six months ended June 30, 2006 increased from $0.2 million to $0.4
      million or 100% and from $0.4 million to $0.9 million or 125% compared to the
      quarter and six months ended June 30, 2005, primarily as a result of the
      acquisition of Neulogic and increased general and administrative services
      provided to our business, mainly in the areas of sales and marketing, research
      and development and general corporate administration.








**Liquidity
      and Capital Resources**





Historically,
      we have funded our operations with the proceeds from debt and from cash
      generated from operations. As of June 30, 2006, we had $25 thousand of cash
      and cash equivalents. We had an accumulated deficit of approximately
      $102.4 million as of June 30, 2006.




Net
      cash
      used in operating activities totaled $0.5 million for the six months ended
      June 30, 2006 as compared to cash used in operations of $0.1 million for
      the six months ended June 30, 2005. Net cash used in operating activities
      for the six months ended June 30, 2006 resulted primarily from operating
      losses and increases in accounts receivables and accrued expenses, as a result
      of including Neulogic’s operations. For the six months ended June 30, 2005,
      net cash used in operating activities resulted primarily from increases in
      accounts payable and accrued liabilities.




Net
      cash
      used in investing activities totaled $2.1 million for the six months ended
      June 30, 2006 as compared to no investing activities the six months ended
      June 30, 2005. For the six months ended June 30, 2006, net cash used
      in investing activities resulted from the acquisition of Neulogic and
      investments. There were no investing activities for the six months ended
      June 30, 2005.




Net
      cash
      provided by financing activities was $2.4 million for the six months ended
      June 30, 2006, as compared to cash provided by financing activities of
      $154 thousand for the six months ended June 30, 2005. For the six
      month periods ended June 30, 2006, net cash provided by financing
      activities consisted of proceeds from the issuance of convertible notes payable
      and advances from our majority shareholder, partially offset by payments on
      debt
      obligations related to the receivables-based revolving line of credit. For
      the
      six months ended June 30, 2005, net cash provided by financing activities
      resulted from proceeds from the sale of common and preferred stock offset by
      payments on debt obligations related to the receivables-based revolving line
      of
      credit.


12




In December 2002, we
      negotiated a $750 thousand revolving line of credit based on domestic accounts
      receivable which accrues interest at a rate of 4% above prime. Accessing the
      accounts receivable based revolving line of credit is restricted based on
      qualifying accounts receivable and compliance with certain loan covenants.
      As of
      June 30, 2006 the credit facility had an outstanding balance of $60
      thousand.




*Series
      1 Subordinated Promissory Notes (the “Notes”)*





We
      have
      $1.3 million in 8% subordinated notes due in December 2007. On July 26, 2001,
      we
      raised $1.1 million though a private placement of convertible promissory notes.
      The Notes are secured on a junior basis by substantially all of the assets
      of
      the Company and its operating subsidiaries, and were convertible into common
      stock, at the option of the investors, at a fixed price of $0.23 per share,
      subject to anti-dilution provisions. The Company paid interest from inception
      through June 30, 2003 by issuing additional Notes. The Company also issued
      a
      total of 836,867 stock warrants in conjunction with the Notes exercisable at
      $0.50.





In April 2005,
      under the terms of the Stellar Transaction, the Notes became payable to Stellar
      McKim LLC, the convertible features of all Notes were eliminated, all warrants
      associated with the Notes were cancelled and the terms of the notes and all
      interest accrued on the Notes as of March 31, 2005 were extended to December
      31,
      2007.





On
      January 4, 2006, we borrowed $1.8 million from Stellar McKim LLC. The loan
      was
      evidenced by a Promissory Note, dated as of January 4, 2006, and is payable
      on
      January 4, 2009.  Interest on the outstanding balance of the note accrues
      at the rate of 9% per annum and is payable annually commencing on the first
      anniversary of the date of the note.  All amounts due under the note are
      payable, at our option, in cash or in shares of our common stock.  In the
      event that we elect to pay amounts due under the note in shares of our common
      stock, the shares shall be valued at the average trading price of our common
      stock for the 20 days immediately preceding the date of payment.  All of
      the proceeds of the loan were paid to the principals of Neulogic.





Under present circumstances, we believes that our planned results from operations, when
      combined with the proceeds available from the BFI credit facility, or any
      alternative working capital facility, will be adequate to fund its operations
      at
      least through the end of 2006. However, our operating results could be worse
      than we are expecting, or the BFI credit facility or other credit facility
      could
      be canceled. Under such circumstances, without additional financing, there
      can
      be no assurance that the Company would have sufficient cash available to meet
      our obligations as they come due in order to continue as a going
      concern.





**Critical
      Accounting Policies**





Management’s Discussion and Analysis of Financial Condition and Results of Operations
      discusses BrightStar’s consolidated financial statements, which have been
      prepared in accordance with accounting principles generally accepted in the
      United States for interim financial information. The preparation of these
      financial statements requires management to make estimates and assumptions
      that
      affect the reported amounts of assets and liabilities and the disclosure of
      contingent assets and liabilities at the date of the financial statements and
      the reported amounts of revenues and expenses during the reporting period.
      On an
      on-going basis, management evaluates its estimates and judgments. Management
      bases its estimates and judgments on historical experience and on various other
      factors that are believed to be reasonable under the circumstances, the results
      of which form the basis for making judgments about the carrying value of assets
      and liabilities that are not readily apparent from other sources. Actual results
      may differ from these estimates under different assumptions or
      conditions.





Management
      believes the following critical accounting policies, among others, affect its
      more significant judgments and estimates used in preparation of its consolidated
      financial statements.





*Revenue
      recognition*





We
      provide services to customers for fees that are based on time and materials
      and
      fixed fee contracts. Accordingly, revenue is recognized as consulting services
      are performed. Unbilled revenue is recorded for contract services provided
      for
      which billing has not been rendered. Costs reimbursed by its customers are
      included in revenue for the periods in which the costs are
      incurred.





13




Also,
      we
      enter into arrangements to sell products, services, and other arrangements
      (multiple element arrangements) that include combinations of products. Revenue
      from product sales and services, net of discounts, is recognized provided that
      persuasive evidence of an arrangement exists, delivery has occurred, the price
      is fixed or determinable, and collectibility is reasonably assured. Service
      revenues are recorded when completed. Deferred revenue primarily represents
      the
      excess of amounts billed over contract amounts earned. Other multiple element
      arrangements require delivery of services in the future. We use objective
      evidence of fair value to allocate revenue to the elements and recognize revenue
      when the criteria for revenue recognition have been met for each element.
      Revenue is deferred on the undelivered element based on estimated service
      periods and recognized when service delivery occurs. Deferred revenues
      associated with annual fees are recognized over the one year service
      period.





*Income
      taxes*





Income
      taxes are recorded under the liability method, under which deferred tax assets
      and liabilities are determined based on the difference between the financial
      statement and tax bases of assets and liabilities using enacted tax rates in
      effect for the year in which the differences are expected to affect taxable
      income. Valuation allowances are established when necessary to reduce deferred
      tax assets to the amount expected to be realized.





*Stock-based
      compensation*




Effective
      January 1, 2006, the Company adopted Statement of Financial Accounting Standards
      (“FAS”) No. 123 (Revised 2004), Share-Based Payment (FAS 123R), which
      requires the measurement and recognition of compensation expense for all
      share-based payment awards made to employees and directors, including stock
      options, employee stock purchases related to the employee stock purchase plan
      and restricted stock units based on estimated fair values of these awards over
      the requisite employee service period. FAS 123R supersedes Accounting Principles
      Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”),
      which the Company previously followed in accounting for stock-based awards.
      In
      March 2005, the SEC issued Staff Accounting Bulletin No. 107 (“SAB 107”) to
      provide guidance on FAS 123R. The Company has applied SAB 107 in its adoption
      of
      FAS 123R.




Under
      FAS
      123R, stock-based compensation cost is measured at the grant date, based on
      the
      estimated fair value of the award, and is recognized on a straight-line basis
      as
      expense over the employee’s requisite service period. The Company has no awards
      with market or performance conditions. The Company adopted the provisions of
      FAS
      123R on January 1, 2006, the first day of the Company’s fiscal year 2006, using
      the modified prospective application. The valuation provisions of FAS 123R
      apply
      to new awards and to awards that are outstanding on the effective date and
      subsequently modified or cancelled, prior periods are not revised for
      comparative purposes. Estimated compensation expense for awards outstanding
      on
      the effective date will be recognized over the remaining service period using
      the compensation cost calculated for pro forma disclosure under FASB Statement
      No. 123, “Accounting for Stock-Based Compensation” (FAS 123).





As
      of
      March 31, 2006, all stock option issued by the Company are fully vested,
      accordingly, no stock-based compensation costs have been recognized by the
      Company.





**Item
      3.** **** **Controls
      and Procedures**





(a)  *Evaluation
      of disclosure controls and procedures* .
      Our
      chief executive officer and our chief financial officer, after evaluating the
      effectiveness of the company’s “disclosure controls and procedures” (as defined
      in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rules
      13a-15e and 15d-15e) as of the end of the period covered by this report (the
      “Evaluation Date”), have concluded that, as of the Evaluation Date, our
      disclosure controls and procedures were adequate based on the evaluation of
      these controls and procedures required by paragraph (b) of the Exchange Act
      Rules 13a-15 or 13d-15.





(b)  *Changes
      in internal controls* .
      During
      our last fiscal quarter, there was no change in our internal control over
      financial reporting that has materially affected, or is reasonably likely to
      materially affect our internal control over financial reporting.




14





**PART
      II**





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





There
      have been no
      material changes from the information previously reported under Item 3 of the
      Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
      2005. Refer to the Company’s Annual Report on Form 10-K for the year ended
      December 31, 2005 for more details.





**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**





(a)
      Exhibits





4.15
      -
      Certificate of Designation, Preferences and Rights of Series B Preferred
      Stock.





10.46
      -
      Stock Exchange Agreement by and among BrightStar Information Technology Group,
      Inc., MyPublicInfo, Inc., Harold Kraft, Pat Dane and investors.





31.1
      -
      Certification of Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





31.2
      -
      Certification of Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.





32.1
      -
      Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
      1360.





32.2
      -
      Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
      1360.




15


SIGNATURES





Pursuant
      to the requirements of the Securities Act of 1934, the Registrant has duly
      caused this report to be signed on its behalf by the undersigned there unto
      duly
      authorized.









BRIGHTSTAR
                INFORMATION TECHNOLOGY GROUP, INC.Date: August
              10, 2006.
            BY:
            /s/ Brian
              S. BurnettBrian
              S. BurnettChairman
                and Chief Executive Officer




16




INDEX
      TO
      EXHIBITS


EXHIBITNUMBER
                
                DESCRIPTION4.15
                    –
                
                Certificate
                    of Designation, Preferences and Rights of Series B Preferred
                    Stock.10.46
                    –
                
                Stock
                    Exchange Agreement by and among BrightStar Information Technology
                    Group,
                    Inc., MyPublicInfo, Inc., Harold Kraft, Pat Dane and
                    investors.31.1
                    –
                
                Certification
                    of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 2002.31.2
                    –
                
                Certification
                    of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                    Act of 200232.1
                    –
                
                Certification
                    of Chief Executive Officer pursuant to 18 U.S.C. Section
                    136032.2
                    –
                
                Certification
                    of Chief Financial Officer pursuant to 18 U.S.C. Section
                    1360


17