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

                                    FORM 10-Q

(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, 2005 OR

|_|   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. EMPLOYER
     INCORPORATION OR ORGANIZATION)                  IDENTIFICATION NO.)


            6601 OWENS DRIVE, SUITE 115, 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 |_|.

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

      The number of shares of Common Stock of the Registrant, par value $.001
per share, outstanding at June 30, 2005 was 70,707,518.

      The number of shares of Series A Preferred Stock of the Registrant, par
value $.001 per share, outstanding at June 30, 2005 was 136,585.

                 The Exhibit Index is located on page 15 hereof.

<PAGE>

                      PART 1, ITEM 1. FINANCIAL STATEMENTS

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
                 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)



<TABLE>
<CAPTION>
                                                                         Unaudited
                                                                          June 30,      December 31,
                                                                            2005            2004
                                                                        ------------    ------------
<S>                                                                     <C>             <C>
                                 ASSETS
Current assets:
    Cash ............................................................   $         84    $         43
    Trade accounts receivable, net of allowance
      for doubtful accounts of $18 ..................................            316             486
    Unbilled revenue ................................................             22               5
    Prepaid expenses and other ......................................             51              34
                                                                        ------------    ------------
        Total current assets ........................................            473             568
    Property and equipment ..........................................            446             446
        Less - accumulated depreciation .............................           (418)           (408)
                                                                        ------------    ------------
    Property and equipment, net .....................................             28              38
                                                                        ------------    ------------
        Total assets ................................................   $        501    $        606
                                                                        ============    ============

                  LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Line of credit ..................................................   $         22    $        218
    Accounts payable ................................................             28              90
    Accrued salaries and other expenses .............................            260             350
                                                                        ------------    ------------
        Total current liabilities ...................................            310             658
    Convertible notes payable, net ..................................             --           1,258
    Note to shareholder, net ........................................          1,258              --
    Other liabilities ...............................................            101              75
    Commitments and contingencies ...................................             --              --
Stockholders' equity:
    Preferred Stock, $0.001 par value; 3,000,000 shares authorized;
      136,585 and 0, Series A Preferred Stock, issued and outstanding
      in 2005 and 2004, respectively ................................             --              --
    Common stock, $0.001 par value; 72,000,000 shares authorized;
      70,707,518 and 15,287,968 shares issued and outstanding in 2005
      and 2004, respectively ........................................             16              16
    Additional paid-in capital ......................................        100,157          99,925
    Unearned compensation ...........................................             --              (1)
    Treasury stock ..................................................             --            (118)
    Accumulated deficit .............................................       (101,341)       (101,207)
                                                                        ------------    ------------
        Total stockholders' equity ..................................         (1,168)         (1,385)
                                                                        ------------    ------------
          Total Liabilities and Stockholders' Equity ................   $        501    $        606
                                                                        ============    ============
</TABLE>

See notes to condensed consolidated financial statements.


                                       2
<PAGE>

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED              SIX MONTHS ENDED
                                                     JUNE 30,                        JUNE 30,
                                           ----------------------------    ----------------------------
                                               2005            2004            2005            2004
                                           ------------    ------------    ------------    ------------
<S>                                        <C>             <C>             <C>             <C>
Revenue ................................            669             842           1,425           2,037
Cost of revenue ........................            483             601           1,056           1,456
                                           ------------    ------------    ------------    ------------
Gross profit ...........................            186             241             369             581

Operating expenses:
     Selling, general and administrative            212             387             431             847
     Depreciation and amortization .....              5               5              10               9
                                           ------------    ------------    ------------    ------------
Total operating expenses ...............            217             392             441             856

Loss from operations ...................            (31)           (151)            (72)           (275)

     Interest expense, net .............            (31)            (53)            (62)           (106)
                                           ------------    ------------    ------------    ------------
Loss before tax provision ..............            (62)           (204)           (134)           (381)
                                           ------------    ------------    ------------    ------------
Net loss ...............................   $        (62)   $       (204)   $       (134)   $       (381)
                                           ============    ============    ============    ============

Net loss per share: basic and diluted
                                           ------------    ------------    ------------    ------------
     Net loss per share ................   $      (0.00)   $      (0.01)   $      (0.00)   $      (0.02)
                                           ============    ============    ============    ============

Average shares outstanding: basic and
  diluted ..............................     62,790,441      15,287,968      39,170,427      15,287,968
                                           ------------    ------------    ------------    ------------
</TABLE>

See notes to condensed consolidated financial statements.


                                       3
<PAGE>

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
       UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                     FOR THE SIX MONTHS ENDED JUNE 30, 2005

<TABLE>
<CAPTION>
                                                                                     Additional Paid in Capital
                                               Common Stock                          ---------------------------
                                        ---------------------------     Series A                      Series A
                                           Shares         Amount        Preferred    Common Stock    Preferred
                                        ------------   ------------   ------------   ------------   ------------
<S>                                     <C>            <C>            <C>            <C>            <C>
Balance, December 31, 2004 ..........     15,287,968   $         16             --   $     99,925             $-
Variable Stock options ..............             --             --             --             --             --
Warrants issued with convertible
  notes .............................             --             --             --             --             --
Exercise of Stock options ...........             --             --             --             --             --
Amortization of unearned compensation             --             --             --             --             --
Additional shares issued ............     55,419,550             --        136,585             --             --
Additional paid-in-capital ..........             --             --             --             95            137
Net loss ............................             --             --             --             --             --
                                        ------------   ------------   ------------   ------------   ------------
Balance, June 30, 2005 ..............     70,707,518   $         16        136,585   $    100,020   $        137
                                        ============   ============   ============   ============   ============

<CAPTION>
                                                                                           Total
                                          Unearned        Treasury      Accumulated     Stockholders'   Comprehensive
                                        Compensation       Stock          Deficit          Equity           Loss
                                        ------------    ------------    ------------    ------------    ------------
<S>                                     <C>             <C>             <C>             <C>             <C>
Balance, December 31, 2004 ..........   $         (1)   $       (118)   $   (101,207)   $     (1,385)             --
Variable Stock options ..............             --              --              --              --              --
Warrants issued with convertible
  notes .............................             --              --              --              --              --
Exercise of Stock options ...........             --              --              --              --              --
Amortization of unearned\compensation              1              --              --              --              --
Additional shares issued ............             --              --              --              --              --
Additional paid-in-capital ..........             --             118              --             350              --
Net loss ............................             --              --            (134)           (134)   $       (134)
                                        ------------    ------------    ------------    ------------    ------------
Balance, June 30, 2005 ..............   $         --    $         --    $   (101,341)   $     (1,169)   $       (134)
                                        ============    ============    ============    ============    ============
</TABLE>

See notes to condensed consolidated financial statements.


                                       4
<PAGE>

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
            UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED
                                                           ----------------------------
                                                             JUNE 30,        JUNE 30,
                                                               2005           2004
                                                           ------------    ------------
<S>                                                        <C>             <C>
Operating activities:
   Net loss ............................................   $       (134)   $       (381)
   Adjustments to reconcile net loss to net
      cash provided (used) by operating activities:
   Depreciation and amortization .......................             10              50
   Non cash compensation expense on issuance of
      common stock options and warrants ................             --               7
   Changes in operating assets and liabilities
      Trade accounts receivable ........................            170             184
      Unbilled revenue .................................            (17)            (14)
      Prepaid expenses and other assets ................            (16)             39
      Accounts payable .................................            (61)            (41)
      Accrued salaries and other expenses ..............             (9)             24
      Deferred revenue .................................             --              --
      Other liabilities ................................             26              --
                                                           ------------    ------------
      Net cash provided (used) by operating activities .           (113)           (132)

Investing activities:
   Capital expenditures ................................             --              (9)
                                                           ------------    ------------
      Net cash used in investing activities ............             --              (9)

Capital:
   Additional paid in capital - Common Stock ...........            213              --
   Additional paid in capital - Series A Preferred Stock            137              --
                                                           ------------    ------------
      Net cash provided from capital activites .........            350              --

Financing activities:
   Net borrowings (payments) under line of credit ......           (196)             70
   Repayments of convertible notes payable .............             --             (27)
                                                           ------------    ------------
      Net cash provided (used) by financing activities .           (196)             43

Net increase (decrease) in cash ........................              4             (98)

Cash:
   Beginning of period .................................             43             125
                                                           ------------    ------------
   End of period .......................................   $         84    $         27
                                                           ============    ============
</TABLE>

See notes to condensed consolidated financial statements.


                                       5
<PAGE>

                  BRIGHTSTAR INFORMATION TECHNOLOGY GROUP, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.    BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America ("U.S. GAAP") for interim financial information and the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include  all of the  information  and  footnotes  required by U.S.  GAAP for
complete  financial  statements.  In the opinion of management,  all adjustments
considered necessary for a fair presentation have been included in the financial
statements.  Operating  results for the six-month period ended June 30, 2005 are
not  necessarily  indicative  of the results  that may be expected  for the year
ending  December 31,  2005.  The balance  sheet at December  31, 2004,  has been
derived from the audited financial  statements at that date but does not include
all of the  information  and  footnotes  required  by  U.S.  GAAP  for  complete
financial statements.  The information included in this Quarterly Report on Form
10-Q should be read in conjunction with "Management's Discussion and Analysis of
Financial  Condition and Results of Operations",  "Quantitative  and Qualitative
Disclosures  About Market Risk" and the  Consolidated  Financial  Statements and
notes  thereto  included in Items 7, 7A and 8,  respectively,  of the  Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

The  preparation of the condensed  financial  statements in conformity with U.S.
GAAP requires  management  to make  estimates  and  assumptions  that affect the
reported amounts of assets and liabilities and disclosures of contingent  assets
and  liabilities  at the  date of the  condensed  financial  statements  and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from these estimates.

Basic  income  (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  Common shares  issuable upon the exercise of Stock options,
warrants,  conversion  of  notes  payable  and the  conversion  of the  Series A
Preferred stock.  Potentially  dilutive  securities  excluded are  approximately
483.9 million  shares and 6.8 million shares at June 30, 2005 and June 30, 2004,
respectively.  The  potentially  dilutive  securities at June 30, 2005 primarily
consist of the Series A Preferred  stock with some stock  options and  warrants.
The  conversion  of the Series A  Preferred  stock is  subject  to  shareholders
approval,  and the exercise price for the stock options and warrants exceeds the
current share price.

Pro forma disclosures required under SFAS 148 are presented below. The pro forma
compensation cost may not be representative of that expected in future years.

<TABLE>
<CAPTION>
(In Thousands, Except Per Share Data)                                 3 Months Ended June 30,          6 Months Ended June 30,
                                                                      2005              2004            2005            2004
                                                                 --------------    -------------   --------------  --------------
<S>                                                              <C>               <C>             <C>             <C>
Net loss, as reported .......................................    $          (62)   $        (204)  $         (134)           (381)

Add: Stock based employee compensation expense
     included in reported income, net of related tax ........                --               --               --              --

Deduct: Total Stock-based employee compensation
        expenses determined under fair value based
        method for all awards, net of related tax effects ...                --               --               --              --
                                                                 --------------    -------------   --------------  --------------

Pro forma net loss ..........................................    $          (62)   $        (204)  $         (134) $         (381)
                                                                 ==============    =============   ==============  ==============

Pro forma basic and diluted loss per share:
   Basic - as reported.......................................    $        (0.00)   $       (0.01)  $        (0.00) $        (0.02)
   Basic - pro forma.........................................    $        (0.00)   $       (0.01)  $        (0.00) $        (0.02)
   Diluted - as reported.....................................    $        (0.00)   $       (0.01)  $        (0.00) $        (0.02)
   Diluted - pro forma.......................................    $        (0.00)   $       (0.01)  $        (0.00) $        (0.02)
</TABLE>

Compensation costs for the quarters ended June 30, 2005 and 2004 were calculated
in accordance  with the binomial  model,  using the following  weighted  average
assumptions:  (i) expected  volatility of 123%; (ii) expected  dividend yield of
0%; (iii) expected  option term of 10 years;  (iv) risk-free  rates of return of
2.0% and (v) expected forfeiture rates of 40% for both periods.


                                       6
<PAGE>

2.    LIQUIDITY AND CREDIT FACILITY

On December 16, 2002,  the Company  entered into an agreement  with BFI Business
Finance ("BFI"), a Santa Clara,  California-based business credit company, for a
two year  working  capital  line of credit for  $750,000 to replace our existing
credit  facility  with  Comerica  Bank.  Under  the  BFI  agreement,   available
borrowings are up to 85% of accounts receivable,  after reduction for ineligible
accounts.  The  interest  rate on  outstanding  balances is at prime plus 4% per
annum, plus a monthly  administrative fee of 0.50% per month,  calculated on the
average   daily  balance   outstanding.   The  minimum   monthly   interest  and
administrative  fee charged to the Company was at least $1,000 per month for the
first six months,  escalating to $2,375 per month for the remaining  term of the
agreement.  The term of the  agreement  is two  years and  renews  automatically
unless  terminated  by the Company  upon 30 days' notice prior to the end of the
term.  In  December  2004,  the  agreement  between  the  Company  and  BFI  was
automatically  renewed  for an  additional  period of two years;  however,  both
parties  have the right to cancel the  agreement  at any time on 30 days'  prior
notice.

On April 14, 2005,  the Company  entered into a Stock  Purchase  Agreement  with
Stellar  McKim LLC  ("Stellar"),  a financial  services and software  group (the
"Stellar Transaction"). Pursuant to the Stellar Transaction, the Company filed a
Certificate of Designations  creating a new series of Preferred Stock designated
Series A Convertible Preferred Stock ("Series A Preferred Stock") and issued and
sold  to  Stellar  (i)   41,487,929   shares  of  Common   Stock,   representing
approximately 57.6% of BrightStar's  currently authorized shares of Common Stock
for $213,000 in cash and (ii) 136,585 shares of Series A Preferred Stock,  which
are  convertible  into  482,764,933  shares of the Company's  Common Stock,  for
$137,000 in cash.  Authorization  of the shares of Common  Stock  issuable  upon
conversion  of the Series A  Preferred  Stock  issued to Stellar in the  Stellar
Transaction  is  subject  to  stockholder  approval.   Upon  such  approval  and
conversion  of its  Series A  Preferred  Stock,  Stellar  will own  94.5% of the
outstanding  Common Stock of BrightStar on a fully diluted  basis.  In addition,
the Series A Preferred  Stock has voting rights based on the number of shares of
Common Stock into which it is convertible.  Accordingly, Stellar currently holds
approximately  94.7% of the outstanding voting power held by stockholders of the
Company in all matters upon which stockholders may vote.

Pursuant to the Stellar  Transaction,  the Company  also entered into an Omnibus
Agreement  (as  amended,  the "Omnibus  Agreement"),  with  Stellar,  BrightStar
Information  Technology  Services,  Inc.  ("Services"),  the Company's principal
operating  subsidiary,  and each holder  (each a "Holder" and  collectively  the
"Holders") of Service's Series 1 Convertible  Subordinated Promissory Notes (the
"Notes"),  pursuant to which Stellar agreed to acquire all of the Notes from the
Holders  for  $860,000.  Pursuant  to the  Omnibus  Agreement  and the  Purchase
Agreement,  warrants that were  originally  issued  together with the Notes were
cancelled, the conversion feature of the Notes was eliminated, the maturity date
of the Notes,  as well as the due date for payment of interest  accrued at March
31, 2005, was extended until December 31, 2007 and the Company issued 13,869,121
shares of Common Stock to the Holders.

The  Stellar  Transaction  resulted  in a change of control of the  Company.  As
explained above,  Stellar  currently owns 57.6% of the outstanding  Common Stock
and 94.5% of the  outstanding  voting power and, upon conversion of its Series A
Preferred Stock, will own 94.5% of the outstanding Common Stock of BrightStar on
a fully diluted basis.

Pursuant to the terms of the Stellar  Transaction,  all of the  directors of the
Company,  other than  Joseph A.  Wagda,  and all of the  officers of the Company
resigned,  effective  at the close of  business on April 18,  2005.  After these
resignations,  Ian Scott-Dunne was appointed to the Company's Board of Directors
and elected  Chairman.  In addition,  the Board  elected  Brian Burnett as Chief
Executive  Officer,  John Coogan as Chief Financial  Officer and Deborah Seal as
Corporate  Secretary.  Shortly  thereafter at a Board meeting held on June 15th,
Deborah  Seal was  elected as Chief  Operating  Officer  and  Jordan  Loewer was
elected as Corporate Secretary.

On April 14th 2005,  holders of 125,000  warrants  converted those warrants into
62,500 shares of the common stock.

The Company  believes that its planned  results from  operations,  when combined
with the proceeds from the Stellar  transaction and 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 2005;  however,
operating results could be worse than expected, or the BFI credit facility could
be canceled and the Company  might be unable to obtain a  replacement  facility;
under  such  circumstances,  without  additional  financing,  there  can  be  no
assurance  that the Company  would have  sufficient  cash  available to meet its
obligations as they come due in order to continue as a going concern.


                                       7
<PAGE>

3.    ACCOUNTS RECEIVABLE

Credit is extended based on an evaluation of the customers'  financial condition
and, generally, collateral is not required. The Company maintains allowances for
doubtful  accounts for  estimated  losses  resulting  from the  inability of our
customers  to  make  required  payments.   Management  regularly  evaluates  the
allowance for doubtful accounts.  The estimated losses are based on the aging of
our  receivable  balances,  a review of significant  past due accounts,  and our
historical write-off experience,  net of recoveries.  If the financial condition
of our  customers  were to  deteriorate,  resulting  in an  impairment  of their
ability to make payments, additional allowances would be required.

4.    ACCRUED SALARIES AND OTHER EXPENSES

Accrued salaries and other expenses consist of the following:

      (In Thousands)                                  June 30,      December 31
                                                        2005            2004
                                                    ------------    ------------
      Accrued payroll and payroll taxes............ $         64    $        145
      Accrued professional fees....................           58              61
      Other accrued expenses.......................          138             144
                                                    ------------    ------------
      Total accrued expenses....................... $        260    $        350
                                                    ============    ============

5.    CONVERTIBLE NOTES PAYABLE, NET

On July 26, 2001,  the Company  completed a private  placement of  approximately
$1,100,000 of Series 1 Convertible  Subordinated  Promissory Notes (the "Notes")
and  detachable  warrants  to  purchase  Common  Stock to a group of  investors,
including members of BrightStar's senior management.  The Notes are secured on a
junior basis by substantially all of the assets of the Company and its operating
subsidiaries,  and were originally  convertible into Common Stock, at the option
of the investors,  at a fixed  redemption  price of $0.23 per share,  subject to
adjustment  upon the occurrence of certain  dilutive  events.  The Notes accrued
simple  interest at the annual rate of 8% per annum,  payable in cash or, at the
option of the Company, by issuing additional Notes and warrants (the "PIK Notes"
and "PIK  Warrants",  respectively).  The  Company  elected to pay the  interest
accrued on the Notes from  inception  through June 30, 2003 by issuing PIK Notes
in an  aggregate  principal  amount of $182,000  and PIK Warrants to purchase an
aggregate of 118,867  shares of Common Stock.  From and after October 2003,  the
Company paid all interest accrued on the Notes and PIK Notes in cash.

The  original  maturity  date of the  Notes  and PIK  Notes  was July 1,  2004.;
effective  October 24, 2003,  the  maturity  date of the Notes and PIK Notes was
extended  to  December  31,  2005.   The   extension  was  approved  by  holders
representing  more than 75% of the aggregate  principal  amount of the Notes and
PIK Notes. As  consideration  for this amendment the Company agreed to a partial
pay down schedule for the PIK notes, commencing January 2004. The Company agreed
to pay in cash each quarter an amount  equal to 50% of the interest  then due on
the Notes and PIK Notes and the  amounts so paid were  applied  sequentially  to
retire the PIK Notes in the order issued until December 31, 2005.  Subsequently,
forbearance  agreements were consummated with holders representing more than 75%
of the aggregate outstanding principal balance of the Notes and PIK Notes in (i)
July 2004 (with respect to interest due for the quarter ended June 30, 2004) and
(ii) October 2004 (with respect to interest due for the quarters ended September
30, 2004 and December  31, 2004) which  provided,  among other  things,  for the
deferral of payment of interest accrued during such quarters.  Subsequently, the
conversion  feature of the Notes and PIK Notes was eliminated,  the warrants and
PIK Warrants were canceled, and the maturity date of the Notes and PIK Notes and
date for payment of all interest  accrued thereon to March 31, 2005 was extended
December 31, 2007.

6.    NOTE TO SHAREHOLDER, NET

On July 26, 2001,  the Company  completed a private  placement of  approximately
$1,100,000 of Series 1 Convertible  Subordinated  Promissory Notes (the "Notes")
and  detachable  warrants  to  purchase  Common  Stock to a group of  investors,
including members of BrightStar's senior management.  The Notes are secured on a
junior basis by substantially all of the assets of the Company and its operating
subsidiaries,  and were originally  convertible into Common Stock, at the option
of the investors,  at a fixed  redemption  price of $0.23 per share,  subject to
adjustment  upon the occurrence of certain  dilutive  events.  The Notes accrued
simple  interest at the annual rate of 8% per annum,  payable in cash or, at the
option of the Company, by issuing additional Notes and warrants (the "PIK Notes"
and "PIK  Warrants",  respectively).  The  Company  elected to pay the  interest
accrued on the Notes from  inception  through June 30, 2003 by issuing PIK Notes
in an  aggregate  principal  amount of $182,000  and PIK Warrants to purchase an
aggregate of 118,867  shares of Common Stock.  From and after October 2003,  the
Company paid all interest accrued on the Notes and PIK Notes in cash.


                                       8
<PAGE>

The  original  maturity  date of the  Notes  and PIK  Notes  was July 1,  2004.;
effective  October 24, 2003,  the  maturity  date of the Notes and PIK Notes was
extended  to  December  31,  2005.   The   extension  was  approved  by  holders
representing  more than 75% of the aggregate  principal  amount of the Notes and
PIK Notes. As  consideration  for this amendment the Company agreed to a partial
pay down schedule for the PIK notes, commencing January 2004. The Company agreed
to pay in cash each quarter an amount  equal to 50% of the interest  then due on
the Notes and PIK Notes and the  amounts so paid were  applied  sequentially  to
retire the PIK Notes in the order issued until December 31, 2005.  Subsequently,
forbearance  agreements were consummated with holders representing more than 75%
of the aggregate outstanding principal balance of the Notes and PIK Notes in (i)
July 2004 (with respect to interest due for the quarter ended June 30, 2004) and
(ii) October 2004 (with respect to interest due for the quarters ended September
30, 2004 and December  31, 2004) which  provided,  among other  things,  for the
deferral of payment of interest accrued during such quarters.

Pursuant to the Stellar  Transaction,  the Company  also entered into an Omnibus
Agreement  (as  amended,  the "Omnibus  Agreement"),  with  Stellar,  BrightStar
Information  Technology  Services,  Inc.  ("Services"),  the Company's principal
operating  subsidiary,  and each holder  (each a "Holder" and  collectively  the
"Holders") of Service's Series 1 Convertible  Subordinated Promissory Notes (the
"Notes"),  pursuant to which Stellar agreed to acquire all of the Notes from the
Holders  for  $860,000.  Pursuant  to the  Omnibus  Agreement  and the  Purchase
Agreement,  warrants that were  originally  issued  together with the Notes were
cancelled, the conversion feature of the Notes was eliminated, the maturity date
of the Notes,  as well as the due date for payment of interest  accrued at March
31, 2005, was extended until December 31, 2007 and the Company issued 13,869,121
shares of Common Stock to the Holders.

7.    INCOME TAXES

As a result of historical losses, the Company has recorded a valuation allowance
to offset all of its net  deferred  tax assets  recorded at June 30,  2005.  The
valuation  allowance,  which was  approximately  $11,900,000  as of December 31,
2004,  relates  to  deferred  tax  assets  established  for net  operating  loss
carry-forwards  generated through June 30, 2005 and other temporary differences.
The Company does not expect to recognize  tax benefits on prior or future losses
or other temporary  differences  until such time that it is more likely than not
that tax  benefits  will be realized by the Company.  At December 31, 2004,  the
Company had a net operating loss carry-forward of approximately  $16,156,000 for
Federal  Income Tax purposes,  which will expire in years 2019 through 2024. The
Stellar  Transaction  described  in Note 2 has  triggered a change in  ownership
which will severely limit the use of our tax attributes in the future.

8.    NET (LOSS) INCOME PER SHARE

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

<TABLE>
<CAPTION>
      (Numerator - In Thousands)                                       Three months ended               Six months ended
                                                                    June 30,        June 30,        June 30,         June 30,
                                                                      2005            2004            2005             2004
                                                                  ------------    ------------    ------------    ------------
<S>                                                               <C>             <C>             <C>             <C>
      Numerator:
      Loss from operations .....................................  $        (31)   $       (151)   $        (72)   $       (275)
                                                                  ============    ============    ============    ============

      Net loss .................................................  $        (62)   $        (53)   $       (134)   $       (381)
                                                                  ============    ============    ============    ============

      Numerator for basic earnings per share - loss
      available to Common Stockholders .........................           (62)           (204)           (134)           (381)

      Effect of dilutive securities:
      None .....................................................            --              --              --              --
                                                                  ------------    ------------    ------------    ------------
      Numerator for diluted earnings per share -
      income available to Common Stockholders after assumed
      conversions ..............................................  $        (62)   $       (204)   $       (134)   $       (381)
                                                                  ============    ============    ============    ============

      Denominator:
      Denominator for basic earnings per share - weighted
      average shares ...........................................    62,790,441      15,287,968      39,170,427      15,287,968
      Effect of dilutive securities:
      Employee stock options and other dilutive securities (1) .            --              --              --              --
                                                                  ------------    ------------    ------------    ------------
      Denominator for diluted earnings per share - adjusted
      weighted-average shares and assumed conversions ..........    62,790,441      15,287,968      39,170,427      15,287,968
                                                                  ------------    ------------    ------------    ------------
</TABLE>

(1)   Diluted EPS for the  three-month  period ended June 30, 2005  excludes the
      effect of approximately 483.9 million shares of Common Stock issuable upon
      the  conversion  of  the  Series  A  Preferred   stock,  the  exercise  of
      outstanding  stock  options and warrants.  The  conversion of the Series A
      Preferred  stock is subject to  shareholders  approval,  and the  exercise
      price for the stock options and warrants exceeds the current share price.


                                       9
<PAGE>

9.    LITIGATION

On January 17,  2005,  the Company  received  service of an action  filed by the
State of Texas in the 353d  Judicial  District of the  District  Court of Travis
County,  Texas  (Cause No.  GV500031)  against the Company and BRBA,  Inc.,  its
former  wholly-owned  subsidiary,  for  sales  taxes,  interest,  penalties  and
attorneys'  fees for the period 1997  through  2004 in the  aggregate  amount of
$666,387,  plus  future  interest.  BRBA,  Inc.  was  liquidated  in a chapter 7
proceeding  that  was  completed  in 2002  and the  Company  no  longer  has any
responsibility for its affairs.

The Company  believes that the suit against it was without  merit.  However,  to
avoid the cost and time  required to adjudicate  this matter,  it entered into a
contingent  settlement  agreement on January 19, 2005 whereby the action against
the Company would be  dismissed,  provided the State of Texas  receives  $25,000
from the Company on or before May 12, 2005. The Company made the $25,000 payment
in April 2005.

On August 1, 2005, the Company  received  notice of a claim on behalf of a prior
director  /  employee  for  the  non-payment  of  severance   payments  totaling
approximately  $200,000.  The  Company has taken the  position  that there is no
valid  claim,  as the  applicable  statue of  limitations  has  expired  and the
asserted claim is time-barred,  and the Company has indicated so in its response
to the claimant.  As such,  the Company  believes  that there is no  significant
uncertainty affecting the financial statements as a result of this claim.

In addition,  the Company is from time to time involved in litigation incidental
to its business.  The Company  believes that the results of such litigation will
not have a materially adverse effect on the Company's financial condition.

10.   SIGNIFICANT CUSTOMERS

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 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.

For the second quarter of 2004, the Company had two customers that accounted for
approximately  55% and 17% of the total revenue  respectively.  These  customers
also  accounted for  approximately  24% and 34%  respectively;  of the Company's
total outstanding accounts receivable balance as of June 30, 2004.

11.   RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial  Accounting  Standards Board issued Statement of
Financial  Accounting  Standards No. 123 (revised 2004)  "Share-Based  Payments"
("SFAS  123R").  SFAS 123R  requires  measurement  of all  employee  stock-based
compensation awards using a fair value method and the recording of such expenses
in the consolidated financial statements. In addition, the adoption of SFAS 123R
will  require  additional  accounting  related  to the income  tax  effects  and
additional disclosure regarding the cash flow effects resulting from share-based
payment  arrangements.  SFAS 123R is effective  beginning in the Company's first
quarter of fiscal 2006. The Company is evaluating the  requirements of SFAS 123R
and it expects that the adoption of SFAS 123R will have a material impact on the
Company's results of operations and financial condition. The Company has not yet
determined  whether  the  adoption  of SFAS  123R will  result in a  stock-based
compensation charges that are similar to the current pro forma disclosures under
SFAS 123.

In March 2005,  the Securities and Exchange  Commission  ("SEC")  released Staff
Accounting Bulletin No. 107,  "Share-Based  Payment" ("SAB 107"), which provides
interpretive guidance related to the interaction between SFAS 123(R) and certain
SEC rules and  regulations.  It also  provides the SEC staff's  views  regarding
valuation of share-based  payment  arrangements.  In April 2005, the SEC amended
the  compliance  dates for SFAS 123(R),  to allow  companies  to  implement  the
standard  at the  beginning  of their  next  fiscal  year,  instead  of the next
reporting  period  beginning  after June 15,  2005.  The  Company  is  currently
evaluating  the  impact  SAB  107  will  have  on  its  consolidated   financial
statements.


                                       10
<PAGE>

In May 2005,  the FASB issued  Statement of Financial  Accounting  Standards No.
154,  "Accounting  Changes and Error  Corrections - a Replacement of APB Opinion
No. 20 and FASB Statement No. 3". This new standard replaces APB Opinion No. 20,
"Accounting Changes", and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements".  Among other changes, Statement 154 requires that
a voluntary change in accounting  principle be applied  retrospectively with all
prior period  financial  statements  presented on the new accounting  principle,
unless it is  impracticable  to do so.  Statement  154 also  provides that (1) a
change in method of depreciating or amortizing a long lived  non-financial asset
be accounted for as a change in estimate  (prospectively) that was effected by a
change in  accounting  principle,  and (2)  correction  of errors in  previously
issued financial  statements should be termed a "restatement".  The new standard
is effective  for  accounting  changes and  correction  of errors made in fiscal
years  beginning  after  December 15, 2005.  Early  adoption of this standard is
permitted for  accounting  changes and correction of errors made in fiscal years
beginning after June 1, 2005.

ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The Company 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.  The Company also provides  software support and
training services to major corporations.  We have approximately 20 employees and
contractors. The Company has its headquarters in the San Francisco Bay Area with
a field office near Dallas, Texas. We also have other service-delivery locations
throughout the United States, including Arizona, Arkansas, California,  Florida,
Oregon and Texas.

The timing of revenue is difficult to forecast because the Company's 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,  the Company's engagements generally
can be  changed  or  terminated  without a  significant  customer  penalty.  The
Company's  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.

Cost of revenue  consists  primarily  of salaries  (including  non-billable  and
training time) and benefits for consultants.  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. As revenues declined over the past
couple of years, the Company reduced its consulting resources accordingly.

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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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.


                                       11
<PAGE>

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 -- The Company provides services to customers for fees that
are based on time and materials or, occasionally,  fixed fee contracts.  Revenue
for fixed fee  contracts is  recognized  ratably over the contract term based on
the  percentage-of-completion  method. Costs incurred to date as a percentage of
total  estimated costs are used to determine the percentage of the contract that
has been  completed  throughout  the  contract  life.  Costs  reimbursed  by its
customers are included in revenue for the periods in which costs are incurred.

Income  taxes -- The  Company  accounts  for income  taxes  under SFAS No.  109,
"Accounting  for Income  Taxes."  SFAS No. 109  requires an asset and  liability
approach to accounting for income taxes.  The Company  provides  deferred income
taxes for  temporary  differences  that will  result in  taxable  or  deductible
amounts  in  future  years.  A  valuation  allowance  is  recognized  if  it  is
anticipated that some or all of a deferred tax asset may not be realized.  Based
on the Company's net losses for the previous  years,  the Company has recorded a
valuation  allowance  for deferred  taxes as of June 30, 2005. In the event that
the Company were to determine  that it would be able to realize its deferred tax
assets in the future,  an asset would be recorded,  which in turn would increase
income for the period in which such determination was made.

RESULTS OF OPERATIONS

Revenue for the second  quarter ended June 30, 2005 decreased from $0.84 million
to $0.67 million or 20% compared to the second  quarter ended June 30, 2004 as a
result of a reduction in the demand for our services.

Gross profit as a percentage  of revenue for the second  quarter  ended June 30,
2005  decreased  from 28.6% to 27.8%  compared to second  quarter ended June 30,
2004 as a result of consultant cost  increases,  which were not passed on to our
customers and a change in the mix of services provided to our clients.

LIQUIDITY AND CAPITAL RESOURCES

On December 16, 2002,  the Company  entered into an agreement  with BFI Business
Finance ("BFI"), a Santa Clara,  California-based business credit company, for a
two year working  capital line of credit for  $750,000,  to replace our existing
credit  facility  with  Comerica  Bank.  Under  the  BFI  agreement,   available
borrowings are up to 85% of accounts receivable,  after reduction for ineligible
accounts.  The  interest  rate on  outstanding  balances is at prime plus 4% per
annum,  plus a monthly  administrative  fee of 0.50% per month calculated on the
average   daily  balance   outstanding.   The  minimum   monthly   interest  and
administrative  fee charged to the Company was at least $1,000 per month for the
first six months,  escalating to $2,375 per month for the remaining  term of the
agreement.  The term of the  agreement  is two  years and  renews  automatically
unless  terminated  by the Company  upon 30 days' notice prior to the end of the
term.  In  December  2004,  the  agreement  between  the  Company  and  BFI  was
automatically  renewed  for an  additional  period of two years;  however,  both
parties  have the right to cancel the  agreement  at any time on 30 days'  prior
notice.

On April 14, 2005,  the Company  entered into a Stock  Purchase  Agreement  with
Stellar  McKim LLC  ("Stellar"),  a financial  services and software  group (the
"Stellar Transaction"). Pursuant to the Stellar Transaction, the Company filed a
Certificate of Designations  creating a new series of Preferred Stock designated
Series A Convertible Preferred Stock ("Series A Preferred Stock") and issued and
sold  to  Stellar  (i)   41,487,929   shares  of  Common   Stock,   representing
approximately 57.6% of BrightStar's currently authorized shares of Common Stock,
for $213,000 in cash and (ii) 136,585 shares of Series A Preferred Stock,  which
are convertible into an aggregate of 482,764,933  shares of the Company's Common
Stock,  for  $137,000  in cash.  Authorization  of the  shares of  Common  Stock
issuable  upon  conversion  of the shares of Series A Preferred  Stock issued to
Stellar in the Stellar Transaction is subject to stockholder approval. Upon such
approval and conversion of its Series A Preferred Stock,  Stellar will own 94.5%
of the  outstanding  Common Stock of  BrightStar on a fully  diluted  basis.  In
addition,  the Series A Preferred Stock has voting rights based on the number of
shares  of Common  Stock  into  which it is  convertible.  Accordingly,  Stellar
currently owns  approximately  94.7% of the voting power held by stockholders of
the Company in all matters upon which stockholders may vote.


                                       12
<PAGE>

Pursuant to the Stellar  Transaction,  the Company  also entered into an Omnibus
Agreement  (as  amended,  the "Omnibus  Agreement"),  with  Stellar,  BrightStar
Information  Technology  Services,  Inc.  ("Services"),  the Company's principal
operating  subsidiary,  and each holder  (each a "Holder" and  collectively  the
"Holders") of Service's Series 1 Convertible  Subordinated Promissory Notes (the
"Notes"),  pursuant to which Stellar agreed to acquire all of the Notes from the
Holders  for  $860,000.  Pursuant  to the  Omnibus  Agreement  and the  Purchase
Agreement,  warrants that were  originally  issued  together with the Notes were
cancelled, the conversion feature of the Notes was eliminated, the maturity date
of the Notes,  as well as the due date for payment of interest  accrued at March
31, 2005, was extended until December 31, 2007 and the Company issued 13,869,121
shares of Common Stock to the Holders.

The  Stellar  Transaction  resulted  in a change of control of the  Company.  As
explained above,  Stellar  currently owns 57.6% of the outstanding  Common Stock
and 94.5% of the  outstanding  voting power and, upon conversion of its Series A
Preferred Stock, will own 94.5% of the outstanding Common Stock of BrightStar on
a fully diluted basis.

The Company  believes that its planned  results from  operations,  when combined
with the proceeds from the Stellar  transaction and 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 2005;  however,
operating results could be worse than expected, or the BFI credit facility could
be canceled and the Company  might be unable to obtain a  replacement  facility;
under  such  circumstances,  without  additional  financing,  there  can  be  no
assurance  that the Company  would have  sufficient  cash  available to meet its
obligations as they come due in order to continue as a going concern.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material  changes from the  information  previously  reported
under Item 7A of the  Company's  Annual  Report on Form 10-K for the fiscal year
ended December 31, 2004.  Refer to the Company's  Annual Report on Form 10-K for
the year ended December 31, 2004 for more details.

ITEM 4. 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.


                                       13
<PAGE>

                           PART II - OTHER INFORMATION

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, 2004.  Refer to the Company's  Annual Report on Form 10-K for
the year ended December 31, 2004 for more details.

ITEM 2. Exhibits

(a) Exhibits

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.


                                       14
<PAGE>

                                   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: Aug 19, 2005.                BY: /s/ Brian Burnett
                                       -----------------------------------------
                                       Brian Burnett
                                       Chief Executive Officer


                                       15
<PAGE>

                                INDEX TO EXHIBITS

            EXHIBIT
            NUMBER      DESCRIPTION
            ------      -----------

            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


                                       16