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 SEPTEMBER 30, 2006
                  ORo
              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 OFINCORPORATION
                OR ORGANIZATION)
            (I.R.S.
                EMPLOYER IDENTIFICATION NO.)





**6** **160
      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 a shell company (as defined in Rule
      12b-2 of the Exchange Act). Yes o No x .





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 December 21, 2006 was 209,707,518.





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





1


BRIGHTSTAR
      INFORMATION TECHNOLOGY GROUP, INC.


INDEX
      TO
      SEPTEMBER 30, 2006 FORM 10-QSB





Page**Part
                I - Financial Information**Item
                1 - Financial Statements (unaudited)Balance
                Sheet - September 30, 2006
            3Statements
                of Operations - For the three and nine months ended September 30,
                2006 and
                September 30, 2005
            4Statements
                of Cash Flows - For the nine months ended September 30, 2006 and
                September
                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
            15**Part
                II - Other Information**Item
                1 - Legal Proceedings
            16Item
                2 - Unregistered Sales of Equity Securities and Use of
                Proceeds
            16Item
                3 - Defaults Upon Senior Securities
            16Item
                4 - Submission of Matters to a Vote of Security Holders
            16Item
                5 - Other information
            16Item
                6 - Exhibits
            16Signature
                Page
            17


**“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)


UnauditedSeptember
                  30,2006ASSETSCurrent
                  assetsCash
              
              $
              56Trade
                  accounts receivable, net of allowance of $12
              
              
              545Prepaid
                  expenses and other
              
              
              98Total
                  current assets
              
              
              699Property
                  and equipment, net
              
              
              51Receivable
                  from affiliate
              
              
              303Receivable
                  from MPI
              
              
              1,674In-place
                  contracts
              
              
              951Customer
                  list
              
              
              777Other
                  intangible assets
              
              
              358Total
                  assets
              
              $
              4,813LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Line
                  of credit
              
              $
              159Accounts
                  payable
              
              
              137Accrued
                  salaries and other expenses
              
              
              260Payable
                  to Stellar
              
              
              697Deferred
                  revenue
              
              
              553Total
                  current liabilities
              
              
              1,806Convertible
                  notes payable to Stellar
              
              
              1,800Convertible
                  notes payable to Vantage - (A Related Party)
              
              
              1,983Notes
                  payable to Stellar
              
              
              1,258Other
                  liabilities - payable to Stellar
              
              
              101Commitments
                  and contingencies
              
              
              —Stockholders'
                  equity:Preferred
                  stock, $0.001 par value: 3,000,000 shares authorized;136,
                  585 shares issued and outstanding
              
              
              —Common
                  stock, $0.001 par value; 747,000,000 shares authorized;209,707,518
                  shares issued and outstanding
              
              
              210Additional
                  paid-in capital
              
              
              100,376Accumulated
                  deficit
              
              
              (102,721
              )Total
                  stockholders' equity
              
              
              (2,135
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' EQUITY
              
              $
              4,813


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
                  
                  NINE
                      MONTHS ENDEDSEPTEMBER
                      30,
                  
                  SEPTEMBER
                      30,2006
                  
                  2005
                  
                  2006
                  
                  2005Revenue
                  
                  $
                  814
                  
                  $
                  534
                  
                  $
                  2,383
                  
                  $
                  1,959Cost
                      of revenue
                  
                  
                  512
                  
                  
                  396
                  
                  
                  1,553
                  
                  
                  1,452Gross
                      profit
                  
                  
                  302
                  
                  
                  138
                  
                  
                  830
                  
                  
                  507Operating
                      expenses:Selling,
                      general and administrative
                  
                  
                  440
                  
                  
                  209
                  
                  
                  1,332
                  
                  
                  640Depreciation
                      and amortization
                  
                  
                  89
                  
                  
                  5
                  
                  
                  269
                  
                  
                  15Total
                      operating expenses
                  
                  
                  529
                  
                  
                  214
                  
                  
                  1,601
                  
                  
                  655Loss
                      from operations
                  
                  
                  (227
                  )
                  
                  (76
                  )
                  
                  (771
                  )
                  
                  (148
                  )Interest
                      expense, net
                  
                  
                  (77
                  )
                  
                  (32
                  )
                  
                  (220
                  )
                  
                  (93
                  )Loss
                      before tax provision
                  
                  
                  (304
                  )
                  
                  (108
                  )
                  
                  (991
                  )
                  
                  (241
                  )Income
                      tax provision
                  
                  
                  —
                  
                  
                  —Net
                      loss
                  
                  $
                  (304
                  )
                  $
                  (108
                  )
                  $
                  (991
                  )
                  $
                  (241
                  )Net
                      loss per share: basic and dilutedNet
                      loss per share
                  
                  $
                  (0.00
                  )
                  $
                  (0.00
                  )
                  $
                  (0.01
                  )
                  $
                  (0.00
                  )Average
                      shares outstanding:basic
                      and diluted
                  
                  
                  209,707,520
                  
                  
                  70,707,518
                  
                  
                  157,264,296
                  
                  
                  49,798,310


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)




NINE
                    MONTHS ENDEDSEPTEMBER
                    30,2006
                
                2005Operating
                    activities:Net
                    loss
                
                $
                (991
                )
                $
                (241
                )Adjustments
                    to reconcile net loss to netcash
                    provided (used) by operating activities:Depreciation
                    and amortization
                
                
                269
                
                
                15Change
                    in allowance for doubtful accounts
                
                
                9Changes
                    in operating assets and liabilitiesTrade
                    accounts receivable
                
                
                (285
                )
                
                199Unbilled
                    revenue
                
                
                —
                
                
                (20
                )Prepaid
                    expenses and other assets
                
                
                254
                
                
                (16
                )Accounts
                    payable
                
                
                118
                
                
                (5
                )Accrued
                    salaries and other expenses
                
                
                35
                
                
                (133
                )Deferred
                    revenue
                
                
                191
                
                
                —Other
                    liabilities
                
                
                —
                
                
                26Net
                    cash provided (used) by operating activities
                
                
                (400
                )
                
                (175
                )Investing
                    activities:Acquistions,
                    net
                
                
                (1,800
                )
                
                —Investment
                
                
                (2,277
                )
                
                —Net
                    cash used in investing activities
                
                
                (4,077
                )
                
                —Financing
                    activities:Proceeds
                    from sale of common and preferred stock
                
                
                —
                
                
                350Net
                    borrowings (payments) under line of credit
                
                
                8
                
                
                (199
                )Net
                    borrowings (payments) from affiliate
                
                
                3,783
                
                
                —Proceeds
                    from convertible notes payable
                
                
                482
                
                
                —Net
                    cash provided (used) by financing activities
                
                
                4,273
                
                
                151Net
                    decrease in cash
                
                
                (204
                )
                
                (24
                )Cash:Beginning
                    of period
                
                
                260
                
                
                43End
                    of period
                
                $
                56
                
                $
                19Supplemental
                    Disclosure:Interest
                    paid
                
                $
                21
                
                $
                21Non
                    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 September 30, 2006, the statements of operations for the
      three and nine months ended September 30, 2006 and September 30, 2005,
      respectively, and the statements of cash flows for the nine months ended
      September 30, 2006 and September 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 September 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. The Company anticipates
      completing the final valuation during the fourth quarter of 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
              
              Nine
                  months endedSeptember
                  30,
              
              September
                  30,2006
              
              2005
              
              2006
              
              2005Revenues
              
              
              814
              
              
              781
              
              
              2,383
              
              
              2,652Gross
                  profit
              
              
              302
              
              
              349
              
              
              830
              
              
              1,100Gross
                  profit margin
              
              
              37
              %
              
              45
              %
              
              35
              %
              
              41
              %Net
                  loss
              
              
              304
              
              
              364
              
              
              991
              
              
              376Net
                  loss per share
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00
              
              $
              0.00Weighted
                  average number of shares
              
              
              209,707,518
              
              
              209,707,518
              
              
              209,707,518
              
              
              188,798,310






**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
      September 30, 2006 (in thousands):




EstimatedGross
              
              Useful
              
              
              
              NetCarrying
              
              Life
              
              Accumulated
              
              CarryingAmount
              
              (in
                  years)
              
              Amortization
              
              ValueIn
                  place contracts
              
              $
              1,065
              
              
              7
              
              $
              114
              
              $
              951Customer
                  list
              
              
              871
              
              
              7
              
              
              94
              
              
              777Tradename
              
              
              150
              
              
              7
              
              
              14
              
              
              136Developed
                  software
              
              
              250
              
              
              7
              
              
              27
              
              
              223$
              2,336
              
              
              
              
              $
              249
              
              $
              2,087






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




2006
              
              $
              832007
              
              
              3342008
              
              
              3342009
              
              
              3342010
              
              
              3342011
              
              
              3342012
              
              
              334$
              2,087









7


**4.
      Accrued Salaries and Other Expenses**







Accrued
      salaries and other expenses consist of the following:





September
                  30,2006Accrued
                  payroll and payroll taxes
              
              $
              98Accrued
                  professional fees
              
              
              71Other
                  accrued expenses
              
              
              91Total
                  accrued expenses
              
              $
              260







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







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




**September
                  30,****2006**Accrued
                  liabilities due to Stellar, net
              
              $
              658Long
                  term notes payable to Stellar
              
              
              1,258Long
                  term other liabilities to Stellar
              
              
              101Convertible
                  note payable to Stellar
              
              
              1,800$
              3,817





Additionally,
      at September 30, 2006, the Company had a $5.0 million convertible promissory
      note agreement due to The Vantage Funds (Vantage), an investment fund; see
      Note
      6 for the terms of the convertible note. A member of the Company’s Board of
      Directors serves as a trustee of Vantage. On March 31, 2005, Vantage entered
      into a $0.3 million loan agreement with MPI (MPI Note). The loan was evidenced
      by a Promissory Note, dated as of March 31, 2005, and is payable on May 29,
      2008.  Interest on the outstanding balance of the note accrues at the rate
      of 6% per annum and is payable quarterly or at maturity. All amounts due
      under the note are payable, at the option of MPI, in cash or in shares of MPI
      Stock. Upon conversion of the MPI Note, Vantage will become a 10% owner of
      MPI.
      MPI is an acquisition target of BrightStar. MPI will elect to convert the MPI
      Note upon closure of the acquisition transaction between BrightStar and MPI.





Also,
      upon closure of the acquisition agreement between the Company and
      MPI:





|· | The
              Company will issue 1,984,273 shares of newly formed Series B Preferred
              Stock (Series B) to the current stockholders’ of MPI, which will include
              Vantage once the MPI Note is converted into shares of MPI stock, in
              exchange for all of the issued and outstanding common stock of MPI.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|· | Holders
              of Series B will be entitled to receive 70% of any future MPI net profit
              distributions and, in the event of liquidation by the Company of MPI,
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|· | Holders
              of Series B will be entitled to receive a pro rate share of the net
              proceeds of the sale of MPI.
|- | ------------------------------------------------------------------------------------------------------------------------------------

|· | In
              the event of this transaction failing to close, MPI will seek third
              party
              financing to repay the bridge loan to the
              Company.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------




The
      preliminary stock exchange agreement between the Company and MPI was originally
      entered into on July 25, 2006. Due to continued negotiations, executive
      availability and MPI shareholder approval the acquisition was unable to be
      closed at September 30, 2006. Please see note 10 below.





8


The
      Company has also entered into loan agreements with two members of MPI’s
      executive team to lend $0.3 million to the executives. The loans are evidenced
      by Promissory Notes, dated as of July 26, 2006, and are payable on August 1,
      2009. Interest on the outstanding balance of the notes accrues at Libor plus
      0.5% and is payable on August 1, 2009. As of September 30, 2006, the Company
      was
      entitled to receive approximately $0.3 million under these
      agreements.




**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.





On
      May
      19, 2006, the Company entered into a promissory note agreement with Vantage
      to
      borrow up to $5.0 million. The loan was evidenced by a Promissory Note, dated
      as
      of May 19, 2006, and is payable on May 19, 2011. Interest on the outstanding
      balance of the note accrues at Prime plus 2% and is payable on the annual
      anniversary of the note. All accrued interest due under the note are payable,
      at
      the option of the Company, in cash or in shares of BrightStar Stock, valued
      at
      the fair market value as determined in good faith by the Board of Directors
      of
      the Company. The proceeds from this agreement have been invested in MPI via
      bridge financing to the company of $1.6 million and loans to two members of
      MPI’s executive team of $0.3 million, see Note 5 for further detail. As of
      September 30, 2006, the Company owed approximately $2.0 million under this
      agreement.




**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.




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




For
      the
      third quarter of 2006, the Company had a single customer that accounted
      for 38% of total revenue.  This customer also accounted for
      approximately 30% of the Company's total outstanding accounts receivable balance
      as of September 30, 2006. In addition, the Company had two other customers
      which accounted for 11% each of the Company's total outstanding accounts
      receivable balance as of September 30, 2006.





For
      the
      third quarter of 2005, the Company had four customers that accounted for
      approximately 55%, 15%, 11% and 8% of the total revenue respectively. For the
      first nine months of 2005, these customers accounted for approximately 47%,
      17%,
      13% and 8% of total revenue respectively. These customers also accounted for
      approximately 31%, 18%, 16% and 16% respectively, of the Company's total
      outstanding accounts receivable balances as of September 30, 2005.





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





In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued
      Statement No. 158 “Employers’ Accounting for Defined Benefit Pension and Other
      Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and
      132(R)”. Management does not believe that this statement will have a significant
      impact as the company does not offer retirement benefits.





In
      September 2006, FASB issued Statement No. 157 “Fair Value Measurements”.
      Management does not believe that this statement will have a significant impact
      as the company maintains its accounts at fair value.





9


In
      September 2006, the SEC issued Staff Accounting Bulletin No. 108, “Considering
      the Effects of Prior Year Misstatements when Quantifying Misstatements in
      Current Year Financial Statements” (“SAB 108”). SAB 108 requires that
      registrants quantify errors using both a balance sheet and income statement
      approach and evaluate whether either approach results in a misstated amount
      that, when all relevant quantitative and qualitative factors are considered,
      is
      material. SAB 108 is effective for fiscal years beginning after November 15,
      2006, and is not expected to have a material impact on the Company’s
      consolidated financial statements.





**10.** **Subsequent
      Event**





Subsequent
      to September 30, 2006, the Company entered into a preliminary agreement with
      Vantage to transfer the bridge loan receivable from MPI, the promissory notes
      receivable from two members of MPI’s executive team and all accrued interest on
      both the loan receivable and promissory notes to Vantage, in full and final
      payment of all monies and accrued interest due from the Company to Vantage
      at
      the date of transfer. It is expected that this transaction will be completed
      prior to December 31 st 2006.








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 50 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 Virginia
      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. As of September 30, 2006, the transaction with MPI had not closed.
      We
      have advanced MPI approximately $1.6 million, from proceeds from a debt
      agreement with The Vantage Funds.





*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 nine months ended September 30, 2006 were $0.8
      million and $2.4 million, significantly higher than the three and nine months
      ended September 30, 2005. Revenues increased due to our acquisition of
      Neulogic. Our operating expenses for the three and nine months ended
      September 30, 2006 were $0.5 million and $1.6 million, compared to
      $0.2 million and $0.7 million for the three and nine months ended
      September 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.





11


**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.





For
      the
      quarter and nine months ended September 30, 2006, revenues were $0.8 million
      and
      $2.4 million, significantly higher than the quarter and nine months ended
      September 30, 2005. The increase is due to 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 September 30, 2006
      increased from 26% to 37% compared to quarter ended September 30, 2005. Gross
      profit as a percentage of revenue for the nine months ended September 30, 2006
      increased from 26% to 35% compared to nine months ended September 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 nine months ended September 30, 2006 increased from $0.2 million
      to
      $0.4 million or 100% and from $0.6 million to $1.3 million or 117% compared
      to
      the quarter and nine months ended September 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 September 30, 2006, we had $56 thousand of
      cash and cash equivalents. We had an accumulated deficit of approximately
      $102.7 million as of September 30, 2006.




Net
      cash
      used in operating activities totaled $0.4 million for the nine months ended
      September 30, 2006 as compared to cash used in operations of $0.2 million
      for the nine months ended September 30, 2005. Net cash used in operating
      activities for the nine months ended September 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 nine months
      ended September 30, 2005, net cash used in operating activities resulted
      primarily from operating losses.




12


Net
      cash
      used in investing activities totaled $4.1 million for the nine months ended
      September 30, 2006 as compared to no investing activities the nine months
      ended September 30, 2005. For the nine months ended September 30,
      2006, net cash used in investing activities resulted from the acquisition of
      Neulogic and investments in MPI. There were no investing activities for the
      nine
      months ended September 30, 2005.




Net
      cash
      provided by financing activities was $4.3 million for the nine months ended
      September 30, 2006, as compared to cash provided by financing activities of
      $0.2
      million for the nine months ended September 30, 2005. For the nine month
      periods ended September 30, 2006, net cash provided by financing activities
      consisted of advances from our majority shareholder and other affiliates,
      partially offset by payments on debt obligations related to the
      receivables-based revolving line of credit. For the nine months ended September
      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.




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 September 30, 2006 the credit facility had an outstanding
      balance of $0.2 million.




*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.





On
      May
      19, 2006, we entered into a promissory note agreement with The Vantage Funds
      (Vantage) to borrow up to $5.0 million. The loan was evidenced by a Promissory
      Note, dated as of May 19, 2006, and is payable on May 19, 2011. Interest on
      the
      outstanding balance of the note accrues at Prime plus 2% and is payable on
      the
      annual anniversary of the note. All accrued interest due under the note are
      payable, at our option, in cash or in shares of our common stock, valued at
      the
      fair market value as determined in good faith by our Board of Directors. 
As of September 30, 2006, we owed approximately $2.0 million under this
      agreement. This note is between related parties and should not be considered
      an
      improvement of our creditworthiness.





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.





13


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.





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.





14


**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.





15


**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
      1A.** **** **Risk
      Factors**





***Collection
      related to long term receivables*** *.* BrightStar has entered into agreements, which allow it to access to up to $5.0
      million to finance acquisitions. BrightStar has accessed these funds to fund
      its
      acquisition of MPI. Any disruption of the operations or cash flows of MPI could
      have a significant negative impact on BrightStar’s ability to collect on those
      receivables and could negatively impact BrightStar’s ability to satisfy its
      obligations. Currently, MPI does not have the financial resources to repay
      the
      bridge loan if requested to do so immediately.








**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




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








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:
              December 21, 2006.
            By:
            /s/ James
              J.
              CahillJames
                J. Cahill
              Chief
                Executive Officer


17


INDEX
      TO
      EXHIBITS




EXHIBITNUMBER
              
              DESCRIPTION31.1
                  -
              
              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