**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549




**FORM
      10-QSB**




**QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934**




For
                the fiscal quarter ended**June
                30, 2006**
            
            Commission
                File Number:000-52023






**PURE
                VANILLA EXCHANGE, INC.**(Exact
                name of small business issuer specified in its
                charter)




**Nevada**
            
            **98-0442839**(State
                or other jurisdiction of incorporation)
            
            (I.R.S.
                Employer Identification No.)




**805
                Third Avenue, 15thFloor, New York, NY 10022**(Address of principal executive offices)**(212)
                972-1600**(Issuer’s
                telephone number, including area
                code)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such
      shorter period that the issuer 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 checkmark whether the issuer is a shell company (as defined in Rule 12b-2
      of
      the Exchange Act). Yes o No
      x





As
      of
      August 14, 2006, the Company had 53,900,031 shares of common stock, par value
      $.001 per share, issued and outstanding.







Transitional
      Small Business Disclosure Format. Yes o No x














**Index****Page****Part
                  I. Financial Information**Item
              1
              .
              Financial
                  Statements (unaudited)Balance
                  Sheet as of June 30, 2006 (unaudited)
              1Statements
                  of Operations for the three and six months ended
                  June 30, 2006 and from August 30, 2005 (Inception)
                  toMarch
                  31, 2006 (unaudited)
              2Statements
                  of Changes in Stockholders’ Deficit from August 30, 2005 (Inception)
                  toJune
                  30, 2006 (unaudited)
              3Statements
                  of Cash Flows for the six months ended June 30, 2006and
                  from August 30, 2005 (Inception) to June 30, 2006
                  (unaudited)
              4Notes
                  to the Financial Statements (unaudited)
              5Item
              2
              .
              Management's
                  Discussion and Analysis or Plan of Operation
              11Item
              3
              .
              Controls
                  and Procedures
              15**Part
                  II. Other Information**Item
              1
              .
              Legal
                  Proceedings
              17Item
              2
              .
              Changes
                  in Securities
              17Item
              3
              .
              Defaults
                  upon Senior Securities
              17Item
              4
              .
              Submission
                  of Matters to a Vote of Security Holders
              17Item
              5
              .
              Other
                  Information
              17Item
              6
              .
              Exhibits
              18Signatures
              20










**Pure
                  Vanilla eXchange, Inc.****(a
                  development stage company)****BALANCE
                  SHEET****June
                  30, 2006****(Unaudited)****ASSETS**Current
                  Assets:Cash
                  and cash equivalents
              
              $
              480,357Prepaid
                  expenses
              
              
              51,865Deferred
                  costs, net of accumulated amortization of $64,620
              
              
              480,289Other
                  current assets
              
              
              48,008Total
                  Current Assets
              
              
              1,060,519Property
                  and equipment, net of accumulated depreciation of $363
              
              
              16,339Deferred
                  costs and other assets
              
              
              453,587**TOTAL
                  ASSETS**
              
              $
              1,530,445**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**Current
                  Liabilities:Accounts
                  payable
              
              $
              165,028Short-term
                  loans and accrued interest payable, net of discount of
                  $565,382
              
              
              1,450,639Other
                  current liabilities
              
              
              40,646Total
                  Current Liabilities
              
              
              1,656,313CommitmentStockholders'
                  Deficit:Common
                  Stock, $0.001 par value;Authorized
                  shares - 500,000,000; Issued andoutstanding
                  shares 53,900,031
              
              
              53,900Additional
                  paid-in-capital
              
              
              2,954,032Accumulated
                  deficit during development stage
              
              
              (3,133,800
              )Total
                  Stockholders' Deficit
              
              
              (125,868
              )**TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT**
              
              $
              1,530,445




***See
      notes to financial statements***




1




**Pure
                  Vanilla eXchange, Inc.****(a
                  development stage company)****STATEMENTS
                  OF OPERATIONS**
  Six
                  Months Ended
                June
                  30, 2006
              
              Three
                      MonthsEnded June 30,2006
              
              August
                      30, 2005(Date of Inception)to June 30,
                  2006(Unaudited)
              
              (Unaudited)
              
              (Unaudited)Operating
                  expenses:Software
                  licensing fees
              
              $
              500,000
              
              $
              -
              
              $
              500,000Other
                  operating expenses
              
              
              1,303,392
              
              
              919,608
              
              
              1,425,348Loss
                  from operations before other expenses
              
              
              (1,803,392
              )
              
              (919,608
              )
              
              (1,925,348
              )Other
                  expenses:Organizational
                  costs
              
              
              (1,017,647
              )
              
              -
              
              
              (1,017,647
              )Interest
                  expense
              
              
              (190,805
              )
              
              (186,879
              )
              
              (190,805
              )Total
                  other expenses
              
              
              (1,208,452
              )
              
              (186,879
              )
              
              (1,208,452
              )Net
                  Loss
              
              $
              (3,011,844
              )
              $
              (1,106,487
              )
              $
              (3,133,800
              )Basic
                  and diluted net loss per share
              
              $
              (0.09
              )
              $
              (0.02
              )Weighted
                  average number of shares outstanding
              
              
              34,811,300
              
              
              53,900,031




***See
      notes to financial statements***


2




**Pure
                  Vanilla eXchange, Inc.****(a
                  development stage company)****STATEMENT
                  OF CHANGES IN STOCKHOLDERS' DEFICIT****(Unaudited)**
  **Accumulated****Additional**
                  
                  **Deficit
                      during****Common
                      Stock**
                  
                  **Paid-in**
                  
                  **Development****Shares**
                  
                  **Amount**
                  
                  **Capital**
                  
                  **Stage**
                  
                  **Total**August
                        30, 2005 (Date of Inception)
                  
                  
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -
                  
                  $
                  -Shares
                      issued for cash
                  
                  
                  2,773,958
                  
                  
                  27,740
                  
                  
                  99,760
                  
                  
                  -
                  
                  
                  127,500Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (121,956
                  )
                  
                  (121,956
                  )Balance
                      at December 31, 2005
                  
                  
                  2,773,958
                  
                  
                  27,740
                  
                  
                  99,760
                  
                  
                  (121,956
                  )
                  
                  5,544Shares
                      issued for cash
                  
                  
                  79,000
                  
                  
                  790
                  
                  
                  328,956
                  
                  
                  -
                  
                  
                  329,746Shares
                      issued for services
                  
                  
                  1,575,000
                  
                  
                  15,750
                  
                  
                  -
                  
                  
                  -
                  
                  
                  15,750Adjustment
                      to outstandingshares
                      as a result ofrecapitalization
                      transaction
                  
                  
                  48,415,210
                  
                  
                  8,563
                  
                  
                  (8,563
                  )
                  
                  -
                  
                  
                  -Shares
                      issued for services inconnection
                      with the reversemerger
                  
                  
                  1,056,863
                  
                  
                  1,057
                  
                  
                  791,590
                  
                  
                  -
                  
                  
                  792,647Stock
                      Options granted under 2006Incentive
                      Compensation Plan
                  
                  
                  -
                  
                  
                  -
                  
                  
                  264,146
                  
                  
                  -
                  
                  
                  264,146Warrants
                      issued in connectionwith
                      guarantee of lease
                  
                  
                  -
                  
                  
                  -
                  
                  
                  421,696
                  
                  
                  -
                  
                  
                  421,696Warrants
                      issued with loans
                  
                  
                  -
                  
                  
                  -
                  
                  
                  1,056,447
                  
                  
                  -
                  
                  
                  1,056,447Net
                      loss
                  
                  
                  -
                  
                  
                  -
                  
                  
                  -
                  
                  
                  (3,011,844
                  )
                  
                  (3,011,844
                  )Balance
                      at June 30, 2006
                  
                  
                  53,900,031
                  
                  $
                  53,900
                  
                  $
                  2,954,032
                  
                  $
                  (3,133,800
                  )
                  $
                  (125,868
                  )


***See
      notes to financial statements***


3


**Pure
                  Vanilla eXchange, Inc.****(a
                  development stage company)****STATEMENTS
                  OF CASH FLOWS**
  **Six
                  Months Ended**
                **June
                    30, 2006**
              ****
              **August
                      30, 2005****(Date of
                    Inception)****to June 30, 2006**
              ********
              **(Unaudited)**
              ****
              **(Unaudited)****Cash
                  flows from operating activities**Net
                  loss
              
              $
              (3,011,844
              )
              $
              (3,133,800
              )Adjustments
                  to reconcile net loss to net cash used inoperating
                  activities:Depreciation
                  and amortization
              
              
              145,315
              
              
              145,315Issuance
                  of shares and stock options for services
              
              
              1,072,543
              
              
              1,072,543Changes
                  in operating assets and liabilities:Prepaid
                  expenses
              
              
              28,541
              
              
              (51,865
              )Other
                  assets
              
              
              (214,075
              )
              
              (214,075
              )Accounts
                  payable
              
              
              91,819
              
              
              165,028Other
                  current liabilities
              
              
              (10,725
              )
              
              85,667Net
                  cash used in operating activities
              
              
              (1,898,426
              )
              
              (1,931,187
              )**Cash
                  flows from investing activities**Purchase
                  of property and equipment
              
              
              (16,702
              )
              
              (16,702
              )Cash
                  used in investing activities
              
              
              (16,702
              )
              
              (16,702
              )**Cash
                  flows from financing activities**Cash
                  received for common stock
              
              
              329,746
              
              
              457,246Proceeds
                  from short-term loans payable
              
              
              1,971,000
              
              
              1,971,000Cash
                  provided by financing activities
              
              
              2,300,746
              
              
              2,428,246Net
                  increase in cash and cash equivalents
              
              
              385,618
              
              
              480,357**Cash
                  at beginning of period**
              
              
              94,739
              
              
              -**Cash
                  and cash equivalents at end of period**
              
              $
              480,357
              
              $
              480,357**Supplemental
                  Disclosures**Income
                  taxes paid
              
              $
              450
              
              $
              450**Non-cash
                  financing activities**Warrants
                  issued for lease guarantee
              
              $
              421,696
              
              $
              421,696Warrants
                  issued for short-term loan guarantees
              
              $
              410,733
              
              $
              410,733Warrants
                  issued with short-term loans
              
              $
              645,714
              
              $
              645,714




***See
      notes to financial statements***


4


**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**




**NOTE
      1. DESCRIPTION OF DEVELOPMENT STAGE OPERATIONS AND BASIS OF
      PRESENTATION**




Pure
      Vanilla eXchange, Inc. (the "Company") was incorporated in the State of Nevada
      under the name Princeton Power Corporation on August 11, 2004. On November
      29,
      2004, the Company changed its name
      to NVS Entertainment, Inc ("NVS").




The
      Company is the successor to the business of Pure Vanilla eXchange, Inc. ("Old
      Pure Vanilla"), which was incorporated in the State of Nevada on August 30,
      2005. Since
      inception, the Company has devoted most of its activities to establishing its
      business, including raising capital. Accordingly, the Company's financial
      statements are presented as a development stage company as defined in Statement
      of Financial Accounting Standards No. 7.




The
      Company plans to provide an anonymous payment solution specifically designed
      to
      facilitate the purchase of adult content online.




On
      March
      13, 2006, the Company completed a recapitalization in the form of a "reverse
      merger" transaction with Old Pure Vanilla (See Note 2). In the reverse merger,
      Old Pure Vanilla merged into a wholly owned subsidiary of the Company. The
      Company acquired all the outstanding capital stock of Old Pure Vanilla and,
      in
      consideration, issued 39,927,452 shares of its common stock to Old Pure
      Vanilla’s shareholders. The Company retired all of its prior existing shares of
      common stock except for 10,568,634 shares of common stock retained by the
      original shareholders of NVS.




Placement
      agents and other advisors received an additional 1,056,863 shares of common
      stock valued at $792,647 for services rendered in connection with the reverse
      merger, which is included in organizational costs. After the closing of the
      reverse merger, there were 53,900,031 shares of common stock of the Company
      issued and outstanding.




For
      financial reporting purposes, Old Pure Vanilla is deemed to be the acquirer
      in
      the reverse merger transaction. Consequently, the assets and liabilities and
      the
      historical operations reflected in the financial statements are those of Old
      Pure Vanilla, and are recorded at the historical cost basis of Old Pure
      Vanilla.




The
      accompanying financial statements and related footnotes should be read in
      conjunction with the financial statements and related footnotes for the periods
      ended December 31, 2005 and March 31, 2006 contained in the Company’s
      registration statement on Form 10-SB filed with the U.S. Securities and Exchange
      Commission on May 26, 2006.




The
      financial statements have been prepared in accordance with accounting
      principles generally accepted in the United States of America for interim
      financial statements, the instructions to Form 10-QSB and Item 310 of Regulation
      S-B. Accordingly, these financial statements do not include all the information
      and footnotes required by accounting principles generally accepted in the United
      States of America for annual financial statements .
      In the
      opinion of management, all adjustments necessary for a fair presentation of
      such
      financial information have been included. All such adjustments are of a normal
      recurring nature. The results of operations for the six and three months ended
      June 30, 2006 are not necessarily indicative of the results expected for the
      full year.




5




**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**




**Net
      loss per share**




Loss
      per
      share ("EPS") is computed based on weighted average number of common shares
      outstanding and excludes any potential dilution. Diluted EPS reflects the
      potential dilution that could occur if stock option or warrants to issue common
      stock were exercised into common stock, which would then share in the earning
      of
      the company. The shares that would be issued upon the exercise of stock options
      or warrants are excluded from the calculation of net loss per share as their
      effect would be anti-dilutive.




**NOTE
      2. REVERSE MERGER**




On
      March
      13, 2006, NVS Entertainment, Inc., a Nevada Corporation ("NVS"), completed
      a
      reverse merger transaction, in which it caused NVS Acquisition Corp., a Nevada
      corporation and newly created, wholly owned subsidiary of NVS, to be merged
      with
      and into Pure Vanilla eXchange, Inc., a Nevada corporation ("Old Pure Vanilla").
      As a result of the merger, Old Pure Vanilla became a wholly owned subsidiary
      of
      NVS, with Old Pure Vanilla's former security holders acquiring a majority of
      the
      outstanding shares of NVS's common stock. For financial reporting purposes,
      the
      Old Pure Vanilla is deemed to be the acquirer in the reverse merger transaction.
      Consequently, the assets and liabilities and the historical operations reflected
      in the financial statements are those of Old Pure Vanilla and are recorded
      at
      the historical cost basis of the Old Pure Vanilla. Old Pure Vanilla was merged
      into NVS on April 12, 2006. In connection with the latter merger, NVS changed
      the name of the company to Pure Vanilla eXchange, Inc.




NVS
      was a
      publicly traded company whose shares traded on the Pink Sheets and which had
      at
      the time of the reverse merger nominal assets and liabilities and no revenues.
      As part of the merger, NVS issued to the stockholders of Old Pure Vanilla shares
      of its common stock representing approximately 80% of its outstanding shares,
      before giving effect to the shares issued to placement agents and other advisors
      in connection with the reverse merger. The Company paid to the controlling
      shareholder of NVS $225,000 for 39,927,452 shares of common stock of NVS. That
      amount is included in organizational costs. Old Pure Vanilla's management at
      the
      time of the reverse merger assumed their same positions with the publicly traded
      company.




**NOTE
      3. GOING CONCERN**




6




**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**




Since
      inception, the Company has recorded aggregate losses from operations of
      $3,133,800 and has incurred total negative cash flow from operations of
      $1,931,187. As described in Note 4, the Company secured additional debt
      financing during the current quarter and as of June 30, 2006 the Company had
      cash and cash equivalents of $480,357.




Based
      upon the Company’s current financial condition, cash forecast and operating
      plan, the Company believes that it has adequate cash resources to sustain its
      operations until September 2006. However, the Company’s continued existence is
      dependent upon several factors, including the ability to achieve profitability
      from the sale of the Company’s products. Until such time as the Company can rely
      on profits generated from operations, it will continue to seek additional
      sources of financing through private offerings. Accordingly, if the Company
      fails to obtain additional financing, it will be required to substantially
      reduce and defer payments of operating expenses.




The
      accompanying unaudited financial statements have been prepared on the basis
      that
      the Company will continue as a going concern, which assumes the realization
      of
      assets and satisfaction of liabilities in the normal course of business. The
      uncertainties regarding the availability of continued financing and commencement
      of adequate commercial revenues raise substantial doubt about the Company’s
      ability to continue as a going concern. The financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.




**NOTE
      4. SHORT-TERM FINANCING**




During
      the six months ended June 30, 2006, the Company completed transactions with
      several private investors to provide short-term debt financing in the aggregate
      amount of $1,971,000, evidenced by promissory notes issued to the investors
      (the
      "Notes"), including $496,000 from Jed Schutz, a principal shareholder and
      director of the Company. The Company is using the proceeds of the financing
      to
      fund start-up activities including the promotion of and the launch of its web
      site, its stored value card and related working capital requirements, and to
      pay
      legal and other professional fees related to the financing. Interest on each
      Note accrues at a rate of 15% per year and is payable monthly, with the
      principal becoming due on the earlier of February 1, 2007 or upon the Company’s
      first underwritten public offering of its common stock. The Notes provide for
      an
      interest rate of 18% in the event of a default. In connection with the issuance
      of each Note, the Company issued to the investor a warrant (a "Warrant") to
      purchase that number of shares of common stock at an exercise price of $2.00
      per
      share such that the total consideration to be paid upon exercise in full of
      the
      Warrant equals 25% of the principal amount of the Note. As of June 30, 2006,
      the
      Company has issued to the Note holders Warrants to purchase 246,375 shares
      of
      common stock (See Note 7).




The
      Company’s obligations under the Notes are personally guaranteed by Jed Schutz.
      In consideration of this guarantee, the Company issued to Mr. Schutz warrants
      to
      purchase 147,500 shares of common stock at an exercise price of $2.00 per share
      (See Note 7).




7




**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**




As
      of
      June 30, 2006 the financial statements include $45,021 of accrued interest
      payable.




**NOTE
      5. OPERATING LEASE**




On
      April
      25, 2006 the Company entered into a non-cancelable operating lease. Under the
      terms of the lease, the Company is responsible for its share of common area
      and
      operating expenses. The term of the lease started on May 15, 2006 and ends
      on
      January 30, 2010. As of May 15, 2006, minimum lease commitments required under
      the lease are as follows:




2006
              
              $
              201,4892007
              
              
              322,3832008
              
              
              322,3832009
              
              
              322,3832010
              
              
              26,865Total
                  minimum lease commitments
              
              $
              1,195,503




The
      Company’s obligations under the lease agreement are personally guaranteed by Jed
      Schutz, a principal shareholder and director of the Company. In consideration
      of
      this guarantee, the Company issued to Mr. Schutz warrants to purchase 176,250
      shares of common stock at an exercise price of $2.00 per share (See Note
      7).




**NOTE
      6.** **INCENTIVE
      COMPENSATION PLAN**




The
      Company’s 2006 Incentive Compensation Plan provides for grants of stock options
      to officers, directors, employees and independent contractors of the Company.
      Under the plan, the total number of shares of common stock that may be subject
      to the granting of awards under the plan shall be equal to 7,500,000
      shares.




The
      fair
      value of the options granted during the six months ended June 30, 2006 were
      estimated at the grant date using the Black-Scholes option pricing model and
      recorded as expense over the respective life of the option. Significant
      assumptions used in the Black-Scholes model are the current rate of the U.S.
      Treasury security that corresponds with the maturity of each warrant, i.e.
      the
      risk free rate and 60% for volatility. The risk-free rate used in the model
      was
      4.77%.




As
      of
      June 30, 2006, stock options to purchase 2,500,000 shares of common stock have
      been granted under the plan. All of the options are currently outstanding.
      During the six months ended June 30, 2006, the Company recorded $264,146 of
      expense related to the plan.




8




**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**


**NOTE
      7. WARRANTS**




During
      the six months ended June 30, 2006, the Company issued warrants to purchase
      393,875 shares of common stock in connection with the short-term financing
      as
      described in Note 4. The fair value of the warrants was estimated to be
      $1,006,938 and classified as deferred loan costs and loan discount. Deferred
      loan costs and discount are amortized over the life of the loan.




During
      the six months ended June 30, 2006, the Company issued warrants to purchase
      20,000 shares of common stock to two advisors as finders fees. The fair value
      of
      the warrants was estimated to be $49,506 and recorded as deferred loan costs.
      Deferred loan costs are amortized over the life of the loan.




During
      the six months ended June 30, 2006, the Company issued warrants to purchase
      176,250 shares of common stock in connection with the guarantee of the Company’s
      obligations under the lease described in Note 5. The fair value of the warrants
      was estimated to be $421,696 and recorded as deferred lease costs. Deferred
      lease costs are amortized over the term of the lease.




The
      fair
      value of the warrants granted were estimated at the grant date using the
      Black-Scholes option pricing model and recorded as expense over the respective
      life of the debt. Significant assumptions used in the Black-Scholes model are
      the current rate of the U.S. Treasury security that corresponds with the
      maturity of each warrant, i.e. the risk free rate and 60% for volatility. The
      risk-free rates used in the model ranged from 4.94% to 5.25%.




During
      six months ended June 30, 2006, amortization expense related to the deferred
      loan costs was $125,784, and amortization expense related to deferred lease
      costs was $19,168.




At
      June
      30, 2006, there were warrants to purchase 590,125 shares of common stock
      outstanding.




9




**Pure
        Vanilla eXchange, Inc.**
 **(a
        development stage company)**
  **Notes
        to Financial Statements**
 **June
        30, 2006**


**NOTE
          8. RELATED PARTY TRANSACTIONS**
  On
        November 1, 2005 the Company entered into a services arrangement with Nimble
        Group, Inc. for the provision of management resources and office space. The
        arrangement had an initial term of three months which automatically renews
        every
        three months if not terminated by either party. The Company, at its own
        discretion, will decide on the management positions that need to be provided.
        The office space will be charged at $1,750 per office and $600 per desk.
        Office
        space costs were paid to Nimble Group through May 15, 2006 at which time
        Pure
        Vanilla leased our own premises as described in Note 5. Nimble Group is
        controlled by Jed Schutz who is a principal shareholder and director of the
        Company. Under this arrangement, Nimble Group charged the Company $237,045
        during the six months ended June 30, 2006. At June 30, 2006 there also remained
        un-reimbursed expenses of $1,992 owed to Nimble Group and a pre-paid services
        balance of $50,000 due from Nimble Group. The pre-paid amount was applied
        to the
        August 2006 services invoice. Effective July 1, 2006 the Company will rent
        space
        to Nimble Group in the newly leased premises referred to in Note 5 on an
        as-used
        basis.




As
        of
        January 1, 2006, the Company entered into a Consulting Agreement with NG
        Outsourcing, Inc., a corporation that is wholly-owned by the Company’s
        President. Under that agreement, NG Outsourcing provided the services of
        its
        employee, the Company’s President, to provide such services as would ordinarily
        be rendered by a corporate president and the Company paid NG Outsourcing
        fees of
        $20,000 per month. The Company also agreed to award stock options to purchase
        125,000 shares of the Company’s Common Stock at a purchase price of $.01 per
        share to a NG Outsourcing employee designated by NG Outsourcing. That agreement
        expired on June 30, 2006.




On
      January 10, 2006 the Company entered into a Software License and Services
      Agreement with Nimble Group, Inc. This agreement relates to the use by the
      Company of Nimble Group’s software to process prepaid, debit and stored value
      card transactions. Nimble Group grants the Company a perpetual, limited,
      non-exclusive, non-transferable license. In consideration of the license rights
      granted under this agreement the Company paid Nimble Group: a) an initial
      license fee of $500,000, and b) will pay an amount equal to ten percent (10%)
      of
      gross revenue generated through the use of said licensed software. The Company
      paid the initial license fee of $500,000 in full at June 30, 2006. The initial
      license fee represents the payment of Nimble Group’s research and development
      costs incurred on behalf the Company for software to be utilized by the Company
      and have been expensed as software licensing fees.




On
      February 21, 2006, the Company issued 1,575,000 shares to consultants, including
      700,000 to the Company’s Chief Executive Officer, for services, pursuant to a
      Board of Directors resolution dated December 5, 2005. In connection with these
      issuances the Company accrued $15,750 of compensation expense at December 31,
      2005.




10




PART
      I - Financial
      Information




**Item
      2. Management Discussion and Analysis**




The
      matters discussed in this Form 10-QSB contain certain forward-looking statements
      and involve risks and uncertainties including changing market conditions,
      competitive and regulatory matters, etc. detailed in the disclosures contained
      in this Form 10-QSB and other regulatory filings with the U.S. Securities and
      Exchange Commission made by the Company from time to time. The discussion of
      the
      Company’s liquidity, capital resources and results of operations, including
      forward looking statements pertaining to such matters, does not take into
      account the effects of any changes to the Company’s operations. Accordingly,
      actual results could differ materially from those projected in the
      forward-looking statements as a result of a number of factors, including those
      identified herein. This item should be read in conjunction with the financial
      statements and other items contained elsewhere in this report.




**Overview**




Pure
      Vanilla eXchange, Inc. (the "Company") was incorporated in the State of Nevada
      under the name Princeton Power Corporation on August 11, 2004. On November
      29,
      2004, we changed our name
      to NVS Entertainment, Inc.





We
      are
      the successor to the business of Pure Vanilla eXchange, Inc. ("Old Pure
      Vanilla"). Old Pure Vanilla was incorporated in the State of Nevada on August
      30, 2005. On March 13, 2006, Old Pure Vanilla was merged with our wholly-owned
      subsidiary, NVS Acquisition Corp., a Nevada corporation which was incorporated
      on March 1, 2006. Old Pure Vanilla was the surviving entity and became our
      wholly-owned subsidiary in that merger. In the merger, the shareholders of
      Old
      Pure Vanilla became the holders of approximately 80% of our issued and
      outstanding shares, before giving effect to shares issued to placement agents
      and other advisors for services rendered in connection with the merger. Old
      Pure
      Vanilla was merged into us on April 12, 2006. In connection with the latter
      merger, we changed our name to Pure Vanilla eXchange, Inc.





Under
      the
      name NVS Entertainment, we conducted the business of film acquisition,
      completion and distribution. That business, which had only nominal income and
      expenses, was discontinued on or about March 13, 2006. Our sole remaining
      business is the business of providing the anonymous payment products that enable
      consumers to pay for adult entertainment.





**Plan
      of Operation**





We
      intend
      to provide money transfer services using stored value cards and an electronic
      payment system that enable consumers to pay
      anonymously for the products and services they wish to buy online. Our products
      and services will be specifically designed for use in paying for adult
      entertainment products and services.




11


PART I - Financial
      Information




Using
      the
      patent-pending technology that we have licensed from Nimble Group and other
      technology that we intend to develop, consumers will be able to purchase goods
      and services by using either an online pV Account or a pV Card. Monetary value
      can be stored in pV Accounts online. Monetary value will be able to be stored
      on
      pV Cards at retail outlets in the United States. The use of pV Accounts and/or
      pV Cards will permit consumers to purchase products and services in a safe
      and
      secure environment without having to compromise their identity or
      credit.





Our
      anonymous cash transactions will eliminate the merchant’s exposure to
      charge-backs, reduce processing fees and significantly accelerate cash flow.
      We
      will support recurring and "pay per minute" billing and provide dynamic
      reporting to the merchants. We will also address current challenges that
      consumers face, such as user anonymity, credit card charge-backs and fraud.




Our
      revenue model has three components: Loading Fees, Account Management Fees and
      Processing Fees.





Loading
      fees are charged to a consumer who purchases a pV Card in a store or funds
      an
      online account. We will charge a $4.00 load fee to the consumer in a store.
      That
      fee is shared among us, the retailer and the distributor. We will receive 100%
      of the $2.00 online load fee.





We
      may
      charge an account management fee to pV Cardholders and consumers having pV
      Accounts if there are no transactions on the relevant card or in the relevant
      account where permitted by law.





Online
      merchants will be charged a processing fee that is a percentage of the revenue
      they receive from transactions that involve the use of pV Cards and pV Accounts.
      We currently do not intend to charge merchants a set-up fee or require a cash
      reserve, although we may do so in the future. We intend to evaluate the
      sufficiency of our fee structure on an ongoing basis in light of our
      experience.





Our
      costs
      for online transactions will be comprised of technology licensing costs and
      bank
      fees. We have licensed the core technology that we use from Nimble Group and
      pay
      Nimble Group a license fee.





In
      April
      2006, we completed a Beta test of our products. Since then, we have begun to
      sign up websites to accept our products for payment for the goods and services
      that they sell. On June 23, 2006 we began providing our product to consumers.
      There were no sales during the period June 23, 2006 through June 30, 2006.





In
      June
      2006 we began to advertise on certain channels of Sirius Radio such as Howard
      Stern, Playboy Radio and Maxim Radio to attract both consumers and websites.
      We
      plan to attend and exhibit at industry and trade shows and intend to sponsor
      selected industry events to sell cards to consumers and to continue our brand
      building and networking efforts within the industry. We will also continue
      to
      promote our brand through the issuance of press releases and articles on
      websites and in trade publications.




12




PART I - Financial
      Information




Over
      the
      next twelve months we expect to introduce two additional products. We believe
      that there will be a market for a User ID and Password Management service and
      an
      Affiliate Program Management service. We intend to introduce such services
      in
      order to match the value-added services of our competitors. We intend to
      continually make adjustments and improvements in our products, software and
      marketing efforts.





The
      execution of our plan of operation is dependent upon several factors, including
      raising sufficient working capital to allow us to implement our plans and the
      successful launch of our online and stored value card services. There can be
      no
      assurance that we will be successful in doing so. We have not generated any
      revenue since our inception. From inception through the six months ended June
      30, 2006 we incurred a net loss of $3,133,800 and a total negative cash flow
      from operations of $1,931,187. Our continued existence is dependent upon several
      factors, including raising additional capital, the successful launch of our
      online and stored value card services and our ability to achieve profitability
      from the sale of our services. These matters raise substantial doubt about
      our
      ability to continue as a going concern. Our financial statements do not include
      any adjustments that might result from the outcome of this
      uncertainty.





In
      order
      to continue providing our products and services throughout 2006, and to execute
      our business plan, we must continue to raise capital. There can be no assurance
      that additional financing will be available, or if available, that such
      financing will be on favorable terms. Any failure to secure additional financing
      could impair our ability to achieve our business strategy. Even if we are
      successful in raising capital, there can be no assurance that we will have
      sufficient funds or successfully achieve our plans to a level that will have
      a
      positive effect on our results of operations or financial condition. Our ability
      to execute our growth strategy is contingent upon our having sufficient capital
      as well as other factors, including our ability to further increase consumer
      awareness and adoption of our products, our ability to sign up websites that
      accept our products as a form of payment, general economic and industry
      conditions, our ability to recruit, train and retain a qualified sales,
      marketing and customer service staff, and other factors, many of which are
      beyond our control. Even if our revenues and earnings grow rapidly, that growth
      may significantly strain our management and our operational and technical
      resources. If we are successful in obtaining greater market penetration with
      our
      products, we will be required to manage an increasing volume of transactions
      on
      a timely basis at a reasonable cost to us. No assurance can be given that we
      can
      meet increased demand or that we will be able to manage our transactions on
      a
      timely and cost-effective basis.





**Critical
      Accounting Policies**





Our
      financial statements and accompanying notes have been prepared in accordance
      with accounting principles generally accepted in the United States. The
      preparation of thse financial statements requires we make estimates, judgments
      and assumptions that affect the reported amounts of assets, liabilities,
      revenues and expenses. Management continually evaluates the accounting policies
      and estimates it uses to prepare the financial statements. We base our estimates
      on historical experience and assumptions believed to be reasonable under current
      facts and circumstances. Significant estimates include the valuation of shares,
      stock options and warrants issued. Actual amounts and results could differ
      from
      these estimates made by management.




We
      have
      not entered into any transactions with unconsolidated entities in which we
      have
      financial guarantees, subordinated retained interests, derivative instruments
      or
      other contingent arrangements that expose us to material continuing risks,
      contingent liabilities or any other obligations under a variable interest in
      an
      unconsolidated entity that provides us with financing, liquidity, market risk
      or
      credit risk support.




13


PART I - Financial
      Information




**Results
      of Operations**




**Six
      months ended June 30, 2006.**




**Net
      Loss.** The
      Company had a net loss of $3,011,844 for the six months ended June 30, 2006
      and
      a net loss since inception of $3,133,800.




**Software
      Licensing Fees.** Software
      licensing fees of $500,000 consist of the initial license fee paid to Nimble
      Group under the Services Agreement entered into between the two parties on
      November 1, 2005.




**Operating
      Expenses.** Operating expenses were $1,303,392 for the six months ended June 30, 2006 and
      $1,425,348 since inception.




Operating
      expenses since the Company’s inception are comprised of expenses of the
      Company’s corporate office. Included in operating expenses is $746,830 of
      compensation expense for management and consultants. Approximately 18.5% of
      operating expenses was the result of non-cash payments in the form of warrants
      and options. Other items included in the Company’s operating expenses are
      marketing costs of $369,893, legal and accounting fees of $159,328, insurance
      of
      $15,845, travel and entertainment expenses of $42,838, and office related
      expenses such as rent, telephone and general supplies of $90,614.




**Organizational
      Costs** **.**
      In connection with the reverse merger in March 2006, the Company paid $225,000
      to the former owners of NVS Entertainment, Inc. to repurchase 39,927,452 of
      their NVS shares which were then cancelled at the closing of the reverse merger.
      Also included in organization costs are non-cash recapitalization expenses
      of
      $792,647 related to the issuance of additional shares in connection with the
      reverse merger. These costs were recorded for accounting purposes as
      organizational costs.




**Interest
      Expense** **.**
      Interest expense is comprised of $45,021 of accrued interest on short-term
      debt,
      amortization of deferred loan costs of $125,784, and other financing costs
      of
      $20,000.




**Liquidity
      and Capital Resources**




As
      of
      June 30, 2006, the Company had cash and cash equivalents of $480,357. As of
      August 14, 2006, the Company had cash and cash equivalents of approximately
      $100,000.




During
      the six months ended June 30, 2006, the Company used net cash of $1,898,426
      for
      operating activities. Additional cash of $16,702 was used to purchase property
      and equipment (investing activity). Cash used for operating and investing
      activities was more than offset by net cash proceeds of $1,971,000 raised
      through short-term debt and $329,746 raised from the issuance of stock
      (financing activities).




14


PART I - Financial
      Information




During
      the six months ended June 30, 2006, the Company completed transactions with
      several private investors to provide short-term debt financing in the aggregate
      amount of $1,971,000, evidenced by promissory notes issued to the investors
      (the
      "Notes"). The Company is using the proceeds of the financing to fund start-up
      activities including the promotion of and the launch of the stored value card
      and related working capital requirements, and pay legal and other professional
      fees related to the financing. Interest on each Note accrues at a rate of 15%
      per year and is payable monthly, with the principal becoming due on the earlier
      of February 1, 2007 or upon the Company’s first underwritten public offering of
      its common stock. The Notes provide for an interest rate of 18% in the event
      of
      a default.





The
      Company is anticipating significant expenditures related to the introduction
      of
      its products and services to the consumer and business-to-business market places
      in the areas of marketing and product development. In  addition,
      the Company anticipates a continued need to fund the general operations of
      the
      business until such time as the profits derived from the Company’s products
      exceed the expenditures. Accordingly, the Company plans to raise additional
      capital through the future issuance of stock or debt to support the development
      and expansion of our business. Additional equity financings are likely to be
      dilutive to holders of our common stock and debt financing, if available, may
      involve significant payment obligations and covenants that restrict how we
      operate our business. We may not be successful in our efforts to raise
      additional capital. Even after we begin to sell our products, we do not yet
      know
      if our products will be successful. At the present time, we have no commitments
      for any additional financing, and there can be no assurance that, if needed,
      additional capital will be available to us on commercially acceptable terms
      or
      at all. If we are unable to raise funds as needed, we may need to curtail
      expenses, reduce planned research and development and sales and marketing
      efforts, forego business opportunities and cease operations. The notes to
      financial statements accompanying this report for the six months ended June
      30,
      2006, include an explanatory paragraph relating to the uncertainty of our
      ability to continue as a going concern, which may make it more difficult for
      us
      to raise additional capital when needed.




**Item
      3. Controls and Procedures**




Disclosure
      controls and procedures are our controls and other procedures that are designed
      to ensure that information required to be disclosed by us in the reports that
      we
      file or submit under the Securities Exchange Act of 1934, as amended (the
      "Exchange Act"), is recorded, processed, summarized and reported, within the
      time periods specified in the U.S. Securities and Exchange Commission’s rules
      and forms. Disclosure controls and procedures include, without limitation,
      controls and procedures designed to ensure that information required to be
      disclosed by us in the reports that we file under the Exchange Act is
      accumulated and communicated to our management, including principal executive
      officer and principal financial officer, as appropriate, to allow timely
      decisions regarding required disclosure.




15




PART
      I - Financial
      Information




Our
      Chief
      Executive Officer and Principal Accounting Officer have evaluated the
      effectiveness of the design and operation of our disclosure controls and
      procedures as of the end of the period covered by this report. Based upon our
      evaluation of the effectiveness of the design and operation of our disclosure
      controls and procedures, our Chief Executive Officer and Principal Accounting
      Officer have concluded that as of the end of the period covered by this report,
      our disclosure controls and procedures were effective.




There
      has
      been no change in the Company’s internal controls over financial reporting
      during the fiscal quarter ending June 30, 2006 that has materially affected,
      or
      is reasonably likely to materially affect, the Company’s internal controls over
      financial reporting.




16




**PART
      II - Other Information**




**Item
      1 - Legal Proceeding**




**None**




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




During
      the period covered by this Quarterly Report on Form 10-QSB, other than
      unregistered sales of equity securities previously reported on a Current Report
      on Form 8-K, we have made the following unregistered sales of equity
      securities:




We
      issued
      to seven private investors three-year warrants to purchase, in the aggregate,
      393,875 shares of common stock at an exercise price of $2.00 per share. The
      warrants were issued in consideration of the investors loaning to us the
      aggregate amount of $1,971,000. No commissions were paid or payable with respect
      to this transaction.




In
      connection with the transactions described above, we issued to two consultants
      and advisors three-year warrants to purchase 20,000 shares of common stock,
      in
      the aggregate, at an exercise price of $2.00 per share. We did not receive
      any
      cash in this transaction. No commissions were paid or payable with respect
      to
      this transaction.




In
      consideration of a personal guarantee of our obligations under a lease
      agreement, we issued to the guarantor warrants to purchase 176,250 shares of
      common stock at an exercise price of $2.00 per share .
      We did
      not receive any cash in this transaction. No commissions were paid or payable
      with respect to this transaction.




Exemption
      from registration of all of the foregoing securities is claimed under Section
      4(2) of the Securities Act of 1933, as amended (the "Act") and Rule 506
      promulgated thereunder. Exemption is claimed based, among other things, upon
      representations made by each of the recipients of such securities that include,
      among other things, a representation from each such person that such person
      is
      an Accredited Investor within the meaning of Regulation D promulgated under
      the
      Act.




**Item
      3 - Default Upon Senior Securities**




**None**




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




**None**




**Item
      5 - Other Information**




17




PART
      II - Other
      Information




During
      the three months ended June 30, 2006, the Company completed transactions with
      several private investors to provide short-term debt financing in the aggregate
      amount of $1,605,000, evidenced by promissory notes issued to the investors
      (the
      "Notes"). The Company is using the proceeds of the financing to fund start-up
      activities including the promotion of and the launch of the stored value card
      and related working capital requirements, and pay legal and other professional
      fees related to the financing. Interest on each Note accrues at a rate of 15%
      per year and is payable monthly, with the principal becoming due on the earlier
      of February 1, 2007 or upon the Company’s first underwritten public offering of
      its common stock. The
      Notes
      may be prepaid at any time and from time to time, in whole or in part without
      premium or penalty. The
      Notes provide for an interest rate of 18% in the event of a default.




Under
      the
      terms of the Notes, the holder may declare a Note immediately due and payable
      upon the occurrence of any of the following events of default: (i) the Company's
      failure to pay principal and interest when within ten days after the same is
      due, or failure to perform any other obligation under the Note or under any
      other agreement with or obligation to the holder, (ii) the Company's insolvency
      or liquidation or a bankruptcy event; (iii) the Company's failure to conduct
      business in the ordinary course, dissolution or termination of existence; (iv)
      any sale, transfer, pledge, lien, grant of a security interest or other
      disposition, outside the ordinary course of business, in or of any material
      assets or a material portion of the assets or business of the Company; (v)
      any
      declaration or payment by the Company of any dividend or distribution with
      respect to or redemption of its capital stock; (vi) the entry of money judgment
      or similar process in excess of $100,000 if such judgment remains unvacated
      for
      30 days; or (vii) Company’s failure to comply in all material respects with all
      applicable laws, rules, regulations or orders.




In
      connection with the issuance of each Note, the Company issued to the investor
      a
      warrant (a "Warrant") to purchase that number of shares of common stock at
      an
      exercise price of $2.00 per share such that the total consideration paid upon
      exercise upon the exercise in full of the Warrant equals 25% of the principal
      amount of the Note. As of June 30, 2006, the Company has issued to the Note
      holders Warrants to purchase 590,125 shares of common stock.




The
      Company’s obligations under the Notes are personally guaranteed by Jed Schutz, a
      principal shareholder and director of the Company. In consideration of this
      guarantee, the Company issued to Mr. Schutz warrants to purchase 147,500 shares
      of common stock at an exercise price of $2.00 per share.




***None***




**Item
      6 - Exhibits**




***Exhibits***




4.1  Form
      of
      Promissory Note




4.2  Form
      of
      Common Stock Purchase Warrant




31.1  Certification
      of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
      Act
      of 2002




18




PART
      II - Other
      Information




31.2  Certification
      of Principal Financial and Accounting Officer Pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002




32.1  Certificate
      Pursuant To 10 U.S.C. Section 1350, Section 906 of the Sarbanes-Oxley Act of
      2002.




19


PART
      II - Other
      Information




**SIGNATURES**




In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.




Date:
      August 14, 2006






**PURE
              VANILLA EXCHANGE, INC.**By:
            /s/
              Steven YevoliSteven
              Yevoli, Chief Executive Officer(Principal
              Executive Officer)


By:
            /s/
              John
              A. CookJohn
              A. Cook(Principal
              Financial and Accounting Officer)


20