Debt Resolve Revenues Explode as Losses Mount

Losses and revenues at Debt Resolve Inc. rose dramatically in the second quarter as the provider of an Internet-based collection system charged off nearly $3 million in compensation expense, along with goodwill related to an acquisition.

Debt Resolve (AMEX: DRV) reported a loss of nearly $5.3 million, down from a loss of $1.7 million in the second quarter of a year ago. The loss included more than $1.6 million in non-cash stock based compensation expense, and nearly $1.2 million in a non-cash goodwill and intangibles impairment charge from its purchase of collection agency First Performance Corp. in January.

Revenues rose to $875,210 from $27,026 with the First Performance unit generating $861,577 of the revenues in this year’s second quarter, according to a filing with the U.S. Securities and Exchange Commission. The firm saw revenues of $12,507 from its online debt management system, and $1,126 in management fees from past-due consumer debt portfolios.

Total expenses rose from $1.1 million in the second quarter of 2006 to nearly $6.2 million this year, primarily due to increases in payroll and general administration costs from the First Performance acquisition.

Debt Resolve reported listing more than $1 billion in face value debt on its online system in the quarter, up from $852 million in the same period a year ago, according to its SEC filing. The company also said it added a top five U.S. bank as a client.

The White Plaines, N.Y.-based firm said it “more than doubled its penetration in the legal collection and auto finance sectors.”

Dept Resolve announced in January the purchase of First Performance, a collector with 2006 gross revenues of more than $6 million, 100 agents and offices in Las Vegas, Ft. Lauderdale, Fla., and offshore.

In its SEC filing, Debt Resolve reports that it no longer is “a development stage entity” following the purchase of First Performance. As of June 30, Debt Resolve had a working capital deficiency of nearly $2.2 million and cash and cash equivalents of $170,882.