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

                                   FORM 10-QSB

[X]  QUARTERLY  REPORT  UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF  1934

          For the quarterly period ended   June 30, 2005
                                         -----------------


[ ]  TRANSITION  REPORT  UNDER  SECTION  13 OR 15 (d) OF THE SECURITIES EXCHANGE
     ACT  OF  1934

          For the transition period from__________ to __________

          Commission file number:    0 - 50235
                                  ---------------


                         PERFORMANCE CAPITAL MANAGEMENT, LLC
                         -----------------------------------
        (Exact name of small business issuer as specified in its charter)

               California                           03-0375751
         ------------------------           --------------------------
      State or other jurisdiction of     (IRS Employer Identification No.)
      incorporation or organization


          222 South Harbor Blvd., Suite 400, Anaheim, California 92805
    ------------------------------------------------------------------------
                    (Address of principal executive offices)


                                  (714) 502-3780
                           ---------------------------
                           (Issuer's telephone number)


        -----------------------------------------------------------------
    (Former name, former address and former fiscal year, if changed since last
                                    report.)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 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 [ ]

Indicate  by check mark whether the registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act). Yes [ ]  No [X]


Check  whether  the  registrant  filed  all documents and reports required to be
filed  by  Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities  under  a  plan  confirmed  by  a  court.  Yes [X]  No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 12, 2005, the issuer had
563,926  LLC  Units  issued  and  outstanding.


Transitional Small Business Disclosure Format (Check one):  Yes [ ]  No [X]


<PAGE>
<TABLE>
<CAPTION>
                                  PERFORMANCE CAPITAL MANAGEMENT, LLC

                                                INDEX TO
                                    QUARTERLY REPORT ON FORM 10-QSB
                                  FOR THE QUARTER ENDED JUNE 30, 2005


PART I - FINANCIAL INFORMATION                                                                     PAGE
<S>                                                                                                <C>
Item 1    Consolidated Financial Statements

          Report of Independent Registered Public Accounting Firm. . . . . . . . . . . . . . . . . .  1

          Consolidated Balance Sheets as of June 30, 2005 (unaudited) and
          December 31, 2004 (audited). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  2

          Consolidated Statements of Operations for the quarters and six months ended
          June 30, 2005 and 2004 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . .  3

          Consolidated Statements of Members' Equity for the six months ended
          June 30, 2005 (unaudited) and the year ended December 31, 2004 (audited) . . . . . . . . .  4

          Consolidated Statements of Cash Flows for the six months ended June 30, 2005 and
          2004 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  5

          Condensed Notes to the Consolidated Financial Statements (unaudited) . . . . . . . . . . .  6

Item 2    Management's Discussion and Analysis of Financial Condition and Results of Operations. . . 15

Item 3    Controls and Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

PART II - OTHER INFORMATION

Item 2    Changes in Securities and Small Business Issuer Purchases of Equity Securities . . . . . . 24

Item 4    Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . 24

Item 6    Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>


<PAGE>
                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS


[MOORE STEPHENS WURTH FRAZER AND TORBET, LLP LETTERHEAD]


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To  the  Board  of  Directors
Performance  Capital  Management,  LLC
Anaheim,  California

We  have  reviewed  the  accompanying  consolidated balance sheet of Performance
Capital  Management,  LLC,  as  of  June  30, 2005, and the related consolidated
statements of operations for the quarters and six months ended June 30, 2005 and
2004,  and statements of members' equity and cash flows for the six months ended
June 30, 2005 and 2004. All information included in these consolidated financial
statements  is  the  representation  of  the  management  of Performance Capital
Management, LLC.

We  conducted  our review in accordance with the standards of the Public Company
Accounting  Oversight  Board  (United  States).  A  review  of interim financial
information  consists  principally  of applying analytical procedures and making
inquiries  of  persons  responsible  for financial and accounting matters. It is
substantially  less  in  scope  than  an  audit conducted in accordance with the
standards  of  the  Public  Company Accounting Oversight Board, the objective of
which  is  the expression of an opinion regarding the financial statements taken
as  a  whole.  Accordingly,  we  do  not  express  such  an  opinion.

Based on our reviews, we are not aware of any material modifications that should
be  made  to the accompanying interim consolidated financial statements referred
to  above  for  them to be in conformity with U.S. generally accepted accounting
principles.

We  have previously audited, in accordance with auditing standards of the Public
Company  Accounting  Oversight  Board  (United States), the consolidated balance
sheet  of  Performance  Capital Management, LLC as of December 31, 2004, and the
related  consolidated  statements  of operations, members' equity and cash flows
for  the  year ended December 31, 2004 (not presented herein); and in our report
dated  March  9, 2005, we expressed an unqualified opinion on those consolidated
financial  statements.  In  our  opinion,  the  information  set  forth  in  the
accompanying  balance  sheet  as  of December 31, 2004, is fairly stated, in all
material  respects,  in relation to the consolidated balance sheet from which it
has  been  derived.

/s/ Moore Stephens Wurth Frazer And Torbet, LLP


July 29, 2005
Orange, California


                                        1
<PAGE>
<TABLE>
<CAPTION>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

                           CONSOLIDATED BALANCE SHEETS
                    AS OF JUNE 30, 2005 AND DECEMBER 31, 2004


                                                                   December 31,
                                                  June 30, 2005        2004
                                                   (unaudited)      (audited)
                                                 ---------------  ---------------
<S>                                              <C>              <C>
                                      ASSETS
                                      ------

  Cash and cash equivalents                      $     1,466,756  $     1,920,155
  Restricted cash                                        521,594          122,205
  Other receivables                                       61,720           31,494
  Purchased loan portfolios, net                       5,472,887        2,991,642
  Property and equipment, net                            189,987          254,808
  Deposits                                                57,746           56,588
  Prepaid expenses and other assets                      123,816           86,063
                                                 ---------------  ---------------

      Total assets                               $     7,894,506  $     5,462,955
                                                 ===============  ===============


                           LIABILITIES AND MEMBERS' EQUITY
                           -------------------------------

LIABILITIES:
  Accounts payable                               $        68,527  $        59,275
  Accrued liabilities                                    480,313          373,924
  Accrued interest                                        41,599            8,075
  Notes payable                                        4,159,895        1,417,043
  Income taxes payable                                    16,000           18,290
                                                 ---------------  ---------------
    Total liabilities                                  4,766,334        1,876,607

COMMITMENTS AND CONTINGENCIES                                  -                -

MEMBERS' EQUITY                                        3,128,172        3,586,348
                                                 ---------------  ---------------

      Total liabilities and members' equity      $     7,894,506  $     5,462,955
                                                 ===============  ===============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
See Review Report of Independent Registered Public Accounting Firm.


                                        2
<PAGE>
<TABLE>
<CAPTION>
                                 PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

                                       CONSOLIDATED STATEMENTS OF OPERATIONS


                                            For the quarter    For the quarter      For the six        For the six
                                                 ended              ended          months ended       months ended
                                             June 30, 2005      June 30, 2004      June 30, 2005      June 30, 2004
                                              (unaudited)        (unaudited)        (unaudited)        (unaudited)
                                           -----------------  -----------------  -----------------  -----------------
<S>                                        <C>                <C>                <C>                <C>
REVENUES:
  Portfolio collections                    $      3,420,980   $      2,273,717   $      6,609,187   $      4,725,087
  Portfolio sales                                   506,009            975,393            506,009          2,757,457
                                           -----------------  -----------------  -----------------  -----------------
    Total revenues                                3,926,989          3,249,110          7,115,196          7,482,544
  Less portfolio basis recovery                   1,711,289          1,402,401          3,271,420          3,228,628
                                           -----------------  -----------------  -----------------  -----------------

NET REVENUES                                      2,215,700          1,846,709          3,843,776          4,253,916
                                           -----------------  -----------------  -----------------  -----------------

OPERATING COSTS AND EXPENSES:
  Salaries and benefits                           1,032,848            975,742          2,150,564          2,090,202
  General and administrative                        793,232            640,581          1,554,319          1,217,951
  Depreciation                                       42,160             44,185             84,993             89,358
                                           -----------------  -----------------  -----------------  -----------------
    Total operating costs and expenses            1,868,240          1,660,508          3,789,876          3,397,511
                                           -----------------  -----------------  -----------------  -----------------

INCOME FROM OPERATIONS                              347,480            186,201             53,900            856,405
                                           -----------------  -----------------  -----------------  -----------------

OTHER INCOME (EXPENSE):
  Interest  expense                                (115,136)                 -           (171,593)                 -
  Reorganization costs                                 (250)           (26,166)              (440)           (35,003)
  Interest income                                     1,596              3,192              4,991              5,583
  Other income (expense)                                445             22,197              2,114             29,214
                                           -----------------  -----------------  -----------------  -----------------
    Total other expense, net                       (113,345)              (777)          (164,928)              (206)
                                           -----------------  -----------------  -----------------  -----------------

INCOME (LOSS) BEFORE INCOME TAX
  PROVISION                                         234,115            185,424           (111,028)           856,199

INCOME TAX PROVISION                                      0              5,790             17,600             17,390
                                           -----------------  -----------------  -----------------  -----------------

NET INCOME (LOSS)                          $        234,115   $        179,634   $       (128,628)  $        838,809
                                           =================  =================  =================  =================

NET INCOME (LOSS) PER MEMBER
  UNIT - BASIC AND DILUTED                 $            .42   $            .31   $           (.23)  $           1.47
                                           =================  =================  =================  =================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
See Review Report of Independent Registered Public Accounting Firm.


                                        3
<PAGE>
<TABLE>
<CAPTION>
                              PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

                                  CONSOLIDATED STATEMENTS OF MEMBERS' EQUITY

                                                                                                    Total
                                        Member      Unreturned      Abandoned     Accumulated     Members'
                                        Units         Capital        Capital        Deficit        Equity
                                     ------------  -------------  -------------  -------------  -------------
<S>                                  <C>           <C>            <C>            <C>            <C>
Balance, December 31, 2003               570,916   $ 25,612,977   $     31,926   $(22,327,145)  $  3,317,758

Distributions to investors                     -       (327,001)             -              -       (327,001)

Net income                                     -              -              -        838,809        838,809
                                     ------------  -------------  -------------  -------------  -------------

Balance, June 30, 2004                   570,916     25,285,976         31,926    (21,488,336)     3,829,566

Distributions to investors                             (346,571)             -              -       (346,571)

Distributions forfeited                                 151,555                                      151,555

Cancellation of investor units            (7,055)      (457,318)       457,318              -              -

Net loss                                       -              -              -        (48,202)       (48,202)
                                     ------------  -------------  -------------  -------------  -------------

Balance, December 31, 2004               563,861     24,633,642        489,244    (21,536,538)     3,586,348

Reinstatement of Units to Investors           65          3,503         (3,503)

Distributions to investors                             (329,548)             -              -       (329,548)

Net loss                                                      -              -       (128,628)      (128,628)
                                     ------------  -------------  -------------  -------------  -------------

Balance, June 30, 2005                   563,926   $ 24,307,597   $    485,741   $(21,665,166)  $  3,128,172
                                     ============  =============  =============  =============  =============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
See Review Report of Independent Registered Public Accounting Firm.


                                        4
<PAGE>
<TABLE>
<CAPTION>
                         PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

                               CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                    For the six      For the six
                                                                   months ended     months ended
                                                                   June 30, 2005    June 30, 2004
                                                                    (unaudited)      (unaudited)
                                                                  ---------------  ---------------
<S>                                                               <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                               $     (128,628)  $      838,809
  Adjustments to reconcile net income (loss) to net cash
    provided by (used in) operating activities:
      Depreciation                                                        84,993           89,358
    (Increase) decrease in assets:
      Other receivables                                                  (30,226)           8,162
      Prepaid expenses and other assets                                  (38,911)          29,410
      Loan portfolios                                                 (2,481,245)         607,176
    Increase (decrease) in liabilities:
      Accounts payable                                                     9,252            8,964
      Accrued liabilities                                                106,389           52,561
      Accrued interest                                                    33,524                -
      Income taxes payable                                                (2,290)               -
                                                                  ---------------  ---------------
            Net cash provided by (used in) operating activities       (2,447,142)       1,634,440
                                                                  ---------------  ---------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                                    (20,172)         (20,144)
                                                                  ---------------  ---------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Loan proceeds from borrowing                                         3,975,022                -
  Repayment of loans                                                  (1,232,170)               -
  Distributions to investors                                            (329,548)        (327,001)
                                                                  ---------------  ---------------
            Net cash provided by (used in) financing activities        2,413,304         (327,001)
                                                                  ---------------  ---------------
NET CHANGE IN CASH AND CASH EQUIVALENTS                                  (54,010)       1,287,295

CASH AND CASH EQUIVALENTS, beginning of period                         2,042,360        1,029,397
                                                                  ---------------  ---------------

CASH AND CASH EQUIVALENTS, end of period                          $    1,988,350   $    2,316,692
                                                                  ===============  ===============

SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION:

  Income taxes paid                                               $       19,890   $       17,390
                                                                  ===============  ===============

  Interest paid                                                   $      138,070   $            -
                                                                  ===============  ===============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
See Review Report of Independent Registered Public Accounting Firm.


                                        5
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

Performance Capital Management, LLC ("PCM LLC") and its wholly-owned subsidiary,
Matterhorn  Financial  Services, LLC ("Matterhorn") (collectively the "Company",
unless  stated  otherwise)  are  engaged  in  the  business  of acquiring assets
originated  by  federal  and  state  banks and other sources, for the purpose of
generating  income  and  cash  flow  from managing, collecting, or selling those
assets.  These  assets  consist  primarily  of  non-performing  credit card loan
portfolios   and   are   purchased   and   sold  as  portfolios  ("portfolios").
Additionally,  some  of the loan portfolios are assigned to third party agencies
for  collection.

Reorganization under bankruptcy
-------------------------------

PCM  LLC  was  formed  under  a  Chapter  11  Bankruptcy Reorganization Plan and
operating  agreement.  The  plan called for the consolidation of five California
limited  partnerships  and  a  California  corporation  into  the new California
limited  liability company. The five California limited partnerships were formed
for  the  purpose  of  acquiring  investments  in   or   direct   ownership   of
non-performing credit card loan portfolios from financial institutions and other
sources.  The  assets  of  the  five limited partnerships consisted primarily of
non-performing  credit card loans, as well as cash. In late December 1998, these
six  entities  voluntarily  filed  bankruptcy  petitions,   which   were   later
consolidated into one case. PCM LLC was formed on January 14, 2002 and commenced
operations  upon  the  confirmation  of  its  Bankruptcy   Reorganization   Plan
("Reorganization Plan") on February 4, 2002. The entities that were consolidated
under the Reorganization Plan are as follows:

Performance  Asset  Management  Fund,  Ltd.  -  (PAM),  a   California   limited
partnership,  formed  in  1991.  Units  in  PAM were sold in a private placement
offering.  PAM  raised  $5,205,000  in  gross  proceeds  from  the  sale  of its
partnership  units.  PAM  was  not  subject to the reporting requirements of the
Securities  and  Exchange  Commission.

Performance  Asset  Management  Fund  II,  Ltd.  - (PAMII), a California limited
partnership,  formed  in  1992.  Units in PAMII were sold in a private placement
offering.  PAMII  raised  $7,670,000  in  gross  proceeds  from  the sale of its
partnership  units.  PAMII  was not subject to the reporting requirements of the
Securities  and  Exchange  Commission.

Performance  Asset  Management  Fund  III, Ltd. - (PAMIII), a California limited
partnership,  formed  in  1992. Units in PAMIII were sold in a private placement
offering.  PAMIII  raised  $9,990,000  in  gross  proceeds  from the sale of its
partnership  units.  PAMIII was a public limited partnership that was subject to
the reporting requirements of the Securities and Exchange Commission.

Performance  Asset  Management  Fund  IV,  Ltd.  - (PAMIV), a California limited
partnership,  formed in 1992. Units in PAMIV were sold in an intrastate offering
to  residents of California. PAMIV raised $28,595,000 in gross proceeds from the
sale  of  its partnership units. PAMIV was a public limited partnership that was
subject to the reporting requirements of the Securities and Exchange Commission.

Performance  Asset  Management  Fund  V,  Ltd.  -  (PAMV),  a California limited
partnership,  formed  in  1994.  Units  in PAMV were sold in a private placement
offering.  PAMV  raised  $5,965,000  in  gross  proceeds  from  the  sale of its
partnership  units.  PAMV  was  not subject to the reporting requirements of the
Securities  and  Exchange  Commission.

Performance  Capital  Management,  Inc.  -  (PCM  INC), a California corporation
incorporated  in  January  1993.  PCM   INC   identified   potential   portfolio
acquisitions,  performed  due  diligence in conjunction with potential portfolio
acquisitions,  acquired  portfolios, and through joint ventures with the limited
partnerships  (PAM,  PAMII, PAMIII, PAMIV, and PAMV) collected and sold acquired
portfolios.  The  limited  partnerships  (PAM,  PAMII,  PAMIII, PAMIV, and PAMV)
collectively  obtained  98.5% of the outstanding shares of PCM INC. The minority
interest  of  1.5%  was  effectively  eliminated  in  the  bankruptcy  plan.


See Review Report of Independent Registered Public Accounting Firm.

                                        6
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

Pre-petition operations
-----------------------

A  total of approximately $57,450,000 was raised over the period 1991 to 1994 by
selling  limited  partnership  interests in PAM, PAMII, PAMIII, PAMIV, and PAMV.
Approximately  $8.7  million  was  deducted  for  brokerage  and  organizational
expenses.  Approximately  $49 million was used to purchase non-performing credit
card  loan  portfolios. These portfolios were typically purchased by the limited
partnerships  from  PCM  INC.  PCM INC also collected the portfolios under joint
venture  agreements  between  itself  and  the  limited  partnerships.

In  the  normal  course  of  business,  loan  portfolios  would  be  purchased,
collections  would  be  made and in some cases the portfolios were sold. PCM INC
was  in  the  business  of  managing  these  loan  portfolios.

PCM INC generally charged a "mark-up" to the limited partnerships for portfolios
purchased for the limited partnerships. This markup averaged 35% above the price
PCM  INC  paid  for  the  portfolios  on  the  open  market.  PCM  INC  was also
contractually entitled to receive 45% of all monies collected on the portfolios.

The  following is a summary of the ownership interest of PCM LLC pursuant to the
terms  of  the  Reorganization  Plan:

<TABLE>
<CAPTION>
       Original      Number of     Number of        Percentage
     Fund's Name   Unit Holders  PCM LLC Units  Interest in PCM LLC
     ------------  ------------  -------------  -------------------
<S>                <C>           <C>            <C>
     PAM                    370         52,050                    9
     PAMII                  459         76,700                   13
     PAMIII                 595         99,900                   18
     PAMIV                 1553        285,950                   50
     PAMV                   327         56,950                   10
                                 -------------  -------------------
         Totals                        571,550                  100
                                 =============  ===================
</TABLE>

The  following is a summary of the ownership interest of PCM LLC as of  June 30,
2005:

<TABLE>
<CAPTION>
       Original     Number of        Percentage
     Fund's Name  PCM LLC Units  Interest In PCM LLC
     -----------  -------------  -------------------
<S>               <C>            <C>
     PAM                 51,565                    9
     PAMII               76,101                   14
     PAMIII              97,759                   17
     PAMIV              281,980                   50
     PAMV                56,521                   10
                  -------------  -------------------
         Totals         563,926                  100
                  =============  ===================
</TABLE>


The  Reorganization  Plan  calls  for  distributions to be made first to the LLC
Members  to  the  extent  of  and  in  proportion  to  their  unreturned Capital
Contributions;  and  thereafter  to  the  LLC  Members  in  proportion  to their
respective  percentage  ownership  interest.


See Review Report of Independent Registered Public Accounting Firm.

                                        7
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1  -  ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

The  combination  of  the  Partnerships and PCM INC is summarized as follows (in
thousands):

<TABLE>
<CAPTION>
                                   PAM      PAMII     PAMIII    PAMIV      PAMV     PCM INC     Total
                                 ----------------------------------------------------------------------
<S>                              <C>       <C>       <C>       <C>       <C>       <C>        <C>
Sale of Limited
  Partnership Units              $ 5,205   $ 7,670   $ 9,990   $28,595   $ 5,965   $      -   $ 57,425

Distributions
  to Investors                    (3,704)   (4,137)   (3,719)   (6,920)     (829)         -    (19,309)
                                 ----------------------------------------------------------------------

Unreturned Capital                 1,501     3,533     6,271    21,675     5,136          -     38,116

Accumulated Deficit                 (288)   (1,333)   (2,424)   (9,330)   (2,561)    (2,302)   (18,238)
                                 ----------------------------------------------------------------------

Cash and Net Assets
  Transferred to PCM LLC         $ 1,213   $ 2,200   $ 3,847   $12,345   $ 2,575   $ (2,302)    19,878
                                 ===========================================================

2002 Distribution to Investors                                                                 (12,000)

Net Loss For The Year Ended
  December 31, 2002                                                                             (2,999)
                                                                                            -----------
Members' Equity PCM, LLC
  at December 31, 2002                                                                           4,879

2003 Distributions to Investors                                                                   (472)

Net Loss For The Year
  Ended December 31, 2003                                                                       (1,089)
                                                                                            -----------

Members' Equity PCM, LLC
  at December 31, 2003                                                                           3,318

2004 Distributions to Investors                                                                   (327)

Net Income For The Period
  Ended June 30, 2004                                                                              839
                                                                                            -----------

Members' Equity PCM, LLC
  at June 30, 2004                                                                               3,830

2004 Distributions to Investors                                                                   (347)

Distributions forfeited                                                                            152

Net Loss For The Period
  Ended December 31, 2004                                                                          (49)
                                                                                            -----------

Members' Equity PCM, LLC
  at December 31, 2004                                                                           3,586

2005 Distributions to Investors                                                                   (329)

Net Loss For The Period
  Ended June 30, 2005                                                                             (129)

                                                                                            -----------
Members' Equity PCM, LLC
  at June 30, 2005                                                                            $  3,128
                                                                                            ===========
</TABLE>


See Review Report of Independent Registered Public Accounting Firm.

                                        8
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  1  -  ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

Performance  Asset  Management  Fund  III, Ltd. and Performance Asset Management
Fund  IV,  Ltd.,  were  reporting  entities under the Securities Exchange Act of
1934.  PAM,  PAMII,  PAMV,  and  PCM  INC  were  not  reporting entities. It was
determined  that  Performance  Capital  Management, LLC is a "successor company"
under  rule  12g-3  of  the  Securities  Exchange  Act of 1934, and therefore is
subject  to  the  reporting requirements of the Securities Exchange Act of 1934.
PCM  LLC's LLC units are not publicly traded securities. The Reorganization Plan
placed  certain  restrictions  on  the  transfer  of  members'  interests.

On  August  2,  2004, an order of the United States Bankruptcy Court was entered
closing  the  Chapter  11 case. The order acts as a discharge and termination of
any  and all liabilities and debts of, and claims against, PCM INC, PAM, PAM II,
PAM  III,  PAM IV and PAM V that arose at any time before the confirmation order
became  effective  on  February  4,  2002.

Wholly-owned Subsidiary
-----------------------

In July, 2004, the Company completed a credit facility (effective June 10, 2004)
with  Varde  Investment  Partners,  L.P.  ("Varde"),  a  participant in the debt
collection  industry,  to  augment  portfolio  purchasing capacity using capital
provided  by  Varde.  To implement the agreement, PCM LLC created a wholly-owned
subsidiary,  Matterhorn.  The facility provides for up to $25 million of capital
(counting each dollar loaned on a cumulative basis) over a five-year term. Varde
is not under any obligation to make a loan to Matterhorn and Varde must agree on
the  terms for each specific advance under the loan facility. Under the terms of
the  facility,  Varde  will  receive  both interest and a residual amount of any
profits  on  the portfolios acquired with a loan. Portfolios purchased using the
facility  are  owned  by  PCM  LLC's  subsidiary,  Matterhorn. Varde has a first
priority  security  interest  in  Matterhorn's  assets securing repayment of its
loans.

NOTE 2 - BASIS OF PRESENTATION

Interim Condensed Financial Statements
--------------------------------------

These  interim  condensed  consolidated  financial statements have been prepared
using generally accepted accounting principles in the United States. The interim
consolidated  financial statements include all adjustments, consisting solely of
normal  recurring  adjustments,  which in management's opinion are necessary for
fair presentation of the financial results for interim periods. The consolidated
financial  statements have been prepared consistent with the accounting policies
described  in  the  Company's  annual audited consolidated financial statements.
Reference  should be made to those statements included with the Company's annual
report  filed  on  Form  10-KSB.

Reporting Entity
----------------

PCM  LLC  is  a  successor entity of six companies emerging from bankruptcy (see
Note  1).  The  accompanying  balance sheets, statements of operations, members'
equity,  and  cash  flows  include balances and transactions since the emergence
from  bankruptcy.  Matterhorn  was consolidated in the financial statements as a
wholly-owned  subsidiary  starting  in  the  third  quarter  of  2004.

Transfer of Assets to Successor Company
---------------------------------------

Assets  were  transferred  at  historical  carrying  values and liabilities were
assumed  as  required  by  the  bankruptcy  confirmation  plan.


See Review Report of Independent Registered Public Accounting Firm.

                                        9
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Use of Estimates
----------------

In  preparing  financial  statements  in  conformity  with accounting principles
generally  accepted  in  the United States of America, management is required to
make  estimates  and  assumptions that affect the reported amounts of assets and
liabilities,  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. Actual results could differ from those estimates.

Significant  estimates  have  been made by management with respect to the timing
and  amount  of  collection of future cash flows from non-performing credit card
loan  portfolios.  Among  other  things,  the estimated future cash flows of the
portfolios  are  used  to recognize impairment in the purchased loan portfolios.
Management  reviews  the  estimate  of  future collections, and it is reasonably
possible  that  these  estimates  may  change  based on actual results and other
factors.  A  change  could  be  material  to  the  financial  statements.

Purchased Loan Portfolios
-------------------------

Purchased  loan  portfolios  consisted  primarily  of non-performing credit card
accounts.  For  substantially all the Company's acquired portfolios, future cash
flows  cannot  be  reasonably  estimated  in order to record an accretable yield
consistently.  Therefore,  the  Company  utilizes  the  cost  recovery method as
required  by  AICPA Practice Bulletin 6. Application of the cost recovery method
requires  that any amounts received be applied first against the recorded amount
of  the  portfolios;  when  that amount has been reduced to zero, any additional
amounts  received  are  recognized  as  net  revenue.  Acquired  portfolios  are
initially  recorded  at  their  respective  costs,  and  no  accretable yield is
recorded  on  the  accompanying  balance  sheets.

The Company provides a valuation allowance for acquired loan portfolios when the
present  value  of  a portfolio's expected future cash flows does not exceed the
carrying  value  of  the  portfolio.

Over the life of the portfolio, the Company's management continues to review the
carrying  values  of  each  loan  for  impairment.  If  the net present value of
estimated  future  cash  flows  falls  below  the  carrying value of the related
portfolio,  the  valuation  allowance  is  adjusted  accordingly.

Cash and Cash Equivalents
-------------------------

The  Company  defines  cash  equivalents  as cash, money market investments, and
overnight  deposits  with  original  maturities  of less than three months. Cash
equivalents are valued at cost, which approximates market. The Company maintains
cash  balances,  which  exceeded  federally insured limits by approximately $1.6
million  as of June 30, 2005. The Company has not experienced any losses in such
accounts. Management believes it is not exposed to any significant risks on cash
in  bank  accounts.

Restricted  cash  consists  principally  of  cash  held  in a segregated account
pursuant  to  the  Company's  credit  facility with Varde. The Company and Varde
settle  the  status  of  these  funds  on a monthly basis pursuant to the credit
facility.  The  proportion  of  the  restricted  cash  ultimately  disbursed  by
Matterhorn to Varde and PCM LLC depends upon a variety of factors, including the
portfolios  from which the cash was collected, the size of servicing fees on the
portfolios  that  generated  the  cash,  and the priority of payments due on the
portfolios  that  generated  the  cash.


See Review Report of Independent Registered Public Accounting Firm.

                                       10
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  3  -  SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (CONTINUED)

Revenue Recognition
-------------------

Revenue  is  accounted  for  using  the  cost  recovery  method of accounting in
accordance  with  Practice Bulletin No. 6, "Amortization of Discounts on Certain
Acquired Loans". Under the cost recovery method of accounting, all cash receipts
relating  to individual loan portfolios are applied first to recover the cost of
the portfolios, prior to recognizing any net revenue. Cash receipts in excess of
the  cost  of  purchased  loan  portfolios  are  then recognized as net revenue.

Loan portfolio sales occur after the initial portfolio analysis is performed and
the  loan  portfolio  is  acquired. Portions of portfolios sold typically do not
meet the Company's targeted collection characteristics. Loan portfolios sold are
valued  at  the  lower  of  cost  or  market.

Proceeds  from  strategic sales of purchased loan portfolios are recorded as net
revenue  when  received.

Members' Equity
---------------

Members'  equity  includes  voting  LLC units held by members and non-voting LLC
units  held  by  one  economic  interest owner. As of June 30, 2005, PCM LLC had
540,204  voting LLC units (540,139 LLC units as of December 31, 2004) and 23,722
non-voting  LLC  units  (23,722  LLC  units  as of December 31, 2004). Abandoned
capital represents LLC units that are either voluntarily returned to the Company
by  a  member or LLC units that are redeemed and cancelled following a procedure
authorized  by  PCM  LLC's  plan of reorganization to eliminate the interests of
members  the  Company  has  not  been  able to locate. At December 31, 2004, the
Company  cancelled  7,055  member  units and took back approximately $152,000 of
related  unclaimed  distributions  under  the  procedure  authorized  in  the
reorganization  plan.  The $152,000 of unclaimed distributions was treated as an
addition  to  Members'  Equity. The total amount of abandoned unreturned capital
relating  to  the  7,055  member units was $457,318. During the first quarter of
2005,  a member with 65 units was reinstated. These 65 units had been considered
returned  voluntarily  with  the  634  member  units surrendered in 2003. It was
determined  that  this  was  done  in  error.

NOTE  4  -  FAIR VALUE OF FINANCIAL INSTRUMENTS

The  estimated  fair  value and the methods and assumptions used to estimate the
fair  values of the financial instruments of the Company as of June 30, 2005 and
December  31,  2004  are  as  follows.  The  carrying  amount  of  cash and cash
equivalents,  restricted cash and liabilities approximate their fair values. The
fair  value  of  purchased  loan  portfolios was determined based on both market
pricing  and  discounted  expected  cash flows. The discount rate is based on an
acceptable rate of return adjusted for the risk inherent in the loan portfolios.
The  expected  cash  flows  used  to  determine  fair value exclude any residual
interest  in  collections  that  may  be due to a third party. The discount rate
utilized  at  June  30,  2005  and December 31, 2004 was 20%. The estimated fair
value  of  loan  portfolios was $24.3 million and $19.2 million at June 30, 2005
and  December  31,  2004,  respectively. Included in the preceding fair value is
$9.5  million  and  $3.8  million  at  June  30,  2005  and  December 31,  2004,
respectively,  that  has been purchased utilizing the credit facility with Varde
(see  Note  8  for  further  discussion).

NOTE  5  -  PURCHASED LOAN PORTFOLIOS

The Company acquires portfolios of non-performing credit card loans from federal
and  state  banks  and  other sources. These loans are acquired at a substantial
discount  from  the  actual  outstanding  balance.  The  aggregate   outstanding
contractual  loan  balances  at  June  30,  2005  and  December 31, 2004 totaled
approximately  $677  million  and  $641  million,  respectively.

The  Company  initially  records  acquired loans at cost. To the extent that the
cost  of  a particular loan portfolio exceeds the net present value of estimated
future  cash flows expected to be collected, a valuation allowance is recognized
in  the  amount  of  such  impairment.


See Review Report of Independent Registered Public Accounting Firm.

                                       11
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - PURCHASED LOAN PORTFOLIOS (CONTINUED)
The carrying amount of loans included in the accompanying balance sheets are as
follows:

<TABLE>
<CAPTION>
                                       As of            As of
                                   June 30, 2005    Dec. 31, 2004
                                  ---------------  ---------------
<S>                               <C>              <C>
Unrecovered cost balance,
  beginning of period             $    3,003,642   $    7,619,515
Valuation allowance,
  beginning of period                    (12,000)      (5,538,019)
                                  ---------------  ---------------
Net balance, beginning of period       2,991,642        2,081,496
Net portfolio activity                 2,481,245          910,146
                                  ---------------  ---------------
Net balance, end of period        $    5,472,887   $    2,991,642
                                  ===============  ===============
</TABLE>

The  activity in the loan portfolios in the accompanying financial statements is
as  follows:

<TABLE>
<CAPTION>
                                       Quarter          Quarter         Six Months       Six Months
                                        Ended            Ended            Ended            Ended
                                    June 30, 2005    June 30, 2004    June 30, 2005    June 30, 2004
                                   ---------------  ---------------  ---------------  ---------------
<S>                                <C>              <C>              <C>              <C>
Purchased loan portfolios- net     $    3,302,438   $    1,301,455   $    5,752,665   $    2,621,452
Collections on loan portfolios         (3,420,980)      (2,273,717)      (6,609,187)      (4,725,087)
Sales of loan portfolios                 (506,009)        (975,393)        (506,009)      (2,757,457)
Revenue recognized on collections       1,945,316        1,640,905        3,573,392        3,300,525
Revenue recognized on sales               316,725          205,804          316,725          953,391
Increase in valuation allowance
due to portfolio impairment               (46,341)               -          (46,341)               -
                                   ---------------  ---------------  ---------------  ---------------
Net portfolio activity             $    1,591,149   $     (100,946)  $    2,481,245   $     (607,176)
                                   ===============  ===============  ===============  ===============
</TABLE>

The  valuation allowance related to the loan portfolios had a balance of $58,341
at  June  30,  2005  and  $12,000  at  December  31,  2004.

NOTE  6  -  OTHER RECEIVABLES

Other  receivables  consist of collections on portfolios received by third party
collection  agencies.

NOTE  7  -  PROPERTY AND EQUIPMENT

Property and equipment is as follows:

<TABLE>
<CAPTION>
                                    As of           As of
                                June 30, 2005   Dec. 31, 2004
                                --------------  --------------
<S>                             <C>             <C>
Office furniture and equipment  $      284,171  $      284,171
Computer equipment                     514,395         494,223
Leasehold improvements                  36,982          36,982
                                --------------  --------------
  Totals                               835,548         815,376
Less accumulated depreciation          645,561         560,568
                                --------------  --------------
  Property and equipment, net   $      189,987  $      254,808
                                ==============  ==============
</TABLE>

Depreciation  expense  for the quarters ended June 30, 2005 and 2004 amounted to
$42,160  and  $44,185,  respectively.


See Review Report of Independent Registered Public Accounting Firm.

                                       12
<PAGE>
              PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARIES

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  8  -  NOTES  PAYABLE

The  Company has entered into an agreement for a credit facility with Varde that
provides  for  up  to  $25  million of capital (counting each dollar loaned on a
cumulative  basis)  over a five-year term ending in July 2009. At June 30, 2005,
PCM  LLC's  wholly-owned  subsidiary  Matterhorn owed approximately $4.2 million
under  the  facility in connection with its purchase of certain charged-off loan
portfolios.  The  total  amount  borrowed through June 30, 2005 is approximately
$5.7  million.  Each  advance has minimum payment threshold points. Each advance
has  a  term of two years and bears interest at the rate of 12% per annum. These
obligations  are  scheduled to be paid in full on dates ranging from August 2006
to  April  2007,  with  the  approximate  following  principal  payments  due:

               Year Ending
                June 30,
               -----------
                   2006        $ 1.3  million
                   2007        $ 2.9  million

Once all funds (including those invested by the Company) invested in a portfolio
financed  by Varde have been repaid (with interest) and all servicing costs have
been  paid,  Varde  will  begin to receive a residual interest in collections of
that  portfolio.  Depending  on the performance of the portfolio, these residual
interests  may never be paid, they may begin being paid a significant time later
than  Varde's  loan is repaid (i.e., after the funds invested by the Company are
repaid  with  interest),  or,  in  circumstances  where  the  portfolio performs
extremely well, the loan could be repaid early and Varde could conceivably begin
to  receive its residual interest on or before the date that the loan obligation
was originally scheduled to be paid in full. Varde has a first priority security
interest  in  all  the assets of Matterhorn, securing repayment of its loans and
payment  of  its  residual  interest. PCM LLC, our parent operating company, has
guarantied  certain  of  Matterhorn's  operational  obligations  under  the loan
documents.  The  amount of remaining available credit under the facility at June
30,  2005 was approximately $19.3 million. The assets of Matterhorn that provide
security  for  Varde's loan were carried at a cost of approximately $4.6 million
at  June  30,  2005.

NOTE  9  -  COMMITMENTS AND CONTINGENCIES

Lease Commitments
-----------------

The  Company  currently  leases  office  space  in  Anaheim,  California under a
non-cancelable  five  year  operating  lease. Under the lease agreement, PCM LLC
must  pay  a basic monthly rental charge plus a portion of the building's common
area  expenses.

Future minimum lease commitments as of June 30, 2005 are as follows:

               Year ending
                 June 30,
               -----------
                  2006         $ 318,000
                  2007         $ 132,000
               Thereafter              -

Rental  expense  for  the  three months ended June 30, 2005 and 2004 amounted to
$81,977  and  $79,210, respectively.  Rent expense for the six months ended June
30,  2005  and  2004  amounted  to  $164,574  and  $158,870,  respectively.  The
Company  is  obligated  under a five year equipment lease, expiring in 2009, for
minimum  payments  of  $4,800  per  year.

NOTE  10  -  EARNINGS PER MEMBER UNIT

Basic  and diluted earnings per member unit are calculated based on the weighted
average  number  of  member  units  issued  and outstanding, 563,926 for the six
months  ended  June 30, 2005 and 570,916 for the six months ended June 30, 2004.


See Review Report of Independent Registered Public Accounting Firm.

                                       13
<PAGE>
               PERFORMANCE CAPITAL MANAGEMENT, LLC AND SUBSIDIARY

            CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

NOTE  11  -  EMPLOYEE  BENEFIT  PLANS

The  Company  has  a  defined  contribution plan covering all eligible full-time
employees of Performance Capital Management (the Plan Sponsor) who are currently
employed  by  the Company and have completed six months of service from the time
of  enrollment.  The  Plan  was  established  by  the  Plan  Sponsor  to provide
retirement  income  for  its  employees  and is subject to the provisions of the
Employee  Retirement  Income  Security  Act  of  1974,  as  amended  (ERISA).

The Plan is a contributory plan whereby participants may contribute a percentage
of  pre-tax annual compensation as outlined in the Plan agreement and as limited
by  Federal  statute.  Participants  may  also  contribute  amounts representing
distributions  from  other qualified defined benefit or contribution plans.  The
Plan  Sponsor  does  not  make  matching  contributions.


See Review Report of Independent Registered Public Accounting Firm.

                                       14
<PAGE>
ITEM 2.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

Except  for  the  historical information presented in this document, the matters
discussed  in this Form 10-QSB, and specifically in "Management's Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations,"  or otherwise
incorporated  by  reference  into   this   document   contain   "forward-looking
statements" (as such term is defined in the Private Securities Litigation Reform
Act  of  1995). These statements can be identified by the use of forward-looking
terminology  such  as  "believes," "plans," "expects," "may," "will," "intends,"
"should,"  "plan,"  or "anticipates" or the negative thereof or other variations
thereon  or  comparable  terminology, or by discussions of strategy that involve
risks  and  uncertainties.  The  safe  harbor  provisions  of Section 21E of the
Securities  Exchange  Act of 1934, as amended, and Section 27A of the Securities
Act of 1933, as amended, apply to forward-looking statements made by Performance
Capital  Management, LLC. You should not place undue reliance on forward-looking
statements due to their inherent uncertainty. Forward-looking statements involve
risks  and  uncertainties.  The  actual  results  that  we  achieve  may  differ
materially  from  any  forward-looking  statements  due  to   such   risks   and
uncertainties.  These  forward-looking   statements   are   based   on   current
expectations,  and  we  assume no obligation to update this information. Readers
are urged to carefully review and consider the various disclosures made by us in
this  report  on  Form 10-QSB and in our other reports filed with the Securities
and  Exchange  Commission that attempt to advise interested parties of the risks
and  factors  that  may  affect  our  business.

The  following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited financial statements
and  accompanying  notes and the other financial information appearing elsewhere
in  this  report and with the financial information contained in our Form 10-KSB
filed  with  the  Securities  and  Exchange  Commission  on  March  31,  2005.

OVERVIEW

We  acquire  assets  originated  by  federal  and  state  banking  and  savings
institutions,  loan  agencies,  and other sources, for the purpose of generating
income  and  cash flow from collecting or selling those assets. Typically, these
assets  consist of charged-off credit card contracts. These assets are typically
purchased  and  sold  as  portfolios.  We purchase portfolios using our own cash
resources  and  funds  borrowed  from  a  third  party.

Before  purchasing  a portfolio, we conduct due diligence to assess the value of
the  portfolio.  We  try to purchase portfolios at a substantial discount to the
actual amount of money that they will ultimately produce, so that we can recover
the cost we pay for portfolios, repay funds borrowed to purchase portfolios, pay
our  collection  and  operating  costs  and  still  have a profit. We record our
portfolios  at cost based on the purchase price. We reduce the cost bases of our
portfolios on a portfolio-by-portfolio basis based on collections, sales of some
or  all  of  the  portfolio  and  impairment  of  net  realizable  value.

We frequently sell certain portions of portfolios we purchase, in many instances
to  retain those accounts that best fit our collection profile and to reduce our
purchase  commitment by reselling the others.  We then collect those accounts we
retain  as  a  distinct  portfolio. We do not generally purchase loan portfolios
solely with a view to their resale, and for this reason we generally do not show
portfolios  on  our balance sheet as "held for investment". From time to time we
sell  some  of  our  portfolios  either  to  capitalize on market conditions, to
dispose of a portfolio that is not performing or to dispose of a portfolio whose
collection  life,  from  our  perspective, has run its course. When we engage in
these  sales, we continue collecting the portfolio right up until the closing of
the  sale.

We  earn revenues from collecting our portfolios and from selling our portfolios
or  portions  of  our  portfolios. We recognize gross revenue when we collect an
account  and  when  we  sell a portfolio or a portion of it. On our statement of
operations  we  reduce  our  total  revenues  by  the cost basis recovery of our
portfolios  to  arrive  at  net   revenue.   For  collections,   we  reduce  the
cost basis of the portfolio dollar-for-dollar until we have completely recovered
the  cost  basis of  the  portfolio.  When  we  sell a portfolio or a portion of
it,  to  the  extent of remaining  cost  basis  for  the  portfolio,  we  reduce
the  cost  basis  of  the  portfolio  by  a  percentage  of  the  original
portfolio  cost.

Our  net  revenues  from  portfolio collections may vary from quarter to quarter
because  the  number  and  magnitude of portfolios where we are still recovering
costs  may  vary, and because the return rates of portfolios whose costs we have
already  recovered  in full may vary. Similarly, our net revenues from portfolio
sales  may  vary  from  quarter  to  quarter


                                       15
<PAGE>
depending  on  the number and magnitude of portfolios (or portions) we decide to
sell  and  the  market  values  of the sold portfolios (or portions) relative to
their  cost  bases.

We  refer  to the discounted present value of the actual amount of money that we
believe  a  portfolio  will  ultimately  produce  as  the  "fair  value"  of the
portfolio.  If we conduct our business successfully, the aggregate fair value of
our  portfolios should be substantially greater than the aggregate cost basis of
our  portfolios  presented  on  our  balance  sheet. We must make assumptions to
determine fair value, the most significant of which are the magnitude and timing
of future collections and the discount rate used to determine present value. The
assumptions  regarding  future  collections  that we use to determine fair value
exclude  any  residual interest in collections that may be due to a third party.
Because  of  the  inherent uncertainty associated with predicting future events,
our  determinations  of  fair  value  at  any  particular point in time are only
estimates,  and  actual  fair value could ultimately vary significantly from our
estimate.

In general, we expect increases in the cost basis of our portfolios presented on
our  balance sheet to accompany increases in portfolio fair value. The magnitude
and timing of our collections could cause cost basis to decline in some quarters
when  fair  value  actually increases, however, because we "front-load" our cost
basis recovery instead of matching portfolio cost basis recovery to revenue on a
proportionate  basis  over  the  life  of the portfolio. Our purchasing patterns
could  reinforce  this  divergence. A decrease in the magnitude of new portfolio
acquisitions  (i.e.,  failing  to  reinvest all of cash collections representing
cost  basis  recovery)  may  still  result  in a fair value increase because new
portfolios  generally  have  a  fair  value  that  exceeds their purchase price.

We plan to realize the difference between fair value and cost basis over time as
we  collect  our portfolios. We generally collect our portfolios over periods of
time  ranging  from  three  to seven years, with the bulk of a portfolio's yield
coming  in  the first three years we collect it. If we succeed in collecting our
portfolios  and  realize the difference between fair value and cost basis of our
portfolios,  we  will recover the cost we paid for them, repay the loans used to
purchase  them,  pay  our  collection and operating costs, and still have excess
cash.

Our  statement  of  operations  generally  will  report  proportionately low net
revenues  in  periods  that  have  substantial collections of recently purchased
portfolios,  due  to  the "front-loaded" cost basis recovery associated with new
portfolios. As a result, during times of rapid growth in our portfolio purchases
(and  probably for several quarters thereafter), our statement of operations may
show  a  net  loss.  As  purchases  slow  and  more  collections come from older
portfolios  whose  cost  bases  have been completely recovered, our statement of
operations will begin to report net income, assuming our portfolios perform over
time  as  anticipated  and  we  collect  them  in  an  efficient manner. For the
foreseeable  future,  we  intend  to  continue  seeking  new large dollar-volume
portfolio purchases using our loan facility with Varde Investment Partners, L.P.
("Varde").

Our  operating  costs  and expenses consist principally of salaries and benefits
and  general  and  administrative  expenses.  Fluctuations  in  our salaries and
benefits  correspond  roughly  to fluctuations in our headcount. Our general and
administrative  expenses  include non-salaried collection costs, telephone, rent
and  professional  expenses.  Fluctuations  in  telephone  and  collection costs
generally  correspond  to  the  volume of accounts we are attempting to collect.
Professional  expenses  tend  to  vary based on specific issues we must resolve.

BASIS OF PRESENTATION

We  present  our  financial  statements based on our February 4, 2002, emergence
from bankruptcy being treated as the inception of our business. In our emergence
from bankruptcy, we succeeded to the assets and liabilities of six entities that
were  in  bankruptcy.   The  equity  owners   of   these   entities  approved  a
reorganization  plan  under  which  the  owners  of these six entities agreed to
receive  ownership interests in Performance Capital Management, LLC, in exchange
for  their  ownership  interests  in the predecessor entities.  Our consolidated
financial  statements  include  the  accounts  of  our parent operating company,
Performance  Capital  Management,  LLC,  and  its  wholly-owned  special purpose
subsidiary  Matterhorn  Financial  Services  LLC, a California limited liability
company  ("Matterhorn").  All significant intercompany balances and transactions
have  been  eliminated.


                                       16
<PAGE>
CRITICAL ACCOUNTING ESTIMATES

We  present investments in portfolios on our balance sheet at the lower of cost,
market,  or  estimated  net  realizable value. As discussed above, we reduce the
cost basis of a portfolio on a proportionate basis when we sell a portion of the
portfolio,  and  we treat amounts collected on a portfolio as a reduction to the
carrying  basis  of  the  portfolio  on  an  individual portfolio basis. When we
present financial statements we assess the estimated net realizable value of our
portfolios  on  a  portfolio-by-portfolio  basis, and we reduce the value of any
portfolio  that  has  suffered  impairment  because  its  cost basis exceeds its
estimated  net  realizable  value.  Estimated  net  realizable  value represents
management's  estimates,  based  upon  present  plans  and  intentions,  of  the
discounted  present  value  of  future  collections. We must make assumptions to
determine  estimated net realizable value, the most significant of which are the
magnitude  and  timing  of  future  collections  and  the  discount rate used to
determine  present  value.  Once we write down a particular portfolio, we do not
increase it in subsequent periods if our plans and intentions or our assumptions
change.

We  present  the fair value of our portfolios only in the notes to our financial
statements,  not  in  the  basic  financial  statements  themselves. In order to
understand  our  financial  statements  the  reader must understand the concepts
involved  in estimation of the fair value of our portfolios, as discussed in the
section  above  entitled  "Overview".  Because  of  the  inherent  uncertainty
associated  with  predicting  future events, our determinations of fair value at
any  particular  point  in  time are only estimates, and actual fair value could
ultimately  vary  significantly  from  our  estimate.

When  we  collect  an  account  in  a portfolio, we reduce the cost basis of the
portfolio dollar-for-dollar until we have completely recovered the cost basis of
the  portfolio. We believe this method of accounting for the amortization of the
purchase  price  of  our  portfolios is conservative and minimizes the effect of
estimation  on  our  results  of  operations.  This  policy  has  the  effect of
"front-loading"  expenses,  however,  and  may  result  in a portfolio initially
showing  no  net  revenue for a period of time and then showing only net revenue
once  we  have  recovered its entire cost basis. We believe a policy grounded in
conservatism  is  preferable  to  a policy of attempting to match portfolio cost
basis to revenue on a proportionate basis over the life of the portfolio, due to
the  distressed  nature  of  the portfolio assets and the lack of assurance that
projected  collections  will  actually  occur.

When  we  sell  a  portfolio or a portion of it, to the extent of remaining cost
basis  for  the  portfolio,  we  reduce  the  cost  basis  of the portfolio by a
percentage of the original portfolio cost. Our policy does not take into account
whether the portion of the portfolio we are selling may be more or less valuable
than  the remaining accounts that comprise the portfolio. We believe our policy,
which  is  grounded  in  this  objective  measure  for  cost  basis recovery, is
preferable  to  a  policy  that would attempt to estimate whether a portion of a
portfolio  being  sold is more or less valuable than the remaining accounts that
comprise the portfolio, because our policy minimizes the effect of estimation on
our  results  of  operations.

As  discussed  in  greater detail below, our credit facility with Varde provides
for  up  to  $25 million of capital (counting each dollar loaned on a cumulative
basis)  over  a  five-year  term  ending in July 2009. The facility provides for
Varde  to  receive  a residual interest in portfolio collections after all funds
invested  in  the  portfolio  have been repaid (with interest) and all servicing
costs  have  been  paid. We do not record a liability for this residual interest
due  to  the distressed nature of the portfolio assets and the lack of assurance
that  collections  sufficient  to  result  in a liability to Varde will actually
occur.

For ease of presentation in the following discussions of "Operating Results" and
"Liquidity  and  Capital  Resources",  we  round  amounts  less than one million
dollars  to  the  nearest  thousand dollars and amounts greater than one million
dollars  to  the  nearest  hundred  thousand  dollars.

OPERATING RESULTS

COMPARISON OF RESULTS FOR THE QUARTERS ENDED JUNE 30, 2005 AND 2004

The  following  discussion  compares  our results for the quarter ended June 30,
2005,  to  the  quarter ended June 30, 2004. We generated net income of $234,000
for  the quarter ended June 30, 2005, compared to net income of $180,000 for the
quarter  ended June 30, 2004.  Our operating activities used cash of $967,000 in
the  quarter  ended  June 30, 2005, as compared to providing cash of $382,000 in
the  quarter  ended  June  30,  2004.  This  was  due  to  a large extent to the
portfolio  purchases  made  in  the  second  quarter  2005.


                                       17
<PAGE>
Revenue
-------

Our  net revenues increased to $2.2 million for the quarter ended June 30, 2005,
from  $1.8  million  for  the  quarter  ended June 30, 2004. The following table
presents  a  comparison  of the components of our revenues for the quarter ended
June  30,  2005,  to  the quarter ended June 30, 2004, as well as presenting net
revenue  as a percentage of the corresponding total revenue (approximate amounts
due  to  rounding):

<TABLE>
<CAPTION>
                                    Total               Collections            Sales
                             --------------------   -------------------  --------------------
                               For the Quarter        For the Quarter     For the Quarter
                                Ended June 30,        Ended June 30,       Ended June 30,
                               2005       2004       2005       2004       2005       2004
                             ---------  ---------  ---------  ---------  ---------  ---------
                                ($ in millions)       ($ in millions)      ($ in millions)
<S>                          <C>        <C>        <C>        <C>        <C>        <C>
     Total revenues          $    3.9   $   3.2    $    3.4   $   2.2    $    0.5   $    1.0
     Less basis recovery         (1.7)     (1.4)       (1.5)     (0.6)       (0.2)      (0.8)
                             ---------  ---------  ---------  ---------  ---------  ---------
     Net revenues            $    2.2   $   1.8    $    1.9   $   1.6    $    0.3   $    0.2
                             =========  =========  =========  =========  =========  =========

     Net Revenue Percentage      56.4%     56.8%       55.5%     72.2%       62.6%      21.1%
</TABLE>

Portfolio collections continue to provide most of our total revenues.  Our total
revenues from portfolio collections increased by $1.2 million, substantially due
to  collections  from  recently purchased portfolios and increased efficiency in
collection  procedures  for  both  recently  purchased  and older portfolios. An
increase  in  collector headcount has also permitted us to exploit the increased
volume of accounts we have available to collect. Our net revenues from portfolio
collections  increased  by $258,000, but the percentage of net revenues to total
revenues  declined  significantly.  These results reflect the fact that recently
purchased portfolios (which provide no net revenues because of front-loaded cost
basis recovery) provided a substantial portion of our increased total collection
revenues.  During the six months ended June 30, 2005,  we acquired approximately
$5.8  million  of new portfolios (net of returns). During 2004, we acquired $5.3
million of new portfolios (net of portions of portfolios we promptly resold). We
expect  to  continue to have strong total collection revenue as we collect these
recent  portfolio  purchases. The cost basis recovery associated with collecting
recently  purchased  2004  portfolios, combined with the portfolios that we have
already  acquired  in 2005 and additional portfolios we plan to acquire in 2005,
could  continue  to  offset  the  increase  in  net  revenue percentage we would
otherwise  expect  our  older  portfolios  (whose  cost bases we have completely
recovered)  to  generate  and  actually  result  in a further decline in our net
revenue  percentage.

Our  total  revenues  from portfolio sales decreased to $506,000 for the quarter
ended  June  30,  2005, from $975,000 for the quarter ended June 30, 2004, while
net  sales revenue increased to $317,000 from $206,000. This change in sales net
revenue percentage occurred in part because during the second quarter of 2005 we
sold some of  our older portfolios whose collection lives, from our perspective,
have run their course. The second quarter of 2004 had a greater concentration of
sales  of newly acquired portfolios from which we do not  generate a substantial
amount  of  net  revenues.

Our  net income of $234,000 for the quarter ended June 30, 2005, was essentially
due  to  the  $317,000  of net revenues we derived from portfolio sales. Without
these  sales, we would have essentially had a loss in the second quarter 2005 of
approximately $83,000.

Operating Expenses
------------------

Our total operating costs and expenses increased to $1.9 million for the quarter
ended June 30, 2005, from  $1.7 million for the quarter ended June 30, 2004, due
primarily  to  the  increase in collection costs associated with our increase in
collection  revenue. Our ratio of operating costs and expenses to total revenues
from  collections  (i.e., excluding the effect of portfolio sales), a measure of
collection  efficiency,  decreased to 54.6% for the quarter ended June 30, 2005,
from  73.0% for the quarter ended June 30, 2004. We accomplished this efficiency
improvement  through  a  three-part  strategy:  (1)  increasing total collection
revenues  by  exploiting  the  increased volume of accounts we have available to
collect;  (2)  using  our  existing  infrastructure  to collect a greater dollar
volume  of  accounts;  and  (3)  continuing  to  reduce


                                       18
<PAGE>
variable  costs  required to collect each dollar of revenue. We believe that our
agreement  with  Varde,  discussed  in  greater  detail  below,  has  played  a
significant  role  in  enabling  us  to  increase the volume of accounts we have
available  to  collect.  The  increased  revenues  that result from collecting a
greater volume of accounts have outpaced the increased variable costs associated
with  increased  collector  headcount  and  other  collection  costs. We plan to
continue improving this efficiency measure, both by continuing to increase total
revenues  (while  holding infrastructure costs down) and by continuing to reduce
variable costs required to collect each dollar of revenue. We intend to continue
monitoring  the  magnitude  of  the  change  in  the  margin  by which our total
collection  revenues  exceed  our  operating  costs and expenses relative to the
principal  and interest we pay to Varde under the credit facility to ensure that
the  Varde  facility  provides additional liquidity to us and does not result in
loan  payments  that  will  deplete  our  cash  balances.

Our  general  and  administrative expenses increased to $793,000 for the quarter
ended  June 30, 2005, from approximately $641,000 for the quarter ended June 30,
2004,  due  principally  to  collection expenses associated with the increase in
collection  revenues.  Our  salaries  and   benefits   expenses   increased   by
approximately  $57,000  due  principally  to  increased  collector headcount and
administrative payroll. Our operating expenses may continue to increase somewhat
in  2005  as  we  increase  the  volume  of  accounts  we collect, but we expect
increases  in  total  revenues  to continue to outpace any material increases in
costs  associated  with  our  collection  efforts.

COMPARISON OF RESULTS FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004

The  following discussion compares our results for the six months ended June 30,
2005,  to the six months ended June 30, 2004. We incurred a net loss of $129,000
for  the six months ended June 30, 2005, compared to net income of  $839,000 for
the  six  months ended June 30, 2004. Our operating activities used cash of $2.5
million for the six months ended June 30, 2005, as compared to providing cash of
$1.6  million  for  the  same  period  in  2004.

Revenue
-------

Our  net  revenues  decreased  to $3.8 million for the six months ended June 30,
2005,  from  $4.3  million for the six months ended June 30, 2004. The following
table presents a comparison of the components of our revenues for the six months
ended  June 30, 2005 and 2004, as well as presenting net revenue as a percentage
of  the  corresponding  total  revenue  (approximate  amounts  due to rounding):

<TABLE>
<CAPTION>
                                     Total              Collections             Sales
                             --------------------  --------------------  --------------------
                              For the Six Months     For the Six Months   For the Six Months
                                Ended June 30,         Ended June 30,        Ended June 30,
                                2005      2004        2005      2004        2005      2004
                             ---------  ---------  ---------  ---------  ---------  ---------
                                ($ in millions)       ($ in millions)       ($ in millions)
<S>                          <C>        <C>        <C>        <C>        <C>        <C>
     Total revenues          $    7.1   $    7.5   $    6.6   $    4.7   $    0.5   $    2.8
     Less basis recovery         (3.3)      (3.2)      (3.1)      (1.4)      (0.2)      (1.8)
                             ---------  ---------  ---------  ---------  ---------  ---------
     Net revenues            $    3.8   $    4.3   $    3.5   $    3.3   $    0.3   $    1.0
                             =========  =========  =========  =========  =========  =========

     Net Revenue Percentage      54.0%      56.9%      53.4%      69.9%      62.6%      34.6%
</TABLE>

Portfolio  collections  provided  92.9% of our total revenues for the six months
ended  June 30, 2005, and 63.1% for the same period in 2004.  Our total revenues
from  portfolio  collections  increased  by  $1.9  million  substantially due to
collections  from  recently  purchased  portfolios  and  increased efficiency in
collection  procedures  for  both  recently  purchased  and older portfolios. An
increase  in  collector headcount has also permitted us to exploit the increased
volume of accounts we have available to collect. Our net revenues from portfolio
collections  increased  by $227,000, but the percentage of net revenues to total
revenues  declined  significantly.  These results reflect the fact that recently
purchased portfolios (which provide no net revenues because of front-loaded cost
basis recovery) provided a substantial portion of our increased total collection
revenues. During the six months ended June 30, 2005, we acquired $5.8 million of
new  portfolios  (net of returns).  During 2004, we acquired $5.3 million of new
portfolios  (net  of  portions  of  portfolios we promptly resold). We expect to
continue  to  have  strong  total  collection revenue as we collect these recent
portfolio purchases. The cost basis recovery associated with collecting recently
purchased  2004  portfolios,  combined  with the portfolios that we have already
acquired  in  2005  and  additional portfolios we plan to acquire in 2005, could


                                       19
<PAGE>
continue  to  offset  the  increase in net revenue percentage we would otherwise
expect  our  older portfolios (whose cost bases we have completely recovered) to
generate and actually result in a further decline in our net revenue percentage.

Both  our total and net revenues from portfolio sales showed dramatic decreases.
As  part  of our program to emphasize efforts to continue to collect some of our
older  portfolios,  we identified a substantial number of older portfolios whose
collection  lives,  from  our perspective, have run their course.  We identified
these  portfolios  as candidates for sale and were able to sell a number of them
in the first six months of 2004 on terms we considered acceptable. We engaged in
further  sales  of such portfolios in the second quarter of 2005, but not nearly
at the magnitude of the sales during the first six months of 2004. We may engage
in  further  sales  of  such  portfolios  if  we  believe  market conditions are
acceptable, but we do not believe any such sales would approach the magnitude of
sales  from  2004.  We continue collection efforts for certain accounts in these
portfolios  right  up  until the point of sale. We also anticipate continuing to
sell  portions  of  newly  acquired  portfolios from time to time, but we do not
expect  to  generate  substantial net revenues from these sales.  During the six
months  ended  June  30,  2004,  the  prompt resale of portions of portfolios we
purchased  provided  approximately  $1.1  million  of  our $2.8 million of total
revenues  from  portfolio  sales. The prompt resale of portions of portfolios we
purchased  during the first six months of 2005 did not provide material total or
net  revenues.  We  anticipate  continuing  to  sell  portions of newly acquired
portfolios  from  time to time, but we do not expect to generate substantial net
revenues  from  these  sales.

Our  net  loss  of  $129,000 for  the  six  months ended June 30, 2005, compares
unfavorably  to  the  profit of $839,000 for the six months ended June 30, 2004,
only  because the level of sales of older fully recovered portfolios in 2004 was
not  comparable.  Without  the  large volume of older portfolios sales, we would
have  essentially  broken  even  during  the  six  months  ended  June 30, 2004.

Operating Expenses
------------------

Our  total  operating  costs  and expenses increased to $3.8 million for the six
months  ended June 30, 2005, from $3.4 million for the six months ended June 30,
2004,  due  primarily  to  the  increase in collection costs associated with our
increase  in  collection  revenue.  Our ratio of operating costs and expenses to
total revenues from collections (i.e., excluding the effect of portfolio sales),
a  measure of collection efficiency, decreased to 57.3% for the six months ended
June  30,  2005, from 71.9% for the six months ended June 30, 2004. As discussed
in more detail in the quarter-to-quarter analysis above, our three-part strategy
- increased collections, infrastructure leveraging and variable cost reduction -
helped  us accomplish this efficiency improvement. We plan to continue improving
this  efficiency  measure,  both by continuing to increase total revenues (while
holding  infrastructure  costs  down) and by continuing to reduce variable costs
required  to  collect each dollar of revenue. We believe that our agreement with
Varde  has  played, and will continue to play, a significant role in enabling us
to  increase  the  volume of accounts we have available to collect. We intend to
continue monitoring the magnitude of the change in the margin by which our total
collection  revenues  exceed  our  operating  costs and expenses relative to the
principal  and interest we pay to Varde under the credit facility to ensure that
the  Varde  facility  provides additional liquidity to us and does not result in
loan payments that will deplete our cash balances.

Our  general  and administrative expenses increased to  $1.6 million for the six
months  ended June 30, 2005, from $1.2 million for the six months ended June 30,
2004,  due  principally  to  collection expenses associated with the increase in
collection  revenues.   Our   salaries   and   benefits  expenses  increased  to
approximately  $2.2  million  for  the  six  months  ended  June  30, 2005, from
approximately  $2.1  million  for  the  six  months  ended  June  30,  2004, due
principally  to  increased  collector  headcount and administrative payroll. Our
operating  expenses may continue to increase somewhat in 2005 as we increase the
volume  of  accounts  we  collect,  but we expect increases in total revenues to
continue  to  outpace  any  material  increases  in  costs  associated  with our
collection  efforts.

LIQUIDITY AND CAPITAL RESOURCES

Our  cash and cash equivalents decreased $54,000 in the first six months of 2005
to  a balance of $2.0 million at June 30, 2005. During the six months ended June
30, 2005, our portfolio collections and sales generated $7.1 million of cash, we
borrowed  $4.0  million  and  we  used  $3.8  million  for  operating  and other
activities, $5.8 million to purchase new portfolios, $1.2 million to repay loans
and  $330,000  for  distributions  to  unit  holders.

The  large  cost  basis  recovery associated with the recent rapid growth in our
portfolios has made it difficult to achieve results consistent with our business
plan.  During  the  six months ended June 30, 2005, we made progress toward, but


                                       20
<PAGE>
did  not achieve results consistent with, our business plan: to recover the cost
we  pay for our portfolios, repay funds borrowed to purchase portfolios, pay our
collecting  and  operating  costs and still have a profit. Excluding the results
from portfolio sales in the first six months of 2005, our cost basis recovery of
$3.1  million  plus  our  operating, interest and other expenses of $4.0 million
exceeded  our  total  revenues  from  collections  of  $6.6 million by $428,000.

During  2004  and the beginning of 2005, we believe we have continued to improve
the balance between our new and old portfolios. In addition, we believe that our
procedures to ensure that our collectors continue to focus collection efforts on
older  portfolios that still have returns to yield, rather than focusing just on
the  most  recently  acquired portfolios, continue to show results. We have used
our  dialer  to ensure that our collectors continue to focus on portfolios other
than  those  we  have most recently acquired. By monitoring the results of calls
originated  through our dialer, we identified portfolios that required more cost
to  collect  than  others.  Particularly  where  we  had worked to collect these
portfolios  over  an  extended  period  of  time, we determined that some of our
portfolios'  collection lives had run their course from our perspective. We sold
a  substantial number of older portfolios identified by this process in 2004 and
a  lesser  number  of  such portfolios in the second quarter of 2005. We believe
this  process  of  constantly  evaluating  portfolio  returns  against  costs of
collection  should  continue  to  improve  the  balance  between our new and old
portfolios. Current plans for 2005 do not call for the sale of a large number of
older  portfolios,  but  we  may  engage  in  further sales if we believe market
conditions  are  acceptable.

During  2004,  we  simultaneously  addressed two objectives: (1) to increase the
volume  of  portfolios  available  for  collection  in  order  to  capitalize on
infrastructure  capacity  and (2) to improve cash liquidity. Of the $7.4 million
of  portfolios  we  purchased  in  2004, we retained $5.3 million to collect (we
promptly resold the other $2.1 million). During the first six months of 2005, we
purchased  $5.8  million of portfolios (net of returns). These purchases enabled
us  to reverse a trend in 2003 of steadily declining portfolio cost basis, which
had resulted from our difficulty in finding portfolios available for purchase at
prices  we  considered  reasonable.  Because of the improvement in the volume of
portfolios available for collection, we added collection personnel to capitalize
on  our  infrastructure capacity, with increased total revenues from collections
outpacing  increased  costs  associated  with  added  headcount  and  increased
collection  activity.  Whether  we continue to acquire portfolios at the pace of
the first six months of 2005 will depend on our assessment of market conditions,
as  well as the amount of liquid cash and other financial resources available to
us.

Our  portfolios  provide our principal long-term source of liquidity. Over time,
we  expect to convert our portfolios to cash in an amount that equals or exceeds
the  cost basis of our portfolios. In addition, some portfolios whose cost bases
we  have  completely  recovered  will  continue to return collections to us. Our
estimate  of  the  fair value of our portfolios at June 30, 2005, increased $5.1
million  to  $24.3  million from $19.2 million at December 31, 2004. At the same
time,  the  cost  basis  of our portfolios increased to $5.5 million at June 30,
2005,  from  $3.0  million  at  December  31,  2004.

In general, we expect increases in the cost basis of our portfolios presented on
our  balance sheet to accompany increases in portfolio fair value. The magnitude
and timing of our collections could cause cost basis to decline in some quarters
when  fair  value  actually increases, however, because we "front-load" our cost
basis recovery instead of matching portfolio cost basis recovery to revenue on a
proportionate  basis  over  the  life  of the portfolio. Our purchasing patterns
could  reinforce  this  divergence. A decrease in the magnitude of new portfolio
acquisitions  (i.e.,  failing  to  reinvest all of cash collections representing
cost  basis  recovery)  may  still  result  in a fair value increase because new
portfolios  generally  have  a  fair  value  that  exceeds their purchase price.

Our estimate of fair value and our portfolio cost basis increased due in part to
the  large  portfolio  purchases  we  made in 2004 and 2005, and fair value also
increased  because  we believe recently purchased portfolios will provide better
collection  ratios  than  some of the older portfolios we inherited from our PAM
Fund  predecessors,  because  newly  acquired  portfolios  generally  provide an
increase  in  fair  value  substantially greater than the increase in cost basis
recorded  on  our  balance sheet and because improved collection procedures have
extended  the collection lives of some of our older portfolios. Whether the fair
value  and  cost  basis  of our portfolios will continue to increase in the near
term  will  depend  on our ability to find portfolios at a reasonable price in a
very competitive market. If we can find reasonably priced portfolios, we believe
our  portfolio  cost basis will increase in the near term because we can use the
Varde credit facility as well as reinvest some cash proceeds from collections to
purchase new portfolios. Long-term growth in portfolio cost basis will depend on
whether  market  conditions  continue  to  permit  us  to purchase portfolios at
reasonable  prices  and  on  our  financial  resources.


                                       21
<PAGE>
We  used  a discount rate of 20% to determine the estimates of fair value of our
portfolios  at  June  30,  2005, and December 31, 2004. The following table sets
forth  alternative  estimates  of  fair  value if we assessed collection risk as
higher  (using  a discount rate of 25%) or lower (using a discount rate of 15%).

<TABLE>
<CAPTION>
                                                         June 30, 2005      December 31, 2004
                                                       ------------------  ------------------
<S>                                                    <C>                 <C>
          Higher collection risk (25% discount rate)   $     22.7 million  $     17.9 million
          Assumed collection risk (20% discount rate)  $     24.3 million  $     19.2 million
          Lower collection risk (15% discount rate)    $     26.3 million  $     20.8 million
</TABLE>

Our  estimates of fair values also would change if we revised our projections of
the  magnitude  and  timing  of  future  collections.  Because  of  the inherent
uncertainty associated with predicting future events, our determinations of fair
value  at any particular point in time are only estimates, and actual fair value
could  ultimately  vary  significantly  from  our  estimate.

In  the near term, we plan to reinvest some of our cash collections representing
cost  basis recovery to acquire additional portfolios and use the Varde facility
to  acquire  additional  portfolios  to  continue  growing the fair value of our
portfolios  on a quarter to quarter basis. Ultimately we plan to reinvest all of
the  cash  representing  cost  basis recovery, plus a portion of excess cash, to
acquire  additional  portfolios.

Our  Board  of  Directors  has  described  this  strategy  as  having two parts:

     -    Provide an annuity without impairing the value of the business; and
     -    Grow the business to increase the annuity.

Due  to  factors  such  as  the  availability  of new portfolios, market pricing
conditions  for  new  portfolios,  the  timing  of  loan repayments and residual
interest  payments  to Varde, and the timing of distributions to our members, we
may  not  achieve  increases  in  fair  value  each  quarter.

In  the  near term we plan to use some of our cash collections representing cost
basis  recovery  to  make  distributions  to  our  members and interest holders.
Ultimately  we  plan  to generate cash in excess of our collection and operating
costs  and  our  cost  basis recovery and to use some of the excess cash to make
distributions  to  our members and interest holders. Beginning in April 2003, we
began  making  quarterly  distributions.  During  2004,  we  made  distributions
totaling  $674,000.  We  made distributions of $165,000 in each of January 2005,
April 2005 and July 2005 relating to quarters ended December 31, 2004, March 31,
2005,  and  June  30,  2005,  respectively.

Our  agreement  with  Varde provides us with a source of capital to purchase new
portfolios.  The  agreement provides up to $25 million of capital (counting each
dollar  loaned on a cumulative basis) over a five-year term. It is unlikely that
we  will  ever have outstanding indebtedness approaching the full $25 million at
any  one  time,  due to the cumulative nature of the facility. At June 30, 2005,
Matterhorn  owed $4.2 million under the facility in connection with purchases of
certain  charged-off  loan  portfolios.  Under  the credit facility, Varde has a
first  priority  security  interest  in  Matterhorn's  assets.  The  assets  of
Matterhorn that provide security for Varde's loan were carried at a cost of $4.6
million  at  June  30,  2005.  The  loan advances have minimum payment threshold
points  with  terms of two years and bear interest at the rate of 12% per annum.
These  obligations are scheduled to be paid in full on dates ranging from August
2006  to April 2007. Once all funds (including those invested by us) invested in
a portfolio financed by Varde have been repaid (with interest) and all servicing
costs  have  been  paid,  Varde  will  begin  to  receive a residual interest in
collections  of  that  portfolio. Depending on the performance of the portfolio,
these  residual  interests  may  never  be  paid,  they  may  begin being paid a
significant  time  later  than  Varde's  loan  is  repaid (i.e., after the funds
invested  by  us  are  repaid  with  interest),  or,  in circumstances where the
portfolio  performs  extremely  well,  the  loan could be repaid early and Varde
could  conceivably  begin to receive its residual interest on or before the date
that  the  loan  obligation  was  originally  scheduled  to  be  paid  in  full.

The amount of remaining available credit under the facility at June 30, 2005 was
$19.3  million.  Matterhorn  has  borrowed  a  total  of $5.7 million, with $4.2
million outstanding at June 30, 2005.  There can be no assurance that Varde will
advance  any  new  money under the facility, because in each instance Varde must
approve  of  the  portfolio(s)  we


                                       22
<PAGE>
propose to acquire and the terms of the acquisition. We do not have any plans to
raise  equity  capital.  Based  on  our  cash  position  and  current  financial
resources,  and assuming our operating results continue to increase at projected
levels,  we  believe we have adequate capital resources to continue our business
as  presently  conducted  for the foreseeable future. We plan to continue to use
the  Varde  credit  facility to maximize the return on our infrastructure and to
continue to reduce variable costs required to collect each dollar of revenue. We
will  continue to consider other alternatives to increase the volume of accounts
we  service,  however,  if  the  economic  returns  to  us  seem  reasonable.

We  do not have any contractual commitments to make capital expenditures, and we
have not budgeted any capital expenditures for the coming year. We may from time
to  time  acquire  capital  assets  on  an as needed basis. Our most significant
capital  assets  are  our  dialer  and  our  telephone  switch,  which we do not
anticipate  having  to  replace  within  the  next  year.

ITEM 3.  CONTROLS AND PROCEDURES

In  accordance  with  the  Exchange Act, we carried out an evaluation, under the
supervision  and  with  the  participation  of  management,  including our Chief
Operations  Officer  and  our  Accounting  Manager,  of the effectiveness of our
disclosure  controls  and procedures as of the end of the period covered by this
report.  In  designing  and  evaluating  disclosure  controls  and  procedures,
management  recognized  that  any  controls  and  procedures, no matter how well
designed  and  operated,  can provide only reasonable assurance of achieving the
desired control objectives. Further, the design of a control system must reflect
the  fact  that  there  are  resource  constraints.  Because  of  the  inherent
limitations  in  all  control  systems,  no  evaluation  of controls can provide
absolute  assurance  that all control issues and instances of fraud, if any, may
be  detected.  Based  on  this  evaluation, our Chief Operations Officer and our
Accounting  Manager  concluded  that our disclosure controls and procedures were
effective  as of June 30, 2005, to provide reasonable assurance that information
required  to  be  disclosed in our reports filed or submitted under the Exchange
Act  is  recorded,  processed,  summarized  and reported within the time periods
specified  in the Securities and Exchange Commission's rules and forms. As noted
below,  however,  we previously identified a weakness in our disclosure controls
and  procedures  that  existed  during  the  period  ended  September  30, 2004.

During the process of evaluating and testing the effectiveness of our disclosure
controls  and  procedures  for  the  period ended September 30, 2004, management
identified  a  potential  deficiency  involving  the Company's failure to timely
disclose  an  event that was reportable under new Form 8-K Item 2.03. Disclosure
of  this  event  was included in our Form 10-QSB for the quarter ended September
30,  2004,  under  Part II, Item 5. Since identifying this potential deficiency,
management  has begun to monitor this potential deficiency in order to determine
whether any further mitigating controls are necessary. We filed a current report
on  Form  8-K  Item 2.03 one day late during the fourth quarter, on December 29,
2004,  for  a  closing under the Varde credit facility that occurred on December
21,  2004.  Our most recent closings under the Varde credit facility occurred on
February  25,  2005  and  April 28, 2005, and we timely filed current reports on
Form  8-K Item 2.03 on March 2, 2005 and April 29, 2005, respectively. We intend
to continue monitoring the reporting of closings under the Varde credit facility
to  ensure  that  related  filings  are  made  on  a  timely  basis.

There  has been no change in our internal controls over financial reporting that
occurred  during  the second quarter of 2005 that has materially affected, or is
reasonably  likely  to  materially  affect, our internal controls over financial
reporting.


                                       23
<PAGE>
                           PART II - OTHER INFORMATION

ITEM  2.  CHANGES  IN  SECURITIES  AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY
SECURITIES

We have not purchased any LLC Units from our members since February 4, 2002, our
inception.  We concluded a procedure authorized by our plan of reorganization to
eliminate  the interests of members we have not been able to locate. At December
31,  2004,  the  Company  cancelled  7,055 LLC Units and took back approximately
$152,000  of  related  unclaimed distributions under the procedure authorized in
the  reorganization plan. The $152,000 of unclaimed distributions was treated as
an addition to Members' Equity. The total amount of abandoned unreturned capital
relating to the 7,055 LLC Units was $457,318. During the first quarter of 2005 a
member  with 65 LLC Units was reinstated. These 65 LLC Units had been considered
returned  voluntarily  with  the  634  LLC  Units  surrendered  in  2003. It was
determined  that  this  was  done  in  error.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

On  June  13, 2005, we held our annual meeting of members in Orange, California.
At  the  meeting,  our  members  were  asked to vote on the election of Class II
directors to the Board of Directors. All of the directors nominated for election
served  as  directors  immediately  prior  to  the annual meeting. The following
directors  were  elected  by  our  members  as  a result of the following votes:

<TABLE>
<CAPTION>
DIRECTORS             VOTES "FOR" ELECTION  VOTES "WITHHELD"
--------------------  --------------------  ----------------
<S>                   <C>                   <C>
    Lester Bishop           246,537              3,553
    Larry Smith             246,885              3,205
    David Barnhizer         246,636              3,454
    Sanford Lakoff          246,537              3,553
</TABLE>

The  following  Class  I directors continued to serve as directors following the
annual  meeting:  Larisa  Gadd,  Rodney  Woodworth  and  Donald  Rutherford.

In  addition to the election of directors, the following matters were voted upon
at  the  annual  meeting:

     -    To  ratify  the board of directors' selection and appointment of Moore
          Stephens  Wurth  Frazer  and  Torbet, LLP, as independent auditors for
          Performance  Capital  Management,  LLC  for  the  fiscal  year  ending
          December 31, 2005. The votes were cast as follows: 244,865 in favor of
          ratification;  597  against  ratification;  and  4,628  abstaining.

No other matters were submitted to our members at the annual meeting.


                                       24
<PAGE>
ITEM 6. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER   DESCRIPTION
-----------------------------------------------------------------------------------------------------------
<S>      <C>
  2.1    Joint Chapter 11 Plan of Reorganization Proposed by Chapter 11 Trustee and the Official Committee
         of Equity Security Holders effective February 4, 2002 (1)

  2.2    First Amended Disclosure Statement Describing Joint Chapter 11 Plan Proposed by Chapter 11
         Trustee and the Official Committee of Equity Security Holders approved on October 12, 2001 (1)

  3.1    Performance Capital Management, LLC Articles of Organization (1)

  3.2    Operating Agreement for Performance Capital Management, LLC (1)

  3.3    First Amendment to Operating Agreement for Performance Capital Management, LLC (1)

  3.4    Second Amendment to Operating Agreement for Performance Capital Management, LLC (2)

  4.1    Specimen Performance Capital Management, LLC Unit Certificate (1)

  4.2    Specimen Performance Capital Management, LLC Economic Interest Unit Certificate (1)

  4.3    Provisions in the Operating Agreement for Performance Capital Management, LLC pertaining to the
         rights of LLC Unit holders (see Exhibits 3.2 and 3.3) (1)

  31.1   Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

  31.2   Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)

  32.1   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
         1350 *
</TABLE>

*  The  certifications  filed  under  Exhibit  32.1  are  not deemed "filed" for
purposes  of Section 18 of the Securities Exchange Act of 1934 and are not to be
incorporated by reference into any filing of Performance Capital Management, LLC
under  the  Securities  Exchange  Act  of  1933,  as  amended, or the Securities
Exchange  Act  of 1934, as amended, whether made before or after the date hereof
irrespective of any general incorporation by reference language contained in any
such  filing,  except  to  the  extent  that Performance Capital Management, LLC
specifically  incorporates  it  by  reference.

(1)  Filed  on  April  2,  2003  as  an  exhibit to our report on Form 8-K dated
February  4,  2002  and  incorporated  herein  by  reference.

(2)  Filed  on  November 14, 2003 as an exhibit to our report on Form 10-QSB for
the  period  ended  September  30,  2003  and  incorporated herein by reference.


                                       25
<PAGE>
                                    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.

                                         PERFORMANCE CAPITAL MANAGEMENT, LLC


      August 12, 2005                      By: /s/ David J. Caldwell
--------------------------                     ---------------------------------
         (Date)                          Name: David J. Caldwell
                                          Its: Chief Operations Officer


                                       26
<PAGE>
<TABLE>
<CAPTION>
                                                EXHIBIT INDEX


EXHIBIT
NUMBER   DESCRIPTION
-----------------------------------------------------------------------------------------------------------
<S>      <C>
  2.1    Joint Chapter 11 Plan of Reorganization Proposed by Chapter 11 Trustee and the Official Committee
          of Equity Security Holders effective February 4, 2002 (1)

  2.2    First Amended Disclosure Statement Describing Joint Chapter 11 Plan Proposed by Chapter 11
         Trustee and the Official Committee of Equity Security Holders approved on October 12, 2001 (1)

  3.1    Performance Capital Management, LLC Articles of Organization (1)

  3.2    Operating Agreement for Performance Capital Management, LLC (1)

  3.3    First Amendment to Operating Agreement for Performance Capital Management, LLC (1)

  3.4    Second Amendment to Operating Agreement for Performance Capital Management, LLC (2)

  4.1    Specimen Performance Capital Management, LLC Unit Certificate (1)

  4.2    Specimen Performance Capital Management, LLC Economic Interest Unit Certificate (1)

  4.3    Provisions in the Operating Agreement for Performance Capital Management, LLC pertaining to the
         rights of LLC Unit holders (see Exhibits 3.2 and 3.3) (1)

  31.1   Certification of Chief Executive Officer Pursuant to Rule 13a-14(a)

  31.2   Certification of Principal Financial Officer Pursuant to Rule 13a-14(a)

  32.1   Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
         1350 *
</TABLE>

*  The  certifications  filed  under  Exhibit  32.1  are  not deemed "filed" for
purposes  of Section 18 of the Securities Exchange Act of 1934 and are not to be
incorporated by reference into any filing of Performance Capital Management, LLC
under  the  Securities  Exchange  Act  of  1933,  as  amended, or the Securities
Exchange  Act  of 1934, as amended, whether made before or after the date hereof
irrespective of any general incorporation by reference language contained in any
such  filing,  except  to  the  extent  that Performance Capital Management, LLC
specifically  incorporates  it  by  reference.

(1)  Filed  on  April  2,  2003  as  an  exhibit to our report on Form 8-K dated
February  4,  2002  and  incorporated  herein  by  reference.

(2)  Filed  on  November 14, 2003 as an exhibit to our report on Form 10-QSB for
the  period  ended  September  30,  2003  and  incorporated herein by reference.


                                       27