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, 2004
                                             -------------------


[ ]  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
      incorporation or organization            (IRS Employer Identification No.)


               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 [ ]


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 June 30, 2004, the issuer had
570,916  LLC  Units  issued  and  outstanding.


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


<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                                    Index to
                         Quarterly Report on Form 10-QSB
                       For the Quarter Ended June 30, 2004


PART  I  -  FINANCIAL INFORMATION                                           Page

Item  1     Financial  Statements

            Report  of  Independent  Registered  Public  Accounting  Firm . . .1

            Balance  Sheets  as  of  June  30,  2004  (unaudited)
            and December 31, 2003 (audited) . . . . . . . . . . . . . . . . . .2

            Statements  of  Operations for the three and six months
            ended June 30, 2004 and 2003 (unaudited). . . . . . . . . . . . . .3

            Statements of Members' Equity for the six months ended
            June 30, 2004 (unaudited) and the year ended
            December  31,  2003  (audited). . . . . . . . . . . . . . . . . . .4

            Statements of Cash Flows for the six months ended
            June 30, 2004 and 2003 (unaudited). . . . . . . . . . . . . . . . .5

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

Item  2     Management's Discussion and Analysis of Financial
            Condition and Results  of  Operations . . . . . . . . . . . . . . 14

Item  3     Controls  and  Procedures . . . . . . . . . . . . . . . . . . . . 21

PART  II -  OTHER INFORMATION

Item  1     Legal  Proceedings. . . . . . . . . . . . . . . . . . . . . . . . 22

Item  2     Changes  in Securities and Small Business Issuer
            Purchases of Equity Securities. . . . . . . . . . . . . . . . . . 22

Item  4     Submission  of  Matters  to  a  Vote  of  Security  Holders . . . 22

Item  6     Exhibits  and  Reports  on  Form  8-K . . . . . . . . . . . . . . 23

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24



<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  balance  sheet  of  Performance  Capital
Management,  LLC,  as of June 30, 2004, and the related statements of operations
for  the  three  and  six months ended June 30, 2004 and 2003, and statements of
members'  equity and cash flows for the six months ended June 30, 2004 and 2003.
All  information included in these 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 financial statements referred to above for them to
be  in  conformity  with  accounting principles generally accepted in the United
States  of  America.

We  have  previously  audited,  in  accordance with auditing standards generally
accepted  in  the  United  States  of  America, the balance sheet of Performance
Capital  Management,  LLC as of December 31, 2003, and the related statements of
operations,  members' equity and cash flows for the year ended December 31, 2003
(not  presented  herein); and in our report dated February 20, 2004 and April 9,
2004,  we expressed an unqualified opinion on those financial statements. In our
opinion,  the  information  set  forth  in  the accompanying balance sheet as of
December  31,  2003,  is fairly stated, in all material respects, in relation to
the  balance  sheet  from  which  it  has  been  derived.

/s/ Moore Stephens Wurth Frazer And Torbet, LLP


July 23, 2004
Orange, California


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

                                 BALANCE SHEETS
                    AS OF JUNE 30, 2004 AND DECEMBER 31, 2003

                                               June 30,    December 31,
                                                 2004        2003
                                             (unaudited)   (audited)
                                             ------------  ----------
<S>                                          <C>           <C>
                            ASSETS
                            ------

  Cash and cash equivalents                  $  2,295,218  $1,007,949
  Restricted cash                                  21,474      21,448
  Other receivables                                 6,330      14,492
  Purchased loan portfolios, net                1,474,320   2,081,496
  Property and equipment, net                     328,710     397,924
  Deposits                                         56,588      56,588
  Prepaid expenses and other assets               106,328     135,738
                                             ------------  ----------

     Total assets                            $  4,288,968  $3,715,635
                                             ============  ==========


                LIABILITIES AND MEMBERS' EQUITY
                -------------------------------
LIABILITIES:
  Accounts payable                           $     77,699  $   68,735
  Accrued liabilities                             365,913     313,352
  Income taxes payable                             15,790      15,790
                                             ------------  ----------
    Total liabilities                             459,402     397,877

COMMITMENTS AND CONTINGENCIES                           -           -

MEMBERS' EQUITY                                 3,829,566   3,317,758
                                             ------------  ----------

      Total liabilities and members' equity  $  4,288,968  $3,715,635
                                             ============  ==========
</TABLE>

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


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

                                          STATEMENTS OF OPERATIONS


                                          For the three    For the three     For the six      For the six
                                          months ended     months ended     months ended     months ended
                                          June 30, 2004    June 30, 2003    June 30, 2004    June 30, 2003
                                           (unaudited)      (unaudited)      (unaudited)      (unaudited)
                                         ---------------  ---------------  ---------------  ---------------
<S>                                      <C>              <C>              <C>              <C>
REVENUES:
  Portfolio collections                  $    2,273,717   $    2,367,483   $    4,725,087   $    5,007,101
  Portfolio sales                               975,393          159,763        2,757,457          505,724
                                         ---------------  ---------------  ---------------  ---------------
    Total revenues                            3,249,110        2,527,246        7,482,544        5,512,825
  Less portfolio basis recovery               1,402,401        1,124,448        3,228,628        2,703,414
                                         ---------------  ---------------  ---------------  ---------------
NET REVENUES                                  1,846,709        1,402,798        4,253,916        2,809,411
                                         ---------------  ---------------  ---------------  ---------------

OPERATING COSTS AND EXPENSES:
  Salaries and benefits                         975,742        1,060,572        2,090,202        2,180,680
  General and administrative                    640,581          530,238        1,217,951        1,075,931
  Depreciation                                   44,185           51,677           89,358          103,178
                                         ---------------  ---------------  ---------------  ---------------
    Total operating costs and expenses        1,660,508        1,642,487        3,397,511        3,359,789
                                         ---------------  ---------------  ---------------  ---------------

INCOME (LOSS) FROM OPERATIONS                   186,201         (239,689)         856,405         (550,378)
                                         ---------------  ---------------  ---------------  ---------------

OTHER INCOME (EXPENSE):
  Reorganization costs                          (26,166)         (24,497)         (35,003)         (48,020)
  Interest income                                 3,192            3,914            5,583            5,850
  Other income (expense)                         22,197           (9,304)          29,214            1,280
                                         ---------------  ---------------  ---------------  ---------------
    Total other expense, net                       (777)         (29,887)            (206)         (40,890)
                                         ---------------  ---------------  ---------------  ---------------

INCOME (LOSS) BEFORE INCOME TAX
   PROVISION                                    185,424         (269,576)         856,199         (591,268)

INCOME TAX PROVISION                              5,790            4,547           17,390            7,496
                                         ---------------  ---------------  ---------------  ---------------


NET INCOME (LOSS)                        $      179,634   $     (274,123)  $      838,809   $     (598,764)
                                         ===============  ===============  ===============  ===============

NET INCOME (LOSS) PER MEMBER
  UNIT - BASIC AND DILUTED               $         0.31   $        (0.48)  $         1.47   $        (1.05)
                                         ===============  ===============  ===============  ===============
</TABLE>

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


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

                                   STATEMENTS OF MEMBERS' EQUITY

                                                                                          Total
                                     Member    Unreturned    Abandoned    Accumulated    Members'
                                     Units      Capital       Capital       Deficit       Equity
                                    --------  ------------  -----------  -------------  -----------
<S>                                 <C>       <C>           <C>          <C>            <C>

Balance, December 31, 2002          571,550   $26,116,880   $        -   $(21,237,826)  $4,879,054

Distribution to investors                 -      (133,912)           -              -     (133,912)

Net loss                                  -             -            -       (598,764)    (598,764)
                                    --------  ------------  -----------  -------------  -----------

Balance, June 30, 2003              571,550    25,982,968            -    (21,836,590)   4,146,378
                                    --------  ------------  -----------  -------------  -----------

Distributions to investors                -      (338,065)           -              -     (338,065)

Member units returned by investors     (634)      (31,926)      31,926              -            -

Net loss                                  -             -            -     (490,555)      (490,555)
                                    --------  ------------  -----------  -------------  -----------

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
                                    ========  ============  ===========  =============  ===========
</TABLE>

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


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

                                  STATEMENTS OF CASH FLOWS


                                                             For the six      For the six
                                                            months  ended    months  ended
                                                            June 30, 2004    June 30, 2003
                                                             (unaudited)      (unaudited)
                                                           ---------------  ---------------
<S>                                                        <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                        $      838,809   $     (598,764)
  Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
      Depreciation                                                 89,358          103,178
   (Increase) decrease in assets:
      Other receivables                                             8,162           13,734
      Note receivables                                                  -          (51,524)
      Prepaid expenses and other assets                            29,410          (16,685)
      Loan portfolios                                             607,176        1,803,573
   Increase (decrease) in liabilities:
      Accounts payable                                              8,964          (40,787)
      Pre-petition claims                                               -          (19,737)
      Accrued liabilities                                          52,561         (161,094)
      Income taxes payable                                              -          (10,695)
                                                           ---------------  ---------------
        Net cash provided by operating activities               1,634,440        1,021,199

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                             (20,144)          (3,674)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Distribution to investors                                      (327,001)        (133,912)
                                                           ---------------  ---------------

NET CHANGE IN CASH AND CASH EQUIVALENTS                         1,287,295          883,613

CASH AND CASH EQUIVALENTS, beginning of period                  1,029,397          871,534
                                                           ---------------  ---------------

CASH AND CASH EQUIVALENTS, end of period                   $    2,316,692   $    1,755,147
                                                           ===============  ===============
SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION:

  Income taxes paid                                        $       17,390   $            -
                                                           ===============  ===============
  Interest paid                                            $            -   $            -
                                                           ===============  ===============
</TABLE>

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


                                        5
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT,LLC

                   CONDENSED NOTES TO THE FINANCIAL STATMENTS
                                  (Unaudited)

Note 1 - Organization and Description of Business

Performance  Capital  Management, LLC ("PCM LLC" or "the Company") is 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.  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 Report of Independent Registered Public Accounting Firm.


                                        6
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT,LLC

                   CONDENSED NOTES TO THE FINANCIAL STATMENTS
                                  (Unaudited)

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 Performance Capital
Management,  LLC  pursuant  to  the  terms  of  the  Reorganization  Plan:


<TABLE>
<CAPTION>
Original
Fund's   Number of      Number of        Percentage
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 Performance Capital
Management,  LLC  as  of  June  30,  2004:

<TABLE>
<CAPTION>
Original
Fund's      Number of        Percentage
Name      PCM LLC Units  Interest in PCM LLC
--------  -------------  -------------------
<S>       <C>            <C>

PAM              52,000                    9
PAMII            76,700                   13
PAMIII           99,900                   18
PAMIV           285,456                   50
PAMV             56,860                   10
          -------------  -------------------
Totals          570,916                  100
          =============  ===================
</TABLE>

See Report of Independent Registered Public Accounting Firm.


                                        7
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

Note  1  -  Organization  and  Description  of  Business  (continued)

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.

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
                                                                                               =========
</TABLE>

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.

See Report of Independent Registered Public Accounting Firm.


                                        8
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

Note 2 - Basis of Presentation

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

These  interim condensed financial statements have been prepared using generally
accepted  accounting  principles  in  the  United  States. The interim 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 financial statements have been
prepared  consistent  with  the  accounting  policies described in the Company's
annual  audited  financial  statements.  Reference  should  be  made  to  those
statements  included  with  the  Company's  annual  report filed on Form 10-KSB.

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

The Company 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.

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

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

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.

See Report of Independent Registered Public Accounting Firm.


                                        9
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

Note 3 - Summary of Significant Accounting Policies, (continued)

Purchased Loan Portfolios, (continued)
--------------------------------------

The Company provides a valuation allowance for acquired loan portfolios when the
present value of expected future cash flows do not exceed the carrying values of
the  portfolios.

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.  Adjustments to the
valuation  allowance  are recorded in the statement of operations as a provision
for  losses  on  loan  portfolios.

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

PCM  LLC  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  $2,511,000  as of June 30, 2004.  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.

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 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.  Portfolios sold typically either do not meet
PCM  LLC's  targeted collection characteristics, are located in geographic areas
where PCM LLC is not licensed to collect or are sold for strategic reasons. Loan
portfolios  sold  are  valued  at  the  lower  of  cost  or  market.

Proceeds  from  strategic  sales of purchased loan portfolios in excess of their
cost  basis  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, 2004, and December 31,
2003,  PCM  LLC  had  547,194  voting LLC units and 23,722 non-voting LLC units.
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.

See Report of Independent Registered Public Accounting Firm.


                                       10
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

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, 2004 and
December  31,  2003  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  discount rate utilized at June 30, 2004 and December 31, 2003 was 20%.  The
estimated  fair  value  of  loan portfolios was $15,300,000 at June 30, 2004 and
December  31,  2003.

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,  2004  and  December 31, 2003 totaled
approximately  $583  million  and  $1.1  billion,  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.

The  carrying amount of loans included in the accompanying balance sheets are as
follows:

<TABLE>
<CAPTION>
                                             As of                         As of
                                         June 30, 2004               December 31, 2003
                                  ----------------------------  ----------------------------
<S>                               <C>                           <C>

Unrecovered cost balance,
  beginning of period             $                 7,619,515   $                 9,517,146
Valuation allowance,
  beginning of period                              (5,538,019)                   (5,472,952)
                                  ----------------------------  ----------------------------
Net balance, beginning of period                    2,081,496                     4,044,194
Net portfolio activity                               (607,176)                   (1,962,698)
                                  ----------------------------  ----------------------------
Net balance, end of period        $                 1,474,320   $                  2,081,496
                                  ============================  ============================
</TABLE>


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

<TABLE>
<CAPTION>
                                        Three months            Three months             Six months             Six months
                                           ended                   ended                   ended                   ended
                                       June 30, 2004           June 30, 2003           June 30, 2004           June 30, 2003
                                   ----------------------  ----------------------  ----------------------  ---------------------
<S>                                <C>                     <C>                     <C>                     <C>
Purchased loan portfolios          $           1,301,455   $             549,890   $           2,621,452   $            899,841
Collections on loan portfolios                (2,273,717)             (2,367,483)             (4,725,087)            (5,007,101)
Sales of loan portfolios                        (975,393)               (159,763)             (2,757,457)              (505,724)
Revenue recognized on collections              1,640,905               1,392,762               3,300,525              2,744,271
Revenue recognized on sales                      205,804                  10,036                 953,391                 65,140
                                   ----------------------  ----------------------  ----------------------  ---------------------
Net portfolio activity             $            (100,946)  $            (574,558)  $            (607,176)  $         (1,803,573)
                                   ======================  ======================  ======================  =====================
</TABLE>

The  valuation  allowance  related  to  the  loan  portfolios  had  a balance of
$5,538,019  at  June  30,  2004  and  December  31,  2003.


See Report of Independent Registered Public Accounting Firm.


                                       11
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

Note 6 - Other Receivables

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

Note 7 - Property and Equipment

<TABLE>
<CAPTION>
Property and equipment is as follows:

                                        As of                   As of
                                    June 30, 2004           Dec. 31, 2003
                                ----------------------  ----------------------
<S>                             <C>                     <C>
Office furniture and equipment  $              282,485  $              273,835
Computer equipment                             494,223                 482,729
Leasehold improvements                          36,982                  36,982
                                ----------------------  ----------------------
  Totals                                       813,690                 793,546
Less accumulated depreciation                  484,980                 395,622
                                ----------------------  ----------------------
  Property and equipment, net   $              328,710  $              397,924
                                ======================  ======================
</TABLE>

Depreciation  expense for the three months ended June 30, 2004 and 2003 amounted
to  $44,185  and $51,677, respectively.  Depreciation expense for the six months
ended  June  30,  2004  and 2003 amounted to $89,358 and $103,178, respectively.

Note 8 - 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,  2004  are  as  follows:

          Year ending
            June 30,
          ------------

          2005                    $309,000
          2006                     318,000
          2007                     139,000
            Thereafter                -

Rental  expense  for  the  three months ended June 30, 2004 and 2003 amounted to
$79,210  and $77,450, respectively. Rental expense for the six months ended June
30, 2004 and 2003 amounted to approximately $158,870 and $155,029, respectively.

Note 9 - 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, 570,916 for the six
months  ended  June 30, 2004 and 571,550 for the six months ended June 30, 2003.

Note 10 - 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).

See Report of Independent Registered Public Accounting Firm.


                                       12
<PAGE>
                       PERFORMANCE CAPITAL MANAGEMENT, LLC

                   CONDENSED NOTES TO THE FINANCIAL STATEMENTS
                                  (Unaudited)

Note 10 - Employee benefit plans (continued)

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.

Note 11 - Subsequent events

On  August  2,  2004, an order of the United States Bankruptcy Court was entered
closing  the  Chapter  11 case. In late December 1998, six entities (See note 1)
voluntarily  filed  bankruptcy petitions, which were later consolidated into one
case.  Performance Capital Management, LLC is the entity that was formed for the
purpose  of  reorganizing  the  six  entities. The order acts as a discharge and
termination of any and all liabilities and debts of, and claims against, the six
entities  that  arose at any time before the confirmation order became effective
on  February  4,  2002.

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. Under the agreement, the Company has created a wholly-owned
subsidiary,  Matterhorn  Financial  Services,  LLC  (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  as  set  forth  in  the loan facility. Under the terms of the facility,
Varde will receive both interest and a contingent interest in any profits on the
portfolios  acquired  with a loan.  Portfolios purchased using the facility will
be  owned  by  the  Company's  subsidiary,  Matterhorn Financial Services LLC, a
California  limited  liability  company,  in  which  Varde  has a first priority
security interest securing repayment of its loans. As of June 30, 2004, no loans
had  been  completed  and  no  activity  occurred  at  Matterhorn.

See Report of Independent Registered Public Accounting Firm.


                                       13
<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.  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  April  14,  2004.

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.

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 the portfolio, pay our collection and operating costs and
still  have  a profit. We believe that deteriorating market conditions have made
it  more  difficult  to  purchase  portfolios  at  prices that will permit us to
accomplish  these  objectives.  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 income statement
we  reduce  our  gross  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 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.


                                       14
<PAGE>
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.
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, pay our collection and
operating  costs,  and  still  have  excess  cash.

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.

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.


                                       15
<PAGE>
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. Although this accounting policy
may  be  criticized  for  not  matching  portfolio  cost  basis  to revenue on a
proportionate basis over the life of the portfolio, we believe a policy grounded
in  conservatism  is  preferable  to  a  policy  of  attempting  to estimate the
appropriate  matching percentages, 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.

OPERATING  RESULTS

Comparison of Results for the Quarters Ended June 30, 2004, and 2003

The  following  discussion  compares  our results for the quarter ended June 30,
2004,  to  the  quarter  ended  June  30,  2003.  We  generated  net  income  of
approximately  $180,000  for  the quarter ended June 30, 2004, compared to a net
loss  of  approximately  $274,000  for  the  quarter  ended  June  30,  2003.

Revenue
-------

Our  net  revenues increased to approximately $1.8 million for the quarter ended
June  30,  2004,  from approximately $1.4 million for the quarter ended June 30,
2003.  The  following  table  presents  a  comparison  of  the components of our
revenues  for  the  quarter  ended  June 30, 2004, to the quarter ended June 30,
2003,  as  well  as  presenting net revenue as a percentage of the corresponding
total  revenue  (approximate  amounts  due  to  rounding):

<TABLE>
<CAPTION>
                               Total           Collections             Sales
                        -------------------  ------------------  ------------------
                          Quarter Ended       Quarter Ended        Quarter Ended
                        6/30/04    6/30/03  6/30/04   6/30/03    6/30/04   6/30/03
                        -------  ----------  ------  ----------  ------  ----------
                        ($in millions)      ($in millions)      ($in millions)
<S>                     <C>      <C>         <C>     <C>         <C>     <C>

Total revenues          $ 3.2    $     2.5   $ 2.2   $     2.4   $ 1.0   $     0.2
Less basis recovery      (1.4)        (1.1)   (0.6)       (1.0)   (0.8)       (0.2)
                        -------  ----------  ------  ----------  ------  ----------
Net revenues            $ 1.8    $     1.4   $ 1.6   $     1.4   $ 0.2   $
                        =======  ==========  ======  ==========  ======  ==========

Net revenue percentage   56.8%       55.5%   72.2%       58.8%   21.1%        6.3%
</TABLE>

Portfolio collections continue to provide most of our total revenues.  Our total
revenues  from  portfolio  collections declined slightly, while our net revenues
from  portfolio collections increased slightly.  Our net revenues from portfolio
collections  (as  well  as the corresponding percentage of net revenues to total
revenues)  increased  principally  due  to  maintaining collection trends on our
older  portfolios  with  low  or fully-amortized cost bases while simultaneously
exploiting  portfolios  purchased  during  the  second  half  of  2002.  We have
completely  recovered  the  cost  basis of most of these portfolios purchased in
2002,  resulting  in collections of these portfolios generating net revenue.  We
expect  our  2002 portfolios to continue generating net revenues. During the six
months  ended  June  30,  2004,  we  acquired  approximately $1.6 million of new
portfolios  (net  of  portions  of  portfolios  we  promptly  resold). In future
quarters,  the  cost  basis  recovery  associated  with  collecting  these  2004
portfolios,  combined  with  others  that  we acquired in 2003, could offset the
increase in net revenue percentage we would otherwise expect our 2002 portfolios
to  generate.


                                       16
<PAGE>
Our  total revenues from portfolio sales increased dramatically.  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 may engage
in  further  sales  if  we believe market conditions are acceptable. 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.

Our net income of approximately $180,000 for the quarter ended June 30, 2004, is
essentially  due  to  the approximately $206,000 of net revenues we derived from
portfolio  sales.  Without  these  sales,  our  collection activities would have
essentially  produced  a  break-even  quarter. Although we still have some older
portfolios identified for sale, we do not expect future portfolio sales to be of
the  same  magnitude  that  we  experienced  in  the  first  six months of 2004.

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

Our  total  operating  costs  and  expenses  remained  relatively  stable  at
approximately  $1.6  million  for  each of the quarters ended June 30, 2004, and
2003.  Our  ratio of operating costs and expenses to total revenues decreased to
51.1%  for  quarter  ended  June  30, 2004, from approximately 65.0% for quarter
ended  June  30, 2003.  The improvement in 2004 from 2003 was due principally to
substantially  higher  revenues  from  portfolio  sales  in 2004.  Because these
portfolio  sales  result  in  substantial  revenues  without  any  corresponding
collection  effort, they have the effect of artificially lowering the 2004 ratio
of operating costs and expenses to total revenues.  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, increased to 73.0% for the
quarter  ended  June  30,  2004, from 69.4% for the quarter ended June 30, 2003.
The  increase  in  this  ratio  results  principally  from the decrease in total
revenues  from  collections  to approximately $2.2 million for the quarter ended
June  30,  2004,  from approximately $2.4 million for the quarter ended June 30,
2003.  We  believe  our  existing  infrastructure  can  collect a greater dollar
volume of accounts, and we plan to lower this ratio by increasing total revenues
from  collections  without incurring a proportionate increase in operating costs
and  expenses.  To  accomplish  this  objective, we will continue our efforts to
improve  the  balance  between  our  new  and old portfolios.  The deteriorating
market  conditions  that  have  led  to  increased  portfolio  prices  present a
significant  obstacle to achieving increases in total revenues from collections,
because  of  the  difficulty in replenishing and then increasing our portfolios.
As  discussed  in greater detail below, we believe that our agreement with Varde
Investment  Partners,  L.P.  ("Varde")  will  assist  our efforts to acquire the
volume  of new portfolios it will take to produce substantial increases in total
revenues  from  collections.

Our  general and administrative expenses increased to approximately $641,000 for
the  quarter  ended  June  30, 2004, from approximately $530,000 for the quarter
ended  June 30, 2003, due principally to legal expenses associated with entering
into  the  Varde  credit  facility  and  increased  expenses for our independent
auditors  and  insurance.  Our  salaries  and  benefits  expenses  decreased  to
approximately  $1.0  million  for  the  quarter  ended  June  30,  2004,  from
approximately  $1.1 million for the quarter ended June 30, 2003, due principally
to reduced headcount. Our operating expenses may increase somewhat if we succeed
in  increasing  the  volume  of  accounts we collect, but we expect increases in
total  revenues  to  outpace any material increases in variable costs associated
with  our  collection  efforts.

Comparison of Results for the Six Months Ended June 30, 2004, and 2003

The following discussion compares our results from the six months ended June 30,
2004,  to  the  six  months  ended  June  30,  2003.

We  generated net income of approximately $839,000 for the six months ended June
30,  2004,  compared  to a net loss of approximately $599,000 for the six months
ended  June  30,  2003.  Our operating activities provided cash of approximately
$1.6  million  for  the six months ended June 30, 2004, as compared to providing
cash  of  approximately  $1.0  million  for  the  same  period  in  2003.

Revenue
-------

Our  net  revenues  increased  to  approximately $4.3 million for the six months
ended  June  30,  2004, from approximately $2.8 million for the six months ended
June  30,  2003.  The following table presents a comparison of the components of
our  revenues  for  the  six  months  ended  June 30, 2004, and 2003, as well as
presenting  net  revenue  as  a  percentage  of  the corresponding total revenue
(approximate  amounts  due  to  rounding):


                                       17
<PAGE>
<TABLE>
<CAPTION>
                                Total               Collections               Sales
                        ---------------------  --------------------  ----------------------
                           Six Months Ended       Six Months Ended       Six Months Ended
                          6/30/04    6/30/03     6/30/04    6/30/03     6/30/04   6/30/03
                          -------  ----------  ---------  ----------  ----------  ---------
                        ($in millions)         ($in millions)         ($in millions)
<S>                     <C>        <C>         <C>        <C>         <C>        <C>

Total revenues          $    7.5   $     5.5   $    4.7   $     5.0   $    2.8   $     0.5
Less basis recovery         (3.2)       (2.7)      (1.4)       (2.3)      (1.8)       (0.4)
                        ---------  ----------  ---------  ---------  ----------  ----------
Net revenues            $    4.3   $     2.8   $    3.3   $     2.7   $    1.0   $     0.1
                        =========  ==========  =========  =========  ==========  ==========

Net revenue percentage      56.9%       51.0%      69.9%       54.8%      34.6%       12.9%
</TABLE>

Portfolio collections continue to provide most of our total revenues.  Our total
revenues  from  portfolio  collections declined slightly, while our net revenues
from  portfolio  collections  increased.  Our  net  revenues  from  portfolio
collections  (as  well  as the corresponding percentage of net revenues to total
revenues)  increased  principally  due  to  maintaining collection trends on our
older  portfolios  with  low  or fully-amortized cost bases while simultaneously
exploiting  portfolios  purchased  during  the  second  half  of  2002.  We have
completely  recovered  the  cost  basis of most of these portfolios purchased in
2002,  resulting  in collections of these portfolios generating net revenue.  We
expect  our  2002 portfolios to continue generating net revenues. During the six
months  ended  June  30,  2004,  we  acquired  approximately $1.6 million of new
portfolios  (net  of  portions  of  portfolios  we  promptly  resold). In future
periods,  the  cost  basis  recovery  associated  with  collecting  these  2004
portfolios,  combined  with  others  that  we acquired in 2003, could offset the
increase in net revenue percentage we would otherwise expect our 2002 portfolios
to  generate.

Both  our total and net revenues from portfolio sales showed dramatic increases.
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 may engage
in  further  sales  if  we believe market conditions are acceptable. 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.

Our net income of approximately $839,000 for the six months ended June 30, 2004,
is essentially due to the approximately $953,000 of net revenues we derived from
portfolio  sales.  Without this large volume of sales, we would have essentially
broken  even for the six months ended June 30, 2004. Although we still have some
older portfolios identified for sale, we do not expect future portfolio sales to
be  of  the  same magnitude that we experienced in the first six months of 2004.

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

Our  total  operating  costs  and  expenses  remained  relatively  stable  at
approximately  $3.4  million  for  each  of the six-month periods ended June 30,
2004,  and  2003.  Our  ratio  of operating costs and expenses to total revenues
decreased  to  45.4%  for the six months ended June 30, 2004, from approximately
60.9% for the six months ended June 30, 2003.  The improvement in 2004 from 2003
was due principally to the dramatic increase in revenues from portfolio sales in
2004.  Because  these portfolio sales result in substantial revenues without any
corresponding  collection  effort, they have the effect of artificially lowering
the  2004 ratio of operating costs and expenses to total revenues.  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, increased to
71.9%  for  the  six  months  ended June 30, 2004, from 67.1% for the six months
ended  June  30,  2003.  The increase in this ratio results principally from the
decrease  in  total  revenues from collections to approximately $4.7 million for
the  six months ended June 30, 2004, from approximately $5.0 million for the six
months  ended  June  30,  2003.  As  discussed  above  in the quarter-to-quarter
analysis,  we  plan  to  reduce  this  ratio  by  increasing total revenues from
collections  without  incurring  a proportionate increase in operating costs and
expenses.


                                       18
<PAGE>
Our  general and administrative expenses increased to approximately $1.2 million
for  the six months ended June 30, 2004, from approximately $1.1 million for the
six  months  ended  June  30, 2003, due principally to legal expenses associated
with  entering  into  the  Varde  credit facility and increased expenses for our
independent auditors and insurance. Our salaries and benefits expenses decreased
to  approximately  $2.1  million  for  the  six months ended June 30, 2004, from
approximately  $2.2  million  for  the  six  months  ended  June  30,  2003, due
principally  to reduced headcount.  Our operating expenses may increase somewhat
if  we  succeed  in  increasing the volume of accounts we collect, but we expect
increases  in total revenues to outpace any material increases in variable costs
associated  with  our  collection  efforts.

LIQUIDITY AND CAPITAL RESOURCES


Our  cash and cash equivalents increased approximately $1.3 million in the first
six  months of 2004 to a balance of approximately $2.3 million at June 30, 2004.
During  the  six months ended June 30, 2004, our portfolio collections and sales
generated  approximately  $6.4 million of cash (net of proceeds from portions of
portfolios  we  promptly  resold),  and  we  used approximately $3.2 million for
operating  and  other  activities,  approximately  $1.6  million to purchase new
portfolios  (net of portions of portfolios we promptly resold) and approximately
$327,000  for  distributions  to  unit  holders. The results from our collection
activities,  net  of  the  approximately  $327,000  of  distributions  we  paid,
essentially  provided  the  approximately  $1.3  million  increase  in  our cash
balance.

During  the six months ended June 30, 2004, we continued making progress toward,
but  did  not achieve results consistent with, our business plan: to recover the
cost we pay for our portfolios, pay our collecting and operating costs and still
have a profit. Excluding the results from the large volume of portfolio sales in
the  first  six  months  of  2004, our cost basis recovery of approximately $1.4
million  plus  our  operating  and  other expenses of approximately $3.4 million
exceeded  our  total  revenues from collections of approximately $4.7 million by
approximately  $97,000.

During  the  fourth  quarter  of  2003,  we  used  some  of the cash reserves we
accumulated  during  the  first  three quarters of 2003 to acquire approximately
$1.1  million of new portfolios. We believe that market conditions for acquiring
new  portfolios improved during the fourth quarter of 2003 but then deteriorated
during  the  first  half  of 2004.  As a result, our portfolio purchases (net of
portions  of portfolios we promptly resold) during the first half of 2004 slowed
to  approximately $1.6 million, which was essentially equal to the approximately
$1.6  million  in  cash  we received during the first half of 2004 from sales of
portfolios  (net  of  proceeds  from portions of portfolios we promptly resold).
The higher prices for portfolios associated with deteriorating market conditions
make  it difficult for us to replenish or increase our portfolios, which in turn
undermines  our ability to implement our strategy to leverage our infrastructure
by  increasing  total  revenues  from  collections.  We  have responded to these
pricing  pressures  by  augmenting our purchases from originating creditors with
purchases  on  the  secondary  market.  Whether  we  can  continue  to  acquire
portfolios  at  the  pace  of the past six months, or accelerate that pace, will
continue to depend on our assessment of market conditions, as well as the amount
of  liquid  cash  and  other  financial  resources  available  to  us.

We  believe  we  continue  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.  By  monitoring  the  results of calls
originated  through  our dialer, we have identified portfolios that require more
cost  to collect than others. Particularly where we have worked to collect these
portfolios  over an extended period of time, we have identified these portfolios
as candidates for sale if we are able to sell them at reasonable prices. We sold
a  number  of  these portfolios in the first six months of 2004. 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.

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 was approximately $15.3 million at
both  June  30, 2004, and December 31, 2003. At the same time, the cost basis of
our  portfolios  decreased  to approximately $1.5 million at June 30, 2004, from
approximately  $2.1  million  at  December  31,  2003.  Our  portfolio  sales of
approximately  $2.8  million  (with  a cost basis of approximately $1.8 million)
played  a  significant  role  in  the  overall decrease in the cost basis of our
portfolios.  Fair  value  remained  constant  in  part because we purchased $1.6
million  of  new  portfolios (net of portions of portfolios we promptly resold),
which  have  an  estimated  fair  value substantially higher than their purchase
price.  We  believe  the estimated fair value of our portfolios will increase in
the  near  term  as we continue to acquire new portfolios and our sales of older
portfolios  diminish.  Our


                                       19
<PAGE>
plan  to  leverage  our  infrastructure  also  contemplates  portfolio purchases
leading  to  an  increase  in  portfolio  cost  basis, based on reinvesting cash
proceeds generated by our collection activities, reinvesting proceeds from sales
of  older  portfolios and accessing the Varde credit facility to borrow funds to
acquire  new portfolios. Whether we are able to achieve this growth in portfolio
cost  basis  -  and  the  timing on which such growth may occur - will depend on
whether  market conditions permit us to purchase portfolios at reasonable prices
and on our financial resources. While we intend to continue to aggressively seek
new  portfolios  that  we  believe  we can acquire on favorable terms, we do not
intend  to  acquire portfolios just to leverage our infrastructure if we believe
the  portfolio  profiles  do  not  justify  their  prices.

We  used  a discount rate of 20% to determine the estimates of fair value of our
portfolios  at  June  30,  2004, and December 31, 2003. 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, 2004   December 31, 2003
                                             --------------  -----------------
<S>                                          <C>             <C>

Higher collection risk (25% discount rate)   $ 14.3 million  $     14.3 million
Assumed collection risk (20% discount rate)  $ 15.3 million  $     15.3 million
Lower collection risk (15% discount rate)    $ 16.6 million  $     16.6 million
</TABLE>

Our  estimates  of fair value 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 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 2003, we made three distributions
totaling  approximately  $472,000.  We made distributions totaling approximately
$327,000  in  January  and  April  of  2004.  We  also  made  a  distribution of
approximately  $162,000  in  July  2004  relating to the second quarter of 2004.

In  the near term, we plan to reinvest some of our cash collections representing
cost  basis  recovery  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, large sales of older portfolios and the timing of
distributions  to  our  members, we may not achieve increases in fair value each
quarter.

We  have  a  credit  facility  with  Varde  that we intend to use to enhance our
ability  to  purchase portfolios. 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 us if Varde does not
approve  of the portfolio(s) we propose to acquire, the terms of the acquisition
and  the  terms  for the specific advance under the loan facility. We must agree
with  Varde  on  the  terms  for  each specific advance under the loan facility,
including  such  material  terms  as:

     -    the relative sizes of our participation and Varde's in supplying the
          purchase price;
     -    the amount of servicing fees we will receive for collecting the
          portfolio;
     -    the rates of return on the funds advanced by Varde and us; and
     -    the split of any excess profits after repayment of the purchase price
          (plus interest) to Varde and us and payment of collection expenses.


                                       20
<PAGE>
It  is  unlikely that we will ever have outstanding indebtedness of the full $25
million  at  any  one  time,  due  to  the  cumulative  nature  of the facility.
Portfolios  purchased  using  the  facility  will  be  owned  by our subsidiary,
Matterhorn  Financial  Services  LLC, a California limited liability company, in
which  Varde  has  a  first priority security interest securing repayment of its
loans.

When  we  identify a portfolio we would like to acquire using the loan facility,
Matterhorn  will  make  a  proposal  to  Varde,  specifying, among other things:

     -    Total  cost of the portfolio(s), including closing costs and amortized
          expenses;
     -    Proportions  of  the  total  cost to be funded by Varde (not to exceed
          75%)  and  us;
     -    Percentage  of  collections  to  be  paid  to  Performance  Capital
          Management,  LLC  as  a  servicing  fee;
     -    Rates  of  return  on  the  funds  advanced  by  Varde  and  us;  and
     -    Proportions of excess profits to Varde and Matterhorn after payment of
          the  preceding  four  items.

When we make a proposal to Varde, Varde has the opportunity to conduct its own
due diligence concerning the portfolio(s). Varde may accept our proposal, with
or without modifications, in a commitment that will specify the number of days
the commitment remains open. Varde has no obligation to accept a proposal and
may reject a proposal for any reason or for no reason.

Our  agreement with Varde is the most important initiative we have undertaken to
leverage  our infrastructure resources.  We believe that, by accessing the Varde
facility  to  acquire  more  portfolios than we could acquire using only our own
financial resources, our current collection infrastructure will handle a greater
volume  of  accounts.  We also believe that the Varde facility will leverage our
portfolio  acquisition  strategy by permitting us to acquire larger denomination
portfolios.  We  believe  that some of these larger denomination portfolios have
pricing  and  quality  characteristics that are difficult to find in the smaller
denomination  portfolios  we  have  acquired thus far.  Even with the additional
financial  resources  available  through  the facility, the deteriorating market
conditions  that  have  led  to  increased  portfolio prices could frustrate our
strategy  to  achieve increases in portfolio cost basis.  As discussed above, we
do  not  intend  to acquire portfolios just to leverage our infrastructure if we
believe the portfolio profiles do not justify their prices.  Please see our Form
8-K filed with the Securities and Exchange Commission on July 29, 2004, for more
information  about  the  Varde  agreement.

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. To
maximize  the  return  on  our infrastructure, we intend to use the Varde credit
facility  to  increase  the volume of accounts we service other than through new
portfolio  acquisitions  using  only  our  cash  resources.

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  Accounting  Manager,  of  the  effectiveness  of  our
disclosure  controls  and procedures as of the end of the period covered by this
report.  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, 2004, 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.

There  has been no change in our internal controls over financial reporting that
occurred  during  the  three  months  ended  June  30, 2004, that has materially
affected,  or  is  reasonably likely to materially affect, our internal controls
over  financial  reporting.


                                       21
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On  August  2,  2004,  an  order  of  the United States Bankruptcy Court for the
Central  District  of  California  Santa  Ana  Division  was entered closing the
Chapter  11  case  involving  Performance  Capital  Management,  LLC  and  its
predecessors.  In  late December 1998, six entities voluntarily filed bankruptcy
petitions,  which  were  later  consolidated  into one case. Performance Capital
Management,  LLC  is  an entity that was formed by a U.S. Chapter 11 Trustee and
the  Official  Committee  of  Equity  Security  Holders  in January 2002 for the
purpose  of  reorganizing  the  six  entities. The order acts as a discharge and
termination of any and all liabilities and debts of, and claims against, the six
entities  that  arose at any time before the confirmation order became effective
on  February  4, 2002. For more information about the bankruptcy, please see our
report  on  Form  8-K  dated February 4, 2002 and filed with the SEC on April 2,
2003.

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 commenced a procedure authorized by our plan of reorganization to
eliminate  the  interests  of  members  we have not been able to locate. Through
delivery  to  last known addresses and public advertising in certain newspapers,
we  have  attempted  to  notify  approximately  42  people or entities listed as
investors in the PAM Funds that they will no longer be members if we do not hear
from  them  in  six  months.  At  this time we believe these investors represent
ownership of approximately 7,154 LLC Units, approximately $307,000 of unreturned
capital  and  approximately  $152,000  of  uncashed  distribution  checks.

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

On  June 14, 2004, we held our annual meeting of members in Anaheim, California.
At  the  meeting,  our  members  were  asked  to vote on the election of Class I
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>
Class I
     Larisa Gadd                        218,357             6,568
     Rodney Woodworth                   218,606             6,195
     Donald W. Rutherford               218,258             6,667
</TABLE>

The  following  Class II directors continued to serve as directors following the
annual  meeting: Lester Bishop, Larry Smith, David Barnhizer and Sanford Lakoff.

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, 2004. The votes were cast as follows: 220,519 in favor of
          ratification;  1,592  against  ratification;  and  2,814  abstaining.

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


                                       22
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)  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)

10.1     Master Loan Agreement by and among Performance Capital Management, LLC, Varde Investment
         Partners, L.P. and Matterhorn Financial Services, LLC, dated June 10, 2004 (3)

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.
         Sec. 1350 *
<FN>


*  The  certifications  filed  under  Exhibit  32.1 are not deemed "filed" for purposes of Section 18 of the
SecuritiesExchange  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.

(3) Filed  on  July  29,  2004 as an exhibit to our report on Form 8-K dated July 13, 2004 and incorporated
herein  by reference.
</TABLE>

(b)  Reports on Form 8-K

No   reports on Form 8-K were filed during the three months ended June 30, 2004.


                                       23
<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  16,  2004                      By:  /s/ David J. Caldwell
-----------------------                         ------------------------
        (Date)                                  Name: David J. Caldwell
                                                Its: Chief Operations Officer


                                       24
<PAGE>
                                  EXHIBIT INDEX

<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)

10.1     Master Loan Agreement by and among Performance Capital Management, LLC, Varde Investment
         Partners, L.P. and Matterhorn Financial Services, LLC, dated June 10, 2004 (3)
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.
         Sec. 1350 *
<FN>

*  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.

(3)  Filed  on  July  29,  2004 as an exhibit to our report on Form 8-K dated July 13, 2004 and incorporated
herein  by reference.
</TABLE>


<PAGE>