<PAGE>   1
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                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549

                                  FORM 10-Q

     [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998

               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE TRANSITION PERIOD FROM _____ TO _____

                        COMMISSION FILE NUMBER 333-50103

                             CREDITRUST CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                          <C>
                   MARYLAND                                      52-1754916
(STATE OR OTHER JURISDICTION OF INCORPORATION OR              (I.R.S. EMPLOYER
                  ORGANIZATION)                              IDENTIFICATION NO.)
</TABLE>


                  7000 SECURITY BLVD., BALTIMORE, MD 21244-2543
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 410-594-7000

    INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
     REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934 DURING THE PRECEDING 12 MONTHS (OR SUCH SHORTER PERIOD
          THAT THE REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND
            (2) HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE
                          PAST 90 DAYS YES [X] NO [ ]

     THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK AS OF
                        NOVEMBER 10, 1998 WAS 8,000,000.



================================================================================

<PAGE>   2


                             CREDITRUST CORPORATION

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                      INDEX




<TABLE>
<S>                                                                               <C>
PART I. FINANCIAL INFORMATION

        Item 1. Financial Statements

                                                                                  Page

        a)     Statements of Earnings
               For the Three and Nine Months Ended September 30, 1997 and 1998 ...   1

        b)     Balance Sheets
               As of December 31, 1997 and September 30, 1998 ....................   2

        c)     Statement of Stockholders' Equity
               As of December 31, 1997 and September 30, 1998.....................   3

        e)     Statements of Cash Flows
               For the Nine Months Ended September 30, 1997 and 1998..............   4

        f)     Notes to Financial Statements .....................................   5


        Item 2. Management's Discussion and Analysis of Financial
                    Condition and Results of Operations...........................  11

PART II. OTHER INFORMATION

        Item 2. Changes in Securities and Use of Proceeds.........................  17

        Item 5. Other Information.................................................  18

        Item 6. Exhibits and Reports on Form 8K ..................................  19

   SIGNATURE......................................................................  19
</TABLE>



<PAGE>   3


PART I. FINANCIAL INFORMATION

    ITEM 1. FINANCIAL STATEMENTS

                             CREDITRUST CORPORATION
                        CONDENSED STATEMENTS OF EARNINGS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
(Dollars in thousands, except per share data)       THREE MONTHS ENDED                   NINE MONTHS ENDED     
                                                       SEPTEMBER 30,                       SEPTEMBER 30,       
                                               ----------------------------------------------------------------
                                                  1997              1998              1997              1998   
                                               ----------        -----------      -----------        ----------
<S>                                            <C>               <C>               <C>               <C>       
                                                                                                               
REVENUE                                                                                                        
   Income on finance receivables               $    1,876        $    2,870        $    5,769        $    6,324
   Servicing fees                                     684               647               684             2,380
   Gain on sale                                         -               800                 -             7,417
                                                                                                               
                                               ----------        ----------        ----------        ----------
Total Revenue                                       2,560             4,317             6,453            16,121
                                                                                                               
EXPENSES                                                                                                       
   Personnel                                        1,724             3,567             3,864             7,497
   Contingency legal and court costs                   57                26               238               303
   Communications                                     271               399               603             1,103
   Rent and other occupancy                           262               319               594               898
   Professional Fees                                   37               152               184               433
   General and administrative                          60               224               245               411
                                                                                                               
                                               ----------        ----------        ----------        ----------
                                                    2,411             4,687             5,728            10,645
                                               ----------        ----------        ----------        ----------
                                                                                                               
EARNINGS (LOSS) FROM OPERATIONS                       149             (370)               725             5,476
                                                                                                               
OTHER INCOME (EXPENSE)                                                                                         
   Interest and other income                            3               290                 7               387
   Interest expense                                  (92)             (101)             (318)             (383)
                                               ----------        ----------        ----------        ----------
                                                                                                               
EARNINGS (LOSS) BEFORE INCOME TAXES                    60             (181)               414             5,480
                                                                                                               
PROVISION FOR INCOME TAXES                             23              (68)               162             2,140
                                               ----------        ----------        ----------        ----------
                                                                                                               
EARNINGS (LOSS) BEFORE EXTRAORDINARY LOSS              37             (113)               252             3,340
                                                                                                               
EXTRAORDINARY LOSS (NET OF TAXES)                       -             (567)                 -             (567)
                                               ----------        ----------        ----------        ----------
                                                                                                               
NET EARNINGS (LOSS)                            $       37        $    (680)        $      252        $    2,773
                                               ----------        ----------        ----------        ----------
                                                                                                               
BASIC EARNINGS (LOSS) PER COMMON SHARE BEFORE                                                                  
  EXTRAORDINARY LOSS                           $     0.01        $   (0.01)        $     0.04        $     0.52
                                               ----------------------------------------------------------------
                                                                                                               
BASIC EARNINGS (LOSS) PER COMMON SHARE ON                                                                      
  EXTRAORDINARY LOSS                           $        -        $   (0.08)        $        -        $   (0.09)
                                               ----------------------------------------------------------------
                                                                                                               
BASIC EARNINGS (LOSS) PER COMMON SHARE         $     0.01        $   (0.09)        $     0.04        $     0.43
                                               ----------------------------------------------------------------
                                                                                                               
                                                                                                               
WEIGHTED AVERAGE SHARES OUTSTANDING                                                                            
  BASIC AND DILUTED                             6,000,000         7,333,333         6,000,000         6,444,444
                                               ==========        ==========        ==========        ==========
</TABLE>


                                      1
<PAGE>   4


                             CREDITRUST CORPORATION
                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)

                                                    DECEMBER 31,     SEPTEMBER 30,
                                                    ------------     -------------
                                                        1997             1998
                                                    ------------     -------------
                                                      (Audited)       (Unaudited)
<S>                                                 <C>              <C>
                   ASSETS

Cash and equivalents                                $        770     $       9,875
Finance receivables-net                                    5,050            20,554
Residual investment in securitizations                         -             5,215
Property and equipment                                     1,434             2,356
Deferred costs                                               535                 -
Other assets                                                 415             1,375
                                                     -----------      ------------
                                                     $     8,204      $     39,375
                                                     -----------      ------------

     LIABILITIES AND STOCKHOLDERS' EQUITY

Accounts payable and accrued expenses                $       653      $      2,123
Notes payable                                              2,106                 -
Capital leases                                               972             1,785
Deferred income                                              895                 -
Other liabilities                                            420               359
Deferred income taxes                                      1,094             2,868
                                                     -----------      ------------
                                                           6,140             7,135

Common stock                                                  60                80
Paid-in-capital                                               53            27,705
Retained earnings                                          1,951             4,724
Stock held under SMILE Program                                 -              (269)
                                                     -----------      ------------
                                                           2,064            32,240
                                                     -----------      ------------
                                                     $     8,204      $     39,375
                                                     ===========      ============
</TABLE>


                                      2
<PAGE>   5


                             CREDITRUST CORPORATION
                       STATEMENTS OF STOCKHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                          ----------------------------------------------------------------------------------------
(In thousands except share data)                                           ADDITIONAL
                                              COMMON           PAR           PAID-IN       TREASURY       RETAINED
                                              STOCK           VALUE          CAPITAL        STOCK         EARNINGS        TOTAL
                                          -------------   -------------   ------------   ------------   ------------   -----------
<S>                                       <C>             <C>             <C>            <C>            <C>            <C>
Balance at December 31, 1997 (Audited)      6,000,000      $        60     $       53     $        -     $    1,951     $   2,064

Value of common stock purchase
warrants issued in connection with
subordinated debt financing                                                       411                                         411

Initial public offering                     2,000,000               20         27,241                                      27,261

Stock held under SMILE program                                                                 (269)                        (269)

Net earnings                                                                                                  2,773         2,773

                                          -------------   -------------   ------------   ------------   ------------   -----------
Balance at September 30, 1998
(Unaudited)                                 8,000,000      $        80     $   27,705     $    (269)     $    4,724     $  32,240
                                          =============   =============   ============   ============   ============   ===========
</TABLE>





                                      3
<PAGE>   6
                             CREDITRUST CORPORATION
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>


(DOLLARS IN THOUSANDS)                                                             NINE MONTHS ENDED SEPTEMBER 30,
                                                                                --------------------------------------
                                                                                      1997                 1998
                                                                                ------------------    ----------------
<S>                                                                             <C>                  <C>
INCREASE (DECREASE) IN CASH AND EQUIVALENTS

CASH FLOWS FROM OPERATING ACTIVITIES:

        Net earnings                                                             $            252       $       2,773
        Adjustments to reconcile net earnings to net cash and equivalents
          provided by operating activities
          Depreciation and Amortization                                                       133                 262
          Deferred tax expense                                                                154               1,775
          Gain on sale                                                                          -              (7,417)
          Extraordinary loss                                                                    -                 929
          Changes in assets and liabilities
             Increase in accounts receivable                                                  (56)               (228)
             Increase in other assets                                                         (17)               (431)
             Increase in prepaid expenses                                                    (118)               (300)
             Increase in accounts payable and accrued          
             expenses                                                                         983               1,470
             Increase (Decrease) in servicing remittances due                                 119                (101)
             (Decrease) Increase in lease incentives                                          (9)                  37
                                                                                ------------------    ----------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES                                         1,441              (1,232)
                                                                                ------------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
        Collections applied (accretion) to principal on finance receivables                 1,742                (641)
        Purchases of property and equipment                                                  (115)               (147)
        Acquisitions of finance receivables                                                  (459)            (26,178)
        Proceeds from securitization                                                            -              12,059
        Net cost of portfolios sold                                                             -                 562
                                                                                ------------------    ----------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES                                         1,168             (14,345)
                                                                                ------------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
        (Principal payments) accrued interest on borrowings from
        participants, net                                                                     (13)                  4
        Payments on capital lease, net                                                       (129)               (224)
        Payments on notes payable, net                                                     (1,139)             (2,106)
        Proceeds from issuance of capital stock                                                                27,261
        Payments for stock held for SMILE program                                               -                (269)
        Proceeds from issuance of warrants                                                      -                 411
        Deferred costs                                                                       (669)               (395)
                                                                                ------------------    ----------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES                                        (1,950)             24,682
                                                                                ------------------    ----------------

NET INCREASE  IN CASH AND EQUIVALENTS                                                         659               9,105
                                                                                ------------------    ----------------
CASH AT BEGINNING OF PERIOD                                                                   476                 770
                                                                                ------------------    ----------------
CASH AND EQUIVALENTS AT END OF PERIOD                                            $          1,135       $       9,875
                                                                                ------------------    ----------------


SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

        Equipment and Furniture Purchased Under Capitalized Leases               $            885       $       1,037

        Residual Investment in Securitization                                    $              -       $       4,310
</TABLE>



                                       4
<PAGE>   7


                             CREDITRUST CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

                                   (UNAUDITED)
--------------------------------------------------------------------------------

BASIS OF PRESENTATION

         In the opinion of management, the accompanying financial statements
include all adjustments (consisting only of normal recurring items) necessary
for their fair presentation in conformity with generally accepted accounting
principles. Preparing financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues, and expenses. Actual results may differ from these estimates. Interim
results are not necessarily indicative of results for a full year. The
information included in this Form 10-Q should be read in conjunction with
Management's Discussion and Analysis and financial statements and notes thereto
included in the Creditrust Corporation final prospectus dated July 29, 1998.

NOTE A-ORGANIZATION AND BUSINESS

         Creditrust Corporation (the Company) was incorporated in Maryland on
October 17, 1991. The Company acquires and liquidates consumer finance
receivables originated and charged off by national financial and retail
institutions. The Company's customers are located throughout the United States.
The Company does not currently extend credit or originate loans. Acquisitions
are financed by operations, capital raised through stock offerings, loans from
third parties and securitizaitons.


NOTE B-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         SIGNIFICANT ESTIMATES

         In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenue and expenses during the reporting period. Actual results could differ
from those estimates.

         Significant estimates have been made by management with respect to the
collectibility of future cash flows of portfolios. Actual results could differ
from these estimates making it reasonably possible that a change in these
estimates could occur within one year. On a quarterly basis, management reviews
the estimate of future collections, and it is reasonably possible that its
assessment of collectibility may change based on actual results and other
factors.

         FINANCE RECEIVABLES/INTEREST INCOME

         The Company accounts for its investment in finance receivables on an
accrual basis under the guidance of Practice Bulletin 6 "Amortization of
Discounts on Certain Acquired Loans" using unique and exclusive static pools.
Static pools are established with accounts having similar attributes, usually
based on acquisition timing and/or by seller. Once a static pool is established
the receivables in the pool are not changed. The difference between the
contractual receivable balance of the accounts in the static pools and the cost
of each static pool (the discount) is not recorded since the Company expects to
collect a relatively small percentage of each static pool's contractual
receivable balance. Each static pool is initially recorded at cost.

         Accrual accounting for each static pool is measured as a unit for the
economic life of the static pool (similar to one loan) for recognition of income
on finance receivables, or collections applied to principal on finance
receivables, and for provision for loss or impairment. The effective interest
rate for each static pool is estimated based on the estimated monthly
collections over the estimated economic life of each pool, currently five years
based on the Company's collection experience. Income on finance receivables is
accrued monthly based on each static pool's effective interest rate applied to
each static pool's monthly opening carrying value. Monthly collections received
for each static pool reduce each static pool's carrying value. To the extent



                                      5
<PAGE>   8


collections exceed the interest accrual, the carrying value is reduced and the
reduction is recorded as collections applied to principal. If the accrual is
greater than collections, then the carrying value accretes. Accretion arises as
a result of collection rates lower in the early months of ownership than the
estimated effective yield which reflects collections for the entire economic
life of the static pool. Measurement of impairment and any provision for loss is
based on each static pool. To the extent the estimated future cash flow,
discounted at the estimated yield increases or decreases, the Company adjusts
the yield accordingly. To the extent that the carrying amount of a particular
static pool exceeds its fair value, a valuation allowance would be recognized in
the amount of such impairment. The estimated yield for each static pool is based
on estimates of future cash flows from collections, and actual cash flows may
vary from current estimates.

         SECURITIZATION

         The Company completed its first securitization in June 1998 and intends
to pursue additional securitizations in the future. No assurance can be given as
to the timing of any future securitization transactions. The Company  accounts
for securitizations as sales in accordance with SFAS No. 125. In summary, a
securitization will qualify as a sale because it meets the following provisions
of SFAS No. 125: (i) the sold receivables are put beyond the reach of the
Company creditors through a number of means, including completion of the
securitization in a two-step structure; (ii) the buyer of the receivables is a
qualifying special-purpose entity; and (iii) there does not exist an agreement
between the Company and the qualifying special purpose entity that maintains the
Company's control over the sold receivables. The residual investment in
securitization is treated as a debt security classified as available-for-sale in
accordance with SFAS 115. To the extent that the Company determines in the
future that collections will be less than the carrying value of the residual,
the Company would be required to record an impairment charge.

         REPORTING COMPREHENSIVE INCOME

         The Financial Accounting Standards Board recently issued Statement of 
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
effective for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting and display of comprehensive income and its
components (revenue, expenses, gains and losses) in a full set of
general-purpose financial statements. This Statement requires all items required
to be recognized under accounting standards as components of comprehensive
income to be reported in a financial statement that is displayed with the same
prominence as other financial statements. SFAS No. 130 does not require a
specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement. The statement requires that an enterprise classify items of
other comprehensive income by their nature in a financial statement and display
the accumulated balance of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section of a statement of
financial position. Reclassification of financial statements for earlier periods
provided for comparative purposes is required. The Company will comply with the
disclosure requirements of SFAS No. 130 in fiscal year 1998. For the quarters
ended September 30, 1997 and 1998 and the nine months ended September 30, 1997
and 1998, the Company had no sources of other comprehensive income. In the
future, comprehensive income or losses might arise from any valuation provision
in connection with the residual investment in securitization as a security held
available for sale.

         STOCK SPLIT/AUTHORIZATION

         On February 19, 1998, the Company effected a 60,000-for-1 stock split
of its common stock in the form of a stock dividend. Pursuant to the split, the
Company increased the number of shares of common stock authorized for issuance
from 1,000 to 20,000,000. The stated par value of each common share was changed
from no par to $0.01. In addition, the Company authorized 5,000,000 shares of
preferred stock, with a par value of $0.01. The accompanying financial
statements, including stockholder's equity and per share amounts, give
retroactive effect to the stock split.



                                      6
<PAGE>   9


         INITIAL PUBLIC OFFERING

         On July 29, 1998, the Company commenced an initial public offering of
2.0 million shares of Common Stock at an initial public offering price of $15.50
per share. The Company's sole shareholder also sold 500,000 shares of Common
Stock in the offering, which closed on August 3, 1998, and an additional 308,711
shares pursuant to an underwriters' over-allotment option which was subsequently
exercised and closed on September 2, 1998. After payment of underwriting
discounts and commissions and estimated other offering expenses, the Company
received net proceeds of $27.3 million. A portion of these proceeds was used to
repay the subordinated notes; of the remaining proceeds, a portion has been
used to make additional portfolio purchases and the balance has been added to
working capital.

         EMPLOYEE STOCK PURCHASE PLAN

         In conjunction with the initial public offering, the Company has
reserved a total of 100,000 shares of common stock for issuance pursuant to the
1998 Creditrust Employee Stock Purchase Plan. The plan is administered by the
Board of Directors and is open to all eligible employees, who will be able to
purchase shares at a 15% discount to the fair market value subject to certain
annual limitations. As permitted by Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," the Company will
account for stock-based compensation on the intrinsic value-based method of
Accounting Principles Board Opinion No. 25 (APB 25). As the plan is
non-compensatory in nature, no compensation expense will be recorded for stock
purchased pursuant to the plan. To date, no shares have been issued under this
plan.

         STOCK INCENTIVE PLAN

         In conjunction with the initial public offering, the Company has
reserved a total of 800,000 shares of common stock for issuance pursuant to the
Creditrust 1998 Stock Incentive Plan. The Stock Incentive Plan is administered
by the Board of Directors and provides for the grant of stock options and other
stock grants to directors and to all eligible employees of the Company,
including executive officers and directors. Options granted under the plan are
granted on such terms and at such prices as determined by the Board of
Directors, except the per share exercise price may not be less than the fair
market value of the common stock on the date of the grant. The Board of
Directors has the authority to amend or terminate the plan, provided no such
amendment or termination adversely affects the rights of any holder of any
outstanding option without the written consent of such holder. Options to
purchase 338,710 shares of Common Stock at an exercise price of $15.50 per share
were issued to certain executives employees and a director upon the closing of 
the initial public offering in August 1998.

         SMILE PROGRAM

         In connection with the initial public offering, the Board of Directors
approved the Creditrust Corporation Shareholders Make Involved Loyal Employees
(SMILE) stock purchase plan. Effective every six months, the Board will
authorize funding to permit an independent trustee to purchase Creditrust 
Corporation shares in the open market, presently 40 shares for each employee as
of the date of purchase. The shares will be held for the benefit of the
employees, and 10 shares per employee will be sold every six months after
purchase and the proceeds distributed to participants then employed at the end
of each six-month period. In August 1998 the trustee for the plan purchased
15,520 shares at an average price of $17 5/16 per share for a total payment of
$269,000. At September 30, 1998 the liability was adjusted to the market value
of $229,000 and charged to earnings. The purchase price of the stock is held at
cost as treasury stock until the shares are distributed.


         EARNINGS PER SHARE

         In February 1997, the Financial Accounting Standards Board issued SFAS
No. 128, "Earnings per Share" (EPS). The statement replaces the presentation of
primary EPS with a presentation of basic EPS. It also requires dual presentation
of basic and diluted EPS on the face of the income statement for all entities
with complex capital structures and requires a reconciliation of the numerator
and denominator of the basic EPS computation to the numerator and denominator
of the diluted EPS calculation. For the three and nine month periods ended
September 30, 1997 the Company had no common stock equivalents. The Company
issued 450,000 warrants for common stock on April 2, 1998 as described under
Subordinated Notes below. The Company also granted 364,516 stock options to
certain executives, employees and a director during the quarter ending
September 30, 1998. Under the treasury stock method there is no dilutive effect
for the quarter and nine months ended September 30, 1998.



                                      7
<PAGE>   10


NOTE C-FINANCE RECEIVABLES

         The Company acquires charged off consumer receivables at a discount
from the actual contractual receivable balance. The following summarizes the
change in finance receivables as of:

<TABLE>
<CAPTION>
                                                                                DECEMBER 31       SEPTEMBER 30
                                                                                -----------       ------------
(IN THOUSANDS)                                                                     1997              1998
                                                                                   ----              ----
                                                                                 (Audited)        (Unaudited)
<S>                                                                             <C>               <C>
Balance, at beginning of period                                                 $     6,604       $     5,050
    Acquisitions of finance receivables                                                 557            26,178
    (Collections) accretion applied to principal on finance receivables             (2,111)               641
    Securitization of finance receivables                                                 -          (11,315)
                                                                                 ----------        ----------
Balance, at end of period                                                       $     5,050       $    20,554
                                                                                 ----------        ----------
                                                                                (Unaudited)       (Unaudited)
Unrecorded discount.......................................................      $   403,308       $   817,888
                                                                                 ----------        ----------
</TABLE>

         To the extent that the carrying amount of a static pool exceeds its
fair value, a valuation allowance would be recognized in the amount of such
impairment. As of December 31, 1997 and September 30, 1997 and 1998, no
provision for loss has been recorded.

NOTE D-RESIDUAL INVENTMENTS IN SECURITIZATIONS

Residual investments in securitizations at September 30, 1998 is comprised of
$4.6 million attributable to the Company's first securitization, Series 1998-1
that closed in June 1998 and $560,000 attributable to its securitized
receivables acquisition facility, the Creditrust Warehouse Notes, Series 1998-A
which closed in September 1998. Utilizing an indenture and servicing agreement
and an independent trustee, the Company secured a $30 million two-year funding
commitment. The warehouse facility carries a floating interest rate of 65 basis
points over LIBOR and is "AA" rated by Standard & Poor's Corporation. The
warehouse facility is secured by a trust estate, primarily consisting of future
consumer receivables to be acquired by the Company and held by a newly formed
special purpose financing subsidiary. The warehouse facility is structured as a
sale for financial statement purposes. No gain is anticipated upon the funding
of future portfolio acquisitions, although gain may occur in a future term
securitization. The Company intends to place the receivables assembled in the
warehouse facility into a term securitization, subject to market conditions,
although the warehouse facility does not require that such a take-out occur.
Generally, the warehouse facility provides 95% of the acquisition cost of
receivables purchased and the Company will fund the remaining 5% and a one time
$900,000 liquidity reserve requirement.

NOTE E-PROPERTY AND EQUIPMENT

         Property and equipment consist of the following at:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31             SEPTEMBER 30
         (IN THOUSANDS)                                                 1997                    1998
                                                                        ----                    ----
                                                                     (Audited)                (Unaudited)
         <S>                                                      <C>                      <C>
         Computer equipment...................................    $          845           $        1,988
         Furniture and fixtures...............................               856                      883
         Leasehold improvements...............................                95                      108
                                                                   -------------            -------------
                                                                           1,796                    2,979
         Less accumulated depreciation and amortization.......             (362)                    (623)
                                                                   -------------            -------------
                                                                  $        1,434           $        2,356
                                                                   -------------            -------------
</TABLE>



                                      8
<PAGE>   11


NOTE  F-DEFERRED COSTS

         The Company has deferred certain costs related to ongoing
securitization, initial public offering and senior subordinated notes placement
efforts. Deferred costs consisted of the following at:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31             SEPTEMBER 30
                                                                    -----------             ------------
(IN THOUSANDS)                                                         1997                     1998
                                                                       ----                     ----
                                                                     (Audited)               (Unaudited)
<S>                                                               <C>                      <C>

Securitization                                                    $           332          $             -
Initial public offering                                                       203                        -
Senior subordinated notes                                                       -                        -
                                                                   --------------           --------------
                                                                  $           535          $             -
                                                                   --------------           --------------
</TABLE>

         Upon closing of the Company's initial public offering, the deferred
initial public offering costs were charged against paid in capital from the 
offering proceeds and the subordinated note costs were charged to 
extraordinary loss on early retirement of debt.

NOTE G-ACCOUNTS PAYABLE AND ACCRUED EXPENSES

         Accounts payable and accrued expenses consist of the following at:

<TABLE>
<CAPTION>
                                                                    DECEMBER 31             SEPTEMBER 30
(IN THOUSANDS)                                                         1997                    1998
                                                                       ----                    ----
                                                                     (AUDITED)               (UNAUDITED)
<S>                                                               <C>                      <C>

Accounts payable                                                  $           239          $           687
Accrued other liabilities                                                     105                      789
Accrued salaries, taxes and fringe benefits                                   309                      647
                                                                   --------------           --------------
                                                                  $           653          $         2,123
                                                                   --------------           --------------
</TABLE>


NOTE H-NOTES PAYABLE

         On September 23, 1996, the Company entered into a credit facility with
a commercial bank to provide acquisition financing for finance receivables. As
of December 31, 1997 the Company had borrowed $2.1 million net of principal
payments made, pursuant to this facility. The facility was retired in June 1998
upon the closing of the securitization (see Note M). Interest was payable
monthly at 1% over the bank's prime rate, which was 9.5% at December 31, 1997
and September 30, 1998.

NOTE I-INCOME TAXES

         Deferred income taxes are recognized for the tax consequences of
temporary differences by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities, following the guidance of SFAS
No. 109, "Accounting for Income Taxes." These differences are primarily the
result from the use of the cost recovery method of accounting for finance
receivables for income tax purposes versus the effective interest rate method
for financial reporting purposes and the treatment of securitizations as
financing for tax purposes.



                                      9
<PAGE>   12


NOTE J-SUBORDINATED NOTES AND EXTRAORDINARY LOSS

         In April 1998, the Company sold $5.0 million aggregate principal amount
of subordinated notes, together with common stock purchase warrants exercisable
for an aggregate of 450,000 shares of the Company's Common Stock. Each of the 50
units was sold for $100,000 principal amount for the note and a warrant
exercisable for 9,000 shares. The exercise price is $12.00 per share for 396,000
of the warrants and $15.50 for 54,000 of the warrants. Upon the closing of the
initial public offering in August 1998, the notes plus accrued interest at 10%
per annum were repaid.

         The Company recorded the fair value of the subordinated notes at
$4.5 million and recorded as paid-in capital the remaining consideration of
$410,000 net of offering expenses attributable to the fair value of the
warrants. The effective interest rate on the subordinated notes based on this
allocation is 12.8%. The Company repaid the subordinated notes at $5.0 million
plus accrued interest. This resulted in the Company recording an extraordinary
charge for the early repayment of indebtedness which, including debt issuance
costs, resulted in an extraordinary charge in August 1998 of $567,000
after-tax, net of amortization of financing costs and original issue discount
expensed between April 2, 1998 and the date of pay-off.

NOTE K-COMMITMENTS AND CONTINGENCIES

LITIGATION

         The Company is routinely involved in various litigation incurred in the
ordinary course of business. Management believes these items, individually or in
aggregate, will not have a material, adverse impact on the Company.

NOTE L-SERVICING REVENUE

         In June 1997, the Company arranged for a commercial bank to acquire,
under an exclusive purchasing agent agreement, a portfolio of approximately $737
million of charged-off balances of Visa and Mastercard accounts originated by a
major money center bank. In August 1997, the Company closed the acquisition for
the bank and acquired the exclusive rights to the servicing, re-marketing and
securitization of, and a majority interest in the underlying recoverable value
of the portfolio. Under the contract, the Company received servicing income of
85% of net collections through February 1998, followed by 60% of collections 
until the bank received a required amount under the contract. The Company
securitized the portfolio in June 1998 and will not receive servicing income on
the same terms (see Note M). In addition, the Company will receive servicing
income of 20% of collections on its new secured warehouse facility and excess
collections during the first 6 months of the facility.
                                                  

NOTE M-GAIN ON SALE AND SECURITIZATIONS

         In June 1998, a special-purpose finance company formed by the Company
issued, through a trust created under an indenture and servicing agreement with
an independent trustee, $14.5 million principal amount of 6.43% Creditrust
Receivables-Backed Notes, Series 1998-1. The securitization notes are secured by
a trust estate, consisting of, among other things, consumer receivables owned by
the Company with a carrying value as of June 1998 of approximately $4.8 million
and all of the serviced receivables. The Company purchased the serviced
receivables included in the securitization for $6.5 million. After payment of
the purchase price of the serviced receivables, retirement of the Company's
credit facility (see Note H), and payment of transaction costs, the Company
received cash of $5.8 million and recognized gain on sale of $6.0 million and
recorded a residual investment in securitization of $4.6 million. The Company
will receive a servicing fee of 20% of the collections of the receivables in the
securitization, and will be entitled to all future recoveries on these
receivables above the debt service on the securitization notes and trustee and
other fees. To the extent that the Company determines in the future that
collections will be less than the carrying value of the residual, the Company
would be required to record an impairment charge. Payment of principal and
interest on the securitization notes is insured by a financial guaranty and has
a "AA" rating from Standard & Poor's Corporation. 

NOTE N-RELATED PARTY TRANSACTIONS

         The Company remitted payments on loans due participants (including
interest) of approximately $5,000, $0, $31,000, and $0 to related parties during
the quarters ended September 30, 1997 and 1998 and the nine months ended
September 30, 1997 and 1998, respectively.

         Additionally, included in accounts receivable are amounts due from
non-stockholder employees of $56,000, and $15,000 as of December 31, 1997 and
September 30, 1998, respectively.

         In addition, the Company purchased shares in the open market for its
outside directors in the amount of $44,000 in connection with the initial public
offering.

         REVISION TO EMPLOYMENT AGREEMENTS

         In conjunction with the initial public offering, the Company revised
employment agreements with two executive officers in April 1998. The employment
agreements entitle each officer to incentive compensation up to $100,000 at the
discretion of the Board of Directors, in addition to annual base compensation.
Each agreement contains non-compete and confidentiality clauses.


NOTE O-SUBSEQUENT EVENTS

         New Receivables Acquisition Facility

         In October 1998, The Company entered into a $20 million revolving line
of credit with a commercial lender to provide receivables financing. The
facility has a term of three years during which time the Company may borrow and
repay funds to purchase receivables at 80% of cost. Interest is based on prime
plus 0.5% or LIBOR plus 2.5% at the option of the Company on each advance. The
facility is secured by any receivables purchased under the facility and 
substantially all of the Company's other assets.
                                


                                      10
<PAGE>   13


ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

         Management's Discussion and Analysis of Financial Condition and Results
of Operations contain, in addition to historical information, forward-looking
statements that involve risks and uncertainties. The Company's actual results
could differ significantly from the results discussed in the forward-looking
statements. The following discussion and analysis should be read in conjunction
with the audited financial statements of the Company, including the notes
thereto, included in the Company's Prospectus dated July 29, 1998 and in
conjunction with the information under "Risk Factors and Forward-Looking
Statements" contained in Part II hereof.

OVERVIEW

         The Company acquires, services and liquidates portfolios of distressed
receivables and believes that it is one of the largest distressed consumer
receivables purchasers anywhere in the United States. The Company uses
proprietary technology to acquire and recover on receivables primarily
consisting of charged-off Visa(R), MasterCard(R), and private label credit card
accounts issued by major banks and merchants, the originating institutions.

         The Company accounts for its investment in consumer or finance
receivables on an accrual basis using unique and exclusive static pools. Static
pools are established using similar accounts with similar attributes, usually
based on acquisition timing and/or by seller. Once a static pool is established
the receivables in the pool are not changed. The difference between the
contractual receivable balance of the accounts in the static pools and the cost
of each static pool (the discount) is not recorded since the Company expects to
collect a relatively small percentage of each static pool's contractual
receivable balance. Each static pool is initially recorded at cost. See Note B
of Notes to Financial Statements.

         In the quarter ended September 30, 1997, the Company began recognizing
servicing income in connection with its agreement to liquidate certain serviced
receivables. Under the terms of the servicing agreement, the financial
institution had agreed to accept any third-party offer to purchase or allow the
Company to securitize the serviced receivables provided the proceeds to the
financial institution exceeded a minimum amount. See "Liquidity and Capital
Resources." The serviced receivables were included in the securitization
described below.

         In June 1998, the Company completed its first securitization of
finance receivables. In the securitization, the Company transferred receivables
owned by the Company with a charged-off balance of $412 million and a carrying
value of $4.8 million and also purchased for $6.5 million and simultaneously
transferred the serviced receivables with a charged-off balance of $692
million, at a transaction price negotiated at the time that the servicing
arrangement was initiated, to Creditrust SPV2, LLC (SPV2), a limited purpose
finance subsidiary. SPV2 issued $14.5 million of 6.43% Creditrust
Receivables-Backed Notes, Series 1998-1, secured by the receivables and a
financial guaranty insurance policy. As of September 30, 1998, the Company also
owned receivables not contributed to the securitization with a charged-off
balance of $837 million and a carrying value of $20.6 million. The notes are
not obligations of the Company and SPV2 is not consolidated for financial
reporting purposes.
                             
         The projected recovery value of the transferred receivables exceeded
the principal balance of the securitization notes. The Company retains a
residual interest in SPV2 representing this interest. The Company acts as
servicer with respect to the receivables included in the securitization, and
receives a servicing fee equal to 20% of collections. As servicer, the Company
continues its collection activities with its customers as it otherwise would
with owned receivables. Accordingly, customer relationships are not affected by
the securitization.

         The securitization qualified as a sale under generally accepted
accounting principles. For securitized pools of finance receivables, future
income is reduced due to the elimination of income on finance receivables and
partially offset by the receipt of servicing income and interest income on the
residual investment in securitization. After payment of all principal and
interest on the notes, the Company will receive all collections, subject to an
obligation to pay the seller of the serviced receivables 10% of collections with
respect to the serviced receivables after aggregate collections on those
receivables exceed a specified amount.


                                      11
<PAGE>   14


         The proceeds from the securitization were used by the Company to pay
the purchase price of the serviced receivables, to retire debt associated with
the owned receivables, and to pay transaction costs. The Company recognized gain
on the sale of both the owned and serviced receivables in the securitization of
$6.0 million and received cash of $5.8 million. The Company also recorded a
residual investment in securitization of $4.6 million. The investment in
securitization is accounted for under the provisions of SFAS 115 as debt
securities available-for-sale and is estimated to accrue income at the rate of
12% per annum. Once the notes are retired, recoveries will be applied to reduce
the carrying amount of the investment in securitization and accrued income. The
Company intends to pursue additional securitization transactions in the future.
No assurance can be given as to the timing of any future securitizations. See
Note B in the Notes to Financial Statements for additional discussion concerning
the financial statement effects of the securitization transactions.

         In September 1998 the Company entered into a securitized receivables
acquisition facility, the Creditrust Warehouse Notes, Series 1998-A. The
Company formed a special-purpose financing subsidiary. Utilizing an indenture
and servicing agreement and an independent trustee, the Company secured a $30
million two-year commitment. The warehouse facility carries a floating interest
rate of 65 basis points over LIBOR and is "AA" rated by Standard & Poor's
Corporation. The warehouse facility is secured by a trust estate, primarily
consisting of future consumer receivables to be acquired by the Company. The
Company intends to place some of the receivables assembled in the facility into
term securitizations, subject to market conditions, although the warehouse
facility does not require such a take out. The warehouse facility is structured
as a sale for financial reporting purposes. No gain is anticipated upon the
funding of future portfolio acquisitions although gain may occur on a future
term securitization or other transaction. Generally, the warehouse facility
provides 95% of the acquisition cost of receivables purchased and the Company
will fund the remaining 5% and a one time $900,000 liquidity reserve
requirement.            

         In October 1998, The Company entered into a $20 million revolving line
of credit with a commercial lender to provide receivables acquisition financing.
The facility has a term of three years during which time the Company may borrow
and repay funds to purchase receivables at 80% of cost. Interest is based on
prime plus .5% or LIBOR plus 2.5% at the option of the Company on each advance.
The facility is secured by any receivables purchased under the facility and the
Company's other owned receivables. Together, with the warehouse facility
discussed the Company's receivables acquisition facilities equal $50 million in
revolving acquisition lines.

         In April 1998, the Company issued, for $5.0 million in total
consideration, $5.0 million principal amount of subordinated notes and warrants
to purchase 396,000 shares of common stock at an exercise price of $12.00 per
share and warrants to purchase 54,000 shares of Common Stock at an exercise
price equal to the initial public offering price or $15.50. The Company recorded
the fair value of the subordinated notes at $4.5 million and recorded as
additional paid-in capital the remaining consideration of $410,000 net of
offering costs attributable to the fair value of the warrants. The Company
repaid the subordinated notes at $5.0 million plus accrued interest of $47,000
at the closing of the initial public offering on August 3, 1998. This resulted
in the Company recording an extraordinary charge for the early repayment of
indebtedness which, including debt issuance costs resulted in an extraordinary
charge of $567,000 after-tax. Accordingly, quarter-to-quarter comparisons of
results for this quarter in which the initial public offering was concluded are
adversely affected.

Results of Operations

         Revenues. Total revenues for the quarter ended September 30, 1998 were
$4.3 million compared to total revenues of $2.6 million for the quarter ended
September 30, 1997, an increase of 69%. On a year to date basis, total revenues
through September 30, 1998 were $16.1 million compared to total revenues through
September 30, 1997 of $6.5 million, a 150% increase. Year to date results were
increased significantly due to a $6.0 million gain on sale from the Company's
securitization of most of its receivables in the second quarter as discussed
above. Revenues year to date were further benefited by a $658,000 gain on sale
in the first quarter of 1998 resulting from the resale of a portfolio
repurchased under a settlement agreement. Previously deferred income of $895,000
was recognized against a $237,000 cost of the resale. Miscellaneous receivables
sold in the third quarter 1998 generated $800,000 in gain on sale income. See
"Financial Condition-Deferred Income."

         Income on finance receivables was $2.9 million for the quarter ended
September 30, 1998 and $1.9 million for the quarter ended September 30, 1997.
Year to date income on finance receivables increased by $500,000 to $6.3
million in 1998 from $5.8 million in 1997. Income on finance receivables
accelerated significantly in the third quarter of 1998 over 1997 due to the
purchases of receivables in the second and third quarters of 1998 with proceeds
from the subordinated debt and initial public offerings discussed above.
Weighted average investment in receivables increased to $13.6 million       
and $8.3 million for the three and nine months ended September 30, 1998 from
$5.4 million and $6.1 million for the same periods in 1997. Collections
increased $4.6 million or 56% from $8.3 million to $12.9 million in the nine
months ended 1997 and 1998. The charged-off balances owned or serviced by the
Company increased from $1.1 billion at September 30, 1997 to 1.9 billion at
September 30, 1998, an increase of 76%.

         Total Expenses from Operations. Total expenses from operations
increased by $2.3 million to $4.7 million in the quarter ended September 30,
1998 from $2.4 million in the quarter ended September 30, 1997. Year to date
total expenses increased by $4.9 million from $5.7 million to $10.6 million. 
Operating expenses for the quarter ended September 30, 1998 increased
over the quarter ended September 30, 1997 by 94.4% due to (a) a 106.9% increase
in personnel costs as a result of growing total staff from 246 to 443 as of
September 30, 1997 and 1998, respectively; (b) a 21.8% increase in rent and
occupancy due to an increase in depreciation expense related to the purchase of
computers and furniture to accommodate the growing staff; and (c) an increase in
communication expense of 47.2% due to increased levels of credit reporting and
long distance usage from a higher volume of accounts.


                                      12
<PAGE>   15


         Operating expenses for the quarter as a percentage of revenues 
increased 14.4% primarily due to an increase in personnel costs resulting from
the implementation of the SMILE program and certain new employee relocation
costs in the third quarter of 1998. Year to date, operating expenses as a
percentage of revenue experienced a significant decline due the gain on sale in
the second quarter of 1998.

         Expenses increased in the quarter ended September 30, 1998 primarily as
a result of costs associated with recovery efforts on the serviced receivables,
and in anticipation of additional acquisitions in fiscal year 1998.
Management believes that many of the expense categories discussed above can
support the servicing and the liquidation of substantially larger volumes of
receivables without proportional expense increases.

         Personnel expenses were $1.7 million or 67.3% of revenue in the quarter
ended September 30, 1997 and $3.6 million or 82.6% of revenue for the quarter
ended September 30, 1998. Personnel expenses were $3.9 million or 59.9% of
revenue in the nine months ended September 30, 1997 and $7.5 million or 46.5% of
revenue for the nine months ended September 30, 1998. Major categories of
personnel expense increases included: (a) additional compensation costs for
development, installation and training associated with the expanded information
technology systems; (b) significant investment in senior management
infrastructure, including senior management staff in the information technology
and legal departments; (c) increase in the number of account officers to service
a larger volume of receivables; and (d) accounting expenses required to be
taken in connection with the SMILE program.

         Rent and other occupancy costs were $262,000 or 10.2% of revenue and
$319,000 or 7.4% of revenue in the quarters ended September 30, 1997 and 1998,
respectively. Rent and other occupancy costs were $594,000 or 9.2% of revenue
and $898,000 or 5.6% of revenue in the nine months ended September 30, 1997 and
1998, respectively. This increase is attributable primarily to utilities and
depreciation expense increases in connection with the addition of approximately
36,000 square feet of space and related equipment for the new operations center
started up in March 1997 and occupied in September 1997 compared to a full nine
months of occupancy in 1998.

         Professional fees were $37,000 or 1.4% of revenue and $152,000 or 3.5%
of revenue in the quarters ended September 30, 1997 and 1998, respectively.
Professional fees were $184,000 or 2.9% of revenue and $433,000 or 2.7% of
revenue in the nine months ended September 30, 1997 and 1998, respectively. The
increases were attributable to increased accounting fees and various legal
expenses.

Earnings From Operations. Earnings (loss) from operations were $149,000 or 5.8%
of revenues in the quarter ended September 30, 1997 and ($370,000) or (8.6%) of
revenues in the quarter ended September 30,1998. Earnings from operations were
$725,000 or 11.2% of revenues in the nine months ended September 30, 1997 and
$5.5 million or 34.0% of revenues in the nine months ended September 30, 1998.
Year to date, this increase resulted from several factors, particularly the
positive effect on revenues from servicing income and gain on sale, which
largely offset the substantial growth in corporate infrastructure to support a
substantially larger base of operations. The September 30, 1998 quarterly loss
was attributable to the sale in the second quarter of most of the Company's
receivables in the securitization offset somewhat by the increased purchases
late in the third quarter. As a result of the securitization, the level of
income recognized by the Company is reduced to the 20% servicing fee with any
remaining proceeds first used to pay interest and principal on the
securitization notes and certain costs, and after the notes are retired, to
make payments with respect to the residual interest.

         Other Income (Expense). Net other income (expense) increased from
($89,000) in the quarter ended September 30, 1997 to $189,000 in the quarter
ended September 30, 1998. Other income (expense) increased from ($311,000) in
the nine months ended September 30, 1997 to $4,000 in the nine months ended
September 30, 1998. Interest on the Company's bank debt decreased during both
periods as a result of pay-downs on the credit facility. Offsetting these
decreases, interest expense on the subordinated notes issued in April 1998
increased interest expense in the third quarter and year to date. Further
offsetting interest expense the Company earned significant interest income
principally on cash equivalent investments on subordinated debt and public
offering proceeds in the second and third quarters of 1998.

         Earnings Before Income Taxes. As the result of the foregoing, earnings
before income taxes were $60,000 in the quarter ended September 30, 1997 and
($181,000) in the quarter ended September 30, 1998. Year to date, earnings
before income taxes were $414,000 and $5.5 million for 1997 and 1998,
respectively.

         Provision For Income Taxes. Income taxes for the quarters ended
September 30, 1997 and 1998 were both at effective tax rates of 39%. Year to
date, tax rates were 39% in both 1997 and 1998. The effective tax rate may
fluctuate as a result of changes in pre-tax income and nondeductible expenses.
Deferred tax liabilities increased from $1.1 million at December 31, 1997 to
$2.9 million at September 30, 1998, principally due to the deferred taxes of
approximately $2.3 million provided for on the gain on sale related to the
securitization which is treated as a financing transaction for tax purposes, and
the reversal of a deferred tax benefit of $345,000 on the first quarter
portfolio resale and recognition of previously deferred income which was
previously taxed.


                                      13
<PAGE>   16


         The extraordinary loss for the three and nine months ended September
30, 1998 resulted from the early retirement of $5 million of senior subordinated
debt required to be repaid upon closing of the Company's initial public offering
which closed in the third quarter. The carrying value of the debt was $ 4.6
million due to the value attributed to the warrants issued in connection with
the debt and credited to paid in capital. The difference in the carrying value
of the debt and the amount owed is original issue discount and was written off
upon the early retirement. In addition, $500,000 of offering costs incurred in
connection with the subordinated debt offering net of amortization was also
charged to extraordinary loss. The after tax effect of the charges was $567,000.

         Net Earnings (Loss). Net earnings for the quarter ended September 30, 
1997 were $37,000 versus ($680,000) for the quarter ended September 30, 1998.
This decrease was principally attributable to a ($567,000) extraordinary loss
related to the early retirement of subordinated notes at the closing of the
company's IPO in July offset by higher revenues as a result of the gain on sale
and servicing income in the quarter ended September 30, 1998 over the quarter
ended September 30, 1997 of $1.8 million offset by higher costs of $2.3 million
and further decreased by a $91,000 decrease in tax expenses. Year to date, net
earnings (loss) were $252,000 for 1997 and $2.8 million for 1998, an increase
of $2.5 million. The increase year to date was attributable to higher revenues
as a result of the gain on sale from securitization and servicing income in
1998 over 1997 of $9.7 million offset by higher costs of $4.8 million and
further decreased by a $2.0 million increase in tax expenses and the
extraordinary loss.

         EBITDA. EBITDA decreased ($489,000) from $215,000 to ($274,000)
at September 30, 1997 to September 30, 1998, respectively. Year to date, EBITDA
increased $4.9 million to $5.7 million in 1998 over $858,000 in 1997. EBITDA
increased consistent with net earnings as a result of the gain on sale in
September 1998.

FINANCIAL CONDITION

         Cash and Cash Equivalents. Cash and cash equivalents increased from
$770,000 as of December 31, 1997 to $9.9 million as of September 30, 1998,
primarily as a result of an increase in net cash financing activities including
the initial public offering offset by investing activities, principally
acquisitions of receivables offset by proceeds of securitization and further
offset by net cash used in operating activities.

         Finance Receivables. Finance receivables increased 307.0% to $20.6
million, as of September 30, 1998 from $5.1 million as of December 31, 1997. All
of the receivables owned as of December 31, 1997 were securitized in the second
quarter and removed from the balance sheet. The carrying value of the
receivables, along with the purchase price of the serviced receivables of $6.5
million was allocated to cost of the sales on the residual investment in
securitization. Purchases of $26.1 million included $6.5 million for the
serviced receivables and $19.6 million for additional receivables some of which
have been purchased by the Company with the intention of securitizing at a
future date, subject to market conditions and are reflected on the balance
sheet as of September 30, 1998. The Company purchased the $19.6 million of
finance receivables as of September 30, 1998 with a portion of the net proceeds
from the initial public offering.

     Residual Investment in Securitization. Residual investment in 
securitization increased from none in 1997 to $5.2 million as of September 30,
1998. The increase is principally due to the residual investment in the
allocated cost of the Company's subordinated retained interest in the excess
recoveries projected from the receivables securitized in June 1998. After
payment of interest and principal on the securitization notes, servicing costs,
trustee fees, insurance premiums and certain other costs, all remaining cash
flows with respect to the securitized receivables are for the account of the
Company. The carrying value was established by allocating the total cost of the
receivables sold of $11.3 million among the fair value of the receivables sold
in the amount of the securitization notes of $14.5 million and the fair value of
the retained interest estimated at $8.1 million, plus a cash reserve of
$435,000. The fair value of the retained interest was estimated by management
based on future projected recoveries employing the Company's proprietary
projection software, the Portfolio Analysis Tool (PAT). PAT projected recoveries
were reduced by 20% for unforeseen reduced collection trends, further reduced
for the estimated costs to service in the future at 20% and discounted at 12%
per annum as a reasonable expected return on a subordinated retained interest.
Interest income is accrued on the residual at 12% per annum for the estimated
remaining life of the receivables of approximately four years. Once the
securitization notes are retired in an expected 18 months, any collections will
be applied to amortize the investment in residual including accrued interest
income. The investment will be accounted for under the provisions of SFAS 115 as
a security available for sale and marked to market through a valuation reserve
in the equity accounts of the Company. As of September 30, 1998, no valuation
adjustment was incurred. In the future, should recoveries fall short of
management's projections, a valuation reserve might be required. The residual
investment further increased by the costs of establishing the warehouse facility
in September 1998 of $561,000.

         Property and Equipment. Property and equipment, net, increased 64.3% to
$2.3 million as of September, 1998 from $1.4 million as of December 31, 1997 due
to $922,000 in purchases (principally through capital leases) of computer
equipment net of $262,000 of depreciation.


                                      14
<PAGE>   17

         Deferred Costs. Deferred costs decreased to $0 as of September 30, 1998
from $535,000 as of December 31, 1997, principally as a result of the netting
against paid in capital $1.3 million ($203,300 at December 31, 1997) in
capitalized initial public offering development costs. Previously capitalized
securitization costs of $511,000 ($332,000 at December 31, 1997) were expensed
in connection with the completion of the securitization. Initial public offering
costs consist principally of legal and accounting fees incurred in 1997 and 1998
that management believes have a benefit to the Company in its efforts to raise
additional equity capital. These costs were netted against the additional paid
in capital of the initial public offering proceeds, which became effective, July
28, 1998.

         Accounts payable and accrued expenses. Accounts payable and accrued
expenses increased 225% from $653,000 at December 31, 1997 to $2.1 million at
September 30, 1998. The increase was principally due to increased accrued legal,
accounting, and printing costs incurred in connection with the initial public
offering of $581,000.

         Notes Payable and Capitalized Lease Obligations. Notes payable
decreased from $2.1 million as of December 31, 1997 to none as of September 30,
1998. Capitalized lease obligations increased from $972,000 to $1.8 million for
the same period. The decrease in notes payable was attributable to repayments on
the Company's bank credit facility and complete repayment in June 1998 at the
time of the securitization.

         Deferred Income. As of December 31,1997 the Company had deferred income
of $895,000. During the first quarter of 1998, the deferred income was
recognized. Historically, the Company purchased receivables from time to time
with commitments from a third party to purchase a portion of the newly acquired
receivables. The Company entered into three such transactions during 1996
resulting in gains totaling $996,000. In 1997, a complaint was filed against
the Company by one such purchaser. In June 1997, the Company settled, resulting
in a dismissal of the complaint. Under the terms of the settlement, the Company
agreed to repurchase the receivables for approximately $1.3 million, as
adjusted for collections until consummation of the repurchase, resulting in
deferred income of $895,000. The repurchase occurred in February 1998 for
approximately $1.0 million. The portfolio was resold in February 1998 to a
financial institution for $800,000. The Company recognized a gain on sale of
approximately $658,000 in the first quarter of 1998, approximately $401,000
after tax.

         Deferred Tax Liability. Deferred tax liability at September 30, 1998 is
$2.9 million compared to $1.1 million as of December 31, 1997. This increase of
$1.8 million was primarily attributable to an increase in deferred income for
tax purposes since the gain from securitization is not income and the
securitization notes are treated as a financing transaction and was further
attributable to a decrease in deferred tax benefit on previously deferred gain
on sale reported in the first quarter of 1998 for book purposes.

         Subordinated Notes. The Company issued subordinated notes of $5 million
on April 2, 1998 with 450,000 of warrants to purchase common stock. The notes
were unsecured and subordinate to the general liabilities of the Company. The
notes were recorded at their fair value less the value attributable to the
warrants. The notes were repaid with proceeds from the initial public offering
on August 3, 1998.

         Total Stockholder's Equity. Total stockholder's equity increased $30.2
million to $32.2 million at September 30, 1998 from $2.1 million at December 31,
1997 as a result of net income of $2.8 million during the nine months ended
September 30, 1998 and $27.2 million of additional paid in capital resulting
from the Company's initial public offering and $400,000 of additional paid in
capital resulting from the subordinated debt issue and $269,000 of treasury
stock purchased for the SMILE program.

LIQUIDITY AND CAPITAL RESOURCES

         Historically, the Company has derived substantially all of its cash
flow from collections on finance receivables and servicing income. In the past,
the primary sources of funds to acquire receivables were cash flow, the sale of
participations to third parties, and borrowings under a bank credit facility.

         As an additional means of increasing the amount of receivables under
management, in August 1997, the Company entered into an exclusive servicing
agreement with a financial institution pursuant to which the Company serviced
approximately 400,000 additional accounts representing approximately $737
million of charged-off balances of serviced receivables. The serviced
receivables were included in the securitization.

         In April 1998, the Company issued $5.0 million of subordinated notes in
a private placement transaction. These notes were repaid upon consummation of
the initial public offering. In connection with the private placement, the
Company issued warrants to purchase 396,000 shares of common stock exercisable
at $12.00 per share and warrants to purchase 54,000 shares of common stock
exercisable at the initial public offering price or $15.50.


                                      15
<PAGE>   18

         On June 19, 1998, the Company completed a securitization of most of the
receivables owned as of March 31, 1998 and the serviced receivables. Gross
proceeds of the securitization were $14.5 million. After securitization expenses
and the purchase of the serviced receivables, the Company retired its notes
payable to its existing senior lender of $1 million resulting in net cash
proceeds available for working capital (including receivables purchases) of $5.8
million.

         On July 29, 1998, the Company commenced an initial public offering of 
2.0 million shares of Common Stock at an initial public offering price of
$15.50 per share. After payment of underwriting discounts and commissions and
estimated other offering expenses, the Company received estimated net proceeds
of $27.7 million. A portion of these proceeds was used to repay On July 29,
1998, the Company commenced an initial public offering of 2.0 million shares of
the subordinated notes; of the remaining proceeds, a portion has been used to
make additional portfolio purchases and the balance has been added to working
capital.

         As of September 30, 1998, the Company had cash of $9.9 million. Capital
expenditures from operations were $147,000 for the nine months ended September
30, 1998. Capital additions made pursuant to capital leases were $1.0 million in
the first nine months of 1998. Receivables purchases were $26.2 million for the
nine months ended September 30, 1998. 

         In September 1998, utilizing an indenture and servicing agreement and 
an independent trustee, the Company secured a $30 million two-year funding
commitment. The warehouse facility carries a floating interest rate of 65 basis
points over LIBOR and is "AA" rated by Standard & Poor's Corporation. The
warehouse facility is secured by a trust estate, primarily consisting of future
consumer receivables to be acquired by the Company and held by a newly formed
special purpose financing subsidiary. The warehouse facility is structured as a
sale. No gain is anticipated upon the funding of future acquisitions, although
gain may occur in future securitizations. The Company intends to place the
receivables assembled in the warehouse facility into a term securitization,
subject to market conditions, although the warehouse facility does not require
that such a take-out occur. Generally, the warehouse facility provides 95% of
the acquisition cost of receivables purchased and the Company will fund the
remaining 5% and a one time $900,000 liquidity reserve requirement.

         In October 1998, The Company entered into a $20 million revolving line
of credit with a commercial lender to provide receivables acquisition
financing. The facility has a term of three years during which time the Company
may borrow and repay funds to purchase receivables at 80% of cost. Interest is
based on prime plus 0.5% or LIBOR plus 2.5% at the option of the Company on each
advance. The facility is secured by any receivables purchased under the
facility and the Company's other owned receivables. Together, with the
warehouse facility discussed above, the Company's receivables acquisition
facilities equal $50 million in revolving acquisition lines.

     The debt service requirements associated with borrowings under the new
credit facility will significantly increase liquidity requirements although both
the on-balance sheet facility and the off-balance sheet securitized warehouse
facility have interest only periods for up to six months. The Company
anticipates that its operating cash flow and proceeds from its initial public
offering and new acquisitions facilities will be sufficient to meet its
anticipated future operating expenses, receivables purchases and to service its
debt requirements as they become due. To the extent the Company is successful in
closing additional term securitizations, borrowing availability under both
facilities may be reborrowed.

YEAR 2000

         The Year 2000 issue arises out of potential problems with computer
systems or any equipment with computer chips that use dates where the date has
been stored as just two digits (e.g. 98 for 1998). On January 1, 2000, any clock
or date recording mechanism, including date sensitive software, which uses only
two digits to represent the year, may recognize a date using 00 as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations and cause a disruption of operations, including, among other
things, a temporary inability to process transactions, send letters and
statements or engage in similar activities.

         The Company believes it has replaced or modified all of its material
computer systems and business applications software so that its computer systems
would properly utilize dates beyond December 31, 1999 and does not believe that
any further material expenditures will be necessary to make these systems Year
2000 compliant. Most of the Company's major customers are the largest
originating institutions in the country, which the Company expects will become
Year 2000 compliant due to the nature of their businesses and the financial
strength of these businesses. Additionally, the Company does not generally
communicate on-line with originating institutions on a continuing basis, but
rather receives discrete data files for analysis and to support recovery
activities. The Company has to date been able to convert data received from
originating institutions and other third parties to be Year 2000 compliant and
expects that it will continue to be able to do so in the future. The Company is
in the process of seeking Year 2000 certifications from key vendors.

INFLATION

         The Company believes that inflation has not had a material impact on
its results of operations for the three and nine months ended September 30, 1997
and 1998.

FORWARD-LOOKING STATEMENTS

         The "Year 2000" and "Risk Factors and Forward-Looking Statements"
sections contained herein discuss factors that could cause actual results to
differ materially from the forward-looking statements (within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934) in the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained herein.


                                      16
<PAGE>   19


PART II. OTHER INFORMATION

         Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

                 (a)      None.

                 (b)      None.

                 (c)      None.

                 (d)      The Company filed its first registration statement
                 under the Securities Act on April 15, 1998 and the
                 registration was declared effective July 28, 1998, File No.
                 333-50103. 

         Through the date hereof, in connection with the issuance and
distribution of the Company's Common Stock the expenses incurred were as
follows:


<TABLE>
         <S>                                                             <C>
         Underwriting Discounts and Commissions                            $2,170,000
         Finders Fees                                                            -
         Underwriters Expenses                                                310,000
         Other Expenses                                                     1,259,000
                                                                           ----------

         Total Expenses                                                    $3,739,000
</TABLE>


         The above-listed expenses were paid directly to underwriters and others
incurring those expenses. The net offering proceeds to the Company after
deducting total expenses described above was $27,261,000.

         The Company used a portion of the net offering proceeds to redeem
subordinated notes in the amount of $5.0 million plus accrued interest of
$47,000 and $16.0 million for post closing purchases of additional portfolios 
of consumer receivables in amounts described elsewhere herein.


                                      17
<PAGE>   20
ITEM 5.  OTHER INFORMATION


RISK FACTORS AND FORWARD-LOOKING STATEMENTS


         The Company's business prospects are highly dependant on a variety of
factors within and beyond the Company's control which may affect the timing and
amount of collections on the Company's portfolios of consumer receivables, most
of which have been in default. Future internal growth will depend on numerous
factors, including the initiation and development of relationships with
originating institutions, the availability of adequate financing to purchase
additional receivables, the ability to securitize receivables, the ability to
maintain the quality of services the Company provides to its customers and to
originating institutions, and the recruitment, motivation and retention of
qualified personnel. The Company's future prospects may be significantly
affected either positively or negatively depending upon the circumstances of
the marketplace and competitive developments. There can be no assurance that 
the Company will be able to manage its expanding operations effectively or to
maintain its historical collection rates, or that it will be able to maintain
or accelerate its growth, and any failure to do so could have a material
adverse effect on the Company's business, results of operations, and financial
condition.

         The Company's quarterly operating results have fluctuated in the past
and may fluctuate in the future as a result of a variety of factors which can
affect revenues, cost of collections and other expenses. These factors include
costs relating to personnel, communications, and legal collections, as well as
variations in the value of portfolios of receivables based on the accuracy of
the Company's pricing models, pricing pressures in connection with future
acquisitions of receivables, and capital expenditures and other costs relating
to the expansion of its operations. No assurance can be given that unanticipated
future events, including further refinements to the Company's collection models,
will not result in changes in estimates in future periods which could adversely
affect quarter-to-quarter comparisons.

         Period-to-period comparisons will also be affected by the timing of
securitization transactions. The Company's initial securitization, completed in
June 1998, resulted in gain on sale and the recognition of a residual
investment in securitization (accounted for as an available-for-sale security).
A decline in the value of an available-for-sale security below cost that is
deemed other than temporary is charged to earnings and results in the
establishment of a new cost basis for the security and, therefore, could have
an adverse effect on the Company's financial position and/or results of
operations. Any downward adjustment in the carrying amount of any residual
interests could also have an adverse effect on the market price of the
Company's Common Stock. Additionally, the timing of future securitizations
which the Company may pursue, if any, could affect period-to-period
comparisons.

         Statements made herein and in other written and oral statements of the
Company may include the plans and objectives of management for future
operations, including plans and objectives relating to future growth in the
number of receivables and availability of adequate third-party financing. Any
forward-looking statements are based on current expectations which involve
numerous risks and uncertainties. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive, and
market conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate and, therefore, there can be no assurance that any of the
forward-looking statements will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or by any other person that the objectives and
plans of the Company will be achieved.


                                      18
<PAGE>   21

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(A)   Exhibits

       3.1  Amended and Restated Charter of the Company (as corrected by
            Certificate of Correction dated September 24, 1998)
      
      10.1  Indenture and Servicing Agreement, dated as of September 1,
            1998, by and among Creditrust Funding I LLC, Norwest Bank
            Minnesota, National Association, Creditrust Corporation and Asset
            Guaranty Insurance Company. (Certain portions of this exhibit have
            been omitted pursuant to a request for confidential treatment and
            have been filed separately with the Securities and Exchange
            Commission)

      27 -  Financial Data Schedule

(B)   Reports on Form 8-K
      Creditrust Corporation filed no reports on Form 8-K during the quarter
      ended September 30, 1998.

Items 1, 3 and 4 are not applicable and have been omitted.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          Creditrust Corporation

Date:  November 16, 1998
                                          By:  /s/
                                          --------------------------------------
                                          Richard J. Palmer
                                          Vice President
                                          Chief Financial Officer

                                          (Principal Financial and Accounting
                                          Officer and Duly Authorized Officer)


                                      19