<PAGE>

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

                                   FORM 10-K


[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
    ACT OF 1934
    For the fiscal year ended December 31, 1999

                                      OR

[ ] 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)

                  Maryland                              52-1754916
       (State or other jurisdiction                  (I.R.S. Employer
     of incorporation or organization)             Identification No.)

                 7000 Security Boulevard, Baltimore, Maryland
                   (Address of principal executive offices)
                                  21244-2543
                                  (Zip Code)
                                (410) 594-7000
              Registrant's telephone number, including area code:

          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                    Common Stock, par value $0.01 per share

     Indicate by check mark X 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 for 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 [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.   [ ]

     As of March 22, 2000, the aggregate market value of the outstanding shares
of the Registrant's Common Stock, par value $0.01 per share, held by non-
affiliates was approximately $24.6 million, based on the average closing price
of the Common Stock as reported by Nasdaq National Market on March 22, 2000.
Determination of affiliate status for this purpose is not a determination of
affiliate status for any other purpose.

     Indicate the number of shares outstanding of each of the Registrant's
classes of common stock, as of the most recent practicable date.

                                                             Outstanding at
                        Class                                March 22, 2000
    ---------------------------------------------            --------------
    Common stock, par value $0.01 per share......          10,453,548 shares

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the Registrant's definitive Proxy Statement for its 2000 Annual
Meeting of Stockholders are incorporated by reference into Part III hereof.
<PAGE>

                        FORM 10-K CROSS-REFERENCE SHEET

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PART I
  Item 1.  Business  ...................................................................   1
  Item 2.  Properties  .................................................................   8
  Item 3.  Legal Proceedings  ..........................................................   8
  Item 4.  Submission of Matters to a Vote of Security Holders  ........................   8

PART II
  Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters  ......   8
  Item 6.  Selected Financial Data  ....................................................  10
  Item 7.  Management's Discussion and Analysis of Financial Condition and Results of
           Operations  .................................................................  12
  Item 7A. Quantitative and Qualitative Disclosures About Market Risk  .................  27
  Item 8.  Consolidated Financial Statements and Supplementary Data  ...................  28
  Item 9.  Changes and Disagreements with Accountants on Accounting and Financial
           Disclosure  .................................................................  52

PART III
  Item 10. Directors and Executive Officers of the Registrant*  ........................  52
  Item 11. Executive Compensation*  ....................................................  54
  Item 12. Security Ownership of Certain Beneficial Owners and Management*  ............  54
  Item 13. Certain Relationships and Related Transactions*  ............................  54

PART IV
  Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K  ............  55

Signatures..............................................................................  57
</TABLE>

* Incorporated by reference from the registrant's definitive Proxy Statement for
  the Annual Meeting of Stockholders to be held on May 25, 2000, which Proxy
  Statement will be filed no later than 120 days after the end of the fiscal
  year covered by this Annual Report on Form 10-K.
<PAGE>

                                    PART I

Item 1.   Business

General

  Creditrust Corporation (the "Company" or "Creditrust") is a leading
information-based purchaser, collector and manager of defaulted consumer
receivables. Defaulted consumer receivables are the unpaid debts of individuals
to credit grantors, including banks, finance companies, retail merchants and
other service providers. Creditrust seeks to use its proprietary pricing models
and software systems as well as extensive information databases to generate high
rates of return on purchased receivables. Most of the Company's receivables are
VISA(R) and MasterCard(R) credit card accounts that the issuing banks have
charged off their books for non-payment. By purchasing receivables, the Company
allows credit grantors to enhance their yields by making a recovery on these
charged-off accounts. Since its founding in 1991 through December 31, 1999,
Creditrust has invested $215.0 million to purchase receivables at a significant
discount.  At December 31, 1999, the Company managed 2.0 million accounts with a
charged-off amount of over $4.9 billion.  The Company currently has over 900
employees and operates three facilities, which can accommodate over 2,500
employees.

Receivables Analysis and Acquisition

  Creditrust purchases defaulted consumer receivables that have been incurred
through VISA(R), MasterCard(R), private label credit cards and consumer loans
issued by credit grantors, including banks, finance companies, retail merchants
and other service providers. The receivables typically are charged-off by the
credit grantors after a default-period of 180 days. The Company focuses on
purchasing such charged-off receivables. From the time of purchase, Creditrust
has found that the average portfolio of receivables has an estimated economic
life of 60 months.

  Creditrust purchases portfolios of receivables at a discount from their
charged-off amount, typically the aggregate unpaid balance at the time of
charge-off by the credit grantors. There is an inverse correlation between
purchase price and the perceived effort necessary to recover the receivables.
Some credit grantors pursue an auction type sales approach by constructing a
portfolio of receivables and seeking bids from specially invited competing
parties. Other means of purchasing receivables include privately negotiated
direct sales when the credit grantors contact known, reputable purchasers and
the terms are negotiated. Credit grantors have also entered into "forward
flow" contracts that provide for a credit grantor to sell some or all of its
receivables over a period of time to a single third party on the terms agreed to
in a contract.

  The Company has historically funded its receivables purchases and the
expansion of its business through a combination of bank and other credit
facilities, public and private equity funding and asset-backed securitizations.
The Company believes that its historical growth is partially attributable to its
diverse funding arrangements.

  The Company's Acquisitions Department locates and develops new and continuing
sources of portfolios of defaulted consumer receivables for purchase. Once such
portfolios are located, the Acquisitions Department is responsible for
coordinating due diligence, including site visits as needed, coordinating
ordering, receipt, tracking and distribution of account documentation and
related media, and ensuring that Creditrust's purchase costs stay within clearly
defined parameters. The Acquisitions Department also supervises the Post-
Purchase Liaison Group, a group that verifies buy-backs and returns with sellers
after the purchase of receivables. The Post-Purchase Liaison Group also
coordinates the import of purchased portfolios into Mozart, the Company's
proprietary revenue and workflow management software system, and routinely
supports the efforts of both the Legal and Recovery Departments by facilitating
the receipt of additional information from the seller which is pertinent to an
account or group of accounts such as account statements or loan files.

                                       1
<PAGE>

  In order for Creditrust to consider a potential seller as a portfolio source,
a variety of factors must be considered. A seller should be able to demonstrate
a significant volume of receivables available for sale and the reasonable
expectation of significant capacity for subsequent sales. To attempt to avoid an
unacceptable level of returned accounts resulting from verified fraud, prior
satisfaction or erroneous sale, all qualified sellers must be able to
demonstrate that they have satisfactory procedures in place for internal audits,
underwriting criteria, post-sales support and return/buy-back warranties.

  Before purchasing any receivables, Creditrust receives a due diligence disk or
tape containing information about each of the accounts being proposed for sale.
Creditrust uses its PAT software to analyze electronic information provided on
each receivable account being proposed for sale. PAT reviews and analyzes each
account and compares its asset type, last known geographic location of the
customer, age since last collection, charged-off amount and other
characteristics with Creditrust's recovery results from similar receivables
purchased in the past. This computer model is updated automatically every time a
customer payment is received. PAT produces a comprehensive analysis of the
proposed portfolio, which compares receivables in the proposed portfolio with
Creditrust's recovery history on similar receivables in other portfolios. PAT
then summarizes all anticipated recoveries and projects a recovery value
expressed in both dollars and liquidation percentages for the first year, as
well as the total recovery for the portfolio's estimated five-year economic
life. In order to determine a bid price for a portfolio, the Company uses the
PAT-projected recovery value. This projection is taken in concert with the
Company's knowledge of the current consumer credit marketplace and any
subjective factors that may be available regarding the portfolio or seller. The
Company has a credit committee (the "Credit Committee") which is composed of
the Company's Chief Executive Officer, Chief Financial Officer and Vice
President of Acquisitions. The Credit Committee, by unanimous decision,
determines whether to purchase the portfolio of receivables and establishes a
minimum and maximum bid range based on the PAT-projected recovery for the
portfolio.

  The Company purchased a majority of its 1999 receivables through forward flow
agreements entered into late in 1998.  Each purchase of receivables is analyzed
using the PAT analysis to ensure consistent file quality.  All of the Company's
forward flow commitments have expired or terminated.  For the foreseeable
future, the Company plans to buy receivables that meet the Company's criteria
when such receivables become available.

Servicing Organization

  Creditrust utilizes three servicing facilities. The headquarters facility,
approximately 19,000 square feet, houses the executive offices and servicing
facilities for approximately 225 employees. The second facility, approximately
36,000 square feet, serves as Creditrust's co-primary operations center and is
designed to house approximately 700 employees, along with information systems
and recruiting departments.  The third facility, approximately 94,000 square
feet, includes a call center and our new centralized Information Technology
center and has the capacity of housing approximately 1,600 additional employees.
The Company is organized into five functional departments: Acquisitions;
Information Technology; Skiptrace; Recovery and Legal.

 Information Technology Department

  The Information Technology ("IT") Department is the backbone of the Company's
operations, handling all computer and telephone systems and providing for the
ongoing development necessitated by both technological advances and business
needs. The IT Department is responsible for the ongoing enhancement of Mozart
and PAT, servicing reports and database developments. The IT Department
regularly reports to all credit bureaus on the Company's entire portfolio. The
IT Department works in concert with the Acquisitions Department to import,
analyze and evaluate all prospective purchases using PAT. The technologies
serviced by this Department include:

                                       2
<PAGE>

  Software.   PAT and Mozart were developed in-house by Creditrust's
programmers. The software is written in a high-speed, relational database
language and is designed to reside on powerful, but readily available, servers.
Both programs have been in use for more than seven years and are believed to be
bug-free.  Back-up tapes of account information are recorded each day and are
stored at an off-site location for safety and security.

  Computer Hardware and Networks.   The software programs reside on Compaq NT-
based servers and are connected via fiber-optic wide area networks and local
area networks to Intel Pentium(R)-based client PCs. The call centers have been
fully wired so that additional employee terminals simply may be placed onto open
desks and plugged into the network. The architecture of the system is
technologically sophisticated, while remaining easily scaleable and updateable.
The Company invested over $2 million in its new IT center in 1999.  The current
architecture is capable of supporting over 5,000 account officers with the
simple addition of client workstations. This should allow the Company to
experience significant growth without a need for further upgrade in the near-
term. The servers the systems operate on are fully redundant so as to ensure
uninterrupted operations. The Company has extensive emergency plans in place for
access to an off-site call center location, should the need arise.

  Telephony.   The Company employs advanced technology in telephony, including
Davox predictive dialers, Cisco automatic routers, three Lucent Technologies
Definity(R) G-3 telephone systems (scaleable to over 5,000 account officers) and
many other components.  The call centers have been fully wired so that
additional account officer telephones may simply be placed onto an open desk and
plugged into the network.  Adequate bandwidth (voice and data) is in place with
scalability configured to support additional growth.  The architecture is
technologically sophisticated, while remaining scaleable and updateable.

  Verification and Research of Account Information.   When a portfolio of
receivables is purchased, each account automatically is run through an extensive
series of proprietary and commercially available databases to compile as much
information about each receivable as possible. The information is combined with
the information already provided by the credit grantor and automatically entered
into Mozart.

  Within 24 hours of importing the receivable into Mozart account officers begin
calling every telephone number available, and within days a letter is sent out
to the customer advising that Creditrust has purchased the receivable. This
initial letter is designed to invite discussion or the resolution of the
receivable and generally contains an offer of settlement at a modest discount.

 Skiptrace Department-Locating Customers

  In the event that contact is not made with a customer based on the compiled
information for that Receivable, the account is automatically transferred to the
Skiptrace Department. Skiptracers are technology-driven telephone detectives.
As an initial step to locate customers, each skiptracer endeavors to compile a
complete "electronic profile" for each customer and to find every possible
telephone number for the customer. Skiptracers utilize internally developed
databases consisting of more than 65,000 creditors, plus a variety of public
databases and third-party database providers.  The Company maintains millions of
individual database records on its current and potential customers. Employing
any or all of these tools frequently enables the Skiptracers to locate otherwise
unreachable customers. A working phone number is frequently found for those
customers transferred to the Skiptrace Department.  Once a customer is found,
Mozart automatically assigns the customer to one of the teams in the Recovery
Department.  In addition, the Company employs various external electronic
skiptrace databases to scrub accounts against in order to obtain current phone
numbers and addresses.  In addition, an electronic skip process is in place
that regularly and consistently searches thousands of accounts against external
databases in an effort to match more current customer phone numbers and
addresses.  This process is technology driven and provides additional workflow
for Creditrust accounts.  All skip matches are loaded directly into dialers for
immediate customer contact.

                                       3
<PAGE>

 Recovery Department-Servicing Customers and Collection of Receivables

  The Recovery Department, unlike a traditional "collections shop," uses a
friendly, customer-focused approach to collect on receivables. Instead of simply
calling about an old bill, Creditrust's employees work to maximize yield while
minimizing customer negativity and maintaining a positive working environment.

  The Recovery Department is responsible for recovering account balances and
selling customer service to our customers. The Company employs advanced
Pentium(R) PC Workstations and sophisticated telephone call management systems
to maximize its employee productivity and thereby increase recovery from its
receivables. The telephone call management systems include predictive dialers,
automated call and account distribution systems, digital switching and
customized computer software. Mozart provides the Recovery Department with: (1)
real-time customer reporting; (2) full customer account data information; (3)
collection discussion notes on each account; (4) telephone numbers and
addresses; (5) payment history; (6) automatic notice of acquisition, settlement
letters, reminders and late payment notices; (7) automatic legal pleadings
production; (8) automatic account distribution to employees; (9) surveillance of
on-screen activity and telephone conversations for quality control, productivity
and regulatory compliance; and (10) exception reports on payment plans.
Creditrust's employees work to maximize yield while minimizing customer
apprehension and maintaining a positive working environment. The Recovery
Department currently is organized into teams of 16 with one supervisor per team.
The supervisors work with the team members and assist employees with quality
control and productivity. Through the Company's extensive network of computer
and telephone systems, each team member in the Recovery Department is
responsible for contacting customers, explaining the benefits of paying
Creditrust, working with customers to develop acceptable means to satisfy their
obligations to Creditrust and recovering the receivables.

  Making Customer Contact.   When an account officer is able to establish
contact with a given customer, the customer's account automatically is placed
inside that account officer's work queue. Each account officer is assigned a
number of dedicated customer accounts depending on the account officer's skill
level. This work queue automatically is replenished on a daily basis, by Mozart,
as the receivables are resolved, whether favorably or unfavorably. In addition
to their group of dedicated accounts, account officers receive receivables from
a general pool daily.

  On the initial customer contact call, the customer is given a standardized and
strictly controlled presentation regarding the benefits of resolving its account
with Creditrust. Emphasis is placed on determining the reason for the customer's
default in order to better assess the customer's situation and to assist in
creating a plan for repayment. Creditrust account officers are trained to follow
rigid receivables resolution priorities.

  Mozart presents the account officer with all available information and a
variety of resolution options. A large emphasis is placed by the account officer
on making the customer aware of all possible alternative repayment methods
available. The computer system will not allow an account officer to exceed his
or her specified settlement authority without electronic authorization of a
supervisor approval code. Once a customer and the account officer agree to a
repayment schedule, the account officer records the terms of the arrangement in
Mozart. The computer system then automatically will generate a series of letters
reminding the customer of important dates.

  Cash Management.   Creditrust, through its strong emphasis on technology and
innovation, has built a customer base that is not exclusively dependent on the
postal service to deliver payments. As a result, more than 70% of all payments
are completed by either the Western Union Quick Collect/TM/ program, which is an
electronic money order system, or by Creditrust's QuickChek pre-authorized
checks drawn on the customer's checking account. Creditrust participates as an
authorized agent for the Quick Collect/TM/ program and is therefore able to
receive payments directly in its offices within minutes. Creditrust's QuickChek
system allows the account officer to obtain the customer's authorization to
reproduce an actual check, drawn on the customer's checking account on an agreed
upon date over a series of months and for the exact amount of the agreed
payment.

                                       4
<PAGE>

  Delinquency Follow-Up.   The problem of delinquent or late payments on
established repayment plans is greatly mitigated through the use of the Quick
Collect/TM/ and QuickChek programs. However, some customers cannot or will not
participate in one of these plans. The Company has developed a system to deal
with late payments to minimize the drain on the productivity of the account
officers. In the event that payment is not received within one day of the
scheduled due date, Mozart automatically issues a late payment letter to the
customer. This is followed by a second letter ten days after the due date.
Unless a scheduled payment is received on or before the day it is due, Mozart
automatically moves the Receivable to the account officer's late queue for
immediate customer contact.

  Late Payment Account Officer.   When a customer falls more than 30 days late
in a payment plan, the Receivable automatically is transferred to a specially
trained, dedicated late payment account officer. These individuals are tasked
with getting the customer back on track according to the terms of his or her
payment plan or, in certain circumstances, negotiating revised terms for
payment. In some instances, a customer's financial circumstances may have
worsened and a plan that accurately fits the new situation is necessary. In
other cases, the customer is able to dispense with the perceived burden of
monthly installments by making a lump sum payment. The Company induces
resolution through a variety of methods. Late payment account officers act as
financial counselors to the customer and may assist the customer in securing new
resources for the resolution of its account.

 Legal Department

  An important component of the Company's collections effort involves the Legal
Department and the pursuit of those customers who have the ability, but not the
willingness, to resolve their obligations. Creditrust employs three in-house
attorneys, dozens of paralegals and a dedicated support staff to process
thousands of court cases each year. The Legal Department has the capacity to
internally prepare and file collection proceedings in multiple jurisdictions.
The Legal Department is responsible for coordinating a network of in excess of
55 attorneys nationwide, determining the suit criteria for each individual
jurisdiction, placing cases for immediate suit, obtaining judgment, seizing bank
accounts, repossessing automobiles that have equity, coordinating sales of
property and instituting wage garnishments to satisfy judgments. In addition,
the Legal Department is responsible for overseeing the Company's compliance with
applicable laws, rules and regulations associated with the conduct of its
business.

  Foreclosure and Asset Disposition.   Creditrust, through its Legal Department,
occasionally engages in the execution and foreclosure of real property. In the
event that a judgment has been secured, and real estate has been verified as
belonging solely to the customer, foreclosure in support of execution of
judgment is considered. Unlike foreclosure pursuant to the power of sale
contained in a mortgage or deed of trust, a judicial sale of real property
follows the state court rules for sheriff's levy and seizure of property. Those
rules vary widely by state.

  Consumer Resolution Center.   Creditrust maintains an independent consumer
resolution center to assist its customers in any dispute they may have with
either the original credit grantor or the efforts made by the Company to resolve
the dispute. The Company has found that a function separate from and that does
not operate in the manner of a recovery department can be useful in resolving
certain matters. In turn, Creditrust's employees are freed up to address
accounts that are capable of immediate resolution. The consumer resolution
center benefits the Company by permitting its employees to use their time more
productively.

                                       5
<PAGE>

  Compliance Procedures.   The Company's policy is to comply with all provisions
of the Fair Debt Collection Practices Act (the "FDCPA") and applicable state
laws, regardless of whether such laws apply to it.  Employees are trained and
tested on their knowledge of the FDCPA, and they are telephonically monitored
for compliance with the FDCPA and the Company's stringent standards of customer
satisfaction and complaint-free receivables resolution. In conjunction with
telephonic monitoring, an employee's receivables activities are monitored
through the Company's DoubleVision system, which allows a supervisor or manager
to observe exactly what the employee sees on the computer monitor, including
every keystroke and every system activity generated.

  On a daily basis, a series of audit reports is generated automatically by
Mozart, including daily management reports, liquidity reports, telephone
reports, skiptrace reports and account officer cash transaction reports. The
flexibility of Mozart allows management to make real-time queries of any
necessary information.

 Competition

  The Company's business is highly competitive, and it expects that competition
from new and existing companies will intensify. The Company competes with other
purchasers of defaulted consumer receivables and with third-party collection
agencies. The Company's ability to obtain new customers is also materially
affected by the financial services companies that choose to manage their own
defaulted consumer receivables. Some of these companies may have substantially
greater personnel and financial resources. The Company seeks to compete with
these companies on the basis of its superior information technology
capabilities, which the Company believes enable it to purchase, collect and
manage receivables more effectively than its competitors.

Trademarks and Proprietary Information

  The Company has obtained federal trademark registrations with the United
States Patent and Trademark Office with respect to the name "Creditrust" and
the Creditrust logo.

  The Company relies on trade secrets to protect its proprietary rights in its
systems and information databases. The Company attempts to protect its trade
secrets and other proprietary information through agreements with employees and
other security measures. Although the Company intends to protect its rights
vigorously, there can be no assurance that these measures will be successful.

Government Regulation

  The FDCPA and comparable state statutes establish specific guidelines and
procedures which debt collectors must follow to communicate with consumer
debtors, including the time, place and manner of such communications. It is the
Company's policy to comply with the provisions of the FDCPA and comparable state
statutes in all of its collection activities, although it may not be
specifically subject thereto. If these laws apply to some or all of the
Company's collection activities, the Company's failure to comply with such laws
could have a materially adverse effect on the Company. The relationship of a
customer and a credit card issuer is extensively regulated by federal and state
consumer protection and related laws and regulations. Because many of its
receivables were originated through credit card transactions, certain of the
Company's operations are affected by such laws and regulations. Significant laws
include the Fair Debt Collections Practices Act, the Fair Credit Reporting Act,
the Federal Truth-In-Lending Act, the Fair Credit Billing Act, the Equal Credit
Opportunity Act, the Fair Credit Reporting Act and the Electronic Funds Transfer
Act (and the Federal Reserve Board's regulations which relate to these Acts), as
well as comparable statutes in those states in which customers reside or in
which the credit

                                       6
<PAGE>

grantors are located. State laws may also limit the interest rate and the fees
that a credit card issuer may impose on its customers. Among other things, the
laws and regulations applicable to credit card issuers impose disclosure
requirements when a credit card account is advertised, when it is applied for
and when it is opened, at the end of monthly billing cycles and at year end.
Federal law requires credit card issuers to disclose to consumers the interest
rates, fees, grace periods and balance calculation methods associated with their
credit card accounts, among other things. In addition, customers are entitled
under current laws to have payments and credits applied to their credit card
accounts promptly, to receive prescribed notices and to require billing errors
to be resolved promptly. In addition, some laws prohibit certain discriminatory
practices in connection with the extension of credit. Failure by the credit
grantors to have complied with applicable statutes, rules and regulations could
create claims and rights for the customers that would reduce or eliminate their
obligations under their receivables, and this could have a materially adverse
effect on the Company. Pursuant to agreements under which the Company purchases
receivables, the Company is normally indemnified against losses caused by the
failure of the credit grantor to have complied with applicable statutes, rules
and regulations relating to the receivables before they are sold to Creditrust.

  Certain laws, including the laws described above, may limit the Company's
ability to collect amounts owing with respect to the receivables regardless of
any act or omission on the part of the Company. For example, under the federal
Fair Credit Billing Act, a credit card issuer is subject to all claims (other
than tort claims) and defenses arising out of certain transactions in which a
credit card is used if the obligor has made a good faith attempt to obtain
satisfactory resolution of a disagreement or problem relative to the transaction
and, except in cases where there is a specified relationship between the person
honoring the card and the credit card issuer, the amount of the initial
transaction exceeds $50.00 and the place where the initial transaction occurred
was in the same state as the customer's billing address or within 100 miles of
that address. As a purchaser of defaulted consumer receivables, the Company may
purchase receivables subject to legitimate defenses on the part of the customer.
The statutes further provide that, in certain cases, customers cannot be held
liable for, or their liability is limited with respect to, charges to the credit
card account that were a result of an unauthorized use of the credit card. No
assurances can be given that certain of the receivables were not established as
a result of unauthorized use of a credit card, and, accordingly, the amount of
such receivables could not be collected by the Company. Pursuant to some
agreements under which the Company purchased receivables, the Company is
indemnified against certain losses with respect to such Receivables regardless
of any act or omission on the part of the Company or the credit grantor.

  Additional consumer protection laws may be enacted that would impose
requirements on the enforcement of and collection on consumer credit card or
installment accounts. Any new laws, rules or regulations that may be adopted as
well as existing consumer protection laws, may adversely affect the ability of
the Company to collect the receivables. In addition, the failure of Creditrust
to comply with such requirements could adversely affect the Company's ability to
enforce the receivables.  The Company's policy is to respond promptly and fully
to inquiries from the Federal, state and local regulators in connection with
alleged complaints from our customers.

Employees

  The Company currently has over 900 full-time employees. None of the Company's
employees are represented by a labor union. The Company believes that its
relations with its employees are good.

                                       7
<PAGE>

Item 2.   Properties

  Creditrust is headquartered in a leased facility, consisting of approximately
19,000 square feet, at 7000 Security Boulevard, Baltimore, Maryland 21244. The
headquarters facility has capacity for approximately 225 employees and houses
the administrative offices. The Company has also leased an additional facility
located approximately one mile from its headquarters at 1705 Whitehead Road,
Baltimore, Maryland 21244. This operations center comprises approximately 36,000
square feet and has the capacity to accommodate approximately 700 employees. In
May 1999, the Company leased another operations center consisting of
approximately 94,000 square feet, located at 10150 York Road, Cockeysville,
Maryland 21030. This operations center will also house the information
technology, training and recruiting departments, and has the capacity to
accommodate approximately 1,600 additional employees, not including
approximately 42,000 square feet of additional space leased, commencing in May
2000. The Company also leases additional space of approximately 27,000 square
feet in Maryland used as a storage facility.

Item 3.   Legal Proceedings

  The Company is subject to routine litigation in the ordinary course of
business, including contract, collections and employment-related litigation.
None of these routine matters, individually or in the aggregate, is believed by
the Company to be material to its business or financial condition.

  The Company brought a declaratory judgement action against a seller of charged
off receivables asking the US Federal District Court to agree with the Company's
interpretation that the agreement has been terminated pursuant to its terms. The
seller has responded, as anticipated by the Company, by denying that the
agreement has terminated, and is seeking, among other things, liquidated damages
of $600,000 plus legal fees. While it is not possible for the Company to
estimate the potential for loss, if any, the Company will vigorously prosecute
its action against the seller and defend any claims made in the proceeding.

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

  Not applicable.

                                    PART II

Item 5.   Market for Registrant's Common Equity and Related Stockholder Matters

 Price Range of Common Stock

  The Company's common stock is quoted on the Nasdaq National Market under the
symbol "CRDT." The following table sets forth the high and low closing sales
prices as reported by the Nasdaq National Market.

<TABLE>
<CAPTION>
                                                      High        Low
                                                      ----        ---
<S>                                                  <C>         <C>
         1998
             Third Quarter (from July 29, 1998)..     $17.13     $14.50
             Fourth Quarter......................      25.00      12.63
         1999
             First Quarter.......................      27.25      16.88
             Second Quarter......................      27.75      16.63
             Third Quarter.......................      33.81      22.44
             Fourth Quarter......................      23.88       7.69
</TABLE>

  On March 22, 2000, approximately 37 holders of record held the Company's
common stock.

                                       8
<PAGE>

 Dividend Policy

  The Company has never declared or paid dividends on its common stock. The
Company expects that it will retain future earnings, if any, to finance the
growth and development of its business. Thus, the Company does not intend to
declare or pay dividends on the common stock in the foreseeable future. The
Company's board of directors will determine when to declare and pay dividends
and the amount of any such dividends. The Company's board would be required to
consider the Company's future earnings, results of operations, financial
condition and capital requirements before deciding to declare a dividend. Also,
under Maryland law, the Company is prohibited from paying any dividend unless
after giving effect to the payment of the dividend (i) the Company may continue
to pay its debts in the ordinary course of business, and (ii) the Company's
assets equal or exceed its liabilities plus the preferences of any outstanding
preferred equity securities upon dissolution. The Company's line of credit
facility restricts payments of dividends that would reduce the Company's net
worth below a certain amount. Future credit facilities may have similar or more
stringent restrictions.

 Sales of Unregistered Securities

  None.

                                       9
<PAGE>

Item 6.   Selected Financial Data


  The following table sets forth the Company's selected balance sheet, statement
of earnings and cash flow data as of the end of and for each of the years in the
five-year period ended December 31, 1999. The selected financial data for the
years ended December 31, 1995, 1996, 1997, 1998 and 1999 have been derived from
the Company's audited financial statements.  The Company's consolidated balance
sheets as of December 31, 1998 and 1999 and the Company's consolidated
statements of earnings, stockholders' equity and comprehensive income and cash
flows for the years ended December 31, 1997, 1998 and 1999 are included
elsewhere in this Annual Report.  The selected financial data presented below
should be read in conjunction with our consolidated financial statements and the
related notes and "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included in this Annual Report.

<TABLE>
<CAPTION>
                                                                                  As of and for the Year Ended December 31,
                                                                         ----------------------------------------------------------
                                                                           1995         1996         1997        1998        1999
                                                                         --------     --------     --------    --------    --------
                                                                                 (dollars in thousands, except share data)
<S>                                                                     <C>         <C>         <C>         <C>         <C>
Statement of Earnings Data:
Revenue:
 Income on Finance Receivables  ....................................... $    4,560  $    5,521  $    7,246  $   12,817  $    70,489
 Servicing Fees  ......................................................         --          --       2,580       3,110        5,508
 Income on Investment in Securitizations  .............................         --          --          --         533        5,027
 Gain on Sale  ........................................................         --          --          --      18,414           --
                                                                        ----------  ----------  ----------  ----------  -----------
Total Revenue  ........................................................      4,560       5,521       9,826      34,874       81,024
Expenses from Operations:
 Personnel  ...........................................................      1,847       2,618       5,922      11,917       32,715
 Communications  ......................................................        404         573         912       1,645        3,903
 Rent  ................................................................        240         382         853       1,195        2,870
 Other Expenses  ......................................................        624         945       1,095       2,047        9,283
                                                                        ----------  ----------  ----------  ----------  -----------
Total Expenses from Operations  .......................................      3,115       4,518       8,782      16,804       48,771
                                                                        ----------  ----------  ----------  ----------  -----------
Earnings from Operations  .............................................      1,445       1,003       1,044      18,070       32,253
Other Income (Expense)  ...............................................       (249)       (213)       (362)       (304)      (4,360)
                                                                        ----------  ----------  ----------  ----------  -----------
Earnings Before Income Taxes and Extraordinary Loss  ..................      1,196         790         682      17,766       27,893
Provision For Income Taxes  ...........................................        462         316         226       7,005       10,875
                                                                        ----------  ----------  ----------  ----------  -----------
Earnings Before Extraordinary Loss  ...................................        734         474         456      10,761       17,018
Extraordinary Loss (net of taxes)  ....................................         --          --          --        (566)          --
                                                                        ----------  ----------  ----------  ----------  -----------
Net Earnings  ......................................................... $      734  $      474  $      456  $   10,195  $    17,018
                                                                        ==========  ==========  ==========  ==========  ===========
Basic Earnings per Common Share  ......................................       $.12        $.08        $.08       $1.49        $1.72
Diluted Earnings per Common Share  ....................................       $.12        $.08        $.08       $1.48        $1.67
Weighted Average Number of Basic Shares Outstanding  ..................  6,000,000   6,000,000   6,000,000   6,827,506    9,907,535
Weighted Average Number of Diluted Shares Outstanding  ................  6,000,000   6,000,000   6,000,000   6,898,870   10,180,900

Other Data:
Weighted Average
Investment in Finance Receivables(1)  ................................. $    1,731  $    3,198  $    5,842  $   13,574  $   107,200
Collections on Managed Receivables(2)  ................................      4,914       6,252      12,420      20,585       85,846
EBITDA(3)  ............................................................      1,538       1,162       1,268      18,751       34,807
Collections Applied to Principal (Accretion) on Finance Receivables  ..        670         832       2,111      (3,413)     (13,145)
Cash Flows Provided by (Used in)
 Operating Activities  ................................................        982       1,207       1,237         258       25,615
 Investing Activities  ................................................       (585)     (4,188)      1,431     (24,951)    (169,619)
 Financing Activities  ................................................       (138)      2,909      (2,374)     31,830      148,024
Charged-off Balance of Managed Receivables(2)  ........................ $  141,241  $  386,164  $1,104,574  $2,529,356  $ 4,904,861
Number of Managed Accounts  ...........................................     67,643     193,566     580,338   1,265,529    1,977,575
Number of Employees  ..................................................         59         124         246         639        1,034
Balance Sheet Data:
Cash and Cash Equivalents  ............................................ $      548  $      476  $      770  $    7,906  $    11,927
Total Debt  ...........................................................         --       3,793       2,106       6,789      111,306
Stockholders' Equity  ................................................. $    1,134  $    1,608  $    2,064  $   46,425  $   102,337
</TABLE>

                                       10
<PAGE>

----------------
(l) Includes all receivables managed by the Company, except for receivables that
    are included in the Company's initial and second securitizations, and
    represents the average investment balance during the period measured by the
    financial statement carrying value of portfolios of receivables determined
    by dividing the total value for the portfolio of receivables at the end of
    each month in the period by the number of months in the period.
(2) Managed receivables includes receivables that Creditrust owns and
    receivables that Creditrust services but does not own, including receivables
    in all of Creditrust's securitizations.
(3) EBITDA is defined as earnings before interest, taxes, depreciation and
    amortization. EBITDA is presented because the Company relies on this
    indicator in the management of its business as a key measure of its ability
    to derive cash from its investing and financing activities and because the
    indicator provides useful information regarding the Company's ability to
    service existing debt, incur additional debt and fund the purchase of
    additional receivables or meet other capital requirements. For instance, an
    increase in EBITDA would generally indicate to the Company that increases in
    income on finance receivables and servicing fees represent increased
    capacity to fund purchases of additional portfolios without reliance on
    external funding sources. Conversely, a reduction in the indicator would
    mean that there was less internally generated cash available for new
    portfolio investments. Additionally, the manner in which the Company
    computes EBITDA may not be the same way in which other companies compute
    similarly described data. Therefore, this data may not be comparable to
    similarly titled measures of other companies.

                                       11
<PAGE>

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Overview

  Creditrust is a leading information-based purchaser, collector and manager of
defaulted consumer receivables. Receivables are the unpaid debts of individuals
to credit grantors, including banks, finance companies, retail merchants and
other service providers. Creditrust seeks to use its proprietary pricing models
and software systems as well as extensive information databases to generate high
rates of return on purchased receivables. Most of its receivables are VISA(R)
and MasterCard(R) credit card accounts that the issuing banks have charged off
their books for non-payment. By purchasing receivables, Creditrust allows credit
grantors to make a recovery on these charged-off accounts.

  From the Company's founding in 1991, the Company has made net purchases of
charged-off receivables (measured at the amount charged off by the credit
grantors that originated the charged-off VISA(R), MasterCard(R) and private
label credit card accounts and consumer loan accounts at the date of charge-off)
aggregating $0.8 million in 1991, $16.2 million in 1992, $38.4 million in 1993,
$38.8 million in 1994, $49.1 million in 1995, $244.9 million in 1996, $718.4
million in 1997, $1.4 billion in 1998, and $2.2 billion in 1999. Creditrust has
invested since its founding in 1991 through December 31, 1999 $215.0 million to
purchase receivables at a significant discount.  At December 31, 1999, the
Company managed 2.0 million accounts with a charged-off amount of over $4.9
billion.

  The following table illustrates Creditrust's revenue and collection experience
for the periods indicated:

<TABLE>
<CAPTION>
                                                                                    As of and for the Year Ended
                                                                             ------------------------------------------
                                                                                            December 31,
                                                                             ------------------------------------------
                                                                                1997           1998            1999
                                                                             -----------   -------------   ------------
                                                                                       (dollars in thousands)
<S>                                                                          <C>            <C>             <C>
Revenues:
  Income on Finance Receivables  .......................................    $    7,246      $   12,817     $   70,489
  Servicing Fees  ......................................................         2,580           3,110          5,508
  Income on Investment in Securitizations  ...........................            --               533          5,027
  Gain on Sale  ........................................................            --          18,414             --
                                                                            ----------      ----------     ----------
Total Revenues  ........................................................         9,826          34,874         81,024
                                                                            ----------      ----------     ----------
Collections on Managed Receivables(1)  .................................        12,420          20,585         85,846
Weighted Average Investment in Finance Receivables(2)  .................         5,842          13,574        107,200
Weighted Average Charged-off Balance on Managed
 Receivables(1)(3)  ....................................................       689,924       1,474,085      3,786,118
Charged-off Balance of Managed Receivables (at end of period)(1)(4)  ...    $1,104,574      $2,529,356     $4,904,861
</TABLE>

----------------
(1) Managed receivables includes receivables that Creditrust owns and
    receivables that Creditrust services but does not own, including receivables
    in all of Creditrust's securitizations.
(2) Includes all receivables managed by the Company, except for receivables that
    are included in the Company's initial and second securitizations, and
    represents the average investment balance during the period measured by the
    financial statement carrying value of portfolios of receivables determined
    by dividing the total value for the portfolio of receivables at the end of
    each month in the period by the number of months in the period.
(3) Represents the average of the charged-off balances managed by the Company
    determined by dividing the total charged-off balance at the end of each
    month in the period by the number of months in the period.
(4) Represents the balance of receivables managed by the Company as of the end
    of the period measured by balances charged off by the credit grantors.
                                 12
<PAGE>

  The Company accounts for its investment in finance receivables on an accrual
basis using 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 D of Notes to Consolidated Financial Statements.

  For accounting purposes, each static pool is measured as a unit for the
estimated economic life of the static pool (similar to a loan). Income on
finance receivables, collections applied to principal on finance receivables and
provisions for loss or impairment are established on a pool by pool basis. The
effective interest rate for each static pool is estimated based on the estimated
monthly collections over the estimated economic life of each pool. The estimated
economic life of each static pool is 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. While these monthly accruals increase the carrying value
of each pool, monthly collections received for each static pool reduce each
static pool's carrying value. To the extent collections in any period exceed the
income accruals for the pool for such period, the carrying value of the pool is
reduced and the reduction is recorded as collections applied to principal. After
the carrying value of any static pool is fully amortized, any further
collections on that pool would be recorded entirely as income on finance
receivables. If the income accrual in any period is greater than collections for
such period, then the carrying value of the pool accretes. Creditrust typically
records accretion in the early months of ownership of the static pool as a
result of collection rates being lower than the estimated effective yield, which
reflects estimated collections for the entire economic life of the static pool.

  Fair value for each static pool is determined by discounting the projected
recovery value (estimated future cash flows) for the pool at the current
effective interest rate being used by the Company. Any measurement of impairment
and any provision for loss is determined separately for each static pool. To the
extent the Company's estimate of future cash flow for a static pool, discounted
at the then current estimated effective interest rate, increases or decreases
the Company adjusts the estimated effective interest rate prospectively. To the
extent that the carrying value of a particular static pool exceeds its fair
value, a valuation allowance will be recognized and charged to expense in the
amount of such an impairment. The Company has not recorded an impairment for any
period to date. The estimated effective interest rate for each static pool is
based on estimates of future cash flows from collections, and actual cash flows
may vary from current estimates.

  The Company monitors its models with a view toward refining the predictability
of both the amount and timing of collections. For the years ended December 31,
1995 and 1996, the Company relied largely on the average past performance of the
Company's entire portfolio. After extensive statistical analysis of static pool
performance data during the year ended December 31, 1997, the Company
implemented a further refinement in its cash flow models. The refinement
included static pool-specific estimates and had the effect of reducing total
future projected cash flows on a portfolio-wide basis. The total effect on the
individual static pools of changes in estimates was to decrease net income for
the year ended December 31, 1997 by approximately $700,000 after taxes from the
amount which would have been computed prior to this change.  Total cash flow for
1997 was unaffected by the change in future estimates, with the result that the
reduction in income on finance receivables was applied to increase the amount of
collections applied to finance receivables.

  In the fourth quarter of 1999, the Company reduced the remaining estimates by
12% to reflect the historical cumulative trend in collections. The effect of the
change in estimate was to reduce earnings by $2.8 million after tax. Total cash
flow for 1999 was unaffected by the change in future estimates. See Note D of
Notes to Consolidated Financial Statements. While the Company believes that its
cash flow models will continue to provide reasonably accurate forecasts of
future collections, changes in collections due to staffing and systems'
capacity, as well as changes in collection patterns within the Company's
portfolios, which may result from a variety of factors beyond the Company's
control, including changes in general economic conditions and changes in
consumer attitudes toward repayment of defaulted obligations, may have an impact
on the Company's future estimates.

                                       13
<PAGE>

  In June 1998, the Company completed its first securitization of finance
receivables (the "Initial Securitization"). The Initial Securitization
included receivables owned by the Company with a charged-off amount of $412
million and a carrying value of $4.8 million as well as $6.5 million of
receivables Creditrust was servicing for a third party with a charged-off amount
of $692 million. These receivables were transferred to Creditrust SPV2, LLC
("SPV2"), a special purpose finance subsidiary. SPV2 issued an aggregate
principal amount of $14.5 million of 6.43% Creditrust Receivables-Backed Notes,
Series 1998-1, which notes are secured by the receivables transferred to SPV2
and a financial guaranty insurance policy. The Company completed its second
securitization in December 1998 (the "Second Securitization"). The Second
Securitization included receivables with a charged-off amount of $956 million
and a carrying value of $28.6 million. The Company transferred the receivables
to Creditrust SPV98-2, LLC ("SPV98-2"), a special purpose finance subsidiary.
SPV98-2 issued an aggregate principal amount of $27.5 million of 8.61%
Creditrust Receivables- Backed Notes, Series 1998-2, which notes are secured by
the receivables transferred to SPV98-2 and a financial guaranty insurance
policy.  In August 1999, the Company completed its third securitization of
finance receivables (the "Third Securitization").  The Third Securitization
included receivables with a charged-off amount of $1.1 billion and a carrying
value of $89 million.  The Company transferred the receivables to Creditrust
SPV99-1, LLC ("SPV99-1"), a special purpose finance subsidiary.  SPV99-1 issued
a aggregate principal amount of $40 million of 9.43% Creditrust Receivables -
Backed Notes, Series 1999-1, which are secured by the receivables transferred to
SPV99-1.

  In the three securitizations, the projected recovery value of the transferred
receivables significantly exceeded the principal balance of the securitization
notes, causing the securitization notes to be over-collateralized. The Company
retains an investment in securitizations for the two 1998 securitizations
representing the residual interest in the securitized receivables. The Company
acts as servicer with respect to the receivables included in the three
securitizations, 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 securitizations.

  After payment of all principal and interest on the securitization notes, the
Company will receive all collections, subject to an obligation in the Initial
Securitization to pay the seller of a portfolio of receivables, which the
Company began servicing in 1997, 10% of collections with respect to this
portfolio after aggregate collections on this portfolio exceed a specified
amount.

   The two 1998 securitizations qualified as sales under generally accepted
accounting principles.  The Third Securitization qualified as a financing
transaction and the assets and liabilities are maintained in the Company's
consolidated balance sheet.  Upon the closing of the Initial Securitization, the
Company: (1) recognized gain on the sale of the owned receivables of $6.0
million, and (2) received total cash of $6.3 million, after payment of the
purchase price of the serviced receivables included in the Initial
Securitization and repayment of associated debt of $7.5 million in the aggregate
and payment of related transaction costs. Of the $6.3 million in total cash,
$435,000 was used to fund a reserve account in trust, leaving net cash of $5.8
million for use in the Company's business. Upon the closing of the Second
Securitization, the Company: (1) recognized gain on sale of $11.0 million, and
(2) received total cash of $7.3 million, after repayment of associated debt and
the Company's cash used to finance the receivables of $19.5 million in the
aggregate and payment of related transaction costs. Of the $7.3 million in total
cash, $1.6 million was used to fund a reserve account in trust, leaving net cash
of $5.7 million for use in the Company's business. The investment in
securitizations 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. This accrual is a non-cash item included in the statement of
earnings as interest on investment in securitizations and in the balance sheet
as a component of the fair value of the investment in securitizations. Once the
securitization notes are retired, recoveries will be applied to reduce the
carrying amount of the investment in securitizations. The Company records its
investment in securitizations at fair value, and any unrealized gains and
losses, net of the related tax effect, generally are not reflected in earnings
but are recorded as a separate component of stockholders' equity until realized.
The fair value of the Company's investment in securitizations was $31.2 million
at December 31, 1999, which included an unrealized gain of $4.2 million (pre-
tax) or $2.6 million (net of taxes). A decline in the value of the investment in
securitizations which is

                                       14
<PAGE>

larger than any unrealized gain and which is deemed other than temporary would
be charged to earnings and result in the establishment of a new cost basis. See
Notes to Consolidated Financial Statements for additional discussion concerning
the financial statement effects of the securitizations.

  In August 1999, the Company borrowed $40 million in an interim financing
through Creditrust SPV99-2, LLC ("SPV99-2"), a wholly owned subsidiary. The loan
is structured similar to a securitization. SPV99-2 issued a note to
institutional investors and used the proceeds to purchase $37.3 million of
receivables. The notes are backed by a parent guarantee from the Company. Unless
this facility is fully retired by May 2000, its terms require a conversion to a
term loan due August 2003. The facility requires all collections to be used for
debt service and requires the Company to use any proceeds from capital markets
transactions or certain asset sales to pay down the debt. The interest rate is
12% per annum, until conversion to a term loan, and 15% thereafter. Upon
conversion, a conversion fee of 3.25% is payable out of the collections on the
receivables, and warrants at market price for 10% of the fully diluted common
stock at the time of conversion will be released from escrow to the lenders. As
of December 31, 1999, the Company had $35.6 million outstanding under this
facility. Interest expense totaled $1.9 million in 1999. See Note I to the
Consolidated Financial Statements.

  Income taxes have been provided in the results of operations based on the
statutory federal and state rates on accounting income. Temporary differences
arise because income on finance receivables is recognized on the cost recovery
method for federal income tax purposes. Under the cost recovery method, gross
collections on finance receivables are not taxable until the cost of the finance
receivables has been collected. In addition, temporary differences arise from
gain on sale because of securitizations, which are treated as financings for tax
purposes. Permanent differences between the statutory rates and actual rates are
minimal. In the past the Company has financed certain portfolio purchases
through participation with certain investors, but does not anticipate that this
will be used as a funding source in the future. Imputed loan repayments and
interest expense on payments to participants are recorded as costs for tax
purposes when due based on collection participation levels. Temporary
differences in recognition of income on finance receivables and gain on sale
have resulted in deferred tax liabilities. Temporary differences in recognition
of payments to participants and deferred gain generally have accumulated
deferred tax assets. The Company's deferred tax liabilities have grown as a
result of the rapid increase in purchases of receivables and gains from
securitizations by the Company, providing the Company with additional liquidity
offered by the deferred tax liabilities. Management expects deferred tax
liabilities to increase as long as the operating expenses on existing and
additional finance receivables exceed collections on fully cost recovered
portfolios.

                                       15
<PAGE>

Results of Operations

  The following table sets forth certain statement of earnings and supplemental
cash flow data on an historical basis, each as a percentage of revenues:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                  -------------------------------------
                                                                     1997          1998         1999
                                                                  -----------   ----------   ----------
<S>                                                               <C>           <C>          <C>
Revenue:
  Income on finance receivables  ........................             73.7%        36.8%        87.0%
  Servicing fees  .......................................             26.3          8.9          6.8
  Income on investment in securitizations  ..............               --          1.5          6.2
  Gain on sale  .........................................               --         52.8           --
                                                                     -----        -----       ------
     Total Revenue  .....................................            100.0        100.0        100.0
Expenses From Operations:
  Personnel  ............................................             60.3         34.2         40.4
  Communications  .......................................              9.3          4.7          4.8
  Rent and other occupancy  .............................              8.7          3.4          3.5
  Other expenses  .......................................             11.1          5.9         11.5
                                                                     -----        -----       ------
     Total Expenses From Operations  ....................             89.4         48.2         60.2
                                                                     -----        -----       ------
Earnings from Operations  ...............................             10.6         51.8         39.8
Other Income (Expense)
  Interest and other  ...................................              0.1          0.9          1.9
  Interest expense  .....................................             (3.8)        (1.8)        (7.3)
                                                                     -----        -----       ------
Earnings before income taxes and extraordinary loss  ....              6.9         50.9         34.4
Provision for income taxes  .............................              2.3         20.1         13.4
                                                                     -----        -----       ------
Earnings before extraordinary loss  .....................              4.6         30.8         21.0
Extraordinary loss (net of taxes)  ......................               --         (1.6)          --
                                                                     -----        -----       ------
Net Earnings  ...........................................              4.6         29.2         21.0
                                                                     =====        =====       ======
EBITDA...................................................             12.9         53.8         43.0
Collections applied to principal (accretion)
  on receivables.........................................             21.5%       (9.8)%      (16.2)%
</TABLE>

Year Ended December 31, 1999 Compared to Year Ended December 31, 1998

  Revenues.   Total revenues increased by $46.1 million, or 132.3%, from $34.9
million for the year ended December 31, 1998 to $81.0 million for the year ended
December 31, 1999.  This increase was primarily due to increased income on
finance receivables resulting from receivables purchased during the year.

  Income on finance receivables increased by $57.7 million, or 450%, from $12.8
million for the year ended December 31, 1998 to $70.5 million for the year ended
December 31, 1999. This increase was attributable to the purchase of receivables
throughout 1999 with proceeds from the follow-on public offering, SPV 99-2
financing, the Third Securitization, and the Company's Warehouse and revolving
credit facilities. The Company's weighted average investment in receivables
increased by $93.6 million, or 689.7%, from $13.6 million during the year ended
December 31, 1998 to $107.2 million during the year ended December 31, 1999. The
weighted average charged-off balance of the receivables managed by the Company
correspondingly increased by $2.3 billion, or 156.8% from $1.5 billion at
December 31, 1998 to $3.8 billion at December 31, 1999. Collections on managed
receivables increased by $65.2 million, or 317%, from $20.6 million for the year
ended December 31, 1998 to $85.8 million for the year ended December 31, 1999.
The growth in managed collections was higher than the growth in the managed
charged-off balance principally because the Company purchased what it believes
to be more valuable receivables more recently charged-off by the originating
institution. In the fourth quarter of 1999, the Company reduced the remaining
collection estimates by 12% to reflect the historical cumulative trend in
collections. The effect of the change in estimate was to reduce income on
finance receivables in 1999 by $4.6 million, or $2.8 million after tax.

                                       16
<PAGE>

  Servicing fees increased by $2.4 million, or 77.1%, from $3.1 million for the
year ended December 31, 1998 to $5.5 million for the year ended December 31,
1999.  The increase was due to the receipt of servicing fees for all of 1999
under the Initial Securitization and the Second Securitization, compared to six
months of servicing fees under the Initial Securitization in 1998.

  Income on investment in securitizations increased $4.5 million, or 842.2%,
from $534,000 for the year ended December 31, 1998 to $5.0 million for the year
ended December 31, 1999.  The income on investment in securitizations increased
because in 1999 the Company recognized income accrued on the Second and Third
Securitizations and the twelve months of income accrued on the Initial
Securitization as compared to six months of income accrued in 1998.

  Gain on sale for 1998 included $17.0 million gain on sale resulting from the
Company's Initial and Second Securitizations, an $800,000 gain on sale resulting
from the sale of a portfolio of receivables, and a $658,000 gain on sale
resulting from the resale of a portfolio of receivables repurchased under a
settlement agreement.  In this latter transaction, previously deferred income of
$895,000 was recognized against a $237,000 cost of resale.  There were no
comparable gain on sale transactions in 1999.

  Expenses from Operations.   Total expenses from operations, prior to special
charges of $1.7 million, increased by $30.2 million, or 179.9%, from $16.8
million for the year ended December 31, 1998 to $47.0 million for the year ended
December 31, 1999.  Operating expenses increased in 1999 primarily as a result
of increased personnel expenses associated with the rapid growth of the
Company's managed receivables base and associated recovery efforts.  Included in
operating expenses are special charges of $1.3 million relating to the
termination of a portion of a forward flow agreement and $436,000 for the write
down of deferred costs associated with a terminated capital markets transaction.

  Personnel expenses increased by $20.8 million, or 174.5%, from $11.9 million
for the year ended December 31, 1998 to $32.7 million for the year ended
December 31, 1999.  Major categories of personnel expense increases included:
(a) recruiting, training and compensation costs associated with the increase in
the number of employees from 639 to 1,034 needed to service the larger volume of
managed receivables, and (b) additional costs for development, installation and
training associated with the Company's expanded information technology systems.

  Communications costs increased by $2.3 million, or 137.3%, from $1.6 million
for the year ended December 31, 1998 to $3.9 million for the year ended December
31, 1999.  This increase was due to greater use of credit reporting and long
distance telephone services to service the higher volume of managed receivables.

  Professional fees increased by $2.0 million, or 200%, from $1.0 million for
the year ended December 31, 1998 to $3.0 million for the year ended December 31,
1999, primarily as a result of increased accounting fees and legal costs,
investor relations expenses, and other consulting fees.

  Contingency legal and court costs increased from $349,000 for the year ended
December 31, 1998 to $2.4 million for the year ended December 31, 1999.  This
increase is due to the increased volume of receivables purchased in 1999 and the
proportionate share of accounts being collected by attorneys.

  Rent and other occupancy costs increased from $1.2 million for the year ended
December 31, 1998 to $2.9 million for the year ended December 31, 1999 as the
Company entered into its third operations center lease in July 1999.

  General and administrative expenses increased from $686,000 for the year ended
December 31, 1998 to $2.1 million for the year ended December 31, 1999.  These
expenses increased proportionately with the increase in personnel and include
office expenses, travel and entertainment, trustee fees, bank service charges,
repairs and maintenance, and property taxes.

                                       17
<PAGE>

  Earnings from Operations.   Earnings from operations increased by $14.2
million, or 78.5%, from $18.1 million for the year ended December 31, 1998 to
$32.3 million for the year ended December 31, 1999.  The increase was due to the
growth in income on finance receivables revenue attributable to the high volume
of receivables purchases in 1999, offset by an expected increase in operating
expenses attributable to the Company's growth in recovery efforts.

  Other Income (Expense).   Other income (expense) increased from an expense of
$304,000 for the year ended December 31, 1998 to an expense of $4.4 million for
the year ended December 31, 1999.  This increase resulted from a $1.2 million
increase in interest and other income primarily due to interest earned on short
term cash equivalent investments which were acquired with proceeds from the
follow-on public offering and the Third Securitization offset by an increase in
interest expense of $5.3 million as a result of higher borrowing incurred in
connection with the Third Securitization, interim financing and the credit
facilities.

  Earnings Before Income Taxes and Extraordinary Loss.   As the result of the
foregoing, earnings before income taxes and extraordinary loss increased from
$17.8 million for the year ended December 31, 1998 to $27.9 million for the year
ended December 31, 1999.

  Provision for Income Taxes.   Income tax rates were 39% for the years ended
December 31, 1998 and 1999. The Company's effective tax rate may fluctuate as a
result of changes in pre-tax income and nondeductible expenses. Deferred tax
liabilities increased from $11.9 million at December 31, 1998 to $20.1 million
at December 31, 1999.

  Net Earnings.   Net earnings increased by $6.8 million, or 66.9% from $10.2
million for the year ended December 31, 1998 to $17.0 million for the year ended
December 31, 1999.  This increase resulted from the same factors which affected
earnings from operations, along with a $3.9 million increase in tax expense.

  EBITDA.   EBITDA increased by $16.0 million, or 85.6%, from $18.8 million for
the year ended December 31, 1998 to $34.8 million for the year ended December
31, 1999.  EBITDA increased slightly more than earnings from operations due to
growth in interest income and depreciation expense of $1.8 million in 1999.

Year Ended December 31, 1998 Compared to Year Ended December 31, 1997

  Revenues.   Total revenues increased by $25.1 million, or 254.9%, from $9.8
million for the year ended December 31, 1997 to $34.9 million for the year ended
December 31, 1998. This increase was largely due to $18.4 million in gain on
sale and increased income on finance receivables resulting from receivables
purchases during the 1998.

  Income on finance receivables increased by $5.6 million, or 76.9%, from $7.2
million for the year ended December 31, 1997 to $12.8 million for the year ended
December 31, 1998. This increase was attributable to the purchase of receivables
in the last three quarters of 1998 with proceeds from the sale of the Company's
Subordinated Notes, Series 1998 (the "Subordinated Notes"), the initial public
offering and the Company's credit facilities. The Company's weighted average
investment in receivables increased by $7.8 million, or 132.4%, from $5.8
million during the year ended December 31, 1997 to $13.6 million during the year
ended December 31, 1998. The weighted average charged-off balance of the
receivables managed by the Company correspondingly increased by $784 million, or
113.7% from $690 million at December 31, 1997 to $1.5 billion at December 31,
1998. Collections on managed receivables increased by $8.2 million, or 65.7%,
from $12.4 million for the year ended December 31, 1997 to $20.6 million for the
year ended December 31, 1998. The growth in collections was lower than the
growth in the managed receivables because lower recovery rates are typically
experienced in the early months of ownership of receivables.

                                       18
<PAGE>

  Servicing fees increased by $530,000, or 20.5%, from $2.6 million for the year
ended December 31, 1997 to $3.1 million for the year ended December 31, 1998.
The increase was due to the receipt of servicing fees under the Initial
Securitization. During the last six months of 1997 and the first six months of
1998, the Company received servicing fees associated with certain receivables
which ceased when they were included in the Initial Securitization.

  Income on investment in securitizations was $534,000 for the year ended
December 31, 1998. This revenue was associated with the interest accrual on the
Company's investment in securitizations, resulting primarily from the Initial
Securitization.

  Gain on sale for 1998 included $17.0 million gain on sale resulting from the
Company's second and fourth quarter 1998 securitizations, an $800,000 gain on
sale in the third quarter of 1998 resulting from the sale of a portfolio of
receivables and a $658,000 gain on sale in the first quarter of 1998 resulting
from the resale of a portfolio of receivables repurchased under a settlement
agreement. In this latter transaction, previously deferred income of $895,000
was recognized against a $237,000 cost of resale.

  Expenses from Operations.   Total expenses from operations increased by $8.0
million, or 91.4%, from $8.8 million for the year ended December 31, 1997 to
$16.8 million for the year ended December 31, 1998. Operating expenses increased
in 1998 primarily as a result of increased personnel expenses associated with
the rapid growth of the Company's managed receivables base and associated
recovery efforts. The Company's communications and rent expenses also increased
as the Company's managed receivables base grew. Operating expenses as a percent
of revenues decreased to 48.2% of revenues for the year ended December 31, 1998,
as compared to 89.4% of revenues for the year ended December 31, 1997, as the
revenues resulting from gain on sale recognized in 1998 substantially offset
operating expense growth.

  Personnel expenses increased by $6.0 million, or 101.2%, from $5.9 million for
the year ended December 31, 1997 to $11.9 million for the year ended December
31, 1998. Major categories of personnel expense increases included: (a)
recruiting, training and compensation costs associated with the increase in the
number of employees from 246 to 639 needed to service the larger volume of
managed receivables, and (b) additional costs for development, installation and
training associated with the Company's expanded information technology systems.

  Communications costs increased by $733,000, or 80.5%, from $912,000 for the
year ended December 31, 1997 to $1.6 million for the year ended December 31,
1998. This increase was due to greater use of credit reporting and long distance
telephone services to service the higher volume of managed receivables.

  Rent and other occupancy costs increased from $853,000 for the year ended
December 31, 1997 to $1.2 million for the year ended December 31, 1998 as the
Company completed its first full year in a second operations center which opened
in June 1997. The Company will incur additional rent and occupancy expenses in
1999 associated with its third facility.

  Other expenses increased from $1.1 million for the year ended December 31,
1997 to $2.0 million for the year ended December 31, 1998, primarily as a result
of increased professional fees, including accounting and legal fees associated
with the Company's capital raising and securitization activities during 1998,
and increases in overall staffing levels. Other expenses for the years ended
December 31, 1997 and 1998 included (a) contingency legal and court costs of
$320,000 and $349,000, respectively, (b) professional fees of $504,000 and $1.0
million, respectively, and (c) general and administrative expenses of $271,000
and $686,000, respectively.

  Earnings from Operations.   Earnings from operations increased by $17.1
million from $1.0 million for the year ended December 31, 1997 to $18.1 million
for the year ended December 31, 1998. This increase resulted from numerous
factors, particularly the increase in gain on sale and income on finance
receivables, which more than offset the substantial growth in operating costs
associated with the additions to corporate infrastructure to support a
substantially larger base of operations.

                                       19
<PAGE>

  Other Income (Expense).   Other income (expense) decreased from an expense of
$362,000 for the year ended December 31, 1997 to an expense of $304,000 for the
year ended December 31, 1998. This decrease resulted from a $298,000 increase in
interest and other income primarily due to interest earned on short term cash
equivalent investments which were acquired with proceeds from the initial public
offering offset by an increase in interest expense of $238,000 as a result of
higher borrowing incurred in connection with the Subordinated Notes and the
credit facilities.

  Earnings Before Income Taxes and Extraordinary Loss.   As the result of the
foregoing, earnings before income taxes increased from $682,000 for the year
ended December 31, 1997 to $17.8 million for the year ended December 31, 1998.

  Provision for Income Taxes.   Income tax rates were 33% for the year ended
December 31, 1997 and 39% for the year ended December 31, 1998. The Company's
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 $11.9 million at December 31, 1998, principally due to the
deferred taxes of $10.8 million provided for on the gain on sale related to both
securitizations, which were treated as financing transactions for tax purposes,
and the reversal of a deferred tax benefit of $345,000 on the first quarter
portfolio resale and recognition of deferred income which was previously taxed,
offset by $6.1 million in net operating loss carryforward.

  Extraordinary Loss (Net of Taxes).   The extraordinary loss of $566,000 (net
of taxes) recognized for the year ended December 31, 1998 resulted from the
early retirement of $5 million of Subordinated Notes required to be repaid upon
the closing of the Company's initial public offering. 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, $515,000 of offering
costs were incurred in connection with the Subordinated Notes net of
amortization and charged to extraordinary loss.

  Net Earnings.   Net earnings increased by $9.7 million from $456,000 for the
year ended December 31, 1997 to $10.2 million for the year ended December 31,
1998. This increase resulted from the same factors which affected earnings from
operations, along with a $6.8 million increase in tax expenses and the
extraordinary loss of $556,000 upon repayment of the Subordinated Notes.

  EBITDA.   EBITDA increased by $17.5 million from $1.3 million for the year
ended December 31, 1997 to $18.8 million for the year ended December 31, 1998.
EBITDA increased slightly more than earnings from operations primarily because
of growth in interest income in 1998.

Financial Condition

  Cash and Cash Equivalents.   Cash and cash equivalents increased from $7.9
million as of December 31, 1998 to $11.9 million as of December 31, 1999, as a
result of an increase in net cash provided by operating activities and net cash
from financing activities including the follow-on public offering, the interim
financing facility, and the Third Securitization, offset by investing
activities, principally purchases of receivables.

  Finance Receivables.   Investment in finance receivables increased 598.4% to
$187.9 million, as of December 31, 1999 from $26.9 million as of December 31,
1998.  The Company purchased $147.9 million of financed receivables during the
year ended December 31, 1999 with a portion of the net proceeds from the follow-
on public offering, the Second Securitization, the Third Securitization, the
interim financing facility, the borrowings available under the Company's credit
facilities, and other cash on hand.  Net accretion on finance receivables of
$13.1 million was recorded for the year ended December 31, 1999 due to the
effects of the accelerated rate of receivables purchases over the latter part of
the year and collection patterns in early months of the collection cycle.

                                       20
<PAGE>

  Investment in Securitizations.   Investment in securitizations increased from
$30.3 million at December 31, 1998 to $31.2 million as of December 31, 1999.
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 retained investment in securitizations is accounted for at
fair value. The fair value of the investment in securitizations was estimated by
management based on future projected recoveries employing the Company's
Portfolio Analysis Tool (PAT). PAT projected recoveries were reduced by 20% to
take into account unforeseen reduced collection trends and further reduced for
the estimated costs to service in the future at the 20% servicing rates
established in the servicing documents and then discounted at 12% per annum,
reflecting the Company's estimate of a reasonable rate of return on a
subordinated retained interest. This methodology results in an effective total
discount of over 30% applied to the Company's projected recoveries. Interest
income is accrued on the carrying value of the investment in securitizations at
12% per annum for the estimated remaining life of the receivables of
approximately five years. Once the securitization notes are retired, any
collections will be applied to amortize the investment in securitizations
including accrued interest income. The investment in securitizations are
accounted for under the provisions of SFAS 115 as a security available for sale
and marked to market in the stockholders' equity accounts of the Company. As of
December 31, 1998 the amount of fair value over amortized cost is recorded as
unrealized gain in the Company's stockholders' equity accounts.  As of December
31, 1999, the fair value of investment in securitizations was $31.2 million and
the unrealized gain was $4.2 million (pre-tax) or $2.6 million (net of taxes).
Unrealized gains may fluctuate based upon changes in the discount rate utilized
by the Company and changes in collection rates.

  Property and Equipment.   Property and equipment, net, increased 279.6% to
$9.3 million as of December 31, 1999 from $2.5 million as of December 31, 1998
due to $6.8 million in purchases of computer equipment, furniture, leaseholds
primarily due to the opening of the Company's third operations center.

  Deferred Costs.  Deferred costs increased to $3.1 million as of December 31,
1999 from $475,000 as of December 31, 1998. The deferred costs as of December
31, 1998 represent costs incurred related to the establishment of the revolving
line of credit and warehouse facility.  The deferred costs as of December 31,
1999 also represent costs associated with the third securitization and the
interim financing.

  Other Assets.  Other assets increased to $2.1 million as of December 31, 1999
from $733,000 as of December 31, 1998.  Other assets as of December 31, 1999
consisted of a receivable from capital lease commitment, servicing fee
receivable from the initial securitization and the second securitization,
prepaid insurance and deposits.  Other assets as of December 31, 1998 consisted
of servicing fee receivable from the initial securitization and the second
securitization, prepaid insurance and deposits.

  Accounts Payable and Accrued Expenses.   Accounts payable and accrued expenses
increased 207.5% from $1.6 million at December 31, 1998 to $5.0 million at
December 31, 1999, due to a proportionate increase in operating expenses
primarily associated with increased personnel and related costs.

  Notes Payable and Capitalized Lease Obligations.   Notes payable increased
from $6.8 million as of December 31, 1998 to $111.3 million as of December 31,
1999.  Capitalized lease obligations increased from $1.7 million to $5.2 million
for the same period.  The increase in notes payable was attributable to
receivables purchased under the Company's line of credit and warehouse
facilities, the third securitization, and the interim financing facility.  The
increase in capitalized lease obligations is due to equipment purchases net of
principal lease payments, principally to build out the third operations center
and new information technology center.

  Other Liabilities.   Other liabilities increased $1.3 million from $346,000 as
of December 31, 1998 to $1.6 million as of December 31, 1999.  Other liabilities
as of December 31, 1999 and 1998 consisted primarily of lease incentives
attributable to the Company's facilities leases.  During 1999, the Company
recorded $1.2 million in lease incentives relating to landlord paid tenant
improvements for its third operations center.

                                       21
<PAGE>

  Deferred Tax Liability.   The Company's deferred tax liability at December 31,
1999 was $20.1 million compared to $11.9 million as of December 31, 1998.  This
increase of $8.2 million was primarily attributable to timing differences for
tax purposes of the income on finance receivables.

  Total Stockholders' Equity.   Total stockholders' equity increased $55.9
million to $102.3 million at December 31, 1999 from $46.4 million at December
31, 1998 as a result of net income of $17.0 million during year ended December
31, 1999, $42.5 million of additional paid in capital resulting from the
Company's follow-on public offering, $895,000 from issuance common stock from
exercises of warrants and options, reduced by $4.5 million (net of taxes) from
unrealized gains related to the fair value of the Company's investment in
securitizations.

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 purchase receivables have been through equity
offerings, securitizations of finance receivables, borrowings under two credit
facilities and cash flow from operations.

  In September 1998, the Company, through Creditrust Funding I, LLC, a wholly
owned consolidated special purpose financing subsidiary, entered into a
securitized receivables acquisition facility (the "Warehouse Facility") with
Banco Santander, New York. Utilizing an indenture and servicing agreement and an
independent trustee, the Company secured an initial $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 certain
receivables to be purchased by the Company. The Company placed some of the
receivables assembled in the facility into the securitizations completed in
December 1998 and August 1999, and although not required under the Warehouse
Facility, may securitize additional receivables that are part of this trust
estate, subject to market conditions. All of the designated cash reserves
available after pay off of the Company's Initial and Second Securitizations will
be applied as additional reserves for the Warehouse Facility. The Company's
right to service the receivables funded by the Warehouse Facility automatically
terminates on a monthly basis subject to reappointment by the note insurer.
Generally, the Warehouse Facility provided 95% of the acquisition cost of
receivables purchased and the Company funded the remaining 5%. The Company also
made a one time $900,000 liquidity reserve payment. Borrowings under the
Warehouse Facility are interest-only for six months, after which time all
collections of receivables, after payment of servicing costs including the
servicing fee for the Company, are used to reduced the borrowings. The interest
only period ended with February 2000. The Warehouse Facility was amended in
February 2000, requiring the facility to be reduced to $19.0 million by July 10,
2000. Debt service on the Warehouse Facility is interest only during a six month
revolving period and thereafter comprised of all collections from receivables
less a 20% servicing fee. In February 2000, the fee increased to 35% pursuant to
the amended indenture and servicing agreement. These servicing fees are
eliminated in consolidation. There is no availability remaining under this
facility. See Note I to the Consolidated Financial Statements.

  In October 1998, the Company entered into a $20.0 million revolving line of
credit with a commercial lender to provide receivables acquisition financing
(the "Line of Credit Facility") with Sunrock Capital Corp., a commercial lender.
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 was based on
prime plus 0.5% or LIBOR plus 2.5% at the option of the Company on each advance.
Effective April 1, 2000, interest is prime plus 2.5%. The facility is secured by
substantially all of the Company's assets, other than receivables in the
Warehouse Facility, the securitizations and the SPV 99-2 facility. Debt service
on the Line of Credit Facility is interest only for six months after a file is
purchased. The interest only period ended with February 2000. After six months,
principal is amortized over twenty-four months. The remaining availability of
$4.1 million is subject to lender approval. See Note I to the Consolidated
Financial Statements.

                                       22
<PAGE>

  On March 19, 1999, the Company commenced a follow-on public offering of 2.4
million shares of common stock at a public offering price of $19.00 per share.
After payment of underwriting discounts and commissions and other offering
expenses, the Company received net proceeds of $42.5 million.  The proceeds were
used to purchase additional portfolios and contribute to working capital.

  In August 1999, the Company borrowed $40 million in an interim financing
through Creditrust SPV99-2, LLC ("SPV99-2"), a wholly owned subsidiary. The loan
is structured similar to a securitization. SPV99-2 issued a note to
institutional investors and used the proceeds to purchase $37.3 million of
receivables. The notes are backed by a parent guarantee from the Company. Unless
this facility is fully retired by May 2000, its terms require a conversion to a
term loan due August 2003. The facility requires all collections to be used for
debt service and requires the Company to use any proceeds from capital markets
transactions or certain asset sales to pay down the debt. The interest rate is
12% per annum, until conversion to a term loan, and 15% thereafter. Upon
conversion, a conversion fee of 3.25% is payable out of the collections on the
receivables, and warrants at market price for 10% of the fully diluted common
stock at the time of conversion will be released from escrow to the lenders. As
of December 31, 1999, the Company had $35.6 million outstanding under this
facility. Interest expense totaled $1.9 million in 1999. See Note I to the
Consolidated Financial Statements.

  On August 29, 1999, the Company completed its third securitization of finance
receivables (the "Third Securitization").  The Third Securitization included
receivables with a charged-off amount of $1.1 billion and a carrying value of
$89 million.  The Company transferred the receivables to Creditrust SPV99-1, LLC
("SPV99-1"), a special purpose finance subsidiary.  SPV99-1 issued an aggregate
principal amount of $40 million of 9.43% Creditrust Receivables - Backed Notes,
Series 1999-1, which are secured by the receivables transferred to SPV99-1.  See
Note I to the Consolidated Financial Statements.

  In March 2000, the Company borrowed $648,000 from its Chairman of the Board
and Chief Executive Officer pursuant to a short-term note. The proceeds of the
note were used to pay an obligation of the Company under the Line of Credit
Facility. The note matures on April 16, 2000 and bears interest at 6% per annum,
payable upon maturity.

  Creditrust had entered into forward flow contracts with a number of credit
grantors. These contracts obligated Creditrust to make monthly purchases of
receivables portfolios provided they met certain agreed-upon criteria. These
commitments have expired or terminated. The Company does not currently intend to
enter into new forward flow contracts. Instead, the Company will purchase
receivables that meet the Company's criteria when such receivables become
available. See Note M to Consolidated Financial Statements.

  The Company is no longer pursuing the $55 million financing as outlined in the
February 2000 term sheet. The Company continues to seek additional financing.

  The debt service requirements associated with borrowings under the Company's
credit facilities have significantly increased liquidity requirements. Both the
Line of Credit Facility and the Warehouse Facility interest only periods have
expired and no further borrowings are permitted under the Warehouse Facility and
the Line of Credit Facility is subject to lender approval. The Company's
liquidity has also been adversely impacted by its lower than estimated
collections and higher cost of receivables purchased in 1999 under forward flow
contracts. The Company has experienced difficulty in obtaining financing with
amortization and other terms appropriately matched to the anticipated cash flows
from receivables that would be purchased with the financing. The Company
believes that other receivables purchasers have experienced similar difficulties
in this financial market. The Company anticipates that its operating cash flow
and strategic sales of receivables that occur subsequent to consent by various
lenders will be sufficient to meet its anticipated future operating expenses,
and to service its debt requirements as they become due. However, without
additional financing to buy receivables, the Company will not be able to grow.
An extended period of no further financing would require management to take
steps to reduce operating expenses to stay in line with reducing revenues that
accompany a static receivables base.

                                       23
<PAGE>

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. 99 for 1999).  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. As of the date of this filing, the Company has not
experienced any significant system failures, miscalculations, or any disruption
of operations including, among other things, a temporary inability to process
transactions, send letters and statements or engage in similar activities.

Inflation

  The Company believes that inflation has not had a material impact on its
results of operations for the three years ended December 31, 1997, 1998 and
1999.

Risk Factors and Forward-Looking Statements

  You should carefully consider the risks described below. If any of the
following risks actually occur, our business, financial condition or results of
future operations could be materially adversely affected. This Annual Report
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in the forward-
looking statements as a result of many factors, including the risks faced by us
described below and elsewhere in this Annual Report.

Growth Rate--We may not be able to maintain our growth rate.

  We have rapidly expanded and developed our business during the last two years.
This expansion and development has placed and will continue to place great
demands on our management, administrative, operational and financial resources.
We may not be able to finance this anticipated growth, or manage it effectively,
which would harm our business, results of operations and financial condition,
and our ability to meet our debt service obligations. Inability to manage this
growth could also affect our ability to fulfill our servicing obligations with
respect to various securitized pools of assets for which we act as servicer.
Future growth and development will depend on numerous factors, including our
ability to :

  .  develop and expand relationships with credit grantors;

  .  recruit, train and retain a sufficient number of qualified employees;

  .  maintain quality service to our customers and credit grantors; and

  .  enhance and maintain our information technology, operational and financial
     systems.

Labor Resources--Our growth and profitability depend on adequate labor
resources.

  The consumer debt collection business is labor intensive and generally
experiences high rates of personnel turnover. Our business requires us to
recruit and train significant numbers of qualified personnel. If we are unable
to recruit and retain an adequate number of qualified employees, we could be
forced to limit our growth or possibly curtail the collection activities we
perform for ourselves or our subsidiaries, including various securitization
vehicles. If companies in this business and similar industries, such as the
collection agency business and the teleservices and telemarketing industries,
increase their efforts to recruit available qualified employees, or if new
companies recruit in our labor market, our operations could be adversely
affected.

                                       24
<PAGE>

Substantial Debt--Our debt levels could limit flexibility in responding to
business developments and result in a competitive disadvantage.

  Our level of debt could result in a number of adverse effects, including:

  .  increasing our vulnerability to a downturn in our business;

  .  limiting our ability to obtain necessary financing in the future;

  .  requiring us to dedicate a substantial portion of our cash flows from
     operations to pay debt service obligations rather than for other purposes,
     such as working capital, purchasing additional portfolios of consumer
     receivables or capital expenditures;

  .  limiting our flexibility to plan for, or react to, changes in our business
     and market; and

  .  making us more highly leveraged than some of our competitors, which may
     place us at a competitive disadvantage.

  A portion of the debt on Creditrust's balance sheet is non-recourse to
Creditrust. The cash flows on assets associated with some of the debt may be
restricted to servicing the non-recourse debt and may not be available generally
to Creditrust.

Possible Losses--We may generate losses on consumer receivables if we are not
successful at recovering in excess of our purchase and servicing costs.

  We purchase, own, and manage consumer receivables generated by consumer credit
card and other consumer credit transactions.  These are obligations that the
individual consumer has failed to pay when due.  If we are unable to obtain
recoveries on the receivables in amounts in excess of the amount paid for the
receivables, we could incur significant losses, which could make it difficult
for us to obtain funds to continue operations or repay debts.  Our future
profitability and our ability to finance further purchases of receivables
depends on success in predicting collectibility and cash flows on our
pools of receivables. However, actual recoveries on the receivables may vary as
a result of a variety of factors, including general economic conditions and
other factors beyond our control and may be less than the amount of expected
recoveries.

Reporting Estimates--We use estimates in reporting our results.

  We recognize revenue based on estimates of future collections on the pools of
receivables we manage. Although estimates are based on statistical analysis, the
actual amount collected on these pools may not correlate with our historical
statistical experience. We have also engaged in two securitization transactions
that have resulted in gain on sale and the recognition of residual interests,
although we do not intend to structure future transactions to result in gain on
sale income. The accounting for securitizations also relies on estimates.

  If collections on these pools are less than estimated, we may be required to
take a charge to earnings in an amount that could materially adversely affect
our earnings. Similarly, we would be required to take a charge to earnings if
there was a decline in the fair value of the residual investment in
securitizations which was larger than any unrealized gain and was deemed other
than temporary.

                                       25
<PAGE>

  Unanticipated future events, including refinements to our cash flow models,
may result in changes in estimates in future periods. We adjust our models with
a view toward refining the predictability of both the amount and timing of
collections. For the years ended December 31, 1995 and 1996, we relied largely
on the average past performance of our entire portfolio. After extensive
statistical analysis of static pool performance data during the year ended
December 31, 1997, we implemented a further refinement in our cash flow models.
The refinement included static, pool-specific estimates and had the effect of
reducing total future projected cash flows on a portfolio-wide basis. The total
effect on the individual static pools of this change in estimates was to
decrease our net earnings for the year ended December 31, 1997 by approximately
$700,000 after taxes from the amount that would have been computed prior to this
change. In the fourth quarter of 1999, the Company reduced the remaining
estimates by 12% to reflect the historical cumulative trend in collections.
While we believe that our cash flow models will continue to provide reasonably
accurate forecasts of future collections, changes in collections due to staffing
and systems' capacity, as well as changes in collection patterns within our
portfolios, which may result from a variety of factors beyond our control,
including changes in general economic conditions and changes in consumer
attitudes toward repayment of defaulted obligations, may make previous estimates
inaccurate or alter the way we make future estimates.

Receivables Market--We may experience a shortage of available receivables for
purchase.

  Our ability to grow and to meet our debt service obligations depends upon the
growth in the level of our operations, which in turn depends upon continued
availability of receivables that meet our requirements. The availability of
portfolios of receivables for purchase at favorable prices depends on a number
of factors outside of our control, including the continuation of the current
growth trend in consumer debt generally and defaulted consumer debt in
particular and competitive factors affecting potential purchasers and sellers of
portfolios of receivables. Any slowing in the growth of consumer debt or
defaulted consumer debt could constrain the supply of consumer receivables
available at attractive prices. If new competitors enter the business, access to
additional consumer receivables may also become limited. In addition, if
competing buyers raise the prices they are willing to pay for portfolios of
consumer receivables above those we may deem appropriate, we may be unable to
buy these receivables at prices consistent with return targets that would assure
adequate levels of revenues for debt service.

Securitizations--We engage in securitization transactions, which could expose us
to risk.

  To date, we have completed four securitization transactions, two of which have
resulted in gain on sale. We intend only to pursue securitization transactions
that will not result in a gain on sale income. Our quarterly financial
statements could be materially affected by any possible future write-down
associated with changes in the fair value of the residual investment in the two
previous securitizations that resulted in gain on sale income. We could also
lose the right to service the receivables included in securitizations for a
variety of reasons. These reasons include defaults in servicing obligations,
breaches of representations and warranties related to a securitization,
bankruptcy or other insolvency of Creditrust, and other matters. Further, with
regard to two of the Company's securitizations, the Company's right to service
the receivables automatically terminates on a monthly basis subject to
reappointment by the note insurer. The loss of the right to service the
receivables included in the securitizations would have a material adverse effect
on us.

Our Stock Price May Experience Volatility--The market price for our common stock
or other securities may be adversely affected by fluctuations in our quarterly
operating results.

  Because of the nature of our business, our quarterly operating results may
fluctuate in the future, which may adversely affect the market price of our
common stock.  The reasons our results may fluctuate include:

                                       26
<PAGE>

  .  The timing and amount of collections on our receivables;

  .  Any charge to earnings resulting from a decline in value of our residual
     investment in securitization or our portfolios;

  .  Increases in operating expenses associated with the growth of our
     operations; and

  .  Comparison to prior periods when our revenues included significant amounts
     of gain on sale.

Control by Principal Stockholder--Joseph K. Rensin owns a substantial amount of
our voting securities and may influence our affairs.

  Joseph K. Rensin beneficially owns approximately 50% of our outstanding voting
securities.  Accordingly, Mr. Rensin has the ability to influence the outcome of
elections of directors and other matters presented for approval by our
stockholders.  Under Maryland law and our charter, owners of a majority of our
outstanding common stock are able to elect all of our directors and approve
significant corporate transactions without the approval of the other
stockholders.  As a result, Mr. Rensin will continue to have the ability, either
alone or together with a small percentage of other stockholders, to elect all of
our directors and to control the vote on all matters submitted to a vote of the
holders of our common stock, including any going private transaction, merger,
consolidation or sale of all or substantially all of our assets.  We cannot
assure you that the interests of either Mr. Rensin or Creditrust will not
conflict with your interests as a holder of common stock.

  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.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

  The Company retains an investment in securitizations with respect to its
securitized receivables which are market risk sensitive financial instruments
held for purposes other than trading; it does not invest in derivative financial
or commodity instruments. This investment exposes the Company to market risk
which may arise in the credit standing of the investment in securitizations and
in interest and discount rates applicable to this investment.

  The impact of a 1% increase in the discount rate used by the Company in the
fair value calculations would decrease the fair value reflected on the Company's
balance sheet by $780,000 as of December 31, 1999. There would be no impact on
the Company's future cash flows or net earnings.

                                       27
<PAGE>

Item 8.   Consolidated Financial Statements and Supplementary Data

                             CREDITRUST CORPORATION

                   Index to Consolidated Financial Statements

<TABLE>
<S>                                                                                                         <C>
Report of Independent Certified Public Accountants  ................................................         29
Consolidated Financial Statements:
  Consolidated Balance Sheets as of December 31, 1998 and 1999  ....................................         30
  Consolidated Statements of Earnings for the years ended December 31, 1997, 1998 and 1999  ........         31
  Consolidated Statements of Stockholders' Equity and Comprehensive Income for the years ended
    December 31, 1997, 1998 and 1999  ..............................................................         32
  Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999  ......         33
  Notes to Consolidated Financial Statements  ......................................................         34
</TABLE>

                                       28
<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

Board of Directors
Creditrust Corporation

  We have audited the accompanying consolidated balance sheets of Creditrust
Corporation (the "Company") as of December 31, 1998 and 1999, and the related
consolidated statements of earnings, stockholders' equity and comprehensive
income and cash flows for the years ended December 31, 1997, 1998 and 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

  We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

  In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the financial position of Creditrust
Corporation as of December 31, 1998 and 1999, and the results of its operations
and its cash flows for the years ended December 31, 1997, 1998 and 1999 in
conformity with generally accepted accounting principles.



Grant Thornton LLP

Vienna, Virginia
February 11, 2000 (except for note S, as to which the date is March 30, 2000)

                                       29
<PAGE>

                             CREDITRUST CORPORATION

                          CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                                  December 31,
                                                                                         -------------------------------
                                                                                             1998             1999
                                                                                         -------------   ---------------
<S>                                                                                      <C>             <C>
                                              Assets
Cash and cash equivalents  ..........................................................       $ 7,906          $ 11,927
Finance receivables held for sale....................................................            --             3,126
Finance receivables  ................................................................        26,915           184,858
Investment in securitizations  ......................................................        30,269            31,169
Property and equipment  .............................................................         2,449             9,297
Deferred costs  .....................................................................           476             3,111
Other assets.........................................................................           733             2,087
                                                                                            -------          --------
     Total Assets  ..................................................................       $68,748          $245,575
                                                                                            =======          ========
                                 Liabilities and Stockholders' Equity
Accounts payable and accrued expenses  ..............................................       $ 1,621          $  4,986
Notes payable  ......................................................................         6,789           111,306
Capitalized lease obligations  ......................................................         1,652             5,208
Deferred tax liability  .............................................................        11,915            20,132
Other liabilities  ..................................................................           346             1,606
                                                                                            -------          --------
     Total Liabilities  .............................................................        22,323           143,238
Stockholders' Equity
  Preferred stock, $.01 par value; 5,000,000 shares authorized, none issued and
   outstanding  .....................................................................            --                --
  Common stock, $.01 par value; 20,000,000 shares authorized, 8,000,000
   Shares issued and 7,984,480 outstanding at December 31, 1998 and 10,469,068
           Shares issued and 10,453,548 outstanding at December 31, 1999  ...........            80               105
  Additional paid-in capital  .......................................................        27,754            71,078
  Stock held for benefit plans  .....................................................          (269)             (269)
  Net unrealized gains on available for sale securities  ............................         6,714             2,259
  Retained earnings  ................................................................        12,146            29,164
                                                                                            -------          --------
     Total Stockholders' Equity  ....................................................        46,425           102,337
                                                                                            -------          --------
     Total Liabilities and Stockholders' Equity  ....................................       $68,748          $245,575
                                                                                            =======          ========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                       30
<PAGE>

                             CREDITRUST CORPORATION

                      CONSOLIDATED STATEMENTS OF EARNINGS
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                          Year ended December 31,
                                                                          -------------------------------------------------------
                                                                                1997               1998               1999
                                                                          -----------------   ---------------   -----------------
<S>                                                                       <C>                 <C>               <C>
Revenue
  Income on finance receivables  .....................................       $    7,246        $   12,817         $    70,489
  Servicing fees  ....................................................            2,580             3,110               5,508
  Income on investment in securitizations  ...........................               --               533               5,027
  Gain on sale  ......................................................               --            18,414                  --
                                                                             ----------        ----------         -----------
                                                                                  9,826            34,874              81,024
Expenses
  Personnel  .........................................................            5,922            11,917              32,715
  Communications  ....................................................              912             1,645               3,903
  Professional fees  .................................................              504             1,012               3,029
  Rent and other occupancy  ..........................................              853             1,195               2,870
  Contingency legal and court costs  .................................              320               349               2,413
  General and administrative  ........................................              271               686               2,105
  Forward flow termination............................................               --                --               1,300
  Extinguishment of deferred costs....................................               --                --                 436
                                                                             ----------        ----------         -----------
                                                                                  8,782            16,804              48,771
                                                                             ----------        ----------         -----------
Earnings from Operations  ............................................            1,044            18,070              32,253
Other Income (Expense)
  Interest and other  ................................................               15               312               1,541
  Interest expense  ..................................................             (377)             (616)             (5,901)
                                                                             ----------        ----------         -----------
Earnings Before Income Taxes  ........................................              682            17,766              27,893
Provision for Income Taxes  ..........................................              226             7,005              10,875
                                                                             ----------        ----------         -----------
Earnings Before Extraordinary Item  ..................................              456            10,761              17,018
Extraordinary Item--loss on extinguishment of debt (net of
     taxes)  .........................................................               --              (566)                 --
                                                                             ----------        ----------         -----------

Net Earnings  ........................................................       $      456        $   10,195         $    17,018
                                                                             ==========        ==========         ===========
Basic Earnings Per Common Share Before Extraordinary Item  ...........       $      .08        $     1.57               $1.72
Extraordinary Item--loss on extinguishment of debt (net of
     taxes)  .........................................................               --              (.08)                 --
                                                                             ----------        ----------         -----------
Basic Earnings Per Common Share  .....................................       $      .08        $     1.49               $1.72
                                                                             ----------        ----------         -----------
Weighted-Average Number of Basic Common Shares Outstanding
 During the Year  ....................................................        6,000,000         6,827,506           9,907,535
                                                                             ==========        ==========         ===========

Diluted Earnings Per Common Share Before Extraordinary Item  .........       $      .08        $     1.56               $1.67
Extraordinary Item--loss on extinguishment of debt (net of
     taxes)  .........................................................               --              (.08)                 --
                                                                             ----------        ----------         -----------
Diluted Earnings Per Common Share  ...................................       $      .08        $     1.48               $1.67
                                                                             ==========        ==========         ===========
Weighted-Average Number of Diluted Common Shares
 Outstanding During the Year  ........................................        6,000,000         6,898,870          10,180,900
                                                                             ==========        ==========         ===========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                       31
<PAGE>

                             CREDITRUST CORPORATION

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                            AND COMPREHENSIVE INCOME
                       (in thousands, except share data)

<TABLE>
<CAPTION>
                                                              Additional                 Stock    Accumulated
                                              Common Stock     Paid-in Preferred Stock  Held for     Other
                                            -----------------  Capital ---------------  Benefit  Comprehensive Retained
                                            Shares     Amount  Amount  Shares   Amount   Plans      Income     Earnings     Total
                                            ------     ------  ------  ------   ------   -----      ------     --------     -----
<S>                                        <C>         <C>    <C>      <C>      <C>     <C>        <C>         <C>        <C>
Balance at January 1, 1997  .............  6,000,000    $60   $    53   $--      $--    $  --       $   --     $ 1,495     $ 1,608
Net earnings.............................         --     --        --    --       --       --           --         456         456
                                           ---------   ------  ------  ------   ------   -----      ------     --------    -------
Balance at December 31, 1997  ...........  6,000,000     60        53    --       --       --           --       1,951       2,064
Initial public offering  ................  2,000,000     20    27,291    --       --       --           --          --      27,311
Value of common stock purchase
    warrants issued in connection with
    subordinated debt financing  ........         --     --       410    --       --       --           --          --         410
Stock purchased for benefit plans  ......    (15,520)    --        --    --       --     (269)          --          --        (269)
Net earnings  ...........................         --     --        --    --       --       --           --      10,195      10,195
Other Comprehensive Income,
    unrealized gains on available for
    sale securities, net of taxes of
    $4,214  .............................         --     --        --    --       --       --        6,714          --       6,714
                                                                                                                          --------
Total Comprehensive Income  .............                                                                                   16,909
                                          ----------   ----   -------   ---     ----   ------      -------     -------    --------
Balance at December 31, 1998  ...........  7,984,480     80    27,754    --       --     (269)       6,714      12,146      46,425
Common stock offering....................  2,400,000     24    42,429    --       --       --           --          --      42,453
Common stock issued on options and
    warrants exercised...................     69,068      1       895    --       --       --           --          --         896
Net earnings.............................         --     --        --    --       --       --           --      17,018      17,018
Other Comprehensive Income,
    decrease in unrealized gains on
    available for sale securities,
    net of...............................         --     --        --    --       --       --       (4,455)         --      (4,455)
    taxes of $2,288  ....................                                                                                 --------
Total Comprehensive Income  .............                                                                                   12,563
                                          ----------   ----   -------   ---     ----   ------      -------     -------    --------
Balance at December 31, 1999............. 10,453,548   $105   $71,078    --     $ --   $(269)      $ 2,259     $29,164    $102,337
                                          ==========   ====   =======   ===     ====   ======      =======     =======    ========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                       32
<PAGE>

                             CREDITRUST CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                                       Year ended December 31,
                                                                         ---------------------------------------------------
                                                                              1997              1998              1999
                                                                         ---------------   --------------   ----------------
<S>                                                                      <C>               <C>              <C>

Increase (Decrease) in Cash and Cash Equivalents
Cash Flows from Operating Activities
  Net earnings  ........................................................        $   456         $ 10,195          $  17,018
  Adjustments to reconcile net earnings to net cash provided by
   operating activities:
     Depreciation and amortization  ....................................            209              369              1,013
     Deferred tax expense  .............................................            471            6,960             10,875
     Gain on sale  .....................................................             --          (18,414)                --
     Income on investment in securitization (accretion).................             --               --             (5,027)
     Extraordinary item--loss on extinguishment of debt (net of
      taxes)  ..........................................................             --              566                 --
  Changes in assets and liabilities:
     Increase in other assets  .........................................           (197)            (517)            (1,696)
     Increase in accounts payable and accrued expenses  ................            196              968              3,365
     Increase (decrease) in other liabilities  .........................            296              (69)                67
     Increase (decrease) in current income taxes
      payable/receivable  ..............................................           (194)             200                 --
                                                                                -------         --------          ---------
Net Cash and Cash Equivalents Provided by Operating Activities  ........          1,237              258             25,615
                                                                                -------         --------          ---------
Cash Flows from Investing Activities
  Collections applied to principal (accretion) on finance
   receivables, net  ...................................................          2,111           (3,413)           (13,145)
  Investment in securitizations  .......................................             --           (1,934)            (2,616)
  Purchases of property and equipment  .................................           (123)            (347)            (5,933)
  Acquisitions of finance receivables  .................................           (557)         (58,336)          (147,924)
  Proceeds from securitizations  .......................................             --           38,517                 --
  Proceeds from portfolios sold, net  ..................................             --              562                 --
                                                                                -------         --------          ---------
Net Cash and Cash Equivalents Provided by (Used in) Investing
 Activities  ...........................................................          1,431          (24,951)          (169,618)
                                                                                -------         --------          ---------
Cash Flows from Financing Activities
  (Payments on) proceeds from notes payable and other debt, net  .......         (1,660)           4,675            104,517
  Proceeds from subordinated debt   ....................................             --            4,530                 --
  Payments on subordinated debt   ......................................             --           (4,530)                --
  Net (payments) proceeds on capital lease obligations   ...............           (179)            (357)             3,082
  Proceeds from issuance of common stock   .............................             --           27,311             42,453
  Common stock purchased for benefit plans  ............................             --             (269)                --
  Proceeds from common stock issued on warrants and options
   exercised   .........................................................             --              410                896
  Deferred costs  ......................................................           (535)              59             (2,924)
                                                                                -------         --------          ---------
Net Cash and Cash Equivalents (Used in) Provided by Financing
 Activities.............................................................         (2,374)          31,829            148,024
                                                                                -------         --------          ---------
Net Increase in Cash and Cash Equivalents...............................            294            7,136              4,021
Cash and Cash Equivalents at Beginning of Year  ........................            476              770              7,906
                                                                                -------         --------          ---------
Cash and Cash Equivalents at End of Year  ..............................        $   770         $  7,906          $  11,927
                                                                                =======         ========          =========
</TABLE>

 The accompanying notes are an integral part of these consolidated statements.

                                       33
<PAGE>

                             CREDITRUST CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note A--Organization and Business

  Creditrust Corporation (the "Company") was incorporated in Maryland on
October 17, 1991. The Company purchases, collects and manages defaulted consumer
receivables from credit grantors, including banks, finance companies, retail
merchants and other service providers. The Company's customers are located
throughout the United States. The Company has funded its receivables purchases
and the expansion of its business through a combination of bank and other
warehouse funding, public and private equity funding and asset-backed
securitizations.

Note B--Summary of Significant Accounting Policies

 Basis of Accounting

  The Company's accounts are presented on the accrual basis of accounting in
accordance with generally accepted accounting principles.

 Principles of Consolidation

  The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Creditrust Funding I LLC, Creditrust Card
Services Corporation, Creditrust SPV99-1, LLC, Creditrust SPV99-2 Capital, Inc.,
and Creditrust SPV99-2, LLC.   All material inter-company accounts and
transactions have been eliminated.

 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 amount
of future cash flows of portfolios.  The estimated future cash flows of the
portfolios are used to recognize income on finance receivables and to estimate
the fair value of investment in securitizations.  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 may change based on actual results and other factors.  The change
could be material (See Note D).

 Cash and Cash Equivalents

  The Company considers all highly liquid securities purchased with a maturity
of three months or less to be cash equivalents.  The Company's two
securitizations that are accounted for as secured borrowings have provisions
which restrict the Company's use of cash.  Restricted cash as of December 31,
1998 and 1999 was $900,000 and $3.3 million, respectively.

                                       34
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note B--Summary of Significant Accounting Policies (Continued)

 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. Proceeds from the sale of accounts that
are included as part of a static pool are accounted for as collections in the
pool. Collections on replacement accounts received from the originator of the
loans are included as collections in the corresponding static pools. The
discount between the cost of each static pool and the contractual receivable of
the accounts in the static pools 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 of 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
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, 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 an 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.

 Servicing Fees

  Servicing fees are recognized on securitized receivables under the terms of
four indenture and servicing agreements. The Company recognizes as a servicing
fee 20% of collections in the two 1998 gain on sale securitizations. The Company
eliminates in consolidation the servicing fee of 20% of collections in the two
securitizations treated as secured borrowings.  In accordance with terms of a
servicing agreement on a non-securitized portfolio from August 1997 through June
1998, the Company recognized as a servicing fee a predetermined percentage of
collections on the related receivables.

 Investments in Debt and Equity Securities

  The Company accounts for investments in accordance with Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain Investments in
Debt and Equity Securities." As such, investments are recorded as either
trading, available for sale, or held to maturity. The Company records its
investment in securitizations (see Note E) as available for sale debt
securities. Such securities are recorded at fair value, and unrealized gains and
losses, net of the related tax effect, are not reflected in earnings but are
recorded as a separate component of stockholders' equity. The investment in
securitizations is estimated to accrue income over the estimated life of the
underlying portfolio of receivables. 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.

                                       35
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note B--Summary of Significant Accounting Policies (Continued)

 Deferred Costs

  The Company accounts for expenditures, principally legal and accounting fees
in connection with its preparation to sell stock in its public offerings, as
capitalized and deferred until the offering occurs. The costs are netted against
the capital raised in the offerings.

  The Company accounts for legal and professional fees in connection with its
securitization efforts as capitalized and deferred until the securitizations are
closed. All transaction costs, including legal and accounting fees, are expensed
when the gain on sale is recognized or amortized for securitizations classified
as secured borrowings, over the note term.

  The Company capitalized legal and accounting costs incurred in connection with
its placement of senior subordinated notes in 1998. The costs were allocated
between the financing costs of the notes and the paid-in capital of the
warrants. The debt financing costs were amortized until the notes were paid off
with the proceeds of the initial public offering, at which time the balance of
deferred costs were expensed and included in the extraordinary loss.

  The Company capitalized legal and accounting costs incurred in connection with
its establishment of the warehouse and revolving line-of-credit facilities in
1998, and with its interim financing facility and secured borrowing
securitization in 1999.  The costs are being amortized against income over the
terms of the facilities.

 Depreciation/Amortization

  Property and equipment, consisting of computer equipment, furniture and
fixtures and leasehold improvements, are stated at cost and
depreciated/amortized using a straight-line method of depreciation over the
lives of the assets, which range from five to seven years.  Leasehold
improvements are amortized over the shorter of the lease term or estimated
useful life. Accelerated methods are used for tax purposes.

 Accounting for Transfers of Financial Assets

  In 1996, the Financial Accounting Standards Board issued SFAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." The Statement provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
The standards are based on consistent application of a financial-components
approach that focuses on control; under this approach, after a transfer of
financial assets, an entity recognizes the financial and servicing assets it
controls and liabilities it has incurred, derecognizes financial assets when
control has been surrendered, and derecognizes liabilities when extinguished.
The Statement provides consistent standards for distinguishing transfers of
financial assets that are sales from transfers that are secured borrowings. The
Company adopted SFAS No. 125 for the year ended December 31, 1997.

                                       36
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note B--Summary of Significant Accounting Policies (Continued)

 Reporting Comprehensive Income

  The Financial Accounting Standards Board issued SFAS No. 130, "Reporting
Comprehensive Income," effective for fiscal years beginning after December 15,
1997. The 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. The 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.
For the year ended December 31, 1997, the Company had no material sources of
other comprehensive income. The Company's investment in securitizations is
classified as available for sale, as such, in accordance with SFAS No. 115, the
Company recognizes as other comprehensive income the unrealized gains or losses
for the difference between the amortized cost and estimated fair value net of
income taxes (See Note E).

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 stockholders' equity and per
share amounts, give retroactive effect to the stock split.

 Public Offerings

  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 stockholder 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' overallotment option which was subsequently
exercised and closed on September 2, 1998. After payment of underwriting
discounts and commissions and other offering expenses, the Company received net
proceeds of $27.3 million. The proceeds were used to repay the subordinated
notes, purchase additional portfolios and contribute to working capital.

  On March 19, 1999, the Company commenced a follow-on public offering of 2.4
million shares of common stock at a public offering price of $19.00 per share.
After payment of underwriting discounts and commissions and other offering
expenses, the Company received net proceeds of $42.5 million.  The proceeds were
used to purchase additional portfolios and contribute to working capital.

                                       37
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note B--Summary of Significant Accounting Policies (Continued)

 Earnings per Common Share

  In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" (EPS).
This 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 statement of earnings 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
computation. Basic EPS excludes dilution and is computed by dividing earnings
available to common stockholders by the weighted-average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.

  The Company did not have any potentially dilutive items for the year ended
December 31, 1997. The following tables reconciles basic and diluted EPS for the
years ended December 31:

<TABLE>
<CAPTION>
                                                                              (in thousands, except share data)
                               1998                                                                           Per
                                                                             Earnings        Shares          Share
                                                                           (Numerator)    (Denominator)      Amount
                                                                           -----------    -------------      ------
<S>                                                                        <C>            <C>                <C>
Basic EPS
Earnings before extraordinary item  .............................            $10,761                          $1.57
Extraordinary item--loss on extinguishment of debt
 (net of taxes)  ................................................               (566)                          (.08)
                                                                             -------                          -----
Net earnings  ...................................................             10,195       6,827,506           1.49
Effect of Dilutive Securities
Warrants  .......................................................                 --          54,276
Stock options  ..................................................                 --          17,088
                                                                             -------      ----------
Diluted EPS
Earnings before extraordinary item plus assumed conversions  ....             10,761                           1.56
Extraordinary item--loss on extinguishment of debt (net of taxes)
    plus assumed conversions  ...................................               (566)                          (.08)
                                                                             -------                          -----
Net earnings plus assumed conversions  ..........................            $10,195       6,898,870          $1.48
                                                                             =======      ==========          =====
<CAPTION>
                                                                              (in thousands, except share data)
                               1999                                                                           Per
                                                                             Earnings        Shares          Share
                                                                           (Numerator)    (Denominator)      Amount
                                                                           -----------    -------------      ------
<S>                                                                        <C>            <C>                <C>
Basic EPS
Net earnings  ...................................................            $17,018       9,907,535          $1.72
Effect of Dilutive Securities
Warrants  .......................................................                 --         193,120
Stock options  ..................................................                 --          80,245
                                                                             -------      ----------
Diluted EPS
Net earnings plus assumed conversions  ..........................            $17,018      10,180,900          $1.67
                                                                             =======      ==========          =====
</TABLE>

 Employee Stock Options

  The Company accounts for its employee stock options in accordance with the
intrinsic value-based method of Accounting Principles Board Opinion No. 25 (APB
25). Under this method, if options are priced at or above the quoted market
price on the date of grant, there is no compensation expense recognized by the
Company as a result of the options.

                                       38
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note B--Summary of Significant Accounting Policies (Continued)

Reclassifications

  Certain amounts in prior years have been reclassified to conform to the
current year presentation.

Note C--Fair Value of Financial Instruments

  The accompanying financial statements include various estimated fair value
information as of December 31, 1998 and 1999, as required by SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." Such information,
which pertains to the Company's financial instruments, is based on the
requirements set forth in the Statement and does not purport to represent the
aggregate net fair value of the Company.

  The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate fair
value.

 Cash and Cash Equivalents

  The carrying amount approximates fair value.

 Finance Receivables

  The Company records finance receivables at cost, which is discounted from the
actual principal balance. The fair value of finance receivables was estimated
based upon discounted future cash flows. The carrying value of finance
receivables approximates fair value at December 31, 1998 and 1999.

 Investment in Securitizations

  Investment in securitizations is recorded at estimated fair value based on
discounted future cash flows.

 Notes Payable

  Quoted market prices for the same or similar issues or the current rate
offered to the Company for debt of the same remaining maturities are used to
estimate the fair value of the Company's notes payable. At December 31, 1998 and
1999, the carrying amount of the notes payable approximates fair value.

Note D--Finance Receivables

  The Company purchases defaulted consumer receivables at a discount from the
actual principal balance. The following summarizes the change in finance
receivables for the year ended December 31:

<TABLE>
<CAPTION>
                                                                                               (in thousands)
                                                                                         1998                1999
                                                                                   -----------------   -----------------
<S>                                                                                <C>                 <C>
Balance, at beginning of year  ......................................                   $  5,050          $   26,915
  Purchases of finance receivables  .................................                     58,336             147,924
  Finance receivables held for sale  ................................                         --              (3,126)
  Accretion to principal ............................................                      4,971              23,903
  Amortization of principal .........................................                     (1,558)            (10,758)
  Securitization of finance receivables  ............................                    (39,884)                 --
                                                                                        --------          ----------
Balance, at end of year  ............................................                   $ 26,915          $  184,858
                                                                                        --------          ----------
Unrecorded discount (unaudited)  ....................................                   $448,473          $2,456,535
                                                                                        ========          ==========
</TABLE>

                                       39
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note D--Finance Receivables  (Continued)

  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, 1998 and 1999, no provision for loss has been
recorded.

  As of December 31, 1999, the Company had $3.1 million of purchased finance
receivables that have been classified as held for sale.  Subsequent to year-end,
all of the finance receivables held for sale were sold for cost and therefore no
gain or loss was recognized.

 Changes in Estimates

  The Company monitors its projection models with a view towards enhancing
predictability of both the amount and timing of collections. After extensive
statistical analysis of individual static pool performances in 1997, the Company
implemented a refinement in its analysis of projected collections used to
compute the effective interest rate for income recognition. The refinement
included individual static pool estimates and had the effect of reducing total
static pools' future projected cash flows. Management believes the change
reflects a more predictable and conservative estimate. The total aggregate
effect on the specific static pools of the change in estimate was to decrease
net earnings by $700,000 in 1997.  In the fourth quarter of 1999, the Company
reduced the remaining estimates by 12% to reflect the historical cumulative
trend in collections.  The effect of the change in estimate was to reduce
earnings in 1999 by $2.8 million after tax.

Note E--Investment in Securitizations

  Investment in securitizations for the year ended December 31, 1998 and 1999 is
comprised of the following:

<TABLE>
<CAPTION>
                                                                    (in thousands)
                                                                                                   Estimated
                                               Cash           Amortized        Unrealized             Fair
                                             Reserves            Cost             Gains              Value
                                         ----------------   --------------   ---------------    ----------------
<S>                                      <C>                <C>              <C>                <C>
Balance as of January 1, 1998  ........       $   --           $    --          $    --            $    --
Retained interests recorded  ..........        2,085            16,874               --             18,959
Unrealized gains.......................           --                --           10,928             10,928
Income accrued  .......................           --               533                                 533
Allowed reduction in reserves  ........         (151)               --               --               (151)
                                              ------           -------          -------            -------

Balance as of December 31, 1998  ......        1,934            17,407           10,928             30,269

Deposits to cash reserves  ............        2,616                --               --              2,616
Decrease in unrealized gains...........           --                --           (6,743)            (6,743)
Income accrued  .......................           --             5,027               --              5,027
                                              ------           -------          -------            -------
Balance as of December 31, 1999  ......       $4,550           $22,434          $ 4,185            $31,169
                                              ======           =======          =======            =======
</TABLE>

  The investment in securitizations accrues interest at 12% per annum. The net
after tax effect of unrealized gains is reflected as a separate component of
stockholders' equity and is included in other comprehensive income. Fair value,
absent actual market quotations for similar securities, was estimated based on
discounted future cash flows.

                                       40
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note F--Property and Equipment

  Property and equipment consist of the following at:

<TABLE>
<CAPTION>
                                                                         (in thousands)
                                                                          December 31,
                                                                   ---------------------------
                                                                       1998           1999
                                                                   ------------   ------------
<S>                                                                <C>            <C>
Computer equipment and software  .....................                $2,105        $ 7,037
Furniture and fixtures  ..............................                   955          1,293
Leasehold improvements................................                   120          2,422
                                                                      ------        -------
                                                                       3,180         10,752
Less accumulated depreciation and amortization  ......                  (731)        (1,455)
                                                                      ------        -------
                                                                      $2,449        $ 9,297
                                                                      ======        =======
</TABLE>

  As of December 31, 1998 and 1999, property and equipment purchased pursuant to
capital leases was $2.2 million and $6.5 million, less accumulated depreciation
of $373,000 and $836,000, respectively.

Note G--Deferred Costs

  Deferred costs consist of the following at:

<TABLE>
<CAPTION>
                                                               (in thousands)
                                                                 December 31,
                                                          --------------------------
                                                              1998          1999
                                                          ------------   -----------
<S>                                                       <C>            <C>
Credit facilities  ......................                     $ 476        $  697
SPV99-1 Securitization  .................                        --           844
SPV99-2 Financing........................                        --         1,570
                                                              -----        ------
                                                              $ 476        $3,111
                                                              =====        ======
</TABLE>

  During 1999, certain legal and accounting costs totaling $436,000 were
expensed in connection with the termination of a capital markets transaction.

Note H--Accounts Payable and Accrued Expenses

  Accounts payable and accrued expenses consist of the following at:

<TABLE>
<CAPTION>
                                                              (in thousands)
                                                               December 31,
                                                        -----------------------------
                                                            1998            1999
                                                        -------------   -------------
<S>                                                     <C>             <C>
Accounts payable  ...............................          $  512          $1,453
Accrued other liabilities  ......................             414           1,550
Accrued salaries, taxes and fringe benefits  ....             695           1,983
                                                           ------          ------
                                                           $1,621          $4,986
                                                           ======          ======
</TABLE>

                                       41
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note I--Notes Payable

 Non Recourse Warehouse Facility

  In September 1998, the Company established through a wholly owned consolidated
special purpose finance subsidiary, Creditrust Funding I LLC, an initial $30
million revolving warehouse facility for use in acquiring finance receivables.
The warehouse facility carries a floating interest rate of LIBOR plus .65%, with
the revolving period expiring in October 2000. The final due date of all
payments due under the facility is October 2005. The warehouse facility is
secured solely by a trust estate, primarily consisting of specific consumer
receivables that the Company has absolutely assigned to the special purpose
finance subsidiary, and is non recourse to the parent company and its other
assets. Generally, the warehouse facility provided 95% of the acquisition costs
of receivables purchased, with the Company funding the remaining 5% and a one-
time $900,000 liquidity reserve requirement. The $900,000 reserve account is
included in cash on the balance sheet and restricted as to use until the
warehouse facility is retired. The facility contains financial covenants the
most restrictive of which requires that the Company maintains a net worth of
$20.0 million plus 75% of net earnings. The Company has agreed to apply all of
the designated cash reserves available after pay off of its 1998 securitizations
as additional reserves for the Warehouse.

  Pursuant to a December 1999 amendment, the Company's right to service the
receivables funded by the Warehouse Facility automatically terminates on a
monthly basis subject to reappointment by the note insurer. The indenture and
servicing agreement was amended in February 2000, requiring the facility to be
reduced to $19 million by July 10, 2000. Debt service on the Warehouse facility
is interest only during a six month revolving period and thereafter comprised of
all collections from receivables less a 20% servicing fee. The interest only
period ended with February 2000. In February 2000, the fee increased to 35%
pursuant to the amended indenture and servicing agreement. The servicing fees
are eliminated in consolidation.

  During 1999, the Company borrowed $55.5 million under the facility and repaid
$30.0 million.  Interest expense, trustee fees and guarantee fees aggregated
$109,691 and $1.4 million in 1998 and 1999, respectively.  As of December 31,
1999, the amount outstanding was $25.5 million and the carrying value of the
assets included in the Warehouse facility were $27.3 million.  As of December
31, 1998, no amounts were outstanding.  As of December 31, 1999, the Company had
no available funds under this facility.

 Revolving Line of Credit

  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 acquisition cost. Interest was based on
prime plus 0.5%, or LIBOR plus 2.5% at the option of the Company on each
advance. Pursuant to an amendment to the loan documents in March 2000, interest
is prime plus 2.5% effective April 1, 2000. The facility is secured by any
receivables purchased under the facility and substantially all the Company's
other assets. Outstanding debt on the line as of December 31, 1998 and 1999 was
$6.8 million and $15.9 million, respectively. Interest expense totaled $97,000
and $1.4 million in 1998 and 1999, respectively. The facility contains financial
covenants the most restrictive of which requires that the Company maintains a
net worth of $30.0 million plus 50% of net earnings. Debt service on the
revolving facility is interest only for six months following the purchase of
receivables. The interest only period ended with February 2000. After six
months, principal is payable over twenty-four months. As of December 31, 1999,
the Company had $4.1 available under the line.

                                       42
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note I--Notes Payable  (Continued)

 SPV99-2 Financing

  In August 1999, the Company borrowed $40 million in an interim financing
through Creditrust SPV99-2, LLC ("SPV99-2"), a wholly owned subsidiary. The loan
is structured similar to a securitization. SPV99-2 issued a note to
institutional investors and used the proceeds to purchase $37.3 million of
receivables. The notes are backed by a parent guarantee from the Company. Unless
this facility is fully retired by May 2000, its terms require a conversion to a
term loan due August 2003. The facility requires all collections to be used for
debt service and requires the Company to use any proceeds from capital markets
transactions or certain asset sales to pay down the debt. The interest rate is
12% per annum, until conversion to a term loan, and 15% thereafter. Upon
conversion, a conversion fee of 3.25% is payable out of the collections on the
receivables, and warrants for 10% of the fully diluted common stock at the time
of conversion will be released from escrow to the lenders. As of December 31,
1999, the Company had $35.6 million outstanding under this facility. Interest
expense totaled $1.9 million in 1999. See Note I to the Consolidated Financial
Statements. As of December 31, 1999, the Company had no funds remaining in this
facility available for use.

 Non Recourse SPV 99-1 Securitization Note

In August 1999, the Company issued a $40.0 million asset backed securitization
note through its newly formed special purpose subsidiary Creditrust SPV99-1, LLC
(Series 1999-1). The Note is secured by the receivables pledged to the note
holders and is non-recourse to the parent Company and its other assets. Interest
is payable at 9.43% per annum and the final maturity date of the note is July
2004.  Interest expense totaled $1.2 million in 1999.  A one-time $2.4 million
liquidity reserve is included in cash on the balance sheet and restricted as to
use until the note is retired.  The securitization did not qualify for gain on
sale accounting under generally accepted accounting principles, with the result
that the securitization notes are treated as a secured borrowing and appear as
debt on the consolidated financial statements of the Company.  As of December
31, 1999, the Company had $34.3 million outstanding under this facility.  Debt
service is paid from all collections on the receivables less a 20% servicing
fee.  Servicing fees are eliminated in consolidation.

  At December 31, 1999, the Company had, on a consolidated basis, $4.1 million
available under all existing debt facilities to borrow for purchases of finance
receivables, subject to lender approval. None of the available funds can be used
for operating purposes. As of December 31, 1999, required and projected minimum
principal payments payable by the Company were as follows:

<TABLE>
<CAPTION>

      Year ending December 31,                                  (in thousands)
      ------------------------
<S>                                                             <C>
      2000..................................................        $ 80,424
      2001..................................................          26,217
      2002..................................................           4,665
                                                                    --------
         Total minimum principal payments...................        $111,306
                                                                    ========
</TABLE>

  The debt service requirements associated with borrowings under the Company's
credit facilities have significantly increased liquidity requirements. Both the
Line of Credit Facility and the Warehouse Facility interest only periods have
expired and no further borrowings are permitted under the Warehouse Facility and
the Line of Credit Facility is subject to lender approval. The Company's
liquidity has also been adversely impacted by its lower than estimated
collections and higher cost of receivables purchased in 1999 under forward flow
contracts. The Company has experienced difficulty in obtaining financing with
amortization and other terms appropriately matched to the anticipated cash flows
from receivables that would be purchased with the financing. The Company
believes that other receivables purchasers have experienced similar difficulties
in this financial market. The Company anticipates that its operating cash flow
and strategic sales of receivables that occur subsequent to consent by various
lenders will be sufficient to meet its anticipated future operating expenses,
and to service its debt requirements as they become due. However, without
additional financing to buy receivables, the Company will not be able to grow.
An extended period of no further financing would require management to take
steps to reduce operating expenses to stay in line with reducing revenues that
accompany a static receivables base.

                                       43
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

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 sold consisted of $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 the allocation is 12.8%. The
Company repaid the subordinated notes at $5.0 million plus accrued interest. The
repayment resulted in the Company's recording an extraordinary charge for the
early repayment of indebtedness which, including debt issuance costs, resulted
in an extraordinary charge in August 1998 of $566,000 after- tax, net of
amortization of financing costs and original issue discount.

Note K--Capitalized Lease Obligations

  The Company has entered into capital lease obligations to finance the purchase
of computer equipment and furniture. The terms of these leases range from 36 to
48 months. The balance due on the leases was $1.7 million and $5.2 million as of
December 31, 1998 and 1999, respectively.  Interest rates range from 8.7% to
11.4%; and interest expense was $61,000, $133,000 and $251,000 in 1997, 1998 and
1999, respectively.

  For the year ended December 31, 1999, future minimum annual lease payments
under capital leases together with their present value are as follows:

<TABLE>
<CAPTION>

      As of December 31,                                          (in thousands)
      ------------------
<S>                                                               <C>
      2000  ..........................................                $2,274
      2001  ..........................................                 2,078
      2002  ..........................................                 1,518
      2003  ..........................................                    30
                                                                      ------
      Total minimum lease payments  ..................                 5,900
      Amount representing interest  ..................                  (692)
                                                                      ------
      Present value of minimum lease payments  .......                $5,208
                                                                      ======
</TABLE>

Note L--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 primarily 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 recognition of securitizations as sales under SFAS
No. 125 versus financing transactions for tax reporting.

                                       44
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note L--Income Taxes (Continued)

  The provision for income taxes consists of the following for the years ended:

<TABLE>
<CAPTION>
                      (in thousands)                                      December 31,
                                                       --------------------------------------------------
                                                            1997             1998              1999
                                                       --------------   ---------------   ---------------
<S>                                                    <C>              <C>               <C>
Current expense (refund)
  Federal  ..............................................  $(161)            $   --           $    --
  State  ................................................    (39)                45                --
                                                           -----             ------           -------
                                                            (200)                45                --
Deferred
  Federal  ..............................................    347              5,811             8,904
  State  ................................................     79              1,149             1,971
                                                           -----             ------           -------
                                                             426              6,960            10,875
                                                           -----             ------           -------
Total....................................................  $ 226             $7,005           $10,875
                                                           =====             ======           =======
</TABLE>

  The net deferred tax liability consists of the following as of:

<TABLE>
<CAPTION>
                      (in thousands)                                         December 31,
                                                                   ---------------------------------
                                                                         1998              1999
                                                                   ---------------   ---------------
<S>                                                                <C>               <C>
Deferred tax assets
  Deferred income  ......................................              $   116          $   599
  Net operating loss carryforward  ......................                4,078           17,559
  Other  ................................................                   44              221
                                                                       -------          -------
Gross deferred tax assets  ..............................                4,238           18,379
Deferred tax liabilities
  Finance receivables  ..................................                  400           24,764
  Investment in securitizations  ........................               15,445           13,519
  Other  ................................................                  297              228
                                                                       -------          -------
Gross deferred tax liabilities  .........................               16,152           38,511
                                                                       -------          -------
Net deferred tax liability  .............................              $11,915          $20,132
                                                                       =======          =======
</TABLE>

  The difference between the total income tax expense and the income tax expense
computed using the federal income tax rate were as follows for the years ended
December 31:

<TABLE>
<CAPTION>
                                                            1997             1998              1999
                                                       --------------   ---------------   ---------------
<S>                                                    <C>              <C>               <C>
Pretax income  ..........................................  $ 682           $17,766           $27,893
                                                           -----           -------           -------
Computed federal income taxes at 34%  ...................    232             6,040             9,483
Computed state income taxes, net of federal benefits  ...     31               821             1,289
Other taxes not based on income  ........................     --                45                --
Permanent differences  ..................................      7                19                28
Other adjustments  ......................................    (45)               80                75
                                                           -----           -------           -------
Income tax expense  .....................................  $ 225           $ 7,005           $10,875
                                                           =====           =======           =======
</TABLE>

  The other adjustments to the deferred tax liability is attributable to the
Company's analysis of its prior tax returns compared to the respective deferred
tax liabilities.  In 1997, the Company generated a net operating loss of $1.1
million for tax purposes, of which approximately $517,000 was carried back to
prior years resulting in a refund of approximately $200,000.  The remaining tax
loss of $582,000 is available to offset future taxable earnings of the Company
and expires on December 31, 2012.  Additional net operating tax loss
carryforwards generated after 1997 of approximately $44.9 million begin to
expire on December 31, 2018.  Utilization of net operating losses is subject to
annual limitations due to the ownership change limitations provided by the
Internal Revenue Code and similar state provisions.  Management does not expect
such limitations, if any, to impact the ultimate utilization of the
carryforwards.

                                       45
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note M--Commitments and Contingencies

 Leases

  In January 1996, the Company entered into an agreement to lease its current
headquarters and a collection facility. In October 1998, the Company amended the
lease to expand the leased space in return for additional monthly rent. Rent
expense for this lease for the years ended December 31, 1997, 1998 and 1999 was
$210,000, $250,000 and $265,000, respectively.

   In September 1997, the Company entered into an agreement to lease additional
office space for an operations center. The lease required no payments for the
first six months. The Company recorded the free rent period as a lease incentive
and is amortizing it straight-line over the term of the lease. Rent expense
for this lease for 1997, 1998 and 1999 was $532,000, $405,000 and $406,000,
respectively, including $211,000, $219,000 and $196,000 of amortized lease
incentive, respectively.

  In January 1999, the Company entered into a storage facility lease agreement.
The lease began in February 1999 and expires in January 2003. The yearly
commitment pursuant to this lease is $142,000. The Company has an option to
terminate the lease after 24 months, or anytime thereafter, with three months
prior notice. Rent expense for this lease for the year ended December 31, 1999
was $136,000.

   In May 1999, the Company entered into a seven-year lease for additional
office space of approximately 94,000 square feet in suburban Baltimore.  The
lease term commenced on July 1, 1999 and ends July 31, 2006.  The Company was
given an improvement allowance of $1.2 million, which has been recorded as lease
incentive and is amortized over the term of the lease.  The lease provides for
the right of first refusal and the right of first offer to lease the remaining
approximately 100,000 square feet of space as it becomes available and a two
year option to purchase the building at a fixed amount.  Pursuant to these
rights and under an amendment dated October 1999, the Company leased an
additional 42,000 square feet of the available 100,000 square feet of office
space commencing in May 2000.  Rent expense for this lease for the year ended
December 31, 1999 was $697,000.

  Future minimum operating lease commitments, net of reimbursements, are as
follows:

<TABLE>
<CAPTION>


  Year ending December 31,             (in thousands)
  ------------------------
<S>                                        <C>
  2000  .........................          $ 2,891
  2001  .........................            3,224
  2002  .........................            3,330
  2003  .........................            2,509
  2004  .........................            2,571
  Thereafter.....................            4,011
                                           -------
                                           $18,536
                                           =======
</TABLE>

 Forward Flow Agreements

  Beginning in September 1998, the Company entered into multiple forward flow
agreements with certain financial institutions, which obligate the Company to
purchase, on a monthly basis, portfolios of charged-off receivables meeting
certain criteria. As of December 31, 1999, all but one forward flow agreement
expired or terminated. In 1999, a charge of $1.3 million was incurred due to a
reduction in the amount of the remaining monthly obligations under the remaining
forward flow contract. The Company's commitment pursuant to the remaining
agreement for 2000 was $2.9 million.
                                       46
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note M--Commitments and Contingencies (Continued)

 Litigation

  The Company is involved in various litigation arising in the ordinary course
of business. Management believes these items, individually or in aggregate, will
not have a material adverse impact on the Company's financial position, results
of operations or liquidity.

  The Company brought a declaratory judgement action against a seller of charged
off receivables asking the US Federal District Court to agree with the Company's
interpretation that the agreement has been terminated pursuant to its terms. The
seller has responded, as anticipated by the Company, by denying that the
agreement has terminated, and is seeking, among other things, liquidated damages
of $600,000 plus legal fees. While it is not possible for the Company to
estimate the potential for loss, if any, the Company will vigorously prosecute
its action against the seller and defend any claims made in the proceeding.

 Servicing contracts

  Pursuant to the second securitization and the warehouse facility, the Company
receives a fee of 20% and 35%, respectively of the collections of the
receivables. Pursuant to the December 1999 amendments, the Company's right to
service the receivables in the securitizations automatically terminate on a
monthly basis subject to reappointment by the insurer. Additionally, minimum
cumulative collection targets must be met, or the Company's servicing rights may
be terminated.

Note N--Servicing Fees

  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 credit card 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, and thereafter received 60% of net
collections until the bank received a required amount under the contract. The
Company securitized the portfolio in June 1998.

  In 1998 the Company completed two securitizations (see Note O). Pursuant to
the securitizations the Company receives a fee of 20% of the collections of the
receivables in the securitizations.

Note O--Gain on Sale--Securitizations

  On June 19, 1998, a special purpose finance subsidiary formed by the Company
issued $14.5 million aggregate principal amount of 6.43% Creditrust
Receivables--Backed Notes, Series 1998-1. The notes are secured by a trust
estate consisting substantially of consumer receivables previously 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 a credit facility and payment
of transaction costs, the Company received cash of $5.8 million, recognized a
gain on sale of $6.0 million and recorded an investment in securitizations of
$4.6 million.

  On December 29, 1998, a special purpose finance subsidiary formed by the
Company issued $27.5 million aggregate principal amount of 8.61% Creditrust
Receivables--Backed Notes, Series 1998-2. The notes are secured by a trust
estate consisting substantially of consumer receivables previously owned by the
Company with a carrying value as of December 1998 of approximately $28.6
million. After retirement of a credit facility and payment of transaction costs,
the Company received cash of $7.3 million, recognized a gain on sale of $11.0
million and recorded an investment in securitizations of $14.4 million.

Note P--Gain on Sale--Finance Receivables

  In February 1998, the Company sold a portfolio of receivables repurchased
under a settlement agreement.  Previously deferred income of $895,000 was
recognized against a $237,000 cost of sale, resulting in gain on sale of
$658,000.  The Company sold miscellaneous finance receivables in July 1998 for
$800,000 to a major credit card issuer. The finance receivables sold were fully
amortized, resulting in a gain on sale of $800,000.

                                       47
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note Q--Stock and Option Plans

 Employee Stock Purchase Plan

   In conjunction with the initial public offering, the Company 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 can purchase shares at a 15 percent
discount to the fair market value, subject to certain annual limitations. As
permitted by 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. As the plan is non-
compensatory in nature, no compensation expense will be recorded for stock
purchased pursuant to the plan.  No shares have been issued pursuant to the
plan.

Stock Incentive Plan

  In conjunction with the initial public offering, the Company reserved a total
of 800,000 shares of common stock for issuance pursuant to the 1998 Creditrust
Stock Incentive Plan. The 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.

 Stock Options Issued

   The Company issues options to employees and members of its Board of Directors
based on hiring incentives and merit. The Company has accounted for its options
under APB Opinion No. 25 and related interpretations. The options, which have a
term of 10 years when issued, are granted at various times during the year and
vest based upon individual grant specifications. The exercise price of each
option equals or exceeds the market price of the Company's stock on the date of
grant. No compensation cost has been recognized for employee options. Had
compensation cost for the plan been determined based on the fair value of the
options at the grant dates, consistent with the method in SFAS No. 123, the
Company's net earnings would have been decreased to the pro forma amounts
indicated below for years ended December 31:


<TABLE>
<CAPTION>
               (in thousands, except share data)                            1998              1999
                                                                      ----------------   ---------------
<S>                                                                   <C>                <C>
  Net earnings--as reported  ...............................               $10,195           $17,018
  Net earnings--pro forma  .................................               $10,043           $16,596
  Net earnings per diluted common share--as reported  ......               $  1.48           $  1.67
  Net earnings per diluted common share--pro forma  ........               $  1.45           $  1.63
</TABLE>

  The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing method with the following weighted-average
assumptions used for grants as of December 31:

<TABLE>
<CAPTION>
                                                                             1998                1999
                                                                       -----------------   ----------------
<S>                                                                    <C>                 <C>
  Expected Volatility  ...............................                       16.00%             80.00%
  Risk-free Rate  ....................................                        5.15%              5.54%
  Expected Lives  ....................................                      5 Years            5 Years
</TABLE>

                                       48
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note Q--Stock and Option Plans (Continued)

  The following tables depict activity in the plan for the year ended December
31:

<TABLE>
<CAPTION>
                                                                                           1998               1999
                                                                                          Shares             Shares
                                                                                     ----------------   ----------------
<S>                                                                                  <C>                <C>
  Options outstanding at beginning of year  .....................................               --            317,338
     Granted  ...................................................................          381,854            102,862
     Exercised  .................................................................               --            (30,963)
     Forfeited  .................................................................          (64,516)           (49,856)
     Expired  ...................................................................               --                 --
                                                                                          --------           --------
  Outstanding at end of year  ...................................................          317,338            339,381
  Options exercisable at year-end  ..............................................           62,500            105,248
  Weighted-average fair value per share of options granted during the year  .....         $   4.57           $  14.83
  Weighted-average exercise price  ..............................................         $  15.68           $  21.92
</TABLE>

Note R--Supplemental Cash Flows Information

 Supplemental Disclosures of Cash Flows Information

  The Company paid the following amounts for interest and income taxes during
the years ended:

<TABLE>
<CAPTION>
              (in thousands)                                      December 31,
                                                  --------------------------------------------
                                                      1997            1998           1999
                                                  -------------   ------------   -------------
<S>                                               <C>             <C>            <C>
  Interest  ...................................      $ 377          $ 616          $5,155
                                                     -----          -----          ------
  Income taxes  ...............................      $   8          $   3          $   --
                                                     -----          -----          ------
</TABLE>

 Supplemental Disclosures of Non-cash Investing and Financing Activities

  The Company financed the following purchases of property and equipment with
capitalized lease obligations and tenant improvement allowances during the years
ended:

<TABLE>
<CAPTION>
                    (in thousands)                                       December 31,
                                                            ---------------------------------------
                                                               1997          1998          1999
                                                            -----------   -----------   -----------
<S>                                                         <C>           <C>           <C>
  Equipment, furniture, and leasehold improvements  .......   $1,051        $1,037        $1,651
                                                              ======        ======        ======
</TABLE>

  The Company recorded an unrealized gain on securitizations as follows for the
years ended:

<TABLE>
<CAPTION>
                       (in thousands)                                           December 31,
                                                                  -----------------------------------------
                                                                      1997          1998           1999
                                                                  ------------   -----------   ------------
<S>                                                            <C>            <C>           <C>
  Unrealized gains on investment in securitizations  .......          $  --       $11,462          $  --
                                                                      =====       =======          =====
</TABLE>

                                       49
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Note S--Related Party Transactions

   In October 1999, the Company became aware that a management employee who
subsequently resigned misdirected corporate funds of approximately $500,000 by
submitting an unauthorized check request and then seeking to redirect those
funds through the collection payment stream.  Members of senior management
learned that a check in a similar amount was unsuccessfully presented by the
former employee into the collection payment stream.   The Chief Executive
Officer sought to recover these funds or have them applied as intended by the
Company. The funds remained under the former employee's control for
approximately seven weeks. During this period, these circumstances were not
reported to the audit committee of the board of directors or our independent
auditors. The Company recovered the full amount of the misappropriated funds. No
improper recording of collections occurred as a result of these activities.

  In March 2000, the Company's Chairman and Chief Executive Officer, loaned the
Company $648,000 as a short-term note. The proceeds of the note were used to pay
an obligation of the Company under the Line of Credit Facility. The note matures
on April 16, 2000 and bears interest at the rate of 6% per annum payable at
maturity. The note provided for a two percent commitment fee payable at funding.

  During 1999, the Company paid approximately $200,000 in contingent legal fees
on collections of receivables placed with a law firm which employs a director of
the Company.

  In December 1999, the Company sold receivables for $4.3 million in proceeds to
a company affiliated with a director of the Company.

Note T - Supplementary Financial Information (Unaudited)

The following tables represent selected quarterly financial information.

<TABLE>
<CAPTION>
                                                                        Year Ended 1998
                                                              (in thousands, except share data)
                                          March 31             June 30           September 30         December 31
                                     ------------------   -----------------   ------------------   -----------------
<S>                                  <C>                  <C>                 <C>                  <C>
Total Revenues                            $3,403              $8,401              $4,317              $18,753
Expenses from Operations                   2,673               3,285               4,687                6,159
                                          ------              ------              ------              -------
Earnings (Loss) from
 Operations                                  730               5,116                (370)              12,594

Earnings (Loss) Before                       415               3,038                (114)               7,422
    Extraordinary Item
Net Earnings (Loss)                       $  415              $3,038              $ (680)             $ 7,422
                                         ========            ========            =========           =========

Basic Earnings (Loss) Per
    Common Share Before                   $  .07              $  .51              $ (.01)             $   .93
    Extraordinary Item
Basic Earnings (Loss) Per
    Common Share                          $  .07              $  .51              $ (.09)             $   .93
                                         ========            ========            =========           =========

Diluted Earnings (Loss) Per
    Common Share Before                   $  .07              $  .51              $ (.01)             $   .90
    Extraordinary Item
Diluted Earnings (Loss) Per
    Common Share                          $  .07              $  .51              $ (.09)             $   .90
                                         ========            ========            =========           =========
</TABLE>

                                       50
<PAGE>

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


Note T - Supplementary Financial Information (Unaudited) (Continued)

<TABLE>
<CAPTION>
                                                                     Year Ended 1999
                                                            (in thousands, except share data)
                                          March 31            June 30          September 30        December 31
                                    ------------------  -----------------   -----------------   -----------------
<S>                                 <C>                 <C>                 <C>                 <C>
Total Revenues                           $12,024             $18,418             $24,170             $26,412
Expenses from Operations                   7,644              10,139              12,575              18,413
                                         -------             -------             -------             -------
Earnings from Operations                   4,380               8,279              11,595               7,999
Net Earnings                             $ 2,430             $ 4,889             $ 6,295             $ 3,404
                                        =========           =========           =========           =========

Basic Earnings Per
    Common Share                         $   .29             $   .47             $   .60             $   .33
                                        =========           =========           =========           =========

Diluted Earnings Per
    Common Share                         $   .28             $   .46             $   .58             $   .32
                                        =========           =========           =========           =========
</TABLE>

                                       51
<PAGE>

Item 9.   Changes and Disagreements with Accountants on Accounting and Financial
          Disclosure

  None.

                                   PART III

Item 10.  Directors and Executive Officers of the Registrant

 Executive Officers of Creditrust as of March 22, 2000

  The following table sets forth the names of executive officers of the Company,
their positions within the Company and their principal business experience for
the past five years.

<TABLE>
<CAPTION>
               Name                      Age                            Position
----------------------------------       ---        -------------------------------------------------
<S>                                      <C>        <C>
Joseph K. Rensin  .................      34         Chairman of the Board and Chief Executive Officer
Frederick W. Glassberg/(1)(2)/.....      66         Director
John G. Moran/(1)(2)/..............      54         Director
Michael S. Witlin..................      32         Director
Stuart Wolpoff.....................      36         Director
J. Barry Dumser  ..................      51         President and Chief Operating Officer
Thomas J. Crotty  .................      50         Vice President, Chief Information Officer
Thomas J. Juranich.................      49         President, Creditrust Bank (in organization)
Jefferson B. Moore  ...............      38         Vice President, Acquisitions
Richard J. Palmer  ................      48         Vice President, Chief Financial Officer and Treasurer
</TABLE>

/(1)/ Member of the Audit Committee.
/(2)/ Member of the Compensation Committee.

  Joseph K. Rensin, Chairman of the Board and Chief Executive Officer--Mr.
Rensin co-founded Creditrust in 1991 and has served as Chairman of the Board and
Chief Executive Officer since that time and was President through December 1999.
Mr. Rensin was the initial developer of Creditrust's PAT and Mozart systems and
its extensive database, as well as the customer relations approach to
collections and recovery. He attended the University of Maryland College Park
from 1983 to 1987. While in college, he wrote three books on computers published
by Prentice-Hall.

  Frederick William Glassberg, Director--Mr. Glassberg has been a director of
Creditrust since 1997. Mr. Glassberg has been since 1991 president of Dornbush
Enterprises, Inc., d/b/a Crystal Hill Advisors or its predecessors, Columbia,
Maryland, which provides commercial real estate management advice and financial
advisory services to corporate and municipal clients. Mr. Glassberg serves on
the Board of Directors of three subsidiaries of The Enterprise Foundation that
own low- and moderate-income housing. Earlier in his career, Mr. Glassberg
served as Chief Financial Officer of a subsidiary of The Rouse Company from 1973
to 1983.

  John G. Moran, Director--Mr. Moran has been a director of Creditrust since
1997. He has been Associate Dean and Executive-in-Residence of the Sellinger
School of Business and Management at Loyola College in Baltimore, Maryland since
1995 and was President of The Moran Group, LTD, which offers management
consulting services to for-profit and not-for-profit organizations, from 1995 to
1998. From 1986 until 1995, Mr. Moran was President of Household Bank, FSB
(Eastern Division).

                                       52
<PAGE>

  Michael S. Witlin, Director--Mr. Witlin co-founded Creditrust in 1991, and he
served as Vice President of Creditrust until 1995. From 1995 to 1997, Mr. Witlin
served as a consultant with Company Entier, providing business process re-
engineering services to privately-held and public companies as well as federal
agencies. Since 1998, Mr. Witlin has been a consultant with RWD Technologies,
Inc., providing management and technology consulting services to Fortune 100
companies.

  Stuart Wolpoff, Director--Mr. Wolpoff has been a director of Creditrust since
1999. Since 1991, Mr. Wolpoff has been executive director of Wolpoff & Abramson
LLP, one of the largest law firms specializing in debt collection. Creditrust
uses this law firm for collection work.

  J. Barry Dumser, President and Chief Operating Officer--Mr. Dumser joined
Creditrust in 1997 as its General Counsel and was named President and Chief
Operating Officer in December 1999.  From 1995 to 1997, Mr. Dumser served as
Vice President, Chevy Chase Bank where he managed the bank's bankruptcy and
deceased processing units and supervised the litigation unit, which supported
the collection efforts with respect to the Chevy Chase Bank's approximately $5
billion credit card portfolio. From 1994 to 1995, Mr. Dumser served as Vice
President and Counsel to Matterhorn Bank Programs, and from 1990 to 1993, Mr.
Dumser served as Vice President, Commercial Loan Collateral Control, of First
American Bank of Virginia. Mr. Dumser received his BS in Economics from Wharton
School of Finance and Commerce and his MBA from Boston University School of
Management. Mr. Dumser received his JD from the University of Baltimore School
of Law in 1983 and was admitted to the Maryland Bar that same year.

  Thomas J. Crotty, Vice President and Chief Information Officer--Mr. Crotty
joined Creditrust in 1999. Prior to joining Creditrust, Mr. Crotty was Vice
President and Chief Information Officer of Commercial Financial Services, Inc.
from 1997 to 1999, served in various senior information technology management
positions with GEICO Insurance Company from 1983 to 1997, and was previously
employed in information technology positions by USAir Group, J.C. Penney, and
GAF. Mr. Crotty has undergraduate and graduate technology management degrees
from the University of Maryland. Commercial Financial Services, Inc. filed for
protection from its creditors under federal bankruptcy laws in December 1998 and
has ceased operations.

  Thomas J. Juranich, President Creditrust Bank--(in organization)--Mr. Juranich
joined Creditrust in 1999 to head Creditrust Bank (in organization). Prior to
joining the organization, Mr. Juranich was President of Key Operations Center, a
wholly-owned subsidiary of Key Bank & Trust from 1991 to 1999, where he was
responsible for the profit and loss of the Credit Card Division. From 1986 to
1991 he was First Vice President of Long Island Savings Bank where he served as
head of Branch Operations for a 50-branch network, and managed their Consumer
Lending Division. From 1970 to 1986 Mr. Juranich managed several areas of the
Credit Card Division for Chemical Bank and served as Vice President of
Operations for that division from 1982 to 1984, and as Vice President of Check
Operations from 1984 to 1986.

  Jefferson Barnes Moore, Vice President, Acquisitions--Mr. Moore joined
Creditrust in 1997. From 1994 to 1997, Mr. Moore was Vice President of Koll-Dove
Global Disposition Services, LLC, where he helped the company develop its
industry-leading defaulted consumer receivables brokerage operations. Prior to
Koll-Dove, Mr. Moore was involved in commercial real estate sales for 12 years.
Mr. Moore received his BS degree in Business Administration from the University
of Missouri, Columbia.

                                       53
<PAGE>

  Richard J. Palmer, Vice President, Chief Financial Officer and Treasurer--Mr.
Palmer has been Chief Financial Officer of Creditrust since 1996. From 1983 to
1996, Mr. Palmer served as Chief Financial Officer of, and in various other
financial functions for, CRI, Inc., a national real estate investment company
with headquarters in Rockville, Maryland. Prior to CRI, Inc., Mr. Palmer was
with Grant Thornton LLP from 1976 until 1983 and KPMG Peat, Marwick from 1973 to
1976. Mr. Palmer has a BS degree in accounting from Florida Atlantic University
in Boca Raton, Florida. He received his Florida certified public accounting
certificate in 1974, and received reciprocity in the District of Columbia in
1976.

  Information regarding the Company's Board of Directors is incorporated by
reference from the text and tables under "Election of Board of Directors" in
the Company's definitive Proxy Statement for the Annual Meeting of Stockholders
to be held May 25, 2000 (the "2000 Proxy Statement").

Item 11.  Executive Compensation

  Information regarding executive compensation is incorporated by reference from
information contained in the text and tables under "Executive Compensation" in
the 2000 Proxy Statement.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

  (a) Except as indicated in the 2000 Proxy Statement, the Company knows of no
person who on March 22, 2000 owned beneficially more than 5% of its common
stock.

  (b) Information regarding stock ownership is incorporated by reference from
information contained in the text and tables under "Securities Beneficially
Owned" in the 2000 Proxy Statement.

  (c) The Company knows of no arrangements the operation of which may at a
subsequent date result in a change of control of the Company.

Item 13.  Certain Relationships and Related Transactions

  Information regarding certain transactions is incorporated by reference from
information contained in the text under "Certain Transactions" in the 2000
Proxy Statement.

                                       54
<PAGE>

                                    PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

  (a)(1) The following consolidated financial statements of Creditrust
Corporation and its subsidiaries are included in Item 8:

     Independent Certified Public Accountants' Report

     Consolidated Balance Sheets as of December 31, 1998 and 1999

     Consolidated Statements of Earnings for the years ended December 31, 1997,
     1998 and 1999

     Consolidated Statements of Stockholders' Equity and Comprehensive Income
     for the years ended December 31, 1997, 1998 and 1999

     Consolidated Statements of Cash Flows for the years ended December 31,
     1997, 1998 and 1999

     Notes to Consolidated Financial Statements

  (a)(2) No financial statement schedules for the years ended December 31, 1997,
1998 and 1999 are required to be filed as part of this Annual Report.

  (a)(3) See accompanying Index to Exhibits on page 58.

  (b) Reports on Form 8-K.

      A Form 8-K was filed on December 10, 1999.

  (c) The following is a list of exhibits filed herewith:

<TABLE>
<CAPTION>

Exhibit No.                                             Document
-----------              ----------------------------------------------------------------------
<S>                      <C>
10.13(d)                 Amendment No. 3 to Indenture and Servicing Agreement, dated as of
                         December 31, 1999, by and among Creditrust Funding I LLC, as issuer,
                         Norwest Bank Minnesota, National Association, as trustee, and as
                         backup servicer, Creditrust Corporation, as servicer, and Asset
                         Guaranty Insurance Company, as note insurer
10.13(e)                 Amendment No. 4 to Indenture and Servicing Agreement, dated as of
                         February 29, 2000, by and among Creditrust Funding I LLC, as issuer,
                         Norwest Bank Minnesota, National Association, as trustee, and as
                         backup servicer, Creditrust Corporation, as servicer, and Asset
                         Guaranty Insurance Company, as note insurer
</TABLE>

                                       55
<PAGE>

<TABLE>
<S>                      <C>
10.14(c)                 Second Amendment to Credit Agreement, dated as of December 31, 1999
                         and effective as of January 1, 2000 by and among Creditrust
                         Corporation, as borrower, and Sunrock Capital Corp., as agent
10.15(c)                 Amendment No. 2 to Indenture and Servicing Agreement, dated as of
                         June 1, 1999, by and among Creditrust SPV98-2, LLC, as issuer,
                         Norwest Bank Minnesota, National Association, as trustee, and as
                         backup servicer, Creditrust Corporation, as servicer, and Asset
                         Guaranty Insurance Company, as note insurer
10.15(d)                 Amendment No. 3 to Indenture and Servicing Agreement, dated as of
                         December 31, 1999, by and among Creditrust SPV98-2, LLC, as issuer,
                         Norwest Bank Minnesota, National Association, as trustee, and as
                         backup servicer, Creditrust Corporation, as servicer, and Asset
                         Guaranty Insurance Company, as note insurer

   10.20                 Guarantee and Collateral Agreement dated as of August 2, 1999 among
                         Creditrust SPV 99-2, LLC, Creditrust SPV 99-2 Capital, Inc., and
                         Norwest Bank Minnesota, National Association
   10.21                 Parent Guarantee and Collateral Agreement dated as of August 2, 1999
                         made by Creditrust Corporation in favor of Norwest Bank Minnesota,
                         National Association
   10.22                 Warrant Agreement dated as of August 2, 1999 between Creditrust
                         Corporation and the Lenders set forth therein
   10.23                 Equity Registration Rights Agreement dated as of August 2, 1999
                         between Creditrust Corporation and the Lenders set forth therein
   10.24                 Stockholders' Agreement dated as of August 2, 1999 among Joseph K.
                         Rensin, Creditrust Corporation, and the Lenders set forth therein
   10.27                 Office Lease Agreement dated as of May 14, 1999 between Sterling York
                         LLC and Creditrust Corporation
    21.1                 List of Subsidiaries of the Registrant
    23.1                 Consent of Grant Thornton LLP
    27.1                 Financial Data Schedule
</TABLE>

  (d) The following is a list of financial statements schedules filed herewith:

      None.

                                       56
<PAGE>

                                   SIGNATURES

  Pursuant to the requirements of Section 13 or 15(d) 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, in the City of Baltimore,
State of Maryland, on March 30, 2000.


                                  Creditrust Corporation


                                  By: /s/ Joseph K. Rensin
                                      ________________________________
                                               Joseph K. Rensin
                                          Chairman of the Board and
                                           Chief Executive Officer

   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons in the capacities indicated.

<TABLE>
<CAPTION>

         Signature                          Title                        Date
----------------------------   --------------------------------    -----------------
<S>                            <C>                                 <C>
/s/ Joseph K. Rensin           Chairman of the Board and            March 30, 2000
____________________________   Chief Executive Officer
Joseph K. Rensin               (Principal Executive Officer)


/s/ J. Barry Dumser            President and Chief Operating        March 30, 2000
____________________________   Officer
J. Barry Dumser


/s/ Richard J. Palmer          Vice President, Chief Financial      March 30, 2000
____________________________   Officer and Treasurer
Richard J. Palmer              (Principal Financial and
                               Accounting Officer)


/s/ Frederick W. Glassberg     Director                             March 30, 2000
____________________________
Frederick W. Glassberg


/s/ John G. Moran              Director                             March 30, 2000
____________________________
John G. Moran


/s/ Michael S. Witlin          Director                             March 30, 2000
____________________________
Michael S. Witlin


/s/ Stuart Wolpoff             Director                             March 30, 2000
____________________________
Stuart Wolpoff
</TABLE>

                                       57
<PAGE>

                                 EXHIBIT INDEX


3.1   Charter of the Company.**

3.2   By-Laws of the Company.**

4.1   Form of stock certificate.**

4.2   Form of Senior Subordinated Note, Series 1998.**

4.3   Form of Common Stock Purchase Warrant.**

4.4   Senior Subordinated Note Series and Common Stock Warrant Purchase
      Agreement.**

4.5   Registration Rights Agreement.**

10.1  Creditrust 1998 Stock Incentive Plan.**

10.2  Creditrust 1998 Employee Stock Purchase Plan.**

10.3  Employment Agreement between the Company and Jefferson B. Moore.**

10.4  Employment Agreement between the Company and Richard J. Palmer.**

10.5 Employment Agreement between the Company and John D. Frey.*

10.6 Employment Agreement between the Company and John L. Davis.**

10.7  Agreement dated March 13, 1997 by and between Crystal Hill Advisors and
      the Company.**

                                       58
<PAGE>

10.8      Lease Agreement, dated January 24, 1996, by and between BRIT Limited
          Partnership and Oxford Capital Corporation.**

10.9      Lease Agreement, dated January 22, 1997, by and between A&E Partners
          and Creditrust Corporation.**

10.10     First Amendment to Lease, dated February 27, 1997, by and between A&E
          Partners and Creditrust Corporation.**

10.11(a)  Indenture and Servicing Agreement, dated as of June 1, 1998, by and
          among Creditrust SPV2, LLC, Norwest Bank Minnesota, National
          Association, Creditrust Corporation and Asset Guaranty Insurance
          Company.**

10.11(b)  Amendment No. 1 to Indenture and Servicing Agreement, dated as of
          February 16, 1999, by and among Creditrust SPV2, LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.*

10.12     Limited Liability Company Agreement of Creditrust SPV2, LLC, dated
          June 19, 1998.**

10.13(a)  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.***

10.13(b)  Amendment No. 1 to Indenture and Servicing Agreement, dated as of
          February 16, 1999, by and among Creditrust Funding I LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.*

10.13(c)  Amendment No. 2 to Indenture and Servicing Agreement, dated as of
          March 15, 1999, by and among Creditrust Funding I LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.*

10.13(d)  Amendment No. 3 to Indenture and Servicing Agreement, dated as of
          December .31, 1999, by and among Creditrust Funding I LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.+++

10.13(e)  Amendment No. 4 to Indenture and Servicing Agreement, dated as of
          February 29, 2000 by and among Creditrust Funding I LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.+++

10.14(a)  Credit Agreement, dated as of October 28, 1998, between Creditrust
          Corporation, the Lenders party thereto and Sunrock Capital Corp.++

10.14(b)  Amendment No. 1 to Credit Agreement dated as of February 12, 1999 and
          effective as of October 28, 1998 by and among Creditrust Corporation,
          as Borrower, and Sunrock Capital Corp., as agent.*

10.14(c)  Second Amendment to Credit Agreement dated as of December 31, 1999 and
          effective as of December 31, 1999, by and among Creditrust
          Corporation, as Borrower, and Sunrock Capital Corp., as Agent+++

                                       59
<PAGE>

10.15(a)  Indenture and Servicing Agreement, dated as of December 29, 1998, by
          and among Creditrust SPV98-2, LLC, Norwest Bank Minnesota, National
          Association, Creditrust Corporation and Asset Guaranty Insurance
          Company.*

10.15(b)  Amendment No. 1 to Indenture and Servicing Agreement, dated as of
          February 16, 1999, by and among Creditrust SPV98-2, LLC, as issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.*

10.15(c)  Amendment No. 2 to Indenture and Servicing Agreement, dated as of June
          1, 1999, by and among Creditrust SPV98-2, LLC, as issuer, Norwest Bank
          Minnesota, National Association, as trustee, and as backup servicer,
          Creditrust Corporation, as servicer, and Asset Guaranty Insurance
          Company, as note insurer.+++

10.15(d)  Amendment No. 3 to Indenture and Servicing Agreement, dated as of
          December 31, 1999, by and among Creditrust SPV98-2, LLC, issuer,
          Norwest Bank Minnesota, National Association, as trustee, and as
          backup servicer, Creditrust Corporation, as servicer, and Asset
          Guaranty Insurance Company, as note insurer.+++

10.16     Limited Liability Company Agreement of Creditrust SPV98-2, LLC, dated
          as of December 29, 1998.*

10.17     Lease, dated January 11, 1999, by and between Butera Properties, LLC,
          as Landlord, and Creditrust Card Services Corporation, as Tenant.*

10.18     Bridge Loan Agreement dated as of August 2, 1999 among dated as of
          August 2, 1999 among Creditrust SPV 99-2, LLC, Creditrust SPV 99-2
          Capital, Inc., Creditrust Corporation, the Lenders named therein, and
          Norwest Bank Minnesota, National Association.++++

10.19     Senior Secured Bridge Note dated August 2, 1999, executed by
          Creditrust SPV 99-2, LLC.++++

10.20     Guarantee and Collateral Agreement dated as of August 2, 1999 among
          Creditrust SPV 99-2, LLC, Creditrust SPV 99-2 Capital, Inc., and
          Norwest Bank Minnesota, National Association.+++

10.21     Parent Guarantee and Collateral Agreement dated as of August 2, 1999
          made by Creditrust Corporation in favor of Norwest Bank Minnesota,
          National Association.+++

10.22     Warrant Agreement dated as of August 2, 1999 between Creditrust
          Corporation and the Lenders set forth therein.+++

10.23     Equity Registration Rights Agreement dated as of August 2, 1999
          between Creditrust Corporation and the Lenders set forth therein.+++

10.24     Stockholders' Agreement dated as of August 2, 1999 among Joseph K.
          Rensin, Creditrust Corporation, and the Lenders set forth therein.+++

10.25     Indenture and Servicing Agreement, dated as of August 31, 1999, by and
          among Creditrust SPV99-1, LLC, Norwest Bank Minnesota, National
          Association, and Creditrust Corporation++++

10.26     Limited Liability Company Agreement of Creditrust SPV99-1, LLC, dated
          as of August 31, 1999.++++

10.27     Office Lease Agreement dated as of May 14, 1999 between Sterling York
          LLC and Creditrust Corporation.+++

21.1      List of Subsidiaries.+++

23.1      Consent of Grant Thornton LLP.+++

27.1      Financial Data Schedule.+++
                                       60
<PAGE>

*     Previously filed as an exhibit to the Company's Registration Statement on
      Form S-1 (Reg. No. 333-70845) and incorporated herein by reference.

**    Previously filed as an exhibit to the Company's Registration Statement on
      Form S-1 (Reg. No. 333-50103) and incorporated herein by reference.

***   Previously filed as an exhibit to the Company's Quarterly Report on Form
      10-Q for the quarterly period ended September 30, 1998 and incorporated
      herein by reference.

+     Previously filed as an exhibit to the Company's Annual Report on Form10-K
      for the year ended December 31, 1998 and incorporated herein by reference.
      A portion of the exhibit has been omitted based upon a request for
      confidential treatment.

++    Previously filed as an exhibit to the Company's Registration Statement on
      Form S-1 (Reg. No. 333-70845) and incorporated herein by reference. A
      portion of this exhibit has been omitted based upon a request for
      confidential treatment.

+++   Filed herewith.

++++  Previously filed as an exhibit to the Company's Quarterly Report on Form
      10-Q for the quarter ended September 30, 1999. A portion of this exhibit
      has been omitted based upon a request for confidential treatment.

                                       61