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

FORM 10-QSB

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

For the quarterly period ended March 31, 2004
------------------

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

For the transition period from__________ to __________

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

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

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

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

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

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

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 10, 2004, the issuer had
570,916 LLC Units issued and outstanding.

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

PERFORMANCE CAPITAL MANAGEMENT, LLC

INDEX TO
QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 2004

PART I - FINANCIAL INFORMATION PAGE

Item 1 Financial Statements

Independent Accountants' Review Report. . . . . . . . . . . . . . . 1

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

Statements of Operations for the three months ended
March 31, 2004 and 2003 (unaudited) . . . . . . . . . . . . . . . . 3

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

Statements of Cash Flows for the three months ended
March 31, 2004 and 2003 (unaudited) . . . . . . . . . . . . . . . . 5

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

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

Item 3 Controls and Procedures . . . . . . . . . . . . . . . . . . . . . 20

PART II - OTHER INFORMATION

Item 1 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . 20

Item 2 Changes in Securities and Small Business Issuer Purchases
of Equity Securities. . . . . . . . . . . . . . . . . . . . . . . . 20

Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . 20

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

[MOORE STEPHENS WURTH FRAZER AND TORBET, LLP LETTERHEAD]

INDEPENDENT ACCOUNTANTS' REVIEW REPORT
- --------------------------------------

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

We have reviewed the accompanying balance sheet of Performance Capital
Management, LLC, as of March 31, 2004, and the related statements of operations,
members' equity and cash flows for the three months ended March 31, 2004 and
2003, in accordance with Statements on Standards for Accounting and Review
Services issued by the American Institute of Certified Public Accountants. All
information included in these financial statements is the representation of the
management of Performance Capital Management, LLC.

A review of interim financial information consists principally of applying
analytical procedures and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

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

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

/s/ Moore Stephens Wurth Frazer And Torbet, LLP

May 3, 2004
Orange, California

PERFORMANCE CAPITAL MANAGEMENT, LLC

BALANCE SHEETS
AS OF MARCH 31, 2004 AND DECEMBER 31, 2003

March 31, December 31,
2004 2003
(unaudited) (audited)
------------ -----------

ASSETS
------
Cash and cash equivalents $ 2,090,319 $ 1,007,949
Restricted cash 21,461 21,448
Other receivables 18,498 14,492
Purchased loan portfolios, net 1,575,265 2,081,496
Property and equipment, net 358,433 397,924
Deposits 56,588 56,588
Prepaid expenses and other assets 195,277 135,738
------------ -----------

Total assets $ 4,315,841 $ 3,715,635
============ ===========

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

LIABILITIES:

Accounts payable $ 67,943 $ 68,735
Accrued liabilities 408,078 313,352
Income taxes payable 27,390 15,790
------------ -----------
Total liabilities 503,411 397,877

COMMITMENTS AND CONTINGENCIES - -

MEMBERS' EQUITY 3,812,430 3,317,758
------------ -----------

Total liabilities and members' equity $ 4,315,841 $ 3,715,635
============ ===========

The accompanying notes are an integral part of these financial statements.
See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

STATEMENTS OF OPERATIONS

March 31, March 31,
2004 2003
(unaudited) (unaudited)
------------ ------------

REVENUES:
Portfolio collections $ 2,451,370 $ 2,639,618
Portfolio sales 1,782,064 345,961
------------ ------------
Total revenues 4,233,434 2,985,579
Less portfolio basis recovery 1,826,227 1,578,966
------------ ------------

NET PORTFOLIO COLLECTION REVENUES 2,407,207 1,406,613
------------ ------------

OPERATING COSTS AND EXPENSES:
Salaries and benefits 1,114,460 1,120,108
General and administrative 577,370 545,693
Depreciation 45,173 51,501
------------ ------------
Total operating costs and expenses 1,737,003 1,717,302
------------ ------------

INCOME (LOSS) FROM OPERATIONS 670,204 (310,689)
------------ ------------

OTHER INCOME (EXPENSE):
Reorganization costs (8,837) (23,523)
Interest income 2,391 1,935
Other income 7,017 10,584
------------ ------------
Total other income (expense), net 571 (11,004)
------------ ------------

INCOME (LOSS) BEFORE INCOME TAX PROVISION 670,775 (321,693)

INCOME TAX PROVISION 11,600 2,948
------------ ------------

NET INCOME (LOSS) $ 659,175 $ (324,641)
============ ============

NET INCOME (LOSS) PER UNIT
BASIC AND DILUTED $ 1.15 $ (0.57)
============ ============

The accompanying notes are an integral part of these financial statements.
See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

STATEMENTS OF MEMBERS' EQUITY

Total
Member Unreturned Abandoned Accumulated Members'
Units Capital Capital Deficit Equity
-------- ------------ ---------- ------------- -----------

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

Net loss (324,641) (324,641)
-------- ------------ ---------- ------------- -----------

Balance, March 31, 2003 571,550 26,116,880 (21,562,467) 4,554,413
-------- ------------ ---------- ------------- -----------

Distributions to investors (471,977) (471,977)

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

Net loss (764,678) (764,678)
-------- ------------ ---------- ------------- -----------

Balance, December 31, 2003 570,916 25,612,977 31,926 (22,327,145) 3,317,758

Distributions to investors (164,503) (164,503)

Net income 659,175 659,175
-------- ------------ ---------- ------------- -----------

Balance, March 31, 2004 570,916 $25,448,474 $ 31,926 $(21,667,970) $3,812,430
======== ============ ========== ============= ===========

The accompanying notes are an integral part of these financial statements.
See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

STATEMENTS OF CASH FLOWS

For the three For the three
months ended months ended
March 31, 2004 March 31, 2003
(unaudited) (unaudited)
---------------- --------------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 659,175 $ (324,641)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 45,173 51,501
(Increase) decrease in assets:
Other receivables (4,006) 9,800
Contract receivable (103,048)
Prepaid expenses and other assets (59,539) (28,537)
Loan portfolios 506,231 1,229,015
Increase (decrease) in liabilities:
Accounts payable (792) 44,297
Pre-petition claims (32,052)
Accrued liabilities 94,726 (9,950)
Income taxes payable 11,600 2,948
---------------- --------------------
Net cash provided by operating activities 1,252,568 839,333

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,682) (3,674)

CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to investors (164,503)
---------------- --------------------
NET CHANGE IN CASH AND CASH EQUIVALENTS 1,082,383 835,659

CASH AND CASH EQUIVALENTS, beginning of period 1,029,397 871,534
---------------- --------------------
CASH AND CASH EQUIVALENTS, end of period $ 2,111,780 $ 1,707,193
================= ====================
SUPPLEMENTAL DISCLOSURE FOR CASH FLOW INFORMATION:

Income taxes paid $ 800 $
================= ====================
Interest paid $ $
================= ====================

The accompanying notes are an integral part of these financial statements.
See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS

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

Reorganization Under Bankruptcy
- ---------------------------------

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

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

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

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

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

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

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

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS, (CONTINUED)

Pre-Petition Operations
- ------------------------

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

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

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

The following is a summary of the ownership interest of Performance Capital
Management, LLC pursuant to the terms of the Reorganization Plan:

Original
Fund's Number of Number of Percentage
Name Unit Holders PCM LLC Units Interest in PCM LLC
- -------- ------------ ------------- -------------------

PAM 370 52,050 9
PAMII 459 76,700 13
PAMIII 595 99,900 18
PAMIV 1553 285,950 50
PAMV 327 56,950 10
------------- -------------------
Totals 571,550 100
============= ===================

The following is a summary of the ownership interest of Performance Capital
Management, LLC as of March 31, 2004:

Original
Fund's Number of Percentage
Name PCM LLC Units Interest in PCM LLC
- -------- ------------- -------------------

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

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS, (CONTINUED)

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

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

PAM PAMII PAMIII PAMIV PAMV PCM INC Total
----------------------------------------------------------------------

Sale of Limited
Partnership Units $ 5,205 $ 7,670 $ 9,990 $28,595 $ 5,965 $ - $ 57,425

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

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

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

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

2002 Distribution to Investors (12,000)

Net Loss For The Year Ended
December 31, 2002 (2,999)
---------

Members' Equity PCM, LLC
at December 31, 2002 4,879

2003 Distributions to Investors (472)

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

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

2004 Distribution to Investors (165)

Net Income For The Period
Ended March 31, 2004 659
---------

Members' Equity PCM, LLC
at March 31, 2004 $ 3,812
=========

Performance Asset Management Fund III, Ltd. and Performance Asset Management
Fund IV, Ltd., were reporting entities under the Securities Exchange Act of
1934. PAM, PAMII, PAMV, and PCM INC were not reporting entities. It was
determined that Performance Capital Management, LLC is a "successor company"
under rule 12g-3 of the

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS, (CONTINUED)

Securities Exchange Act of 1934, and therefore is subject to the reporting
requirements of the Securities Exchange Act of 1934. PCM LLC's LLC units are
not publicly traded securities. The Reorganization Plan placed certain
restrictions on the transfer of members' interests.

NOTE 2 - BASIS OF PRESENTATION

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

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

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

The Company is a successor entity of six companies emerging from bankruptcy (see
Note 1). The accompanying balance sheets, statements of operations, members'
equity, and cash flows include balances and transactions since the emergence
from bankruptcy.

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

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

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

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

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (CONTINUED)

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

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

Over the life of the portfolio, the Company's management continues to review the
carrying values of each loan for impairment. If the net present value of
estimated future cash flows falls below the carrying value of the related
portfolio, the valuation allowance is adjusted accordingly. Adjustments to the
valuation allowance are recorded in the statement of operations as a provision
for losses on loan portfolios.

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

PCM LLC defines cash equivalents as cash, money market investments, and
overnight deposits with original maturities of less than three months. Cash
equivalents are valued at cost, which approximates market. The Company
maintains cash balances, which exceeded federally insured limits by
approximately $2,265,000 as of March 31, 2004. The Company has not experienced
any losses in such accounts. Management believes it is not exposed to any
significant risks on cash in bank accounts.

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

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

Loan portfolio sales occur after the initial portfolio analysis is performed and
the loan portfolio is acquired. Portfolios sold typically either do not meet
PCM LLC's targeted collection characteristics, are located in geographic areas
where PCM LLC is not licensed to collect or are sold for strategic reasons. Loan
portfolios sold are valued at the lower of cost or market.

Proceeds from strategic sales of purchased loan portfolios in excess of their
cost basis are recorded as net revenue when received.

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

Members' equity includes voting LLC units held by members and non-voting LLC
units held by one economic interest owner. As of March 31, 2004, PCM LLC had
547,194 voting LLC units (547,194 LLC units as of December 31, 2003) and 23,722
non-voting LLC units (23,722 LLC units as of December 31, 2003). Abandoned
capital represents LLC units that are either voluntarily returned to the Company
by a member or LLC units that are redeemed and cancelled following a procedure
authorized by PCM LLC's plan of reorganization to eliminate the interests of
members the Company has not been able to locate.

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 4 - FAIR VALUE OF FINANCIAL INSTRUMENTS

The estimated fair value and the methods and assumptions used to estimate the
fair values of the financial instruments of the Company as of March 31, 2004 and
December 31, 2003 are as follows. The carrying amount of cash and cash
equivalents, restricted cash and liabilities approximate their fair values. The
fair value of purchased loan portfolios was determined based on both market
pricing and discounted expected cash flows. The discount rate is based on an
acceptable rate of return adjusted for the risk inherent in the loan portfolios.
The discount rate utilized at March 31, 2004 and December 31, 2003 was 20%. The
estimated fair value of loan portfolios was $15,200,000 and $15,300,000 at March
31, 2004 and December 31, 2003, respectively.

NOTE 5 - PURCHASED LOAN PORTFOLIOS

The Company acquires portfolios of non-performing credit card loans from federal
and state banks and other sources. These loans are acquired at a substantial
discount from the actual outstanding balance. The aggregate outstanding
contractual loan balances at March 31, 2004 and December 31, 2003 totaled
approximately $692 million and $1.1 billion, respectively.

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

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

As of As of
Mar. 31, 2004 Dec. 31, 2003
--------------- ---------------

Unrecovered cost balance,
beginning of period $ 7,619,515 $ 9,517,146
Valuation allowance,
beginning of period (5,538,019) (5,472,952)
--------------- ---------------
Net balance, beginning of period 2,081,496 4,044,194
Net portfolio activity (506,231) (1,962,698)
--------------- ---------------
Net balance, end of period $ 1,575,265 $ 2,081,496
=============== ===============

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

For the three For the three
months ended months ended
Mar. 31, 2004 Mar. 31, 2003
--------------- ---------------

Purchased loan portfolios $ 1,319,996 $ 349,951
Collections on loan portfolios (2,451,370) (2,639,618)
Sales of loan portfolios (1,782,064) (345,961)
Revenue recognized on collections 1,659,620 1,351,509
Revenue recognized on sales 747,587 55,104
--------------- ---------------
Net portfolio activity $ (506,231) $ (1,229,015)
=============== ===============

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 5 - PURCHASED LOAN PORTFOLIOS, (CONTINUED)

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

NOTE 6 - OTHER RECEIVABLES

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

NOTE 7 - PROPERTY AND EQUIPMENT

Property and equipment is as follows:

As of As of
Mar. 31, 2004 Dec. 31, 2003
-------------- --------------

Office furniture and equipment $ 274,260 $ 273,835
Computer equipment 487,986 482,729
Leasehold improvements 36,982 36,982
-------------- --------------
Totals 799,228 793,546
Less accumulated depreciation 440,795 395,622
-------------- --------------
Property and equipment, net $ 358,433 $ 397,924
============== ==============

Depreciation expense for the three months ended March 31, 2004 and 2003 amounted
to $45,173 and $51,501, respectively.

NOTE 8 - COMMITMENTS AND CONTINGENCIES

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

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

Future minimum lease commitments as of March 31, 2004 are as follows:

Year ending
March 31,
-----------

2004 $307,000
2005 316,000
2006 214,000
Thereafter -

Rental expense for the three months ended March 31, 2004 and 2003 amounted to
approximately $79,659 and $77,581, respectively.

Consent Decree - Fair Credit Reporting Act
- ------------------------------------------

In February 2001, a Consent Decree was entered in United States District Court
in an action United States of America v. Performance Capital Management, Inc.
(One of the entities that formed Performance Capital Management, LLC, see

See Independent Accountants' Review Report.

PERFORMANCE CAPITAL MANAGEMENT, LLC

CONDENSED NOTES TO THE FINANCIAL STATEMENTS

NOTE 8 - COMMITMENTS AND CONTINGENCIES, (CONTINUED)

Consent Decree - Fair Credit Reporting Act, (continued)
- -------------------------------------------------------

Note 1). Under the terms of the Consent Decree, PCM, INC had a civil penalty
pursuant to Section 621 (a) of the Fair Credit Reporting Act, 15 U.S.C. 1681s(a)
of $2,000,000 waived. The Consent Decree basically had PCM INC and its
successors agree to follow the provisions of the Fair Credit Reporting Act. The
Consent Decree ordered, among other specifics, that PCM INC and its successors,
officers, employees, et al, are: 1) enjoined from failing to report correct
delinquency dates to consumer reporting agencies; 2) enjoined from failing to
properly investigate consumer disputes and verify, correct or delete the
reporting of such information to consumer reporting agencies within the time set
forth in the Fair Credit Reporting Act; 3) enjoined from failing to report
accounts as "disputed" to consumer reporting agencies when consumers dispute
accounts either in writing, orally, or by electronic means; and 4) enjoined from
failing to comply in any other respect with the Fair Credit Reporting Act.

The Consent Decree provides for access to the business for a period of three
years, including all computerized databases, right to inspect and copy all
relevant documents and the right to interview officers and employees. The
Consent Decree expired in February 2004.

NOTE 9 - EARNINGS PER MEMBER UNIT

Basic and diluted earnings per member unit are calculated based on the weighted
average number of member units issued and outstanding 570,916 for the three
months ended March 31, 2004 and 571,550 for the three months ended March 31,
2003.

NOTE 10 - EMPLOYEE BENEFIT PLANS

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

The Plan is a contributory plan whereby participants may contribute up to a
maximum of 15% of pre-tax annual compensation. Participants may also contribute
amounts representing distributions from other qualified defined benefit or
contribution plans. The Plan Sponsor does not make matching contributions.

NOTE 11 - OTHER EVENTS

The Company is conducting extensive negotiations with Varde Investment Partners,
L.P. ("Varde"), a well-known participant in the debt collection industry, to
augment its purchasing capacity using capital provided by Varde. The Company has
not yet concluded its negotiation with Varde and reached a definitive agreement,
and it is possible that the Company may not reach a definitive agreement with
Varde.

See Independent Accountants' Review Report.

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

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

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the unaudited financial statements
and accompanying notes and the other financial information appearing elsewhere
in this report and with the financial information contained in our Form 10-KSB
filed with the Securities and Exchange Commission on April 14, 2004.

OVERVIEW

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

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

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

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

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

of the portfolio. When we sell a portfolio or a portion of it, to the extent of
remaining cost basis for the portfolio, we reduce the cost basis of the
portfolio by a percentage of the original portfolio cost.

Our net revenues from portfolio collections may vary from quarter to quarter
because the number and magnitude of portfolios where we are still recovering
costs may vary, and because the return rates of portfolios whose costs we have
already recovered in full may vary. Similarly, our net revenues from portfolio
sales may vary from quarter to quarter depending on the number and magnitude of
portfolios (or portions) we decide to sell and the market values of the sold
portfolios (or portions) relative to their cost bases.

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

BASIS OF PRESENTATION

We present our financial statements based on our February 4, 2002, emergence
from bankruptcy being treated as the inception of our business. In our emergence
from bankruptcy, we succeeded to the assets and liabilities of six entities that
were in bankruptcy. The equity owners of these entities approved a
reorganization plan under which the owners of these six entities agreed to
receive ownership interests in Performance Capital Management, LLC, in exchange
for their ownership interests in the predecessor entities.

CRITICAL ACCOUNTING ESTIMATES

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

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

When we collect an account in a portfolio, we reduce the cost basis of the
portfolio dollar-for-dollar until we have completely recovered the cost basis of
the portfolio. We believe this method of accounting for the amortization of the
purchase price of our portfolios is conservative and minimizes the effect of
estimation on our results of operations. This policy has the effect of
"front-loading" expenses, however, and may result in a portfolio initially
showing no net revenue for a period of time and then showing only net revenue
once we have recovered its entire cost basis. Although this accounting policy
may be criticized for not matching portfolio cost basis to revenue on a
proportionate basis over the life of the portfolio, we believe a policy grounded
in conservatism is preferable to a policy of attempting to estimate the
appropriate matching percentages, due to the distressed nature of the portfolio
assets and the lack of assurance that projected collections will actually occur.

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

policy that would attempt to estimate whether a portion of a portfolio being
sold is more or less valuable than the remaining accounts that comprise the
portfolio, because our policy minimizes the effect of estimation on our results
of operations.

OPERATING RESULTS

Comparison of Results for the Quarters Ended March 31, 2004, and 2003

The following discussion compares our results for the quarter ended March 31,
2004, to the quarter ended March 31, 2003. We had net income of approximately
$659,000 for the quarter ended March 31, 2004, as compared to a net loss of
approximately $325,000 for the quarter ended March 31, 2003. Our operating
activities provided cash of approximately $1.3 million in the quarter ended
March 31, 2004, as compared to providing cash of approximately $839,000 in the
quarter ended March 31, 2003.

Revenue
- -------

Our net revenues increased to approximately $2.4 million for the quarter ended
March 31, 2004, from approximately $1.4 million for the quarter ended March 31,
2003. The following table presents a comparison of the components of our
revenues for the quarter ended March 31, 2004, to the quarter ended March 31,
2003, as well as presenting net revenue as a percentage of the corresponding
total revenue (approximate amounts due to rounding):

Total Collections Sales
------------------------ ------------------------ ------------------------
March 31, March 31, March 31, March 31, March 31, March 31,
2004 2003 2004 2003 2004 2003
----------- ----------- ----------- ----------- ----------- -----------
($in millions) ($in millions) ($in millions)

Total revenues $ 4.2 $ 3.0 $ 2.4 $ 2.6 $ 1.8 $ 0.4
Less basis recovery (1.8) (1.6) (0.8) (1.3) (1.0) (0.3)
----------- ----------- ----------- ----------- ----------- -----------
Net revenues $ 2.4 $ 1.4 $ 1.6 $ 1.3 $ 0.8 $ 0.1
=========== =========== =========== =========== =========== ===========
Net revenue percentage 56.9% 47.1% 67.7% 51.2% 42.0% 15.9%

Portfolio collections continue to provide most of our total revenues. Our total
revenues from portfolio collections remained stable, but we showed substantial
improvement in net revenues from portfolio collections. Our net revenues from
portfolio collections (as well as the corresponding percentage of net revenues
to total revenues) increased principally due to maintaining collection trends on
our older portfolios with low or fully-amortized cost bases while simultaneously
exploiting portfolios purchased during the second half of 2002. We have
completely recovered the cost basis of most of these portfolios purchased in
2002, resulting in collections of these portfolios generating net revenue. We
expect our 2002 portfolios to continue generating net revenues. During the
quarter ended March 31, 2004, we acquired approximately $1.3 million of new
portfolios. The cost basis recovery associated with collecting these 2004
portfolios, combined with others that we acquired in 2003, could offset the
increase in net revenue percentage we would otherwise expect our 2002 portfolios
to generate.

Both our total and net revenues from portfolio sales showed dramatic increases.
As part of our program to emphasize efforts to continue to collect some of our
older portfolios, we identified a substantial number of older portfolios whose
collection lives, from our perspective, have run their course. We identified
these portfolios as candidates for sale and were able to sell a number of them
in the first quarter of 2004 on terms we considered acceptable. We may engage in
further sales if we believe market conditions are acceptable. We continue
collection efforts for certain accounts in these portfolios right up until the
point of sale. We also anticipate continuing to sell portions of newly acquired
portfolios from time to time, but we do not expect to generate substantial net
revenues from these sales.

Our net income of approximately $659,000 for the quarter ended March 31, 2004,
is essentially due to the approximately $748,000 of net revenues we derived from
portfolio sales. Without this large volume of sales, we would have essentially
had a break-even quarter. Although we still have some portfolios identified for
sale, we do not expect future portfolio sales to be of the same magnitude that
we experienced this quarter.

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

Our total operating costs and expenses remained relatively stable at
approximately $1.7 million for each of the quarters ended March 31, 2004, and
2003. Our ratio of operating costs and expenses to total revenues decreased to
41.0% for quarter ended March 31, 2004, from approximately 57.5% for quarter
ended March 31, 2003. The improvement in 2004 from 2003 was due principally to
the dramatic increase in revenues from portfolio sales in 2004. Because these
portfolio sales result in substantial revenues without any corresponding
collection effort, they have the effect of artificially lowering the 2004 ratio
of operating costs and expenses to total revenues. Without the large portfolio
sales, our ratio of operating costs and expenses to total revenues would have
fluctuated somewhat, but probably not more than three to five percent. Our
general and administration expenses increased to approximately $577,000 for the
quarter ended March 31, 2004, from approximately $546,000 for the quarter ended
March 31, 2003. Our salaries and benefits expenses remained relatively stable at
approximately $1.1 million for each of the quarters ended March 31, 2004, and
2003. Our headcount has remained relatively stable, although we still experience
significant employee turnover among our collectors. Our operating expenses may
increase somewhat in 2004 if we increase the volume of accounts we collect, but
we expect increases in total revenues to accompany any material increases in
variable costs associated with our collection efforts.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents increased approximately $1.1 million in the first
quarter of 2004 to a balance of approximately $2.1 million at March 31, 2004.
During the quarter ended March 31, 2004, our portfolio collections and sales
generated approximately $4.2 million of cash, and we used approximately $1.7
million for operating and other activities, approximately $1.3 million to
purchase new portfolios and approximately $165,000 for distributions to unit
holders.

During the quarter ended March 31, 2004, we continued making progress toward,
but did not achieve results consistent with, our business plan: to recover the
cost we pay for our portfolios, pay our collecting and operating costs and still
have a profit. Excluding the results from the large volume of portfolio sales in
the first quarter of 2004, our cost basis recovery of approximately $792,000
plus our operating and other expenses of approximately $1.7 million exceeded our
total revenues from collections of approximately $2.4 million by approximately
$77,000. We received approximately $1.8 million in cash during the quarter ended
March 31, 2004, from sales of portfolios. We used some of these funds to
purchase approximately $1.3 million of new portfolios during the quarter.
Approximately $518,000 included in these purchases and sales consists of a
portfolio that we purchased and then immediately resold. On a cash basis, our
$1.1 million increase in cash was due to our collections and sales of
approximately $4.2 million exceeding the sum of (a) our new portfolio
acquisitions of approximately $1.3 million plus (b) our cash operating and other
costs of approximately $1.7 million plus (c) distributions of approximately
$165,000.

During the fourth quarter of 2003, we used some of the cash reserves we
accumulated during the first three quarters of 2003 to acquire approximately
$1.1 million of new portfolios. We believe that market conditions for acquiring
new portfolios improved during the fourth quarter of 2003 and have remained
favorable during the first quarter of 2004. Due in large part to our
substantial portfolio sales in the first quarter of 2004, we increased portfolio
acquisitions in the first quarter to approximately $1.3 million, and at the same
time increased our cash balance by approximately $1.1 million. Whether we
continue to acquire portfolios at the pace of the last two quarters will
continue to depend on our assessment of market conditions, as well as the amount
of liquid cash and other financial resources available to us.

We believe we continue to improve the balance between our new and old
portfolios. In addition, we believe that our procedures to ensure that our
collectors continue to focus collection efforts on older portfolios that still
have returns to yield, rather than focusing just on the most recently acquired
portfolios, continue to show results. By monitoring the results of calls
originated through our dialer, we have identified portfolios that require more
cost to collect than others. Particularly where we have worked to collect these
portfolios over an extended period of time, we have identified these portfolios
as candidates for sale if we are able to sell them at reasonable prices. We
sold a number of these portfolios in the first quarter of 2004. We believe this
process of constantly evaluating portfolio returns against costs of collection
should continue to improve the balance between our new and old portfolios.

Our portfolios provide our principal long-term source of liquidity. Over time,
we expect to convert our portfolios to cash in an amount that equals or exceeds
the cost basis of our portfolios. In addition, some portfolios whose cost bases

we have completely recovered will continue to return collections to us. Our
estimate of the fair value of our portfolios at March 31, 2004, decreased
approximately $100,000 to approximately $15.2 million from approximately $15.3
million at December 31, 2003. At the same time, the cost basis of our portfolios
decreased to approximately $1.6 million at March 31, 2004, from approximately
$2.1 million at December 31, 2003.

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

In the first quarter of 2004, however, both the cost basis of our portfolios and
their fair value decreased. Our portfolio sales of $1.8 million (with a cost
basis of approximately $1.0 million) played a significant role in the overall
decrease in the cost basis of our portfolios. Fair value declined in part
because we replaced these sold portfolios with only $1.3 million of new
portfolios. We believe the fair value of our portfolios will increase in the
near term as we continue to acquire new portfolios and our sales of older
portfolios decrease. We believe our portfolio cost basis will also increase in
the near term because of reinvesting cash proceeds from sales of older
portfolios into the purchase of new portfolios and because we anticipate being
able to borrow funds to acquire new portfolios. Long-term growth in portfolio
cost basis will depend on whether market conditions continue to permit us to
purchase portfolios at reasonable prices and on our financial resources.

We used a discount rate of 20% to determine the fair values of our portfolios at
March 31, 2004, and December 31, 2003. The following table sets forth
alternative estimates of fair value if we assessed collection risk as higher
(using a discount rate of 25%) or lower (using a discount rate of 15%).

March 31, 2004 December 31, 2003
--------------- ------------------

Higher collection risk (25% discount rate) $ 14.1 million $ 14.3 million
Assumed collection risk (20% discount rate) $ 15.2 million $ 15.3 million
Lower collection risk (15% discount rate) $ 16.3 million $ 16.6 million

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

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

In the near term we plan to use some of our cash collections representing cost
basis recovery to make distributions to our members and interest holders.
Ultimately we plan to generate cash in excess of our collection and operating
costs and our cost basis recovery and to use some of the excess cash to make
distributions to our members and interest holders. Beginning in April 2003, we
began making quarterly distributions. During 2003, we made three distributions
totaling approximately $472,000. We made distributions totaling approximately
$327,000 in January and April of 2004.

In the near term, we plan to reinvest some of our cash collections representing
cost basis recovery to acquire additional portfolios to continue growing the
fair value of our portfolios on a quarter to quarter basis. Ultimately we plan
to reinvest all of the cash representing cost basis recovery, plus a portion of
excess cash, to acquire additional portfolios. During the first quarter of
2004, we reinvested approximately $1.3 million of the approximately $1.8 million
we received from portfolio sales to acquire new portfolios.

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

- Provide an annuity without impairing the value of the business; and

- Grow the business to increase the annuity.

Due to factors such as the availability of new portfolios, market pricing
conditions for new portfolios, large sales of older portfolios and the timing of
distributions to our members, we may not achieve increases in fair value each
quarter.

We do not have any lines of credit or other debt financing available to us at
this time. At this time we do not use credit arrangements to acquire portfolios.
We have, however, conducted extensive negotiations with Varde Investment
Partners, L.P. ("Varde"), a well-known participant in the debt collection
industry, to augment our purchasing capacity using capital provided by Varde. We
have not yet concluded our negotiation with Varde and reached a definitive
agreement, and it is possible that we may not reach a definitive agreement with
Varde. Due to the material effect that concluding an agreement with Varde could
have on our business prospects, however, we are providing the following summary
of some of the key business points we have negotiated with Varde:

- The facility would provide up to $25 million of capital (counting each
dollar loaned on a cumulative basis) over a five-year term.
- Varde would not be under any obligation to make a loan to us if Varde
does not approve of the portfolio(s) we propose to acquire and the
terms of the acquisition.
- Varde would have the right to participate in any proposed acquisition
of a portfolio by us pursuant to a right of first refusal.
- We would have to agree with Varde on the terms for each specific
advance under the loan facility, including such material terms as (a)
the relative sizes of our participation and Varde's in supplying the
purchase price; (b) the amount of servicing fees we would receive for
collecting the portfolio; (c) the rates of return on the funds
advanced by Varde and us; and (d) the split of any excess profits
after repayment of the purchase price (plus interest) to Varde and us
and payment of collection expenses.

If we conclude an agreement with Varde, it is unlikely that we will ever have
outstanding indebtedness of the full $25 million at any one time, due to the
cumulative nature of the facility. There can be no assurance that we will reach
a final agreement with Varde, although we believe we will be able to negotiate
the remaining open issues to the mutual satisfaction of both parties. In
addition, even if we reach a final agreement with Varde, there can be no
assurance that Varde will advance any money under the facility, because in each
instance Varde must approve of the portfolio(s) we propose to acquire and the
terms of the acquisition.

We do not have any plans to raise equity capital. Based on our cash position and
current financial resources, and assuming our operating results continue to
increase at projected levels, we believe we have adequate capital resources to
continue our business as presently conducted for the foreseeable future. To
maximize the return on our infrastructure, we are also considering whether there
might be ways, such as concluding and accessing the Varde credit facility, to
increase the volume of accounts we service other than through new portfolio
acquisitions using only our cash resources.

We believe our current collection infrastructure could handle a greater volume
of accounts. We have finite cash resources available for portfolio acquisition,
so we are actively seeking ways to deploy our infrastructure resources to
collect more accounts. Strategies to leverage our collection infrastructure
include borrowing money to acquire additional portfolios or collecting accounts
for third parties. Both of these strategies would require us to share collection
proceeds with a third party, as opposed to retaining 100% of collection proceeds
from portfolios that we own due to portfolio acquisitions using only our cash
resources. Our negotiation with Varde is the most important initiative we have
undertaken to leverage our infrastructure resources. As discussed previously,
there can be no assurance that we will reach a final agreement with Varde,
although we believe we will be able to negotiate the remaining open issues to
the mutual satisfaction of both parties. In addition, even if we reach a final
agreement with Varde, there can be no assurance that Varde will advance any
money under the facility, because in each instance Varde must approve of the
portfolio(s) we propose to acquire and the terms of the acquisition. The only
definitive understanding we have reached at this time is a limited third-party
collection program instituted in late 2003.

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

ITEM 3. CONTROLS AND PROCEDURES

In accordance with the Exchange Act, we carried out an evaluation, under the
supervision and with the participation of management, including our Chief
Operations Officer and Accounting Manager, of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
report. Based on this evaluation, our Chief Operations Officer and Accounting
Manager concluded that our disclosure controls and procedures were effective as
of March 31, 2004, to provide reasonable assurance that information required to
be disclosed in our reports filed or submitted under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.

There has been no change in our internal controls over financial reporting that
occurred during the three months ended March 31, 2004, that has materially
affected, or is reasonably likely to materially affect, our internal controls
over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As previously disclosed in our periodic filings with the Securities and Exchange
Commission, the Consent Decree entered in February 2001 in the United States
District Court for the Central District of California, provided that for a
period of three years, which ended in February 2004, the Federal Trade
Commission had access to our business, all of our computerized databases, the
right to inspect and copy all relevant documents, and the right to interview our
officers and employees.

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

We have not purchased any LLC Units from our members since February 4, 2002, our
inception. We commenced a procedure authorized by our plan of reorganization to
eliminate the interests of members we have not been able to locate. Through
delivery to last known addresses and public advertising in certain newspapers,
we will attempt to notify approximately 42 people or entities listed as
investors in the PAM Funds that they will no longer be members if we do not hear
from them in six months. At this time we believe these investors represent
ownership of approximately 7,154 LLC Units, approximately $307,000 of unreturned
capital and approximately $152,000 of uncashed distribution checks.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number Description
- ----------------------------------------------------------------------------------------------------------

2.1 Joint Chapter 11 Plan of Reorganization Proposed by Chapter 11 Trustee and the Official Committee
of Equity Security Holders effective February 4, 2002 (1)

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

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

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

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

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

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

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

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

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

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

32.1 Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C.
Sec. 1350 *

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

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

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

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the three months ended March 31, 2004.

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

PERFORMANCE CAPITAL MANAGEMENT, LLC

May 14, 2004 By: /s/ David J. Caldwell
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(Date) Name: David J. Caldwell
Its: Chief Operations Officer

EXHIBIT INDEX

Exhibit
Number Description
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