(State or Other Jurisdiction

of Incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

Exhibit
Number

Description

Exhibit
Number

Description

Gross collections were $102.1 million, a 9% increase over the $93.6 million in the same period of the prior year.

Investments in receivable portfolios were $52.5 million, to purchase $1.8 billion in face value of debt, compared to $41.1 million, to purchase $1.3 billion in face value of debt in the same period of the prior year.

Revenues from receivable portfolios were $66.3 million, a 4% increase over the $64.0 million in the same period of the prior year. Revenue recognized on receivable portfolios, as a percentage of portfolio collections, excluding the effects of impairment provisions, was 68%, compared to 67% in the same period of the prior year.

Revenues from bankruptcy servicing were $3.7 million, compared to $3.2 million in the same period of the prior year.

Total operating expenses were $55.9 million, a 6% increase over the $52.6 million in the same period of the prior year. Operating expense (excluding stock-based compensation expense, bankruptcy servicing operating expenses and costs related to the consideration of strategic alternatives) per dollar collected decreased to 50.0% compared to 50.5% in the same period of the prior year.

Adjusted EBITDA, defined as net income before interest, taxes, depreciation and amortization, stock-based compensation expense and portfolio amortization, was $53.7 million, a 17% increase over the $46.1 million in the same period of the prior year.

Total interest expense was $3.6 million, compared to $16.0 million in the same period of the prior year.

Net income was $7.3 million or $0.31 per fully diluted share, compared to a net loss of $0.8 million or $0.04 per fully diluted share in the same period of the prior year.

In the second quarter of 2008, the Company recorded a net impairment provision of $3.4 million, compared to an impairment reversal of $1.0 million in the same period of the prior year.

In the second quarter of 2008, the Company repurchased $5.0 million principal amount of its outstanding convertible senior notes, for a total price of $3.5 million, plus accrued interest. This repurchase resulted in a net gain of $1.4 million.

In the second quarter of 2007, approximately $11.7 million of total interest expense was attributable to the agreement reached with the Company’s previous lender to pay off all future contingent interest payments.

Assets

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Investment in receivable portfolios, net

Deferred court costs

Property and equipment, net

Prepaid income tax

Forward flow asset

Other assets

Goodwill

Identifiable intangible assets, net

Total assets

Liabilities and stockholders’ equity

Liabilities:

Accounts payable and accrued liabilities

Deferred tax liabilities, net

Deferred revenue and purchased servicing obligation

Debt

Other liabilities

Total liabilities

Commitments, contingencies and subsequent events

Stockholders’ equity:

Convertible preferred stock, $.01 par value, 5,000 shares authorized, no shares issued and outstanding

Common stock, $.01 par value, 50,000 shares authorized, 23,016 shares and 22,992 shares issued and outstanding as of June 30, 2008, and December 31, 2007, respectively

Additional paid-in capital

Accumulated earnings

Accumulated other comprehensive loss

Total stockholders’ equity

Total liabilities and stockholders’ equity

Revenues

Revenue from receivable portfolios, net

Servicing fees and other related revenue

Total revenues

Operating expenses

Salaries and employee benefits (excluding stock-based compensation expense)

Stock-based compensation expense

Cost of legal collections

Other operating expenses

Collection agency commissions

General and administrative expenses

Depreciation and amortization

Total operating expenses

Income before other (expense) income and income taxes

Other (expense) income

Interest expense

Contingent interest expense

Pay-off of future contingent interest

Gain on repurchase of convertible notes, net

Other income (expense)

Total other expense

Income (loss) before income taxes

(Provision) benefit for income taxes

Net income (loss)

Weighted average shares outstanding:

Basic

Diluted

Earnings (loss) per share:

Basic

Diluted

Operating activities

Gross collections

Amounts collected on behalf of third parties

Amounts applied to principal on receivable portfolios

Provision for impairment (reversal)

Servicing fees

Operating expenses

Interest payments

Contingent interest payments

Other income

Decrease in restricted cash

Income tax refund (payments)

Tax provision (benefit) from stock-based payment arrangements

Net cash provided by (used in) operating activities

Investing activities

Purchases of receivable portfolios, net of forward flow allocation

Collections applied to investment in receivable portfolios

Proceeds from put-backs of receivable portfolios

Purchases of property and equipment

Net cash used in investing activities

Financing activities

Proceeds from notes payable and other borrowings

Repayment of notes payable and other borrowings

Repurchase of convertible notes

Proceeds from exercise of stock options

Tax (provision) benefit from stock-based payment arrangements

Repayment of capital lease obligations

Net cash (used in) provided by financing activities

Net increase (decrease) in cash

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

GAAP net income (loss), as reported

Interest expense

Contingent interest expense

Pay-off of future contingent interest

Provision (benefit) for income taxes

Depreciation and amortization

Amount applied to principal on receivable portfolios

Stock-based compensation expense

Adjusted EBITDA

GAAP total operating expenses, as reported

Stock-based compensation expense

Bankruptcy servicing operating expenses

Costs related to the consideration of strategic alternatives

Operating expenses, excluding stock-based compensation expense, bankruptcy servicing operating expenses and costs related to the consideration of strategic alternatives