(State or Other Jurisdiction

of Incorporation)

(Commission File

Number)

(IRS Employer

Identification No.)

Exhibit
Number

Description

Exhibit
Number

Description

Gross collections were $97.8 million, a 14% increase over the $85.6 million in the same period of the prior year.

Investments in receivable portfolios were $66.1 million, to purchase $1.8 billion in face value of debt, compared to $47.9 million, to purchase $1.3 billion in face value of debt in the same period of the prior year. Available capacity under the revolving credit facility, subject to borrowing base and applicable debt covenants, was $138.0 million as of September 30, 2008, compared to $67.3 million as of September 30, 2007.

Revenues from receivable portfolios were $62.6 million, a 5% increase over the $59.4 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 71%, compared to 74% in the same period of the prior year.

Revenues from bankruptcy servicing were $3.8 million, compared to $3.3 million in the same period of the prior year.

Total operating expenses were $55.8 million, a 7% increase over the $52.0 million in the same period of the prior year. Operating expense (excluding stock-based compensation expense and bankruptcy servicing operating expenses) per dollar collected decreased to 52.2% compared to 55.1% 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 $47.3 million, a 21% increase over the $39.0 million in the same period of the prior year.

Total interest expense was $3.9 million, compared to $3.6 million in the same period of the prior year.

Net income was $3.8 million or $0.16 per fully diluted share, compared to net income of $5.4 million or $0.23 per fully diluted share in the same period of the prior year.

In the third quarter of 2008, the Company recorded a net impairment provision of $7.3 million, compared to a net impairment provision of $2.4 million and a write-down of its healthcare receivable portfolios of $1.4 million in the same period of the prior year.

In the third quarter of 2008, the Company recorded an income tax provision of $2.9 million, reflecting an effective tax rate of 43.7%, compared to an income tax provision of $1.7 million, reflecting an effective tax rate of 24.3% in the same period of the prior year. The increase in the overall effective tax rate in the third quarter of 2008 is primarily due to state law changes, which resulted in a higher effective state tax rate. The overall effective tax rate in the third quarter of 2007 reflected a one-time benefit of 15.2% primarily due to certain beneficial changes to the effective state tax rate.

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 and contingencies

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, 23,044 shares and 22,992 shares issued and outstanding as of September 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 (expense) income

Total other expense

Income before income taxes

Provision for income taxes

Net income

Weighted average shares outstanding:

Basic

Diluted

Earnings per share:

Basic

Diluted

Operating activities:

Net Income

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of loan costs

Stock-based compensation expense

Gain on repurchase of convertible notes, net

Deferred income tax expense

Other non-cash tax benefits, net

Tax provision (benefit) from stock-based payment arrangements

Provision for impairment on receivable portfolios, net

Changes in operating assets and liabilities

Restricted cash

Other assets

Deferred court costs

Prepaid income tax

Accrued profit sharing arrangement

Deferred revenue and purchased service obligation

Accounts payable and accrued liabilities

Net cash provided by 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 provided by financing activities

Net increase (decrease) in cash

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

Supplemental disclosures of cash flow information:

Cash paid for interest

Cash paid for income taxes

Supplemental schedule of non-cash investing and financing activities:

Fixed assets acquired through capital lease

Allocation of forward flow asset to acquired receivable portfolios

GAAP net income, as reported

Interest expense

Provision 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

Operating expenses, excluding stock-based compensation expense and bankruptcy servicing operating expenses