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e10vq

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934


For the Quarterly Period Ended June 30, 2007		Commission File No. 000-19424

EZCORP, INC.

(Exact name of registrant as specified in its charter)


Delaware (State or other jurisdiction of incorporation or organization)		74-2540145 (I.R.S. Employer Identification No.)

1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)

Registrant’s telephone number: (512) 314-3400

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO CORPORATE ISSUERS:

The only class of voting securities of the registrant issued and outstanding is the Class B Voting Common Stock, par value $.01 per share, all of which is owned by one record holder who is an affiliate of the registrant. There is no trading market for the Class B Voting Common Stock.

As of June 30, 2007, 38,329,337 shares of the registrant’s Class A Non-voting Common Stock, par value $.01 per share and 2,970,171 shares of the registrant’s Class B Voting Common Stock, par value $.01 per share were outstanding.

EZCORP, INC.
INDEX TO FORM 10-Q


	Page

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2007, June 30, 2006 and September 30, 2006		1

Condensed Consolidated Statements of Operations for the Three Months and Nine Months Ended June 30, 2007 and 2006		2

Condensed Consolidated Statements of Cash Flows for the Nine Months Ended June 30, 2007 and 2006		3

Notes to Interim Condensed Consolidated Financial Statements		4

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

Item 3. Quantitative and Qualitative Disclosures about Market Risk		28

Item 4. Controls and Procedures		29

PART II. OTHER INFORMATION

Item 1. Legal Proceedings		30

Item 1A. Risk Factors		30

Item 6. Exhibits		30

SIGNATURE		31

EXHIBIT INDEX		32

CERTIFICATIONS
First Amendment to Fourth Amended and Restated Credit Agreement
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

PART I

Item 1. Financial Statements

Condensed Consolidated Balance Sheets


	June 30,			June 30,
	2007			2006			September 30,
	(Unaudited)			(Unaudited)			2006
	(In thousands)
Assets:
Current assets:
Cash and cash equivalents	$	31,686		$	22,731		$	29,939
Pawn loans		58,053			48,932			50,304
Payday loans, net		4,514			1,966			2,443
Pawn service charges receivable, net		8,150			7,037			8,234
Signature loan fees receivable, net		5,439			3,708			4,380
Inventory, net		33,641			32,937			35,616
Deferred tax asset		7,344			8,365			7,150
Federal income taxes receivable		—			—			35
Prepaid expenses and other assets		5,197			3,340			3,907

Total current assets		154,024			129,016			142,008

Investment in unconsolidated affiliate		21,250			17,870			19,275
Property and equipment, net		31,895			27,283			29,447
Deferred tax asset, non-current		4,536			3,669			3,749
Goodwill		16,211			631			768
Other assets, net		3,448			2,614			2,611

Total assets	$	231,364		$	181,083		$	197,858


Liabilities and stockholders’ equity:
Current liabilities:
Accounts payable and other accrued expenses	$	21,658		$	18,517		$	22,579
Customer layaway deposits		1,888			1,734			1,890
Federal income taxes payable		1,255			752			—

Total current liabilities		24,801			21,003			24,469

Deferred gains and other long-term liabilities		2,977			3,339			3,249
Commitments and contingencies
Stockholders’ equity:
Preferred Stock, par value $.01 per share; Authorized 5 million shares; none issued and outstanding		—			—			—
Class A Non-voting Common Stock, par value $.01 per share; Authorized 50 million shares; 38,356,436 issued and 38,329,337 outstanding at June 30, 2007; 36,735,471 issued and 36,708,372 outstanding at June 30, 2006; 37,542,240 issued and 37,515,141 outstanding at September 30, 2006		383			363			375
Class B Voting Common Stock, convertible, par value $.01 per share; 3 million shares authorized; 2,970,171 issued and outstanding		30			30			30
Additional paid-in capital		130,236			121,070			124,572
Retained earnings		70,692			34,805			43,973

		201,341			156,268			168,950
Treasury stock, at cost (27,099 shares)		(35	)		(35	)		(35	)
Accumulated other comprehensive income		2,280			508			1,225

Total stockholders’ equity		203,586			156,741			170,140

Total liabilities and stockholders’ equity	$	231,364		$	181,083		$	197,858

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

Condensed Consolidated Statements of Operations (Unaudited)


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006

	(In thousands, except per share amounts)
Revenues:
Sales	$	42,676		$	40,640		$	141,688		$	130,598
Pawn service charges		16,978			15,021			51,496			46,988
Signature loan fees		27,024			17,821			74,132			49,949
Other		315			304			1,007			962

Total revenues		86,993			73,786			268,323			228,497

Cost of goods sold		25,421			23,698			85,618			77,696

Net revenues		61,572			50,088			182,705			150,801

Operating expenses:
Operations		31,595			27,544			94,087			82,095
Signature loan bad debt		10,142			5,531			19,086			12,062
Administrative		8,033			6,830			23,528			20,347
Depreciation and amortization		2,495			2,143			7,194			6,402

Total operating expenses		52,265			42,048			143,895			120,906


Operating income		9,307			8,040			38,810			29,895

Interest income		(618	)		(193	)		(1,499	)		(283	)
Interest expense		67			43			214			396
Equity in net income of unconsolidated affiliate		(720	)		(557	)		(2,185	)		(1,745	)
Gain on sale / disposal of assets		(155	)		(70	)		(131	)		(62	)

Income before income taxes		10,733			8,817			42,411			31,589
Income tax expense		3,971			3,209			15,692			11,498

Net income	$	6,762		$	5,608		$	26,719		$	20,091


Net income per common share:
Basic	$	0.16		$	0.14		$	0.65		$	0.51

Diluted	$	0.16		$	0.13		$	0.62		$	0.48


Weighted average shares outstanding:
Basic		41,282			39,657			40,943			39,174
Diluted		43,482			42,557			43,393			41,923

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended
	June 30,
	2007			2006
	(In thousands)

Operating Activities:
Net income	$	26,719		$	20,091
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		7,194			6,402
Payday loan loss provision		3,316			1,490
Deferred taxes		(787	)		2,512
Net gain on sale or disposal of assets		(131	)		(62	)
Share-based compensation		2,726			1,099
Income from investment in unconsolidated affiliate		(2,185	)		(1,745	)
Changes in operating assets and liabilities, net of business acquisitions:
Service charges and fees receivable, net		(432	)		2,045
Inventory, net		407			(387	)
Prepaid expenses, other current assets, and other assets, net		(1,160	)		(1,145	)
Accounts payable and accrued expenses		(951	)		(460	)
Customer layaway deposits		(79	)		46
Deferred gains and other long-term liabilities		(272	)		(258	)
Excess tax benefit from stock-based compensation		(895	)		—
Federal income taxes		2,756			138

Net cash provided by operating activities		36,226			29,766

Investing Activities:
Pawn loans made		(150,656	)		(139,049	)
Pawn loans repaid		80,530			76,385
Recovery of pawn loan principal through sale of forfeited collateral		69,824			65,271
Payday loans made		(32,708	)		(16,361	)
Payday loans repaid		27,427			14,538
Additions to property and equipment		(9,234	)		(6,684	)
Acquisitions, net of cash acquired		(23,201	)		(1,590	)
Dividends from unconsolidated affiliate		1,274			969
Proceeds from sale of assets		200			98

Net cash used in investing activities		(36,544	)		(6,423	)

Financing Activities:
Proceeds from exercise of stock options and warrants		1,453			2,220
Excess tax benefit from stock-based compensation		895			—
Debt issuance costs		(283	)		—
Net payments on bank borrowings		—			(7,000	)

Net cash provided by (used in) financing activities		2,065			(4,780	)


Change in cash and equivalents		1,747			18,563
Cash and equivalents at beginning of period		29,939			4,168

Cash and equivalents at end of period	$	31,686		$	22,731


Non-cash Investing and Financing Activities:
Pawn loans forfeited and transferred to inventory	$	66,521		$	66,834
Issuance of common stock to 401(k) plan	$	27		$	44
Foreign currency translation adjustment	$	(1,055	)	$	254

See Notes to Interim Condensed Consolidated Financial Statements (unaudited).

EZCORP, Inc. and Subsidiaries
Notes to Interim Condensed Consolidated Financial Statements (Unaudited)
June 30, 2007

Note A: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Management has included all adjustments it considers necessary for a fair presentation. These adjustments are of a normal, recurring nature except for those related to acquired businesses (described in Note C). The accompanying financial statements should be read with the Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended September 30, 2006. The balance sheet at September 30, 2006 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. Certain prior period balances have been reclassified to conform to the current presentation.

Our business is subject to seasonal variations, and operating results for the three and nine-month periods ended June 30, 2007 (the “current quarter” and “current year-to-date period”) are not necessarily indicative of the results of operations for the full fiscal year.

Note B: Significant Accounting Policies

CONSOLIDATION: The consolidated financial statements include the accounts of EZCORP, Inc. and its wholly owned subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation. We account for our interest in Albemarle & Bond Holdings, plc using the equity method.

STOCK SPLIT: In November 2006, our Board of Directors approved a three-for-one stock split of our two classes of common stock to shareholders of record as of November 27, 2006. The additional shares were distributed on December 11, 2006. All shares and amounts per share in this report have been adjusted to reflect the split.

PAWN LOAN AND SALES REVENUE RECOGNITION: We record pawn service charges using the interest method for all pawn loans we believe to be collectible. We base our estimate of collectible loans on several factors, including recent redemption rates, historical trends in redemption rates and the amount of loans due in the following two to three months. Unexpected variations in any of these factors could change our estimate of collectible loans, affecting our earnings and financial condition. If a pawn loan is not repaid, we value the forfeited collateral (inventory) at the lower of cost (pawn loan principal) or market (net realizable value) of the property. We record sales revenue and the related cost when this inventory is sold.

CREDIT SERVICE REVENUE RECOGNITION: We earn credit service fees when we assist customers in obtaining loans from unaffiliated lenders. We accrue the percentage of credit service fees we expect to collect. Accrued fees related to defaulted loans reduce credit service fee revenue upon loan default, and increase credit service fee revenue upon collection. Credit service revenue is included in “Signature loan fees” on our statements of operations.

CREDIT SERVICE BAD DEBT: We issue letters of credit to enhance the creditworthiness of our credit service customers seeking loans from unaffiliated lenders. The letters of credit assure the lenders that if borrowers default on the loans, we will pay the lenders, upon demand, the principal and accrued interest owed it by the borrowers plus any insufficient funds fee. Although amounts paid under letters of credit may be collected later, we charge those amounts to signature loan bad debt upon default. We record recoveries under the letters of credit as a reduction of bad debt at the time of collection.

The majority of our credit service customers obtain short-term loans with a single maturity date. These short-term loans, with maturity dates averaging about 17 days, are considered defaulted if they have not been repaid or renewed by the maturity date. Other credit service customers obtain installment loans with a series of payments due over as

much as a five-month period. If one payment of an installment loan is delinquent, that one payment is considered defaulted. If more than one installment payment is delinquent at any time, the entire loan is considered defaulted.

CREDIT SERVICE ALLOWANCE FOR LOSSES: We also provide an allowance for losses we expect to incur under letters of credit for loans that have not yet matured. The allowance is based on recent loan default experience adjusted for seasonal variations. It includes all amounts we expect to pay to the unaffiliated lenders upon loan default, including loan principal, accrued interest and insufficient funds fees, net of the amounts we expect to collect from borrowers (“Expected LOC Losses”). Changes in the allowance are charged to signature loan bad debt expense. We include the balance of Expected LOC Losses in “Accounts payable and other accrued expenses” on our balance sheet. At June 30, 2007, the allowance for Expected LOC Losses was $1.4 million. At that date, our maximum exposure for losses on letters of credit, if all brokered loans defaulted and none was collected, was $22.8 million. This amount includes principal, interest and insufficient funds fees. Based on the expected loss and collection percentages, we also provide an allowance for the credit service fees we expect not to collect, and charge changes in this allowance to signature loan fee revenue.

PAYDAY LOAN REVENUE RECOGNITION: We accrue fees on the percentage of payday loans we believe to be collectible using the interest method. Accrued fees related to defaulted loans reduce fee revenue upon loan default, and increase fee revenue upon collection. Payday loan fee revenue is included in “Signature loan fees” on our statements of operations.

PAYDAY LOAN BAD DEBT: We consider a loan defaulted if it has not been repaid or renewed by the maturity date. Although defaulted loans may be collected later, we charge the loan principal to signature loan bad debt upon default, leaving only active loans in the reported balance. We record collections of principal as a reduction of signature loan bad debt when collected.

PAYDAY LOAN ALLOWANCE FOR LOSSES: We also provide an allowance for losses on payday loans that have not yet matured and related fees receivable, based on recent loan default experience adjusted for seasonal variations. We charge any changes in the principal valuation allowance to signature loan bad debt. We record changes in the fee receivable valuation allowance to signature loan fee revenue.

INVENTORY: If a pawn loan is not redeemed, we record the forfeited collateral at cost. We do not record loan loss allowances or charge-offs on the principal portion of pawn loans, as they are fully collateralized. In order to state inventory at the lower of cost (specific identification) or market (net realizable value), we record an allowance for shrinkage and excess, obsolete or slow moving inventory. The allowance is based on the type and age of merchandise and recent sales trends and margins. At June 30, 2007, the inventory valuation allowance was $3.8 million, or 10.2% of gross inventory. We record changes in the inventory valuation allowance as cost of goods sold.

INTANGIBLE ASSETS: Goodwill and other intangible assets having indefinite lives are not subject to amortization. They are tested for impairment each July 1^st, or more frequently if events or changes in circumstances indicate that they might be impaired. We recognized no impairment of our intangible assets in the current or prior year-to-date periods. We amortize intangible assets with definite lives over their estimated useful lives.

PROPERTY AND EQUIPMENT: Property and equipment is shown net of accumulated depreciation of $82.4 million at June 30, 2007.

VALUATION OF TANGIBLE LONG-LIVED ASSETS: We assess the impairment of tangible long-lived assets whenever events or changes in circumstances indicate that the net recorded amount may not be recoverable. The following factors could trigger an impairment review: significant underperformance relative to historical or projected future cash flows; significant changes in the manner of use of the assets or the strategy for the overall business; or significant negative industry trends. When we determine that the net recorded amount of tangible long-lived assets may not be recoverable, we measure impairment based on the excess of the assets’ net recorded amount over the estimated fair value. No impairment of tangible long-lived assets was recognized in the current or prior year-to-date periods.

INCOME TAXES: We calculate the provision for federal income taxes based on our estimate of the effective tax rate for the full fiscal year. As part of the process of preparing the financial statements, we estimate income taxes in each jurisdiction in which we operate. This involves estimating the actual current tax liability and assessing

temporary differences in recognition of income for tax and accounting purposes. These differences result in deferred tax assets and liabilities that we include in our balance sheet. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income. If we determined we would not be able to realize all or part of our net deferred tax assets in the future, an increase to the valuation allowance would be charged to the income tax provision in that period. Likewise, if we determined we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a decrease to the valuation allowance would decrease the tax provision in that period. We assess the need for a deferred tax asset valuation allowance quarterly. Our valuation allowance was $0.4 million at June 30, 2007.

SHARE-BASED COMPENSATION: We account for share-based compensation in accordance with the fair value recognition provisions of SFAS No. 123(R), “Share-based Payment.” We estimate the grant-date fair value of options using the Black-Scholes-Merton option-pricing model and amortize that fair value to compensation expense on a straight-line basis over the options’ vesting periods.

SEGMENTS: We account for our operations in accordance with SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information.” Prior to October 1, 2006, we had a single reportable segment. Effective October 1, 2006, we reorganized our operations and internal reporting to manage it as two separate segments. See Note K for further discussion and separate data for each segment.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS: In June 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). To be recognized in the financial statements, FIN 48 requires that a tax position is more-likely-than-not to be sustained in an audit, based on the technical merits of the position. In making the determination of sustainability, we must presume the appropriate taxing authority with full knowledge of all relevant information will audit our tax positions. FIN 48 also prescribes how the benefit should be measured, including the consideration of any penalties and interest. It requires that the new standard be applied to the balances of tax assets and liabilities as of the beginning of the period of adoption and that a corresponding adjustment be made to the opening balance of retained earnings. We must adopt FIN 48 in the fiscal year ending September 30, 2008. We do not expect FIN 48 to have a material effect on our financial position or results of operations. It will not impact our cash flows.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements.” Among other requirements, SFAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosure about the use of fair value to measure assets and liabilities. We must adopt SFAS No. 157 in our fiscal year ending September 30, 2009. We are currently evaluating the impact, if any, of SFAS No. 157 on our financial position and results of operations. It will not impact our cash flows.

Note C: Acquisitions

On June 18, 2007, we completed the acquisition of fifteen pawnshops and one signature loan store from Jumping Jack Cash, a competitor in Colorado for $23.2 million of cash and direct transaction costs. The purchase price was allocated as follows (in thousands):


Current assets:
Pawn loans	$	4,144
Payday loans, net		106
Pawn service charges receivable, net		529
Signature loan fees receivable, net		14
Inventory, net		1,735
Deferred tax asset		194
Prepaid expenses and other assets		217

Total current assets		6,939

Property and equipment		423
Non-compete agreement		500
Goodwill		15,443
Other assets, net		20

Total assets	$	23,325

Liabilities:
Accrued liabilities	$	(47	)
Customer deposits		(77	)

Total liabilities		(124	)

Net assets acquired	$	23,201

We acquired three pawnshops in the fiscal year ended September 30, 2006. One was acquired in December 2005 for $1.6 million, and the other two were acquired in August 2006 for $0.6 million.

The results of all acquired stores have been consolidated with our results since their acquisition. Pro forma results of operations have not been presented because the acquisitions were not material.

Note D: Earnings Per Share

We compute basic earnings per share on the basis of the weighted average number of shares of common stock outstanding during the period. We compute diluted earnings per share on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period using the treasury stock method. Dilutive potential common shares include outstanding stock options, warrants and restricted stock awards.

Components of basic and diluted earnings per share are as follows (in thousands, except per share amounts):


	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2007		2006		2007		2006
Net income (A)	$	6,762	$	5,608	$	26,719	$	20,091

Weighted average outstanding shares of common stock (B)		41,282		39,657		40,943		39,174
Dilutive effect of stock options, warrants, and restricted stock		2,200		2,900		2,450		2,749

Weighted average common stock and common stock equivalents (C)		43,482		42,557		43,393		41,923


Basic earnings per share (A/B)	$	0.16	$	0.14	$	0.65	$	0.51


Diluted earnings per share (A/C)	$	0.16	$	0.13	$	0.62	$	0.48

Anti-dilutive options, warrants and restricted stock grants have been excluded from the computation of diluted earnings per share because the assumed proceeds upon exercise, as defined by SFAS No. 123(R), were greater than

the cost to re-acquire the same number of shares at the average market price, and therefore the effect would be anti-dilutive.

Note E: Investment in Unconsolidated Affiliate

At June 30, 2007, we owned 13,276,666 common shares of Albemarle & Bond Holdings, plc (“A&B”), or approximately 28.4% of the total outstanding shares. The investment is accounted for using the equity method. Since A&B’s fiscal year ends three months prior to ours, we report the income from this investment on a three-month lag. A&B files interim and annual financial reports for its fiscal periods ending December 31 and June 30. The income reported for our current year-to-date period ended June 30, 2007 represents our percentage interest in the results of A&B’s operations from July 1, 2006 to March 31, 2007.

Below is summarized financial information for A&B’s most recently reported results (using average exchange rates for the periods indicated):


	Six Months Ended December 31,
	2006		2005
	(in thousands)
Turnover (gross revenues)	$	32,853	$	26,391
Gross profit		23,631		18,207
Profit after tax (net income)		5,148		4,134

On July 11, 2007, we purchased 3,022,209 additional shares of A&B’s common stock as part of a private placement of stock by A&B. The purchase increased our ownership percentage to 29.95% of the outstanding shares of A&B. Because we include A&B’s earnings in our financial statements on a three-month lag as described above, our incremental share of A&B’s results of operations will first be reflected in our results in the quarter ending December 31, 2007. For further discussion, see Note L, “Subsequent Event.”

Note F: Contingencies

Currently and from time to time, we are defendants in legal and regulatory actions. While we cannot determine the ultimate outcome of these actions, after consultation with counsel, we believe their resolution will not have a material adverse effect on our financial condition, results of operations or liquidity. However, we cannot give any assurance as to their ultimate outcome.

In May 2007, the State of Texas filed suit against EZCORP, Inc. and its Texas affiliates in state district court in Bexar County alleging violations of the Texas Identity Theft statute, Deceptive Trade Practices Act, and a provision of the Business and Commerce Code by allegedly failing to safeguard and properly dispose of customers’ sensitive personal information. In late May 2007, we voluntarily entered into an Agreed Temporary Injunction regarding the safeguarding and disposal of the information and are in the process of negotiating a resolution. We have reviewed and enhanced our information security polices to address the State’s concerns.

Note G: Comprehensive Income

Comprehensive income includes net income and other revenues, expenses, gains and losses that are excluded from net income but are included as a component of total stockholders’ equity. Comprehensive income for the current quarter and current year-to-date period ended June 30, 2007 was $6.8 million and $27.8 million. For the comparable 2006 periods, comprehensive income was $5.7 million and $19.8 million, respectively. The difference between comprehensive income and net income results from the effect of foreign currency translation adjustments determined in accordance with SFAS No. 52, “Foreign Currency Translation.” At June 30, 2007, the accumulated balance of foreign currency activity excluded from net income was $3.5 million, net of tax of $1.2 million. The net $2.3 million is presented as “Accumulated other comprehensive income” in the current quarter balance sheet.

Note H: Long-term Debt

While we had no debt at June 30, 2007 and 2006, we have a $40.0 million revolving credit facility secured by our assets, which matures October 1, 2009. For any borrowed funds, we may choose a Eurodollar rate plus 100 to 200 basis points (depending on the leverage ratio) or the agent bank’s base rate. On the unused amount of the revolving

facility, we pay a commitment fee of 25 to 30 basis points depending on the leverage ratio calculated at the end of each quarter. Terms of the agreement require, among other things, that we meet certain financial covenants. Payment of dividends and additional debt are allowed but restricted.

Note I: Goodwill and Other Intangible Assets

The following table presents the balance of each major class of indefinite-lived intangible asset at the specified dates:


	June 30, 2007		June 30, 2006		September 30, 2006
	(In thousands)

Pawn licenses	$	1,549	$	1,549	$	1,549
Goodwill		16,211		631		768

Total	$	17,760	$	2,180	$	2,317

The following table presents the gross carrying amount and accumulated amortization for each major class of definite-lived intangible asset at the specified dates:


	June 30, 2007					June 30, 2006					September 30, 2006
	Carrying		Accumulated			Carrying		Accumulated			Carrying		Accumulated
	Amount		Amortization			Amount		Amortization			Amount		Amortization
	(In thousands)

License application fees	$	345	$	(281	)	$	345	$	(250	)	$	345	$	(257	)
Real estate finders’ fees		556		(323	)		556		(306	)		556		(311	)
Non-compete agreements		898		(293	)		388		(272	)		398		(277	)
Customer list		20		—			—		—			—		—

Total	$	1,819	$	(897	)	$	1,289	$	(828	)	$	1,299	$	(845	)

Total amortization expense from definite-lived intangible assets for the current quarter and year-to-date periods ended June 30, 2007 was approximately $17,000 and $52,000. For the comparable 2006 periods, amortization expense was approximately $17,000 and $51,000. We estimate amortization expense will be $62,000 in the remaining three months of fiscal 2007. The expected increase from prior quarters is primarily due to the amortization of intangible assets acquired from Jumping Jack Cash. The following table presents our estimate of amortization expense for definite-lived intangible assets for the next four full fiscal years (in thousands):


Fiscal Year	Amortization Expense
2008	$	168
2009	$	159
2010	$	144
2011	$	138

As acquisitions and dispositions occur in the future, amortization expense may vary from these estimates.

Note J: Common Stock, Warrants, Options, and Share-based Compensation

Our income includes the following share-based compensation expense, determined in accordance with the fair value provisions of SFAS No. 123(R):


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(in thousands)
Gross compensation cost	$	1,061		$	206		$	2,726		$	1,099
Income tax benefit		(322	)		(7	)		(858	)		(116	)

Share-based compensation cost, net of tax benefit	$	739		$	199		$	1,868		$	983

Stock option and warrant exercises resulted in the issuance of 49,846 shares of Class A Non-voting Common Stock in the current quarter for total proceeds of $0.2 million. For the current year-to-date period, 812,347 shares of Common Stock were issued for total proceeds of $1.5 million.

In September 2006, the Compensation Committee of our Board of Directors approved an award of 675,000 shares of restricted stock to our Chairman of the Board, and 945,000 shares of restricted stock to our Chief Executive Officer. The award was effective October 2, 2006. The cumulative market value of the two grants on the award date was $21 million, and 20% of the shares will vest every two years for a ten-year period if certain company performance requirements are achieved. If the bi-annual performance requirements are not met, the unvested shares will be added to subsequent vesting dates. In the event that the performance requirements for vesting are not achieved for any vesting date by the end of our fiscal year ending September 30, 2016, all unvested shares will be forfeited and cancelled.

In September 2006, the Compensation Committee of our Board of Directors approved an award of 137,250 shares of restricted stock to key individuals. The award was effective October 2, 2006. The shares will vest October 2, 2010, and the market value of the restricted stock on the award date was $1.8 million.

In November 2006, our Board of Directors approved a three-for-one stock split of our two classes of common stock to shareholders of record as of November 27, 2006. The additional shares were distributed on December 11, 2006. Shares and amounts per share in this report have been adjusted retroactively to reflect the split.

On June 1, 2007, the Compensation Committee of our Board of Directors granted to a new independent board member a non-qualified option to acquire 1,666 shares of our Class A Non-voting Common Stock. The option vests in one year and has an exercise price of $15.05 per share.

Note K: Operating Segment Information

Prior to October 1, 2006, we had a single reportable segment. Effective October 1, 2006, we reorganized our business and internal reporting to manage it as two reportable segments with operating results reported separately for each segment. The two reportable segments are:

	•		EZPAWN Operations: This segment offers pawn loans and related sales in all 298 of our pawn stores and offers signature loans in seven EZMONEY stores and 80 of our pawn stores.

	•		EZMONEY Operations: This segment offers signature loans in 383 of our EZMONEY stores.

There are no inter-segment revenues, and the amounts below were determined in accordance with the same accounting principles used in our consolidated financial statements. The following tables present operating segment information:


	EZPAWN		EZMONEY
	Operations		Operations		Consolidated
	(in thousands)
Three Months Ended June 30, 2007:
Revenues:
Sales	$	42,676	$	—	$	42,676
Pawn service charges		16,978		—		16,978
Signature loan fees		808		26,216		27,024
Other		315		—		315

Total revenues		60,777		26,216		86,993

Cost of goods sold		25,421		—		25,421

Net revenues		35,356		26,216		61,572

Store operating expenses:
Operations expense		21,613		9,982		31,595
Signature loan bad debt		570		9,572		10,142

Total store operating expenses		22,183		19,554		41,737

Store operating income	$	13,173	$	6,662	$	19,835


Three Months Ended June 30, 2006:
Revenues:
Sales	$	40,640	$	—	$	40,640
Pawn service charges		15,021		—		15,021
Signature loan fees		838		16,983		17,821
Other		304		—		304

Total revenues		56,803		16,983		73,786

Cost of goods sold		23,698		—		23,698

Net revenues		33,105		16,983		50,088

Store operating expenses:
Operations expense		20,747		6,797		27,544
Signature loan bad debt		406		5,125		5,531

Total store operating expenses		21,153		11,922		33,075

Store operating income	$	11,952	$	5,061	$	17,013


	EZPAWN		EZMONEY
	Operations		Operations		Consolidated
	(in thousands)
Nine Months Ended June 30, 2007:
Revenues:
Sales	$	141,688	$	—	$	141,688
Pawn service charges		51,496		—		51,496
Signature loan fees		2,554		71,578		74,132
Other		1,007		—		1,007

Total revenues		196,745		71,578		268,323

Cost of goods sold		85,618		—		85,618

Net revenues		111,127		71,578		182,705

Store operating expenses:
Operations expense		64,926		29,161		94,087
Signature loan bad debt		1,070		18,016		19,086

Total store operating expenses		65,996		47,177		113,173

Store operating income	$	45,131	$	24,401	$	69,532


Nine Months Ended June 30, 2006:
Revenues:
Sales	$	130,598	$	—	$	130,598
Pawn service charges		46,988		—		46,988
Signature loan fees		2,237		47,712		49,949
Other		962		—		962

Total revenues		180,785		47,712		228,497

Cost of goods sold		77,696		—		77,696

Net revenues		103,089		47,712		150,801

Store operating expenses:
Operations expense		63,401		18,694		82,095
Signature loan bad debt		920		11,142		12,062

Total store operating expenses		64,321		29,836		94,157

Store operating income	$	38,768	$	17,876	$	56,644

The following table reconciles store operating income, as shown above, to our consolidated income before income taxes:


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(in thousands)
Consolidated store operating income	$	19,835		$	17,013		$	69,532		$	56,644
Administrative expenses		8,033			6,830			23,528			20,347
Depreciation and amortization		2,495			2,143			7,194			6,402
Interest income		(618	)		(193	)		(1,499	)		(283	)
Interest expense		67			43			214			396
Equity in net income of unconsolidated affiliate		(720	)		(557	)		(2,185	)		(1,745	)
Gain on sale / disposal of assets		(155	)		(70	)		(131	)		(62	)

Consolidated income before income taxes	$	10,733		$	8,817		$	42,411		$	31,589

The following table presents separately identified segment assets:


	EZPAWN		EZMONEY
	Operations		Operations		Consolidated
	(in thousands)
Assets at June 30, 2007:
Pawn loans	$	58,053	$	—	$	58,053
Payday loans, net		487		4,027		4,514
Inventory, net		33,641		—		33,641

Total separately identified recorded segment assets	$	92,181	$	4,027	$	96,208

Brokered loans outstanding from unaffiliated lenders	$	486	$	21,023	$	21,509

Assets at June 30, 2006:
Pawn loans	$	48,932	$	—	$	48,932
Payday loans, net		487		1,479		1,966
Inventory, net		32,937		—		32,937

Total separately identified recorded segment assets	$	82,356	$	1,479	$	83,835

Brokered loans outstanding from unaffiliated lenders	$	508	$	15,396	$	15,904

Assets at September 30, 2006:
Pawn loans	$	50,304	$	—	$	50,304
Payday loans, net		489		1,954		2,443
Inventory, net		35,616		—		35,616

Total separately identified recorded segment assets	$	86,409	$	1,954	$	88,363

Brokered loans outstanding from unaffiliated lenders	$	553	$	17,657	$	18,210

Brokered loans are not recorded as an asset on our balance sheet, as we do not own a participation in the loans made by independent lenders. We monitor the principal balance of these loans, as our credit service fees and bad debt are directly related to their volume due to the letters of credit we issue on these loans. The balance shown above is the gross principal balance of the loans outstanding.

Note L: Subsequent Event

On July 11 2007, Albemarle & Bond announced its acquisition of a 26-store competitor in the United Kingdom. In conjunction with that transaction, Albemarle & Bond issued to the seller and sold in a private placement a total of 7,346,335 newly issued shares of its common stock. On July 11, 2007, we purchased 3,022,209 of those additional shares for $13.4 million. The purchase increased our ownership percentage to 29.95% of A&B’s outstanding shares. Because we include A&B’s earnings in our financial statements on a three-month lag as described in Note E, “Investment in Unconsolidated Affiliate,” our incremental share of A&B’s results of operations will first be reflected in our results in the quarter ending December 31, 2007.

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

The discussion in this section contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those forward-looking statements. Factors that could cause or contribute to these differences include, but are not limited to, those discussed in this section and throughout this report.

Third Quarter Ended June 30, 2007 vs. Third Quarter Ended June 30, 2006

The following table presents selected, unaudited, consolidated financial data for our three-month periods ended June 30, 2007 and 2006 (“current quarter” and “prior year quarter”):


	Three Months Ended June 30,				Percentage
	2007		2006		Change
	(Dollars in thousands)
Net revenues:
Sales	$	42,676	$	40,640		5.0	%
Pawn service charges		16,978		15,021		13.0	%
Signature loan fees		27,024		17,821		51.6	%
Other		315		304		3.6	%

Total revenues		86,993		73,786		17.9	%
Cost of goods sold		25,421		23,698		7.3	%

Net revenues	$	61,572	$	50,088		22.9	%

Net income	$	6,762	$	5,608		20.6	%

Nine Months Ended June 30, 2007 vs. Nine Months Ended June 30, 2006

The following table presents selected, unaudited, consolidated financial data for our nine-month periods ended June 30, 2007 and 2006 (“current year-to-date” and “prior year-to-date” periods):


	Nine Months Ended June 30,				Percentage
	2007		2006		Change
	(Dollars in thousands)
Net revenues:
Sales	$	141,688	$	130,598		8.5	%
Pawn service charges		51,496		46,988		9.6	%
Signature loan fees		74,132		49,949		48.4	%
Other		1,007		962		4.7	%

Total revenues		268,323		228,497		17.4	%
Cost of goods sold		85,618		77,696		10.2	%

Net revenues	$	182,705	$	150,801		21.2	%

Net income	$	26,719	$	20,091		33.0	%

Consolidated signature loan data (combined payday loan and credit service activities) are as follows:


	Three Months Ended						Nine Months Ended
	June 30,						June 30,
	2007			2006			2007			2006
	(Dollars in thousands)
Fee revenue	$	27,024		$	17,821		$	74,132		$	49,949
Bad debt:
Net defaults, including interest on brokered loans		8,692			4,520			17,353			11,342
Insufficient funds fees, net of collections		318			273			775			790
Change in valuation allowance		1,059			669			758			(198	)
Other related costs		73			69			200			128

Net bad debt		10,142			5,531			19,086			12,062

Fee revenue less bad debt	$	16,882		$	12,290		$	55,046		$	37,887


Average signature loan balance outstanding during period (a)	$	23,779		$	15,845		$	22,222		$	15,299
Signature loan balance at end of period (a)	$	26,023		$	17,870		$	26,023		$	17,870
Participating stores at end of period		470			370			470			370
Signature loan bad debt, as a percent of fee revenue		37.5	%		31.0	%		25.7	%		24.1	%
Net default rate (a)(b)		6.1	%		5.0	%		4.6	%		4.5	%


(a)		Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

(b)		Principal defaults net of collections, as a percentage of signature loans made and renewed.

Overview

We lend or provide credit services to individuals who do not have cash resources or access to credit to meet their short-term cash needs. We offer pawn loans in 295 domestic pawn stores, including fifteen acquired in the current quarter, and three Mexico pawn stores open at June 30, 2007. Pawn loans are non-recourse loans collateralized by tangible personal property. At these stores, we also sell merchandise, primarily collateral forfeited from our pawn lending operations, to customers looking for good value. In 390 EZMONEY stores and 80 of our domestic pawn stores open June 30, 2007, we offer short-term non-collateralized loans, often called payday loans, or fee-based credit services to customers seeking loans (collectively, “signature loans”).

We manage our business as two segments. The EZPAWN Operations segment offers pawn related activities in all 298 pawn stores, and offers signature loans in 80 pawn stores and seven EZMONEY stores. The EZMONEY Operations segment offers signature loans in 383 EZMONEY stores, and accounts for approximately 97% of our consolidated signature loan revenues. The following tables present store data by operating segment:


	Three Months Ended June 30, 2007
	EZPAWN		EZMONEY
	Operations		Operations		Consolidated
Stores in operation:
Beginning of period		289		362		651
New openings		1		20		21
Acquired		15		1		16
Sold, combined, or closed		—		—		—

End of period		305		383		688

Average number of stores during the period		293		369		662


	Nine Months Ended June 30, 2007
	EZPAWN		EZMONEY
	Operations		Operations			Consolidated
Stores in operation:
Beginning of period		287		327			614
New openings		3		57			60
Acquired		15		1			16
Sold, combined, or closed		—		(2	)		(2	)

End of period		305		383			688

Average number of stores during the period		290		348			638

Composition of ending stores:
EZPAWN — United States		295		—			295
EZPAWN — Mexico		3		—			3
EZMONEY signature loan stores adjoining EZPAWNs		7		159			166
EZMONEY signature loan stores — free standing		—		224			224

Total stores in operation		305		383			688

Total stores offering signature loans		87		383			470


	Three Months Ended June 30, 2006
	EZPAWN			EZMONEY
	Operations			Operations		Consolidated
Stores in operation:
Beginning of period		288			256		544
New openings		—			25		25
Acquired		—			—		—
Sold, combined, or closed		(1	)		—		(1	)

End of period		287			281		568

Average number of stores during the period		288			263		550


	Nine Months Ended June 30, 2006
	EZPAWN			EZMONEY
	Operations			Operations			Consolidated
Stores in operation:
Beginning of period		287			227			514
New openings		—			55			55
Acquired		1			—			1
Sold, combined, or closed		(1	)		(1	)		(2	)

End of period		287			281			568

Average number of stores during the period		288			244			532

Composition of ending stores:
EZPAWN — United States		280			—			280
EZPAWN — Mexico		—			—			—
EZMONEY signature loan stores adjoining EZPAWNs		7			158			165
EZMONEY signature loan stores — free standing		—			123			123

Total stores in operation		287			281			568

Total stores offering signature loans		89			281			370

We earn pawn service charge revenue on our pawn lending. While allowable service charges vary by state and loan size, a majority of our pawn loans are in amounts that allow 20% per month, or 240% annually. Our average pawn loan amount typically ranges between $80 and $90 but varies depending on the valuation of each item pawned. The total loan term, consisting of the primary term and grace period, ranges between 60 and 120 days.

Between August and November 2005, we reduced the total loan term on new pawn loans from 90 days to 60 days in 215 of our pawn stores. Forty-three stores had previously made the change. We estimate this change reduced our pawn portfolio approximately 15% for the loans in these stores that were between 60 and 90 days old, with very little or no impact on pawn service charge revenues. This change also created a one-time doubling of forfeitures in the prior year-to-date period as loans made 90 and 60 days earlier simultaneously forfeited for a 30-day period, resulting in a higher level of inventory available for sale (beginning inventory plus forfeitures and purchases). We experienced this doubling of forfeitures as loans in these 215 stores matured in the first two quarters of fiscal 2006.

In our pawnshops, we acquire inventory for retail sales through pawn loan forfeitures and, to a lesser extent, through purchases of customers’ merchandise. The gross profit on sales of inventory depends primarily on our assessment of the resale value at the time the property is either accepted as loan collateral or purchased. Improper assessment of the resale value in the lending or purchasing process can result in lower margins or reduced marketability of the merchandise.

At June 30, 2007, 254 of our 383 EZMONEY stores and 50 of our 298 pawn stores offered credit services to customers seeking loans from unaffiliated lenders. We do not participate in any of the loans made by the lenders, but earn a fee for helping customers obtain credit and for enhancing customers’ creditworthiness by providing letters of credit. We also offer a free service to all credit service customers to improve or establish their credit histories by reporting their payments to an external credit-reporting agency.

In connection with our credit services, the unaffiliated lenders offer customers two types of loans. In all 254 EZMONEY stores offering credit services, customers can obtain short-term loans, with principal amounts up to $1,500 but averaging $550. Terms of these short-term loans are generally less than 30 days, averaging about 17 days, with due dates corresponding with the customers’ next payday. We typically earn a fee of 20% of the loan amount for our short-term loan credit services. In 13 EZMONEY stores offering credit services, customers can obtain longer-term installment loans from the unaffiliated lenders. The installment loans typically carry terms of about five months with ten equal installment payments due on customers’ paydays. Installment loan principal amounts range from $1,525 to $3,000, but average about $2,000. With each installment payment, we earn a fee of 10% of the initial loan amount. At June 30, 2007, short-term loans comprised 99% of the balance of loans brokered through our credit services, and installment loans comprised the remaining 1%.

We earn payday loan fee revenue on our payday loans. In 166 stores, we make payday loans subject to state law. The average payday loan amount is approximately $440 and the term is generally less than 30 days, averaging about 19 days. We typically charge a fee of 15% to 22% of the loan amount for a 7 to 23-day period. Through December 2005, we also marketed and serviced payday loans made by County Bank of Rehoboth Beach in some of our stores. We could purchase a 90% participation in the County Bank loans we marketed. As of December 31, 2005, County Bank discontinued its payday loan program. Most of our stores previously marketing County Bank loans now provide credit services to customers in obtaining loans from unaffiliated lenders.

On June 18, 2007, we completed the acquisition of fifteen pawnshops and one payday loan store from Jumping Jack Cash, a competitor in Colorado for $23.2 million of cash and direct transaction costs. Results of the acquired stores are included in our consolidated results from the date of acquisition. Because the stores were acquired near the end of the current quarter, their impact on the current quarter and year-to-date operating results were not significant. The acquisition had a more material impact on the balance of assets and liabilities. The purchase price was allocated as presented in Note C, “Acquisitions,” in the Condensed Consolidated Financial Statements filed with this quarterly report.

In the current quarter, the EZPAWN Operations segment contributed $1.2 million greater store operating income compared to the prior year quarter, primarily from an increase in pawn service charges. Our EZMONEY Operations segment contributed $1.6 million greater store operating income, comprised of higher fees net of bad debt, somewhat offset by higher operating costs primarily at new stores. After an increase in administrative expenses and less material changes in other items, our consolidated net income improved to $6.8 million in the current quarter from $5.6 million in the prior year quarter.

Results of Operations

Third Quarter Ended June 30, 2007 vs. Third Quarter Ended June 30, 2006

The following discussion compares our results of operations for the quarter ended June 30, 2007 (the “current quarter”) to the quarter ended June 30, 2006 (the “prior year quarter”). The discussion should be read with the accompanying financial statements and related notes.

EZPAWN Operations Segment

The following table presents selected financial data for the EZPAWN Operations segment:


	Three Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Sales	$	42,676		$	40,640
Pawn service charges		16,978			15,021
Signature loan fees		808			838
Other		315			304

Total revenues		60,777			56,803
Cost of goods sold		25,421			23,698

Net revenues		35,356			33,105
Store operating expenses:
Operations expense		21,613			20,747
Signature loan bad debt		570			406

Total store operating expenses		22,183			21,153

Store operating income	$	13,173		$	11,952


Other data:
Gross margin on sales		40	%		42	%
Annualized inventory turnover		3.4x			3.0x
Average pawn loan balance per pawn store at quarter end	$	195		$	175
Average inventory per pawn store at quarter end	$	113		$	118
Average yield on pawn loan portfolio (a)		136	%		136	%
Pawn loan redemption rate		78	%		77	%
Average signature loan balance per store offering signature loans at quarter end (b)	$	11		$	11


(a)		Average yield on pawn loan portfolio is calculated as annualized pawn service charge revenue for the period divided by the average pawn loan balance during the period.

(b)		Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

Our current quarter pawn service charge revenue increased 13%, or $2.0 million from the prior year quarter to $17.0 million. This was due to a 13% higher average pawn loan balance, with the average loan yield unchanged. In the last two years, we have periodically raised our loan values on gold jewelry in response to increases in gold market values and similar changes by our competitors. This contributed about $1.2 million to the increase in pawn service charges in the current quarter. The ending pawn loan balance was 19% higher than the balance at June 30, 2006, indicating the year over year improvement in pawn service charges is likely to increase in the fourth fiscal quarter ending September 30, 2007. Eleven percentage points of the increase in the pawn loan balance was due to same store loan growth, with the remaining increase from the Jumping Jack Cash acquisition and three new Mexico pawn locations.

In the current quarter, 93% ($15.8 million) of recorded pawn service charge revenue was collected in cash, and $1.2 million resulted from an increase in pawn service charges receivable. In the comparable prior year quarter, 97% ($14.6 million) of recorded pawn service charge revenue was collected in cash, and $0.4 million resulted from an increase in pawn service charges receivable. The accrual of pawn service charges is dependent on the size of the loan portfolio and our estimate of collectible loans in the portfolio at the end of each quarter.

The table below summarizes our sales volume, gross profit and gross margins:


	Three Months Ended June 30,
	2007			2006
	(Dollars in millions)

Merchandise sales	$	30.6		$	29.6
Jewelry scrapping sales		12.1			11.0

Total sales	$	42.7		$	40.6

Gross profit on merchandise sales	$	12.9		$	12.7
Gross profit on jewelry scrapping sales	$	4.4		$	4.2

Gross margin on merchandise sales		42.0	%		43.0	%
Gross margin on jewelry scrapping sales		36.4	%		38.1	%
Overall gross margin		40.4	%		41.7	%

The current quarter’s merchandise gross profit increased $0.2 million from the prior year quarter to $12.9 million. This was due to a $1.0 million, or 3.4% increase in merchandise sales, partially offset by a one percentage point decrease in margins. More aggressive discounting of electronics and other non-jewelry merchandise led to the decreased margins in the current quarter.

The current quarter’s gross profit on jewelry scrapping sales increased $0.2 million from the prior year quarter to $4.4 million. This was due to a $1.1 million increase in jewelry scrapping sales on 3% less volume and a 1.7 percentage point decrease in margins. The jewelry scrapping sales include the current quarter sale of approximately $0.7 million of loose diamonds removed from scrapped jewelry. The proceeds refiners pay us for jewelry has increased in the last year in response to higher gold values. We also increased the amount we loan on jewelry and pay to purchase jewelry from customers, increasing the cost of these items. These factors’ net effect on gross profit from jewelry scrapping sales in the quarter was minimal. Future changes in gold prices would similarly affect the proceeds, cost, and margins on jewelry scrapping.

Merchandise and jewelry scrapping sales volume is heavily dependent on inventory available for sale, or beginning inventory on hand plus pawn loan forfeitures and inventory purchases. Excluding the inventory acquired late in the quarter as part of the Jumping Jack Cash acquisition, inventory available for sale in the current quarter was 1% lower than in the prior year quarter. Including the inventory acquired from Jumping Jack Cash, the current quarter’s ending inventory was 2% above the prior year ending balance. We expect this higher inventory balance, combined with forfeitures from the 19% higher ending pawn loan balance to fuel an increase in sales in the quarter ending September 30, 2007.

Selected signature loan data for the EZPAWN Operations segment are as follows:


	Three Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Fee revenue	$	808		$	838
Net bad debt		570			406

Fee revenue less bad debt	$	238		$	432

Signature loan bad debt, as a percent of fee revenue		70.5	%		48.4	%

The segment’s signature loan contribution, or fee revenue less bad debt, decreased $0.2 million in the current quarter compared to the prior year quarter, primarily due to an increase in signature loan bad debt from 48.4% of fees in the prior year quarter to 70.5% in the current quarter.

Operations expense improved to 61% of net revenues ($21.6 million) in the current quarter from 63% of net revenues ($20.7 million) in the prior year quarter, as operating expenses grew at a slower pace than the segment’s net revenues.

In the current quarter, the $2.3 million greater net revenue from pawn activities, partially offset by the $0.9 million higher operations expenses and $0.2 million lower contribution from signature loans resulted in a $1.2 million overall increase in store operating income from the EZPAWN Operations segment compared to the prior year quarter. For the quarter, EZPAWN Operations made up 66% of consolidated store operating income compared to 70% in the prior year quarter. This relative reduction is due to the more rapid growth in the EZMONEY Operations segment.

EZMONEY Operations Segment

The following table presents selected financial data for the EZMONEY Operations segment:


	Three Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Signature loan fees	$	26,216		$	16,983
Signature loan bad debt		9,572			5,125

Fee revenue less bad debt		16,644			11,858

Operations expense		9,982			6,797

Store operating income	$	6,662		$	5,061


Other data:
Signature loan bad debt as a percent of signature loan fees		36.5	%		30.2	%
Average signature loan balance per store offering signature loans at quarter end (a)	$	65		$	60


(a)		Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

The segment’s signature loan contribution, or fees less bad debt, increased $4.8 million, or 40% compared to the prior year quarter. The primary cause of the increased contribution was the higher average loan balances at existing stores and the addition of new stores, resulting in a 54% current quarter increase in signature loan fee revenue. Signature loan bad debt increased to 36.5% of related fees in the current quarter, compared to 30.2% in the prior year quarter. Early in the current quarter, we revised some of our underwriting criteria to optimize our loan growth. The result was stronger than normal loan growth as well as a higher level of bad debt. Later in the quarter, we refined our underwriting criteria specifically for new customers to ensure future bad debt results are more in line with our prior levels. As a result, we saw our bad debt return to expected levels in the month of June.

Operations expense increased $3.2 million in the current quarter to $10.0 million, or 38% of segment revenues from 40% in the prior year quarter. The increase was mostly from additional labor, rent and other costs at new stores that have not yet matured. In the current quarter, operations expense was $27,100 per average store, compared to $25,900 in the prior year quarter. Stores adjoining an EZPAWN location, which generally have lower operating costs, now comprise a smaller percentage of the total EZMONEY stores.

In the current quarter, the $4.8 million increase in signature loan fees net of bad debt and $3.2 million greater operations expense resulted in a $1.6 million net increase in store operating income from the EZMONEY Operations segment. For the quarter, EZMONEY Operations made up 34% of consolidated store operating income compared to 30% in the prior year quarter. The relative increase is due to the more rapid growth in the EZMONEY Operations segment compared to the EZPAWN Operations segment.

Other Items

The items discussed below affect our consolidated financial results, but are not allocated between segments.

Administrative expenses in the current quarter were $8.0 million compared to $6.8 million in the prior year quarter, an improvement of 0.6 of a percentage point to 13.0% when measured as a percent of net revenue. The dollar increase was due primarily to a $0.9 million increase in stock compensation and a $0.6 million increase in professional fees and services.

Depreciation and amortization expense was $2.5 million in the current quarter, compared to $2.1 million in the prior year quarter. Depreciation on assets placed in service, primarily related to new EZMONEY stores, exceeded the reduction from assets that became fully depreciated or were retired.

We earned $0.6 million of interest income on our invested cash in the current quarter, for an annualized rate of return of 5.1%. In the comparable prior year quarter, we earned $0.2 million of interest income on a smaller amount of invested cash, yielding 3.9%.

Throughout the current and prior year quarters, we had no debt. Our $0.1 million interest expense in each period was mostly amortization of deferred financing costs and the commitment fee on our line of credit.

The current quarter income tax expense was $4.0 million (37.0% of pretax income) compared to $3.2 million (36.4% of pretax income) for the prior year quarter. The increase in effective tax rate between these periods is due primarily to a legislative change increasing our expected taxes in Texas.

Consolidated operating income for the current quarter improved $1.3 million over the prior year quarter to $9.3 million. Contributing to this were the $1.2 million and $1.6 million increases in store operating income in our EZPAWN and EZMONEY Operations segments, partially offset by the $1.2 million increase in administrative expenses and higher depreciation. After a $0.4 million improvement in net interest and a $0.8 million increase in income taxes and other smaller items, net income improved to $6.8 million in the current quarter from $5.6 million in the prior year quarter.

Nine Months Ended June 30, 2007 vs. Nine Months Ended June 30, 2006

The following discussion compares our results of operations for the nine months ended June 30, 2007 to the nine months ended June 30, 2006. The discussion should be read with the accompanying financial statements and related notes.

EZPAWN Operations Segment

The following table presents selected financial data for the EZPAWN Operations segment:


	Nine Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Sales	$	141,688		$	130,598
Pawn service charges		51,496			46,988
Signature loan fees		2,554			2,237
Other		1,007			962

Total revenues		196,745			180,785
Cost of goods sold		85,618			77,696

Net revenues		111,127			103,089
Store operating expenses:
Operations expense		64,926			63,401
Signature loan bad debt		1,070			920

Total store operating expenses		65,996			64,321

Store operating income	$	45,131		$	38,768

Other data:
Gross margin on sales		40	%		41	%
Annualized inventory turnover		3.4	x		3.2	x
Average pawn loan balance per pawn store at period end	$	195		$	175
Average inventory per pawn store at period end	$	113		$	118
Average yield on pawn loan portfolio (a)		142	%		137	%
Pawn loan redemption rate		78	%		77	%
Average signature loan balance per store offering signature loans at period end (b)	$	11		$	11


(a)		Average yield on pawn loan portfolio is calculated as annualized pawn service charge revenue for the period divided by the average pawn loan balance during the period.

(b)		Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

Our current year-to-date pawn service charge revenue increased 10%, or $4.5 million from the prior year to $51.5 million. This was due to a five percentage point increase in loan yields to 142%, coupled with a 6% higher average pawn loan balance. In the last two years, we have periodically raised our loan values on gold jewelry in response to increases in gold market values and similar changes by our competitors. This contributed about $2.8 million to the increase in pawn service charges in the current year-to-date period. The higher yield resulted largely from the fiscal 2006 mid-year conversion of most of our pawn stores from offering 90-day loan terms to offering 60-day terms.

In the current year-to-date period, $51.6 million of recorded pawn service charge revenue was collected in cash, offset by a $0.1 million decrease in pawn service charges receivable. In the comparable prior year period, 105% ($49.4 million) of recorded pawn service charge revenue was collected in cash, offset by a $2.4 million decrease in pawn service charges receivable. While we seasonally expect to see a moderate change in the accrued pawn service charges between September 30 and June 30 each year, the decrease was larger in the prior year-to-date period primarily due to shortening the loan term in most of our pawn stores in that period. The accrual of pawn service charges is dependent on the size of the loan portfolio and our estimate of collectible loans in the portfolio at the end of each quarter.

The table below summarizes our sales volume, gross profit and gross margins:


	Nine Months Ended June 30,
	2007			2006
	(Dollars in millions)

Merchandise sales	$	108.0		$	104.3
Jewelry scrapping sales		33.7			26.3

Total sales	$	141.7		$	130.6

Gross profit on merchandise sales	$	44.1		$	43.9
Gross profit on jewelry scrapping sales	$	12.0		$	9.0

Gross margin on merchandise sales		40.8	%		42.1	%
Gross margin on jewelry scrapping sales		35.6	%		34.3	%
Overall gross margin		39.6	%		40.5	%

The current year-to-date merchandise gross profit increased $0.2 million from the prior year-to-date period to $44.1 million. This was due to a $3.1 million, or 3% increase in same store merchandise sales and a $0.6 million increase in other store sales, mostly offset by a 1.3 percentage point decrease in margins. In the prior year period, we benefited from the doubling of loan forfeitures due to the reduction of loan terms in the majority of our stores. This provided a greater amount of fresh inventory to fuel sales at a better margin. More aggressive discounting of electronics and jewelry also led to lower margins in the current year-to-date period.

The gross profit on jewelry scrapping sales increased $3.0 million from the prior year-to-date period to $12.0 million. This was due to a $7.4 million increase in jewelry scrapping sales on 10% more volume, and a 1.3 percentage point improvement in margins. The jewelry scrapping sales include the current year sale of approximately $1.2 million of loose diamonds removed from scrapped jewelry. The proceeds refiners pay us for jewelry has increased in the last year in response to higher gold values. We also increased the amount we loan on jewelry and pay to purchase jewelry from customers, increasing the cost of these items. These factors had a $1.7 million positive net effect on the gross profit from jewelry scrapping sales. Future changes in gold prices would similarly affect the proceeds, cost, and margins on jewelry scrapping.

Selected signature loan data for the EZPAWN Operations segment are as follows:


	Nine Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Fee revenue	$	2,554		$	2,237
Net bad debt		1,070			920

Fee revenue less bad debt	$	1,484		$	1,317

Signature loan bad debt, as a percent of fee revenue		41.9	%		41.1	%

The segment’s signature loan contribution, or fee revenue less bad debt, increased $0.2 million, or 13% in the current year-to-date period compared to the prior year period. A 17% increase in same store fee revenues, primarily from higher average loan balances, drove the growth in signature loan contribution. Bad debt as a percent of fee revenues increased slightly from 41.1% of fees in the prior year-to-date period to 41.9% in the current year-to-date period, partially offsetting the fee growth.

Operations expense improved to 58% of net revenues ($64.9 million) in the current year-to-date period from 62% of net revenues ($63.4 million) in the prior year-to-date period. Included in the current year-to-date period are a $0.6 million reduction in health benefit claims, a $0.4 million reduction in workers’ compensation expense, and a $0.3 million reversal of a loss contingency.

In the current year-to-date period, the $7.7 million greater net revenue from pawn activities, $0.2 million greater contribution from signature loans, and $1.5 million higher operations expenses resulted in a $6.4 million overall increase in store operating income from the EZPAWN Operations segment compared to the prior year-to-date period. For the current year-to-date period, EZPAWN Operations made up 65% of consolidated store operating income compared to 68% in the prior year-to-date period. The relative reduction is due to the more rapid growth in the EZMONEY Operations segment.

EZMONEY Operations Segment

The following table presents selected financial data for the EZMONEY Operations segment:


	Nine Months Ended June 30,
	2007			2006
	(Dollars in thousands)

Signature loan fees	$	71,578		$	47,712
Signature loan bad debt		18,016			11,142

Fee revenue less bad debt		53,562			36,570

Operations expense		29,161			18,694

Store operating income	$	24,401		$	17,876

Other data:
Signature loan bad debt as a percent of signature loan fees		25.2	%		23.4	%
Average signature loan balance per store offering signature loans at period end (a)	$	65		$	60


(a)		Signature loan balances include payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, the balance of which is not included on our balance sheet.

The segment’s signature loan contribution, or fees less bad debt, increased $17.0 million, or 46% compared to the prior year-to-date period. The primary cause of the increased contribution was the higher average loan balances at existing stores and the addition of new stores, resulting in a 50% increase in the current year-to-date signature loan fee revenue. Signature loan bad debt increased $6.9 million, to 25.2% of related fees in the current year-to-date period compared to 23.4% in the prior year period. Early in the current quarter, we revised some of our underwriting criteria to optimize our loan growth. The result was stronger than normal loan growth as well as a higher level of bad debt. Later in the quarter, we refined our underwriting criteria specifically for new customers to ensure future bad debt results are more in line with our prior trends. As a result, we saw our bad debt return to expected levels in the month of June.

Operations expense increased $10.5 million in the current year-to-date period to $29.2 million, or 41% of segment revenues from 39% in the prior year period. The increase was mostly from additional labor, rent and other costs at new stores that have not yet matured. In the current year-to-date period, operations expense was $83,800 per average store, compared to $76,500 per average store in the prior year-to-date period. Stores adjoining an EZPAWN location, which generally have lower operating costs, now comprise a smaller percentage of the total EZMONEY stores.

In the current year-to-date period, the $17.0 million increase in signature loan fees net of bad debt and $10.5 million greater operations expense resulted in a $6.5 million net increase in store operating income from the EZMONEY Operations segment. For the current year-to-date period, EZMONEY Operations made up 35% of consolidated store operating income compared to 32% in the prior year period. The relative increase is due to the more rapid growth in the EZMONEY Operations segment compared to the EZPAWN Operations segment.

Other Items

The items discussed below affect our consolidated financial results, but are not allocated between segments.

Administrative expenses in the current year-to-date period were $23.5 million compared to $20.3 million in the prior year-to-date period. This is an improvement of 0.6 of a percentage point to 12.9% when measured as a percent of net revenue. The dollar increase was due primarily to a $1.7 million increase in stock compensation, a $0.8 million increase in professional fees and a $0.5 million increase in administrative labor and benefits.

Depreciation and amortization expense was $7.2 million in the current year, compared to $6.4 million in the prior year. Depreciation on assets placed in service, primarily related to new EZMONEY stores, exceeded the reduction from assets that became fully depreciated or were retired.

We earned $1.5 million of interest income on our invested cash in the current year-to-date period for an annualized rate of return of 5.0%. In the comparable prior year period, we earned $0.3 million of interest income on our invested cash, yielding a 3.8% annualized rate of return.

With no debt in the current year-to-date period, our $0.2 million interest expense was comprised mostly of the amortization of deferred financing costs and the commitment fee on our line of credit. Interest expense in the prior year-to-date period was $0.4 million. In that period, we had an average debt balance of $2.1 million.

The current year-to-date income tax expense was $15.7 million (37.0% of pretax income) compared to $11.5 million (36.4% of pretax income) for the prior year period. The increase in effective tax rate between these periods is due primarily to a legislative change increasing our expected taxes in Texas.

Consolidated operating income for the current year-to-date period improved $8.9 million over the prior year-to-date period to $38.8 million. Contributing to this were the $6.4 million and $6.5 million increases in store operating income in our EZPAWN and EZMONEY Operations segments, partially offset by the $3.2 million increase in administrative expenses. After a $1.4 million improvement in net interest and a $4.2 million increase in income taxes and other smaller items, net income improved to $26.7 million in the current year-to-date period from $20.1 million in the prior year-to-date period.

Liquidity and Capital Resources

In the current year-to-date period, our $36.2 million cash flow from operations consisted of (a) net income plus several non-cash items, aggregating to $36.9 million, net of (b) $0.6 million of changes in operating assets and liabilities. The changes in operating assets and liabilities were of a normal, recurring nature. In the prior year-to-date period, our $29.8 million cash flow from operations consisted of net income plus several non-cash items, primarily depreciation and the change in deferred taxes. The primary differences in cash flow from operations between the two periods were an increase in the gross profit on sales of inventory and an increase in collected signature loan fees and pawn service charges, net of higher operating expenditures and cash taxes paid.

The $36.5 million of cash used in investing activities during the current year-to-date period were funded primarily by cash flow from operations. Our most significant year-do-date investment was the $23.2 million acquisition of 15 pawn stores and one payday loan store from Jumping Jack Cash. Other significant investments were the $9.2 million in additions to property and equipment and funding the $5.3 million of payday loans net of repayments. Partially offsetting these was $1.3 million of dividends received from an unconsolidated affiliate and $2.3 million received from the exercise of employee stock options and related excess tax benefits. The net effect of these and other smaller cash flows was a $1.7 million increase in cash on hand, providing a $31.7 million ending cash balance.

Below is a summary of our cash needs to meet future aggregate contractual obligations (in millions):


	Payments due by Period
			Less than 1						More than
Contractual Obligations	Total		year		1-3 years		3-5 years		5 years

Long-term debt obligations	$	—	$	—	$	—	$	—	$	—
Interest on long-term debt obligations		0.2		0.1		0.1		—		—
Capital lease obligations		—		—		—		—		—
Operating lease obligations		135.3		20.0		35.1		28.9		51.3
Purchase obligations		—		—		—		—		—
Other long-term liabilities		—		—		—		—		—

Total	$	135.5	$	20.1	$	35.2	$	28.9	$	51.3

In addition to the contractual obligations in the table above, we are obligated under letters of credit issued to unaffiliated lenders as part of our credit service operations. At June 30, 2007, our maximum exposure for losses on letters of credit, if all brokered loans defaulted and none was collected, was $22.8 million. This amount includes principal, interest and insufficient funds fees.

In addition to the operating lease obligations in the table above, we are responsible for the maintenance, property taxes, and insurance at most of our locations. In the fiscal year ended September 30, 2006, these collectively amounted to $6.7 million.

On July 11, 2007, subsequent to the current quarter-end, we invested $13.4 million in additional common shares of Albemarle & Bond, as described in Note L, “Subsequent Event” in the financial statements filed as part of this Form 10-Q.

In the remaining three months of the fiscal year ending September 30, 2007, we plan to open 45 new signature loan stores and one new pawn store for an expected capital expenditure of approximately $2.6 million, plus the funding of working capital and start-up losses at these stores. We believe these new stores will create a drag on earnings and liquidity in their first six to nine months of operations before turning profitable.

While we had no debt outstanding at June 30, 2007, we have a $40 million revolving credit facility secured by our assets, which matures October 1, 2009. Under the terms of the agreement, we could borrow the full $40 million at June 30, 2007. Terms of the agreement require, among other things, that we meet certain financial covenants. Payment of dividends and additional debt are allowed but restricted. The interest amount shown in the table above reflects the commitment fee we anticipate paying through the maturity of the credit agreement, assuming we remain debt-free.

We anticipate that cash flow from operations, cash on hand and availability under our revolving credit facility will be adequate to fund our contractual obligations, planned store growth, capital expenditures and working capital requirements during the coming year.

Seasonality

Historically, fee and service charge revenues are highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season. Merchandise sales generally are highest in the first and second fiscal quarters (October through March) due to the holiday season, jewelry sales surrounding Valentine’s Day, and the impact of tax refunds. Jewelry scrapping sales are heavily influenced by the timing of decisions to scrap excess jewelry inventory. The majority of jewelry scrapping sales generally occurs during our fourth fiscal quarter (July through September) due to low jewelry merchandise sales in that quarter. The net effect of these factors is that net revenues and net income typically are highest in the fourth fiscal quarter, with the first fiscal quarter being second highest. Our cash flow typically is greatest in the second fiscal quarter due to a high level of loan redemptions and sales in the income tax refund season.

Use of Estimates and Assumptions

Management’s Discussion and Analysis of Financial Condition and Results of Operations is based on our condensed consolidated financial statements. We prepared those statements according to accounting principles generally accepted in the United States for interim financial information. We must make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, inventory, allowance for losses on signature loans, long-lived and intangible assets, income taxes, contingencies and litigation. We base our estimates on historical experience, observable trends and other assumptions that we believe are reasonable under the circumstances. We use this information to make judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from the estimates under different assumptions or conditions.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The following discussion about our market risk disclosures involves forward-looking statements. Actual results could differ materially from those projected in the forward-looking statements. We are exposed to market risk related to changes in foreign currency exchange rates and gold values. We also are exposed to regulatory risk in relation to our credit services, payday loans and pawn operations. We do not use derivative financial instruments.

Our earnings and financial position may be affected by changes in gold values and the resulting impact on pawn lending and jewelry sales. The proceeds of scrap sales and our ability to sell excess jewelry inventory at an acceptable margin depend on gold values. The impact on our financial position and results of operations of a hypothetical change in gold values cannot be reasonably estimated. For further discussion, you should read “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the year ended September 30, 2006.

Our earnings and financial position are affected by foreign currency exchange rate fluctuations related to our equity investment in A&B. A&B’s functional currency is the U.K. pound. The impact on our results of operations and financial position of a hypothetical change in the exchange rate between the U.S. dollar and the U.K. pound cannot be reasonably estimated due to the interrelationship of operating results and exchange rates. The translation adjustment representing the strengthening in the U.K. pound during the quarter ended March 31, 2007 (included in our June 30, 2007 results on a three-month lag as described above) was a $23,000 increase, net of tax effect, to stockholders’ equity. On June 30, 2007, the U.K. pound strengthened to £1.00 to $2.0039 U.S. from $1.9625 U.S. at March 31, 2007. We cannot assure the future valuation of the U.K. pound or how further movements in the pound could affect our future earnings or financial position.

Similar to the discussion above regarding the U.K. pound, fluctuations in the exchange rate for the Mexican peso also affect our earnings and financial position due to our pawn operations in Mexico. Currently these operations are not material. The translation adjustment representing the strengthening in the Mexican peso during the quarter ended June 30, 2007 was a $3,000 increase, net of tax effect, to stockholders’ equity.

Forward-Looking Information

This Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations, includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We intend that all forward-looking statements be subject to the safe harbors created by these laws. All statements other than statements of historical information are forward-looking and may contain information about financial results, economic conditions, trends, planned store openings and known uncertainties. These statements are often, but not always, made with words or phrases like “may,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “outlook,” “expect,” “will,” and similar expressions. All forward-looking statements are based on current expectations regarding important risk factors. Many of these risks and uncertainties are beyond our control, and in many cases, we cannot predict all of the risks and uncertainties that could cause our actual results to differ materially from those expressed in the forward-looking statements. Actual results could differ materially from those expressed in the forward-looking statements, and you should not regard them as a representation that the expected results will be achieved. Important risk factors that could cause results or events to differ from current expectations are described in Part II, Item 1A, “Risk Factors,” of this

Quarterly Report and in the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2006. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect our operations, performance, development and results. You are cautioned not to overly rely on these forward-looking statements, which are current only as of the date of this report. We undertake no obligation to release publicly the results of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this report, including without limitation, changes in our business strategy or planned capital expenditures, store growth plans or to reflect unanticipated events.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2007. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of June 30, 2007, our disclosure controls and procedures are effective to ensure that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Disclosure controls and procedures include those controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

(b) Changes in Internal Controls

There were no changes in our internal controls that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

Item 1. Legal Proceedings

See Note F, “Contingencies,” in the Notes to the Interim Condensed Consolidated Financial Statements included in this filing.

Item 1A. Risk Factors

Important risk factors that could cause results or events to differ from current expectations are described in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2006. These factors are supplemented by those discussed under “Quantitative and Qualitative Disclosures about Market Risk” in Part I, Item 3 of this report and in Part II, Item 7A of our Annual Report on Form 10-K for the year ended September 30, 2006.

Item 6. Exhibits


Exhibit
Number		Description

10.105		First Amendment to Fourth Amended and Restated Credit Agreement between the Company and Wells Fargo Bank Texas, N.A., as the Agent and Issuing Bank, re: $40 million credit facility.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURE

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


	EZCORP, INC. (Registrant)

Date: August 6, 2007	By:	/s/ Dan N. Tonissen
		(Signature)

		Dan N. Tonissen Senior Vice President, Chief Financial Officer & Director

EXHIBIT INDEX


Exhibit
Number		Description
10.105		First Amendment to Fourth Amended and Restated Credit Agreement between the Company and Wells Fargo Bank Texas, N.A., as the Agent and Issuing Bank, re: $40 million credit facility.

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

exv10w105

Exhibit 10.105

FIRST AMENDMENT TO FOURTH AMENDED
AND RESTATED CREDIT AGREEMENT

This FIRST AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT dated as of July 5, 2007 (this “Amendment”), is among EZCORP, INC., a Delaware corporation (the “Borrower”), the Guarantors, the Lenders, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent for itself and the other Lenders (the “Agent”).

RECITALS:

A. The Borrower, the Agent, the Lenders and the Issuing Bank have previously entered into that certain Fourth Amended and Restated Credit Agreement dated as of October 13, 2006 (as the same has been amended, restated or modified from time to time, the “Agreement”).

B. The Agent, the Lenders and the Borrower desire to amend the Agreement on the terms and subject to the conditions and to the extent set forth below.

NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, the parties hereto hereby agree as follows:

ARTICLE I

Definitions

Section 1.1 Definitions. All capitalized terms not otherwise defined herein shall have the same meanings as in the Agreement, as amended hereby.

ARTICLE II

Amendment

Section 2.1 Addition to Article I. Effective as of the date hereof, a new Section 1.3 is added to Article I of the Agreement to read in its entirety as follows:

Section 1.3 Consolidation of Variable Interest Entities. All references herein to consolidated financial statements of the Borrower and the Subsidiaries or to the determination of any amount for the Borrower and its Subsidiaries on a consolidated basis or any similar reference shall, in each case, be deemed to include each variable interest entity that the Borrower is required to consolidate pursuant to FASB Interpretation No. 46 — Consolidation of Variable Interest Entities: an interpretation of ARB No. 51 (January 2003), as if such variable interest entity were a Subsidiary as defined herein, but each such variable interest entity shall not be considered a Subsidiary for any other purpose hereunder.

Section 2.2 Amendment to Section 9.5(c). Effective as of the date hereof, the reference to the dollar amount “$7,500,000” in Section 9.5(c) of the Agreement is deleted and the reference to the dollar amount “$15,000,000” is inserted in lieu thereof.

ARTICLE III

Conditions Precedent

Section 3.1 Conditions. The effectiveness of this Amendment is subject to the satisfaction of the following conditions precedent:

	(a)		Amendment. The Agent shall have received this Amendment executed by the Borrower, the Guarantors, the Required Lenders and the Agent.

	(b)		No Default. No Default shall have occurred and be continuing.

	(c)		Representations and Warranties. All of the representations and warranties contained in Article VII of the Agreement and in the other Loan Documents shall be true and correct on and as of the date of this Amendment with the same force and effect as if such representations and warranties had been made on and as of such date, except to the extent such representations and warranties speak to a specific date.

	(d)		Additional Documentation. The Agent shall have received such additional approvals, opinions or documents as the Agent or its legal counsel may reasonably request.

ARTICLE IV

Ratifications, Representations and Warranties

Section 4.1 Ratifications. The terms and provisions set forth in this Amendment shall modify and supersede all inconsistent terms and provisions set forth in the Agreement and except as expressly modified and superseded by this Amendment, the terms and provisions of the Agreement and the other Loan Documents are ratified and confirmed and shall continue in full force and effect. The Borrower, the Guarantors and the Agent agree that the Agreement as amended hereby and the other Loan Documents shall continue to be legal, valid, binding and enforceable in accordance with their respective terms.

Section 4.2 Representations and Warranties. Each of the Borrower and the Guarantors hereby represents and warrants to the Lenders, the Agent and the Issuing Bank that (a) the execution, delivery and performance of this Amendment and any and all other Loan Documents executed and/or delivered in connection herewith have been authorized by all requisite corporate or other action on the part of the Borrower or such Guarantor and will not violate the certificate of incorporation, bylaws or other organizational documents of the Borrower or such Guarantor, (b) the representations and warranties contained in the Agreement, and any other Loan Document are true and correct on and as of the date hereof as though made on and as of the date hereof (except for such representations and warranties as are limited by their express terms to a specific date), (c) effective upon the execution of this Amendment and the Loan Documents executed in connection herewith, no Default has occurred and is continuing, and (d) the Borrower and the Guarantors are in full compliance with all covenants and agreements contained in the Agreement as amended hereby.

Section 4.3 Ratification by Guarantors. The Guarantors hereby consent and agree to this Amendment and agree that the Guaranty shall remain in full force and in effect and shall continue to (a) guarantee the Guaranteed Indebtedness (as defined in the Guaranty), and (b) be the legal, valid and binding obligation of the Guarantors and enforceable against the Guarantors in accordance with its terms. In addition, the Guarantors hereby agree that each Subsidiary Security Agreement, the Contribution and Indemnification Agreement and each Real Property Security Agreement shall remain in full force and in effect and shall continue to (i) secure the Obligations (as defined in the Loan Documents other than the Real Property Security Documents) and the Debt (as defined in the Real Property Security Documents), and (ii) be the legal, valid and binding obligation of the Guarantors and enforceable against the Guarantors and collateral in accordance with their respective terms.

ARTICLE V

Miscellaneous

Section 5.1 Survival of Representations and Warranties. All representations and warranties made in this Amendment or any other Loan Document including any Loan Document furnished in connection with this Amendment shall survive the execution and delivery of this Amendment and the other Loan Documents, and no

investigation by the Lenders, the Agent or the Issuing Bank or any closing shall affect the representations and warranties or the right of the Lenders, the Agent or the Issuing Bank to rely upon them.

Section 5.2 Reference to Agreement. Each of the Loan Documents, including the Agreement and any and all other agreements, documents, or instruments now or hereafter executed and delivered pursuant to the terms hereof or pursuant to the terms of the Agreement as amended hereby, are hereby amended so that any reference in such Loan Documents to the Agreement shall mean a reference to the Agreement as amended hereby.

Section 5.3 Expenses of Agent. As provided in the Agreement, Borrower agrees to pay on demand all costs and expenses incurred by the Agent in connection with the preparation, negotiation, and execution of this Amendment and the other Loan Documents executed pursuant hereto and any and all amendments, modifications, and supplements thereto, including without limitation the reasonable costs and fees of the Agent’s legal counsel, and all costs and expenses incurred by the Agent in connection with the enforcement or preservation of any rights under the Agreement or any other Loan Document, including without limitation the reasonable costs and fees of the Agent’s legal counsel.

Section 5.4 Severability. Any provision of this Amendment held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Amendment and the effect thereof shall be confined to the provision so held to be invalid or unenforceable.

Section 5.5 Applicable Law. This Amendment and all other Loan Documents executed pursuant hereto shall be governed by and construed in accordance with the laws of the State of Texas and the applicable laws of the United States of America.

Section 5.6 Successors and Assigns. This Amendment is binding upon and shall inure to the benefit of the Lenders, the Agent, the Issuing Bank and the Borrower and the Guarantors and their respective successors and assigns, except neither the Borrower nor any Guarantor may assign or transfer any of its rights or obligations hereunder without the prior written consent of the Lenders and the Agent.

Section 5.7 Counterparts. This Amendment may be executed in one or more counterparts, each of which when so executed shall be deemed to be an original, but all of which when taken together shall constitute one and the same instrument. Signatures transmitted by facsimile, email or other electronic medium shall be effective as originals.

Section 5.8 Headings. The headings, captions, and arrangements used in this Amendment are for convenience only and shall not affect the interpretation of this Amendment.

Section 5.9 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION WITH THIS AMENDMENT EMBODY THE FINAL, ENTIRE AGREEMENT AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL, RELATING TO THIS AMENDMENT, AND MAY NOT BE CONTRADICTED OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.

[Remainder of Page Intentionally Left Blank]

Executed as of the date first written above.


		BORROWER:

		EZCORP, INC.

		By:

				Daniel N. Tonissen Senior Vice President

		GUARANTORS:

		EZCORP INTERNATIONAL, INC. EZMONEY COLORADO, INC. EZMONEY HOLDINGS, INC. EZMONEY IDAHO, INC. EZMONEY MANAGEMENT, INC. EZMONEY NEBRASKA, INC. EZMONEY UTAH, INC. EZMONEY WISCONSIN, INC. EZPAWN ALABAMA, INC. EZPAWN ARKANSAS, INC. EZPAWN COLORADO, INC. EZPAWN FLORIDA, INC. EZPAWN HOLDINGS, INC. EZPAWN INDIANA, INC. EZPAWN LOUISIANA, INC. EZPAWN NEVADA, INC. EZPAWN OKLAHOMA, INC. EZPAWN TENNESSEE, INC. EZPAWN MEXICO LTD., INC. EZPAWN MEXICO HOLDINGS, INC. TEXAS EZPAWN MANAGEMENT, INC. PAYDAY LOAN MANAGEMENT, INC. TEXAS DIAMOND & GOLD, & PAWN, INC.


		By:
				Daniel N. Tonissen Senior Vice President of each Guarantor listed above


		By:
				Daniel N. Tonissen Senior Vice President


		By:
				Daniel N. Tonissen Senior Vice President


		TEXAS EZMONEY, L.P.

		By:		Payday Loan Management, Inc., its sole general partner

		By:

				Daniel N. Tonissen Senior Vice President

		Address for Notices: 1901 Capital Parkway Austin, Texas 78746 Fax No.: (512) 314-3404 Telephone No.: (512) 314-2289 Email: dtonissen@ezcorp.com Attention: Chief Financial Officer


	AGENT AND LENDERS: WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and a Lender
	By:
		Michael Brewer
		Vice President


	GUARANTY BANK, as a Lender
	By:
		Dan Leonard
		Vice President

exv31w1

Exhibit 31.1

CERTIFICATION

I, Joseph L. Rotunda, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of EZCORP, Inc. (the “registrant”) for the quarter ended June 30, 2007;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2007



	/s/ Joseph L. Rotunda
	Joseph L. Rotunda
	President, Chief Executive Officer & Director

exv31w2

Exhibit 31.2

CERTIFICATION

I, Dan N. Tonissen, certify that:

	1.		I have reviewed this Quarterly Report on Form 10-Q of EZCORP, Inc. (the “registrant”) for the quarter ended June 30, 2007;

	2.		Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

	3.		Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

	4.		The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	(a)		Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	(b)		Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	(c)		Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	(d)		Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

	(a)		All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	(b)		Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 6, 2007



	/s/ Dan N. Tonissen
	Dan N. Tonissen
	Senior Vice President, Chief Financial Officer & Director

exv32w1

Exhibit 32.1

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (the “Report”) by EZCORP, Inc. (“Registrant”), the undersigned hereby certifies that:

	1.		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

	2.		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Date: August 6, 2007



	/s/ Joseph L. Rotunda
	Joseph L. Rotunda
	President, Chief Executive Officer & Director

exv32w2

Exhibit 32.2

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the filing of the Quarterly Report on Form 10-Q for the quarter ended June 30, 2007 (the “Report”) by EZCORP, Inc. (“Registrant”), the undersigned hereby certifies that:

	1.		The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

	2.		The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant.

Date: August 6, 2007



	/s/ Dan N. Tonissen
	Dan N. Tonissen
	Senior Vice President, Chief Financial Officer & Director

TEXAS EZPAWN L.P.

Texas EZPAWN Management, Inc.,
its sole general partner