UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-K

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

For the Fiscal Year Ended September 30, 2008		Commission File No. 000-19424

EZCORP, INC.

(Exact name of registrant as specified in its charter)

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

1901 Capital Parkway
Austin, Texas 78746
(Address of principal executive offices)
Registrant’s telephone number: (512) 314-3400

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class		Name of Each Exchange on Which Registered
Class A Non-voting Common Stock, $.01 par value per share		The NASDAQ Stock Market

Securities Registered Pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes o No þ

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 if disclosures of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 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		Smaller reporting company: o
				(Do not check if a smaller reporting company)

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

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. The aggregate market value of the Class A Non-Voting Common Stock held by non-affiliates of the registrant was $459 million, based on the closing price on the NASDAQ Stock Market on March 31, 2008.

As of October 31, 2008, 40,239,931 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.

Documents incorporated by reference: None

 

 

EZCORP, INC.
YEAR ENDED SEPTEMBER 30, 2008
INDEX TO FORM 10-K

Item		Page
No.		No.
INTRODUCTION
PART I
1. Business			3
1A. Risk Factors			19
2. Properties			23
3. Legal Proceedings			26
4. Submission of Matters to a Vote of Security Holders			27
PART II
5. Market for Registrant’s Common Equity and Related Stockholder Matters			28
6. Selected Financial Data			30
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations			31
7A. Qualitative and Quantitative Disclosures About Market Risk			50
8. Financial Statements and Supplementary Data			52
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure			83
9A. Controls and Procedures			84
PART III
10. Directors and Executive Officers of the Registrant			87
11. Executive Compensation			91
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters			107
13. Certain Relationships and Related Party Transactions			108
14. Principal Accounting Fees and Services			110
PART IV
15. Exhibits and Financial Statement Schedules			111
Signatures			113
Exhibit Index			114
EX-3.2
EX-10.14
EX-21.1
EX-23.1
EX-31.1
EX-31.2
EX-32.1
EX-32.2

PART I

Item 1. Business

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

General

EZCORP, Inc. is a Delaware corporation with principal executive offices at 1901 Capital Parkway, Austin, Texas 78746. Our telephone number is (512) 314-3400. You may access our filings with the Securities and Exchange Commission through a link in the Investor Relations section of our website at www.ezcorp.com. Our Code of Conduct and Ethics, Audit Committee Charter and Compensation Committee Charter are also available on our website.

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 294 domestic pawn stores and 38 Mexico pawn stores open at September 30, 2008. 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 477 EZMONEY stores and 71 of our domestic pawn stores open September 30, 2008, 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 three segments. The EZPAWN US Operations segment offers pawn related activities in all 294 domestic pawn stores, and offers signature loans in 71 pawn stores and six EZMONEY stores. The Empeño Fácil segment offers pawn related activities in all 38 stores in Mexico. The EZMONEY Operations segment offers signature loans in 471 EZMONEY stores in the United States, and accounts for approximately 98% of our consolidated signature loan revenues.

We earn pawn service charge revenue on our pawn lending. While allowable service charges vary by state and loan size, a majority of our U.S. pawn loans earn 20% per month, or 240% annually. Our average U.S. pawn loan amount typically ranges between $80 and $100 but varies depending on the valuation of each item pawned. The total U.S. loan term, consisting of the primary term and grace period, ranges between 60 and 120 days. In Mexico, a majority of our pawn loans earn monthly pawn service charges of 13% to 14% net of applicable taxes, and the total loan term is 40 days. In the years ended September 30, 2006, 2007 and 2008 (fiscal 2006, 2007, and 2008), approximately 76%, 77% and 79% of our pawn loans were redeemed in full or were renewed or extended through the payment of accrued pawn service charges.

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 loan or purchase value at the time the property is either accepted as loan collateral or purchased. Improper value assessment in the lending or purchasing process can result in lower margins or reduced marketability of the merchandise. We realized gross margins on sales of 40%, 39% and 40% in fiscal 2006, 2007 and 2008.

At September 30, 2008, 287 of our 477 EZMONEY stores and 47 of our 294 domestic 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 287 EZMONEY stores and 47 domestic pawn stores offering credit services, customers can obtain short-term loans, with principal amounts up to $1,500 but averaging approximately $560. Terms of these short-

term loans are generally less than 30 days, averaging about 18 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 90 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 $2,100. With each semi-monthly or bi-weekly installment payment, we earn a fee of 10% of the initial loan amount. At September 30, 2008, short-term loans comprised 98% of the balance of loans brokered through our credit services, and installment loans comprised the remaining 2%.

We earn payday loan fee revenue on our payday loans. In 24 domestic pawn stores and 190 EZMONEY stores, we make payday loans subject to state law. The average payday loan amount is approximately $430 and the term is generally less than 30 days, averaging about 18 days. We typically charge a fee of 15% to 22% of the loan amount for a 7 to 23-day period.

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.

On October 22, 2007, we completed the acquisition of twenty Mexico pawnshops from MMFS Intl., S.A. de C.V., a subsidiary of Mister Money Holdings, Inc., for $15.5 million cash and direct transaction costs. Results of the acquired stores are included in our consolidated results from the date of acquisition.

On September 5, 2008, we announced an asset purchase agreement to acquire eleven pawnshops located in Las Vegas, North Las Vegas and Henderson, Nevada that operate under the Pawn Plus, Pawn Place and ASAP Pawn brands. We completed this acquisition on November 13, 2008 for total consideration of approximately $34.3 million plus direct transaction costs. Approximately half the purchase consideration was funded with the issuance of EZCORP Class A Non-voting Common Stock and the remaining half was funded in cash. Results of the acquired stores will be included in our consolidated results from the date of acquisition.

On September 16, 2008, we announced a merger agreement with Value Financial Services, Inc. that we expect to consummate December 31, 2008. In the merger, we will acquire Value Financial Services’ 67 pawn stores, mostly in Florida, for a total estimated acquisition price of $80.6 million, plus the assumption of Value Financial Services’ debt estimated at $35.3 million, for an aggregate cost of approximately $115.9 million. The total purchase price may increase upon the payment of contingent consideration depending on the price at which the sellers sell, within 125 days of the merger, the EZCORP shares they will acquire as part of the merger consideration. This acquisition is described more fully later in this annual report.

During fiscal 2008, we opened 66 EZMONEY stores and closed or consolidated 22. Of the 477 total EZMONEY stores, 158 adjoin existing EZPAWN locations but have a different entrance, signage, décor and staffing. Even though they adjoin an EZPAWN, the EZMONEY stores are a separate business from the customers’ point of view. We refer to these as “adjoined stores.” During fiscal 2008, we also opened 14 Empeño Fácil pawn stores in Mexico, in addition to the twenty stores acquired in October 2007. We plan to open another 30 to 35 Empeño Fácil pawn stores in fiscal 2009.

We have experienced rapid signature loan growth in the past several years. We expect continued growth in the near term both with the maturation of existing stores and the planned fiscal 2009 opening of another 30 to 35 EZMONEY stores. Customers find signature loans a more attractive alternative than borrowing from friends and family or incurring insufficient fund fees, overdraft protection fees, utility reconnect fees and other charges imposed when they have insufficient cash. Signature loan customers exercise greater control of their personal finances without damaging the relationship they have with their merchants and service providers. Customers also value the excellent service we provide them.

The following components comprised our net revenues (total revenues less cost of goods sold):

		Fiscal Year Ended September 30,
		2006				2007				2008
Pawn service charges			31	%			29	%			30	%
Gross profit from merchandise sales			27	%			23	%			20	%
Gross profit from jewelry scrapping			7	%			7	%			9	%
Signature loan (payday loan and credit service) fees			34	%			41	%			40	%
Other			1	%			—				1	%
Net revenues			100	%			100	%			100	%

Pawn Lending Activities

Our pawnshops make pawn loans, which typically are small, non-recourse loans collateralized by tangible personal property. At September 30, 2008, we had approximately 757,000 loans outstanding, representing an aggregate principal balance of $75.9 million. A majority of our U.S. pawn loans earn 20% per month, or 240% annually. In Mexico, a majority of our pawn loans earn monthly pawn service charges of 13% to 14% net of applicable taxes. For fiscal 2008, pawn service charges accounted for approximately 21% of our total revenues and 30% of our net revenues.

Collateral for our pawn loans consists of tangible personal property, generally jewelry, consumer electronics, tools, sporting goods and musical instruments. Approximately 65% of our pawn loan collateral is jewelry and approximately 90% of this amount is gold jewelry. We do not evaluate the creditworthiness of a pawn customer, but rely on the estimated resale value of the collateral and the perceived probability of the loan’s redemption. We generally lend from 25% to 65% of the pledged property’s estimated resale value depending on an evaluation of these factors. The sources for our determination of the resale value of collateral include our computerized valuation software, gold values, internet retail and auction sites, catalogues, newspaper advertisements and previous sales of similar merchandise.

The collateral is held through the duration of the loan, which in most U.S. locations is 60 days and in Mexico is 40 days. The customer generally has the option of renewing or extending the loan. Through our lending guidelines, we generally maintain a redemption rate (the percent of loans made that are redeemed, renewed or extended) between 75% and 80%. In each of our last three fiscal years, the redemption rate was within this range. If a borrower does not repay, extend or renew a loan, the collateral is forfeited to us and becomes inventory available for sale. We do not record loan losses or charge-offs of pawn loans because the principal amount of an unpaid loan becomes the inventory carrying cost of the forfeited collateral. We provide an inventory valuation allowance to ensure that this forfeited collateral is valued at the lower of cost or market.

The table below shows our dollar amount of pawn loan activity for fiscal 2006, 2007 and 2008:

		Fiscal Year Ended September 30,
		2006				2007				2008
		(in millions)
Loans made		$	191.8			$	211.9			$	262.5
Loans repaid			(101.6	)			(109.2	)			(136.8	)
Loans forfeited			(93.2	)			(96.4	)			(113.7	)
Loans acquired in business acquisitions			0.4				4.1				3.2
Net increase (decrease) in pawn loans outstanding at the end of the year		$	(2.6	)		$	10.4			$	15.2
Loans renewed		$	30.2			$	40.3			$	103.1
Loans extended		$	183.3			$	267.8			$	375.9

The redemption rate of pawn loans and the gross profit realized on the sale of forfeited collateral are dependent on the appraisal of customer merchandise. Jewelry, which makes up approximately 65% of the value of collateral, can be appraised based on weight, gold content, style and value of gemstones, if any. Other items pawned typically consist of consumer electronics, tools, sporting goods, and musical instruments. These are evaluated based on recent sales experience and the selling price of similar new merchandise, adjusted for age, wear, and obsolescence.

At the time a pawn transaction is made, a pawn loan agreement is given to the borrower. It presents, among other things, the name and address of the pawnshop and the borrower, the borrower’s identification information, the date of the loan and a detailed description of the pledged goods (including applicable serial numbers), the amount financed, the pawn service charge, the maturity date of the loan, the total amount that must be paid to redeem the loan and the annual percentage rate.

Since a majority of our pawn stores are located in Texas, Texas pawnshop laws and regulations govern most of our pawn operations. The maximum allowable pawn service charges in Texas are set in accordance with the Texas Pawnshop Act and are based on the dollar amount of the loan. Historically, the maximum allowable pawn service charges under Texas law have not changed, but loan amounts have been increased annually in relation to the Consumer Price Index.

Applicable Pawn Loan Service Charges for Texas

		Amount Financed per Pawn Loan								Maximum
		July 1, 2007 to				July 1, 2008 to				Allowable Annual
		June 30, 2008				June 30, 2009				Pawn Service Charge
		$	1 to $171			$	1 to $180				240	%
		$	172 to $1,140			$	181 to $1,200				180	%
		$	1,141 to $1,710			$	1,201 to $1,800				30	%
		$	1,711 to $14,250			$	1,801 to $15,000				12	%

Under Texas law, there is a ceiling on the maximum allowable pawn loan. For the year ended June 30, 2008, the loan ceiling was $14,250. For the year ending June 30, 2009, the loan ceiling is $15,000.

Signature Loans

In 477 EZMONEY and 71 EZPAWN locations, we offer signature loans, consisting of payday loans or fee-based credit services to customers seeking loans from unaffiliated lenders. The table below shows our dollar amount of signature loan activity for fiscal 2006, 2007 and 2008. For purposes of this table, signature loan balances include the principal portion of payday loans (net of valuation allowance) recorded on our balance sheet and the principal portion of active brokered loans outstanding from unaffiliated lenders, which is not included on our balance sheet.

		Fiscal Year Ended September 30,
		2006				2007				2008
		(in millions)
Combined Signature Loans:
Loans made		$	115.5			$	164.3			$	204.4
Loans repaid			(93.7	)			(130.3	)			(167.5	)
Loans forfeited, net of collections on bad debt			(17.0	)			(26.5	)			(34.3	)
Net increase in signature loans outstanding at the end of the year		$	4.8			$	7.5			$	2.6
Loans renewed		$	247.3			$	368.4			$	449.9
Credit Services Only (Loans made by unaffiliated lenders):
Loans made		$	91.1			$	115.8			$	122.4
Loans repaid			(72.4	)			(89.5	)			(96.5	)
Loans forfeited, net of collections on bad debt			(14.8	)			(21.2	)			(25.6	)
Net increase in loans outstanding at the end of the year		$	3.9			$	5.1			$	0.3
Loans renewed		$	236.1			$	334.4			$	392.8
Payday Loans Only (Loans made by us):
Loans made		$	24.4			$	48.5			$	82.0
Loans repaid			(21.3	)			(40.8	)			(71.0	)
Loans forfeited, net of collections on bad debt			(2.2	)			(5.3	)			(8.7	)
Net increase in payday loans outstanding at the end of the year		$	0.9			$	2.4			$	2.3
Loans renewed		$	11.2			$	34.0			$	57.1

Signature loans are unsecured, and their profitability is highly dependent upon our ability to manage the default rate and collect defaulted loan principal, interest and insufficient fund fees. In determining whether to lend or provide credit services, we perform a limited review of customer information, such as making a credit reporting agency inquiry, evaluating and verifying income levels and verifying a telephone number where the customers may be contacted.

At the time a signature loan is made, a loan agreement, and credit services agreement when applicable, is given to the borrower. It presents, among other things, the name and address of the lender, the borrower and the credit services company when applicable, the borrower’s identification information, the date of the loan, the amount financed, the interest or service charges due on maturity, the maturity date of the loan, the total amount that must be paid and the annual percentage rate.

Credit Services

We offer credit services in our EZMONEY stores in Texas. These services consist of advice and assistance to customers in obtaining loans from unaffiliated lenders. We do not make, fund or participate in the loans made by the lenders, but earn a fee for assisting customers in obtaining credit and by enhancing their creditworthiness by issuing a letter of credit. In connection with our credit services, the unaffiliated lenders offer customers two types of loans. In all 287 EZMONEY stores and 47 EZPAWN

stores offering credit services, customers can obtain short-term loans, with principal amounts up to $1,500, averaging $560. Terms of these short-term loans are generally less than 30 days, averaging about 18 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 90 EZMONEY stores offering credit services, customers can also 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, averaging about $2,100. With each semi-monthly or bi-weekly installment payment, we earn a fee of 10% of the initial loan amount. At September 30, 2008, short-term loans comprised 98% of the balance of loans brokered through our credit services, and installment loans comprised the remaining 2%.

If a credit service customer defaults on the loan, we pay the lender the principal and accrued interest due under the loan and an insufficient funds fee. We then attempt to collect the unpaid principal, interest and insufficient funds fee from the borrower. We consider as our bad debt the amount we pay the lenders under letters of credit, less any amounts we collect from borrowers.

Although amounts paid under letters of credit may be collected later, we charge those amounts to bad debt expense upon default. Subsequent recoveries under the letters of credit are recorded as a reduction of bad debt at the time of collection. We also record as bad debt expense an accrual of expected losses for principal, interest and insufficient fund fees we expect to pay the lenders on default of the lenders’ current loans under the terms of the letters of credit. This estimate is based on recent default and collection experience and the amount of loans the lenders have outstanding.

Following an unfavorable outcome from an administrative action in Florida, we closed our eleven Florida EZMONEY stores in June 2008. The stores offered credit services and adjoined EZPAWN locations.

Payday Lending Activities

State law governs our payday loans. The average payday loan amount is approximately $430 and the term is generally less than 30 days, averaging about 18 days. We typically charge a fee of 15% to 22% of the loan amount for a 7 to 23-day period.

We consider a loan defaulted if the loan has not been repaid or renewed by the maturity date. Although defaulted loans may be collected later, we charge the loan principal to bad debt upon default, leaving only active loans in the reported balance. Subsequent collections of principal are recorded as a reduction of bad debt at the time of collection. Accrued service charges related to defaulted loans are deducted from service charge revenue upon loan default, and increase service charge revenue upon subsequent collection. We provide for a valuation allowance on both the principal and service charges receivable based on recent default and collection experience. Our payday loan balance represents the principal amount of all active (non-defaulted) loans, net of this valuation allowance.

Retail Activities

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 loan or purchase value at the time the property is either accepted as loan collateral or purchased. Improper value assessment in the lending or purchasing process can result in lower margins or reduced marketability of the merchandise. During fiscal 2006, 2007 and 2008, we realized gross margins on sales of 40%, 39% and 40%. Jewelry sales represent approximately half of our total sales with the remaining sales consisting primarily of consumer electronics, tools, sporting goods and musical instruments. We believe our ability to offer quality used merchandise at prices significantly lower than original retail prices attracts value-conscious customers.

During the three most recent fiscal years, sources of inventory additions were:

		Fiscal Year Ended September 30,
		2006				2007				2008
Forfeited pawn loan collateral			83	%			81	%			78	%
Purchases from customers			16	%			18	%			21	%
Acquired in business acquisitions			1	%			1	%			1	%

For fiscal 2006, 2007 and 2008, retail activities and jewelry scrapping (sales of precious metals and gemstones to refiners and gemstone wholesalers) accounted for approximately 56%, 52% and 51% of our total revenues, or 34%, 30% and 30% of our net revenues, after deducting the cost of goods sold. As a significant portion of our inventory and sales involve gold jewelry, our results can be heavily influenced by the market price of gold. This is particularly true for gold scrapping, which comprised 24% of total sales in fiscal 2006, 27% in fiscal 2007 and 33% in fiscal 2008.

Analysis of the sales and inventory data provided by our management information systems, along with market intelligence and financial modeling, highlight opportunities for refinement of our marketing and merchandising programs and lending and pricing decisions. The Vice President of EZPAWN U.S. Operations and the Director General for Mexico provide the strategic direction. Our Director of Operations, in conjunction with our Regional Directors and Area Managers oversee the tactical execution of these marketing and merchandising programs and are responsible for balancing inventory levels within their markets.

In the United States, customers may purchase a product protection plan that allows them to return or exchange certain merchandise sold through our retail operations within six months of purchase, but have experienced a low rate of returns and exchanges as a percentage of sales. Customers may purchase an item on layaway, whereby a customer typically pays a minimum layaway deposit of 20% of an item’s sale price. We hold the item for a 60 to 90-day period, during which the customer is required to pay for the balance of the item. The initial deposit and subsequent payments are recorded as customer layaway deposits. Layaways are recorded as sales when paid in full. As of September 30, 2008, we held $2.3 million in customer layaway deposits.

Our overall inventory is stated at the lower of cost or market. We provide an inventory valuation allowance for shrinkage and cost in excess of market value. We estimate this valuation allowance through study and analysis of sales trends, inventory turnover, inventory aging, margins achieved on recent sales and shrinkage. At September 30, 2008, total inventory on hand was $43.2 million after deducting the inventory valuation allowance of $4.0 million.

Seasonality

Historically, pawn service charges are highest in our fourth fiscal quarter (July through September) due to a higher average loan balance during the summer lending season. Merchandise sales 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 in the United States. Jewelry scrapping sales are heavily influenced by the timing of decisions to scrap excess jewelry inventory. Jewelry scrapping sales generally are greatest during our fourth fiscal quarter (July through September) due to relatively low jewelry merchandise sales in that quarter.

Signature loan fees are generally highest in our third and fourth fiscal quarters (April through September) due to a higher average loan balance during the summer lending season. Signature loan bad debt, both in dollar terms and as a percentage of related fees, is highest in the third and fourth quarters and lowest in the second quarter due primarily to the impact of tax refunds.

The net effect of these factors is that net revenues and net income typically are strongest in the fourth fiscal quarter and weakest in the third fiscal quarter. 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.

Operations

A typical company pawn store employs approximately six full-time equivalent employees (“FTEs”) consisting of a store manager, an operations manager and four pawnbrokers. Each store manager is responsible for ensuring that the store is run in accordance with our policies, procedures and operating guidelines, and reports to an area manager. Area managers are responsible for the performance of all stores within their area and report to one of our regional directors (district managers in Mexico), who in turn report to the Vice President of EZPAWN U.S. Operations or the Empeño Fácil Director General in Mexico. Area managers, store managers and operations managers receive incentive compensation based on their area or store’s performance in comparison to an operating budget. Beginning in fiscal 2008, our U.S. pawnbrokers are also eligible for incentive compensation based on the store’s performance and their individual productivity performance. The incentive compensation for EZPAWN staff typically ranges between 5% and 30% of their total compensation. Regional directors’ (district managers in Mexico) compensation is also dependent upon the performance of their region (district).

Signature loan stores typically employ two to three FTEs per location, consisting of a store manager and one to two customer service representatives. Each store manager is responsible for ensuring that the store is run in accordance with our policies, procedures and operating guidelines, and reports to an area manager, who is responsible for the stores within a specific operating area. Area managers report to one of the EZMONEY regional directors, who report to the President — EZMONEY Division. Managers and regional directors receive incentive compensation based on their performance in comparison to an operating budget.

In the majority of our EZMONEY stores, store employees attempt to collect defaulted signature loans in the first 30 days after default. After the initial 30 days, our centralized collection center assumes collection responsibility. The collection center also collects defaulted signature loans for all other locations from the date of default. After attempting to collect for approximately 60 days, we then occasionally sell the remaining defaulted signature loans to an outside collection agency.

We have an internally developed store level point of sale (“POS”) system that automates the recording of store-level pawn transactions. We use a separate POS specifically designed to handle signature loans. Financial data from all stores is processed at the corporate office each day and the preceding day’s data are available for management review via our internal network. Our communications network provides information access between the stores and the corporate office.

Our internal audit staff, consisting of a Director of Internal Audit, four Audit Managers and 25 Auditors, monitors the perpetual inventory system, lending practices, regulatory compliance and compliance with our policies and procedures. Each location is typically audited four times annually.

As of September 30, 2008, we employed approximately 3,300 people. We believe that our success is dependent upon our employees’ ability to provide prompt and courteous customer service and to execute our operating procedures and standards. We seek to hire people who will become long-term, career employees. To achieve our long-range personnel goals, we offer a structured career development program for all of our field associates. This program encompasses computer-based training, formal structured classroom training and supervised on-the-job training. All store associates, including managers, must meet certain competency criteria prior to hire or promotion and participate in on-going training classes and intensive formal instructional programs. We anticipate store manager candidates will be promoted from the ranks of existing store employees, from our store manager in training program and hired from outside the company. Our career development plan develops and advances our employees and provides training for the efficient integration of experienced managers and associates from outside the company.

At October 31, 2008, we operated our U.S. pawnshops under the names “EZPAWN” and the Mexico pawn stores under the name “Empeño Fácil.” Our payday loan stores operated under the names “EZMONEY Payday Loans,” “EZ Loan Services,” “EZ Payday Advance” and “EZPAWN Payday Loans,” and our credit service stores operated under the name “EZMONEY Loan Services.” We have registered with the United States Patent and Trademark Office the names EZPAWN, EZMONEY and EZCORP,

among others. We hold a trademark in Mexico for the name “Mister Money” and have applied for a trademark for “Empeño Fácil.” Additionally, we operate under the trade name EZMONEY Payroll Advance.

Future Expansion

We plan to expand the number of locations we operate through the development of new locations and through acquisitions. We believe that in the near term the largest growth opportunities are with domestic EZMONEY stores and pawn stores in Mexico, as well as pawn store acquisitions in the United States. On November 13, 2008, we acquired the operating assets of an eleven-store pawn chain in Las Vegas, North Las Vegas and Henderson, Nevada. We plan to open approximately 30 to 35 new EZMONEY stores in the United States and an additional 30 to 35 pawn stores in Mexico in fiscal 2009.

The 66 new EZMONEY stores opened in fiscal 2008 required an average property and equipment investment of approximately $76,000. In addition to the acquired stores, we opened 14 Mexico pawnshops in fiscal 2008 at an average property & equipment investment of approximately $125,000. Although we acquired pawnshops in fiscal 2006 and 2007, we have not opened a new pawnshop location in the United States since fiscal 2000.

On September 16, 2008, we announced a merger agreement with Value Financial Services, Inc. that we expect to consummate December 31, 2008. In the merger, we will acquire Value Financial Services’ 67 pawn stores, mostly in Florida.

Our ability to add new stores is dependent on several variables, such as the availability of acceptable sites or acquisition candidates, the regulatory environment, local zoning ordinances and the availability of qualified personnel.

Competition

We encounter significant competition in connection with our lending operations. These competitive conditions may adversely affect our revenues, profitability and ability to expand. In our lending business, we compete with other pawnshops, payday lenders, credit service organizations and financial institutions, such as consumer finance companies. Other lenders may lend money on an unsecured basis, at interest rates that may be lower than our service charges and on other terms that may be more favorable than ours. We believe that the primary elements of competition are the quality of customer service and relationship management, store location and the ability to loan competitive amounts at competitive rates. In addition, we believe the ability to compete effectively will be based increasingly on strong general management, regional market focus, automated management information systems and access to capital.

Our competitors for merchandise sales include numerous retail and wholesale stores, including jewelry stores, discount retail stores, consumer electronics stores, other pawnshops, other resale stores, electronic commerce retailers and auction sites. Competitive factors in our retail operations include the ability to provide the customer with a variety of merchandise at an exceptional value.

The pawnshop industry in the United States is large and highly fragmented. The industry consists of approximately 12,000 pawnshops owned primarily by independent operators who own one to three locations, and we consider the industry mature. With 294 domestic pawn locations, we are the second largest operator of pawnshops in the United States. The three largest pawnshop operators account for less than ten percent of the total estimated pawnshops in the United States.

The pawnshop industry in Mexico is also fragmented, but less so than in the United States. The industry consists of approximately 4,000 to 5,000 pawnshops owned by independent operators and chains, including some owned by not-for-profit organizations. The pawn industry remains in more of an expansion stage in Mexico than in the United States.

The signature loan industry in the United States is larger and more concentrated than the pawn industry. The industry consists of approximately 24,000 locations that are either mono-line stores that offer only

signature loans, or other businesses offering signature loans in addition to other products and services, such as check cashing stores and pawnshops. The ten largest signature loan companies, including us, comprise approximately 40% of the total number of locations. The signature loan industry is moving toward a mature stage.

Strategic Investment

At September 30, 2008, we held just under 30% of the outstanding shares of Albemarle & Bond Holdings plc (“A&B”). At June 30, 2008, the latest date at which A&B has publicly reported results, A&B operated 111 locations in the United Kingdom that offer pawn loans, payday loans, installment loans, check cashing and retail jewelry. Prior to its July 2007 acquisition of 26 locations, A&B operated 86 locations. For A&B’s fiscal year ended June 30, 2008, its turnover (gross revenues) increased 42% to £46.9 million ($93.9 million), and the company’s profit after tax (net income) increased 37% over the prior year to approximately £7.2 million ($14.5 million). A&B is based in Bristol, England and publicly trades on the Alternative Investment Market of the London Stock Exchange. As its largest single shareholder, we and our affiliates hold three seats on A&B’s board of directors.

In 1998, we acquired 13,276,666 shares of A&B’s common stock for approximately $12.8 million. On July 12, 2007, we acquired 3,022,209 additional shares of A&B’s common stock for approximately $13.4 million as part of a private placement of stock by A&B to fund an acquisition. Including these additional shares, we now own approximately 29.95% of A&B’s total outstanding shares. Because we include A&B’s earnings in our financial statements on a three-month lag, our incremental share of A&B’s results of operations for the quarter ended September 30, 2007 were first reflected in our results in the quarter ended December 31, 2007.

We account for our investment in A&B under the equity method. In fiscal 2008, our interest in A&B’s income was $4,342,000 and we received A&B dividends of $1,760,000. Based on the closing price and exchange rates on October 31, 2008, the market value of our investment in A&B was approximately $49.9 million compared to its book value of $38.4 million.

Regulation

Pawn Operations

Our pawn operations are subject to extensive regulation, examination and licensing under various federal, state, and local statutes, ordinances, and regulations. The laws of Texas, Colorado, Oklahoma, Florida, Indiana, Alabama and Mexico govern the majority of our pawn operations. A summary of these governing pawn statutes and regulations are discussed below.

Texas Regulations

In Texas, pawnshops are regulated by the Office of the Consumer Credit Commissioner (“OCCC”) in accordance with Chapter 371 of the Texas Finance Code, commonly known as the Texas Pawnshop Act and Rules of Operation for Pawnshops. Pawnshops and pawnshop employees are licensed by the OCCC.

To be eligible for a license to operate a pawnshop in Texas, an applicant must:

	(i)		be of good moral character, which in the case of a business entity applies to each officer, director, and holder of five percent or more of the entity’s outstanding shares;
	(ii)		have net unencumbered assets of at least $150,000 readily available for use in conducting the business of each pawnshop;
	(iii)		demonstrate that the applicant has the financial responsibility, experience, character, and general fitness to command the confidence of the public in its operation; and
	(iv)		demonstrate that the pawnshop will be operated lawfully and fairly.

Additionally, each pawnshop employee must qualify for and maintain a separate pawnshop employee license.

For a new license application in any Texas county, the OCCC provides notice of the application and the opportunity for a public hearing to the other licensed pawnshops in the county in which the applicant proposes to operate. In counties with 250,000 or more people, applications for new licenses are approved only at locations that are at least two miles from another licensed pawnshop and applications to relocate a license are approved only for locations that are at least one mile from another licensed pawnshop. Any existing store may relocate within one mile of its present location, regardless of the existence of other pawnshops. Our ability to open new stores or relocate existing stores may be adversely affected by these licensing provisions.

The Texas Pawnshop Act also contains provisions related to the operation of pawnshops and authorizes the Rules of Operation for Pawnshops. The Rules of Operation for Pawnshops regulate the day-to-day operation of our pawnshops including the maximum pawn service charge and principal loan amount.

Pawn service charges vary based on loan amounts. Historically, the maximum allowable pawn service charge rates have not changed; however, loan amounts are adjusted annually based on fluctuations in the Consumer Price Index. A table of the maximum allowable pawn service charges under the Texas Pawnshop Act for the various loan amounts is presented in “Lending Activities.” Under Texas law, there is a ceiling on the maximum allowable pawn loan. For July 1, 2007 through June 30, 2008, the loan ceiling was $14,250. For July 1, 2008 through June 30, 2009, the loan ceiling is $15,000. Texas requires pawn transactions to be reported to local law enforcement.

Under the Texas Pawnshop Act and the Rules of Operation for Pawnshops, a pawnbroker may not do any of the following:

	(i)		accept a pledge from a person under the age of 18 years;
	(ii)		make any agreement requiring the personal liability of the borrower;
	(iii)		accept any waiver of any right or protection accorded to a pawn customer;
	(iv)		fail to exercise reasonable care to protect pledged goods from loss or damage;
	(v)		fail to return pledged goods to a pawn customer upon payment of the full amount due;
	(vi)		make any charge for insurance in connection with a pawn transaction;
	(vii)		enter into any pawn transaction that has a maturity date of more than one month;
	(viii)		display pistols, swords, canes, blackjacks or similar weapons for sale in storefront windows or sidewalk display cases;
	(ix)		purchase used or second hand personal property unless a record is established containing the name, address, and identification of the seller, a complete description of the property, including serial number and a signed statement that the seller has the right to sell the property; or
	(x)		accept into pawn or purchase stolen goods.

The OCCC may, after notice and hearing, suspend or revoke any license for a Texas pawnshop or employee upon finding that:

	(i)		any fees or charges have not been paid;
	(ii)		the licensee has knowingly or unknowingly without due care violated any provisions of the Texas Pawnshop Act or any regulation or order; or
	(iii)		any fact or condition exists that, if it had existed at the time the original license application was filed would have justified the OCCC in refusing the license.

The OCCC may also take other administrative action against a licensee including the assessment of fines and penalties.

Colorado Regulations

The Colorado Pawnbroker Act is limited in scope and primarily establishes the terms and prohibitions of a pawn loan. In Colorado, local municipalities subject pawnshops to extensive and varied regulation, including licensing and bonding. Pawn transactions must be reported to local authorities and pawnbrokers must maintain certain bookkeeping records. Colorado law allows a maximum pawn service charge of 240% annually for all pawn loans regardless of the amount financed.

Oklahoma Regulations

The Oklahoma Pawnshop Act follows a statutory scheme similar to the Texas Pawnshop Act, requires pawnshops to be licensed and bonded, and regulates their day-to-day operations. The Oklahoma Administrator of Consumer Credit administers the Oklahoma Pawnshop Act, has broad rule-making authority, and is responsible for investigating the general fitness of pawnshop applicants. Unlike Texas, Oklahoma pawnshop employees are not individually licensed.

In general, the Oklahoma Pawnshop Act prescribes loan amounts and maximum rates of service charges that pawnbrokers may charge. The regulations provide for a graduated rate structure, similar to the structure used for federal income tax purposes. Under this rate structure, a $500 loan, for example, earns interest as follows:

	(i)		the first $150 at 240% annually,
	(ii)		the next $100 at 180% annually, and
	(iii)		the remaining $250 at 120% annually.

The maximum allowable pawn service charges for the various loan amounts in Oklahoma are as follows:

		Maximum Allowable
		Amount Financed				Annual Percentage
		Per Pawn Loan				Rate
		$	1 to $150				240	%
		$	151 to $250				180	%
		$	251 to $500				120	%
		$	501 to $1,000				60	%
		$	1,001 to $25,000				36	%

The principal amount of an Oklahoma pawn loan may not exceed $25,000 per transaction.

Florida Regulations

Florida pawnshops are governed by the Florida Pawnbroking Act and accompanying regulations. The Division of Consumer Services of the Department of Agriculture and Consumer Services licenses and regulates pawnshops.

Pawn loans in Florida have a 30-day minimum term. The pawnbroker is entitled to charge two percent of the amount financed for each 30-day period as interest, and an additional amount as pawn service charges, provided the total amount of such charges, inclusive of interest, does not exceed 25% of the amount financed for each 30-day period. The pawnbroker may charge a minimum pawn service charge of $5.00 for each 30-day period. Pawn loans may be extended by agreement, with the charge being one-thirtieth of the original total pawn service charge for each day by which the loan is extended. For loans redeemed greater than 60 days after the date made, pawn service charges continue to accrue at the daily rate of one-thirtieth of the original total pawn service charge.

Indiana Regulations

In Indiana, the Pawnbroking Law governs pawnshops. The Department of Financial Institutions regulates our Indiana operations. The Department of Financial Institutions requires the licensing of all pawnshops and investigates the general fitness of pawn license applicants to determine whether the convenience and needs of the public will be served by granting a pawn license. The Department of Financial Institutions has broad investigatory and enforcement authority. It may grant, revoke, and suspend licenses. Pawnshops are required to keep books, accounts, and records to enable The Department of Financial Institutions to determine if the pawnshop is complying with the statute. Each pawnshop is required to give authorized agents of The Department of Financial Institutions free access to its books and accounts for these purposes.

The Indiana Pawnbroking Law prescribes loan amounts and maximum interest rates that pawnbrokers in Indiana may charge. The regulations provide for a graduated rate structure similar to the structure used

for federal income tax purposes. Under this rate structure, for July 1, 2008 through June 30, 2010, a $3,600 loan, for example, may earn interest as follows:

	(i)		the first $1,050 at 36% annually,
	(ii)		the next $2,450 at 21% annually, and
	(iii)		the remaining $100 at 15% annually.

In addition to interest, we may also charge a service charge of 240% annually. The maximum combined allowable interest and service charges for the various loan amounts under the Indiana statute are as follows:

		Maximum Allowable
		Amount Financed				Annual Percentage
		Per Pawn Loan				Rate
		$	1 to $1,050				276	%
		$	1,051 to $3,500				261	%
		$	3,501 and up				255	%

The Indiana Pawnbroking Law provides for a grace period of 60 days after the initial 30-day term of the loan. During the grace period, interest and service charges continue to accrue and are prorated to the date of loan redemption.

Alabama Regulations

The Alabama Pawnshop Act regulates the licensing and operation of Alabama pawnshops. The Supervisor of the Bureau of Loans of the State Department of Banking is responsible for licensing and investigating the general fitness of pawnshop applicants. The Alabama Pawnshop Act requires that certain bookkeeping records be maintained and made available to the Supervisor and to local law enforcement authorities. The Alabama Pawnshop Act establishes a maximum allowable pawn service charge of 300% annually.

Local Pawn Regulations

At the local level, most of our pawnshops voluntarily or pursuant to state law or municipal ordinance, provide reports of pawn transactions and purchases from customers to local law enforcement on a regular basis. These reports are designed to provide local law enforcement with a detailed description of the goods involved, including any serial numbers and the names and addresses of the customers.

A record of each transaction is provided to local law enforcement agencies to aid in the investigation of property crimes. Pawn loan collateral or goods purchased which are determined to belong to an individual other than the pawnshop’s customer are subject to recovery by the rightful owner. While a risk exists that pledged or purchased merchandise may be subject to claims of rightful owners, our claims experience is historically less than 0.25% of pawn loans made. Additionally, some counties and municipalities regulate pawn operations through local business licenses and zoning restrictions.

Mexico Regulations

Mexico has enacted federal legislation that provides for administrative regulation of the pawn industry by PROFECO, the federal consumer protection agency. Under these regulations, PROFECO regulates the form of pawn loan contracts, consumer disclosures, and certain operating procedures of pawnshops. Neither PROFECO nor the federal statute impose interest rate caps on pawn loans. The pawn industry in Mexico is subject to various regulations in the areas of tax compliance, customs, consumer protections and employment matters, among others, by various federal, state and local governmental agencies. Additionally, certain states, including the state of Tamaulipas have pawn statutes that purportedly require pawnshops to be licensed and regulate the pawn operations including rate, pawn ticket and other terms of the pawn transaction; however, federal regulations are intended to supersede the state statutes.

Firearms Regulations

Each of our 220 U.S. locations with firearm licenses at September 30, 2008 must comply with the regulations issued by the Bureau of Alcohol, Tobacco, and Firearms (the “ATF”). ATF regulations require each location dealing in firearms to maintain a federal firearms license and a permanent written record of all transactions involving the receipt or disposition of firearms. We do not sell or make pawn loans on handguns.

The Brady Handgun Violence Prevention Act and the related ATF rules require us, in either selling firearms or releasing pawned firearms, to have the customer complete appropriate forms and pass a background check through the National Instant Criminal Background Check System before we may transfer a firearm to any customer.

We comply with the Brady Act and the ATF regulations. We do not believe that compliance with the Brady Act and the ATF regulations materially affects our operations.

Credit Service Organization Regulations

In Texas, we are registered as a Credit Service Organization (“CSO”). We provide fee-based advice, assistance, and services in obtaining loans from unaffiliated lenders. Texas CSOs are required to register with the Texas Office of the Secretary of State pursuant to Chapter 393 of the Texas Finance Code. We have registered each location where we offer credit services and posted a surety bond in the amount of $10,000 per location as required. We must renew our Texas CSO registration annually.

Texas law requires us to provide each CSO customer a disclosure statement describing the services to be provided, the fees, explanation of the customer’s rights, identification of the surety bond company, and other specified information. This disclosure must be delivered to the customer prior to us entering into any contract with the customer for credit services. We must enter into a written contract with each customer fully describing the services, the payment terms, our principal place of business, and agent authorized to receive service. Customers have three days to cancel a CSO contract. The CSO statute also prohibits us from making false or misleading representations or statements, receiving compensation solely for referring a customer to a lender who will or may make the loan on substantially the same terms, and engaging in fraudulent or deceptive conduct. Violations of the CSO statute could subject us to criminal and civil liability.

In Texas, we do business with two unaffiliated lenders. The maximum loan currently offered by the unaffiliated lenders is $3,000. The lenders are not required to be licensed and are not regulated by a state agency, provided the interest rate charged on their loans does not exceed 10% annually. The lenders are authorized to charge a late fee for loans past due more than 10 days and an insufficient funds fee, but the lenders that we do business with do not assess late fees. The insufficient funds fee is $30. If a customer defaults on a loan, the letter of credit issued by us authorizes the unaffiliated lender to make demand on us for payment of the principal, interest, and insufficient funds fee. We are obligated to pay the lender on any demand made on the letter of credit pursuant to the terms and conditions set forth in the letter of credit. We then may recover those amounts from the borrower.

During this fiscal year, we also offered credit services in eleven EZMONEY stores in Florida under a CSO statute similar to Texas. We ceased offering credit services in Florida in June 2008. The Florida CSO statute did not require registration or bonds. We did business with one unaffiliated lender in Florida. Like Texas, the Florida lender was not required to be licensed or regulated provided the interest rate charged on its loans did not exceed eighteen percent (18%) annually.

We currently offer credit services only in Texas.

Payday Loan Regulations

State statutes regulate our payday lending. These statutes vary in scope, but generally require licensing, establish loan terms, provide for consumer protections and disclosures, and allow regulatory examinations. The statutes regulating payday loans generally limit the loan amount, duration, rates and

fees, ability to renew or extend, and the number of loans, and allow payment plans and cooling-off periods, among other things.

The table below provides the key terms of the payday loan statutes that we operate under in the states in which we do business.

Summary Table of Payday Loan Statutes

Rollovers

Cooling-Off

Maximum

Payment

State

Allowed

Period Required

Loan

Maximum

Plan

Database

State

Fees

(Yes/No)

(Yes/No)

Amount

Term

(Yes/No)

(Yes/No)

Alabama

17.5% of amount advanced

Yes

Yes

$

500

31 days

Yes

Yes

Colorado

20% on first $300; 7.5% above $300

Yes

No

$

500

40 days

Yes

No

Idaho

No cap

Yes

No

$

1,000

37 months

No

No

Kansas

15% of amount advanced.

No

No

$

500

30 days

No

No

Louisiana

16.75% of face amount of check ($45 maximum)

Yes

No

$

350

30 days

No

No

Missouri

75% of original loan amount

Yes

No

$

500

31 days

No

No

Nebraska

15% of face amount of check

No

Yes

$500 (maximum check)

34 days

No

No

Nevada

No cap

Yes

No

25% of gross monthly income

None

No

No

Oklahoma

15% of amount advanced up to first $300; 10% for amounts in excess of $300

No

Yes

$

500

45 days

Yes

Yes

South Dakota

No cap

Yes

No

$

500

None

No

No

Utah

No cap

Yes

No

None

None

No

No

Wisconsin

No cap

Yes

No

None

None

No

No

Local Payday Loan Regulation

We are also subject to various local rules and regulations primarily related to zoning and licensing that affect our business. These local rules and regulations vary from city to city and state to state. The existence of these local rules has been increasing and may affect our ability to expand our operations or do business. We comply with these local rules and regulations and regularly monitor their impact on our business.

Miscellaneous

Privacy: We are subject to a variety of federal and state laws and regulations intended to protect customer non-public personal information. We disclose our privacy policies to our customers and have policies, procedures, and systems in place intended to safeguard this information to the extent required by law.

Federal: Our pawn, CSO, and payday loan operations are subject to extensive state and federal statutes and regulations such as the federal Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Truth in Lending Act, the Gramm-Leach-Bliley Act, the Fair Debt Collection Practices Act and the regulations promulgated for each. We comply with the requirements of these federal and state statutes and their regulations.

Item 1A. Risk Factors

Important risk factors that could cause results or events to differ from current expectations are described below. These factors are not intended to be an all-encompassing list of risks and uncertainties that may affect the operations, performance, development and results of our business. You are cautioned not to place undue reliance on this discussion, which speaks only as of the date hereof. We undertake no obligation to release publicly the results of any revisions to these risk factors which may be made to reflect events or circumstances after the date hereon, including without limitation, changes in our business strategy or planned capital expenditures, store growth plans, or to reflect the occurrence of unanticipated events.

•

Our earnings and financial position are affected by changes in gold values and the resulting impact on pawn lending and jewelry sales; a significant or sudden decrease in gold values may have a material impact on our earnings. Pawn service charges, sales proceeds and our ability to liquidate excess jewelry inventory at an acceptable margin are dependent upon gold values. We periodically change our lending guidelines on jewelry in response to gold values and other market factors, such as competitor loan values. Gold scrapping revenues were $76.7 million and gross profit from gold scrapping was $29.9 million in fiscal 2008. The impact on our financial position and results of operations of a hypothetical decrease in gold values cannot be reasonably estimated because the market and competitive response to changes in gold values is not known; however, changes in gold values would lead to changes in sales, sales margins, and pawn service charge revenues.

•

Changes in laws, governmental rules or regulations applicable to the specialty financial services industry could have a negative impact on our lending activities. The passage of new laws and regulations or changes in existing laws and regulations could have a negative impact on our lending activities, including our ability to provide credit services in Texas, where a majority of our signature loans are made. Our lending is subject to extensive regulation and licensing requirements under various federal, state and local laws, ordinances and regulations. Recent legislative action has concentrated on attempts to regulate, prohibit, or severely restrict payday lending, including applicable rates and the ability for customers to renew their loans. We can give no assurance that additional local, state, or federal legislation will not be enacted or that existing laws and regulations will not be changed or amended or that events of noncompliance may occur which would materially, adversely impact our operations, financial condition, and the ability to expand our operations.

•

Our CSO revenues are dependent upon unaffiliated lenders’ ability and willingness to make loans to our customers. The loss of the relationships with our unaffiliated lenders or a decrease in those lenders’ ability to lend money could significantly decrease our revenues and earnings.

•

Achievement of our growth objectives is dependent upon our ability to open and acquire new stores. Our expansion program is subject to numerous factors that cannot be predicted or controlled, such as identifying acceptable locations or attractive acquisition targets and our ability to attract, train and retain qualified associates.

•

Fluctuations in our sales, pawn loan balances, sales margins, pawn redemption rates, and signature loan default and collection rates could have a material adverse impact on our operating results. We regularly experience fluctuations in these operating metrics. Changes in any of these factors, as might be caused by changes in the economic environment, competitive pressures, changes in customers’ tastes and preferences or a significant decrease in gold prices, could materially and adversely affect our profitability and ability to achieve our planned results.

•

Changes in the business, regulatory, or political climate in Mexico could affect our Mexico operations and growth plans. Our plans include further growth in Mexico. Significant changes in the business, regulatory or political climate in Mexico, or significant fluctuations in currency exchange rates could limit or cease our ability to continue operating and growing our operations in Mexico, which could have a material adverse impact on our financial position, results of operations, and cash flows.

•

Changes in our liquidity and capital requirements or in banks’ abilities to lend to us could limit our ability to achieve our plans. We require continued access to capital; a significant reduction in cash flows from operations or the availability of credit could materially and adversely affect our ability to achieve our planned growth and operating results, and to complete our planned acquisition of Value Financial Services, Inc. (“VFS”). We are exposed to some credit risk related to our credit agreement to the extent that our lenders, Wells Fargo Bank and Guaranty Bank, may be unable to provide necessary funding to us under our existing credit agreement if either or both of the lenders experience liquidity problems. If either lender is unable to provide funding in accordance with the lender’s commitment, our available credit would be reduced by the amount of that lender’s commitment, but we would still have access to the other lender’s credit commitment. We face the same risk in relation to our Fifth Amended and Restated Credit Agreement we expect to become effective at the time we acquire VFS on December 31, 2008, however we believe the risk is lower due to the larger number of banks participating in that credit agreement and the other lenders’ remaining commitments if one or more lenders are unable to honor their commitments. The lenders participating in that credit agreement are Wells Fargo Bank, Union Bank of California, U.S. Bank, Guaranty Bank, and Allied Irish Bank. Liquidity problems at any of these banks could limit or eliminate such bank’s ability to lend to us and, in turn, would reduce our available credit by the lender’s commitment. The remaining lenders’ commitments would remain available to us.

•

Changes in competition from various sources could have a material adverse impact on our ability to achieve our plans. We encounter significant competition in connection with our lending and retail operations from other pawnshops, cash advance companies and other forms of financial institutions and other retailers, many of which have significantly greater financial resources than us. Significant increases in these competitive influences could adversely affect our operations through a decrease in the number or quality of signature loan and pawn loans or our ability to liquidate forfeited collateral at acceptable margins.

•

One person holds voting control of our stock and controls the outcome of all matters requiring a vote of stockholders, which may influence the value of our publicly traded stock. Mr. Phillip E. Cohen controls all of our Class B Voting Common Stock. He controls the outcome of all issues requiring a vote of stockholders, including the election of our directors.

•

If we are unable to complete our acquisition of Value Financial Services, Inc. by December 31, 2008, we may not be able to complete the acquisition at all. The commitment we have obtained from several lenders for an expanded credit facility expires December 31, 2008, and we may need the expanded credit facility to finance the cash portion of the consideration to be issued to VFS shareholders. We expect the acquisition to be completed immediately following the vote of VFS’s shareholders on December 31, 2008. If the acquisition is not completed by December 31, 2008, the lending commitment from our bank group will expire. Unless the lenders are willing to extend the lending commitment beyond December 31, 2008, we may not have the cash or access to credit necessary to complete the planned acquisition.

•

The integration with our business of the eleven Nevada pawn stores acquired in November 2008 and the 67 pawn stores we anticipate acquiring from Value Financial Services, Inc. on December 31, 2008 may not be successful or anticipated benefits from the acquisitions may not be realized. After completion of the acquisitions, we will have significantly larger operations than we did prior to them. Our ability to realize the benefits of the acquisitions will depend in part on the timely integration of the acquired organizations, operations, procedures, policies and

technologies with ours, as well as the harmonization of differences in the acquired businesses’ cultures and practices with ours. Our management will be required to devote a significant amount of time and attention to integrating the acquired businesses with ours. There is a significant degree of difficulty and management involvement inherent in that process. These difficulties include the following:

	•		integrating the operations of the acquired businesses with our business while maintaining our ongoing operations;
	•		diversion of management’s attention from the management of daily operations to the integration of the acquired businesses with our business;
	•		managing a significantly larger company than before completion of the acquisitions;
	•		realizing economies of scale and eliminating duplicative overheads;
	•		the possibility of faulty assumptions underlying our expectations regarding the integration process or expected earnings enhancement;
	•		coordinating businesses located in different geographic regions;
	•		integrating the acquired businesses’ cultures and practices with ours, which may prove to be incompatible;
	•		attracting and retaining the personnel associated with the acquired businesses following the acquisitions;
	•		creating and instituting uniform standards, controls, procedures, policies and information systems and minimizing the costs associated with such matters; and
	•		integrating information, purchasing, accounting, finance, sales, payroll and regulatory compliance systems.

		There is no assurance that the acquisitions will be successfully or cost-effectively integrated into our business operations. The process of integrating the acquired businesses into our operations may cause an interruption of, or loss of momentum in, the activities of our business. If our management is not able to effectively manage the integration process, or if any significant business activities are interrupted as a result of the integration process, our business could suffer and the results of our operations and financial condition may be harmed.
		All of the risks associated with the integration process could be exacerbated by the fact that we may not have a sufficient number of employees with the requisite expertise to integrate the businesses or to operate the combined businesses after the acquisitions. If the combined companies do not hire or retain employees with the requisite skills and knowledge to run its business — including the acquired businesses — after the acquisitions, it may have a material adverse effect on the combined companies.
		We cannot assure you that we will realize the anticipated benefits and value of the acquisitions or successfully integrate the acquired businesses with our existing operations. Even if we are able to successfully integrate the acquired businesses with ours, it may not be possible to realize the full benefits and value that are currently expected to result from the acquisitions, or realize these benefits and value within the time frames that are currently expected. For example, the benefits and value gained from the acquisitions may be offset by costs incurred or delays in integrating the acquired businesses with ours. If we fail to realize anticipated cost savings, synergies or revenue enhancements we anticipate from the acquisitions, our financial position and results of operations may be adversely affected.
		We have not engaged in any prior mergers as we plan with VFS and have not made any other acquisitions of companies or assets as large as VFS. We have engaged in other acquisitions in the range of $20 million and less. We have not experienced significant operating problems with these acquisitions.

•

A change in the business climate may cause the actual benefits and value of acquired businesses to differ from the anticipated benefits and value of the acquisitions. A change in the business climate surrounding our business after the completed Nevada and planned VFS acquisitions may affect our customers’ activities and actions. This could cause our financial results and results of operations to be adversely affected. This may also cause the actual benefits and value of the acquired businesses to differ from the benefits and value we anticipate from the acquisitions.

•

We will incur significant costs and expenses associated with acquisitions. We expect to incur significant costs and expenses associated with the recently completed Nevada acquisition and planned VFS acquisition, which include but are not limited to transaction fees (approximately $0.6 million) and professional service fees and regulatory filing fees (approximately $0.7 million). We also believe we may incur charges to operations, which are not currently reasonably estimable, in the quarter in which the acquisitions are completed or the following quarters, to reflect costs associated with integrating the acquired businesses into ours. There can be no assurance that we will not incur additional material charges in subsequent quarters to reflect additional costs associated with the acquisitions and the integration of the acquired businesses into our business.

•

Issuance of the EZCORP Shares in the Nevada and Value Financial Services, Inc. acquisitions could have a dilutive effect and cause EZCORP’s earnings per share to decrease. In the November 2008 Nevada acquisition, we issued 1.1 million shares of our Class A Non-voting Common Stock as part of the purchase consideration. Assuming we complete the VFS acquisition as planned on December 31, 2008, we will issue a total of nearly 5 million shares of our Class A Non-voting Common Stock if all VFS shareholders elect to receive such shares pursuant to the merger agreement with VFS. Together, these transactions will increase the number of issued and outstanding shares of our Class A Non-voting Common Stock by approximately 15%. If we are unable to realize sufficient value from the acquisitions, the issuance of these shares will decrease the net asset value per share of our stock, thereby decreasing the value of those shares in the hands of our shareholders and possibly causing our stock market price to drop.

•

The Florida Business Corporation Act gives Value Financial Services, Inc. shareholders the right to have the value of their stock appraised by a Florida court, which could raise the cost of acquiring the Value Financial Services, Inc. stock. The Florida Business Corporation Act provides that VFS shareholders who do not vote in favor of the merger with EZCORP, assert their right to be paid “fair value” for their shares and do not accept our estimate of the fair value of VFS shares after the merger, can seek to have a Florida state court review the transaction and award them fair value for their shares. If a significant number of minority shareholders assert these appraisal rights, a Florida court might disagree with our valuation and award the shareholders a significantly higher price than we intend to pay.

•

The contingent consideration we offered in the Value Financial Services, Inc. merger may increase the incentive of the Value Financial Services, Inc. shareholders to sell the EZCORP shares they obtain in the merger and drive down the price of our stock. To induce VFS’s board of directors and shareholders to approve the merger, we agreed to pay additional cash consideration to the VFS shareholders if they sell their stock within 125 days after closing of the merger, if they sell at a price either above or below $14.67 per EZCORP share. During the 125 day period, the additional cash consideration gives a limited amount of price protection to VFS shareholders if our stock price falls, and to provide an incentive to sell our stock at prices only in excess of the $14.67 valuation on which the merger consideration was based. Because these additional payments are available for only a limited, 125 day period after closing, VFS shareholders may feel an additional urge to sell their EZCORP shares. Thus, these potential payments could increase selling of our stock and send our stock price down.

•

We face other risks discussed under Qualitative and Quantitative Disclosures about Market Risk in Item 7A of this Form 10-K.

Item 2. Properties

Our typical pawnshop is a freestanding building or part of a retail strip center with contiguous parking. Store interiors are designed to resemble small retail operations and attractively display merchandise by category. Distinctive exterior design and attractive in-store signage provide an appealing atmosphere to customers. The typical pawn store has approximately 1,800 square feet of retail space and approximately 3,200 square feet dedicated to collateral storage. An EZMONEY signature loan store is designed to resemble a bank interior and offers payday loans or credit services to help customers obtain short-term signature loans. The typical EZMONEY store is approximately 1,000 to 1,500 square feet and is located in a retail strip center. Some of our EZMONEY stores adjoin an EZPAWN location and occupy approximately 300 to 500 square feet, with a different entrance, signage, décor, and staffing. From the customers’ perspective, these are viewed as a separate business. We maintain property and general liability insurance for each of our stores. Our stores are open six or seven days a week.

As of October 31, 2008, we leased 294 U.S. and 38 Mexico locations containing pawn stores and 158 adjoining EZMONEYs, and leased 320 EZMONEY locations. In five of these EZMONEY locations, we lease the land, but own the portable modular EZMONEY store. We also own the real estate and building for one non-operating location. We generally lease facilities for a term of three to ten years with one or more renewal options. Our existing leases expire on dates ranging between December 31, 2008 and July 31, 2026, with a small number of leases on month-to-month terms. All leases provide for specified periodic rental payments at market rates. Most leases require us to maintain the property and pay the cost of insurance and taxes. We believe the termination of any one of our leases would not have a material adverse effect on our operations. Our strategy generally is to lease rather than own space for our stores unless we find what we believe is a superior location at an attractive price.

Below is a summary of changes in the number of store locations during fiscal 2006, 2007 and 2008.

		Fiscal Year Ended September 30,
		2006				2007				2008
Store count at beginning of fiscal year			514				614				731
New stores opened			101				104				80
Acquired stores			3				16				20
Stores closed or consolidated			(4	)			(3	)			(22	)
Store count at end of fiscal year			614				731				809

Included in the new stores opened in 2006, 2007 and 2008 are 7, 6 and 3 EZMONEY stores adjoining existing pawnshop locations. In 2008, we opened 14 Empeño Fácil stores in Mexico. All other new stores are separate EZMONEY locations. We also acquired 20 pawn stores in Mexico during fiscal 2008.

On an ongoing basis, we may close or consolidate under-performing store locations. In fiscal 2007, we closed one EZMONEY store, consolidated one EZMONEY store into another existing EZMONEY store, and consolidated one existing EZPAWN store into a newly acquired store. In fiscal 2008, we closed 16 EZMONEY stores and consolidated six EZMONEY stores into other existing EZMONEY stores.

The following table presents the number of locations serving each metropolitan area or region as of October 31, 2008:

		Pawn				EZMONEY
		Stores in				Stores in
Region/Area		Each Area				Each Area
Texas:
Houston			60				94
Dallas / Ft. Worth			17				74
San Antonio			21				32
West and Southwest			17				15
Valley			20				14
Austin Area			7				23
Panhandle			11				13
Central			10				8
Corpus Christi			8				10
Laredo Area			11				4
Total Texas			182				287
Colorado:
Denver Area			29				30
Colorado Springs Area			9				8
Other Areas			—				5
Total Colorado			38				43
Wisconsin:
Milwaukee			—				10
Green Bay			—				13
Madison			—				9
Central			—				5
Other Areas			—				10
Total Wisconsin			—				47
Oklahoma:
Tulsa Area			11				3
Oklahoma City Area			8				3
Other Areas			1				—
Total Oklahoma			20				6
Utah:
Salt Lake City			—				13
Provo			—				4
Other Areas			—				2
Total Utah			—				19
Idaho:
Boise			—				10
Idaho Falls			—				3
Other Areas			—				6
Total Idaho			—				19

		Pawn				EZMONEY
		Stores in				Stores in
Region/Area		Each Area				Each Area
Florida:
Tampa			9				—
Orlando			5				—
Other Areas			4				—
Total Florida			18				—
Nebraska:
Omaha			—				7
Lincoln			—				4
Other Areas			—				5
Total Nebraska			—				16
Kansas:
Topeka			—				4
Kansas City			—				5
Wichita			—				5
Other Areas			—				2
Total Kansas			—				16
Indiana:
Indianapolis			8				—
Other Areas			7				—
Total Indiana			15				—
Alabama:
Birmingham Area			5				5
Other Areas			2				2
Total Alabama			7				7
Missouri:
Central			—				3
St. Charles			—				3
Kansas City			—				1
Other			—				4
Total Missouri			—				11
South Dakota:
Sioux Falls			—				3
Other Areas			—				4
Total South Dakota			—				7
Nevada:
Las Vegas			4				—
Total Nevada			4				—
Tennessee:
Memphis			3				—
Total Tennessee			3				—

		Pawn				EZMONEY
		Stores in				Stores in
Region/Area		Each Area				Each Area
Louisiana:
New Orleans Area			2				—
Other Areas			1				—
Total Louisiana			3				—
Mississippi:
Jackson			2				—
Other Areas			1				—
Total Mississippi			3				—
Arkansas:
West Helena			1				—
Total Arkansas			1				—
Mexico:
Mexico City			8				—
Veracruz			12				—
Bajio / León Area			11				—
Matamoros			3				—
Reynosa			4				—
Total Mexico			38				—
Total Company			332				478

In addition to our store locations, we lease our two Austin, Texas corporate offices totaling 39,500 square feet, and our 4,000 square foot Empeño Fácil corporate office in Queretaro, Mexico.

Item 3. Legal Proceedings

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 our Texas affiliates in state district court 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. We are not aware of any customer that was harmed by our alleged actions, and have reviewed and enhanced our information security polices to address the State’s concerns. In June 2008, we reached a $0.6 million settlement of the lawsuit with the Attorney General’s Office, and agreed to a permanent injunction regarding the safeguarding and disposal of the customer information. The settlement was recorded as a charge to Administrative Expense in the current year.

The Florida Office of Financial Regulation previously filed an administrative action against us alleging that our Florida credit service organization business model used in eleven stores adjoining EZPAWN locations violated state usury law. After a contested administrative hearing, the Office of Financial Regulation issued a cease and desist order against our credit services operations in Florida on June 12, 2008. On

June 13, 2008 we filed a Notice of Appeal with the First District Court of Appeal of Florida. To comply with the Office of Financial Regulation’s order pending the final outcome on appeal, we closed our eleven EZMONEY credit service organization stores in Florida. As a result of the closure of these stores, we recorded in the current year a loss on disposal of property and equipment of $0.2 million and a $0.5 million charge to EZMONEY Operating Income. The Operating income charge was comprised of a $0.2 million fee reduction, a $0.3 million bad debt charge for increases in loan defaults resulting from the closure, and a $38,000 charge for employee severance payments. We expect no further charges as a result of these store closures.

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

None.

PART II

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

Since August 27, 1991, our Class A Non-voting Common Stock (“Class A Common Stock”) has traded on The NASDAQ Stock Market under the symbol EZPW. As of October 31, 2008, there were 107 stockholders of record of our Class A Common Stock. There is no trading market for our Class B Voting Common Stock (“Class B Common Stock”), which was held by one stockholder as of October 31, 2008.

The high and low per share closing price for our Class A Common Stock for the past two fiscal years, as reported by The NASDAQ Stock Market (adjusted to reflect a three-for-one stock split issued to shareholders as of November 27, 2006), were as follows:

		High				Low
Fiscal 2007:
First quarter ended December 31, 2006		$	16.95			$	11.64
Second quarter ended March 31, 2007			17.05				13.54
Third quarter ended June 30, 2007			16.68				12.82
Fourth quarter ended September 30, 2007			13.57				10.46
Fiscal 2008:
First quarter ended December 31, 2007		$	14.75			$	11.05
Second quarter ended March 31, 2008			13.45				10.40
Third quarter ended June 30, 2008			14.70				11.89
Fourth quarter ended September 30, 2008			18.80				12.87

On October 31, 2008, our Class A Common Stock closed at $15.84 per share.

During the past three fiscal years, we have not declared or paid any dividends. Under the terms of our credit agreement, which matures October 1, 2009, payment of dividends is allowed but restricted. Should we pay dividends in the future, our certificate of incorporation provides that cash dividends on common stock, when declared, must be declared and paid at the same per share amounts on both classes of stock.

Any interested party may request a copy of this Annual Report on Form 10-K free of charge by submitting a written request to EZCORP, Inc., Investor Relations, 1901 Capital Parkway, Austin, Texas 78746, by e-mail to investorrelations@ezcorp.com, or by printing a copy from the Investor Relations section of our website at www.ezcorp.com. The Code of Conduct and Ethics, Audit Committee Charter and Compensation Committee Charter also may be obtained from the Investor Relations section of our website at www.ezcorp.com.

Stock Performance Graph

The following table compares cumulative total shareholder returns for our Class A Non-voting Common Stock for the period September 30, 2003 through September 30, 2008 with the cumulative total return on the NASDAQ Composite Index (ticker symbol IXIC) and the NASDAQ Other Financial Index (ticker symbol IXFN) over the same period. The graph assumes $100 was invested in each on September 30, 2003.

The Stock Performance Graph above and related information does not constitute “soliciting material” and will not be deemed “filed” or incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that we specifically incorporate it by reference into such filing.

Securities authorized under equity compensation plans as of September 30, 2008, were as follows:

Number of Securities Remaining

Number of Securities

Weighted Average

Available for Future Issuance Under

to be Issued Upon

Exercise Price of

Equity Compensation Plans

Exercise of

Outstanding

(Excluding Securities Reflected in

Outstanding Options

Option

Column (a))

Plan Category

(a)

(b)

(c)

Equity compensation plans approved by security holders

2,307,366

$

3.31

413,584

Equity compensation plans not approved by security holders

—

—

—

Total

2,307,366

$

3.31

413,584

Item 6. Selected Financial Data

The following selected financial information should be read in conjunction with, and is qualified in its entirety by the accompanying consolidated financial statements and related notes:

Selected Financial Data

		Fiscal Years Ended September 30,
		2004				2005				2006				2007				2008
		(Amounts in thousands, except per share and store figures)
Operating Data:
Sales		$	143,472			$	148,410			$	177,424			$	192,987			$	232,560
Pawn service charges			59,090				62,274				65,325				73,551				94,244
Signature loan fees			23,874				42,200				71,840				104,347				128,478
Other			1,361				1,275				1,263				1,330				2,121
Total revenues			227,797				254,159				315,852				372,215				457,403
Cost of goods sold			88,202				90,678				106,873				118,007				139,402
Net revenues			139,595				163,481				208,979				254,208				318,001
Store operating expenses			87,898				97,079				111,738				128,602				153,420
Signature loan bad debt			8,067				13,000				17,897				28,508				37,150
Administrative expenses			21,845				23,067				27,749				31,749				40,458
Depreciation and amortization			7,512				8,104				8,610				9,812				12,354
(Gain) loss on sale of assets			3				79				(7	)			(72	)			939
Interest expense (income), net			1,528				1,275				(79	)			(1,373	)			(57	)
Equity in net income of unconsolidated affiliate			(1,739	)			(2,173	)			(2,433	)			(2,945	)			(4,342	)
Other			—				—				—				—				8
Income before income taxes and cumulative effect of adopting a new accounting principle			14,481				23,050				45,504				59,927				78,071
Income tax expense			5,358				8,298				16,245				22,053				25,642
Net income		$	9,123			$	14,752			$	29,259			$	37,874			$	52,429
Earnings per common share, diluted		$	0.23			$	0.36			$	0.69			$	0.88			$	1.21
Cash dividends per common share		$	—			$	—			$	—			$	—			$	—
Weighted average common shares and share equivalents, diluted			39,366				40,722				42,264				43,230				43,327
Stores operated at end of period			405				514				614				731				809

		September 30,
		2004				2005				2006				2007				2008
		(in thousands)
Balance Sheet Data:
Pawn loans		$	49,078			$	52,864			$	50,304			$	60,742			$	75,936
Payday loans			7,292				1,634				2,443				4,814				7,124
Inventory			30,636				30,293				35,616				37,942				43,209
Working capital			93,062				92,954				117,539				124,871				159,918
Total assets			164,322				165,448				197,858				251,186				308,720
Long-term debt			25,000				7,000				—				—				—
Stockholders’ equity			116,729				133,543				170,140				215,925				273,050

Item 7. 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.

The following table presents summary consolidated financial data for our fiscal years ended September 30, 2008 (“current year” or “fiscal 2008”), September 30, 2007 (“prior year” or “fiscal 2007”) and September 30, 2006 (“fiscal 2006”).

Summary Financial Data

		Fiscal Years Ended September 30,
		2006				2007				2008
		(in thousands)
Net revenues:
Sales		$	177,424			$	192,987			$	232,560
Pawn service charges			65,325				73,551				94,244
Signature loan fees			71,840				104,347				128,478
Other			1,263				1,330				2,121
Total revenues			315,852				372,215				457,403
Cost of goods sold			106,873				118,007				139,402
Net revenues		$	208,979			$	254,208			$	318,001
Net Income		$	29,259			$	37,874			$	52,429

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

		Fiscal Years Ended September 30,
		2006				2007				2008
		(Dollars in thousands)
Fee revenue		$	71,840			$	104,347			$	128,478
Bad debt:
Net defaults, including interest on brokered loans			17,088				26,631				34,266
Insufficient funds fees, net of collections			1,119				1,154				1,239
Change in valuation allowance			(468	)			402				1,362
Other related costs			158				321				283
Net bad debt			17,897				28,508				37,150
Fee revenue less bad debt		$	53,943			$	75,839			$	91,328
Average signature loan balance outstanding during period (a)		$	16,369			$	23,479			$	28,790
Signature loan balance at end of period (a)		$	20,653			$	28,125			$	30,677
Participating stores at end of period			416				508				548
Signature loan bad debt, as a percent of fee revenue			24.9	%			27.3	%			28.9	%
Net default rate (a) (b)			4.7	%			5.0	%			5.2	%

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 294 domestic pawn stores and 38 Mexico pawn stores open at September 30, 2008. On November 13, 2008, we acquired the operating assets of

eleven additional pawn stores in the Las Vegas, Nevada area. 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 477 EZMONEY stores and 71 of our domestic pawn stores open September 30, 2008, 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 three segments. The EZPAWN US Operations segment offers pawn related activities in all 294 domestic pawn stores, and offers signature loans in 71 pawn stores and six EZMONEY stores. The Empeño Fácil segment offers pawn related activities in all 38 stores in Mexico. The EZMONEY Operations segment offers signature loans in 471 EZMONEY stores in the United States, and accounts for approximately 98% of our consolidated signature loan revenues.

The following tables present store data by operating segment:

		Year Ended September 30, 2008
		EZPAWN U.S				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
Stores in operation:
Beginning of period			300				4				427				731
New openings			—				14				66				80
Acquired			—				20				—				20
Sold, combined, or closed			—				—				(22	)			(22	)
End of period			300				38				471				809
Average number of stores during the period			300				26				449				775
Composition of ending stores:
Pawn			294				38				—				332
Signature loan stores adjoining pawn stores			6				—				152				158
Signature loan stores — free standing			—				—				319				319
Total stores in operation			300				38				471				809
Total stores offering signature loans			77				—				471				548

		Year Ended September 30, 2007
		EZPAWN U.S				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
Stores in operation:
Beginning of period			286				—				328				614
New openings			—				4				100				104
Acquired			15				—				1				16
Sold, combined, or closed			(1	)			—				(2	)			(3	)
End of period			300				4				427				731
Average number of stores during the period			290				2				362				654
Composition of ending stores:
Pawn			294				4				—				298
Signature loan stores adjoining pawn stores			6				—				164				170
Signature loan stores — free standing			—				—				263				263
Total stores in operation			300				4				427				731
Total stores offering signature loans			81				—				427				508

		Year Ended September 30, 2006
		EZPAWN U.S				Empeño				EZMONEY
		Operations				Fácil				Operations				Consolidated
Stores in operation:
Beginning of period			286				—				228				514
New openings			—				—				101				101
Acquired			3				—				—				3
Sold, combined, or closed			(3	)			—				(1	)			(4	)
End of period			286				—				328				614
Average number of stores during the period			286				—				259				545
Composition of ending stores:
Pawn			280				—				—				280
Signature loan stores adjoining pawn stores			6				—				159				165
Signature loan stores — free standing			—				—				169				169
Total stores in operation			286				—				328				614
Total stores offering signature loans			88				—				328				416

We earn pawn service charge revenue on our pawn lending. While allowable service charges vary by state and loan size, a majority of our U.S. pawn loans earn 20% per month, or 240% annually. Our average U.S. pawn loan amount typically ranges between $80 and $100 but varies depending on the valuation of each item pawned. The total U.S. loan term, consisting of the primary term and grace period, ranges between 60 and 120 days. In Mexico, a majority of our pawn loans earn pawn service charges of 13% to 14% net of applicable taxes, and the total loan term is 40 days.

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 loan or purchase value at the time the property is either accepted as loan collateral or purchased. Improper value assessment in the lending or purchasing process can result in lower margins or reduced marketability of the merchandise.

At September 30, 2008, 287 of our 477 EZMONEY stores and 47 of our 294 domestic 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 287 EZMONEY stores and 47 domestic pawn stores offering credit services, customers can obtain short-term loans, with principal amounts up to $1,500 but averaging approximately $560. Terms of these short-term loans are generally less than 30 days, averaging about 18 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 90 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 $2,100. With each semi-monthly or bi-weekly installment payment, we earn a fee of 10% of the initial loan amount. At September 30, 2008, short-term loans comprised 98% of the balance of loans brokered through our credit services, and installment loans comprised the remaining 2%.

We earn payday loan fee revenue on our payday loans. In 24 domestic pawn stores and 190 EZMONEY stores, we make payday loans subject to state law. The average payday loan amount is approximately

$430 and the term is generally less than 30 days, averaging about 18 days. We typically charge a fee of 15% to 22% of the loan amount for a 7 to 23-day period.

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.

On October 22, 2007, we completed the acquisition of twenty Mexico pawnshops from MMFS Intl., S.A. de C.V., a subsidiary of Mister Money Holdings, Inc., for $15.5 million cash and direct transaction costs. Results of the acquired stores are included in our consolidated results from the date of acquisition.

On November 13, 2008, we acquired the operating assets of eleven pawnshops located in Las Vegas, North Las Vegas and Henderson, Nevada that operate under the Pawn Plus, Pawn Place and ASAP Pawn brands for approximately $34.3 million, as more fully described below under Acquisitions Pending at September 30, 2008. Results of the acquired stores will be included in our consolidated results from the date of acquisition, and will first be reflected in our results in the quarter ending December 31, 2008.

On September 16, 2008, we announced a merger agreement with Value Financial Services, Inc. that we expect to consummate December 31, 2008. In the merger, we will acquire Value Financial Services’ 67 pawn stores, mostly in Florida, for a total estimated acquisition price of $80.6 million, plus the assumption of Value Financial Services’ debt estimated at $35.3 million, for an aggregate cost of approximately $115.9 million. The total purchase price may increase upon the payment of contingent consideration depending on the price at which the sellers sell the EZCORP shares they will acquire as part of the merger consideration. This acquisition is described more fully below under Acquisitions Pending at September 30, 2008.

In fiscal 2008, the EZPAWN U.S Operations segment contributed $22.7 million greater store operating income compared to the prior year, primarily from a $15.7 million increase in gross profit on sales and a $16.0 million increase in pawn service charges, partially offset by higher operating costs. Empeño Fácil contributed $3.3 million of store operating income compared to a small loss in the prior year. Our EZMONEY Operations segment contributed $4.1 million greater store operating income, comprised of higher fees net of bad debt, somewhat offset by higher operating costs at new and existing stores. After an $8.7 million increase in administrative expenses, a $2.5 million increase in depreciation and amortization and a $0.9 million loss on the sale/disposal of assets compared to a small gain in fiscal 2007, operating income increased $18.1 million to $73.7 million. After a $1.3 million decrease in net interest income, a $1.4 million increase in our equity interest in the income of Albemarle & Bond, and a $3.6 million increase in income taxes and other smaller items, our consolidated net income improved to $52.4 million in the current year from $37.9 million in the prior year.

Critical Accounting Policies and Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to 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 various other assumptions that we believe to be 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 from the estimates under different assumptions or conditions.

We believe the following critical accounting policies and estimates could have a significant impact on our results of operations. You should refer to Note A of our consolidated financial statements for a more

complete review of other accounting policies and estimates used in the preparation of our consolidated financial statements.

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 initially defer recognition of the fees we expect to collect, net of direct expenses, and recognize that deferred net amount over the life of the related loans. We reserve the percentage of credit service fees we expect not 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. After attempting collection of bad debts internally, we occasionally sell them to an unaffiliated company as another method of recovery. We account for the sale of defaulted accounts in the same manner as internal collections of defaulted accounts.

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 18 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 September 30, 2008, the allowance for Expected LOC Losses was $2.3 million. At that date, our maximum exposure for losses on letters of credit, if all brokered loans defaulted and none was collected, was $25.0 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.

The accuracy of our allowance estimates is dependent upon several factors, including our ability to predict future default rates based on historical trends and expected future events. Actual loan losses could vary from those estimated due to variance in any of these factors. Increased defaults and credit losses may occur during a national or regional economic downturn, in response to regulatory changes or for other reasons, resulting in the need to increase the allowance. We believe we effectively manage these risks through our underwriting criteria and closely monitoring the performance of the portfolio.

PAYDAY LOAN REVENUE RECOGNITION: We accrue fees in accordance with state laws on the percentage of payday loans we believe to be collectible. 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. Loan terms are generally less than 30 days, averaging about 18 days.

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. After attempting collection of bad debts internally, we occasionally sell them to an unaffiliated company as another method of recovery. We account for the sale of defaulted accounts in the same manner as internal collections of defaulted accounts.

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. At September 30, 2008, the combined allowances for uncollectible principal and interest on payday loans were $0.7 million.

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 September 30, 2008, the inventory valuation allowance was $4.0 million, or 8.5% of gross inventory. We record changes in the inventory valuation allowance as cost of goods sold. The accuracy of our inventory allowance is dependent on our ability to predict future events based on historical trends. Unexpected variations in sales margins, inventory turnover, or other factors, including fluctuations in gold values could increase or decrease our inventory allowance.

INCOME TAXES: As part of the process of preparing the consolidated 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 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 $0.2 million at September 30, 2008, compared to $0.4 million at September 30, 2007. As a result of a taxable gain on the sale of property, we reduced the valuation allowance in the fourth quarter of fiscal 2008 due to the utilization of a capital loss carry-forward that was previously reserved.

Effective October 1, 2007, we adopted Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”). See Note J, “Income Taxes,” to our Consolidated Financial Statements for further discussion and related disclosures.

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.

Certain prior year balances have been reclassified to conform to the current year presentation.

Acquisitions Pending at September 30, 2008

On November 13, 2008, we acquired the operating assets of eleven pawnshops located in Las Vegas, North Las Vegas and Henderson, Nevada that operate under the Pawn Plus, Pawn Place and ASAP Pawn brands for approximately $34.3 million. $17.3 million of the purchase price was paid through the issuance of 1,116,505 shares of our Class A Non-voting Common Stock, and the remaining $17.0 million was paid in cash.

On September 16, 2008, we agreed to acquire through a merger all of the capital stock of Value Financial Services, Inc. (“VFS”). In the merger, we will acquire VFS’s 67 pawn stores, most of which are in Florida. The total purchase price may increase upon the payment of contingent consideration, as described below, depending on the price at which the sellers sell the EZCORP shares they will acquire as part of the merger consideration. As merger consideration, each VFS shareholder may choose to receive either (1) 0.75 shares of EZCORP Class A Non-voting Common Stock (the “EZCORP shares”), rounded up to the nearest whole EZCORP Share, or (2) $11.00 cash for each share of VFS common stock owned by such shareholder at the effective time of the merger. The cash consideration is limited to 20% or less of the VFS common stock. Assuming the exercise of all options, warrants or other conversion rights, we expect to acquire 6,646,370 shares of VFS Common Stock in the merger.

EZCORP agreed to provide VFS shareholders some price protections if they sell their EZCORP Shares received in the merger within 125 days after the closing of the merger. Pursuant to this, EZCORP will pay a selling shareholder the difference between $14.67 per share and the gross price per share the selling shareholder actually receives, if less than $14.67 per share, up to a maximum of $4.01 per share. As an inducement to enter the merger agreement, EZCORP has also agreed to provide VFS shareholders who decide to sell their EZCORP Shares within 125 days after the closing of the merger a premium for sales of their EZCORP Shares for more than $14.67 per share. For VFS shareholders who sell their EZCORP Shares for more than $14.67 per share and, after a five day waiting period to facilitate share distribution, within the (1) first 35 day period from the date of the closing of the merger, EZCORP will pay $1.33 per share, (2) second 30 day period from the date of the closing of the merger, $1.00 per share, (3) third 30 day period from the date of the closing of the merger, $0.67 per share, and (4) fourth 30 day period from the date of the closing of the merger, $0.33 per share. We are currently unable to estimate the amount of contingent consideration that will be paid under the provisions described in this paragraph.

Excluding the contingent consideration that is not currently known, we estimate the total VFS acquisition price to be approximately $80.6 million, plus the assumption of VFS outstanding debt of approximately $35.3 million, for an aggregate value of approximately $115.9 million. The ultimate total purchase price will vary from this amount based on the value of EZCORP’s stock, the amount of VFS shareholders electing to receive cash in lieu of EZCORP shares, and any contingent consideration that will become payable, up to a maximum possible contingent payment of $20.0 million. We anticipate completing the VFS acquisition on December 31, 2008.

Results of Operations

Fiscal 2008 Compared to Fiscal 2007

The following discussion compares our results of operations for the current year ended September 30, 2008 to the prior year ended September 30, 2007. It should be read with the accompanying consolidated financial statements and related notes.

Included in the fiscal 2008 results is the impact of Hurricane Ike, which made landfall near Houston, Texas on September 13, 2008. In September 2008, the Company lost approximately 1,000 store days due to the hurricane and the resulting power outages. We estimate this reduced our fiscal 2008 pre-tax income by approximately $2.5 million. In the EZPAWN U.S. Operations segment, we estimate the hurricane reduced sales gross profit $0.2 million, reduced pawn service charges $0.6 million, and

increased operating expenses $0.2 million. In the EZMONEY Operations segment, we estimate the hurricane reduced signature loan fee revenues $0.9 million and increased signature loan bad debt $0.5 million. The remaining impact was a loss on the disposal of assets destroyed by the storm, net of insurance recoveries expected. These effects are included in the results discussed below.

EZPAWN U.S. Operations Segment

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

		Year Ended September 30,
		2007				2008
		(Dollars in thousands)
Sales		$	192,832			$	225,747
Pawn service charges			73,471				89,431
Signature loan fees			3,314				2,782
Other			1,328				2,116
Total revenues			270,945				320,076
Cost of goods sold			117,923				135,142
Net revenues			153,022				184,934
Store operating expenses:
Operations expense			87,151				96,674
Signature loan bad debt			1,390				1,108
Total store operating expenses			88,541				97,782
Store operating income		$	64,481			$	87,152
Other data:
Gross margin on sales			39	%			40	%
Annual inventory turnover			3.4	x			3.5	x
Average pawn loan balance per pawn store at year end		$	206			$	243
Average inventory per pawn store at year end		$	128			$	137
Average yield on pawn loan portfolio (a)			143	%			146	%
Pawn loan redemption rate			76	%			78	%
Average signature loan balance per store offering signature loans at year end (b)		$	12			$	11