##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

FORM 10-K

|      |  |                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------
|[X]   |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2002
|      |  |                                                                                                                             
|      |  | OR                                                                                                                          
|      |  |                                                                                                                             
|[   ] |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from  to

Commission File Number 0-20774

ACE CASH EXPRESS, INC.

(Exact name of registrant as specified in its charter)


|                                                                                      |  |                                             
|------------------------------------------------------------------------------------- |  | --------------------------------------------
|Texas
(State or other jurisdiction of incorporation or organization)                  |  | 75-2142963
(IRS Employer Identification No.)
|                                                                                      |  |                                             
|1231 Greenway Drive, Suite 600
Irving, Texas
(Address of principal executive offices) |  | 75038
(Zip Code)                            

(Registrants telephone number, including area code) (972) 550-5000

Securities registered pursuant to Section 12(b) of the Act:

|                    |  |                                         
|------------------- |  | ----------------------------------------
|Title of each class |  | Name of each exchangeon which registered

None
Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

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 X No

Indicate by check mark if disclosure 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. [  ]

As of September 19, 2002, 10,180,588 shares of Common Stock were outstanding.
As of such date the aggregate market value of voting stock (based upon the last
reported sales price in The Nasdaq Stock Market) held by nonaffiliates of the
registrant was approximately $62,364,204.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Part III is incorporated by reference from the
registrants definitive proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A not later than 120 days after
the end of the fiscal year covered by this report.





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TABLE OF CONTENTS



|                                              |                                                                                               |  |  |  |  |  |  | 
|--------------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I                                       
|                                              | ITEM 1. BUSINESS                                                                             
|                                              | ITEM 2. PROPERTIES                                                                           
|                                              | ITEM 3. LEGAL PROCEEDINGS                                                                    
|                                              | ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|PART II                                      
|                                              | ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                
|                                              | ITEM 6. SELECTED FINANCIAL DATA                                                              
|                                              | ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                              | ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                          
|                                              | ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                          
|                                              | ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
|PART III                                     
|PART IV                                      
|                                              | ITEM 14. CONTROLS AND PROCEDURES                                                             
|                                              | ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                    
|SIGNATURES                                   
|Index to Exhibits                            
|EX-10.66 Seventh Amendment to Lease Agreement
|EX-10.67 Eighth Amendment to Lease Agreement 
|EX-10.68 Executive Non-Qualified Excess Plan 
|EX-21 Subsidiaries of the Company            
|EX-23 Consent of Grant Thornton LLP          
|EX-99 Certifications of CEO & CFO            



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PART I




ITEM 1. BUSINESS

General

Ace Cash Express, Inc. (ACE or the Company) is a significant provider of
retail financial services in the United States. The Company is also the
largest owner, operator, and franchiser of check-cashing stores in the United
States. As of August 31, 2002, the Company had a total network of 1,189 stores
in 35 states and the District of Columbia, consisting of 1,002 company-owned
stores and 187 franchised stores. The Companys general objective is to provide
a full range of retail financial services and transaction processing in its
markets. Additionally, it is the Companys objective to develop and maintain
the largest network of stores in each of the markets where the Company
operates. The Companys growth strategy is to integrate acquisitions, new store
openings, and franchising in new and existing markets and to develop new
products for introduction into the existing store base.

ACE stores offer check-cashing services and other retail financial services at
competitive rates in clean, convenient settings. Services include cashing
payroll checks, government checks, and insurance drafts; selling money orders;
providing money transfer services using the MoneyGram network; and offering
small, short-term consumer loans, including (in most locations) loans made by
Goleta National Bank. Many company-owned stores also offer bill-payment
services, lottery and lotto tickets, and other retail financial and transaction
processing services.

Industry Overview

The primary industry in which ACE operates is check-cashing. Industry sources
indicate that there are approximately 8,000 check-cashing stores nationally.
Though there is limited public information available, the Company believes that
there are four other check-cashing companies operating or franchising over 100
stores and five companies that operate or franchise between 50 and 100
locations, with the remaining companies operating fewer than 50 stores, in the
United States.

The Company believes that it and other check-cashing companies offer services
that banks do not provide and operate at locations and during hours that are
more convenient than those traditionally offered by banks. Unlike many banks,
check-cashing stores are willing to assume the risk that checks they cash will
bounce. For instance, it is not unusual for a bank to refuse to cash a check
for a customer who does not maintain a deposit account with the bank and to
require its depositors to maintain sufficient funds in an account to cover a
check to be cashed or wait several days for the check to clear. As a result,
the Company believes check-cashing stores provide an attractive alternative to
customers without bank accounts or with relatively small account balances.
Although these customers might save money by depositing their checks in a bank
and waiting for them to clear, many prefer paying a fee to take advantage of
the convenience and availability of immediate cash offered by check-cashing
stores.

The core business of check-cashing stores is generally cashing checks for a
fee. These fees are intended to provide the check casher with a profit after
covering operating expenses, including any interest expense incurred by the
check casher on the funds advanced to customers between the time checks are
cashed and the time the checks clear through the banking system. The risk a
check-cashing store assumes upon cashing a check is that the check will be
uncollected because of insufficient funds, stop payment orders, or fraud. In
order to minimize this risk and the losses associated with uncollected checks,
many check-cashing stores cash only payroll or government entitlement checks,
charge higher fees, or have stricter approval procedures for cashing personal
checks. ACE does not promote the cashing of personal checks in its stores.
For the fiscal year ended June 30, 2002, less than 1% of the checks cashed by
the Company were one-party personal checks.

In addition to check-cashing services, most check-cashing stores offer
customers a range of other services, including access to small consumer loans,
bill payments, money orders, and wire transfers of cash. Some check-cashing
stores also offer lottery and lotto tickets, public transportation passes,
copying and fax transmission services, and postage stamps.

The Company believes that the deregulation of the banking and savings and loan
industry has increased the role played by check-cashing stores in providing
basic financial transaction services to low-income and middle-income customers.
At the same time, the Company believes that competition, regulatory scrutiny
and complexity are contributing to consolidation of the industry. The Companys
strategy is to position itself to benefit from industry consolidation and the
competitive advantages available to large operators and franchisers of retail
financial services.

Growth Strategy

ACEs growth strategy consists principally of combining acquisitions and new
store openings with the objective of having the largest number of retail
financial services locations in each of its markets and developing new products
for introduction into the existing store base. ACE defines its target markets
as cities of 100,000 or more. The Company has expanded from

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544 company-owned stores in 19 states as of June 30, 1996, to a network of
1,187 company-owned and franchised stores in 35 states as of June 30, 2002. In
fiscal 2002, the Company opened 39 newly-constructed stores, acquired 8 stores,
franchised 22 stores, and closed 32 company-owned stores. The Company
currently anticipates that it will construct and open 20 company-owned stores,
primarily in existing markets, during the fiscal year ending June 30, 2003. The
Companys growth strategy depends upon the availability of adequate financing,
as well as suitable locations, acquisition opportunities, and experienced
management employees, and is subject to the risk that any of these conditions
may not be met. The Companys growth in owned stores in fiscal 2002 was, and
growth in owned stores in fiscal 2003 is expected to be, smaller than the
Companys historical growth primarily because of limitations on capital
expenditures imposed by the Companys existing bank credit agreement. The
Company intends to continue to pursue additional sources of capital for growth
and intends to focus on expanding the Companys franchise network, which
requires a minimal amount of capital.

3



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The following table illustrates the development of company-owned stores since
June 30, 1996 by showing the number of stores open in each market area at the
end of each of the indicated periods:

|                                                                             |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|---------------------------------------------------------------------------- |  | -------------------- | ----- | ---- |  | ---- | --- | ---- |  | ---- | --- | ---- |  | ---- | --- |  |  |  | --- |  |  |  | --- |  |  |  | --- | 
|                                                                             |  | Company-owned stores
|                                                                             |  |                     
|                                                                             |  | June 30,            
|                                                                             |  |                     
|Market Area                                                                  |  | 2002                 |       | 2001 |  | 2000 |     | 1999 |  | 1998 |     | 1997 |  | 1996
|                                                                             |  |                      |       |      |  |      |     |      |  |      |     |      |  |     
|Texas:                                                                       |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Dallas/Fort Worth/East Texas                                                 |  |                      | 120   |      |  |      | 120 |      |  |      | 129 |      |  |      | 122 |  |  |  | 117 |  |  |  | 114 |  |  |  | 112 | 
|Houston/Corpus Christi                                                       |  |                      | 132   |      |  |      | 128 |      |  |      | 112 |      |  |      | 83  |  |  |  | 76  |  |  |  | 74  |  |  |  | 72  | 
|San Antonio/Austin/El Paso                                                   |  |                      | 77    |      |  |      | 78  |      |  |      | 68  |      |  |      | 59  |  |  |  | 51  |  |  |  | 42  |  |  |  | 28  | 
|Florida:                                                                     |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Jacksonville/Orlando/Palm
Beach/Tampa                                        |  |                      | 91    |      |  |      | 91  |      |  |      | 90  |      |  |      | 73  |  |  |  | 60  |  |  |  | 46  |  |  |  | 38  | 
|California:                                                                  |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Los Angeles/Van Nuys/San Bernadino/
Sacramento/San Francisco/Fresno/
Oakland |  |                      | 88    |      |  |      | 90  |      |  |      | 30  |      |  |      | 16  |  |  |  | 9   |  |  |  |    |  |  |  |    | 
|Maryland/Washington, D.C./Virginia:                                          |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Baltimore/Washington, D.C./
Northern VA/Norfolk/Virginia Beach               |  |                      | 84    |      |  |      | 85  |      |  |      | 93  |      |  |      | 81  |  |  |  | 77  |  |  |  | 72  |  |  |  | 74  | 
|Arizona:                                                                     |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Phoenix/Tucson/Nogales/Douglas                                               |  |                      | 72    |      |  |      | 75  |      |  |      | 73  |      |  |      | 69  |  |  |  | 59  |  |  |  | 58  |  |  |  | 46  | 
|Colorado:                                                                    |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Denver/Colorado Springs/Pueblo                                               |  |                      | 56    |      |  |      | 53  |      |  |      | 52  |      |  |      | 51  |  |  |  | 45  |  |  |  | 44  |  |  |  | 41  | 
|Georgia:                                                                     |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Atlanta/Albany/Augusta/Macon/
Savannah                                       |  |                      | 50    |      |  |      | 50  |      |  |      | 54  |      |  |      | 52  |  |  |  | 50  |  |  |  | 47  |  |  |  | 47  | 
|North & South Carolina:                                                      |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Charlotte/Charleston/Columbia/
Greenville/Spartanburg/Orangeburg             |  |                      | 29    |      |  |      | 29  |      |  |      | 34  |      |  |      | 29  |  |  |  | 17  |  |  |  | 16  |  |  |  | 16  | 
|Louisiana:                                                                   |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|New Orleans/Baton Rouge/Shreveport                                           |  |                      | 27    |      |  |      | 25  |      |  |      | 25  |      |  |      | 25  |  |  |  | 25  |  |  |  | 25  |  |  |  | 19  | 
|Indiana:                                                                     |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Indianapolis                                                                 |  |                      | 25    |      |  |      | 25  |      |  |      | 25  |      |  |      | 23  |  |  |  | 14  |  |  |  | 9   |  |  |  | 4   | 
|Ohio:                                                                        |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Cleveland, Youngstown                                                        |  |                      | 24    |      |  |      | 18  |      |  |      | 11  |      |  |      | 10  |  |  |  | 10  |  |  |  | 10  |  |  |  | 8   | 
|Oklahoma:                                                                    |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Oklahoma City, Tulsa                                                         |  |                      | 23    |      |  |      | 23  |      |  |      | 12  |      |  |      | 14  |  |  |  | 13  |  |  |  | 13  |  |  |  | 12  | 
|Tennessee:                                                                   |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Memphis/Nashville                                                            |  |                      | 18    |      |  |      | 19  |      |  |      | 26  |      |  |      | 22  |  |  |  | 18  |  |  |  | 15  |  |  |  | 5   | 
|Pennsylvania:                                                                |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Pittsburgh                                                                   |  |                      | 16    |      |  |      | 9   |      |  |      | 3   |      |  |      |    |  |  |  |    |  |  |  |    |  |  |  |    | 
|Nevada:                                                                      |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Las Vegas                                                                    |  |                      | 14    |      |  |      | 14  |      |  |      | 14  |      |  |      | 11  |  |  |  | 4   |  |  |  |    |  |  |  |    | 
|Washington:                                                                  |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Seattle/Tacoma/Everette                                                      |  |                      | 13    |      |  |      | 13  |      |  |      | 14  |      |  |      | 12  |  |  |  | 10  |  |  |  | 8   |  |  |  | 6   | 
|Missouri:                                                                    |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|St. Louis                                                                    |  |                      | 11    |      |  |      | 11  |      |  |      | 11  |      |  |      | 10  |  |  |  | 6   |  |  |  | 6   |  |  |  | 3   | 
|New Mexico:                                                                  |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Albuquerque                                                                  |  |                      | 10    |      |  |      | 10  |      |  |      | 8   |      |  |      | 8   |  |  |  | 7   |  |  |  | 7   |  |  |  | 7   | 
|Arkansas:                                                                    |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Little Rock                                                                  |  |                      | 8     |      |  |      | 8   |      |  |      | 8   |      |  |      | 7   |  |  |  | 7   |  |  |  | 6   |  |  |  | 6   | 
|Oregon:                                                                      |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Portland                                                                     |  |                      | 8     |      |  |      | 7   |      |  |      | 9   |      |  |      | 8   |  |  |  | 5   |  |  |  | 5   |  |  |  |    | 
|Kansas:                                                                      |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Wichita                                                                      |  |                      | 4     |      |  |      | 4   |      |  |      | 4   |      |  |      | 3   |  |  |  | 2   |  |  |  |    |  |  |  |    | 
|Alabama:                                                                     |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Birmingham/Homewood                                                          |  |                      | 3     |      |  |      | 3   |      |  |      | 3   |      |  |      | 4   |  |  |  | 1   |  |  |  |    |  |  |  |    | 
|Utah:                                                                        |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Salt Lake City/Layton/Ogden                                                  |  |                      |      |      |  |      |    |      |  |      | 5   |      |  |      | 3   |  |  |  |    |  |  |  |    |  |  |  |    | 
|Kentucky:                                                                    |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Paducah /Murray                                                              |  |                      |      |      |  |      |    |      |  |      | 2   |      |  |      | 3   |  |  |  |    |  |  |  |    |  |  |  |    | 
|                                                                             |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 
|Total                                                                        |  |                      | 1,003 |      |  |      | 988 |      |  |      | 915 |      |  |      | 798 |  |  |  | 683 |  |  |  | 617 |  |  |  | 544 | 
|                                                                             |  |                      |       |      |  |      |     |      |  |      |     |      |  |      |     |  |  |  |     |  |  |  |     |  |  |  |     | 

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Acquisitions.During fiscal 2002, the Company acquired 8 stores in four
separate transactions. The Company believes its experience with acquisitions
permits it to successfully integrate additional acquisitions. Of the 1,003 ACE
company-owned stores in operation as of June 30, 2002, 403, or 40%, have been
acquired stores. The Company does not have any current plan or expectation as
to the number of stores that it may acquire during the fiscal year ending June
30, 2003. The Company intends to continue searching for strategic opportunities
in both existing and new markets, subject to the availability of capital.

Self-service machines. The Company has developed self-service machines which
are able to cash checks, sell prepaid long-distance telephone cards, sell money
orders, and process third-party bill payments. The Company placed 100 of the
self-service machines in H&R Block locations during the 2002 tax season (i.e.,
January through March). Those machines only cashed tax-refund checks issued by
one bank to customers of H&R Block. The Company currently has 22 machines in
company-owned locations and 150 machines available for deployment at H&R Block
locations during the 2003 tax season.

Franchise Operations

With the acquisition of Check Express, Inc. and its wholly-owned franchising
subsidiaries in February 1996, the Company became one of the largest
franchisers of check-cashing stores in the United States. ACE franchises are
marketed through an employee sales force, supplemented by advertising in
newspapers, trade journals, and other media. As of June 30, 2002 and 2001,
there were 184 and 175 company-franchised stores open and operating,
respectively, in 29 states, as follows:

|               |  |                                 |     |      |  |  |     | 
|-------------- |  | ------------------------------- | --- | ---- |  |  | --- | 
|               |  | Number of Stores as of June 30,
|               |  |                                
|               |  | 2002                            |     | 2001
|               |  |                                 |     |     
|Texas          |  |                                 | 56  |      |  |  | 55  | 
|Ohio           |  |                                 | 16  |      |  |  | 14  | 
|Florida        |  |                                 | 14  |      |  |  | 13  | 
|Louisiana      |  |                                 | 12  |      |  |  | 12  | 
|California     |  |                                 | 11  |      |  |  | 12  | 
|Oklahoma       |  |                                 | 11  |      |  |  | 9   | 
|South Carolina |  |                                 | 8   |      |  |  | 8   | 
|North Carolina |  |                                 | 7   |      |  |  | 7   | 
|Tennessee      |  |                                 | 7   |      |  |  | 7   | 
|Georgia        |  |                                 | 6   |      |  |  | 7   | 
|Oregon         |  |                                 | 4   |      |  |  | 4   | 
|Colorado       |  |                                 | 4   |      |  |  | 3   | 
|Kansas         |  |                                 | 4   |      |  |  | 1   | 
|Missouri       |  |                                 | 3   |      |  |  | 3   | 
|Arizona        |  |                                 | 3   |      |  |  | 2   | 
|Indiana        |  |                                 | 2   |      |  |  | 2   | 
|Kentucky       |  |                                 | 2   |      |  |  | 2   | 
|Minnesota      |  |                                 | 2   |      |  |  | 2   | 
|Idaho          |  |                                 | 2   |      |  |  | 1   | 
|Connecticut    |  |                                 |    |      |  |  | 2   | 
|Other states   |  |                                 | 10  |      |  |  | 9   | 
|               |  |                                 |     |      |  |  |     | 
|Total          |  |                                 | 184 |      |  |  | 175 | 
|               |  |                                 |     |      |  |  |     | 

The Company intends to continue its expansion through the sale of new
franchises and the opening of additional units under existing franchise
agreements. The Company is actively marketing several types of ACE franchises
depending on the style of business being conducted. These include a standard
store franchise, a store-within-a-store (or kiosk) franchise, a small market
franchise for market areas under 15,000 in population, and a conversion
franchise that permits an existing check-cashing business to convert to an ACE
franchisee. The Company opened 22 franchised stores, acquired eight former
franchised stores, transferred one franchised store, and closed four franchised
stores during fiscal 2002. The majority of franchised stores operate under the
ACE name, by license from the Company.

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Customers and Services

Management believes the Companys core customer group is composed primarily of
individuals whose average age is 29 and who rent their house or apartment and
hold a wide variety of jobs in the service sector or are clerical workers,
craftsmen, and laborers. These customers tend to change jobs and residences
more often than average, have annual family incomes of approximately $30,000,
often pay their bills with money orders, and prefer the availability of
immediate cash provided by cashing checks at the Companys stores.

The following table reflects the major categories of services that ACE
currently offers and the revenues (in thousands) from these services for the
indicated fiscal years:

|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|----------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- | ---- |  | ---- | ------- |  |  | - | ------- |  |  | - | ------- | 
|                        |  | Year Ended June 30,
|                        |  |                    
|Revenue Category        |  | 2002                |         | 2001 |  | 2000 |         | 1999 |  | 1998
|                        |  |                     |         |      |  |      |         |      |  |     
|Check cashing fees      |  | $                   | 118,907 |      |  | $    | 105,479 |      |  | $    | 89,641  |  |  | $ | 78,839  |  |  | $ | 68,987  | 
|Loan fees and interest  |  |                     | 74,197  |      |  |      | 54,771  |      |  |      | 17,872  |  |  |   | 14,257  |  |  |   | 10,137  | 
|Bill payment services   |  |                     | 10,156  |      |  |      | 10,376  |      |  |      | 9,447   |  |  |   | 8,394   |  |  |   | 4,146   | 
|Money transfer services |  |                     | 10,998  |      |  |      | 10,270  |      |  |      | 8,944   |  |  |   | 7,951   |  |  |   | 6,082   | 
|Money order fees        |  |                     | 7,554   |      |  |      | 7,245   |      |  |      | 7,032   |  |  |   | 5,332   |  |  |   | 2,879   | 
|Franchise revenues      |  |                     | 2,199   |      |  |      | 2,257   |      |  |      | 2,537   |  |  |   | 2,117   |  |  |   | 1,665   | 
|Other fees              |  |                     | 5,255   |      |  |      | 6,377   |      |  |      | 5,163   |  |  |   | 5,424   |  |  |   | 6,298   | 
|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 
|Total revenue           |  | $                   | 229,266 |      |  | $    | 196,775 |      |  | $    | 140,636 |  |  | $ | 122,314 |  |  | $ | 100,194 | 
|                        |  |                     |         |      |  |      |         |      |  |      |         |  |  |   |         |  |  |   |         | 

Check cashing. ACEs primary business is cashing checks for a fee. The
principal type of check the Company cashes is a payroll check. The Company
also cashes government assistance, tax refund, and insurance checks or drafts.
Subject to market conditions at different locations, the Companys
check-cashing fees for payroll checks approximate 2.2% of the face amount of
the check. The Company imposes a surcharge for cashing out-of-state checks,
handwritten checks, money orders, tax refund checks, and insurance checks or
drafts. Unlike many of its competitors, the Company displays its check-cashing
fees in full view of its customers on a menu board in each store and provides
a detailed receipt for each transaction. Although the Company has established
guidelines for approving check-cashing transactions, it has no preset limit on
the size of the checks it will cash. In fiscal year 2002, approximately 3.2% of
the check cashing fees were derived from SSMs located in the Companys stores
or in H&R Block offices.

If a check cashed by the Company is not paid for any reason, the Company
accounts for the amount of the check as a loss in the period in which it is
returned. ACE then transfers the check to its collection department, which
contacts the maker and payee of each returned check and, if necessary,
commences legal action. The collection department utilizes an automated
tracking system on the Companys proprietary information system to monitor the
status of all returned items. See Selected Financial Data  Collections
Data.

Loan services.The Company is engaged in the small consumer loan business
because the Company believes that many consumers may have limited access to
other sources of consumer credit. Historically, the Company offered payday
loans, a check-based service, at its locations to the extent permitted by
applicable state law; however, state law did not permit the Company to offer
payday loans at many of its locations. Though the Company continued to offer
payday loans at a few of its locations, since May 2000 it has offered the
short-term loans made by Goleta National Bank (Bank Loans) at almost all of
its locations. Offering the Bank Loans has enabled the Company to offer its
customers a single or standard loan product at almost all of its locations in
all states and the District of Columbia. As a result of recent changes in
state laws and regulations and in state-regulatory approaches, in the fourth
quarter of fiscal 2002, the Company ceased to offer Bank Loans at its locations
in Colorado, Louisiana, Maryland, and Missouri. To the extent permissible,
the Company has begun to offer short-term or payday loans which are in
compliance with the states new laws and regulations. As of June 30, 2002, ACE
was a licensed provider of state regulated loans in Colorado, Louisiana,
Missouri and South Carolina, and since June 30, 2002, has become a licensed
provider in Oklahoma. The Company plans to become a licensed provider of
state-regulated loan products in Arizona, Indiana, and Virginia. The Company
anticipates that regulatory issues or constraints will also prompt the Company
to convert its loan service offering from the Bank Loans to state-regulated
loans in certain other states.

The Bank Loans are made by Goleta National Bank (Goleta), a national bank
located in California. The Bank Loan process at a Company-owned store consists
of the following:



|1. |  | A customer completes a loan application to Goleta.                                                                                          
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | The customers information from the application is entered into the
Companys point-of-sale system and transmitted electronically to Goleta.

6



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##### Table of Contents





|3. |  | Applying its credit criteria, Goleta makes a decision in California
whether to approve or deny the application for a Bank Loan.                                                                                                               
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|4. |  | If the application is approved, the borrower completes and signs Bank
Loan documents, which are made available by Goleta to the borrower
electronically through the Companys point-of-sale system, in favor of
Goleta.                       
|  
|5. |  | Goleta opens a bank account for the borrower at Goleta in California and
places the borrowed funds into that account.                                                                                                                         
|  
|6. |  | Goleta activates a debit card and issues a corresponding personal
identification number (PIN), through which the borrower has access to
the funds in his or her bank account, and the Company delivers the card
and the PIN to the borrower.
|  
|7. |  | The borrower can then withdraw the proceeds of the Bank Loan from his or
her bank account by using the debit card and the PIN at any Company-owned
store or at various other retail stores or ATM locations.                                  

The Bank Loan process at a Company-owned store is typically completed in 15 to
20 minutes. A Bank Loan may be repaid at any Company-owned store, and the
Company will deposit the payment in an account for Goleta. A Bank Loan may also
be repaid by Goletas debiting the borrowers checking account through an
Automated Clearing House (ACH) transaction, as authorized by the borrower.
During the fiscal year ended June 30, 2002, the average principal amount of a
Bank Loan was approximately $269. As of June 30, 2002, Bank Loans were offered
in 848 of the Companys owned stores.

Where the Bank Loans are not offered, and where legally permitted, the Company
offers small, short-term loans, which are commonly referred to as payday
loans, at its locations. The Companys payday loan service or product
consists of providing a customer cash in exchange for the customers check or
an ACH authorization to debit the customers bank account, along with an
agreement to defer the presentment or deposit of that check or the initiation
of that ACH debit on the customers account, as the case may be, for a period
of 14 to 30 days. The amount of the customers check or ACH authorization is
the amount of the cash provided to the customer plus a fee to the Company. The
term of the deferral of the check presentment or ACH debit is typically two to
four weeks. Because payday loans are authorized by statute or rule in the
states in which they may be offered, they are subject to extensive regulation.
But the scope of that regulation, including the terms on which payday loans may
be made, by the states is not, and has not been, consistent. Almost all of the
states establish allowable fees and other charges to consumers for these payday
loans. In addition, many of the states regulate the maximum amount, maturity,
and renewal or extension of these payday loans. To comply with the laws and
regulations of the states in which the Companys payday loans are offered, the
terms of those payday loans must vary somewhat from state to state. As
required, ACE is or has been licensed as a provider of payday loans under the
laws and regulations of the states in which that service or product is offered.
As of June 30, 2002, the Company offered state-regulated loans in 105 of its
owned stores.

Bill-payment services.The Companys stores serve as payment locations for
customers to pay their utility, telephone, and other bills to third parties.
Upon acceptance of the customers payment, the Company remits the amount owed
to the third-party payee under an agreement with that payee and either receives
a service fee from the payee or collects a fee from the consumer.

Under a Bill-Payment Processing and Funds Transfer Services Agreement (the
MoneyLine Agreement) with Travelers Express Company, Inc. (Travelers
Express) and its affiliate MoneyLine Express, Inc. (MoneyLine), the Company
acts as an agent for MoneyLine, which has agreements with various third-party
payees for consumer services. The Companys services and obligations under the
MoneyLine Agreement are similar to those in its other bill-payment agreements
directly with the payees, though consumer payments accepted by the Company are
transmitted to MoneyLine instead of directly to the payees. The MoneyLine
Agreement permits the Company to offer its customers bill-payment services to
virtually any third-party payee.

Money transfer services.ACE is an agent for the transmission and receipt
of wire transfers through the MoneyGram network. Through this network, ACE
customers can transfer funds electronically to any of approximately 20,000
MoneyGram locations nationwide (including other ACE stores) and over 55,000
agent locations worldwide. MoneyGram Payment Systems, Inc. establishes the fees
for this service, and the Company is paid a percentage of the fees it collects
from customers as a commission and remits the balance to MoneyGram Payment
Systems, Inc.

Money orders. The Company sells money orders issued by Travelers Express
in denominations up to $1,000. These money orders are generally used by the
Companys customers for bill payments, rent payments, and other general
disbursements. The Company sold 11.6 million money orders during the fiscal
2002. The fees charged for money orders depend on local market conditions and
the size of the money order. The Company remits the face amount of each money
order sold to Travelers Express. ACEs money order revenues include that
portion of the fees retained by the Company.

7



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##### Table of Contents



Franchise revenues.The Companys franchise revenues consist of royalties and
initial and optional franchise fees. There were 184 company-franchised stores
in operation as of June 30, 2002, compared to 175 as of June 30, 2001.

Other services and products. In many company-owned stores, ACE also offers a
variety of other retail financial products and services to its customers,
including lottery and lotto ticket sales, prepaid debit/credit cards, public
transportation passes, copying and fax transmission services, postage stamps,
prepaid local telephone time, and prepaid long-distance telephone cards.

Self-service machines. The Company has developed self-service machines which
are able to cash checks, sell prepaid long-distance telephone cards, sell money
orders, and process third-party bill payments. The Company currently has 22
machines in company-owned locations and 150 machines available for deployment
at H&R Block locations during the 2003 tax season (i.e., January through
March). These machines use the Companys proprietary software that, among other
things, reads checks and analyzes customer and check-issuer history, thereby
enabling the Company to assess credit risk before cashing a check. The Company
leases the machine hardware from Diebold, Incorporated, a manufacturer of
self-service banking products and ATMs. Each of the Companys self-service
machines is connected with the Companys point-of-sale computer system.

The Company entered into an agreement with H&R Block under which the company
placed 100 machines in H&R Block locations during the 2002 tax season. Those
machines were available only to cash tax-refund checks issued to customers of
H&R Block. The Company obtained the cash that constituted the inventory for
those 100 machines through a separate agreement with a bank. The agreement with
H&R Block also anticipates the Companys placing up to 250 of its machines at
H&R Block Locations during the 2003 tax season. Implementation of this
agreement, however, will require the Company to obtain an operating lease for
the self-service machine hardware and capital to constitute inventory for those
machines. See Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources   SSM Funding.

Store Operations and New Store Economics

The Companys objective is to locate its company-owned stores in highly
visible, accessible locations and to operate the stores during convenient
hours. The Company attempts to locate stores on high traffic streets or
intersections, in many cases in or near destination shopping centers. The
Companys stores occupy 1,100 square feet on average and are located in strip
shopping centers, free-standing buildings, and kiosks located inside major
retail stores. The Company is focused on increasing the markets awareness of
ACE by using consistent signage and design at each store location. All but two
of the company-owned stores are leased.

Normal business hours of the company-owned stores are from 9:00 a.m. until 7:00
p.m., Monday through Thursday, 9:00 a.m. until 8:00 p.m. on Friday, and 9:00
a.m. until 6:00 p.m. on Saturday. Currently, 183 stores are also open on
Sunday, generally from 10:00 a.m. until 5:00 p.m., and several stores are open
24 hours. The business hours of any store may be changed due to local market
conditions.

The Companys store construction and facilities planning staff reviews and
negotiates lease agreements for store locations, supervises the construction of
new stores, the remodeling of existing stores, and performs lease management
once the leases are executed. Although the size and shape of a company-owned
store may vary, and since many of the stores are built out of existing space,
the work area of each store is a modular-designed unit that can be customized
to meet the requirements of each location while giving a uniform appearance.
These modular units may be moved from one location to the next, thus reducing
the costs associated with opening new stores and relocating existing stores.

8



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##### Table of Contents



The following tables show the average annual store revenues and the average
store contribution for company-owned stores which were opened in the year
indicated and remain open as of June 30, 2002:

|                 |  |                |       |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|---------------- |  | -------------- | ----- | -------------- |  | ---------------------- | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- |  |  | - | ----- |  |  | - | ----- | 
|                 |  |                |       |                |  | Average Store Revenues
|                 |  |                |       |                |  | Year Ended June 30,   
|                 |  | Number of      |       | (in thousands)
|                 |  | stores open at |       |               
|Year Opened:     |  | June 30, 2002  |       | 2002           |  | 2001                   |       | 2000 |  | 1999 |       | 1998
|                 |  |                |       |                |  |                        |       |      |  |      |       |     
|1993 and earlier |  |                | 196   |                |  | $                      | 279.0 |      |  | $    | 244.7 |      |  | $ | 204.9 |  |  | $ | 192.3 |  |  | $ | 171.3 | 
|1994             |  |                | 34    |                |  |                        | 279.1 |      |  |      | 240.7 |      |  |   | 180.3 |  |  |   | 169.9 |  |  |   | 149.0 | 
|1995             |  |                | 33    |                |  |                        | 241.8 |      |  |      | 209.6 |      |  |   | 167.3 |  |  |   | 158.7 |  |  |   | 128.0 | 
|1996             |  |                | 25    |                |  |                        | 266.9 |      |  |      | 246.1 |      |  |   | 194.4 |  |  |   | 173.8 |  |  |   | 146.1 | 
|1997             |  |                | 37    |                |  |                        | 236.9 |      |  |      | 203.5 |      |  |   | 157.7 |  |  |   | 142.0 |  |  |   | 105.5 | 
|1998             |  |                | 53    |                |  |                        | 220.2 |      |  |      | 184.9 |      |  |   | 129.0 |  |  |   | 97.1  |  |  |   | 26.9  | 
|1999             |  |                | 67    |                |  |                        | 197.8 |      |  |      | 161.7 |      |  |   | 91.6  |  |  |   | 30.3  |  |  |   |      | 
|2000             |  |                | 68    |                |  |                        | 173.5 |      |  |      | 121.0 |      |  |   | 25.5  |  |  |   |      |  |  |   |      | 
|2001             |  |                | 47    |                |  |                        | 136.5 |      |  |      | 32.4  |      |  |   |      |  |  |   |      |  |  |   |      | 
|2002             |  |                | 40    |                |  |                        | 34.8  |      |  |      |      |      |  |   |      |  |  |   |      |  |  |   |      | 
|                 |  |                |       |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                | 600   |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|Acquired stores  |  |                | 403   |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                |       |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                | 1,003 |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 
|                 |  |                |       |                |  |                        |       |      |  |      |       |      |  |   |       |  |  |   |       |  |  |   |       | 

|                 |  |                |       |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|---------------- |  | -------------- | ----- | -------------- |  | ------------------------------ | ----- | ---- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ----- | - |  | - | ----- | -
|                 |  |                |       |                |  | Average Store Contribution (1)
|                 |  |                |       |                |  | Year Ended June 30,           
|                 |  | Number of      |       | (in thousands)
|                 |  | Stores open at |       |               
|Year Opened:     |  | June 30, 2002  |       | 2002           |  | 2001                           |       | 2000 |  | 1999 |       | 1998
|                 |  |                |       |                |  |                                |       |      |  |      |       |     
|1993 and earlier |  |                | 196   |                |  | $                              | 119.4 |      |  | $    | 82.3  |      |  | $ | 91.6  |   |  | $ | 84.2  |   |  | $ | 69.8  |  
|1994             |  |                | 34    |                |  |                                | 119.0 |      |  |      | 78.3  |      |  |   | 71.5  |   |  |   | 62.2  |   |  |   | 47.9  |  
|1995             |  |                | 33    |                |  |                                | 89.1  |      |  |      | 56.9  |      |  |   | 54.2  |   |  |   | 47.1  |   |  |   | 26.3  |  
|1996             |  |                | 25    |                |  |                                | 110.4 |      |  |      | 91.1  |      |  |   | 82.0  |   |  |   | 61.7  |   |  |   | 42.6  |  
|1997             |  |                | 37    |                |  |                                | 84.9  |      |  |      | 52.8  |      |  |   | 39.9  |   |  |   | 31.4  |   |  |   | 2.2   |  
|1998             |  |                | 53    |                |  |                                | 75.3  |      |  |      | 40.5  |      |  |   | 25.6  |   |  |   | (1.0  | ) |  |   | (12.5 | )
|1999             |  |                | 67    |                |  |                                | 56.2  |      |  |      | 14.8  |      |  |   | (12.7 | ) |  |   | (15.8 | ) |  |   |      |  
|2000             |  |                | 68    |                |  |                                | 39.3  |      |  |      | (12.1 | )    |  |   | (12.9 | ) |  |   |      |   |  |   |      |  
|2001             |  |                | 47    |                |  |                                | 4.0   |      |  |      | (23.7 | )    |  |   |      |   |  |   |      |   |  |   |      |  
|2002             |  |                | 40    |                |  |                                | (22.7 | )    |  |      |      |      |  |   |      |   |  |   |      |   |  |   |      |  
|                 |  |                |       |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                | 600   |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|Acquired stores  |  |                | 403   |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                |       |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                | 1,003 |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  
|                 |  |                |       |                |  |                                |       |      |  |      |       |      |  |   |       |   |  |   |       |   |  |   |       |  



---

|(1) |  | Average store contribution equals revenues less direct store
expenses and store-related depreciation and amortization. Direct
store expenses consist of store salaries and benefits, occupancy
costs (rent, maintenance, taxes and utilities), returned checks
net of collections, cash shortages, armored and security costs,
loan losses, and bank charges. Direct store expenses exclude
region or corporate overhead, depreciation, and amortization
expenses.
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The capital cost of opening a new store varies depending on the size and type
of store. During fiscal 2002, the Company opened 39 company-owned stores at an
average capital cost of approximately $55,000 per store.

During fiscal 2002, the Company had 76 self-service machines in company-owned
stores. The Company placed 100 self-service machines at H&R Block retail
offices during the 2002 tax season During fiscal year 2002, the Companys
machines (located in Company stores or in H&R Block offices) cashed 214,000
checks with a face value of $185 million, which generated net check-cashing
fees to the Company of $3.8 million (3.2% of the Companys total check-cashing
fees). The majority of the checks cashed were tax checks in H&R Block offices.
After the end of fiscal 2002, the Company moved approximately 50 self-service
machines from company-owned stores to H&R Block offices for use during the 2003
tax season.

There can be no assurance that the Companys stores will continue to generate
the same level of revenues or revenue growth as in the past or that any new or
acquired store will perform at a level comparable to any of the Companys
existing stores. There also can be no assurance that the Companys self-service
machines will continue to generate the same level of revenues as in the past or
that the machines can be successfully deployed at H&R Block offices during the
2003 tax season.

9



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##### Table of Contents



Advertising and Marketing

ACE markets and promotes service and product offerings by a variety of methods.
The Company believes that its most effective marketing is through in-store
programs, combining the selling efforts of store personnel with various selling
messages on point-of-purchase material. The Company emphasizes courteous
service and trains service associates to recognize and develop good
relationships with customers. All check-cashing customers are invited to join
the ACE PLUS gold card retention program, which rewards members with benefits
like free check-cashing commensurate with the volume of check-cashing done at
ACE. Also, through its branding with standardized signage and store design,
the Company attempts to foster an image that attracts customers and inspires
consumer confidence. The Company also benefits from vendor-sponsored media
advertising in some markets.

Supervision and Training

The Companys operations are organized in regions, which generally correspond
to the market areas in which ACE operates its stores. Each region has a
regional vice president (RVP), who reports to one of two division vice
presidents of operations and is responsible for the operations, administration,
training, and supervision of the company-owned stores in his or her region. The
Company currently has 11 RVPs who supervise an average of 91 stores each. The
Company currently has 73 district managers, each of whom reports to the RVP for
his or her region and is directly responsible for the general management of up
to 25 stores within his or her territory. These district managers are
responsible for hiring, scheduling, operations, marketing, and employee
relations. Each center manager reports to a district manager, and has direct
responsibility over his or her stores operations.

Service associates, center managers, district managers, and RVPs must complete
formal training programs conducted by the Company. ACE has a Company-wide
training program, with higher-level training conducted at the corporate office
and new-hire training conducted in each regional office by corporate-trained
personnel. The principal purpose of this training, which covers topics ranging
from customer service to loss reduction, is to improve the Companys delivery
of products and services.

Point-of-Sale System

ACE has developed and implemented a proprietary personal computer based
point-of-sale system, which has been fully operational in all company-owned
stores since 1991. This point-of-sale system is also used in the Companys
self-service machines for cashing checks. In addition to other management
information and control functions, ACEs point-of-sale system allows the
Company to:



|1.  |  | capture, analyze, and update on a daily basis data relating to customers
and transactions, including the makers of checks cashed, which allows the
Company to provide service associates with on-demand access to current
information for use in approving check-cashing transactions;
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|2.  |  | utilize an automated decision methodology to guide service associates to
take appropriate actions and to better manage risk in check-cashing
transactions;                                                                                                                            
|   
|3.  |  | monitor daily revenues by product or service on a company, regional, per
store, and per employee basis;                                                                                                                                                                               
|   
|4.  |  | monitor and manage daily store exception reports, which record, for
example, any cash shortages and late store opening times;                                                                                                                                                         
|   
|5.  |  | identify cash differences between bank statements and the Companys
records (such as differences resulting from missing items and deposits);                                                                                                                                          
|   
|6.  |  | determine, on a daily basis, the amount of cash needed at each store
location, allowing centralized cash management personnel to maintain the
optimum amount of cash inventory in each store;                                                                                         
|   
|7.  |  | reduce the risk of transaction errors by, for example, automatically
calculating check-cashing and other transaction fees;                                                                                                                                                            
|   
|8.  |  | provide products and services in a standardized and efficient manner,
which the Company believes allows it to operate its stores with fewer
personnel than many of its competitors (with many of the Companys stores
being operated by only one person);                             
|   
|9.  |  | electronically transmit information and documents to third-party
providers of services or products offered at the stores; and                                                                                                                                                         
|   
|10. |  | facilitate compliance with regulatory requirements.                                                                                                                                                                                                                                   

The data captured by the point-of-sale system is transmitted daily from each
store to a centralized database maintained at ACEs headquarters and is
automatically integrated into its general ledger system.

10



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##### Table of Contents



Security

All company-owned store employees work behind bullet-resistant Plexiglas and
steel partitions. Each company-owned stores security measures include safes,
alarm systems monitored by third parties, teller area entry control, perimeter
opening entry detection, and tracking of all employee movement in and out of
secured areas. All centers are currently using centralized security; acquired
centers are typically converted within one month of acquisition. The
centralized system includes the following security measures in addition to
those described above: identical alarm systems in all stores, remote control
over alarm systems, arming/disarming and changing user codes, and mechanically
and electronically controlled time-delay safes.

Since ACEs business requires its stores to maintain a significant supply of
cash, the Company is subject to the risk of cash shortages resulting from
employee and non-employee theft and employee errors. Although the Company has
implemented various programs to reduce these risks and provide security for its
facilities and employees, there can be no assurance that these problems will be
eliminated. During 2002 and 2001, cash shortages from employee errors and from
theft were approximately $2.1 million (0.9% of revenues) and $2.9 million (1.5%
of revenues), respectively.

The Companys point-of-sale system allows management to detect cash shortages
on a daily basis. In addition to other procedures, district managers conduct
audits of each company-owned stores cash position and inventories on an
unannounced, random basis.

Daily transportation of currency and checks is provided by nationally
recognized armored carriers. ACE employees are not authorized to transport
currency or checks.

Employees

At June 30, 2002, ACE employed 2,336 persons: 980 service associates at
company-owned stores, 995 center or store managers, 75 district managers, 11
regional vice presidents, 35 region support personnel, 231 corporate employees
and 9 franchise personnel. Third-party firms hired by the Company conduct
background checks of all Company new hires.

The Company considers its employee relations to be good. ACEs employees are
not covered by a collective bargaining agreement, and the Company has never
experienced any organized work stoppage, strike, or labor dispute. Generally,
the Companys employees are not bonded.

Competition

The Company believes that the principal competitive factors in the
check-cashing industry are location, customer service, fees, convenience, and
range of services offered. The Company faces intense competition and believes
that the check-cashing market is becoming more competitive as the industry
matures and consolidates. The Company competes with other check-cashing stores,
grocery stores, banks, savings and loans, short-term consumer lenders, other
financial services entities, and any retail businesses that cash checks, sell
money orders, provide money transfer services, or other similar financial
services. Certain competitors of the Company, other than check-cashing stores,
cash checks without charging a fee under limited circumstances. Some of the
Companys competitors that are not check-cashing companies have larger and more
established customer bases and substantially greater financial, marketing, and
other resources. The Companys stores have also recently been facing
competition from automated check-cashing machines, sometimes referred to as
CCMs (check-cashing machines) or SSMs (self-service machines), deployed in
supermarkets, convenience stores, and other public venues by large financial
services organizations. There is no assurance that the Company will be able to
compete successfully with its competitors.

Trademarks and Patents

The Company has obtained several federal trademark registrations, including for
A-C-E Americas Cash Express®, ACE® and its logo design

On May 9, 2002 and June 19, 2002. the Company applied to the U.S. Patent and
Trademark Office for two process patents related to its software used in the
self-service business and those patent applications are pending.

Regulation

General.The Company is subject to regulation in several jurisdictions in
which it operates, including jurisdictions that regulate check-cashing fees or
require the registration of check cashing companies or money transmission
agents. The Company is also subject to federal and state regulation relating
to the recording and reporting of certain financial

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transactions and relating to the privacy of customer information. Further, the
Companys loan-related activities are subject to federal regulation and, in
certain states, to state regulation.

State Regulations.The Company operates in 17 states that have licensing
and/or fee regulations regarding check cashing: Arkansas, Arizona, California,
Florida, Georgia, Indiana, Kentucky, Louisiana, Maryland, Nevada, North
Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, Washington, and the
District of Columbia. The Company is licensed in each of the states in which a
license is currently required for it to operate as a check cashing company. To
the extent these states have adopted ceilings on check cashing fees, those
ceilings are in excess of or equal to the fees charged by the Company.

In some jurisdictions, check-cashing companies or money transmission agents are
required to meet minimum bonding or capital requirements and are subject to
record-keeping requirements. In addition, in those jurisdictions in which the
Company operates or has operated as a payday or other short-term consumer
lender, it is or has been licensed as such and is or has been subject to the
regulations governing the terms of payday or other short-term consumer loans.
Though the Company has obtained or maintained a small-loan or other specialized
lenders license in certain states in which Bank Loans are or have been
offered, the Company believes that its activities related to the Bank are
generally not subject to state regulation; the Company believes that the Bank
Loans are subject primarily to federal regulation applicable to Goleta as a
lending national bank. See Legal Proceedings.

Federal Regulations.Under the Bank Secrecy Act regulations of the United
States Department of the Treasury (the Treasury Department), transactions
involving currency in an amount greater than $10,000 or the purchase of
monetary instruments for cash in amounts from $3,000 to $10,000 must be
reported. In general, every financial institution, including the Company, must
report each deposit, withdrawal, exchange of currency or other payment or
transfer, whether by, through or to the financial institution, that involves
currency in an amount greater than $10,000. In addition, multiple currency
transactions must be treated as single transactions if the financial
institution has knowledge that the transactions are by, or on behalf of, any
person and result in either cash in or cash out totaling more than $10,000
during any one business day. Management believes that the Companys
point-of-sale system and employee-training programs permit the Company to
comply with these requirements.

The Money Laundering Suppression Act of 1994 added a section to the Bank
Secrecy Act requiring the registration of money services businesses, like the
Company, that engage in check cashing, currency exchange, money transmission,
or the issuance or redemption of money orders, travelers checks, and similar
instruments. This registration is intended to enable governmental authorities
to better enforce laws prohibiting money laundering and other illegal
activities. The Company registered as a money services business with the
Treasury Department, by filing with the Financial Crimes Enforcement Network of
the Treasury Department (FinCEN), by December 31, 2001, and must re-register
at least every two years thereafter. The Company, as a money services business,
must also maintain a list of names and addresses of, and other information
about, its agents and must make that list available to any requesting law
enforcement agency (through FinCEN). That agent list must be updated at least
annually. The Company does not believe that compliance with the these existing
requirements has had or will have any material impact on its operations.

In addition, federal regulations require money services businesses like the
Company to report suspicious transactions involving at least $2,000 to FinCEN.
The regulations generally describe three classes of reportable suspicious
transactions  one or more related transactions that the money services
business knows, suspects, or has reason to suspect (1) involve funds derived
from illegal activity or are intended to hide or disguise such funds, (2) are
designed to evade the requirements of the Bank Secrecy Act, or (3) appear to
serve no business or lawful purpose. Because of the Companys point-of-sale
system and employee-training programs, the Company does not believe that
compliance with the existing reporting requirement has had or will have any
material impact on its operations. The federal regulatory authorities, however,
are in the process of adopting additional regulations to implement specific
provisions of this Act (e.g., procedures regarding the identity of persons
opening accounts and corresponding recordkeeping), and the Company cannot
estimate the impact of any of those additional regulations.

The Gramm-Leach-Bliley Act and its implementing federal regulations require the
Company to generally protect the confidentiality of its customers nonpublic
personal information and to disclose to its customers its privacy policy and
practices, including those regarding sharing the customers nonpublic personal
information with third parties. That disclosure must be made to customers at
the time that the customer relationship is established and at least annually
thereafter.

The USA PATRIOT Act of 2001 and its implementing federal regulations require
the Company, as a financial institution, to establish and maintain an
anti-money-laundering program. Such a program must include (1) internal
policies, procedures, and controls designed to identify and report money
laundering, (2) a designated compliance officer, (3) an ongoing
employee-training program, and (4) an independent audit function to test the
program. Because of its compliance with other federal regulations having
essentially a similar purpose, the Company does not believe that compliance
with these requirements has had or will have any material impact on its
operations.

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Bank Loans.As a national bank, Goleta is subject to regulation, supervision,
and regular examination by various federal regulatory authorities, including
the Office of the Comptroller of the Currency (the OCC). Because of the
Companys contractual relationships with Goleta, the Companys activities
regarding the Bank Loans are also subject to regulation and examination by the
OCC and the other regulatory authorities to which Goleta is subject. To the
extent an examination involves review of the Bank Loans and related processes,
the OCC or other regulatory authority may require the Company to provide
requested information and grant access to the Companys locations, personnel,
and records regarding the Bank Loans. The OCCs examinations and reviews of
Goleta have included on-site reviews of the Companys activities at certain of
its locations as well as discussions with certain personnel of the Company.

On November 27, 2000, the OCC issued OCC Advisory Letter 2000-10 to all
national banks. In that Advisory Letter, the OCC acknowledged that a national
bank may offer small, short-term loans if those loans are made in a safe and
sound manner and in compliance with applicable consumer-protection and
fair-lending laws. The Advisory Letter described various safety and
soundness, compliance, consumer protection, and other risks to national banks
that are posed by payday and similar short-term lending and are of concern to
the OCC. The Advisory Letter also contained the OCCs guidelines, or various
recommended policies and procedures, to address those risks and avoid abusive
lending practices. Further, the OCC expressed its view that arrangements that
involve a national bank appointing a non-bank as agent significantly increase
the various risks to the national bank and, therefore, the OCCs supervisory
concerns. The OCC indicated that it would carefully review existing and
proposed short-term lending activities and agency arrangements of that kind,
including by direct examination of the national bank and the agent or agents
involved in the arrangements. The OCC also warned that agency arrangements of
that kind might not afford the agents activities the same federal pre-emption
of state and local law that a national banks lending activities enjoy.

On November 1, 2001, the OCC issued OCC Bulletin 2001-47 to all national banks.
In that Bulletin, the OCC identified the risks to national banks that might
arise from their business relationships with agents and acknowledged or
recommended corresponding risk-management principles. The OCC reiterated its
various concerns regarding agency arrangements of the general kind that Goleta
has with the Company and warned that the OCC would carefully scrutinize any
such arrangement, to avoid any abuse of the national bank charter.

In the first three months of 2002, the OCC ordered one national bank to cease
its short-term or payday loan program and filed charges against another
national bank regarding its management of its short-term or payday loan
program. It appears to the Company, however, that the banks issues that
prompted the OCCs action were not limited to those banks short-term loan
programs. More recently, other federal regulatory agencies have taken actions
that have resulted in two other financial institutions (not national banks)
discontinuing their short-term or payday loan programs.

In March 2002, the Company received information regarding the most recent
report of the OCC delivered to Goleta regarding, among other things, Goletas
contractual relationship with the Company. The OCCs report apparently
expressed strong reservations about, and identified certain reputational,
compliance, and transaction risks to Goletas safety and soundness arising
from Goletas short-term loan program and relationship with the Company. More
recently, other federal regulatory agencies have taken action that have
resulted in two other financial institutions (not national banks) discontinuing
their short-term or payday loan programs. In addition, for over two years,
Goleta has been subject to a formal written agreement with the OCC that
requires Goleta to, among other things, adhere to certain operational and
reporting requirements, some of which relate to Goletas short-term loan
program and relationship with the Company. The Company understands that Goleta
has been informed that the OCC does not believe that Goleta is in full
compliance with certain provisions of the formal agreement that relate to
compliance with certain laws and regulations applicable to the short-term loan
program.

Representatives of Goleta and the Company have had discussions between
themselves and with representatives of the OCC about the OCCs concerns
regarding the Bank Loans and the actions that might be taken to address those
concerns. The Company believes that it and Goleta have not determined whether
any particular modifications of their policies and procedures regarding the
Bank Loans and their relationship will be able to address those concerns. The
discussions between the Company and Goleta, and with the OCC, have also
included the possibility of gradually reducing the scope of or phasing out the
program. But until Goleta and the Company determine, through further
discussions with the OCC, what will be required to satisfy the OCCs concerns,
the Company cannot state what actions will be taken and, therefore, how those
actions might affect the Companys loan-related business and revenues. The OCC
possesses extensive regulatory authority in determining how, or even if, the
Goleta short-term loan program will continue.

Governmental action to prohibit or restrict payday loans and other short-term
loans has been advocated over the past few years by consumer-advocacy groups
and by media reports and stories. The consumer groups and media stories
typically focus on the cost to a consumer for that type of loan, which is
higher than the interest typically charged by credit-card issuers to a more
creditworthy consumer. This difference in credit cost is more significant if a
consumer does not promptly repay the payday loan or other short-term loan, but
renews (or rolls over) that loan for one or more additional short-term (e.g.,
two-

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week) periods. The consumer groups and media stories typically characterize
short-term lending activities as abusive toward consumers. During the last
few years, legislation has been introduced in the United States Congress and in
certain state legislatures, and regulatory authorities have proposed or
publicly addressed the possibility of proposing regulations, that would
prohibit or restrict payday loans and other short-term loans. So far as the
Company is aware, no such federal legislation or federal regulatory proposal
has made any significant progress in the legislative or regulatory process.
But legislation and regulatory action that affects consumer lending has
recently become effective in a few states and may be taken in other states.
See Legal Proceedings. The Company intends to continue, with others in the
payday loan and short-term loan industry, to oppose legislative or regulatory
action that would prohibit or restrict payday loans or short-term loans. But
if legislative or regulatory action with that effect were taken on the federal
level or in states such as Texas, in which the Company has a significant number
of stores, that action could have a material adverse effect on the Companys
loan-related activities and revenues.

Relationships with the Money Order and MoneyGram Suppliers

Money Order Agreement.In April 1998, the Company signed a money order
agreement with Travelers Express which became effective December 17, 1998.
Under this five-year agreement, the Company exclusively sells Travelers Express
money orders that bear the Companys logo. In conjunction with this agreement
and the MoneyLine Agreement for bill-payment services (which also has a
five-year term), the Company received $3 million from Travelers Express in
April 1998, and was to receive $400,000 each of the remaining years of the
contract for a total of $5.0 million. As of June 30, 2002, the final year
contract balance of $400,000 remains unpaid. See Managements Discussion and
Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources and Note 5 of Notes to Audited Consolidated Financial
Statements. If the money order agreement is terminated under certain
circumstances before the expiration of its five-year term, the Company will be
obligated to repay a portion of the amounts received from Travelers Express.
The money order agreement with Travelers Express does not allow an extended
deferral of remittances of money order proceeds without a significant change in
the Amended Collateral Trust Agreement. The Companys payment and other
obligations to Travelers Express under the money order agreement are secured by
a subordinated lien on the Companys assets in accordance with the Amended
Collateral Trust Agreement described under Managements Discussion and
Analysis of Financial Condition and Results of Operations  Liquidity and
Capital Resources   Credit Facilities.

MoneyGram Services Agreement.The Company is an agent for the receipt and
transmission of wire transfers of money through the MoneyGram network. The
Companys agency relationship was previously governed by the 1996 MoneyGram
Master Agreement, as amended (the Expired MoneyGram Agreement), with
MoneyGram Payment Systems, Inc. (MPS), an affiliate of Travelers Express,
until it expired on December 31, 2000.

In June 2000, the Company signed a Money Transfer Agreement with Travelers
Express and MPS that became effective on January 1, 2001 (the Existing
MoneyGram Agreement). During the seven-year term of the Existing MoneyGram
Agreement, the Company will exclusively offer and sell MoneyGram wire transfer
services. Under the Existing MoneyGram Agreement (as under the Expired
MoneyGram Agreement), the Company earns commissions for each transmission and
receipt of money through the MoneyGram network effected at a company-owned
location; those commissions equal varying percentages of the fees charged by
MPS to consumers for the MoneyGram services.

Under the Existing MoneyGram Agreement, the Company is also entitled to receive
a total of approximately $12.5 million in bonuses, payable in equal monthly
installments (without interest) over the seven-year term. The amount of those
monthly installments will be subject to reduction if the Company closes or
sells a significant number of those locations at which MoneyGram services are
offered at the beginning of the Existing MoneyGram Agreement. In addition, the
Company will be entitled to receive certain incentive payments regarding new
MoneyGram service locations that it opens or acquires during the term of the
Existing MoneyGram Agreement similar to those received under the Expired
MoneyGram Agreement.

The Existing MoneyGram Agreement extended and strengthened the Companys
relationship with Travelers Express and its affiliates. That relationship
includes the money order agreement as well as the MoneyLine Agreement for
bill-payment services, and is therefore significant to the Companys business.
Though the Company does not anticipate any disruption of that relationship, if
such a disruption were to occur, the Companys business could be materially and
adversely affected.

Bank Loans

The Company is a party to the Master Loan Agency Agreement, as amended, and
ancillary agreements (collectively, the Goleta Agreement) with Goleta
National Bank, a national bank located in Goleta, California , under which
short-term loans made by Goleta are offered at most company-owned locations.
Under the Goleta Agreement, the offering of Bank Loans is also subject to
various operational requirements of Goleta set forth in its Bank Loan Operating
Manuals delivered to the Company (the Operating Manuals).

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The terms of the Bank Loans are established, and subject to change from time to
time, solely by Goleta. Currently, a Bank Loan may be up to $500 and must be
repaid in 14 days. A Bank Loan may be renewed by a borrower only if at least
five percent of the outstanding principal amount is paid. A borrower may have
only one Bank Loan outstanding at a time.

Goleta determines, in accordance with its credit criteria, those applicants to
whom a Bank Loan will be made. The Companys involvement in the Bank Loan
process is limited to the electronic transmission of information and documents
in accordance with procedures established by Goleta. A Bank Loan is funded
into the borrowers account at Goleta. Access to those funds is through a
debit card and personal identification number issued by Goleta in the Bank Loan
process. That debit card (with identification number) may be used at various
ATM machines or retail stores or at company-owned locations.

A Bank Loan may be repaid at an ACE company-owned location or deducted from the
borrowers bank account through an ACH transaction, for transmission to Goleta
and credit to the borrowers bank account. Goleta has appointed the Company as
servicing agent for any necessary collection activity regarding past-due Bank
Loans, subject to Goletas reasonable direction. Goleta has sole authority to
modify the terms, or extend the payment, of any Bank Loans.

Under the Goleta Agreement, the Company must purchase from Goleta a
participation interest in all Bank Loans made on a previous day or previous
days. That participation entitles the Company to 90 percent of the interest
received by Goleta from the borrowers, and subjects the Company to 90 percent
of the risk of nonpayment by the borrowers. The Company must pay Goleta a
processing fee for Goletas originating the Bank Loans.

The Company is responsible under the Goleta Agreement for 90 percent of any
third-party claims, including regulatory claims, regarding the Bank Loans other
than claims resulting solely from Goletas misconduct. See Legal
Proceedings.

The Company has agreed in the Goleta Agreement not to offer at its
company-owned locations any short-term loan that is substantially similar to
the Bank Loans, except that the Company may offer payday loans or other
short-term loans where the Company has decided not to offer Bank Loans (because
of contractual, legal, or regulatory limitations) and may offer short-term
loans by other lenders at a limited number of its company-owned locations.
Goleta has agreed in the Goleta Agreement not to offer or make Bank Loans or
any substantially similar short-term loan anywhere in the United States except
at an office of Goleta or as required by law. The parties exclusivity
obligations will be effective so long as applications for a minimum number of
Bank Loans are submitted to Goleta from ACE locations during the 12-month
period beginning April 14 of each year.

The term of the Goleta Agreement will expire on April 13, 2007, at the
earliest. That term will be extended annually if applications for a certain
number of Bank Loans are submitted to Goleta from ACE locations during the
12-month period beginning April 14 of each year. As of June 30, 2002, the
number of Bank Loan applications submitted to Goleta exceeded the minimum
required to extend the exclusivity.

Either party may terminate the Goleta Agreement because of (1) the other
partys insolvency, (2) the other partys failure to make any required payment
or to perform any other material obligation that is not cured after notice, (3)
any action by a regulatory authority that requires Goleta to cease making Bank
Loans or imposes restrictions that would materially and adversely affect
Goletas ability to make Bank Loans, or (4) Goletas termination of the Companys authority to offer Bank Loans at
a significant number of company-owned stores because the Companys operations
at those particular locations do not comply with the Operating Manuals. In
addition, Goleta may terminate (a) the Goleta Agreement if it reasonably
determines that the Company is not in compliance with the Operating Manuals and
the noncompliance is not cured after notice of noncompliance from Goleta, and
(b) the Companys authority to offer Bank Loans at one or more particular
locations if the Companys operations at those locations do not comply with the
Operating Manuals and the noncompliance at those locations is not cured after
notice of noncompliance from Goleta. The Company may also terminate the
Goleta Agreement upon its determination that any change by Goleta in the terms
of the Bank Loans or its credit criteria has adversely affected or would
adversely affect the market for Bank Loans.

Because the Companys economic interest in the Bank Loans results from the
purchase of participations, the Company is dependent on Goletas originating
the Bank Loans. If any change in the terms of, or the credit criteria for, the
Bank Loans were to result in losses that the Company deems unacceptable, the
Companys sole legal recourse would be to exercise its right to terminate the
Goleta Agreement.

The Goleta Agreement permits the Company to offer Bank Loans at many more of
its locations than it could offer payday loans. If the Goleta Agreement were
terminated or the Companys ability to offer Bank Loans at a significant number
of its locations were otherwise restricted, then (even though the Company might
again be able to offer payday loans at many of its locations) the Companys
loan-related revenues could be materially and adversely affected.

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Investment in ePacific

In March and April 2000, the Company invested a total of $1 million in ePacific
Incorporated (ePacific), a private company in the business of providing
customized debit-card payment systems and electronic funds transfer processing
services, which has been recorded under the cost method and is included in
other assets. ePacific, formerly a controlled subsidiary of Goleta, provides
the debit-card system and processing services to Goleta to enable it to make
the Bank Loans described above in Bank Loans.

The Companys investment in ePacific was made at the same time, and on the same
terms, as the investment by two venture capital investors. The Company
purchased approximately 14% of the shares of ePacifics Series A Convertible
Preferred Stock purchased by the group of investors. The terms of those shares
are typical of preferred stock issued and purchased in venture capital
investments, and include the right to periodic dividends from ePacific, the
right to a preferential distribution upon liquidation of ePacific, voting
rights with ePacific common stock, and the right to convert the preferred stock
into ePacific common stock. Under a stockholders agreement with ePacific and
its other stockholders, the Company agreed to certain restrictions on transfer
of its ePacific stock, received certain securities registration rights
regarding resale of its ePacific stock, and received the right to designate one
person to serve as a director of ePacific. The Company designated Jay B.
Shipowitz, its President and Chief Operating Officer, to serve as a director of
ePacific.

The investment in ePacific was motivated by the Companys belief that the
market for financial-services products delivered through debit-ATM cards will
continue to expand; a reason for that expansion is the technology that now
permits value to be placed or loaded on a debit-ATM card for a consumer in a
retail environment. The Company also believes that ePacific has developed
unique debit-card processing applications for internet users that may allow it
to compete effectively with some of the larger debit-card processors.

Arrangements Regarding Secured Notes

In December 1996, the Company consummated a private placement of $20 million of
its 9.03% Senior Secured Notes (Notes) and issued the Notes to Principal Life
Insurance Company (formerly known as Principal Mutual Life Insurance Company)
(Principal) under the terms of a Note Purchase Agreement dated as of November
15, 1996 (the Note Purchase Agreement). The net proceeds of the issuance of
the Notes were used to pay in full the then outstanding $18.5 million principal
amount of the Companys term-loan indebtedness (incurred for acquisitions and
capital expenditures), plus corresponding interest and fees, and for general
corporate purposes of the Company.

Interest on the unpaid principal amount of the Notes, accruing at 9.03% per
annum, is payable semiannually on May 15 and November 15 of each year,
commencing May 15, 1997. The principal amount of the Notes is payable in five
equal installments of $4 million on November 15 of each year, commencing
November 15, 1999. All principal and accrued interest is payable at the
scheduled maturity of the Notes on November 15, 2003.

The Company may prepay the Notes, at any time or from time to time, in the
principal amount of at least $1 million, plus accrued interest on the principal
amount being prepaid, plus an amount approximately equal to the discounted
present value of the return that the holders of the prepaid Notes would have
received if the prepayment were not made. Any prepayment will ratably reduce
the amount of each scheduled principal payment on the Notes due thereafter.

The Note Purchase Agreement contains certain restrictive covenants affecting
the business and affairs of the Company and its subsidiaries. Those covenants
address, among other things, the maintenance of specified financial ratios, the
incurrence and payment of other indebtedness, the disposition of assets or of
the ownership of any subsidiary of the Company, the grant or existence of other
liens on the assets of the Company and its subsidiaries, and transactions
between the Company or its subsidiaries and any of their affiliates.

The Note Purchase Agreement also specifies events of default that could result
in the acceleration of the maturity of the Notes. Those events include (a) any
failure by the Company to pay any amount due under the Notes, (b) any failure
by the Company to comply with various covenants set forth in the Note Purchase
Agreement and ancillary documents, (c) any misrepresentation or breach of
warranty by the Company, (d) any failure by the Company or any of its
subsidiaries to pay, or perform its obligations under, any indebtedness for
borrowed money or under capital leases in excess of $1 million, (e) various
events of bankruptcy or insolvency of the Company or any of its subsidiaries,
and (f) any final judgment of any court in excess of $1 million against the
Company or any of its subsidiaries remaining in effect 30 days after the entry
thereof.

The Companys obligations under the Notes, the Note Purchase Agreement, and all
ancillary documents entered into with Principal are secured by liens on all of
the assets of the Company. Concurrent with the Note Purchase Agreement, the
Company entered into a Collateral Trust Agreement dated as of November 15, 1996
(the Original Collateral Trust Agreement), with Wilmington Trust Company, as
trustee (the Collateral Trustee), Principal, and the Companys other

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secured lender at the time. The Original Collateral Trust Agreement created a
collateral trust to secure the Companys obligations to both of its then
existing secured lenders and, under conditions set forth therein, future
secured lenders to the Company. The collateral trust continues to exist,
though the Original Collateral Trust Agreement has been amended and superseded
in connection with the establishment and renewals of the Companys credit
facilities with a syndicate of bank lenders, as described below under
Managements Discussion and Analysis of Financial
Condition and Results of Operations  Liquidity and Capital Resources  Credit Facilities.

Credit Facilities

During the year ended June 30, 2002, the Company was a party to an Amended and
Restated Credit Agreement (the Credit Agreement) with a syndicate of banks
(the Lenders), led by Wells Fargo Bank Texas, National Association (Wells
Fargo Bank).

The Credit Agreement provided the Company with a revolving line-of-credit
facility and a term-loan facility. The revolving facility was available for
working capital and general corporate purposes of the Company, and the
term-loan facility was available for capital expenditures of the Company.
Also, in addition to the primary credit facilities, the Company had available,
from Wells Fargo Bank and certain of the other Lenders, a seasonal revolving
advance facility of up to $25 million from January 1 through March 31, 2002,
and, from Wells Fargo Bank, a standby letter-of-credit facility of up to $1.5
million.

The Credit Agreement was amended three times during the fiscal year: (1) on
November 8, 2001, to extend the maturity of the credit facilities until
December 31, 2001, and to revise certain other terms; (2) on December 31, 2001,
to extend the maturity of the credit facilities until April 30, 2002, and to
revise certain other terms; and (3) on April 30, 2002, to extend the maturity
of the credit facilities until October 31, 2002, and to revise certain other
terms. The terms of the Credit Agreement as so amended are described in more
detail at Managements Discussion and Analysis of Financial Condition and
Results of Operations  Liquidity and Capital Resources  Credit Facilities.




ITEM 2. PROPERTIES

All but two of the Companys stores are leased, generally under leases
providing for an initial term of three years and optional renewal terms of from
three to six years. The Company acquired, as part of the Check Express
acquisition in February 1996, and still owns the land and building at which two
of the Companys stores are located, one in Indianapolis, Indiana and the other
in Tampa, Florida. The Companys headquarters offices in Irving, Texas, a
suburb of Dallas, occupy approximately 56,000 square feet under an 84-month
lease, the term of which expires in 2008.




ITEM 3. LEGAL PROCEEDINGS

Loan-Related Proceedings

A number of lawsuits and state regulatory proceedings have been filed or
initiated against the Company regarding its loan-related activities. Those
activities consist of (1) offering Bank Loans, which are short-term loans made
by Goleta National Bank (Goleta), at most of the Companys locations, and (2)
offering a check-based service commonly known as a payday loan at certain of
its locations. Before May 2000, the Company offered only payday loans at its
locations in jurisdictions that it believed legally permitted that service. See
Business  Customers and Services  Loan services and   Bank Loans.
The lawsuits and state regulatory proceedings pending as of September 23, 2002,
are described below.

A key issue in the existing lawsuits and state regulatory proceedings that
concern the Bank Loans is whether Goleta or the Company is properly regarded as
the lender. The Company and Goleta maintain that, as stated in the legal
documents and marketing materials for the Bank Loans, Goleta is the lender and
that, because Goleta is a national bank located in California, the Bank Loans,
including the interest that may legally be charged, should be governed by
federal and California law. The opposing parties in most of these lawsuits and
regulatory proceedings, however, maintain that the Company should be regarded
as the lender, because of its agent services in connection with the Bank Loans
and its purchase of participation interests in the Bank Loans, and that the
Bank Loans, including the interest that may legally be charged, should be
governed by the laws of the respective states in which the borrowers reside.
If the Company were held to be the lender, then the interest charged for the
Bank Loans would violate most of the applicable states usury laws, which
impose maximum rates of interest or finance charges that a non-bank lender may
charge. The consequences to the Company of such a holding in any lawsuit or
regulatory proceeding would depend on the applicable states usury and
consumer-protection laws and on the basis for a finding of violation of those
laws. But those consequences could include the Companys obligation to refund
interest collected on the illegal Bank Loans, to refund the principal amount of
the illegal Bank Loans, to pay treble or other multiple damages, to pay
monetary penalties specified by statute, and to cease offering the Bank Loans
(at least as theretofore offered). The Company is committed to defend these
lawsuits through trial and, if necessary, appeal.

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The Company expects that the defense of the lawsuits and state regulatory
proceedings described below, even if successful, will continue to require
substantial time and attention of certain of its senior officers and other
management personnel that would otherwise be spent on other aspects of its
business and will continue to require the expenditure of significant amounts
for legal fees and other litigation-related costs. See Managements
Discussion and Analysis of Financial Condition and Results of Operations 
Liquidity and Capital Resources  Litigation Expenses. In addition, the
Company would be adversely affected if it were unable to successfully defend
against the claims made in these lawsuits and state regulatory proceedings.
The effects on the Company of an adverse determination would vary depending on
the particular adverse determination and the particular lawsuit or regulatory
proceeding in which it occurred. In general, however, the Company believes
that the effects of an adverse determination regarding its payday-loan service
would be less severe than the effects of an adverse determination regarding its
offering of Bank Loans. If the Company were held to be the lender of the Bank
Loans, then the Company would likely (1) become obligated to pay amounts as
damages and other relief that could significantly impair the Companys
financial condition and financial resources, and its business as a whole (and
not merely its loan-related business), and (2) be ordered to cease the offering
of Bank Loans by Goleta or to significantly modify the terms on which Bank
Loans are offered. Even if, under such circumstances, the Company were
required only to cease offering the Bank Loans or to significantly modify the
terms on which the Bank Loans are offered, then its loan-related revenues could
be materially impaired.

Pending Lawsuits  Payday Loans

Eva J. Rowings v. Ace Cash Express, Inc.: This lawsuit regarding the Companys
former payday loan activities in Indiana was filed against the Company in the
United States District Court for the Southern District of Indiana on December
17, 1999. The plaintiff, for herself and others similarly situated, alleged
that (1) the Companys disclosures to recipients of payday loans in Indiana did
not comply with the disclosure requirements of the federal Truth in Lending Act
(TILA), Regulation Z of the Federal Reserve Board (Regulation Z), and the
Indiana Uniform Consumer Credit Code (the Indiana UCCC), and (2) the
Companys payday-loan finance charges exceeded those permitted by the Indiana
UCCC and by Indiana Code 35-45-7-2 (Indianas loansharking statute), so that
those loans were void. Regarding the disclosure-violation claims, the
plaintiff sought to represent a class of the Companys payday-loan customers
since December 17, 1998. Regarding the excess-finance-charge claims, the
plaintiff sought to represent a class of the Companys payday-loan customers
since December 17, 1997 who were assessed finance charges at an annual interest
rate greater than 72%. The plaintiff sought to recover, for herself and
members of the respective putative classes, monetary damages for the
disclosure-violation claims as specified by the federal TILA, Regulation Z, and
the Indiana UCCC, unspecified damages for the excess-finance-charge claims, the
plaintiffs attorneys fees and expenses, court costs, and other appropriate
relief.

On August 28, 2002, the court approved a class settlement agreement, under
which the Company agreed to pay approximately $400,000, and entered an order
dismissing all claims in this lawsuit with prejudice. Unless appealed, that
order will become final and effective on September 27, 2002.

Wendy Betts, John Cardegna and Gary M. Kane v. Ace Cash Express, Inc. et al.:
This lawsuit regarding the Companys former deferred-deposit (payday loan)
activities in Florida was filed in a Florida state Circuit Court in Orange
County, Florida, against the Company, its wholly owned subsidiary Check
Express, Inc., and certain unnamed persons described in the complaint. In this
lawsuit the plaintiffs, for themselves and others similarly situated since
January 27, 1996, alleged that the Companys deferred-deposit activities in
Florida violated certain Florida lending practices and usury statutes, the
Florida Consumer Finance Act, the Florida Deceptive and Unfair Trade Practices
Act, and the Florida Civil Remedies for Criminal Practices Act and constituted
fraud. The plaintiffs sought an injunction against any such further alleged
illegal activities as well as actual and punitive damages of various kinds,
including forfeiture of the total amount of the deferred-deposit transactions
with the purported class of customers in Florida, an amount equal to twice the
fees and charges received by the Company from those transactions, an amount
equal to three times the damages suffered by the purported class, the
plaintiffs attorneys fees, and court costs.

In February 2001, the Attorney General of the State of Florida filed a motion
to intervene as a plaintiff in this lawsuit, but the court denied that motion.
On May 29, 2001, the court dismissed the plaintiffs complaint with prejudice.
The plaintiffs appealed that dismissal, but on August 30, 2002, the Florida
appellate court affirmed the trial courts decision. On September 13, 2002,
the plaintiffs filed a motion for rehearing of the appeal, and that motion is
pending before the appellate court.

Eugene R. Clement v. Ace Cash Express, Inc. and Neil Gillespie v. Ace Cash
Express, Inc.: This lawsuit regarding the Companys former deferred-deposit
(payday loan) activities in Florida is pending in a Florida state Circuit
Court in Hillsborough County, Florida. It is the result of the consolidation
on August 8, 2000 of two separate lawsuits filed against the Company in the
court. Each of those lawsuits purported to be a class action and alleged that
the Companys deferred-deposit activities violated the federal TILA, the
Florida usury laws, and the Florida Deceptive and Unfair Trade Practices Act
(FDUTPA). The plaintiffs sought an injunction against any further alleged
illegal activities as well as actual and punitive

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damages of various kinds, including damages under the federal TILA, an amount
equal to twice the fees and charges received by the Company from its
deferred-deposit transactions with the purported class of customers in Florida,
the plaintiffs attorneys fees, and court costs.

The Attorney General of the State of Florida (the Attorney General)
intervened as a plaintiff in this lawsuit. The intervenor complaint filed on
April 11, 2001 named as defendants, in addition to the Company, the Companys
Chairman of the Board, Raymond C. Hemmig; the Companys Chief Executive
Officer, Donald H. Neustadt; and two former employees of the Company. The
intervenor complaint alleged violations by the Company and the other defendants
of the Florida RICO Act and the FDUTPA. The intervenor complaint sought all
remedies available under the Florida RICO Act, including the civil forfeiture
of all money and other property of the Company used in, derived from, or
realized through the Companys deferred-deposit activities in Florida, the
revocation of each license or permit of the Company granted by any Florida
state agency, and an injunction against future violations of the FDUTPA or the
Florida RICO Act. The intervenor complaint also sought, because of alleged
violations of other Florida laws, the payment to Florida consumers of actual
damages caused by the Companys illegal activities, the payment to the State of
Florida of certain civil penalties, the divestiture of any interests of the
Company in Florida real property, and the payment of attorneys fees and costs.

On July 7, 2001, the court dismissed plaintiffs Clements and Gillespies
existing complaints without prejudice. Plaintiffs Clement and Gillespie filed
an amended complaint, and the court dismissed all of Gillespies claims, and
all but one of Clements claims, with prejudice. Plaintiff Gillespie appealed
the dismissal of his claims. On June 12, 2002, the Company entered into a
settlement agreement with plaintiffs Clement and Gillespie in which the Company
agreed to pay each of them a nominal amount. Accordingly, on July 2, 2002,
plaintiff Gillespie voluntarily dismissed with prejudice his appeal, and on
July 14, 2002, the trial court dismissed with prejudice the remaining claim in
plaintiff Clements complaint.

On August 29, 2001, the Attorney General filed an amended complaint that
restated its previous allegations against the Company and the other named
defendants under the FDUTPA and the Florida RICO Act and that also named as
additional defendants a current franchisee and a former franchisee of the
Company in Florida. On March 27, 2002, the court dismissed with prejudice the
Attorney Generals complaint against one of the former employees of the
Company, and on May 20, 2002, the Attorney General appealed that dismissal.
That appeal is pending.

On May 22, 2002, the court dismissed, without prejudice, all but one of the
claims asserted by the Attorney General against the Company and all of the
claims asserted by the Attorney General against the current franchisee in
Florida. On June 5, 2002, upon request by the Attorney General, the court
dismissed the claims against the current franchisee with prejudice, thereby
permitting the Attorney General to appeal that decision. The Attorney General
subsequently filed such an appeal. The remaining claims of the Attorney
General before the trial court are against the Company concerning a small
dollar amount of its renewal transactions; against Messrs. Hemmig and Neustadt
and the remaining former employee of the Company; and against the Companys
former franchisee. The motion to dismiss filed by Messrs. Hemmig and Neustadt
and the former employee and the motion to dismiss filed by the former
franchisee have not yet been considered by the court. The Company intends to
file a motion for summary judgment regarding the remaining claims against it.

Mayella Veasey et al. v. Ace Cash Express, Inc.: This lawsuit regarding the
Companys former deferred-presentment (payday loan) activities in Arkansas
was filed in the Arkansas state Circuit Court of Pulaski County, Arkansas, in
December 2000 and was served on the Company on March 22, 2001. The plaintiff,
for herself and others similarly situated, alleged that the Companys
deferred-presentment transactions in Arkansas from June 15, 1999 to May 1, 2000
violated the usury laws of Arkansas. The plaintiff is represented by the same
counsel that represented the plaintiffs in the previous lawsuit against the
Company in Arkansas regarding deferred-presentment transactions. That previous
lawsuit, which was settled by the Company in October 2000, related to the
Companys deferred-presentment transactions in Arkansas through June 15, 1999,
when a statute that expressly authorized such transactions, the Check Cashers
Act, became effective in Arkansas. The Company believes that this new lawsuit
was prompted by the decision of the Arkansas Supreme Court in March 2001 to the
effect that a portion of the Check Cashers Act was unconstitutional insofar as
it may purport to construe or define the usury provisions of the Arkansas
Constitution. That decision did not, however, address the legality of any
deferred-presentment transaction effected under the Check Cashers Act. Because
the Company has offered only short-term loans made by Goleta National Bank at
the Companys locations in Arkansas since May 1, 2000, the Company has not
entered into any deferred-presentment transactions in Arkansas since that date.
The complaint sought damages in an amount equal to twice the amount paid by
customers of deferred-presentment transactions in Arkansas during the specified
101/2-month period as well as the plaintiffs reasonable attorneys fees and
costs.

On March 6, 2002, the Company entered into a settlement agreement with the
plaintiff under which it agreed to pay a total of $300,000. On July 12, 2002,
the court entered an order approving the settlement agreement and dismissing
the plaintiffs complaint with prejudice. That order became final and
effective on August 12, 2002.

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Pending Lawsuits  Bank Loans

Jennafer Long v. Ace Cash Express, Inc.: This lawsuit regarding Bank Loans
offered and made at the Companys locations in Florida was filed in a Florida
state Circuit Court in Clay County, Florida, and was served on the Company on
November 8, 2000. The plaintiff, for herself and others similarly situated,
alleges that the Bank Loans offered at the Companys locations in Florida are
being made by the Company rather than by Goleta and, therefore, that those Bank
Loans violate Florida usury laws and the offering of those Bank Loans involves
misrepresentations and deceptive practices in violation of Florida law. The
plaintiff seeks an unspecified amount of damages, including an amount equal to
all interest charged on the Bank Loans made in Florida, the plaintiffs
attorneys fees, and court costs.

The Companys attempt to remove this case to federal court was unsuccessful.
On October 2, 2001, the court granted Goletas motion to intervene as a
defendant in this lawsuit. The Company and Goleta filed a motion to dismiss
the plaintiffs complaint on the basis that Goleta is the lender of the Bank
Loans and, under federal law, is entitled to charge interest at the rate
permitted by California law. But on March 20, 2002, the court denied that
motion, and on April 19, 2002, each of the Company and Goleta filed its answer
to the plaintiffs complaint. The parties are conducting discovery in this
lawsuit.

Vonnie T. Hudson v. Ace Cash Express, Inc. et al.: This lawsuit regarding the
Bank Loans offered and made at the Companys locations in Indiana was filed on
September 11, 2001 in the United States District Court for the Southern
District of Indiana. This lawsuit was filed against the Company; Goleta; the
Companys Chairman of the Board, Raymond C. Hemmig; the Companys Chief
Executive Officer, Donald H. Neustadt; the Companys President and Chief
Operating Officer, Jay B. Shipowitz; and a former employee of the Company. The
plaintiff alleged violations of (1) the Indiana UCCC and the Indiana
loansharking statute, because the interest charged for the Bank Loans
exceeded the finance charges permitted by those statutes, (2) the federal TILA,
Regulation Z, and the Indiana UCCC, because the disclosures to borrowers of
Bank Loans did not comply with the disclosure requirements of those laws, and
(3) the federal RICO Act. In the complaint the plaintiff purported to
represent a class of all persons to whom a Bank Loan has been made at any
location of the Company in Indiana (a) since September 11, 1999, regarding the
excess-charge claims, (b) since September 11, 2000, regarding the
disclosure-violation claims, and (c) since September 11, 1997, regarding the
federal RICO Act claims. The plaintiff sought relief of various kinds,
including (i) for the members of the class of plaintiffs who were allegedly
charged excessive interest, an order declaring the Bank Loans to them void,
the refund of all finance charges or interest paid by them in excess of the
maximum finance charges permitted under the Indiana UCCC, and a penalty (to be
determined by the court) in a maximum amount equal to the greater of either all
of the finance charges or interest received from them or up to ten times the
amount of all excess finance charges or interest received from them; (ii) for
the members of the class of plaintiffs who allegedly did not receive proper
disclosures under the federal TILA, Regulation Z, and the Indiana UCCC,
statutory damages of $500,000 each for violations of those statutes; (iii) for
the members of the class of plaintiffs allegedly damaged because of violations
of the RICO Act, an amount equal to three times those damages; and (iv) the
plaintiffs attorneys fees and court costs. The plaintiffs counsel are the
same as the plaintiffs counsel in the Eva J. Rowings lawsuit described above.

On December 17, 2001, the defendants filed a motion to dismiss the plaintiffs
complaint, and on May 30, 2002, the court granted the motion. Based on its
review of the complaint and other filed documents, the court concluded that
Goleta made the Bank Loan to the plaintiff and then sold a participation
interest in that Bank Loan to the Company, so that the claims asserted in the
complaint were not sufficient to entitle the plaintiff to any damages or other
legal relief. The court, however, afforded the plaintiff an opportunity to
amend her complaint to assert legally sufficient claims.

On June 25, 2002, the plaintiff filed an amended complaint, which is
substantially similar to the complaint that was dismissed, except that the
amended complaint does not name Goleta as a defendant and does not assert any
disclosure-violation claims. On July 8, 2002, the Company and other remaining
defendants filed a motion to dismiss the amended complaint, asserting that the
amended complaint did not allege sufficient new facts to justify relief and
that the courts initial decision is dispositive. On August 8, 2002, the
plaintiff filed an opposition to that motion. The motion is pending before the
court.

Pending Lawsuits  Payday Loans and Bank Loans

Rufus Patricia Brown v. Ace Cash Express, Inc. et al.: This lawsuit regarding
both the Companys former payday loan activities and the Bank Loans offered
and made at the Companys locations in Maryland was filed on August 20, 2001 in
the Circuit Court for Baltimore City, Maryland. On September 12, 2001, the
plaintiff filed an amended complaint against the Company and unnamed
franchisees of the Company. In the complaint, the plaintiff purports to
represent a class of all consumers with whom the Company has entered into any
payday-loan transaction or to whom a Bank Loan has been made at any location of
the Company in Maryland since April 1, 2000. The plaintiff alleges that the
defendants loan-related activities violate the Maryland usury laws, the
Maryland Consumer Loan Law, the Maryland Unsecured Closed End Credit

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Regulation Act, and the Maryland Consumer Protection Act and are unconscionable
under Maryland law. The plaintiff seeks relief of various kinds, including a
permanent injunction against any further alleged illegal activities, an order
that all obligations of the class of plaintiffs to the defendants are void, the
return (as restitution) to the class of plaintiffs of all amounts paid to the
defendants, an order dissolving the Company and prohibiting all defendants from
conducting any further financial services business, the disgorgement and return
of all profits from the loan-related activities, the plaintiffs attorneys
fees and expenses, and court costs.

On September 7, 2001, the Company removed this lawsuit to the United States
District Court for the District of Maryland, but on November 14, 2001, the
federal court granted the plaintiffs motion to remand this lawsuit back to the
Circuit Court of Baltimore City. On January 3, 2002, Goleta filed a motion to
intervene as a defendant in this lawsuit, and the court granted that motion on
January 8, 2002. The parties are conducting discovery in this lawsuit.

Beverly Purdie v. Ace Cash Express, Inc. et al.: This lawsuit regarding both
the Companys former payday loan activities and the Bank Loans offered and
made at the Companys locations was filed on September 6, 2001 in the United
States District Court for the Northern District of Texas. The original
complaint named as defendants the Company and certain of the executive officers
and directors and a former employee of the Company. As the result of two
amended complaints, however, only the Company and Goleta are currently
defendants in this lawsuit. In her second amended complaint, the plaintiff
purports to represent a class of all consumers in the United States with whom
the Company has entered into any payday-loan transaction or to whom a Bank Loan
has been made at any location of the Company since September 6, 1997, as well
as sub-classes of persons who have engaged in those kinds of transactions with
the Company or at the Companys locations and are alleged to be victims of
usury or of unfair or deceptive lending practices under the laws of various
states in the United States during the time periods within the various
applicable statutes of limitations. The plaintiffs allege that the defendants
loan-related activities violate the federal RICO Act and the laws and
regulations of various states regarding usury, deceptive trade practices
(including the Texas Deceptive Trade Practices Act), and other consumer
protections. The plaintiff seeks relief of various kinds, including a
permanent injunction against any further alleged illegal activities; the return
(as restitution) to the class and sub-classes of plaintiffs of all amounts paid
to the defendants; damages equal to three times the amount of all fees and
interests paid by the class and sub-classes of plaintiffs since September 6,
1997; punitive damages of at least $250 million; the plaintiffs attorneys
fees; and court costs.

On January 18, 2002, the Company and Goleta filed a motion to dismiss the
second amended complaint, asserting that the federal RICO Act claims are
legally deficient and should be dismissed and that, if those claims are
dismissed, the court should not retain jurisdiction of the remaining state-law
claims. On February 7, 2002, the plaintiff filed an opposition to that motion.
The motion is pending before the court.

General: Because each of these lawsuits purports to be a class action, the
amount of damages for which the Company might be responsible is necessarily
uncertain. Regarding each lawsuit, that amount would depend upon proof of the
allegations, on the number of persons who constitute the class of plaintiffs
(if permitted by the court) or the number or the amount of the loan-related
transactions during an applicable time period, and (for certain of the claims)
on proof of actual damages sustained by the plaintiffs. The Company intends to
vigorously defend these lawsuits.

State Regulatory Proceedings

Notice from Ohio Department of Commerce: On July 16, 2001, the Ohio Department
of Commerce delivered a Notice of Intent to Issue Cease and Desist Order and
Notice of Opportunity for Hearing to the Company. In this Notice, the Ohio
Superintendent of the Division of Financial Institutions (the Superintendent)
asserted that the Company, not Goleta, is the lender or the maker of the Bank
Loans made in Ohio; that those Bank Loans violate the Ohio Small Loan Act and
are void; that all finance charges and interest received from those Bank Loans,
as well as the outstanding principal of all such existing Bank Loans, should be
forfeited; and that the Company should be ordered to cease violating the Ohio
Small Loan Act.

On October 12, 2001, Goleta filed a complaint in the United States District
Court for the Southern District of Ohio against the Superintendent. The
complaint requests the court to enjoin the Superintendent from enforcing the
Ohio Small Loan Act against the Company or Goleta in connection with the Bank
Loans in Ohio. Goleta concurrently filed a motion for preliminary injunction
against the Superintendents continuing the administrative action. On November
23, 2001, the Superintendent filed a motion opposing Goletas motion for a
preliminary injunction and a motion to dismiss Goletas complaint. On December
14, 2001, Goleta filed a motion opposing the Superintendents motion to dismiss
and a brief in support of its motion for preliminary injunction; and on January
4, 2002, the Superintendent filed its reply brief. On January 4, 2002, a
friend-of-the-court brief in favor of the Superintendent was filed by the
attorneys general or consumer protection agencies of 16 states: Alabama,
Alaska, Arizona, Colorado, Connecticut, Indiana, Iowa, Kansas, Louisiana,
Massachusetts, Nevada, New Mexico, North Carolina, Vermont, West Virginia, and
Wyoming. On February 12, 2002, Financial Services Centers of America, Inc.,
the largest trade association for the payday-loan industry, filed a
friend-of-the-court brief in favor of the Company and Goleta. The motions
are pending before the court.

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North Carolina Lawsuits: As the result of inquiries and statements to the
Company by North Carolina governmental authorities in early January 2002, the
Company and Goleta learned that those authorities intended to institute legal
proceedings against the Company regarding the offering of Bank Loans in North
Carolina. In response, on January 14, 2002, the Company and Goleta filed a
complaint in the United States District Court for the Eastern District of North
Carolina against Hal D. Lingerfelt, the Commissioner of Banks of North
Carolina, and Roy Cooper, the Attorney General of North Carolina (collectively,
the State). In the complaint, the Company and Goleta requested that the
court (1) declare that the Bank Loans and related activities of Goleta and the
Company are governed by federal law, which preempts any contrary North Carolina
law, and (2) enjoin the State from alleging any violations of North Carolina
law because of those Bank Loans and related activities and from seeking to
prohibit or restrict those loans and related activities by applying North
Carolina law. On May 23, 2002, the federal court granted the States motion to
dismiss the complaint filed by the Company and Goleta. On June 21, 2002, the
Company and Goleta filed an appeal of that dismissal in the United States Court
of Appeals for the Fourth Circuit, which is pending.

Also on January 14, 2002 (but after the complaint of the Company and Goleta was
filed in federal court), the State filed a complaint in North Carolina state
court in Wake County, North Carolina, against the Company (but not Goleta).
The complaint alleges that the Company rather than Goleta is the lender of the
short-term loans in North Carolina and, therefore, that the Companys loan
activities violate the North Carolina Consumer Finance Act and other North
Carolina usury laws and the North Carolina Check Casher Act (under which the
Company is licensed as a check casher). In the alternative, the complaint
alleges that if the Company is not the lender, it is arranging or brokering
loans for North Carolina consumers on behalf of Goleta in violation of the
North Carolina Loan Broker Act. The complaint also alleges that, in either
case, the Companys loan activities violate North Carolina laws against unfair
and deceptive acts or practices. In the complaint, the State seeks relief of
various kinds, including a permanent injunction against the Companys
loan-related activities regarding North Carolina consumers; a judicial
declaration that the loans made by the Company in violation of North Carolina
are void and usurious; an order that the Company refund all amounts collected
by it as a result of the unlawful loans; an order that the Company forfeit all
interest and pay an amount equal to twice the interest collected from North
Carolina borrowers; and the plaintiffs attorneys fees and costs. On January
31, 2002, the Company removed this lawsuit to the United States District Court
for the Eastern District of North Carolina, but on May 14, 2002, the federal
court granted the States motion to remand this lawsuit back to North Carolina
state court. The parties are conducting discovery in this lawsuit.

Non-Loan-Related Proceeding

Ace Cash Express, Inc. v. Valley Check Cashiers, Inc., Jeffrey D. Silverman,
and Morris Silverman: On November 27, 2001, the Company filed this lawsuit in
Texas state court in Travis County, Texas, seeking damages relating to the
defendants misrepresentations and breaches of warranties in an Asset Purchase
Agreement between the Company and the defendants, and certain other entities
affiliated with the defendants, dated as of November 10, 2000. Under the Asset
Purchase Agreement, the Company acquired the assets of 107 check-cashing and
retail financial services locations owned and managed by the defendants and
their affiliated entities for a total purchase price of $29.7 million in cash.
Eleven of the acquired locations were in third-party grocery stores, operated
under the Handy Andy name, in and around San Antonio, Texas. Following the
foreclosure and sale of those grocery stores by the secured creditor of the
grocery store operator, the Company (in cooperation with the sellers under the
Asset Purchase Agreement) instituted litigation against that creditor and its
purchaser in January 2001 to maintain the Companys right to operate in those
locations. At a trial in April 2001, the court found that the lease agreement
under which the Company claimed the right to occupy those eleven locations,
which had been assigned to the Company by the defendants and their affiliated
entities, was not enforceable under Texas law. The court therefore ordered the
Company to vacate those eleven locations, which the Company did in June 2001.
Because of the courts finding, the Company requested the defendants to satisfy
their monetary obligations to the Company, based on their representations and
warranties, regarding those locations. When it appeared that further
negotiations regarding the Companys request would be unsuccessful, the Company
filed this lawsuit to recover the damages suffered in connection with, and as a
result of, the loss of those eleven locations. In its complaint, the Company
seeks actual damages in excess of $2 million. On January 14, 2002, the
defendants filed their answer denying all of the Companys material claims.
The parties are conducting discovery in this lawsuit.

Other Incidental Proceedings

The Company is also involved from time to time in various legal proceedings
incidental to the conduct of its business. Management believes that none of
these legal proceedings will result in any material impact on the Companys
financial condition and results of operations.

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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the shareholders of the Company during
the fourth quarter of fiscal 2002.




PART II




ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Companys Common Stock is quoted on The Nasdaq Stock Market (NASDAQ)
under the symbol AACE. At September 19, 2002, there were approximately 97
holders of record of the Common Stock, and there were approximately 1,515
beneficial holders of the Common Stock held in nominee or street name.

The following table sets forth the high and low sale prices of the Common Stock
as reported by NASDAQ for the past two fiscal years:

|                                 |  |      |          |     |  |  |         | 
|-------------------------------- |  | ---- | -------- | --- |  |  | ------- | 
|                                 |  | High |          | Low
|                                 |  |      |          |    
|Fiscal 2001                      |  |      |          |     |  |  |         | 
|Quarter ended September 30, 2000 |  |      | 12-5/16  |     |  |  | 8-3/4   | 
|Quarter ended December 31, 2000  |  |      | 15-1/4   |     |  |  | 10-1/8  | 
|Quarter ended March 31, 2001     |  |      | 13-7/8   |     |  |  | 10-1/8  | 
|Quarter ended June 30, 2001      |  |      | 12-11/16 |     |  |  | 7-1/4   | 
|Fiscal 2002                      |  |      |          |     |  |  |         | 
|Quarter ended September 30, 2001 |  |      | 10-1/2   |     |  |  | 7-5/8   | 
|Quarter ended December 31, 2001  |  |      | 9-7/8    |     |  |  | 7-3/4   | 
|Quarter ended March 31, 2002     |  |      | 11-1/8   |     |  |  | 8-3/8   | 
|Quarter ended June 30, 2002      |  |      | 11-1/2   |     |  |  | 8-11/16 | 

On September 19, 2002, the last reported sale price of the Common Stock on
NASDAQ was $8.55 per share.

The Company has never paid dividends on the Common Stock and has no plans to
pay dividends in the foreseeable future. In addition, the Companys ability to
pay cash dividends is currently limited under the Credit Agreement (see
Managements Discussion and Analysis of Financial Condition and Results of
Operations  Liquidity and Capital Resources  Credit Facilities).

23



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##### Table of Contents






ITEM 6. SELECTED FINANCIAL DATA

|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |     |     |     |  
|---------------------------------------------------------------------------- | --------------------------------------- | ----------------- | ---------- | ----- | ----------------------------------------------- | --- | ------- | ----- | ---- | ---- | ------- | --- | ---- | --- | ------- | ---- | --- | --- | ------- | --- | --- | --- | -
|                                                                             |                                         |                   |            |       | Year Ended June 30,                            
|                                                                             |                                         |                   |            |       |                                                
|                                                                             |                                         |                   |            |       | 2002                                            |     | 2001    |       | 2000 |      | 1999    |     | 1998
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |     
|                                                                             |                                         |                   |            |       | (in thousands, except per share and store data)
|Statement of Operations Data:                                                |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Revenues                                                                     |                                         | $                 | 229,266    |       |                                                 | $   | 196,775 |       |      | $    | 140,636 |     |      | $   | 122,314 |      |     | $   | 100,194 |    
|Store expenses                                                               |                                         |                   | 151,827    |       |                                                 |     | 145,015 |       |      |      | 94,668  |     |      |     | 80,943  |      |     |     | 67,103  |    
|Region expenses                                                              |                                         |                   | 17,495     |       |                                                 |     | 14,127  |       |      |      | 11,119  |     |      |     | 9,369   |      |     |     | 8,353   |    
|Headquarters expenses                                                        |                                         |                   | 16,594     |       |                                                 |     | 10,328  |       |      |      | 8,247   |     |      |     | 7,673   |      |     |     | 7,198   |    
|Franchise expenses                                                           |                                         |                   | 993        |       |                                                 |     | 1,017   |       |      |      | 1,063   |     |      |     | 1,288   |      |     |     | 965     |    
|Other depreciation and amortization                                          |                                         |                   | 7,570      |       |                                                 |     | 5,087   |       |      |      | 3,798   |     |      |     | 4,236   |      |     |     | 3,502   |    
|Interest expense                                                             |                                         |                   | 14,934     |       |                                                 |     | 12,016  |       |      |      | 6,123   |     |      |     | 4,476   |      |     |     | 2,437   |    
|Other expenses:                                                              |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|                                                                             | Restructuring                           |                   |            | (163  | )                                               |     |         | 7,710 |      |      |         |    |      |     |         |     |     |     |         |    |    
|                                                                             | Legal settlements                       |                   |            | 1,984 |                                                 |     |         | 350   |      |      |         | 584 |      |     |         | 130  |     |     |         | 0   |    
|                                                                             | Other (including store closing expense) |                   |            | 1,006 |                                                 |     |         | 108   |      |      |         | 371 |      |     |         | 559  |     |     |         | 49  |    
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Total other expenses                                                         |                                         |                   | 2,827      |       |                                                 |     | 8,168   |       |      |      | 955     |     |      |     | 689     |      |     |     | 49      |    
|Income before income taxes                                                   |                                         |                   | 17,026     |       |                                                 |     | 1,017   |       |      |      | 14,663  |     |      |     | 13,640  |      |     |     | 10,587  |    
|Income taxes                                                                 |                                         |                   | 6,913      |       |                                                 |     | 406     |       |      |      | 5,797   |     |      |     | 5,390   |      |     |     | 4,185   |    
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Net income before cumulative effect of
accounting change (1)                 |                                         | $                 | 10,113     |       |                                                 | $   | 611     |       |      | $    | 8,866   |     |      | $   | 8,250   |      |     | $   | 6,402   |    
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Diluted earnings per share before cumulative effect of
accounting change (1) |                                         | $                 | 1.00       |       |                                                 | $   | .06     |       |      | $    | .86     |     |      | $   | .80     |      |     | $   | .63     |    
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Weighted average number of dilutive shares                                   |                                         |                   | 10,141     |       |                                                 |     | 10,158  |       |      |      | 10,361  |     |      |     | 10,283  |      |     |     | 10,215  |    
|Balance Sheet Data:                                                          |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Cash and cash equivalents                                                    |                                         | $                 | 116,264    |       |                                                 | $   | 129,186 |       |      | $    | 105,577 |     |      | $   | 59,414  |      |     | $   | 60,168  |    
|Total assets                                                                 |                                         |                   | 267,062    |       |                                                 |     | 276,197 |       |      |      | 221,423 |     |      |     | 145,233 |      |     |     | 134,635 |    
|Term advances                                                                |                                         |                   | 48,350     |       |                                                 |     | 53,000  |       |      |      | 18,500  |     |      |     | 10,500  |      |     |     | 7,073   |    
|Money order principal payable                                                |                                         |                   | 13,417     |       |                                                 |     | 16,928  |       |      |      | 10,487  |     |      |     | 5,340   |      |     |     | 47,486  |    
|Revolving advances                                                           |                                         |                   | 97,500     |       |                                                 |     | 109,800 |       |      |      | 95,000  |     |      |     | 40,100  |      |     |     | 1,932   |    
|Senior secured notes payable                                                 |                                         |                   | 8,000      |       |                                                 |     | 12,000  |       |      |      | 16,000  |     |      |     | 20,226  |      |     |     | 20,226  |    
|Shareholders equity                                                         |                                         |                   | 66,139     |       |                                                 |     | 54,726  |       |      |      | 55,159  |     |      |     | 48,274  |      |     |     | 38,951  |    
|Supplemental Statistical Data:                                               |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Company-owned stores in operation:                                           |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|                                                                             |                                         | Beginning of year |            |       | 988                                             |     |         |       | 915  |      |         |     | 798  |     |         |      | 683 |     |         |     | 617 |    
|                                                                             |                                         |                   | Acquired   |       |                                                 | 8   |         |       |      | 133  |         |     |      | 36  |         |      |     | 35  |         |     |     | 15  |  
|                                                                             |                                         |                   | Opened     |       |                                                 | 39  |         |       |      | 49   |         |     |      | 99  |         |      |     | 99  |         |     |     | 62  |  
|                                                                             |                                         |                   | Closed (2) |       |                                                 | (32 | )       |       |      | (109 | )       |     |      | (18 | )       |      |     | (19 | )       |     |     | (11 | )
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|                                                                             |                                         | End of year       |            |       | 1,003                                           |     |         |       | 988  |      |         |     | 915  |     |         |      | 798 |     |         |     | 683 |    
|                                                                             |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|Percentage increase in comparable store revenues from
prior year:            |                                         |                   |            |       |                                                 |     |         |       |      |      |         |     |      |     |         |      |     |     |         |    
|                                                                             | Exclusive of tax-related revenues (3)   |                   |            | 14.1  | %                                               |     |         | 25.5  | %    |      |         | 7.1 | %    |     |         | 10.6 | %   |     |         | 8.0 | %  
|                                                                             | Total revenues (4)                      |                   |            | 15.6  | %                                               |     |         | 23.3  | %    |      |         | 6.9 | %    |     |         | 10.8 | %   |     |         | 6.9 | %  
|Capital expenditures                                                         |                                         | $                 | 7,127      |       |                                                 | $   | 12,655  |       |      | $    | 12,255  |     |      | $   | 10,089  |      |     | $   | 5,742   |    
|Cost of net assets acquired                                                  |                                         | $                 | 1,177      |       |                                                 | $   | 35,841  |       |      | $    | 11,359  |     |      | $   | 8,378   |      |     | $   | 4,708   |    



---

|(1) |  | Before a cumulative effect of accounting change recorded in the three
months ended September 30, 1999, of $0.6 million, net of a $0.4 million
tax benefit, relating to the adoption of Statement of Position 98-5,
Reporting on the Costs of Start-up Activities.
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Includes the 85 stores closed in the fourth quarter of fiscal 2001
resulting from a plan established and executed by management during the
third quarter of fiscal 2001.                                                                                           
|   
|(3) |  | Change in revenues computed excluding electronic tax filing and tax
refund check cashing for the years compared.                                                                                                                                                   
|   
|(4) |  | Calculated based on the changes in revenues of all stores open for the
years compared.                                                                                                                                                                             
|   
|    |  |                                                                                                                                                                                                                                                                    

24



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##### Table of Contents



SELECTED FINANCIAL DATA (continued)

|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |   | 
|------------------------------------------------------------------ | ------------------------- | - | ------------------- | ------- | ---- | - | ------- | ------- | ---- | - | ------- | - |  | - | ------- | - |  | - | ------ | - | 
|                                                                   |                           |   | Year Ended June 30,
|                                                                   |                           |   |                    
|                                                                   |                           |   | 2002                |         | 2001 |   | 2000    |         | 1999 |   | 1998   
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |        
|Operating Data (Check Cashing and Money Orders):                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Face amount of checks cashed (in millions)                         |                           | $ | 4,843               |         |      | $ | 4,498   |         |      | $ | 3,839   |   |  | $ | 3,373   |   |  | $ | 2,898  |  
|Face amount of money orders sold (in millions)                     |                           | $ | 1,711               |         |      | $ | 1,709   |         |      | $ | 1,585   |   |  | $ | 1,905   |   |  | $ | 1,858  |  
|Face amount of average check                                       |                           | $ | 378                 |         |      | $ | 358     |         |      | $ | 339     |   |  | $ | 320     |   |  | $ | 305    |  
|Average fee per check                                              |                           | $ | 9.36                |         |      | $ | 8.38    |         |      | $ | 7.92    |   |  | $ | 7.47    |   |  | $ | 7.26   |  
|Fees as a percentage of average check                              |                           |   | 2.48                | %       |      |   | 2.34    | %       |      |   | 2.33    | % |  |   | 2.33    | % |  |   | 2.38   | %
|Number of checks cashed (in thousands)                             |                           |   | 12,821              |         |      |   | 12,580  |         |      |   | 11,317  |   |  |   | 10,556  |   |  |   | 9,496  |  
|Number of money orders sold (in thousands)                         |                           |   | 11,562              |         |      |   | 12,787  |         |      |   | 12,339  |   |  |   | 14,495  |   |  |   | 14,146 |  
|Collections Data:                                                  |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Face amount of returned checks (in thousands)                      |                           | $ | 23,637              |         |      | $ | 26,536  |         |      | $ | 16,548  |   |  | $ | 12,442  |   |  | $ | 10,193 |  
|Collections (in thousands)                                         |                           |   | 16,090              |         |      |   | 17,717  |         |      |   | 10,788  |   |  |   | 7,423   |   |  |   | 6,301  |  
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Net write-offs (in thousands)                                      |                           | $ | 7,547               |         |      | $ | 8,819   |         |      | $ | 5,760   |   |  | $ | 5,019   |   |  | $ | 3,892  |  
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Collections as a percentage of returned checks                     |                           |   | 68.1                | %       |      |   | 66.8    | %       |      |   | 65.2    | % |  |   | 59.7    | % |  |   | 61.8   | %
|Net write-offs as a percentage of revenues                         |                           |   | 3.3                 | %       |      |   | 4.5     | %       |      |   | 4.1     | % |  |   | 4.1     | % |  |   | 3.9    | %
|Net write-offs as a percentage of the face amount
of checks cashed |                           |   | .16                 | %       |      |   | .20     | %       |      |   | .15     | % |  |   | .15     | % |  |   | .13    | %
|Operating Data (Small Consumer Loans):                             |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Volume (in thousands)                                              |                           | $ | 502,013             |         |      | $ | 396,783 |         |      | $ | 137,015 |   |  | $ | 105,765 |   |  | $ | 69,182 |  
|Average advance                                                    |                           | $ | 269                 |         |      | $ | 269     |         |      | $ | 240     |   |  | $ | 200     |   |  | $ | 177    |  
|Average finance charge                                             |                           | $ | 45.61               |         |      | $ | 42.30   |         |      | $ | 34.51   |   |  | $ | 30.30   |   |  | $ | 27.51  |  
|Number of loan transactions (in thousands)                         |                           |   | 1,866               |         |      |   | 1,477   |         |      |   | 557     |   |  |   | 460     |   |  |   | 338    |  
|Balance Sheet Data (in thousands):                                 |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Gross loans receivable                                             |                           | $ | 29,569              |         |      | $ | 27,768  |         |      | $ | 18,695  |   |  | $ | 5,543   |   |  | $ | 4,733  |  
|Less: Allowance for losses on loans receivable                     |                           |   | 12,213              |         |      |   | 13,382  |         |      |   |        |   |  |   |        |   |  |   |       |  
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Loans receivable, net of allowance                                 |                           | $ | 17,356              |         |      | $ | 14,386  |         |      | $ | 18,695  |   |  | $ | 5,543   |   |  | $ | 4,733  |  
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Allowance for losses on loans receivable:                          |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|                                                                   | Beginning of period       |   | $                   | 13,382  |      |   | $       |        |      |   | $       |  |  |   | $       |  |  |   | $      |  | 
|                                                                   | Provision for loan losses |   |                     | 21,924  |      |   |         | 26,429  |      |   |         |  |  |   |         |  |  |   |        |  | 
|                                                                   | Net charge-offs           |   |                     | (23,093 | )    |   |         | (13,047 | )    |   |         |  |  |   |         |  |  |   |        |  | 
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|                                                                   | End of period             |   | $                   | 12,213  |      |   | $       | 13,382  |      |   | $       |  |  |   | $       |  |  |   | $      |  | 
|                                                                   |                           |   |                     |         |      |   |         |         |      |   |         |   |  |   |         |   |  |   |        |  
|Allowance as a percent of gross loans receivable                   |                           |   | 41.3                | %       |      |   | 48.2    | %       |      |   |        |   |  |   |        |   |  |   |       |  

25



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##### Table of Contents






ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Results of Operations

|                                                         |  |                     |         |                         |  |      |         |      |  |      |         |      |  |  |       |   |  |  |       |   |  |  |       |  
|-------------------------------------------------------- |  | ------------------- | ------- | ----------------------- |  | ---- | ------- | ---- |  | ---- | ------- | ---- |  |  | ----- | - |  |  | ----- | - |  |  | ----- | -
|Revenue Analysis                                         |  | Year Ended June 30,
|                                                         |  |                    
|                                                         |  | (in thousands)      |         | (percentage of revenue)
|                                                         |  | 2002                |         | 2001                    |  | 2000 |         | 2002 |  | 2001 |         | 2000
|                                                         |  |                     |         |                         |  |      |         |      |  |      |         |     
|Check cashing fees                                       |  | $                   | 118,907 |                         |  | $    | 105,479 |      |  | $    | 89,641  |      |  |  | 51.9  | % |  |  | 53.6  | % |  |  | 63.8  | %
|Loan fees and interest                                   |  |                     | 74,197  |                         |  |      | 54,771  |      |  |      | 17,872  |      |  |  | 32.4  |   |  |  | 27.8  |   |  |  | 12.7  |  
|Bill-payment services                                    |  |                     | 10,156  |                         |  |      | 10,376  |      |  |      | 9,447   |      |  |  | 4.4   |   |  |  | 5.3   |   |  |  | 6.7   |  
|Money transfer services                                  |  |                     | 10,998  |                         |  |      | 10,270  |      |  |      | 8,944   |      |  |  | 4.8   |   |  |  | 5.2   |   |  |  | 6.4   |  
|Money order fees                                         |  |                     | 7,554   |                         |  |      | 7,245   |      |  |      | 7,032   |      |  |  | 3.3   |   |  |  | 3.7   |   |  |  | 5.0   |  
|Franchise revenues                                       |  |                     | 2,199   |                         |  |      | 2,257   |      |  |      | 2,537   |      |  |  | 0.9   |   |  |  | 1.2   |   |  |  | 1.8   |  
|Other fees                                               |  |                     | 5,255   |                         |  |      | 6,377   |      |  |      | 5,163   |      |  |  | 2.3   |   |  |  | 3.2   |   |  |  | 3.6   |  
|                                                         |  |                     |         |                         |  |      |         |      |  |      |         |      |  |  |       |   |  |  |       |   |  |  |       |  
|Total revenue                                            |  | $                   | 229,266 |                         |  | $    | 196,775 |      |  | $    | 140,636 |      |  |  | 100.0 | % |  |  | 100.0 | % |  |  | 100.0 | %
|                                                         |  |                     |         |                         |  |      |         |      |  |      |         |      |  |  |       |   |  |  |       |   |  |  |       |  
|Average revenue per store
(excluding franchise revenues) |  | $                   | 227.3   |                         |  | $    | 195.9   |      |  | $    | 161.1   |      |  |  |       |   |  |  |       |   |  |  |       |  

Fiscal 2002 Compared to Fiscal 2001.Revenues increased $32.5 million, or 17%,
from $196.8 million in the year ended June 30, 2001, to $229.3 million in the
year ended June 30, 2002. This revenue growth resulted from a $25.5 million, or
15.6%, increase in comparable company-owned store revenues (797 stores) and a
$7.0 million increase from stores which were opened or acquired after June 30,
2000, and were therefore not open for both of the full periods compared.
Average revenue per store increased by $31,400 primarily because of increases
in check cashing fees (including tax check fees) and loan fees and interest,
though these increases were partially offset by a decrease in other fees. The
number of company-owned stores increased by 15, or 2%, from 988 stores open at
June 30, 2001, to 1,003 stores open at June 30, 2002. The increase in loan fees
and interest accounted for 60% of the total revenue increase, and total
check-cashing fees accounted for 41% of the total revenue increase.

Loan fees and interest for the year ended June 30, 2002, primarily reflect the
Companys participation interests in loans made by Goleta National Bank
(Goleta) at most of the company-owned stores during fiscal 2002. Loan fees
and interest increased $19.4 million, or 35%, to $74.2 million in fiscal 2002
as compared to $54.8 million in fiscal 2001, due to the increased consumer
awareness of Goleta loans at the stores and to the increase in the average
finance charges for these loans. Check cashing fees, including tax check fees,
increased $13.4 million, or 13%, from $105.5 million in fiscal 2001 to $118.9
million in fiscal 2002. This increase resulted from a 6% increase in the
average size check and a 12% increase in the average fee per check. An
increase in tax check fees contributed $6.2 million of the total $13.4 million
increase. The Company received $3.8 million of tax check fees from 100
self-service machines located in H&R Block offices in fiscal 2002, compared to
$1.2 million of tax check fees from 50 self-service machines in H&R Block
offices last fiscal year. Despite a decrease in the number of money orders
sold, money order fees increased $0.3 million in fiscal 2002 from fiscal 2001
as a result of an increase in the average money order fee charged. Other fees
declined primarily as a result of reductions in peso exchange fees and fees
from prepaid telephone cards.

During fiscal 2002, the Company opened 22 franchised stores, acquired eight
former franchised stores, transferred one franchised store and closed four
franchised stores. Franchise revenues consist of royalties, and initial and
optional franchise fees. Franchise revenues declined slightly as a result of
the reduced number of franchised store openings.

Fiscal 2001 Compared to Fiscal 2000.Revenues increased $56.1 million, or 40%,
from $140.6 million in the year ended June 30, 2000, to $196.8 million in the
year ended June 30, 2001. This revenue growth resulted from a $28.7 million, or
23.3%, increase in comparable company-owned store revenues (713 stores) and a
$27.4 million increase from stores which were opened or acquired after June 30,
1999, and were therefore not open for both of the full periods compared.
Average revenue per store increased by $34,800 primarily because of the
offering of the Goleta loans in almost all of the company-owned stores in
fiscal 2001. The number of company-owned stores increased by 73, or 8%, from
915 stores open at June 30, 2000, to 988 stores open at June 30, 2001. The
increase in loan fees and interest accounted for 66% of the total revenue
increase; total check-cashing fees accounted for 28% of the total revenue
increase; the increase in money transfer services revenues accounted for 2% of
the total revenue increase; and the increase in bill-payment services revenues
accounted for 2% of the total revenue increase.

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Loan fees and interest for the year ended June 30, 2001, primarily reflect the
Companys participation interests in Goleta loans, but for most of the year
ended June 30, 2000, reflect the Companys so-called payday loans to
customers. Loan fees and interest increased $36.9 million, or 206%, to $54.8
million in fiscal 2001 as compared to $17.9 million in fiscal 2000 due to the
increase in the number of stores offering loan products, which in turn is
principally due to the offering of the Goleta loan product in 947 stores as of
June 30, 2001. The Companys payday loan product was offered in 355 stores
during the first nine months of fiscal 2000, and the transition to the Goleta
loan product began in the fourth quarter of fiscal 2000. Check cashing fees,
including tax check fees, increased $15.8 million, or 18%, from $89.6 million
in fiscal 2000 to $105.5 million in fiscal 2001. This increase resulted from an
11% increase in the total number of checks cashed and a 6% increase in the
average fee per check due to the increase in the average size check. In
addition, $1.0 million of the increase in fees was attributable to 50 of the
Companys self-service machines located in tax preparers offices during the
calendar 2001 tax season. Money transfer services revenues increased $1.3
million, or 15%, principally as a result of acquired stores and related revenue
guarantees and bonuses. Bill-payment services increased $0.9 million, or 10%,
principally as a result of new bill-payment contracts and growth in payment
revenue from existing bill-payment contracts.

During fiscal 2001, the Company opened 29 franchised stores, acquired two
former franchised stores and closed nine franchised stores. Franchise revenues
consist of royalties, and initial and optional franchise fees. Franchise
revenues decreased $0.3 million, or 11%, from fiscal 2000 to fiscal 2001 due to
the reduced number of franchised store openings.

|                           |  |                     |         |                         |  |      |         |      |  |      |        |      |  |  |      |   |  |  |      |   |  |  |      |  
|-------------------------- |  | ------------------- | ------- | ----------------------- |  | ---- | ------- | ---- |  | ---- | ------ | ---- |  |  | ---- | - |  |  | ---- | - |  |  | ---- | -
|Store Expense Analysis     |  | Year Ended June 30,
|                           |  |                    
|                           |  | (in thousands)      |         | (percentage of revenue)
|                           |  | 2002                |         | 2001                    |  | 2000 |         | 2002 |  | 2001 |        | 2000
|                           |  |                     |         |                         |  |      |         |      |  |      |        |     
|Salaries and benefits      |  | $                   | 57,864  |                         |  | $    | 51,969  |      |  | $    | 38,639 |      |  |  | 25.2 | % |  |  | 26.4 | % |  |  | 27.4 | %
|Occupancy                  |  |                     | 28,207  |                         |  |      | 26,439  |      |  |      | 21,507 |      |  |  | 12.3 |   |  |  | 13.4 |   |  |  | 15.3 |  
|Armored and security       |  |                     | 7,708   |                         |  |      | 7,442   |      |  |      | 5,608  |      |  |  | 3.4  |   |  |  | 3.8  |   |  |  | 4.0  |  
|Returns and cash shorts    |  |                     | 10,390  |                         |  |      | 12,553  |      |  |      | 9,037  |      |  |  | 4.6  |   |  |  | 6.4  |   |  |  | 6.4  |  
|Loan losses and provisions |  |                     | 22,064  |                         |  |      | 24,825  |      |  |      | 4,177  |      |  |  | 9.6  |   |  |  | 12.6 |   |  |  | 3.0  |  
|Depreciation               |  |                     | 7,180   |                         |  |      | 6,697   |      |  |      | 5,429  |      |  |  | 3.1  |   |  |  | 3.4  |   |  |  | 3.9  |  
|Other expenses             |  |                     | 18,414  |                         |  |      | 15,090  |      |  |      | 10,271 |      |  |  | 8.0  |   |  |  | 7.7  |   |  |  | 7.3  |  
|                           |  |                     |         |                         |  |      |         |      |  |      |        |      |  |  |      |   |  |  |      |   |  |  |      |  
|Total store expense        |  | $                   | 151,827 |                         |  | $    | 145,015 |      |  | $    | 94,668 |      |  |  | 66.2 | % |  |  | 73.7 | % |  |  | 67.3 | %
|                           |  |                     |         |                         |  |      |         |      |  |      |        |      |  |  |      |   |  |  |      |   |  |  |      |  
|Average per store expense  |  | $                   | 152.0   |                         |  | $    | 146.1   |      |  | $    | 110.5  |      |  |  |      |   |  |  |      |   |  |  |      |  

Fiscal 2002 Compared to Fiscal 2001.Store expenses increased $6.8 million, or
5%, in fiscal 2002 over fiscal 2001, primarily as a result of increased amount
of performance bonuses and merit increases paid to store employees. Average
store expense increased by approximately $6,000 per store in fiscal 2002 as
compared to fiscal 2001. Store expenses decreased as a percentage of revenues,
however, from 73.7% in fiscal 2001 to 66.2% in fiscal 2002. Salaries and
benefits expenses increased $5.9 million, or 11 percent, in fiscal 2002 from
fiscal 2001 primarily as a result of the increased performance bonus expense.
Occupancy costs and armored and security expenses combined increased $2.0
million, or 6%, as a result of scheduled increases in lease and armored and
security expense, along with additional armored and security expense related to
the self-service machines. Returned checks, net of collections, and cash
shortages decreased $2.2 million, or 17%, in fiscal 2002 as compared to fiscal
2001, due to improvements in operational procedures and controls. Returned
checks, net of collections, and cash shortages as a percentage of revenues also
decreased to 5% in fiscal 2002 from 6% in fiscal 2001. Loan loss provision
decreased $2.8 million, or 11%, in fiscal 2002 from fiscal 2001 primarily due
to improved collections experience. The allowance for loan losses of $12.2
million at June 30, 2002, represented 41.3% of gross loans receivable and was a
decrease from the allowance for loan losses of $13.4 million and 48.2% of gross
loans receivable at June 30, 2001. Loan losses are charged to this allowance,
which is reviewed for adequacy (and may be adjusted) on a quarterly basis.
Other store expenses increased $3.3 million, or 22%, primarily as a result of
lease costs for the Companys self-service machines placed at H&R Block
offices, increases in bank charges related to increased rates for bank services
and increased utilization of Automated Clearing House (ACH) transactions for
collections, and additional expense related to operational and marketing
supplies required to support the Goleta loan product.

Fiscal 2001 Compared to Fiscal 2000.Store expenses increased $50.3 million, or
53%, in fiscal 2001 over fiscal 2000, primarily as a result of the increased
number of stores in operation during the period and the increased loan loss
provision for the Goleta loan product. Average store expense increased by
approximately $35,600 per store in fiscal 2001 as compared to fiscal 2000.
Store expenses increased as a percentage of revenues from 67.3% in fiscal 2000
to 73.7% in fiscal 2001, principally as a result of the increase in the loan
loss provision which was 12.6% of revenue. Salaries and benefits expenses,
occupancy costs, and armored and security expenses combined increased $20.1
million, or 31%, primarily as a result of the increased number of stores in
operation. Returned checks, net of collections, and cash shortages increased
$3.5 million, or

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39%, in fiscal 2001 as compared to fiscal 2000, due also to the increased
number of stores in operation. Returned checks, net of collections, and cash
shortages as a percentage of revenues remained the same for fiscal 2001 as for
fiscal 2000.

Loan losses and loss provisions increased $20.6 million in fiscal 2001 over
fiscal 2000. In fiscal 2001, the Company established an allowance for loan
losses to cover the losses anticipated from its participations in Goleta loans,
rather than charging off actual losses as incurred, as the Company did in
fiscal 2000 regarding its payday loans. Loan write-offs are charged to this
allowance, which is reviewed for adequacy, and may be adjusted, on a quarterly
basis. During the third quarter of fiscal 2001, an additional loan loss
provision of $8.5 million was established regarding participations in Goleta
loans. Depreciation expense increased $1.3 million, or 23%, in fiscal 2001 over
fiscal 2000 due to the increased number of stores in operation. Other store
expenses increased $4.8 million, or 47%, as a result of the increased number of
stores in operation and an increase in advertising and other expenses related
to the Goleta loan product.

|                                    |                     |                |        |                         |  |      |        |      |  |      |        |  |  |  |     |   |  |  |     |   |  |  |     |  
|----------------------------------- | ------------------- | -------------- | ------ | ----------------------- |  | ---- | ------ | ---- |  | ---- | ------ |  |  |  | --- | - |  |  | --- | - |  |  | --- | -
|Other Expense Analysis              | Year Ended June 30,
|                                    |                    
|                                    |                     | (in thousands) |        | (percentage of revenue)
|                                    |                     | 2002           |        | 2001                    |  | 2000 |        | 2002 |  | 2001 | 2000  
|                                    |                     |                |        |                         |  |      |        |      |  |      |       
|Region expenses                     |                     | $              | 17,495 |                         |  | $    | 14,127 |      |  | $    | 11,119 |  |  |  | 7.6 | % |  |  | 7.2 | % |  |  | 7.9 | %
|Headquarters expenses               |                     |                | 16,594 |                         |  |      | 10,328 |      |  |      | 8,247  |  |  |  | 7.2 |   |  |  | 5.2 |   |  |  | 5.9 |  
|Franchise expenses                  |                     |                | 993    |                         |  |      | 1,017  |      |  |      | 1,063  |  |  |  | 0.4 |   |  |  | 0.5 |   |  |  | 0.8 |  
|Other depreciation and amortization |                     |                | 7,570  |                         |  |      | 5,087  |      |  |      | 3,798  |  |  |  | 3.3 |   |  |  | 2.6 |   |  |  | 2.7 |  
|Interest expense                    |                     |                | 14,934 |                         |  |      | 12,016 |      |  |      | 6,123  |  |  |  | 6.5 |   |  |  | 6.1 |   |  |  | 4.4 |  
|Other expenses                      |                     |                | 2,827  |                         |  |      | 8,168  |      |  |      | 955    |  |  |  | 1.2 |   |  |  | 4.2 |   |  |  | 0.7 |  

Region Expenses

Fiscal 2002 Compared to Fiscal 2001.Region expenses increased $3.4 million,
or 24%, in fiscal 2002 over fiscal 2001. The increase is a result of additional
personnel in collections and customer-service related to the Goleta loan
product and an increase in the number of district managers in the field. Region
expenses increased as a percentage of revenues to 7.6% in fiscal 2002 from 7.2%
in fiscal 2001.

Fiscal 2001 Compared to Fiscal 2000.Region expenses increased $3.0 million,
or 27%, in fiscal 2001 over fiscal 2000. The increase is primarily a result of
additional personnel in collections and customer-service related to the Goleta
loan product. Region expenses as a percentage of revenues decreased to 7.2%
for fiscal 2001 from 7.9% for fiscal 2000.

Headquarters Expenses

Fiscal 2002 Compared to Fiscal 2001.Headquarters expenses increased $6.3
million, or 61%, in fiscal 2002 over fiscal 2001. Increased legal expenses
associated with defending various lawsuits constituted $2.7 million of the
increase; performance bonus expense constituted $1.4 million of the increase;
and the addition of headquarters personnel and their corresponding salaries and
benefits constituted most of the remaining increase. Headquarters expenses
increased as a percentage of revenues to 7.2% in fiscal 2002 from 5.2% in
fiscal 2001.

Fiscal 2001 Compared to Fiscal 2000.Headquarters expenses increased $2.1
million, or 25%, in fiscal 2001 over fiscal 2000. The increase is principally
the result of additional personnel and the corresponding salaries and benefits.
Headquarters expenses as a percentage of revenue decreased to 5.2% in fiscal
2001 from 5.9% in fiscal 2000.

Franchise Expenses

Fiscal 2002 Compared to Fiscal 2001.Franchise expenses relate to the
salaries, benefits, and other franchisee support costs for the sales and
support personnel in the ACE Franchise Group. Franchise expenses for fiscal
2002 remained substantially the same as those for fiscal 2001. Franchise
expenses as a percentage of revenue decreased to 0.4% for fiscal 2002 from 0.5%
for fiscal 2001.

Fiscal 2001 Compared to Fiscal 2000.Franchise expenses relate to the
salaries, benefits, and other franchisee support costs for the sales and
support personnel in the ACE Franchise Group. Franchise expenses for fiscal
2001 remained substantially the same as those for fiscal 2000. Franchise
expenses as a percentage of revenue decreased to 0.5% for fiscal 2001 from 0.8%
for fiscal 2000.

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Other Depreciation and Amortization

Fiscal 2002 Compared to Fiscal 2001.Other depreciation and amortization
increased $2.5 million, or 49%, in fiscal 2002 from fiscal 2001. This increase
was due to the amortization of an additional $4.9 million of debt financing
costs in fiscal 2002 compared to fiscal 2001 resulting from amendments to the
Companys bank credit agreement, offset by a reduction of $2.3 million for the
discontinuation of goodwill amortization in accordance with SFAS 142, which the
Company adopted in the first quarter of fiscal 2002.

Fiscal 2001 Compared to Fiscal 2000.Other depreciation and amortization
increased $1.3 million, or 34%, for fiscal 2001 as compared to fiscal 2000.
This increase is a result of the additional amortization of intangibles (i.e.,
goodwill and non-competition agreements) resulting from the 133 stores acquired
during fiscal 2001 and the 33 stores acquired during the last half of fiscal
2000, along with the depreciation expense resulting from the 49 stores opened
in fiscal 2001 and the 67 stores opened in the last half of fiscal 2000.

Interest Expense

Fiscal 2002 Compared to Fiscal 2001.Interest expense increased $2.9 million,
or 24%, in fiscal 2002 as compared to fiscal 2001. This increase was the
result of an increase in borrowings used to finance the higher-volume tax
season operations and higher interest rates charged in the last half of fiscal
2002 by the Companys bank lenders.

Fiscal 2001 Compared to Fiscal 2000.Interest expense increased $5.9 million,
or 96%, in fiscal 2001 as compared to fiscal 2000. This increase was
principally the result of increased borrowings to finance store openings and
acquisitions and to purchase participation interests in the Goleta loans.

Other Expenses

Fiscal 2002 Compared to Fiscal 2001.Other expenses decreased by $5.3 million
in fiscal 2002 from fiscal 2001 as a result of the $7.7 million recorded in
fiscal 2001 for the costs associated with closing 85 unprofitable or
underperforming stores owned and operated by the Company, offset by legal
settlement expense of $2.0 million recorded in fiscal 2002 for the settlement
of legal proceedings against the Company in Colorado, Indiana, and Maryland.

Fiscal 2001 Compared to Fiscal 2000.Other expenses increased by $7.2 million
in fiscal 2001 from fiscal year 2000 primarily as a result of the $7.7 million
recorded for the costs associated with closing 85 unprofitable or
underperforming stores owned and operated by the Company.

Income Taxes

Fiscal 2002 Compared to Fiscal 2001.A provision of $6.9 million was recorded
for income taxes for fiscal 2002, compared to $0.4 million for fiscal 2001.
The provision for income taxes was calculated based on a statutory federal
income tax rate of 35%, plus a provision for state income taxes and
non-deductible goodwill resulting from acquisitions. The effective income tax
rate was 40.6% for fiscal 2002 compared to 39.9% for last fiscal year.

Fiscal 2001 Compared to Fiscal 2000.A total of $0.4 million was provided for
income taxes for fiscal 2001 as compared to $5.8 million (excluding a $402,000
tax benefit resulting from a cumulative effect of accounting change) in fiscal
2000. The provisions for income taxes were calculated based on the statutory
federal income tax rate of 34%, plus a provision for state income taxes and
non-deductible goodwill resulting from acquisitions. The effective income tax
rate was 39.9% for fiscal year 2001 and 39.5% for fiscal year 2000.

Balance Sheet Variations

Cash and cash equivalents, the money order principal payable, and the revolving
advances vary because of seasonal and day-to-day requirements resulting
primarily from maintaining cash for cashing checks, purchasing participations
in Goleta loans, and making small consumer loans; receipts of cash from the
sale of money orders; loan volume; and remittances on money orders sold. For
the year ended June 30, 2002, cash and cash equivalents decreased $12.9
million, compared to an increase of $23.6 million for the year ended June 30,
2001.

Accounts receivable, net, at June 30, 2002 increased $5.2 million from June 30,
2001 primarily due to the timing of remittances from Goleta.

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Loans receivable, net, at June 30, 2002 increased $3.0 million from June 30,
2001 as a result of the increased participation interests in outstanding Goleta
loans and a decrease in the loan loss provision for the Companys
participations in Goleta loans based on the improved loan loss experience in
fiscal 2002.

Prepaid expenses and other current assets at June 30, 2002 decreased by $1.7
million from June 30, 2001 primarily due to the change in deferred tax asset
balance.

Property and equipment, net, at June 30, 2002 decreased $2.0 million, and
goodwill, net, at June 30, 2002 increased $1.1 million, from June 30, 2001 as a
result of the 39 stores opened and the 8 stores acquired during fiscal 2002,
offset by the related depreciation and amortization and the 32 stores closed.

Revolving advances at June 30, 2002 decreased by $12.3 million from June 30,
2001 due to timing and reduced usage of the revolving credit facility resulting
from better forecasting and operational procedures regarding store cash
deliveries and more efficient working capital management.

Accounts payable, accrued liabilities, and other current liabilities at June
30, 2002 increased by $5.2 million from June 30, 2001 primarily due to a
combination of an increase in employee performance bonuses payable ($2.0
million) and an increase in litigation-related accrual ($2.3 million).

Senior secured notes payable at June 30, 2002 decreased by $4.0 million from
June 30, 2001 as the result of the Companys payment of the third annual $4.0
million installment of principal in November 2001.

Term advances, which was previously classified as reducing revolving
advances, decreased by a total of $4.7 million at June 30, 2002, as compared
to June 30, 2001, as the result of the Companys repayment of those advances.
The change in classification of term advances from Noncurrent Liabilities to
Current Liabilities on the consolidated balance sheets corresponds to the
short-term maturity of the credit facility under the Companys bank credit
agreement as amended.

Bank Loan Portfolio

Under the Companys Master Loan Agency Agreement and ancillary agreements (the
Goleta Agreement) with Goleta National Bank (Goleta), a national bank
located in Goleta, California, short-term loans made by Goleta (Bank Loans)
are offered at most of the Companys owned locations. Goleta determines the
terms of, including the interest rate charged for, the Bank Loans. Currently,
a Bank Loan may be up to $500 and must be repaid or renewed in 14 days; a Bank
Loan may be renewed up to three times if the borrower pays all accrued interest
and at least 5% of the outstanding principal at the time of each renewal; and
interest equal to $17 per $100 principal of a Bank Loan is charged for each
14-day period.

Under the Goleta Agreement, the Company purchases from Goleta a participation
interest equal to 90% of each Bank Loan made on a previous day. As of June 30,
2002, the gross receivable for the Companys participation interests in the
outstanding Bank Loans was $29.6 million.

The Company has established a loan loss provision for its participation
interests in the Bank Loans; that loan loss provision is maintained at a level
that management of the Company believes to be adequate to absorb known or
probable losses from existing participation interests in Bank Loans. The loan
loss reserve of $12.2 million as of June 30, 2002 represented 41.3% of the
gross loans receivable as of that date. Loan losses for the twelve months ended
June 30, 2002 were $23.1 million. The Companys policy for determining the
loan loss provision is based on historical experience with Bank Loans generally
as well as the results of managements review and analysis of the payment and
collection of the Bank Loans within the last fiscal quarter. The Companys
policy is to charge off its participation interests in all Bank Loans which are
180 days or more past due or delinquent. Charge-offs are applied as a
reduction to the loan loss provision, and any recoveries of previously charged
off participation interests in Bank Loans are applied as an increase to the
loan loss provision.

Management determines or calculates the loan loss provision for the Companys
participation interests in outstanding Bank Loans as a percentage of its
participation interests in the total principal amount of and accrued interest
on the Bank Loans that are to mature, or become due and payable, in a
particular time period (typically, a fiscal quarter). Though the Companys
desire is to receive or collect 100% of the participation interests in the sum
of the principal amount of and accrued interest on all matured Bank Loans, the
Company has established the loan loss provision on the assumption that it will
receive in payment of its participation interests an amount equal to 93% (for
Bank Loans due or past-due in the Companys first, second, and fourth fiscal
quarters) or 94% (for Bank Loans due or past-due in the Companys third fiscal
quarter) of its participation interests in the sum of the principal amount of
and accrued interest on all matured Bank Loans (or, in other words, 7% in the
Companys first, second or fourth fiscal quarters, and 6% in the Companys
third fiscal quarter, of its participation interests in all of the Bank Loans
will be charged off). For this purpose, each renewal of a Bank Loan is treated
as a continuation of the initial Bank Loan.

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The schedule below provides the progressive receipts or collections made on
each quarterly portfolio of Bank Loans. In this case, a quarterly
portfolio is the Companys participation interests in all of the Bank Loans
that matured in a particular fiscal quarter. (Since the Company now has over
one years worth of data, it is able to track the payment rates at different
points of time for each quarterly portfolio.)

Management has established the following targets regarding each quarterly portfolio:



| |  | Receive or collect 89% (or 91% in the Companys third fiscal quarter) of the total
principal and interest by the end of the current quarter (i.e., by March 31 for the
Bank Loans maturing between January 1 and March 31).                                             
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Receive or collect a cumulative 91% (or 93% in the Companys third fiscal quarter)
by 90 days out (i.e., by June 30 for the same quarterly portfolio).                                                                                                                  
| 
| |  | Receive or collect a cumulative 93% (or 94% in the Companys third fiscal quarter)
by 180 days out (i.e., by September 30 for the same quarterly portfolio). The
Company charges off its participation interests in Bank Loans when they become
delinquent for 180 days.

The assumed higher rate of payment in the Companys third fiscal quarter is a
result of improved collections during the Companys tax season, because of
borrowers receipt of tax refunds.

Collection Progression for Quarterly Bank Loan Portfolios

|                       |     |        |                       |             |   |                |        |      |   |  |  |      |  
|---------------------- | --- | ------ | --------------------- | ----------- | - | -------------- | ------ | ---- | - |  |  | ---- | -
|                       |     |        | Collection Percentage
|                       |     |        |                      
|                       |     |        |                       |             |   |                | Actual
|                       |     |        |                       |             |   |                |       
|Days Following Quarter |     | Target |                       | Fiscal 2002 |   | Fiscal 2001   
|                       |     |        |                       |             |   |               
|                       |     |        |                       |             |   | First Quarter  |        |      |   | 
|                       | 30  |        |                       | 89.00       | % |                |        | 89.4 | % |  |  | 88.0 | %
|                       | 90  |        |                       | 91.00       | % |                |        | 91.6 | % |  |  | 88.5 | %
|                       | 180 |        |                       | 93.00       | % |                |        | 93.0 | % |  |  | 89.9 | %
|                       |     |        |                       |             |   | Second Quarter |        |      |   | 
|                       | 30  |        |                       | 89.00       | % |                |        | 90.7 | % |  |  | 89.2 | %
|                       | 90  |        |                       | 91.00       | % |                |        | 93.5 | % |  |  | 91.2 | %
|                       | 180 |        |                       | 93.00       | % |                |        | 94.5 | % |  |  | 92.5 | %
|                       |     |        |                       |             |   | Third Quarter  |        |      |   | 
|                       | 30  |        |                       | 91.00       | % |                |        | 92.3 | % |  |  | 91.4 | %
|                       | 90  |        |                       | 93.00       | % |                |        | 94.7 | % |  |  | 93.2 | %
|                       | 180 |        |                       | 94.00       | % |                |        |     |   |  |  | 94.1 | %
|                       |     |        |                       |             |   | Fourth Quarter |        |      |   | 
|                       | 30  |        |                       | 89.00       | % |                |        | 89.9 | % |  |  | 89.2 | %
|                       | 90  |        |                       | 91.00       | % |                |        |     |   |  |  | 91.2 | %
|                       | 180 |        |                       | 93.00       | % |                |        |     |   |  |  | 92.4 | %

Liquidity and Capital Resources

Cash Flows from Operating Activities

During fiscal 2002, 2001, and 2000, the Company had net cash provided by
operating activities of $18.4 million, $20.4 million, and $6.7 million,
respectively. The decrease in cash flows provided from operating activities in
fiscal 2002 compared to fiscal 2001 was primarily the result of the timing of
remittances from Goleta and increased costs associated with the renewal and
extension of the Companys credit facilities from its bank lenders.

During fiscal 2002, 2001, and 2000, the Company recognized $2.2, $3.1 million,
and $3.5 million in deferred revenue, respectively. The Expired MoneyGram
Agreement (which expired December 31, 2000) provided, and the Existing
MoneyGram Agreement currently provides, incentive bonuses for opening new
locations at which MoneyGram services are offered as well as certain other
performance incentives. Incentive bonuses are recognized as revenue over the
terms of the respective agreements. (See Business  Relationships with the
Money Order and MoneyGram Suppliers.)

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Cash Flows from Investing Activities

During fiscal 2002, 2001, and 2000, the Company used $7.1 million, $12.7
million, and $12.3 million, respectively, for purchases of property and
equipment related principally to new store openings and remodeling existing
stores. Capital expenditures related to acquisitions, amounted to $1.2
million, $35.8 million, and $11.4 million for the fiscal years ended June 30,
2002, 2001, and 2000, respectively.

The Companys total capital expenditures, excluding acquisitions, are currently
anticipated to be approximately $5.2 million during its fiscal year ending June
30, 2003, in connection with the opening of 20 new stores, the relocation or
remodeling of certain existing stores, and computer system upgrades. The
actual amount of capital expenditures will depend in part on the number of new
stores opened, the number of stores acquired, and the number of existing stores
that are relocated or remodeled. The amount will also be affected by the
Companys ability under its bank credit agreement to make capital expenditures;
currently, the Companys ability is limited. The Company believes that its
existing resources, anticipated cash flows from operations, and credit
facilities will be sufficient to finance its anticipated capital expenditures
and operational requirements during fiscal 2003. Although management
anticipates that the Company will continue to expand, there can be no assurance
that the Companys expansion plans will not be adversely affected by the terms
on which financing is available to the Company or by competition, market
conditions, or changes in laws or regulations affecting check-cashing and
related businesses of the types conducted by the Company.

Cash Flows from Financing Activities

During fiscal 2002, the Company had net cash used by financing activities of
$23.0 million, compared to cash provided by financing activities in fiscal 2001
and fiscal 2000 of $51.8 million and $64.1 million, respectively. During the
year ended June 30, 2002, the Company reduced the money order principal payable
by $3.5 million, reduced the balance of the revolving advances by $12.3
million, reduced the balance of the term advances by $4.7 million, and repaid
an additional $4.0 million of the long-term notes payable. The Company
received $1.1 million from the exercise of stock options and increased the
acquisition notes payable balance by $0.4 million.

Money Order Agreement and MoneyLine Agreement

In April 1998, the Company signed a money order agreement with Travelers
Express, which became effective December 17, 1998. In conjunction with this
agreement and the MoneyLine Agreement, the Company received $3 million from
Travelers Express in fiscal 1998, received $400,000 in each of the fiscal years
1999, 2000, 2001 and 2002, and is entitled to receive one more payment of
$400,000 in fiscal 2003. Payments are deferred and amortized on a
straight-line basis over the five-year term of the agreements beginning January
1999 based on the $5 million total.

Credit Facilities

During the year ended June 30, 2002, the Company was a party to an Amended and
Restated Credit Agreement (the Credit Agreement) with a syndicate of banks
(the Lenders), led by Wells Fargo Bank Texas, National Association ( Wells
Fargo Bank).

The Credit Agreement was amended three times during the fiscal year: (1) on
November 8, 2001, to extend the maturity of the credit facilities until
December 31, 2001, and to revise certain other terms; (2) on December 31, 2001,
to extend the maturity of the credit facilities until April 30, 2002, and to
revise certain other terms; and (3) on April 30, 2002, to extend the maturity
of the credit facilities until October 31, 2002, and to revise certain other
terms.

Until November 8, 2001, the two primary credit facilities available to the
Company under the Credit Agreement were a revolving line-of-credit facility of
$155 million and a term facility of $55 million, both available until November
8, 2001. Borrowings under the revolving line-of-credit facility were available
for working capital and general corporate purposes, and borrowings under the
term loan facility were available for store construction and relocation and
other capital expenditures, including acquisitions, and refinancing other debt.
In addition to the two primary credit facilities, the Company also had
available under the Credit Agreement an additional 25-day revolving credit
facility of up to $25 million from Wells Fargo Bank and certain of the other
Lenders, and a standby letter-of-credit facility of up to $1.5 million from
Wells Fargo Bank.

Until November 8, 2001, the Companys borrowings under the revolving
line-of-credit facility bore interest at a variable annual rate equal to, at
the Companys discretion, either the prime rate publicly announced by Wells
Fargo Bank from time to time (the Prime Rate) or the London InterBank Offered
Rate (LIBOR) plus 0.75%. The Companys borrowings under the term facility
bore interest at a variable annual rate equal to, at the Companys discretion,
either the Prime Rate plus 0.25% or LIBOR plus 2.375% (but subject to
adjustment quarterly within a range of 2.125% to 2.625% above LIBOR, depending
on the Companys debt-to-cash flow ratio). Interest was generally payable
monthly, except on LIBOR-rate borrowings; interest

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on LIBOR-rate borrowings was payable every 30, 60, or 90 days, depending on the
period selected by the Company. The Company also paid a commitment fee for
each of these credit facilities. The commitment fee for the revolving
line-of-credit facility was equal to 0.25% per annum of the average daily
unused portion of that facility; and the commitment fee for the term facility
varied within a range of 0.3% to 0.5% per annum of the average daily unused
portion of that facility, depending on the Companys debt-to-cash flow ratio.

On November 8, 2001, the Company entered into an amendment to the Credit
Agreement, which was effective until December 31, 2001. That amendment:



| |  |  | Extended the Companys revolving line-of-credit facility, temporary
additional revolving advance facility, and letter-of-credit facility to
December 31, 2001.                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Converted the Companys reducing revolving facility, which had been
available for acquisitions and capital expenditures until November 9,
2003, to a term-loan facility expiring and maturing on December 31,
2001.       
|
| |  |  | Authorized the Companys borrowing of an additional $4 million under
the term-loan facility for payment of the $4 million installment of
principal due under the Senior Secured Notes of the Company on November
15, 2001.
|
| |  |  | Increased the interest rate on the revolving line-of-credit facility
to a variable annual rate equal to, at the Companys option, either the
Prime Rate plus 1.75% or LIBOR plus 2.75%.                                   
|
| |  |  | Increased the interest rate on the term-loan facility to a variable
annual rate equal to, at the Companys option, either the Prime Rate
plus 2.25% or LIBOR plus 3.25%.                                                  

That amendment did not change any of the other material terms of the Credit
Agreement.

On December 31, 2001, the Company entered into another amendment to the Credit
Agreement, which was effective through April 30, 2002. That amendment:



| |  |  | Extended the Companys $155 million revolving line-of-credit facility
and $55 million term-loan facility to April 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Converted the Companys $25 million temporary revolving advance
facility, which had been available for only 25 days during a 12-month
period, to a seasonal revolving credit facility available to the
Company on a daily basis from January 1 until March 31, 2002; the
interest rate on this facility was the Prime Rate plus 3%.                                                                                                                                                                                                                                                                       
|
| |  |  | Increased the interest rate on the revolving line-of-credit facility
to a variable annual rate equal to, at the Companys option, either the
Prime Rate plus 3% or LIBOR plus 4%.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Increased the interest rate on the term-loan facility to a variable
annual rate equal to, at the Companys option, either the Prime Rate
plus 3% or LIBOR plus 4%.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Required the Company to pay the Lenders $3.5 million of principal of
the outstanding term loan on February 28, 2002, and an additional $1.65
million of principal of the outstanding term loan on March 31, 2002;
each such payment of principal had to be accompanied by the payment of
all accrued interest on the outstanding principal of the term loan.                                                                                                                                                                                                                                                
|
| |  |  | Required the Company to pay the Lenders the net proceeds over $1
million of any sale of the Companys assets outside of the ordinary
course of business, to be applied to reduce the outstanding seasonal
revolving credit loans or, if no such loans were outstanding, the
outstanding term loan.                                                                                                                                                                                                                                                                                                          
|
| |  |  | Included covenants that restricted the Company from making, or
agreeing or committing to make, any acquisition of stores, from entering
into any additional lease agreements or opening any new stores, from
spending amounts to construct or finish out any new stores other than
the stores that the Company had committed to lease or construct or
finish out as of December 31, 2001, or from making capital expenditures
in excess of $2 million (in addition to the permitted new-store
finish-out expenditures), in each case on or before April 30, 2002
without the Lenders prior written consent.
|
| |  |  | Included the Companys obligation to pay commitment fees for the
revolving line-of-credit and term-loan facilities of $1.05 million on
each of January 1 and March 1, 2002, and a commitment fee for the
seasonal revolving credit facility of $250,000 on March 31, 2002.                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Included the Companys obligation to pay the Lenders an additional
commitment fee equal to 0.5% per annum of the average daily unused
portion of the revolving line-of-credit and seasonal revolving credit
facilities.                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Included the Companys obligation to pay the Lenders a fee equal to
0.5% of all of the credit facilities available to the Company (i.e.,
$1.175 million) if the Company sells, or enters into a binding agreement
to sell, all or substantially all of its outstanding stock or assets,
including by any merger, consolidation, share exchange, or other
reorganization, on or before the maturity date of the credit facilities
(as it may be extended) or within 120 days thereafter.                                                                                                                     

That amendment did not change any of the other material terms of the Credit
Agreement.

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On April 30, 2002, the Company entered into another amendment to the Credit
Agreement, which is effective until October 31, 2002. That amendment:



| |  | Extended the maturity date for the Lenders $155 million revolving line-of-credit commitment and $49.85 million term-loan
commitment from April 30, 2002 to October 31, 2002.                                                                                                                                                                                                                                                                                                                                                                      
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Reduced the maximum amount that the Company may borrow under the revolving line-of-credit facility to $130 million, subject
to the previously applicable borrowing base.                                                                                                                                                                                                                                                                                                                                                                           
| 
| |  | Increased the interest rate on the term-loan facility to, and converted the previously applicable variable rate to a fixed
rate of interest equal to, an annual rate of 9%.                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | Required the Company to pay the Lenders $1.0 million of principal of the outstanding term loan on April 30, 2002, and an
additional $250,000 of principal of the outstanding term loan on the last business day of each calendar month ending before
the maturity date; each such payment of principal must also be accompanied by the payment of all accrued interest on the
outstanding principal of the term loan.                                                                                                                              
| 
| |  | Reflected the expiration, as of March 31, 2002, of the seasonal revolving credit facility of $25 million.                                                                                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | Includes a covenant that restricts the Company from opening any new stores or entering into any new lease agreement for
additional stores other than (1) completing construction and finish-out of five stores that the Company had committed to
construct or finish-out as of December 31, 2001, and (2) opening ten other stores to replace stores closed in the ordinary
course of business, if the capital expenditures for the completion and finish-out and the replacement of stores do not
exceed $75,000 per store or a total of $750,000.
| 
| |  | Includes a covenant that restricts the Company from making aggregate capital expenditures (other than those permitted for
new or additional stores) in excess of $1.5 million without the Lenders prior written consent.                                                                                                                                                                                                                                                                                                                          
| 
| |  | Required the Company to obtain the Lenders prior written consent to any settlement payment by the Company regarding any
lawsuit against the Company in excess of $1.5 million.                                                                                                                                                                                                                                                                                                                                                                    
| 
| |  | Included the Companys obligation to pay commitment fees for the revolving line-of-credit and term-loan commitments of
$524,000 on April 30, 2002, $500,000 on July 1, 2002, and $1,024,000 on October 1, 2002.                                                                                                                                                                                                                                                                                                                                    

In all other material respects, the terms of the Credit Agreement, as
previously amended, remain in effect.

The Credit Agreement may be terminated before the stated expiration or maturity
dates of the credit facilities  requiring all unpaid principal and accrued
interest to be paid to the Lenders  upon any Event of Default as defined in
the Credit Agreement. The Events of Default include: (a) nonpayment of
amounts due to the Lenders under the Credit Agreement, (b) failure to observe
or perform covenants set forth in the Credit Agreement (including the
restrictive covenants described below) that are not cured, (c) a change in
control of the Company, and (d) an event or circumstance that has a material
adverse effect on the Companys business, operations, financial condition, or
prospects. Upon an Event of Default, the Lenders may also exercise other
remedies provided for in the Credit Agreement, including foreclosure of the
liens on the Companys assets (as described below).

The Company is subject to various restrictive covenants stated in the Credit
Agreement. These covenants include those described above in the lists of
amended terms as well as others which are typical of those found in loan
agreements of that kind, such as restrictions on the incurrence of indebtedness
from other sources, restrictions on advances to or investments in other persons
or entities, restrictions on significant acquisitions, restrictions on the
payment of dividends to shareholders or the repurchase of shares, and the
requirement that various financial ratios be maintained. The Company has
received the consent of the Lenders to implement the stock repurchase program
described below under  Stock Repurchase Program.

The Companys payment and performance of its obligations under the Credit
Agreement and ancillary documents are secured by liens on all its assets. The
collateral arrangements are subject to the Amended and Restated Collateral
Trust Agreement dated as of July 31, 1998 (the Amended Collateral Trust
Agreement) that was signed with the Companys first credit agreement with a
syndicate of bank lenders that preceded the Credit Agreement. The Amended
Collateral Trust Agreement amended and superseded the Original Collateral Trust
Agreement. See Business  Arrangement Regarding Secured Notes. The
Amended Collateral Trust Agreement created a collateral trust, with Wilmington
Trust Company as trustee, to secure the Companys obligations under the Credit
Agreement and to the Companys two other secured lenders, Principal and
Travelers Express. The Amended Collateral Trust Agreement includes agreements
regarding the priority of distributions to the secured lenders upon foreclosure
and liquidation of the collateral subject thereto and certain other
intercreditor arrangements.

To reduce its risk of greater interest expense because of interest-rate
fluctuations, the Company has entered into interest-rate swap agreements, which
effectively converted a portion of its floating-rate interest obligations to
fixed-rate interest obligations, as described in Notes 1 and 5 to the Audited
Consolidated Financial Statements.

As of June 30, 2002, the Company had borrowed $97.5 million under its revolving
line-of-credit facility and $48.4 million under its term-loan facility. The
Prime Rate effective on June 30, 2002 was 4.75%, and LIBOR effective on that
date was 1.84%.

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When the existing credit facilities were originated in November 2000 (and
previously), their short-term availability permitted the Company to obtain a
lower interest rate and other terms more favorable than available with
longer-term facilities, and the Company expected those facilities to be renewed
at the expiration of their effective period. The credit facilities were in fact
renewed and extended three times, for comparatively short periods, during
fiscal 2002. But because of tightened credit markets, the cost to the Company
of each renewal increased, and the Company has been unable to other obtain
suitable debt financing from other sources. During fiscal 2002, the Company
has had to use a significant amount of its available cash flow to discharge
indebtedness to the Lenders under the Credit Agreement.

The Company desires to obtain additional debt capital and to reduce and modify
its existing bank credit facilities under the Credit Agreement. The Company
has engaged JPMorgan Securities Inc. as placement agent to assist it in
pursuing a private placement of $50 million to $75 million of senior secured
debt securities. The Company intends to continue to pursue that offering,
which is being made to only a few institutional investors, and to use the net
proceeds of that offering, if completed, to repay the term advances from the
Lenders. The Company desires to complete that placement by October 31, 2002,
when the existing credit facilities under the Credit Agreement expire. But the
Company cannot give any assurance that it will be able to complete that
placement by that time, and the Company cannot predict whether, or when or from
what source, it may be able to obtain additional debt capital.

The Company believes that the existing credit facilities from the Lenders under
the Credit Agreement will be renewed at the end of October 2002. The Company
also expects to be able to pay the $4.0 million installment of its senior
secured notes in mid-November 2002. The Company cannot, however, give any
assurance that the anticipated renewal will be effected or that the terms of
such renewal will not be more unfavorable to the Company then the existing
terms of the credit facilities. If the anticipated renewal is not effected,
and the Company is unable to obtain financing from one or more other sources,
the Companys liquidity and operations would be materially and adversely
affected. If the existing credit facilities with the Lenders are renewed, the
Companys sources of capital are expected to be sufficient to operate its
business as anticipated.

SSM Funding

The cash used for inventory in the Companys self-service machines operating in
the Companys stores is obtained from the revolving facility provided by the
Lenders under the Credit Agreement. The cash used for inventory in the
Companys 100 self-service machines located in the H&R Block offices during the
2002 tax season was obtained through a separate agreement with a bank entered
into in January 2002. Under that agreement, the bank provided the Company with
the use of the banks cash and related transportation and custodial services in
exchange for fees paid by the Company; the fees varied in part depending on the
extent of the Companys use of the banks cash and related services. The
inventory of cash in the machines, as well as the cashed checks deposited in
the machines in exchange for that cash, constituted the assets only of the bank
and were under the sole control of the bank. The Company did not borrow the
cash or have any possession or control of the cash or the cashed checks. The
Company finally received all of the check-cashing fees earned by it from those
machines after the expiration of the agreement on April 15, 2002.

The Company is considering a few alternatives for obtaining the cash for
inventory in the self-service machines to be placed in H&R Block offices during
the 2003 tax season. Those alternatives include an arrangement similar to the
one implemented for the 2002 tax season, a separate bank line-of-credit, and a
special-purpose-entity financing.

Stock Repurchase Program

The Companys Board of Directors has authorized the repurchase from time to
time of up to approximately $5 million of the Companys common stock in the
open market or in negotiated transactions. This stock repurchase program will
remain in effect unless discontinued by the Board of Directors. Though no
shares have been purchased during fiscal 2002, as of June 30, 2002, the Company
had repurchased 211,400 shares at an average price of $12.81 per share.

Litigation Expenses

As indicated in Legal Proceedings above, the Company is increasingly being
required to defend itself and, in some matters, its directors, officers, and
others in various lawsuits and state regulatory proceedings regarding its
current and past loan-related activities. The Company has incurred, and
expects to continue to incur, significant legal expenses in conducting that
defense, regardless of the Companys success in defending or otherwise
resolving the various proceedings. The Company is, in accordance with its
Bylaws, paying the expenses of defense for its directors, officers, employees,
and other employees named as additional defendants in these lawsuits. The
Company also is, in accordance with the Goleta Agreement, paying 90 percent of
the expenses of Goleta as a party in these proceedings. In fiscal 2002, the
Companys expense of defense, for itself and others, was approximately $2.7
million. Because of the various factors involved in litigation and regulatory
proceedings, it is impossible to predict an amount or a range of amounts that
the Company may have to expend, in fiscal 2003 or thereafter, to conduct that
defense. But the Company currently estimates that its legal expenses in
defending, for

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itself and others, the various lawsuits and state regulatory proceedings will
be approximately $2.2 million during the fiscal year ending June 30, 2003.

Recently Issued Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144)
which requires a single accounting model to be used for long-lived assets to be
sold and broadens the presentation of discontinued operations to include a
component of an entity (rather than a segment of a business). A component of
an entity comprises operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the
rest of the entity. A component of an entity that is classified as held for
sale, or has been disposed of, is presented as a discontinued operation if the
operations and cash flows of the component will be (or have been) eliminated
from the ongoing operations of the entity and the entity will not have any
significant continuing involvement in the operations of the component. SFAS
144 is effective for the Company beginning July 1, 2002, and management is
currently reviewing and evaluating the effects this statement will have, if
any, on the Companys financial position and results of operations.

In June 2002, the Financial Accounting Standards Board issued SFAS 146,
Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146). SFAS 146 nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. Examples of costs covered by the
standard include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. Under Issue 94-3, a liability for
an exit cost as defined in Issue 94-3 was recognized at the date of an entitys
commitment to an exit plan. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged.

The AICPAs Accounting Standards Committee (AcSEC) issued Statement of Position
01-6, Accounting by Certain Entities (Including Entities with Trade
Receivables) That Lend to or Finance the Activities of Others (SOP 01-6).
SOP 01-6 provides guidance on accounting and reporting matters for entities
that have trade receivables and entities that finance their customers
purchases of goods and services using trade receivables. SOP 01-6 is effective
for years beginning after December 15, 2001. The Company will adopt SOP 01-6
beginning July 1, 2002. Management is currently reviewing and evaluating the
effects this statement will have, if any, on the Companys financial position
and results of operations.

Critical Estimates, Uncertainties or Assessments in the Financial Statements

The preparation of the Companys financial statements in conformity with
generally accepted accounting principles in the United States of America
requires the Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. In applying the accounting
principles, management must often make individual estimates and assumptions
regarding expected outcomes or uncertainties. As might be expected, the actual
results or outcomes are generally different than the estimated or assumed
amounts. These differences are usually minor and are included in the Companys
consolidated financial statements as soon as they are known. Estimates,
judgments and assumptions are continually evaluated based on available
information and experience. Because of the use of estimates inherent in the
financial reporting process, actual results could differ from those estimates.

Actual results related to the estimates and assumptions made in preparing the
Companys consolidated financial statements will emerge over periods of time,
such as estimates and assumptions underlying the determination of allowance for
loan losses and self-insurance liabilities. These estimates and assumptions are
monitored and periodically adjusted as circumstances warrant. For instance, the
Companys liability for self-insurance related to workers compensation,
general liability, and medical liability may be adjusted based on higher or
lower actual loss experience. Although there is greater risk with respect to
the accuracy of these estimates and assumptions because of the period over
which actual results may emerge, such risk is mitigated by the ability to make
changes to these estimates and assumptions over the same period.

Management periodically reviews the carrying value of goodwill and other
intangible assets when events and circumstances warrant such a review. One of
the methods used for this review is performed using estimates of future cash
flows. If the carrying value of goodwill or other intangible assets is
considered impaired, an impairment charge is recorded for the amount by which
the carrying value of the goodwill or intangible assets exceeds its fair value.
The Company believes that the estimates of future cash flows and fair value are
reasonable. Changes in estimates of such cash flows and fair value, however,
could affect the evaluation.

Based on an assessment of the Companys accounting policies and the underlying
judgments and uncertainties affecting the application of those policies,
management believes that the Companys consolidated financial statements
provide a

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meaningful and fair perspective of the Company. The Company does not suggest
that other risk factors, such as those discussed elsewhere in this Report as
well as changes in growth objectives, could not adversely impact the
consolidated financial position, results of operations and cash flows in future
periods.

Critical Accounting Policies

The preparation of financial statements in conformity with generally accepted
accounting principles in the United States of America requires the Company to
make estimates and assumptions in determining the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and expenses
during the reported period. Actual results could differ from the Companys
estimates. The Company believes the most significant estimate made in the
preparation of the accompanying consolidated financial statements relates to
the determination of its allowance for loan losses. The next paragraph
addresses the Companys accounting policy concerning such allowance. Other
accounting policies are disclosed in Note 1 to the Audited Consolidated
Financial Statements.

The Company maintains an allowance for loan losses at a level it considers
sufficient to cover anticipated losses in the collection of its loan
receivables. The allowance for loan losses is determined based upon a review of
historical and recent loan losses and the loan portfolio, and takes into
consideration economic conditions and trends. The allowance for loan losses is
periodically reviewed by the Companys management with any changes reflected in
current operations. It is at least reasonably possible that actual loan losses
may be materially different from the recorded allowance for loan losses.

Operating Trends

Seasonality

The Companys business is seasonal to the extent of the impact of cashing tax
refund checks. The impact of these services is in the third and fourth quarters
of the Companys fiscal year.

Impact of Inflation

Management believes that the Companys results of operations are not dependent
upon the levels of inflation.

Forward-Looking Statements

This Report contains, and from time to time the Company or certain of its
representatives may make, forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These statements are generally
identified by the use of words such as anticipate, expect, estimate,
believe, intend, and terms with similar meanings. Although the Company
believes that the current views and expectations reflected in these
forward-looking statements are reasonable, those views and expectations, and
the related statements, are inherently subject to risks, uncertainties, and
other factors, many of which are not under the Companys control and may not
even be predictable. Those risks, uncertainties, and other factors could cause
the actual results to differ materially from these in the forward-looking
statements. Those risks, uncertainties, and factors include, but are not
limited to, many of the matters described in this Report:



| |  |  | the Companys relationships with Travelers Express and its
affiliates, with Goleta, and with the Lenders;                                                                                                                                                                                      
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | governmental regulation of check-cashing, short-term consumer
lending, and related financial services businesses;                                                                                                                                                                              
|
| |  |  | the results of legal and regulatory proceedings regarding the Companys loan-related activities;                                                                                                                                                                                               
|
| |  |  | theft and employee errors;                                                                                                                                                                                                                                                                     
|
| |  |  | the availability of adequate financing, suitable locations,
acquisition opportunities, and experienced management employees to
implement the Companys growth strategy;                                                                                                                        
|
| |  |  | increases in interest rates, which would increase the Companys
borrowing costs;                                                                                                                                                                                                               
|
| |  |  | the fragmentation of the check-cashing industry and competition from
various other sources, such as banks, savings and loans, short-term
consumer lenders, and other similar financial services entities, as well
as retail businesses that offer products and services offered by the
Company;
|
| |  |  | the terms and performance of third-party products and services offered at the Company locations; and                                                                                                                                                                                           
|
| |  |  | customer demand and response to products and services offered by the Company.                                                                                                                                                                                                                  

The Company does not assume, but expressly disclaims, any obligations to
release publicly any updates or revisions to these forward-looking statements,
whether because of future events, new information, a change in the Companys
views or expectations, or otherwise. The Company makes no prediction or
statement about the performance of its Common Stock.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to financial market risks, particularly including
changes in interest rates that might affect the costs of its financing under
the Credit Agreement. To mitigate the risks of changes in interest rates, the
Company utilizes derivative financial instruments. The Company does not use
derivative financial instruments for speculative or trading purposes. To reduce
its risk of greater interest expense because of interest-rate fluctuations, the
Company has entered into interest-rate swap agreements, which effectively
converted a portion of its floating-rate interest obligations to fixed-rate
interest obligations, as described in Notes 1 and 5 to the Audited Consolidated
Financial Statements.

The fair value of the Companys existing interest-rate swap was ($1.8) million
as of June 30, 2002. Based on the average outstanding indebtedness in the
previous quarter, a 10% change in interest rates would have changed the
Companys interest expense by approximately $980,000 (pre-tax) for the year
ended June 30, 2002 without consideration of the Companys interest-rate swap.
The associated underlying debt has exceeded the notional amount for each swap
throughout the existence of the swap and it is anticipated that it will
continue to do so. The remaining swap is based on the same index as, and
repriced on a consistent basis with, its respective underlying debt.




ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Part IV, Item 15(a)(1) for information required for this item.




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On June 3, 2002, the Company filed a Current Report on Form 8-K (dated May 31,
2002) to report the Companys change in its independent certified public
accountants from Arthur Andersen LLP to Grant Thornton LLP. There were no
disagreements with the former accountant on any matter of accounting principles
or practices, financial statement disclosure, or auditing scope or procedure.




PART III

The information called for in Part III of this Form 10-K is incorporated by
reference from the Companys definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than
October 28, 2001 (120 days after the Companys fiscal year).




PART IV




ITEM 14. CONTROLS AND PROCEDURES

Not applicable.




ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this Report:

|                                                                                                  |  |  |    | 
|------------------------------------------------------------------------------------------------- |  |  | -- | 
|(1) Financial Statements                                                                          |  |  |    | 
|Reports of independent certified public accountants                                               |  |  | 47 | 
|Consolidated balance sheets as of June 30, 2002 and 2001                                          |  |  | 49 | 
|Consolidated statements of earnings for the years ended June 30, 2002, 2001, and 2000             |  |  | 50 | 
|Consolidated statements of shareholders equity for the years ended June 30, 2002, 2001, and 2000 |  |  | 51 | 
|Consolidated statements of cash flows for the years ended June 30, 2002, 2001, and 2000           |  |  | 52 | 
|Notes to consolidated financial statements                                                        |  |  | 53 | 
|(2) Financial Statement Schedules                                                                 |  |  |    | 
|Report of independent certified public accountants                                                |  |  | 76 | 
|Schedule II  Valuation and Qualifying Accounts                                                   |  |  | 78 | 

38



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##### Table of Contents



(3)  Exhibits.

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|3.1            |  | Restated Articles of Incorporation of the Company, as amended through January 31, 1998. (Included as Exhibit 3.6 to the Companys Form 10-Q as of December 31, 1997 (Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                               
|3.2            |  | Amended and Restated Bylaws of the Company, as amended through January 31, 1998. (Included as Exhibit 3.7 to the Companys Form 10-Q as of December 31, 1997 (Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                      
|3.3            |  | Certificate of Amendment to the Companys Bylaws dated January 3, 2000. (Included as Exhibit 3.3 to the Companys Form 10-Q as of December 31, 1999 (Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                               
|4.1            |  | Form of Certificate representing shares of Registrants Common Stock.
(Included as Exhibit 4.1 to the Companys Registration Statement on Form
S-1 (Reg. No. 33-53286) (the Registration Statement) and incorporated
herein by reference.)                                                                                                                                                                                                                              
|10.1           |  | Ace Cash Express, Inc. 1987 Stock Option Plan, as amended (including form
of Incentive Stock Option Agreement). (Included as Exhibit 10.1 to the
Registration Statement and incorporated herein by reference.)#                                                                                                                                                                                                                                                           
|10.2           |  | 1992 Master Agreement dated October 14, 1992 (the Money Order Agreement)
between the Company and American Express Travel Related Services Company,
Inc. (the Money Order Supplier). (Confidential treatment for a portion
of this document has been granted by the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934) (Included as Exhibit 10.4 to the Registration Statement and
incorporated herein by reference.)
|10.3           |  | Agreement Regarding Stock Pledges dated as of November 20, 1992, between
the Company and the shareholders pledging shares of Common Stock to secure
the performance of the Companys obligations under the Money Order
Agreement. (Included as Exhibit 10.7 to the Registration Statement and
incorporated herein by reference.)                                                                                                                                          
|10.4           |  | Lease Agreement dated October 1, 1987, between the Company and Greenway
Tower Joint Venture, as amended by First Amendment to Lease Agreement
dated April 29, 1988, Second Amendment to Lease Agreement dated August 24,
1988, Third Amendment to Lease Agreement dated December 29, 1988 and
Fourth Amendment to Lease Agreement dated January 29, 1991. (Included as
Exhibit 10.8 to the Registration Statement and incorporated herein by
reference.)                  
|10.5           |  | First Amendment to the Money Order Agreement dated December 1, 1992,
between the Company and the Money Order Supplier. (Included as Exhibit
10.9 to the Registration Statement and incorporated herein by reference.)                                                                                                                                                                                                                                                     
|10.6           |  | Agreement for Purchase and Sale of Stock Assets dated January 2, 1992,
between T.J. Martin (Martin) and R.C. Hemmig (Hemmig). (Included as
Exhibit 10.10 to the Registration Statement and incorporated herein by
reference.)                                                                                                                                                                                                                                         
|10.7           |  | Option to Repurchase, dated January 2, 1992, in favor of Hemmig.
(Included as Exhibit 10.12 to the Registration Statement and incorporated
herein by reference.)                                                                                                                                                                                                                                                                                                          
|10.8           |  | Irrevocable Proxy of Martin dated January 2, 1992 in favor of Hemmig.
(Included as Exhibit 10.13 to the Registration Statement and incorporated
herein by reference.)                                                                                                                                                                                                                                                                                                     
|10.9           |  | Letter Agreement between First Data Corporation and the Company dated
December 6, 1993, amending the First Amendment to the Money Order
Agreement. (Included as Exhibit 10.9 to the Companys Form 10-K as of June
30, 1994 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                       
|10.10          |  | Fifth Amendment to Lease Agreement dated June 13, 1994, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.10 to
the Companys Form 10-K as of June 30, 1994 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                           

39



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##### Table of Contents



|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|10.11          |  | Asset Purchase Agreement dated November 22, 1993, among the Company,
sole proprietor, limited partnership, and general partnerships that
conduct business under the name Mr. Money Check Cashers (the Sellers),
general partners of the partnership sellers (the General Partners), and
an individual agent for the Sellers and the General Partners (the
Agent). (Included as Exhibit 2.1 in the Companys Form 8-K filed on
December 7, 1993 (Commission File Number 0-20774) and incorporated herein
by reference.)
|10.12          |  | Food Stamp Sub-Contract Agreement dated November 22, 1993, between the
Company and the Agent. (Included as Exhibit 2.2 to the Companys Form 8-K
filed on December 7,1993 (Commission File Number 0-20774) and incorporated
herein by reference.)                                                                                                                                                                                                                                                                             
|10.13          |  | Ace Cash Express, Inc. 401(k) Profit Sharing Plan, adopted July 1, 1994.
(Included as Exhibit 10.13 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                   
|10.14          |  | Ace Cash Express, Inc. Deferred Compensation Plan, adopted July 1, 1994.
(Included as Exhibit 10.14 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                   
|10.15          |  | Asset Purchase Agreement dated June 27, 1995, among the Company and
Quick Cash, Inc., Q.C. & G. Financial, Inc., David Christenholz and Gloria
Guerra-Leyva. (Included as Exhibit 2.1 to the Companys Form 8-K filed on
July 11, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                
|10.16          |  | Escrow Agreement dated June 27, 1995, among the Company, Quick Cash,
Inc., Q.C. & G. Financial, Inc., David Christenholz, Gloria Guerra-Leyva,
and Bank One, Arizona, NA, as escrow agent. (Included as Exhibit 2.2 to
the Companys Form 8-K filed on July 11, 1995 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                  
|10.17          |  | Promissory Note dated June 27, 1995, of the Registrant in favor of the
Money Order Supplier. (Included as Exhibit 2.3 to Form 8-K filed on July
11, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                                                                              
|10.18          |  | Second Amendment to the Money Order Agreement dated September 8, 1995,
between the Company and the Money Order Supplier. (Included as Exhibit
10.18 to the Companys Form 10-K as of June 30, 1995 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                    
|10.19          |  | Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan dated
March 27, 1995. (Included as Exhibit 10.19 to the Companys Form 10-K as
June 30, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                                                                          
|10.20          |  | Letter Agreement dated July 13, 1995, between First Data Corporation and
the Company amending the Money Order Agreement. (Included as Exhibit
10.20 to the Companys Form 10-K as of June 30, 1995 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                    
|10.21          |  | Letter Agreement dated February 1, 1996, between the Company and the
Money Order Supplier amending the Money Order Agreement. (Included as
Exhibit 10.21 to the Companys Form 10-Q as of December 31, 1995
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                           
|10.22          |  | 1996 MoneyGram Master Agreement dated February 1, 1996, between the
Company and the Money Order Supplier (the MoneyGram Agreement).
(Included as Exhibit 10.22 to the Companys Form 10-Q as of December 31,
1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                   
|10.23          |  | Agreement and Plan of Merger dated October 13, 1995, among the Company,
Check Express, Inc., and Ace Acquisition Corporation. (Included as
Exhibit 2.1 to the Companys Form 8-K filed on February 16, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                           
|10.24          |  | Amendment (to Agreement and Plan of Merger) dated December 20, 1995,
among the Company, Check Express, Inc., and Ace Acquisition Corporation.
(Included as Exhibit 2.2 to the Companys Form 8-K filed on February 16,
1996 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                           
|10.25          |  | Sixth Amendment to Lease Agreement dated February 1, 1996, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.25 to
the Companys Form 10-Q as of March 31, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                           

40



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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10.26          |  | 1996-A Amendment to the MoneyGram Agreement dated March 21, 1996,
between the Company and the Money Order Supplier. (Included as Exhibit
10.26 to the Companys Form 10-K as of June 30, 1996 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                               
|10.27          |  | 1996-B Amendment to the MoneyGram Agreement dated June 27, 1996, between
the Company and the Money Order Supplier. (Included as Exhibit 10.27 to
the Companys Form 10-K as of June 30, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                
|10.28          |  | Note Purchase Agreement dated November 15, 1996, between the Company and
Principal Life Insurance Company. (Included as Exhibit 10.28 to the
Companys Form 10-Q as of December 31, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                    
|10.29          |  | Form of 9.03% Senior Secured Notes due November 15, 2003. (Included as
Exhibit 10.29 to the Companys Form 10-Q as of December 31, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                     
|10.30          |  | Collateral Trust Agreement dated November 15, 1996, among the Company
and the Money Order Supplier, Principal Life Insurance Company, and
Wilmington Trust Company. (Included as Exhibit 10.30 to the Companys Form
10-Q as of December 31, 1996 (Commission File Number 0-20774) and
incorporated herein by reference.)                                                                                                                                                           
|10.31          |  | Assignment of Deposit Accounts and Security Agreement dated November 15,
1996, between the Company and Wilmington Trust Company. (Included as
Exhibit 10.31 to the Companys Form 10-Q as of December 31, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                              
|10.32          |  | Third Amendment to the Money Order Agreement dated November 15, 1996,
between the Company and the Money Order Supplier. (Included as Exhibit
10.32 to the Companys Form 10-Q as of December 31, 1996 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                       
|10.33          |  | Amendment No.1 to the Ace Cash Express 401K Profit Sharing Plan
effective January 1, 1998. (Included as Exhibit 10.33 to the Companys
Form 10-Q as of March 31, 1998 (Commission File Number 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                                                      
|10.34          |  | Amendment No. 1 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.34 to the Companys Form 10-K as of
June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                                                
|10.35          |  | Amendment No. 2 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.35 to the Companys Form 10-K as of
June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                                                
|10.36          |  | Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit A
to the Companys Proxy Statement for the 1997 Annual Meeting of
Shareholders (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                                            
|10.37          |  | Amendment No. 1 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.37 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.) #                                                                                                                                                                                                                                                                  
|10.38          |  | Form of Change-in-Control Executive Severance Agreement between the
Company and each of its three executive officers. (Included as Exhibit
10.38 to the Companys Form 10-K as of June 30, 1998 (Commission File No.
0-20774) and incorporated herein by reference.) #                                                                                                                                                                                                              
|10.39          |  | Money Order Agreement dated as of April 16, 1998, but effective as of
December 16, 1998, between the Company and Travelers Express Company,
Inc. (Confidential treatment for a portion of this document has been
granted by the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934). (Included as Exhibit 10.39 to
the Companys Form 10-K as of June 30, 1998 (Commission File No. 0-20774)
and incorporated herein by reference.)
|10.40          |  | Credit Agreement dated as of July 31, 1998, but effective as of December
16, 1998, among the Company, Wells Fargo Bank (Texas), National Association, as agent (the Credit Agent), and the lenders named therein,
with Exhibits A and B thereto and Schedules 2.01(a) and 2.01(b) thereto.
(Included as Exhibit 10.40 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.)                                         

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|10.41          |  | Amended and Restated Collateral Trust Agreement dated as of July 31,
1998, but effective as of December 16, 1998, among the Company, the Credit
Agent, Travelers Express Company, Inc., Principal Life Insurance Company
(formerly known as Principal Mutual Life Insurance Company), and
Wilmington Trust Company. (Included as Exhibit 10.41 to the Companys Form
10-K as of June 30, 1998 (Commission File No. 0-20774) and incorporated
herein by reference.)             
|10.42          |  | Amended and Restated Assignment of Deposit Accounts and Security
Agreement dated as of July 31, 1998, but effective as of December 16,
1998, between the Company and Wilmington Trust Company. (Included as
Exhibit 10.42 to the Companys Form 10-K as of June 30, 1998 (Commission
File No. 0-20774) and incorporated herein by reference.)                                                                                                                                  
|10.43          |  | First Amendment to Credit Agreement dated as of December 16, 1998, among
the Company, the Credit Agent, and the lenders named therein, with
Schedules 2.01(a) and 2.01(b) thereto. (Included as Exhibit 10.43 to the
Companys Form 8-K filed on December 23, 1998 (Commission File No.
0-20774) and incorporated herein by reference.)                                                                                                                                        
|10.44          |  | Amendment No. 3 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.44 to the Companys Form 10-Q as of
December 31, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                        
|10.45          |  | Amendment No. 2 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.45 to the Companys Form 10-Q as of December 31,
1999 (Commission File Number 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                                       
|10.46          |  | Second Amendment to Credit Agreement dated as of December 15, 1999,
among the Company, the Credit Agent , and the lenders named therein, with
Schedules 2.01(a) and 2.01(b) thereto. (Included as Exhibit 10.46 to the
Companys Form 10-Q as of December 31, 1999 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                     
|10.47          |  | Master Loan Agency Agreement dated as of August 11, 1999, between the
Company and Goleta National Bank. (Confidential treatment for a portion
of this document has been granted by the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.) (Included as Exhibit 10.47 to the Companys Form 10-K as of June
30, 2000 (Commission File No. 0-20774) and incorporated herein by
reference.)                                    
|10.48          |  | Money Transfer Agreement dated as of June 30, 2000, among the Company,
Travelers Express Company, Inc., and MoneyGram Payment Systems, Inc.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.48 to the
Companys Form 10-K as of June 30, 2000 (Commission File No. 0-20774) and
incorporated herein by reference.)
|10.49          |  | Change-in-Control Executive Severance Agreement dated as of August 17,
2000, between the Company and Debra A. Bradford. (Included as
Exhibit 10.49 to the Companys Form 10-K as of June 30, 2000 (Commission
File No. 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                        
|10.50          |  | Amendment No. 3 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.50 to the Companys Form 10-Q as of December 31,
2000 (Commission File No. 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                          
|10.51          |  | Amended and Restated Credit Agreement dated November 9, 2000, among the
Company, Wells Fargo Bank Texas, National Association, as agent for the
lenders named therein, and the lenders named therein with the Schedules
(other than the Companys disclosure schedules) and the Exhibits thereto.
(Included as Exhibit 10.1 to the Companys Form 8-K dated November 9, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                              
|10.52          |  | Asset Purchase Agreement dated November 10, 2000, among the Company,
Check Cashiers of Arizona, Inc., Check Cashiers of California, Inc.,
Corpus Christi Check Cashiers, Inc., U.S. Money Order Company, Inc.,
Valley Check Cashiers, Inc., Morris Silverman, and Jeffrey D. Silverman.
(Included as Exhibit 2.1 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                        
|10.53          |  | Escrow Agreement dated November 10, 2000, among the Company, Check
Cashiers of Arizona, Inc., Check Cashiers of California, Inc., Corpus
Christi Check Cashiers, Inc. U.S. Money Order Company, Inc., Valley Check
Cashiers, Inc., and Chicago Title Insurance Company, as Escrow Agent.
(Included as Exhibit 2.2 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                       

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|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|-------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|10.54          |  | Form of Amendment to Change-in-Control Executive Severance Agreement
between the Company and each of its four senior executive officers (Donald
H. Neustadt, Jay B. Shipowitz, Raymond E. McCarty, and Debra A. Bradford)
dated as of January 3, 2001. (Included as Exhibit 10.51 to the Companys
Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                  
|10.55          |  | Amendment Number 1 to Master Loan Agency Agreement, with the
corresponding Amendment Number 1 to Master Loan Participation Agreement
and Amendment Number 1 to Schedule of Interest and Fees, dated of March
29, 2001, between the Company and Goleta National Bank. (Confidential
treatment for a portion of this document has been granted by the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.52 to the
Companys Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)
|10.56          |  | Change-in-Control Executive Severance Agreement dated as of May 15,
2001, between the Company and Barry M. Barron. (Included as Exhibit 10.56
to the Companys Form 10-K as of June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                       
|10.57          |  | Amendment Number 2 to Master Loan Agency Agreement, with the
corresponding Amendment Number 2 to Master Loan Participation Agreement,
dated of June 30, 2001, between the Company and Goleta National Bank.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.57 to the
Companys Form 10-K as of June 30, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)                                                          
|10.58          |  | Change-in-Control Executive Severance Agreement dated as of July 16,
2001, between the Company and Joe W. Conner. (Included as Exhibit 10.58
to the Companys Form 10-K as of June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                        
|10.59          |  | First Amendment to Amended and Restated Credit Agreement dated February
21, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.59 to the Companys Form 10-Q as of September 30, 2001
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                        
|10.60          |  | Second Amendment to Amended and Restated Credit Agreement dated November
8, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.60 to the Companys Form 10-Q as of September 30, 2001
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                        
|10.61          |  | Third Amendment to Amended and Restated Credit Agreement dated December
31, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.1 to the Companys Form 8-K filed on January 4, 2002
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                          
|10.62          |  | Second Amendment to Amended and Restated Collateral Trust Agreement
dated December 31, 2001, by and among the Company, Wells Fargo Bank Texas,
National Association, as agent, Travelers Express Company, Inc., Principal
Life Insurance Company, and Wilmington Trust Company as collateral
trustee. (Included as Exhibit 10.2 to the Companys Form 8-K filed on
January 4, 2002 (Commission File No. 0-20774) and incorporated herein by
reference.)                                                                                                                                                  
|10.63          |  | Separation Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.1 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                           
|10.64          |  | Consulting Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.2 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                           
|10.65          |  | Fourth Amendment to Amended and Restated Credit Agreement dated April
30, 2002, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.3 to the Companys Form 10-Q as of March 31, 2002 (Commission
File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                               
|10.66          |  | Seventh Amendment to Lease Agreement dated December 20, 2000, between
the Company and Greenway Tower Joint Venture.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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|               |  |                                                                                                                                                                                                         
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibits                                                                                                                                                                                                
|               |  |                                                                                                                                                                                                         
|10.67          |  | Eighth Amendment to Lease Agreement dated May 10, 2001, between the
Company and Greenway Tower Joint Venture.*                                                                                          
|10.68          |  | Ace Cash Express, Inc. Executive Non-Qualified Excess Plan Adoption
Agreement with the First Amendment to the Ace Cash Express, Inc. Executive
Non-Qualified Excess Plan, dated as of October 1, 2001.*#
|21             |  | Subsidiaries of the Company.*                                                                                                                                                                           
|23             |  | Consent of Grant Thornton LLP.*                                                                                                                                                                         
|99             |  | Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*                        



---

|* |  | Filed herewith                                         
|- |  | -------------------------------------------------------
| 
|# |  | Management contract or compensatory plan or arrangement



|(b) |  | Reports on Form 8-K
|--- |  | -------------------



| |  | During its fourth fiscal quarter ended June 30, 2002, the Company filed a
Current Report on Form 8-K, dated May 31, 2002, to report the Companys
change of its independent certified public accountants from Arthur
Andersen LLP to Grant Thornton LLP.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

| |  |     |  |                                                                  
| |  | --- |  | -----------------------------------------------------------------
| |  |     |  | ACE CASH EXPRESS, INC.                                           
| |  |     |  |                                                                  
| |  | By: |  | /s/ JOE W. CONNER                                                
| |  |     |  |                                                                  
| |  |     |  | Joe W. Conner

Senior Vice President

and Chief Financial Officer
| |  |     |  |                                                                  
| |  |     |  | Date: September 27, 2002                                         

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.

|                                             |  |                                                                                                                       
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Signature                                    |  | Title                                                                                                                 
|                                             |  |                                                                                                                       
|/s/ RAYMOND C. HEMMIG

Raymond C. Hemmig     |  | Chairman of the Board, Director                                                                                       
|                                             |  |                                                                                                                       
|/s/ DONALD H. NEUSTADT

Donald H. Neustadt   |  | Chief Executive Officer,
Director (Principal Executive Officer)                                                       
|                                             |  |                                                                                                                       
|/s/ JAY B. SHIPOWITZ

Jay B. Shipowitz       |  | President and Chief Operating Officer
Director                                                                        
|                                             |  |                                                                                                                       
|/s/ JOE W. CONNER

Joe W. Conner             |  | Senior Vice President and Chief Financial Officer
Treasurer and Secretary (Principal Financial and
Accounting Officer)
|                                             |  |                                                                                                                       
|/s/ MARSHALL B. PAYNE

Marshall B. Payne     |  | Director                                                                                                              
|                                             |  |                                                                                                                       
|/s/ MICHAEL S. RAWLINGS

Michael S. Rawlings |  | Director                                                                                                              
|                                             |  |                                                                                                                       
|/s/ EDWARD W. ROSE III

Edward W. Rose III   |  | Director                                                                                                              
|                                             |  |                                                                                                                       
|/s/ CHARLES DANIEL YOST

Charles Daniel Yost |  | Director                                                                                                              

45



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##### Table of Contents



CERTIFICATIONS

I, Donald H. Neustadt, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Ace Cash Express,
Inc.;                                                                                                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report.                       



Date: September 27, 2002



| | /s/ DONALD H. NEUSTADT
Donald H. Neustadt
Chief Executive Officer
| | -----------------------------------------------------------------



I, Joe W. Conner, certify that:



|1. |  | I have reviewed this annual report on Form 10-K of Ace Cash Express,
Inc.;                                                                                                                                                                                                                                                  
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. |  | Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this annual report; and
|  
|3. |  | Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this annual
report.                       



Date: September 27, 2002



| | /s/ JOE W. CONNER
Joe W. Conner
Senior Vice President
and Chief Financial Officer
| | ---------------------------------------------------------------------------------

46



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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors and Shareholders,
Ace Cash Express, Inc.:

We have audited the consolidated balance sheet of Ace Cash Express, Inc. (a
Texas corporation) and Subsidiaries as of June 30, 2002, and the related
consolidated statements of earnings, shareholders equity, and cash flows for
the year then ended. These financial statements are the responsibility of the
Companys management. Our responsibility is to express an opinion on these
financial statements based on our audit. The consolidated financial statements
of Ace Cash Express, Inc. as of June 30, 2001 and for the two years in the
period ended June 30, 2001, were audited by other auditors who have ceased
operations. Those auditors expressed an unqualified opinion on those
consolidated financial statements in their report dated August 13, 2001.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Ace Cash Express,
Inc. and Subsidiaries as of June 30, 2002, and the consolidated results of
their operations and their consolidated cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States
of America.



GRANT THORNTON LLP

Dallas, Texas
August 26, 2002

47



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##### Table of Contents



This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Ace Cash Express, Inc. filing on Form 10-K for the year
ended June 30, 2001. This audit report has not been reissued by Arthur
Andersen LLP in connection with this filing of Form 10-K. The consolidated
balance sheet at June 30, 2000, and the consolidated statements of earnings,
shareholders equity and cash flows for the year ended June 30, 1999 have not
been included in the accompanying financial statements.



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders of Ace Cash Express, Inc.:

We have audited the accompanying consolidated balance sheets of Ace Cash
Express, Inc., a Texas corporation, and subsidiaries as of June 30, 2001 and
2000, and the related consolidated statements of earnings, shareholders equity
and cash flows for each of the three years in the period ended June 30, 2001.
These financial statements are the responsibility of the Companys management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ace Cash Express, Inc. and
subsidiaries as of June 30, 2001 and 2000, and the results of their operations
and their cash flows for each of the three years in the period ended June 30,
2001, in conformity with accounting principles generally accepted in the United
States.

As explained in Note 1 to the consolidated financial statements, effective July
1, 1999, the Company changed its method of accounting for costs of start-up
activities, and effective July 1, 2000, the Company changed its method of
accounting for derivative instruments and hedging activities.



| | ARTHUR ANDERSEN LLP
| | -------------------

Dallas, Texas
August 13, 2001

48



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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)

|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------------------------- | ------- | -------- | ------- | ---- | ------- | ------ | ------- | 
|                                                                                                                                                                    |                                                                                         |                                                                      |         | June 30,
|                                                                                                                                                                    |                                                                                         |                                                                      |         |         
|                                                                                                                                                                    |                                                                                         |                                                                      |         | 2002     |         | 2001
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |     
|ASSETS                                                                                                                                                              |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|Current Assets                                                                                                                                                      |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Cash and cash equivalents                                            |         | $        | 116,264 |      |         | $      | 129,186 | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Accounts receivable, net                                             |         |          | 8,792   |      |         |        | 3,558   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Loans receivable, net                                                |         |          | 17,356  |      |         |        | 14,386  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Prepaid expenses and other current assets                            |         |          | 7,979   |      |         |        | 9,710   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Inventories                                                          |         |          | 946     |      |         |        | 951     | 
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|Total Current Assets                                                                                                                                                |                                                                                         |                                                                      | 151,337 |          |         |      | 157,791 |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       
|Noncurrent Assets                                                                                                                                                   |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Property and equipment, net                                          |         |          | 37,161  |      |         |        | 39,168  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Covenants not to compete, net                                        |         |          | 1,546   |      |         |        | 2,012   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Goodwill, net                                                        |         |          | 75,015  |      |         |        | 73,892  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Other assets                                                         |         |          | 2,003   |      |         |        | 3,334   | 
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|Total Assets                                                                                                                                                        |                                                                                         | $                                                                    | 267,062 |          |         | $    | 276,197 |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                                |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|Current Liabilities                                                                                                                                                 |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Revolving advances                                                   |         | $        | 97,500  |      |         | $      | 109,800 | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Accounts payable, accrued liabilities, and other current
liabilities |         |          | 28,512  |      |         |        | 23,303  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Money orders payable                                                 |         |          | 13,417  |      |         |        | 16,928  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Senior secured notes payable                                         |         |          | 4,000   |      |         |        | 4,000   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Term advances                                                        |         |          | 48,350  |      |         |        | 1,125   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Notes payable                                                        |         |          | 1,145   |      |         |        | 477     | 
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|Total Current Liabilities                                                                                                                                           |                                                                                         |                                                                      | 192,924 |          |         |      | 155,633 |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       
|Noncurrent Liabilities                                                                                                                                              |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Senior secured notes payable                                         |         |          | 4,000   |      |         |        | 8,000   | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Term advances                                                        |         |          |        |      |         |        | 51,875  | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Notes payable                                                        |         |          | 319     |      |         |        | 601     | 
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    |                                                                                         | Other liabilities                                                    |         |          | 3,680   |      |         |        | 5,362   | 
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|Total Liabilities                                                                                                                                                   |                                                                                         |                                                                      | 200,923 |          |         |      | 221,471 |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       
|Commitments and Contingencies                                                                                                                                       |                                                                                         |                                                                      |        |          |         |      |        |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|Shareholders Equity                                                                                                                                                |                                                                                         |                                                                      |         |          |         |      |         |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    | Preferred stock, $1 par value, 1,000,000 shares authorized, none
issued and outstanding |                                                                      |         |         |         |      |         |       |        
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|Common stock, $.01 par value, 20,000,000 shares authorized,
10,391,988 and 10,258,520 shares issued, and 10,180,588 and
10,047,120 shares outstanding, respectively |                                                                                         |                                                                      | 102     |          |         |      | 100     |       
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    | Additional paid-in capital                                                              |                                                                      |         | 24,353   |         |      |         | 23,288 |        
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    | Retained earnings                                                                       |                                                                      |         | 45,469   |         |      |         | 35,356 |        
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    | Other comprehensive loss                                                                |                                                                      |         | (1,078   | )       |      |         | (1,311 | )      
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                   
|                                                                                                                                                                    | Treasury stock, at cost, 211,400 shares                                                 |                                                                      |         | (2,707   | )       |      |         | (2,707 | )      
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |        |         | 
|Total Shareholders Equity                                                                                                                                          |                                                                                         |                                                                      | 66,139  |          |         |      | 54,726  |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       
|Total Liabilities and Shareholders Equity                                                                                                                          |                                                                                         | $                                                                    | 267,062 |          |         | $    | 276,197 |       
|                                                                                                                                                                    |                                                                                         |                                                                      |         |          |         |      |         |       

The accompanying notes are an integral part of these consolidated financial statements.

49



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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(in thousands, except per share amounts)

|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |        |        |        |        | 
|------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------------------- | ------------------------------ | -------------------- | ------ | ------------------- | ------- | ------ | ------ | ------ | ------- | ------ | ------ | ------ | ------ | 
|                                                                          |                                                              |                                                                             |                                |                      |        | Year Ended June 30,
|                                                                          |                                                              |                                                                             |                                |                      |        |                    
|                                                                          |                                                              |                                                                             |                                |                      |        | 2002                |         | 2001   |        | 2000  
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |       
|Revenues                                                                  |                                                              | $                                                                           | 229,266                        |                      |        | $                   | 196,775 |        |        | $      | 140,636 |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Store expenses:                                                           |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              |                                                                             | Salaries and benefits          |                      |        | 57,864              |         |        |        | 51,969 |         |        |        | 38,639 |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              |                                                                             | Occupancy                      |                      |        | 28,207              |         |        |        | 26,439 |         |        |        | 21,507 |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              |                                                                             | Loan losses and loss provision |                      |        | 22,064              |         |        |        | 24,825 |         |        |        | 4,177  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              |                                                                             | Depreciation                   |                      |        | 7,180               |         |        |        | 6,697  |         |        |        | 5,429  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              |                                                                             | Other                          |                      |        | 36,512              |         |        |        | 35,085 |         |        |        | 24,916 |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                          |                                                              |                                                                             |                                | Total store expenses |        |                     | 151,827 |        |        |        | 145,015 |        |        |        | 94,668 | 
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Store gross margin                                                        |                                                              |                                                                             | 77,439                         |                      |        |                     | 51,760  |        |        |        | 45,968  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Region expenses                                                           |                                                              |                                                                             | 17,495                         |                      |        |                     | 14,127  |        |        |        | 11,119  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Headquarters expenses                                                     |                                                              |                                                                             | 16,594                         |                      |        |                     | 10,328  |        |        |        | 8,247   |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Franchise expenses                                                        |                                                              |                                                                             | 993                            |                      |        |                     | 1,017   |        |        |        | 1,063   |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Other depreciation and amortization                                       |                                                              |                                                                             | 7,570                          |                      |        |                     | 5,087   |        |        |        | 3,798   |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Interest expense                                                          |                                                              |                                                                             | 14,934                         |                      |        |                     | 12,016  |        |        |        | 6,123   |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Other expenses                                                            |                                                              |                                                                             | 2,827                          |                      |        |                     | 8,168   |        |        |        | 955     |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Income before income taxes and cumulative
effect of accounting change     |                                                              |                                                                             | 17,026                         |                      |        |                     | 1,017   |        |        |        | 14,663  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Income taxes                                                              |                                                              |                                                                             | 6,913                          |                      |        |                     | 406     |        |        |        | 5,797   |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Income before cumulative effect of
Accounting change (See Note 1)         |                                                              |                                                                             | 10,113                         |                      |        |                     | 611     |        |        |        | 8,866   |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cumulative effect of accounting change, net
of income tax benefit of $402 |                                                              |                                                                             |                               |                      |        |                     |        |        |        |        | (603    | )     
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Net income                                                                |                                                              | $                                                                           | 10,113                         |                      |        | $                   | 611     |        |        | $      | 8,263   |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Basic earnings per share                                                  |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Before cumulative effect of accounting change                |                                                                             | $                              | 1.00                 |        |                     | $       | .06    |        |        | $       | .88    |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Cumulative effect of accounting change                       |                                                                             |                                |                     |        |                     |         |       |        |        |         | (.06   | )     
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                          | Basic earnings per share                                     |                                                                             | $                              | 1.00                 |        |                     | $       | .06    |        |        | $       | .82    |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                          | Weighted average number of common
shares outstanding  basic |                                                                             |                                | 10,118               |        |                     |         | 10,012 |        |        |         | 10,067 |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|Diluted earnings per share                                                |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              | Before cumulative effect of accounting change                               |                                | $                    | 1.00   |                     |         | $      | .06    |        |         | $      | .86    |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                              | Cumulative effect of accounting change                                      |                                |                      |       |                     |         |        |       |        |         |        | (.06   | )     
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                          |                                                              | Diluted earnings per share                                                  |                                | $                    | 1.00   |                     |         | $      | .06    |        |         | $      | .80    |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       
|                                                                          |                                                              | Weighted average number of common
and dilutive shares outstanding  diluted |                                |                      | 10,141 |                     |         |        | 10,158 |        |         |        | 10,361 |       
|                                                                          |                                                              |                                                                             |                                |                      |        |                     |         |        |        |        |         |       

The accompanying notes are an integral part of these consolidated financial statements.

50



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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(in thousands, except shares)

|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |        |  
|------------------------------------------------------- | -------------------- |  | ------------ | - | ------ | - | ---------- | - | -------- | - | ------------- |  | ----------- | - | ------ |  | -------------- | - | ------- | - | ------------- |  | ------- |  |  | - | ------- | - |  | - | ------ | ------ | -
|                                                        |                      |  | Common Stock |   |        |   |            |   |          |   |               |  |             |   |        |  | Treasury Stock |   |         |   |              
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  | Accumulated |   |        |  |                |   |        
|                                                        |                      |  |              |   |        |   | Additional |   |          |   |               |  | Other       |   |        |  |                |   |         |   |               |  | Total  
|                                                        |                      |  |              |   |        |   | Paid-In    |   | Retained |   | Comprehensive |  |             |   |        |  |                |   |         |   | Shareholders'
|                                                        |                      |  | Shares       |   | Amount |   | Capital    |   | Earnings |   | Income (Loss) |  | Shares      |   | Amount |  | Equity        
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |               
|Balance as of
July 1, 1999                              |                      |  | 10,055,528   |   |        | $ | 101        |   |          | $ | 21,691        |  |             | $ | 26,482 |  |                | $ |        |   |               |  |        |  |  | $ |        |   |  | $ | 48,274 |       
|                                                       
|                                                       
|                                                       
|                                                       
|Net income                                              |                      |  |             |   |        |   |           |   |          |   |              |  |             |   | 8,263  |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 8,263  |       
|                                                       
|                                                       
|                                                       
|                                                       
|Stock options
exercised and related
tax benefit         |                      |  | 110,435      |   |        |   | 1          |   |          |   | 1,024         |  |             |   |       |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 1,025  |       
|                                                       
|                                                       
|                                                       
|                                                       
|Repurchased
shares, at cost                             |                      |  | (181,400     | ) |        |   | (2         | ) |          |   |              |  |             |   |       |  |                |   |        |   |               |  | 181,400 |  |  |   | (2,401  | ) |  |   | (2,403 | )     
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|Balance as of
June 30, 2000                             |                      |  | 9,984,563    |   |        |   | 100        |   |          |   | 22,715        |  |             |   | 34,745 |  |                |   |        |   |               |  | 181,400 |  |  |   | (2,401  | ) |  |   | 55,159 |       
|                                                       
|                                                       
|                                                       
|                                                       
|Net income                                              |                      |  |             |   |        |   |           |   |          |   |              |  |             |   | 611    |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 611    |       
|                                                       
|                                                       
|                                                       
|                                                       
|Cumulative effect of
accounting change
(See Note 1)     |                      |  |             |   |        |   |           |   |          |   |              |  |             |   |       |  |                |   | 648     |   |               |  |        |  |  |   |        |   |  |   | 648    |       
|                                                       
|                                                       
|                                                       
|                                                       
|Change in fair value
of interest-rate
swaps,
net of tax |                      |  |             |   |        |   |           |   |          |   |              |  |             |   |       |  |                |   | (1,959  | ) |               |  |        |  |  |   |        |   |  |   | (1,959 | )     
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|                                                        | Comprehensive
loss   |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        | (700   | )
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|Stock options
exercised and related
tax benefit         |                      |  | 92,557       |   |        |   |           |   |          |   | 573           |  |             |   |       |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 573    |       
|                                                       
|                                                       
|                                                       
|                                                       
|Repurchased
shares, at cost                             |                      |  | (30,000      | ) |        |   |           |   |          |   |              |  |             |   |       |  |                |   |        |   |               |  | 30,000  |  |  |   | (306    | ) |  |   | (306   | )     
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|Balance as of
June 30, 2001                             |                      |  | 10,047,120   |   |        |   | 100        |   |          |   | 23,288        |  |             |   | 35,356 |  |                |   | (1,311  | ) |               |  | 211,400 |  |  |   | (2,707  | ) |  |   | 54,726 |       
|                                                       
|                                                       
|                                                       
|                                                       
|Net income                                              |                      |  |             |   |        |   |           |   |          |   |              |  |             |   | 10,113 |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 10,113 |       
|                                                       
|                                                       
|                                                       
|                                                       
|Change in fair value
of interest-rate
swaps,
net of tax |                      |  |             |   |        |   |           |   |          |   |              |  |             |   |       |  |                |   | 233     |   |               |  |        |  |  |   |        |   |  |   | 233    |       
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|                                                        | Comprehensive
income |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        | 10,346 |  
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|Stock options
exercised and related
tax benefit         |                      |  | 133,468      |   |        |   | 2          |   |          |   | 1,065         |  |             |   |       |  |                |   |        |   |               |  |        |  |  |   |        |   |  |   | 1,067  |       
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       
|Balance as of
June 30, 2002                             |                      |  | 10,180,588   |   |        | $ | 102        |   |          | $ | 24,353        |  |             | $ | 45,469 |  |                |   | ($1,078 | ) |               |  | 211,400 |  |  |   | ($2,707 | ) |  | $ | 66,139 |       
|                                                        |                      |  |              |   |        |   |            |   |          |   |               |  |             |   |        |  |                |   |         |   |               |  |         |  |  |   |         |   |  |   |        |       

The accompanying notes are an integral part of these consolidated financial statements.

51



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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |         |         |        |         |  
|---------------------------------------------------- | --------------------------------------------------------------------------------- | ------------------------------------------------------------ | ------------------------------------------------ | ----------------------------------------- | ------- | ------------------- | ------- | ------- | ------- | ------ | ------- | ------- | ------- | ------ | ------- | -
|                                                     |                                                                                   |                                                              |                                                  |                                           |         | Year Ended June 30,
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                    
|                                                     |                                                                                   |                                                              |                                                  |                                           |         | 2002                |         | 2001    |         | 2000  
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |       
|Cash flows from operating activities:                |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|Net income                                           |                                                                                   | $                                                            | 10,113                                           |                                           |         | $                   | 611     |         |         | $      | 8,263   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Adjustments to reconcile net income to net cash provided
by operating activities: |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Depreciation and amortization                                                     |                                                              |                                                  | 14,750                                    |         |                     |         | 11,784  |         |        |         | 9,227   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Provision for loan loss and provision for doubtful accounts                       |                                                              |                                                  | 22,064                                    |         |                     |         | 24,825  |         |        |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Restructuring charge                                                              |                                                              |                                                  | (163                                      | )       |                     |         | 6,630   |         |        |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Loss on disposal of property and equipment                                        |                                                              |                                                  | 688                                       |         |                     |         |        |         |        |         |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cumulative effect of accounting change                                            |                                                              |                                                  |                                          |         |                     |         |        |         |        |         | 1,005   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deferred income taxes                                                             |                                                              |                                                  | 1,443                                     |         |                     |         | (7,104  | )       |        |         | 322     |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Deferred revenue amortized                                                        |                                                              |                                                  | (2,182                                    | )       |                     |         | (3,077  | )       |        |         | (3,485  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|Changes in assets and liabilities:                   |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Accounts receivable                                          |                                                  |                                           | (5,374  | )                   |         |         | 2,110   |        |         |         | (1,761  | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Loans receivable                                             |                                                  |                                           | (24,894 | )                   |         |         | (20,516 | )      |         |         | (13,152 | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Prepaid expenses and other current assets                    |                                                  |                                           | 133     |                     |         |         | (7,606  | )      |         |         | (824    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Inventories                                                  |                                                  |                                           | 5       |                     |         |         | 431     |        |         |         | 93      |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Other assets                                                 |                                                  |                                           | (4,453  | )                   |         |         | (816    | )      |         |         | (321    | )     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                   | Accounts payable, accrued liabilities, and other liabilities |                                                  |                                           | 6,260   |                     |         |         | 13,083  |        |         |         | 7,315   |       
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                     |                                                                                   |                                                              |                                                  | Net cash provided by operating activities |         |                     | 18,390  |         |         |        | 20,355  |         |         |        | 6,682   |  
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from investing activities:                |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchases of property and equipment, net                                          |                                                              |                                                  | (7,127                                    | )       |                     |         | (12,655 | )       |        |         | (12,255 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Cost of net assets acquired                                                       |                                                              |                                                  | (1,177                                    | )       |                     |         | (35,841 | )       |        |         | (11,359 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in ePacific                                                            |                                                              |                                                  |                                          |         |                     |         |        |         |        |         | (1,000  | )      
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                     |                                                                                   |                                                              |                                                  | Net cash used by investing activities     |         |                     | (8,304  | )       |         |        | (48,496 | )       |         |        | (24,614 | )
|                                                    
|                                                    
|                                                    
|                                                    
|Cash flows from financing activities:                |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net increase (decrease) in money order payable                                    |                                                              |                                                  | (3,511                                    | )       |                     |         | 6,441   |         |        |         | 5,147   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net borrowings (repayments) from revolving advances                               |                                                              |                                                  | (12,300                                   | )       |                     |         | 14,800  |         |        |         | 54,900  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net borrowings (repayments) from term advances                                    |                                                              |                                                  | (4,650                                    | )       |                     |         | 34,500  |         |        |         | 8,000   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net borrowings (repayments) of notes payable                                      |                                                              |                                                  | 386                                       |         |                     |         | (258    | )       |        |         | 1,006   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Payments of senior secured notes payable                                          |                                                              |                                                  | (4,000                                    | )       |                     |         | (4,000  | )       |        |         | (4,000  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Proceeds from stock options exercised                                             |                                                              |                                                  | 1,067                                     |         |                     |         | 573     |         |        |         | 1,025   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Purchase of treasury stock                                                        |                                                              |                                                  |                                          |         |                     |         | (306    | )       |        |         | (1,983  | )      
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                     |                                                                                   |                                                              | Net cash provided (used) by financing activities |                                           |         | (23,008             | )       |         |         | 51,750 |         |         |         | 64,095 |        
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|Net increase (decrease) in cash and cash equivalents |                                                                                   |                                                              | (12,922                                          | )                                         |         |                     | 23,609  |         |         |        | 46,163  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and cash equivalents, beginning of year         |                                                                                   |                                                              | 129,186                                          |                                           |         |                     | 105,577 |         |         |        | 59,414  |        
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|Cash and cash equivalents, end of year               |                                                                                   | $                                                            | 116,264                                          |                                           |         | $                   | 129,186 |         |         | $      | 105,577 |        
|                                                     |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|Supplemental disclosures of cash flows information:  |                                                                                   |                                                              |                                                  |                                           |         |                     |         |         |         |        |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Interest paid                                                                     |                                                              | $                                                | 12,292                                    |         |                     | $       | 11,710  |         |        | $       | 7,373   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Income taxes paid                                                                 |                                                              | $                                                | 3,871                                     |         |                     | $       | 5,739   |         |        | $       | 5,420   |        

The accompanying notes are an integral part of these consolidated financial statements.

52



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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Operations

Ace Cash Express, Inc. (the Company) was incorporated under the laws of the
state of Texas in March 1982. The Company operates in one line of business
with two segments (company-owned and franchised operations) and provides
retail financial services, such as check-cashing; small, short-term consumer
loans (including those made by Goleta National Bank); bill-payments; money
orders; wire transfers; and other transactional services to customers for a
fee. On June 30, 2002, the Company owned and operated 1,003 stores and had 184
franchised stores, for a total network of 1,187 stores in 35 states and the
District of Columbia.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions. These estimates and assumptions
affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities, and the reported amounts of revenues and
expenses. Actual results could differ from those estimates.

Revenue Recognition

Check cashing fees, bill-payment fees, money transfer services fees, money
order fees, and all other transaction fees are recognized when the transaction
is completed. Loan fees and interest are recognized ratably over the term of
each loan. Revenue guarantees are recognized based on contractual terms. Any
bonus or incentive payments are amortized over the term of the contract under
which they are made. The Company acts in an agency capacity on many of its
products, and therefore records the gross revenue less the cost remitted as
revenue. See Franchise Accountingbelow in this Note 1 for a description of
revenue recognition relative to franchises.

The components of revenue are as follows:

|                        |  |                     |         |      |  |      |         |  |  |   |         | 
|----------------------- |  | ------------------- | ------- | ---- |  | ---- | ------- |  |  | - | ------- | 
|                        |  | Year Ended June 30,
|                        |  |                    
|                        |  | 2002                |         | 2001 |  | 2000
|                        |  |                     |         |      |  |     
|                        |  | (in
thousands)     
|Check cashing fees      |  | $                   | 118,907 |      |  | $    | 105,479 |  |  | $ | 89,641  | 
|                       
|                       
|                       
|                       
|Loan fees and interest  |  |                     | 74,197  |      |  |      | 54,771  |  |  |   | 17,872  | 
|                       
|                       
|                       
|                       
|Bill payment services   |  |                     | 10,156  |      |  |      | 10,376  |  |  |   | 9,447   | 
|                       
|                       
|                       
|                       
|Money transfer services |  |                     | 10,998  |      |  |      | 10,270  |  |  |   | 8,944   | 
|                       
|                       
|                       
|                       
|Money order fees        |  |                     | 7,554   |      |  |      | 7,245   |  |  |   | 7,032   | 
|                       
|                       
|                       
|                       
|Franchise revenues      |  |                     | 2,199   |      |  |      | 2,257   |  |  |   | 2,537   | 
|                       
|                       
|                       
|                       
|Other fees              |  |                     | 5,255   |      |  |      | 6,377   |  |  |   | 5,163   | 
|                        |  |                     |         |      |  |      |         |  |  |   |         | 
|Total revenue           |  | $                   | 229,266 |      |  | $    | 196,775 |  |  | $ | 140,636 | 
|                        |  |                     |         |      |  |      |         |  |  |   |         | 

Cash and Cash Equivalents

The Company considers all highly liquid investment securities purchased with an
original maturity of three months or less from the date of purchase to be cash
equivalents.

Accounts Receivable, Net

Accounts receivable, net, on the consolidated balance sheets as of June 30,
2002 and 2001 were $8.8 million and $3.6 million, respectively, and include the
MoneyGram receivable and other miscellaneous receivables, net of an allowance
for doubtful accounts of $1.0 million and $0.1 million as of June 30, 2002 and
2001, respectively.

53



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##### Table of Contents



Investments

The Company has an investment of $1 million in ePacific Incorporated
(ePacific), a private company in the business of providing customized
debit-card payment systems and electronic funds transfer processing services.
This investment, which is carried at cost, is included in other non-current
assets on the consolidated balance sheets. The Company purchased approximately
14% of the shares of ePacifics Series A Convertible Preferred Stock during
fiscal 2000.

Loans Receivable, Net

The Company is a party to a Master Loan Agency Agreement and ancillary
agreements (the Goleta Agreement) with Goleta National Bank (Goleta), a
national bank located in Goleta, California. Under the Goleta Agreement, which
was first entered into in August 1999, the parties have developed and
implemented an arrangement under which short-term loans made by Goleta (Bank
Loan) are offered at most company-owned locations. Currently, a Bank Loan may
be up to $500 and must be repaid or renewed in 14 days. Under the Goleta
Agreement, the Company purchases from Goleta a participation representing 90%
of each Bank Loan made on a previous day. Goleta determines the interest rate
(and other terms) of the Bank Loans. Currently, a fee of $17 per $100 of Bank
Loan is charged by Goleta for each 14-day period. As of June 30, 2002 and
2001, the gross receivable for the Companys participation interests in Bank
Loans was $27.3 million and $27.6 million, respectively.

Where the Bank Loans are not offered, and where legally permitted, the Company
offers small, short-term loans, which are commonly referred to as payday
loans, at its locations. The Companys payday loan service or product
consists of providing a customer cash in exchange for the customers check or
an ACH authorization to debit the customers bank account, along with an
agreement to defer the presentment or deposit of that check or the initiation
of that ACH debit on the customers account, as the case may be, until the
customers next payday. The amount of the customers check or ACH
authorization is the amount of the cash provided to the customer plus a fee to
the Company. The term of the deferral of the check presentment or ACH debit is
typically two to four weeks. As of June 30, 2002 and 2001, the gross
receivable for Payday Loans was approximately $2.3 million and $0.2 million,
respectively.

In fiscal 2001, the Company established a loan loss provision for its
participation interests in the Bank Loans. The Companys policy for
determining the loan loss provision is based on historical experience with the
Bank Loans generally, as well as the results of managements review and
analysis of the payment and collection of the Bank Loans within the last fiscal
quarter. The Companys policy is to charge off its participation interests in
all Bank Loans which are 180 days or more past due. Based on prior experience
and collection analysis, during the third quarter of fiscal 2002, the Company
changed its estimate of the percentage of participations in matured Bank Loans
expected to be uncollectible from 8% to 7% for the quarter ended December 31,
2001 and from 8% to 6% for the quarter ended March 31, 2002. The impact of the
change in estimate during the third quarter of fiscal 2002 was $2.6 million.
The Companys current policy is to provide for loan losses at 7% of
participations in matured loans in the first, second and fourth fiscal quarters
and 6% of participations in matured loans in the third fiscal quarter.

Loans receivable, net, on the consolidated balance sheets as of June 30, 2002
and 2001 were $17.4 million and $14.4 million, respectively. Loans receivable,
net, includes receivables for the Companys payday loans and the Companys
participation interest in the Bank Loans. In fiscal 2000, the Company
accounted for the full amount of loans not paid on the due date as a loan loss
in that period. In the first quarter of fiscal 2001, the Company established a
loan loss allowance for its participation interests in the Bank Loans based on
the Companys prior experience with its payday loans. The losses resulting
from borrowers nonpayment of Bank Loans occurred at a different rate than that
originally anticipated, and as a result, in the third quarter of fiscal 2001,
an additional loan loss provision of $8.5 million was established regarding the
Companys participation interests in Bank Loans.

The loan loss allowance of $12.2 million as of June 30, 2002 represented 41.3%
of the gross loans receivable as of that date. Loan charge-offs for the fiscal
years ended June 30, 2002 and 2001 were $23.1 million and $13.0 million,
respectively.

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Inventories

Inventories consist of unsold lottery tickets, postage stamps and other
inventory. Lottery tickets and postage stamps are stated at purchase price and
accounted for using the specific identification method. Other inventories are
stated at cost and utilize the first-in, first-out method.

|                          |  |                |     |      |  |   |     | 
|------------------------- |  | -------------- | --- | ---- |  | - | --- | 
|                          |  | June 30,      
|                          |  |               
|                          |  | 2002           |     | 2001
|                          |  |                |     |     
|                          |  | (in
thousands)
|Lottery tickets inventory |  | $              | 310 |      |  | $ | 382 | 
|                         
|                         
|                         
|                         
|Postage stamp inventory   |  |                | 420 |      |  |   | 298 | 
|                         
|                         
|                         
|                         
|Other inventory           |  |                | 216 |      |  |   | 271 | 
|                          |  |                |     |      |  |   |     | 
|                          |  | $              | 946 |      |  | $ | 951 | 
|                          |  |                |     |      |  |   |     | 

Property and Equipment

Depreciation of property and equipment is based on the lesser of the estimated
useful lives of the respective assets or the lease terms. The useful lives of
property and equipment by class are as follows: store equipment and furniture
and fixtures, four to ten years; leasehold improvements, ten years; signs,
eight years; and other property and equipment, five to ten years. Depreciation
is calculated on a straight-line basis.

Intangible Assets

The Company adopted SFAS 142, Goodwill and Other Intangible Assets, effective
July 1, 2001, and has identified two reporting units: (1) company-owned stores
and (2) franchised stores. The franchised stores reporting unit has no
intangible assets, and therefore it is not impacted by SFAS 142. The Company
completed the first step of the two-step impairment test by obtaining an
independent third-party appraisal of the fair value of the company-owned stores
reporting unit as of July 1, 2001. The fair value of the company-owned stores
reporting unit exceeded the carrying value, and as a result, the second step of
the two-step impairment test was not required and no impairment loss has been
recorded as of June 30, 2002. In accordance with SFAS 142, the Company
discontinued recording goodwill amortization effective July 1, 2001. Covenants
not to compete are amortized over the applicable period of the contract,
generally ranging from two to five years.

As required, the Company adopted a new accounting standard, American Institute
of Certified Public Accountants (AICPA) Statement of Position (SOP) 98-5,
Reporting on the Costs of Start-Up Activities, effective July 1, 1999. This
standard requires that previously capitalized start-up costs be recognized as a
cumulative effect of change in accounting principle and expensed fully in the
period of adoption. Start-up costs, net of tax, of $0.6 million were expensed
in the first quarter ended September 30, 1999. On a pro forma basis, the
Companys net income would have been $8.9 million ($0.88 per share) for the
year ended June 30, 2000 if this accounting change had been retroactively
applied.

Deferred Borrowing Costs

Deferred borrowing costs are amortized over the term of their respective
financing arrangement. Amortization expense related to deferred borrowing
costs for the years ended June 30, 2002, 2001, and 2000 was $5.8 million, $0.9
million, and $0.4 million, respectively. The deferred borrowing cost balances
for the years ended June 30, 2002 and 2001 were $0.7 million and $1.4 million,
net of accumulated amortization of $7.4 million and $1.5 million, respectively.
Deferred borrowing costs are reflected in other current and other non-current
assets in the accompanying consolidated balance sheets.

Store Expenses

The direct costs incurred in operating the stores have been classified as store
expenses and are deducted from total revenues to determine contribution
attributable to the stores. Store expenses include salary and benefit expense
of store employees, rent and other occupancy costs, depreciation of store
property, bank charges, armored and security costs, loan losses, net returned
checks, cash shortages, and other costs incurred by the stores.

Derivative Instruments and Hedging Activities

The Companys objective in managing its exposure to fluctuations in interest
rates is to decrease the volatility of earnings and cash flows associated with
changes in the applicable rates. To achieve this objective, the Company has
entered into interest-rate swap agreements. The interest-rate swaps are
derivative instruments related to forecasted transactions and are considered to
hedge future cash flows. The effective portion of any gains or losses are
included in accumulated other comprehensive

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income (loss) until earnings are affected by the variability of cash flows.
Any ineffective portion is recognized currently into earnings. The cash flows
of the interest-rate swaps are expected to be highly effective in achieving
offsetting cash flows attributable to fluctuations in the cash flows of the
floating-rate revolving loan facility. If it becomes probable that a
forecasted transaction will no longer occur, the interest-rate swap will
continue to be carried on the balance sheet at fair value, and gains or losses
that were deferred in accumulated other comprehensive income (loss) will be
recognized immediately into earnings. If the interest-rate swaps are
terminated prior to their expiration dates, any cumulative gains and losses
will be deferred and recognized into earnings over the remaining life of the
underlying exposure. If the hedged liabilities are to be sold or extinguished,
the Company will recognize the gain or loss on the designated financial
instruments currently into earnings.

The Company uses the cumulative approach to assess effectiveness of the cash
flow hedges. The measurement of hedge ineffectiveness is based on the
cumulative dollar offset method. Under this method, the Company compares the
changes in the floating rate component of the cash flow hedge to the floating
rate cash flows of the revolving loan facility. Changes in the fair value of
the effective cash flow hedges are recorded in accumulated other comprehensive
income (loss). The effective portion that has been deferred in accumulated
other comprehensive income (loss) will be reclassified to earnings when the
hedged items impact earnings.

The Companys adoption of SFAS 133, Accounting for Derivative Instruments and
Hedging Activities, as of July 1, 2000 resulted in a $648,000 credit to
accumulated other comprehensive income (loss) for the cumulative effect of
accounting change representing the transition adjustment. The associated
underlying hedged liability has exceeded the notional amount for each of the
Companys interest-rate swaps throughout the existence of the interest-rate
swap, and it is anticipated that it will continue to do so with respect to the
remaining swap. The interest-rate swaps were and are based on the same index
as their respective underlying debt. The interest-rate swaps were highly
effective in achieving offsetting cash flows attributable to the fluctuations
in the cash flows of the hedged risk, and no amount has been required to be
reclassified from accumulated other comprehensive income (loss) into earnings
for hedge ineffectiveness or due to excluding a portion of the value from
measuring effectiveness during the year ended June 30, 2002. The interest-rate
swap resulted in an increase of interest expense of $3,109,000 for the year
ended June 30, 2002 and a reduction of interest expense of $168,000 for the
year ended June 30, 2001. The fair value of the interest-rate swaps increased
by $233,000, net of tax, during the year ended June 30, 2002, and decreased by
$1,959,000, net of tax, during the year ended June 30, 2001, which have been
recorded in accumulated other comprehensive loss. The estimated net amount of
existing loss expected to be reclassified into earnings during the next fiscal
year is $1.1 million.

As indicated in Credit Facilitiesin Note 5, the Company expects the Credit
Agreement will be renewed or replaced. If the revolving line-of-credit
facility is not renewed or replaced with a facility with similar economic
characteristics, the remaining deferred loss in accumulated other comprehensive
loss will be recognized immediately into earnings.

Accumulated other comprehensive loss balances related to the interest-rate
swaps are as follows:

|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  |                   |     |        |   |   |        |  
|----------------- | ----- | --------------------- | -------- | ---- | -------- | ---- | ------------------------------- | ------ | --------------------- | ---- | - | ------ | --- | - | - | --- | --- |  | ----------------- | --- | ------ | - | - | ------ | -
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  | Change in        
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  | Accumulated Other
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  | Comprehensive    
|                  |       |                       |          |      |          |      | Accumulated Other Comprehensive |        | Income (Loss) for the
|                  |       |                       |          |      |          |      | Income (Loss) as of             |        | Year Ended June 30,  
|                  |       |                       |          |      |          |      |                                 |        |                      
|                  |       |                       | Notional |      | June 30, |      | June 30,                        |        | July 1,               |      |   |        |     |   |   |     |    
|Loan Facility     |       | Amount                |          | 2002 |          | 2001 |                                 | 2000   |                       | 2002 |   | 2001  
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |       
|                  |       |                       |          |      |          |      | (in
thousands)                 
|Revolving advance |       | $33 million           |          | $    |         |      |                                 | $      |                      |      |   | $      | 452 |   |   | $   |    |  |                   | $   | (452   | )
|                 
|                 
|                 
|                 
|Revolving advance |       | $10 million           |          |      |         |      |                                 |        |                      |      |   |        | 92  |   |   |     |     |  |                   |     | (92    | )
|                 
|                 
|                 
|                 
|Revolving advance |       | $85 million(average)  |          |      | (1,078   | )    |                                 |        | (1,311                | )    |   |        | (35 | ) |   |     | 233 |  |                   |     | (1,276 | )
|                 
|                 
|                 
|                 
|Term advance      |       | $9.4 million(average) |          |      |         |      |                                 |        |                      |      |   |        | 139 |   |   |     |    |  |                   |     | (139   | )
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  |                   |     |        |   |   |       
|                 
|                 
|                 
|                 
|                  | Total |                       |          |      |          |      | $                               | (1,078 | )                     |      | $ | (1,311 | )   |   | $ | 648 |     |  | $                 | 233 |        |   | $ | (1,959 | )
|                  |       |                       |          |      |          |      |                                 |        |                       |      |   |        |     |   |   |     |     |  |                   |     |        |   |   |       

The accumulated other comprehensive loss as of June 30, 2002 and 2001, is net
of a tax benefit of $737,000 and $892,000, respectively.

Franchise Accounting

The Company includes franchise fees in revenues. Franchise fees generally
include initial fees (initial fees) and future optional, exclusive store fees
(optional fees) as well as continuing franchise fees (royalty fees).

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Initial fees are recognized when the Company has provided substantially all of
its initial services in accordance with the franchise agreements. Generally,
this occurs when the related sites have been approved or identified and the
franchisee has completed the training required by the Company. Optional fees
for providing exclusive arrangements until the franchisee opens the store are
recognized either when the option expires or when the commitments pursuant to
the option are completed. Royalty fees are recognized as revenues as they are
earned under the franchise agreements.

The following table presents the components of franchise fees recognized in
revenues for the years ended June 30, 2002, 2001, and 2000:

|                          |                         |   |                |       |      |   |       |       |  |   |       |       | 
|------------------------- | ----------------------- | - | -------------- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | 
|                          |                         |   | June 30,      
|                          |                         |   |               
|                          |                         |   | 2002           |       | 2001 |   | 2000 
|                          |                         |   |                |       |      |   |      
|                          |                         |   | (in thousands)
|Initial and optional fees |                         | $ | 320            |       |      | $ | 581   |       |  | $ | 1,090 |      
|                         
|                         
|                         
|                         
|Royalty fees              |                         |   | 1,872          |       |      |   | 1,669 |       |  |   | 1,284 |      
|                         
|                         
|                         
|                         
|Other                     |                         |   | 7              |       |      |   | 7     |       |  |   | 163   |      
|                          |                         |   |                |       |      |   |       |       |  |   |       |      
|                          | Total franchise revenue |   | $              | 2,199 |      |   | $     | 2,257 |  |   | $     | 2,537 | 
|                          |                         |   |                |       |      |   |       |       |  |   |       |      

Cash payments received under franchise agreements prior to the completion of
the earnings process are deferred until the initial and optional fees are
recognized in accordance with the preceding paragraph. As of June 30, 2002 and
2001, approximately $185,000 and $170,000, respectively, of deferred franchise
fees are recorded in other current and other non-current liabilities in the
accompanying consolidated balance sheets.

Income Taxes

The Company utilizes an asset and liability approach, and deferred taxes are
determined based on the estimated future tax effects of differences between the
financial statement and tax bases of assets and liabilities given the
provisions of the enacted tax laws. A valuation allowance would be recognized
if it is more likely than not that some portion or all of a deferred tax asset
will not be realized. The Company recorded no valuation allowance as of June
30, 2002 or 2001.

Returned Checks

The Company charges operations for losses on returned checks in the period such
checks are returned. Recoveries on returned checks are credited in the period
when the recovery is received.

Software Development Costs

The Company expenses costs incurred in the preliminary project stages, and
thereafter capitalizes costs incurred in the developing or obtaining, of
internal use software, including external direct costs of materials and
services, as well as payroll and payroll-related costs.

Earnings Per Share

Earnings per share have been computed based on the weighted average number of
common and dilutive shares outstanding for the respective periods. Dilutive
shares include employee and non-employee director stock options.

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Basic earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding. Diluted earnings per share are
computed by dividing net income by the weighted average number of common shares
outstanding, after adjusting for the dilutive effect of stock options. The
following table presents the reconciliation of the numerator and denominator
used in the calculation of basic and diluted earnings per share:

|                                                                 |                                                                             |   |                     |        |      |   |      |        |  |   |       |        | 
|---------------------------------------------------------------- | --------------------------------------------------------------------------- | - | ------------------- | ------ | ---- | - | ---- | ------ |  | - | ----- | ------ | 
|                                                                 |                                                                             |   | Year Ended June 30,
|                                                                 |                                                                             |   |                    
|                                                                 |                                                                             |   | 2002                |        | 2001 |   | 2000
|                                                                 |                                                                             |   |                     |        |      |   |     
|                                                                 |                                                                             |   | (in thousands)     
|Income before cumulative effect of accounting
change (numerator) |                                                                             | $ | 10,113              |        |      | $ | 611  |        |  | $ | 8,866 |       
|                                                                 |                                                                             |   |                     |        |      |   |      |        |  |   |       |       
|Reconciliation of denominator:                                   |                                                                             |   |                     |        |      |   |      |        |  |   |       |       
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Weighted average number of common shares
outstanding  basic                |   |                     | 10,118 |      |   |      | 10,012 |  |   |       | 10,067 | 
|                                                                
|                                                                
|                                                                
|                                                                
|                                                                 | Effect of dilutive stock options                                            |   |                     | 23     |      |   |      | 146    |  |   |       | 294    | 
|                                                                 |                                                                             |   |                     |        |      |   |      |        |  |   |       |       
|                                                                 | Weighted average number of common and
dilutive shares outstanding  diluted |   |                     | 10,141 |      |   |      | 10,158 |  |   |       | 10,361 | 
|                                                                 |                                                                             |   |                     |        |      |   |      |        |  |   |       |       

For fiscal years ending June 30, 2002, 2001, and 2000, options to purchase
1,275,818, 862,560, and 198,000 shares of common stock, respectively, were not
included in the computation of diluted earnings per share because the exercise
prices of those options were greater than the average market price of the
common stock; and therefore, the effect would be anti-dilutive.

Fair Value of Financial Instruments

The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. The amounts reported in the
consolidated balance sheets for trade receivables, trade payables, notes
receivable, revolving advances, money order payable, and notes payable all
approximate fair value. The carrying value and fair value of the interest-rate
swap is ($1.8) million and is calculated using the forward market rates
available as of June 30, 2002.

Reclassifications

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

Recently Issued Accounting Pronouncements

In October 2001, the Financial Accounting Standards Board issued SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS 144),
which requires a single accounting model to be used for long-lived assets to be
sold and broadens the presentation of discontinued operations to include a
component of an entity (rather than a segment of a business). A component of
an entity constitutes operations and cash flows that can be clearly
distinguished, operationally and for financial reporting purposes, from the
rest of the entity. A component of an entity that is classified as held for
sale, or has been disposed of, is presented as a discontinued operation if the
operations and cash flows of the component will be (or have been) eliminated
from the ongoing operations of the entity and the entity will not have any
significant continuing involvement in the operations of the component. SFAS
144 is effective for the Company beginning July 1, 2002, and management is
currently reviewing and evaluating the effects this statement will have, if
any, on the Companys financial position and results of operations.

In June 2002, the Financial Accounting Standards Board issued SFAS 146,
Accounting for Costs Associated with Exit or Disposal Activities (SFAS
146). SFAS 146 nullifies Emerging Issues Task Force (EITF) Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring). SFAS 146 requires companies to recognize costs associated
with exit or disposal activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. Examples of costs covered by the
standard include lease termination costs and certain employee severance costs
that are associated with a restructuring, discontinued operation, plant
closing, or other exit or disposal activity. Under Issue No. 94-3, a liability
for an exit cost as defined in Issue No. 94-3 was recognized at the date of an
entitys commitment to an exit plan. SFAS 146 is effective for exit or disposal
activities that are initiated after December 31, 2002, with early application
encouraged.

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The AICPAs Accounting Standards Committee (AcSEC) issued Statement of Position
01-6, Accounting by Certain Entities (Including Entities with Trade
Receivables) That Lend to or Finance the Activities of Others (SOP 01-6).
SOP 01-6 provides guidance on accounting and reporting matters for entities
that have trade receivables and entities that finance their customers
purchases of goods and services using trade receivables. SOP 01-6 is effective
for years beginning after December 15, 2001. SOP 01-6 will be effective for the
Company beginning July 1, 2002, and management is currently reviewing and
evaluating the effects this statement will have, if any, on the Companys
financial position and results of operations.

2.     OPERATING SEGMENTS

The Companys reportable segments are strategic business units that
differentiate between company-owned and franchised stores. Company-owned store
revenue is generated from store customer-transaction processing, and franchised
store revenue is generated from the franchise fees charged for opening the
store and on-going royalty fees. The accounting policies of the segments are
the same as those described in the summary of significant accounting policies.

Segment information for the years ended June 30, 2002, 2001, and 2000 was as
follows:

|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |         |        | 
|------------------------- | ---------------------------------------- | --------------------------------------------------------------------- | - | ------------------------------------------- | ------ | ---------- | - | ------ | ----- | ----- | - | ------- | ------- | - | - | ------- | ------ | 
|                          |                                          |                                                                       |   | Company-                                    |        |            |   |        |       |       |   |         |         |   |   |        
|                          |                                          |                                                                       |   | owned                                       |        | Franchised |   | Other  |       | Total
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |      
|                          |                                          |                                                                       |   | (in
thousands, except for number of stores)
|Year ended June 30, 2002: |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |        
|                         
|                         
|                         
|                         
|                          | Revenue                                  |                                                                       | $ | 227,067                                     |        |            | $ | 2,199  |       |       | $ |        |         |   | $ | 229,266 |       
|                         
|                         
|                         
|                         
|                          | Gross margin                             |                                                                       |   | 75,240                                      |        |            |   | 2,199  |       |       |   |        |         |   |   | 77,439  |       
|                         
|                         
|                         
|                         
|                          | Region, headquarters, franchise expenses |                                                                       |   | (34,089                                     | )      |            |   | (993   | )     |       |   |        |         |   |   | (35,082 | )     
|                         
|                         
|                         
|                         
|                          | Other depreciation and amortization      |                                                                       |   |                                            |        |            |   |       |       |       |   | (7,570  | )       |   |   | (7,570  | )     
|                         
|                         
|                         
|                         
|                          | Interest expense                         |                                                                       |   |                                            |        |            |   |       |       |       |   | (14,934 | )       |   |   | (14,934 | )     
|                         
|                         
|                         
|                         
|                          | Other expenses                           |                                                                       |   |                                            |        |            |   |       |       |       |   | (2,827  | )       |   |   | (2,827  | )     
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |         |       
|                          | Income (loss) before taxes               |                                                                       | $ | 41,151                                      |        |            | $ | 1,206  |       |       | $ | (25,331 | )       |   | $ | 17,026  |       
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |        
|                          | Total assets                             |                                                                       | $ | 262,781                                     |        |            | $ | 4,281  |       |       | $ |        |         |   | $ | 267,062 |       
|                         
|                         
|                         
|                         
|                          | Number of stores                         |                                                                       |   | 1,003                                       |        |            |   | 184    |       |       |   |        |         |   |   | 1,187   |       
|                         
|                         
|                         
|                         
|Year ended June 30, 2001: |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |        
|                         
|                         
|                         
|                         
|                          | Revenue                                  |                                                                       | $ | 194,518                                     |        |            | $ | 2,257  |       |       | $ |        |         |   | $ | 196,775 |       
|                         
|                         
|                         
|                         
|                          | Gross margin                             |                                                                       |   | 49,503                                      |        |            |   | 2,257  |       |       |   |        |         |   |   | 51,760  |       
|                         
|                         
|                         
|                         
|                          | Region, headquarters, franchise expenses |                                                                       |   | (24,455                                     | )      |            |   | (1,017 | )     |       |   |        |         |   |   | (25,472 | )     
|                         
|                         
|                         
|                         
|                          | Other depreciation and amortization      |                                                                       |   |                                            |        |            |   |       |       |       |   | (5,087  | )       |   |   | (5,087  | )     
|                         
|                         
|                         
|                         
|                          | Interest expense                         |                                                                       |   |                                            |        |            |   |       |       |       |   | (12,016 | )       |   |   | (12,016 | )     
|                         
|                         
|                         
|                         
|                          | Restructuring charge                     |                                                                       |   | (7,710                                      | )      |            |   |        |       |       |   |        |         |   |   | (7,710  | )     
|                         
|                         
|                         
|                         
|                          | Other expenses                           |                                                                       |   |                                            |        |            |   |       |       |       |   | (458    | )       |   |   | (458    | )     
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |         |       
|                          | Income (loss) before taxes               |                                                                       | $ | 17,338                                      |        |            | $ | 1,240  |       |       | $ | (17,561 | )       |   | $ | 1,017   |       
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |        
|                          | Total assets                             |                                                                       | $ | 273,196                                     |        |            | $ | 3,001  |       |       | $ |        |         |   | $ | 276,197 |       
|                         
|                         
|                         
|                         
|                          | Number of stores                         |                                                                       |   | 988                                         |        |            |   | 175    |       |       |   |        |         |   |   | 1,163   |       
|                         
|                         
|                         
|                         
|Year ended June 30, 2000: |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |        
|                         
|                         
|                         
|                         
|                          | Revenue                                  |                                                                       | $ | 138,099                                     |        |            | $ | 2,537  |       |       | $ |        |         |   | $ | 140,636 |       
|                         
|                         
|                         
|                         
|                          | Gross margin                             |                                                                       |   | 43,431                                      |        |            |   | 2,537  |       |       |   |        |         |   |   | 45,968  |       
|                         
|                         
|                         
|                         
|                          | Region, headquarters, franchise expenses |                                                                       |   | (19,366                                     | )      |            |   | (1,063 | )     |       |   |        |         |   |   | (20,429 | )     
|                         
|                         
|                         
|                         
|                          | Other depreciation and amortization      |                                                                       |   |                                            |        |            |   |       |       |       |   | (3,798  | )       |   |   | (3,798  | )     
|                         
|                         
|                         
|                         
|                          | Interest expense                         |                                                                       |   |                                            |        |            |   |       |       |       |   | (6,123  | )       |   |   | (6,123  | )     
|                         
|                         
|                         
|                         
|                          | Other expenses                           |                                                                       |   |                                            |        |            |   |       |       |       |   | (955    | )       |   |   | (955    | )     
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |         |       
|                          |                                          | Income (loss) before taxes and cumulative
effect of accounting change |   | $                                           | 24,065 |            |   | $      | 1,474 |       |   | $       | (10,876 | ) |   | $       | 14,663 | 
|                          |                                          |                                                                       |   |                                             |        |            |   |        |       |       |   |         |         |   |   |         |       
|                          | Total assets                             |                                                                       | $ | 217,456                                     |        |            | $ | 3,967  |       |       | $ |        |         |   | $ | 221,423 |       
|                         
|                         
|                         
|                         
|                          | Number of stores                         |                                                                       |   | 915                                         |        |            |   | 157    |       |       |   |        |         |   |   | 1,072   |       

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3.     RESTRUCTURING CHARGES  ACCELERATED STORE CLOSINGS

In the third quarter of fiscal year 2001, the Company recorded charges for the
costs associated with closing 85 unprofitable or underperforming stores. The
restructuring charge of $8.7 million consisted of costs associated with $7.7
million of write-offs for goodwill and covenants not to compete, fixed asset
and inventory disposals, and lease terminations related to the store closings,
and $1.0 million of impaired goodwill associated with nine underperforming
stores not closed. The Company determined that the remaining carrying value of
goodwill on these nine stores was not recoverable.

The following table reflects the components of the significant items reported
as restructuring charges for the quarter ended March 31, 2001 and the accrual
balance as of June 30, 2001 and June 30, 2002 (in millions):

|                                      |       |   |                |     |             |   |             |       |          |  |             |       |             |   |          |     |  |   |      |       |   |   |         |       |   |   |     |     | 
|------------------------------------- | ----- | - | -------------- | --- | ----------- | - | ----------- | ----- | -------- |  | ----------- | ----- | ----------- | - | -------- | --- |  | - | ---- | ----- | - | - | ------- | ----- | - | - | --- | --- | 
|                                      |       |   | Fiscal 2001    |     | Fiscal 2002
|                                      |       |   |                |     |            
|                                      |       |   | Original       |     |             |   |             |       |          |  |             |       | Accrual     |   |          |     |  |   |      |       |   |   | Accrual
|                                      |       |   | Restructure    |     |             |   |             |       |          |  |             |       | Balance     |   |          |     |  |   |      |       |   |   | Balance
|                                      |       |   | Charge         |     | Restructure |   | Write-offs/ |       | as of    |  | Restructure |       | Write-offs/ |   | as of   
|                                      |       |   | as of          |     | Charge      |   | Lease       |       | June 30, |  | Charge      |       | Lease       |   | June 30,
|                                      |       |   | March 31, 2001 |     | Adjustments |   | Settlements |       | 2001     |  | Adjustments |       | Settlements |   | 2002    
|                                      |       |   |                |     |             |   |             |       |          |  |             |       |             |   |         
|Net book value of
tangible assets     |       | $ | 2.5            |     |             | $ |            |       |          |  | ($2.5       | )     |             | $ |         |     |  | $ |     |       |   | $ |        |       |   | $ |    |    
|                                     
|                                     
|                                     
|                                     
|Goodwill and
covenants not to
compete |       |   | 2.6            |     |             |   |            |       |          |  | (2.6        | )     |             |   |         |     |  |   |     |       |   |   |        |       |   |   |    |    
|                                     
|                                     
|                                     
|                                     
|Remaining lease
obligations           |       |   | 2.8            |     |             |   | (1.0        | )     |          |  | (0.8        | )     |             |   | 1.0      |     |  |   | (0.2 | )     |   |   | (0.6    | )     |   |   | 0.2 |    
|                                     
|                                     
|                                     
|                                     
|Other, including
store clean-up       |       |   | 0.8            |     |             |   |            |       |          |  | (0.6        | )     |             |   | 0.2      |     |  |   |     |       |   |   |        |       |   |   | 0.2 |    
|                                      |       |   |                |     |             |   |             |       |          |  |             |       |             |   |          |     |  |   |      |       |   |   |         |       |   |   |     |    
|                                      | Total |   | $              | 8.7 |             |   |             | ($1.0 | )        |  |             | ($6.5 | )           |   | $        | 1.2 |  |   |      | ($0.2 | ) |   |         | ($0.6 | ) |   | $   | 0.4 | 
|                                      |       |   |                |     |             |   |             |       |          |  |             |       |             |   |          |     |  |   |      |       |   |   |         |       |   |   |     |    

The decision to close these unprofitable or underperforming stores was made in
order to benefit future operations. Typically, these stores would have been
closed at various times over the succeeding two or three years, depending on
the circumstances of each store and its local market. Frequently, the
Companys decision to close a store is made to coincide with the expiration of
the store lease. The Company determined, however, that closing these stores in
this manner would permit better use of its capital and other resources, which
the Company believes would improve the profitability of its overall operations.
All of the 85 stores were closed by June 30, 2001.

The original restructuring charge of $8.7 million less the $1.0 million
adjustment was recorded in other expenses in the fiscal year ended June 30,
2001, and an additional adjustment of $0.2 million was recorded in other
expenses through the fiscal year ended June 30, 2002. The adjustments reflect
a reduction in the estimate of lease payouts which resulted from the Companys
ability to negotiate favorable lease terminations. Since some of the leases
will be paid out over their remaining terms, the Company anticipates that the
estimated completion date for the remaining liabilities will be approximately
June 2005.

4.     PRIOR FISCAL YEAR SIGNIFICANT ACQUISITION

On November 10, 2000, the Company acquired the assets of 107 check-cashing and
retail financial services stores in California, Texas, and Oklahoma from a
group of five privately held companies that are majority owned by Morris
Silverman and Jeffrey D. Silverman and managed by MS Management Company based
in Chicago, Illinois. The total purchase price for the assets of all of the
acquired locations was $29.7 million in cash.

This acquisition was accounted for using the purchase method of accounting, and
accordingly, the net assets and results of operations of the acquired companies
have been included in the Companys consolidated financial statements since the
date that each store location was activated with the Companys proprietary
point-of-sale system. As of December 31, 2000, all of the stores were phased
into the Companys network.

Eleven of the acquired locations were in third-party grocery stores, operated
under the Handy Andy name, in and around San Antonio, Texas. Following the
foreclosure and sale of those grocery stores by the secured creditor of the
grocery store operator, the Company instituted litigation against that creditor
and its purchaser in January 2001 to maintain the Companys right to operate in
those locations. At a trial in April 2001, the court found that the lease
agreement under which the Company claimed the right to occupy those 11
locations, which had been assigned to the Company by the sellers, was not
enforceable under Texas law. The court therefore ordered the Company to vacate
those 11 locations, which the Company did in June 2001. Because of the courts
finding, the Company made demand for indemnification from the sellers and their
majority shareholders under the purchase agreement. When it appeared that
further negotiations regarding the Companys

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demand for indemnification would be unsuccessful, in November 2001 the Company
filed a lawsuit against the sellers and their majority shareholders to recover
the damages suffered in connection with, and as a result of, the lost 11
locations. In its complaint, the Company seeks actual damages in excess of $2
million. The defendants have filed an answer denying all of the Companys
material claims, and the Company and the defendants are conducting discovery in
this lawsuit.

5.     FINANCING ARRANGEMENTS AND GUARANTEES

Senior Secured Notes Payable

The Company has outstanding $8 million, of the original $20 million, principal
amount of 9.03% senior secured notes payable (Senior Secured Notes) issued to
Principal Life Insurance Company (formerly known as Principal Mutual Life
Insurance Company) (Principal) under a Note Purchase Agreement. The
principal amount of the Senior Secured Notes is due in equal annual
installments of $4 million each on November 15, through November 15, 2003.
Interest payments are due semiannually, on May 15 and November 15, through
November 15, 2003. There is $90,000 and $135,000 of accrued interest on the
Senior Secured Notes as of June 30, 2002 and 2001, respectively, included in
accrued liabilities in the accompanying consolidated balance sheets. For the
years ended June 30, 2002, 2001, and 2000, there was $0.9 million, $1.2
million, and $1.6 million of interest expense, respectively, incurred on the
Senior Secured Notes which is included in interest expense.

The Senior Secured Notes are secured by a security interest in substantially
all the assets of the Company. The collateral arrangements are subject to the
Amended and Restated Collateral Trust Agreement dated as of July 31, 1998 (the
Amended Collateral Trust Agreement) that was signed with a credit agreement
with a syndicate of bank lenders that preceded the Credit Agreement (defined
below), and those arrangements also apply to the Credit Agreement. The Amended
Collateral Trust Agreement created a collateral trust, with Wilmington Trust
Company as trustee, to secure the Companys obligations under the Credit
Agreement and to the Companys two other secured lenders, Principal and
Travelers Express Company, Inc. The Amended Collateral Trust Agreement
includes agreements regarding the priority of distributions to the secured
lenders upon foreclosure and liquidation of the collateral subject thereto and
certain other intercreditor arrangements. The Company also executed an Amended
and Restated Assignment of Deposit Accounts and Security Agreement with
Wilmington Trust Company to grant the trustee a security interest in the same
collateral that secures the Companys obligations under the Credit Agreement.

The Note Purchase Agreement contains certain restrictive covenants affecting
the business and affairs of the Company and its subsidiaries. Those covenants
address, among other things, the maintenance of specified financial ratios, the
incurrence and payment of other indebtedness, the disposition of assets or of
the ownership of any subsidiary of the Company, the grant or existence of other
liens on the assets of the Company and its subsidiaries, and transactions
between the Company or its subsidiaries and any of their affiliates. At June
30, 2002, the Company is in compliance with these restrictive covenants.

Credit Facilities

During the year ended June 30, 2002, the Company was a party to an Amended and
Restated Credit Agreement (the Credit Agreement) with a syndicate of banks
(the Lenders), led by Wells Fargo Bank Texas, National Association (Wells
Fargo Bank).

The Credit Agreement was amended three times during the fiscal year: (1) on
November 8, 2001, to extend the maturity of the credit facilities until
December 31, 2001, and to revise certain other terms; (2) on December 31, 2001,
to extend the maturity of the credit facilities until April 30, 2002, and to
revise certain other terms; and (3) on April 30, 2002, to extend the maturity
of the credit facilities until October 31, 2002, and to revise certain other
terms. The Company does not believe the borrowing limit nor the limit on future
capital expenditures will adversely affect its operations during the extension
period.

Until November 8, 2001, the two primary credit facilities available to the
Company under the Credit Agreement were a revolving line-of-credit facility of
$155 million and a term facility of $55 million, both available until November
8, 2001. Borrowings under the revolving line-of-credit facility were available
for working capital and general corporate purposes, and borrowings under the
term loan facility were available for store construction and relocation and
other capital expenditures, including acquisitions, and refinancing other debt.
In addition to the two primary credit facilities, the Company also had
available under the Credit Agreement an additional 25-day revolving credit
facility of up to $25 million from Wells Fargo Bank and certain of the other
Lenders, and a standby letter-of-credit facility of up to $1.5 million from
Wells Fargo Bank.

Until November 8, 2001, the Companys borrowings under the revolving
line-of-credit facility bore interest at a variable annual rate equal to, at
the Companys discretion, either the prime rate publicly announced by Wells
Fargo Bank from time to time (the Prime Rate) or the London InterBank Offered
Rate (LIBOR) plus 0.75%. The Companys borrowings under the term facility
bore interest at a variable annual rate equal to, at the Companys discretion,
either the Prime Rate plus 0.25%

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or LIBOR plus 2.375% (but subject to adjustment quarterly within a range of
2.125% to 2.625% above LIBOR, depending on the Companys debt-to-cash flow
ratio). Interest was generally payable monthly, except on LIBOR-rate
borrowings; interest on LIBOR-rate borrowings was payable every 30, 60, or 90
days, depending on the period selected by the Company. The Company also paid a
commitment fee for each of these credit facilities. The commitment fee for the
revolving line-of-credit facility was equal to 0.25% per annum of the average
daily unused portion of that facility; and the commitment fee for the term
facility varied within a range of 0.3% to 0.5% per annum of the average daily
unused portion of that facility, depending on the Companys debt-to-cash flow
ratio.

On November 8, 2001, the Company entered into an amendment to the Credit
Agreement, which was effective until December 31, 2001. That amendment:



| |  |  | Extended the Companys revolving line-of-credit facility, temporary
additional revolving advance facility, and letter-of-credit facility to
December 31, 2001.                                                            
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Converted the Companys reducing revolving facility, which had been
available for acquisitions and capital expenditures until November 9,
2003, to a term-loan facility expiring and maturing on December 31,
2001.       
|
| |  |  | Authorized the Companys borrowing of an additional $4 million under
the term-loan facility for payment of the $4 million installment of
principal due under the Senior Secured Notes of the Company on November
15, 2001.
|
| |  |  | Increased the interest rate on the revolving line-of-credit facility
to a variable annual rate equal to, at the Companys option, either the
Prime Rate plus 1.75% or LIBOR plus 2.75%.                                   
|
| |  |  | Increased the interest rate on the term-loan facility to a variable
annual rate equal to, at the Companys option, either the Prime Rate
plus 2.25% or LIBOR plus 3.25%.                                                  

That amendment did not change any of the other material terms of the Credit
Agreement.

On December 31, 2001, the Company entered into another amendment to the Credit
Agreement, which was effective through April 30, 2002. That amendment:



| |  |  | Extended the Companys $155 million revolving line-of-credit facility
and $55 million term-loan facility to April 30, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Converted the Companys $25 million temporary revolving advance
facility, which had been available for only 25 days during a 12-month
period, to a seasonal revolving credit facility available to the
Company on a daily basis from January 1 until March 31, 2002; the
interest rate on this facility was the Prime Rate plus 3%.                                                                                                                                                                                                                                                                       
|
| |  |  | Increased the interest rate on the revolving line-of-credit facility
to a variable annual rate equal to, at the Companys option, either the
Prime Rate plus 3% or LIBOR plus 4%.                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  |  | Increased the interest rate on the term-loan facility to a variable
annual rate equal to, at the Companys option, either the Prime Rate
plus 3% or LIBOR plus 4%.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  |  | Required the Company to pay the Lenders $3.5 million of principal of
the outstanding term loan on February 28, 2002, and an additional $1.65
million of principal of the outstanding term loan on March 31, 2002;
each such payment of principal had to be accompanied by the payment of
all accrued interest on the outstanding principal of the term loan.                                                                                                                                                                                                                                                
|
| |  |  | Required the Company to pay the Lenders the net proceeds over $1
million of any sale of the Companys assets outside of the ordinary
course of business, to be applied to reduce the outstanding seasonal
revolving credit loans or, if no such loans were outstanding, the
outstanding term loan.                                                                                                                                                                                                                                                                                                          
|
| |  |  | Included covenants that restricted the Company from making, or
agreeing or committing to make, any acquisition of stores, from entering
into any additional lease agreements or opening any new stores, from
spending amounts to construct or finish out any new stores other than
the stores that the Company had committed to lease or construct or
finish out as of December 31, 2001, or from making capital expenditures
in excess of $2 million (in addition to the permitted new-store
finish-out expenditures), in each case on or before April 30, 2002
without the Lenders prior written consent.
|
| |  |  | Included the Companys obligation to pay commitment fees for the
revolving line-of-credit and term-loan facilities of $1.05 million on
each of January 1 and March 1, 2002, and a commitment fee for the
seasonal revolving credit facility of $250,000 on March 31, 2002.                                                                                                                                                                                                                                                                                                                                  
|
| |  |  | Included the Companys obligation to pay the Lenders an additional
commitment fee equal to 0.5% per annum of the average daily unused
portion of the revolving line-of-credit and seasonal revolving credit
facilities.                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  |  | Included the Companys obligation to pay the Lenders a fee equal to
0.5% of all of the credit facilities available to the Company (i.e.,
$1.175 million) if the Company sells, or enters into a binding agreement
to sell, all or substantially all of its outstanding stock or assets,
including by any merger, consolidation, share exchange, or other
reorganization, on or before the maturity date of the credit facilities
(as it may be extended) or within 120 days thereafter.                                                                                                                     

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That amendment did not change any of the other material terms of the Credit
Agreement.

On April 30, 2002, the Company entered into another amendment to the Credit
Agreement, which is effective until October 31, 2002. That amendment:



| |  | Extended the maturity date for the Lenders $155 million revolving line-of-credit commitment and $49.85 million term-loan
commitment from April 30, 2002 to October 31, 2002.                                                                                                                                                                                                                                                                                                                                                                      
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| 
| |  | Reduced the maximum amount that the Company may borrow under the revolving line-of-credit facility to $130 million, subject
to the previously applicable borrowing base.                                                                                                                                                                                                                                                                                                                                                                           
| 
| |  | Increased the interest rate on the term-loan facility to, and converted the previously applicable variable rate to a fixed
rate of interest equal to, an annual rate of 9%.                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | Required the Company to pay the Lenders $1.0 million of principal of the outstanding term loan on April 30, 2002, and an
additional $250,000 of principal of the outstanding term loan on the last business day of each calendar month ending before
the maturity date; each such payment of principal must also be accompanied by the payment of all accrued interest on the
outstanding principal of the term loan.                                                                                                                              
| 
| |  | Reflected the expiration, as of March 31, 2002, of the seasonal revolving credit facility of $25 million.                                                                                                                                                                                                                                                                                                                                                                                                                                        
| 
| |  | Includes a covenant that restricts the Company from opening any new stores or entering into any new lease agreement for
additional stores other than (1) completing construction and finish-out of five stores that the Company had committed to
construct or finish-out as of December 31, 2001, and (2) opening ten other stores to replace stores closed in the ordinary
course of business, if the capital expenditures for the completion and finish-out and the replacement of stores do not
exceed $75,000 per store or a total of $750,000.
| 
| |  | Includes a covenant that restricts the Company from making aggregate capital expenditures (other than those permitted for
new or additional stores) in excess of $1.5 million without the Lenders prior written consent.                                                                                                                                                                                                                                                                                                                          
| 
| |  | Required the Company to obtain the Lenders prior written consent to any settlement payment by the Company regarding any
lawsuit against the Company in excess of $1.5 million.                                                                                                                                                                                                                                                                                                                                                                    
| 
| |  | Included the Companys obligation to pay commitment fees for the revolving line-of-credit and term-loan commitments of
$524,000 on April 30, 2002, $500,000 on July 1, 2002, and $1,024,000 on October 1, 2002.                                                                                                                                                                                                                                                                                                                                    

In all other material respects, the terms of the Credit Agreement, as
previously amended, remain in effect.

As of June 30, 2002, the Company had borrowed $97.5 million under its revolving
line-of-credit facility and $48.4 million under its term-loan facility. The
Prime Rate effective on June 30, 2002 was 4.75%, and LIBOR effective on that
date was 1.84%.

To reduce its risk of greater interest expense because of interest-rate
fluctuations, the Company has entered into interest-rate swap agreements, which
effectively converted a portion of its floating-rate interest obligations to
fixed-rate interest obligations, as described in Notes 1 and 5.

The following table provides summarized data related to the revolving advances
under the Credit Agreement (Revolving Advances) and term advances and the
previously effective reducing revolving advances under the Credit Agreement
(collectively, Term Advances) as of June 30, 2002 and 2001:

|                               |  |                                        |        |               |  |      |         |      |  |   |        |   |  |   |        |  
|------------------------------ |  | -------------------------------------- | ------ | ------------- |  | ---- | ------- | ---- |  | - | ------ | - |  | - | ------ | -
|                               |  | As of and for the Years Ended June 30,
|                               |  |                                       
|                               |  | 2002                                   |        | 2001          |  | 2002 |         | 2001
|                               |  |                                        |        |               |  |      |         |     
|                               |  | Revolving Advances                     |        | Term Advances
|                               |  |                                        |        |              
|                               |  | (dollars in
thousands)                
|Balance                        |  | $                                      | 97,500 |               |  | $    | 109,800 |      |  | $ | 48,350 |   |  | $ | 53,000 |  
|                              
|                              
|                              
|                              
|Interest expense               |  | $                                      | 5,868  |               |  | $    | 6,859   |      |  | $ | 3,602  |   |  | $ | 3,860  |  
|                              
|                              
|                              
|                              
|Accrued interest expense       |  | $                                      | 48     |               |  | $    | 29      |      |  | $ | 36     |   |  | $ | 580    |  
|                              
|                              
|                              
|                              
|Weighted average interest rate |  |                                        | 5.19   | %             |  |      | 6.60    | %    |  |   | 6.90   | % |  |   | 8.48   | %
|                              
|                              
|                              
|                              
|Unused advance commitment fees |  | $                                      | 166    |               |  | $    | 101     |      |  | $ | 17     |   |  | $ | 37     |  

The Company is subject to various restrictive covenants stated in the Credit
Agreement. These covenants, which are typical of those found in loan
agreements of that kind, include restrictions on the incurrence of indebtedness
from other sources, restrictions on advances to or investments in other persons
or entities, restrictions on significant acquisitions, restrictions on the
payment of dividends to shareholders or the repurchase of shares, and the
requirement that various financial ratios be

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maintained. The Company has received the consent of the Lenders to implement
the stock repurchase program described in Note 12. At June 30, 2002, the
Company is in compliance with these restrictive covenants.

The Company intends to continue to pursue its proposed private placement of
senior secured debt securities, and anticipates that it will also pursue debt
capital from other sources, with the objective to revise its existing bank
indebtedness and credit facilities. If the Company is unable to obtain capital
from one or more other sources to achieve its objective by October 31, 2002, it
may be required to attempt to obtain a further renewal or extension of its
credit facilities from the Lenders.

SSM Funding

The cash used for inventory in the Companys self-service machines operating in
the Companys stores is obtained from the revolving facility provided by the
Lenders under the Credit Agreement. The cash used for inventory in the
Companys 100 self-service machines located in the H&R Block offices during the
2002 tax season was obtained through an agreement with a bank entered into in
January 2002. Under that agreement, the bank provided the Company with the use
of the banks cash and related transportation and custodial services in
exchange for fees paid by the Company; the fees varied in part depending on the
extent of the Companys use of the banks cash and related services. The
inventory of cash in the machines, as well as the cashed checks deposited in
the machines in exchange for that cash, constituted the assets only of the bank
and were under the sole control of the bank. The Company did not borrow the
cash or have any possession or control of the cash or the cashed checks. The
Company finally received all of the check-cashing fees earned by it from those
machines after the expiration of the agreement on April 15, 2002.

Notes Payable

Notes payable, related to acquired stores, normally bear interest at
approximately 5%, and are due six months after the related acquisition.
However, at June 30, 2002, of the four notes payable, three were
non-interest-bearing notes, $720,000 dated May 24, 2000, $856,000 dated
November 10, 2000, and $200,000 dated November 8, 2001. Two of these notes are
payable in monthly installments of $20,000 and $23,778 until maturity on May 1,
2003 and November 1, 2003, respectively. The third note is payable in annual
installments of $40,000 until maturity in October 2006. Interest was imputed
on these notes at an interest rate of 5%, 6% and 8%, respectively. Notes
payable were approximately $1.5 million and $1.1 million, respectively, as of
June 30, 2002 and 2001. For the years ended June 30, 2002, 2001, and 2000,
there was $100,000, $81,000, and $42,000, respectively, related to the
acquisition notes payable which is included in interest expense.

The note payable of $856,000 is the escrowed portion of the total purchase
price for the 107-store acquisition in November 2000, described in Note 4. In
light of the Companys pending lawsuit against the sellers and their majority
shareholders, the Company has not authorized the monthly release of $23,778
from escrow since the monthly release in June 2001. (See Note 4.)

Debt Maturity Schedule

Scheduled maturities of debt for the years following June 30, 2002, including
the Term Advance, Senior Secured Notes, and notes payable are as follows (in
thousands):

|                     |  |   |        | 
|-------------------- |  | - | ------ | 
|Year Ending June 30: |  |   |        | 
|                     |  |   |        | 
|2003                 |  | $ | 53,497 | 
|                    
|                    
|                    
|                    
|2004                 |  |   | 4,209  | 
|                    
|                    
|                    
|                    
|2005                 |  |   | 33     | 
|                    
|                    
|                    
|                    
|2006                 |  |   | 36     | 
|                    
|                    
|                    
|                    
|2007                 |  |   | 39     | 
|                     |  |   |        | 
|                     |  | $ | 57,814 | 
|                     |  |   |        | 

Money Order Agreement

In April 1998, the Company signed a money order agreement with Travelers
Express Company, Inc. (Travelers Express), effective December 17, 1998.
Under this five-year agreement, the Company exclusively sells Travelers Express
money orders, which bear the Companys logo. The Company also signed a
five-year agreement with an affiliate of Travelers Express, effective in April
1998, to offer an electronic bill-payment service to the Companys customers.
Under these agreements, $5.0 million was to be received over the term of the
agreement and $0.4 million remains unpaid at June 30, 2002. Payments are
deferred and amortized on a straight-line basis over the five-year term of the
agreements beginning January 1999. If the money order agreement is terminated
under certain circumstances before the expiration of its five-year term, the
Company will be obligated to repay a portion of the amounts received from
Travelers Express. The money order agreement with Travelers Express does not
allow an extended deferral of remittances of money order proceeds. The

64



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Companys payment and other obligations to Travelers Express under the money
order agreement are secured by a subordinated lien on the Companys assets.
The deferred revenue balances as of June 30, 2002 and 2001, are $1.1 million
and $1.8 million, respectively, and are included in other current and
non-current liabilities in the accompanying consolidated balance sheets.
Revenue of $1.0 million was recognized for each of the three years in the
period ended June 30, 2002.

MoneyGram Guarantees and Incentive Bonuses

Expired MoneyGram Agreement.The Company is an agent for the receipt and
transmission of wire transfers of money through the MoneyGram network. The
Companys agency relationship was previously governed by the 1996 MoneyGram
Master Agreement, as amended (the Expired MoneyGram Agreement), with
MoneyGram Payment Systems, Inc. (MPS), an affiliate of Travelers Express,
until it expired on December 31, 2000.

The Expired MoneyGram Agreement provided for a revenue guarantee on acquired
stores for the conversion of wire transfer services to MoneyGram from another
supplier. The amount of the guarantee was equivalent to the annual aggregate
wire transfer revenue for the acquired stores derived from another supplier.
The Existing MoneyGram Agreement (defined below) also provides for revenue
guarantees. The amount of guarantee revenue, which represents the difference
between the guarantee and the Companys actual wire transfer service revenue
from the acquired stores, for the fiscal years ended June 30, 2002, 2001, and
2000 was approximately $3.9 million, $3.3 million, and $2.0 million,
respectively. Accounts receivable from MoneyGram related to these guarantees
as of June 30, 2002 and 2001 was $0.9 million and $1.2, respectively.

Existing MoneyGram Agreement. In June 2000, the Company signed a Money
Transfer Agreement with Travelers Express and MPS that became effective January
1, 2001 (the Existing MoneyGram Agreement). During the seven-year term of
the Existing MoneyGram Agreement, the Company will exclusively offer and sell
MoneyGram wire transfer services. Under the Existing MoneyGram Agreement (as
under the Existing MoneyGram Agreement) the Company earns commissions for each
transmission and receipt of money through the MoneyGram network effected at a
Company location; those commissions will equal varying percentages of the fees
charged by MPS to consumers for the MoneyGram services.

Under the Existing MoneyGram Agreement, the Company is receiving a total of
approximately $12.5 million in bonuses, payable in equal monthly installments
(without interest) over the seven-year term. The amount of those monthly
installments will be subject to reduction if the Company closes or sells a
significant number of those locations at which MoneyGram services are offered
at the beginning of the Existing MoneyGram Agreement. In addition, the Company
will be entitled to receive certain incentive bonuses regarding new MoneyGram
service locations that it opens or acquires during the term of the Existing
MoneyGram Agreement similar to those received under the Expired MoneyGram
Agreement.

During the fiscal years ended June 30, 2002, 2001, and 2000, $2.5 million, $2.7
million, and $2.6 million, respectively, of revenue was recognized related to
bonuses and incentive bonuses under the Expired MoneyGram Agreement and the
Existing MoneyGram Agreement. The total deferred revenue related to these
bonuses and incentive bonuses as of June 30, 2002 and 2001, was $4.2 million
and $4.4 million, respectively and are included in other current and
non-current liabilities in the accompanying consolidated balance sheets.

Derivative Instruments and Hedging Activities

To reduce its risk of greater interest expense because of floating-rate
interest obligations under its credit facilities under the Credit Agreement,
the Company entered into three interest-rate swap agreements with Bank of
America and one interest-rate swap agreement with Wells Fargo Bank. Those
agreements effectively converted a portion of the Companys floating-rate
interest obligations to fixed-rate interest obligations. With respect to the
Revolving Advances, the first notional amount was $33 million for a two-year
period that began January 4, 1999, the second notional amount was $10 million
for a sixteen-month period that began September 3, 1999, and the third notional
amount was an average of $62 million from November 1, 2000 through January 31,
2001, increased to an average of $85 million from February 1, 2001 to January
1, 2003. With respect to Term Advances, the notional amount was an average of
$9.4 million from January 4, 1999 through January 3, 2001. The notional
amounts were determined based on the Companys minimum projected borrowings
during calendar years 1999 through 2002. The fixed rate applicable to the
notional amount of $33 million under the Revolving Advances was 5.14% for
calendar year 1999 and 5.23% for calendar year 2000. The fixed rate applicable
to the notional amount of $10 million under the Revolving advances was 5.25%
for calendar year 1999 and 2000. The fixed rate applicable to the average
notional amount of $62 million and $85 million, respectively, under the
Revolving Advances was 6.945% for the period from November 1, 2000 through
January 31, 2001, and is 6.045% for the period from February 1, 2001 through
January 1, 2003. The fixed rate applicable to the notional amount under the
Term Advances was 6.23% for calendar year 1999 and 6.38% for calendar year
2000. As of June 30, 2002, all interest-rate swap agreements had expired,
except for one with respect to the Revolving Advances with an average notional
amount of $85 million; that existing interest-rate swap had a fair value of
($1.8) million.

65



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6.     OTHER EXPENSES

Other store expenses consisted of the following:

|                                   |  |                     |        |      |  |      |        |  |  |   |        | 
|---------------------------------- |  | ------------------- | ------ | ---- |  | ---- | ------ |  |  | - | ------ | 
|                                   |  | Year Ended June 30,
|                                   |  |                    
|                                   |  | 2002                |        | 2001 |  | 2000
|                                   |  |                     |        |      |  |     
|                                   |  | (in
thousands)     
|Net returns and cash shortages     |  | $                   | 10,390 |      |  | $    | 12,553 |  |  | $ | 9,038  | 
|                                  
|                                  
|                                  
|                                  
|Armored and security               |  |                     | 7,708  |      |  |      | 7,442  |  |  |   | 5,607  | 
|                                  
|                                  
|                                  
|                                  
|Bank charges                       |  |                     | 5,207  |      |  |      | 3,972  |  |  |   | 3,415  | 
|                                  
|                                  
|                                  
|                                  
|Center supplies                    |  |                     | 3,995  |      |  |      | 3,832  |  |  |   | 2,617  | 
|                                  
|                                  
|                                  
|                                  
|Telephone                          |  |                     | 3,844  |      |  |      | 3,524  |  |  |   | 2,695  | 
|                                  
|                                  
|                                  
|                                  
|Self-service machine lease expense |  |                     | 1,309  |      |  |      | 105    |  |  |   |       | 
|                                  
|                                  
|                                  
|                                  
|Other                              |  |                     | 4,059  |      |  |      | 3,657  |  |  |   | 1,544  | 
|                                   |  |                     |        |      |  |      |        |  |  |   |        | 
|                                   |  | $                   | 36,512 |      |  | $    | 35,085 |  |  | $ | 24,916 | 
|                                   |  |                     |        |      |  |      |        |  |  |   |        | 

Other expenses consisted of the following:

|                      |  |                     |       |      |  |      |       |  |  |   |     |  
|--------------------- |  | ------------------- | ----- | ---- |  | ---- | ----- |  |  | - | --- | -
|                      |  | Year Ended June 30,
|                      |  |                    
|                      |  | 2002                |       | 2001 |  | 2000
|                      |  |                     |       |      |  |     
|                      |  | (in
thousands)     
|Legal                 |  | $                   | 1,984 |      |  | $    | 350   |  |  | $ | 640 |  
|                     
|                     
|                     
|                     
|Store closing expense |  |                     | 1,029 |      |  |      | 108   |  |  |   | 330 |  
|                     
|                     
|                     
|                     
|Restructure provision |  |                     | (163  | )    |  |      | 7,710 |  |  |   |    |  
|                     
|                     
|                     
|                     
|Other                 |  |                     | (23   | )    |  |      |      |  |  |   | (15 | )
|                      |  |                     |       |      |  |      |       |  |  |   |     |  
|                      |  | $                   | 2,827 |      |  | $    | 8,168 |  |  | $ | 955 |  
|                      |  |                     |       |      |  |      |       |  |  |   |     |  

7.     PREPAID EXPENSES AND OTHER CURRENT ASSETS

Other prepaid expenses and other current assets consisted of the following:

|                       |  |                |       |      |  |   |       | 
|---------------------- |  | -------------- | ----- | ---- |  | - | ----- | 
|                       |  | June 30,      
|                       |  |               
|                       |  | 2002           |       | 2001
|                       |  |                |       |     
|                       |  | (in
thousands)
|Deferred tax asset     |  | $              | 6,900 |      |  | $ | 7,254 | 
|                      
|                      
|                      
|                      
|Deferred finance costs |  |                | 322   |      |  |   | 673   | 
|                      
|                      
|                      
|                      
|Supplies               |  |                | 595   |      |  |   | 997   | 
|                      
|                      
|                      
|                      
|Other prepaid invoices |  |                | 162   |      |  |   | 786   | 
|                       |  |                |       |      |  |   |       | 
|                       |  | $              | 7,979 |      |  | $ | 9,710 | 
|                       |  |                |       |      |  |   |       | 

8.     PROPERTY AND EQUIPMENT

Property and equipment consisted of the following:

|                                 |                                          |   |                |        |      |   |         |        | 
|-------------------------------- | ---------------------------------------- | - | -------------- | ------ | ---- | - | ------- | ------ | 
|                                 |                                          |   | June 30,      
|                                 |                                          |   |               
|                                 |                                          |   | 2002           |        | 2001
|                                 |                                          |   |                |        |     
|                                 |                                          |   | (in
thousands)
|Property and equipment, at cost: |                                          |   |                |        |      |   |         |       
|                                
|                                
|                                
|                                
|                                 | Store equipment, furniture, and fixtures |   | $              | 41,507 |      |   | $       | 38,490 | 
|                                
|                                
|                                
|                                
|                                 | Leasehold improvements                   |   |                | 25,022 |      |   |         | 23,878 | 
|                                
|                                
|                                
|                                
|                                 | Signs                                    |   |                | 8,009  |      |   |         | 6,609  | 
|                                
|                                
|                                
|                                
|                                 | Other property and equipment             |   |                | 795    |      |   |         | 596    | 
|                                 |                                          |   |                |        |      |   |         |       
|                                 |                                          |   | 75,333         |        |      |   | 69,573  |       
|                                
|                                
|                                
|                                
|Less  accumulated depreciation  |                                          |   | (38,172        | )      |      |   | (30,405 | )     
|                                 |                                          |   |                |        |      |   |         |       
|                                 |                                          | $ | 37,161         |        |      | $ | 39,168  |       
|                                 |                                          |   |                |        |      |   |         |       

Depreciation expense was $8.3 million, $7.9 million, and $6.4 million in fiscal
2002, 2001, and 2000, respectively

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9.     GOODWILL AND OTHER INTANGIBLE ASSETS

The Company adopted SFAS 142 effective July 1, 2001, and has identified two
reporting units: (1) company-owned stores and (2) franchised stores. The
franchised stores reporting unit has no intangible assets, and therefore it is
not impacted by SFAS 142. The Company completed the first step of the two-step
impairment test by obtaining an independent third-party appraisal of the fair
value of the company-owned stores reporting unit as of July 1, 2001. The fair
value of the company-owned stores reporting unit exceeded the carrying value,
and as a result, the second step of the two-step impairment test is not
required and no impairment loss has been recorded as of June 30, 2002. In
accordance with SFAS 142, the Company discontinued recording goodwill
amortization effective July 1, 2001.

Transitional Disclosures

Net income and earnings per share, excluding the after-tax effect of
amortization expense related to goodwill, for the years ended June 30, 2002,
2001 and 2000 are as follows:

|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |      | 
|---------------------------------------------------- | ---------------------------------------------------- | - | --------------------------------------- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                     |                                                      |   | Year Ended June 30,                    
|                                                     |                                                      |   |                                        
|                                                     |                                                      |   | 2002                                    |      | 2001 |   | 2000 
|                                                     |                                                      |   |                                         |      |      |   |      
|                                                     |                                                      |   | (in
thousands except per share amounts)
|Reported net income                                  |                                                      | $ | 10,113                                  |      |      | $ | 611   |      |  | $ | 8,263 |     
|                                                    
|                                                    
|                                                    
|                                                    
|Add back: Goodwill amortization, net of income taxes |                                                      |   |                                        |      |      |   | 1,390 |      |  |   | 1,707 |     
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|Adjusted net income                                  |                                                      | $ | 10,113                                  |      |      | $ | 2,001 |      |  | $ | 9,970 |     
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|Basic earnings per share:                            |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reported earnings per share                          |   | $                                       | 1.00 |      |   | $     | 0.06 |  |   | $     | 0.82 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Add back: Goodwill amortization, net of income
taxes |   |                                         |     |      |   |       | 0.14 |  |   |       | 0.17 | 
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|                                                     | Adjusted earnings per share                          |   | $                                       | 1.00 |      |   | $     | 0.20 |  |   | $     | 0.99 | 
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|Diluted earnings per share:                          |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reported earnings per share                          |   | $                                       | 1.00 |      |   | $     | 0.06 |  |   | $     | 0.80 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Add back: Goodwill amortization, net of income
taxes |   |                                         |     |      |   |       | 0.14 |  |   |       | 0.16 | 
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     
|                                                     | Adjusted earnings per share                          |   | $                                       | 1.00 |      |   | $     | 0.20 |  |   | $     | 0.96 | 
|                                                     |                                                      |   |                                         |      |      |   |       |      |  |   |       |     

Total intangible amortization expense for fiscal 2002, 2001, and 2000,
respectively was $0.5 million, $3.0 million, and $2.4 million.

Acquisitions

The following table provides information concerning the acquisitions made
during the years ended June 30, 2002, 2001 and 2000:

|                                           |                          |   |                                                                    |       |      |   |        |        |  |   |        |       | 
|------------------------------------------ | ------------------------ | - | ------------------------------------------------------------------ | ----- | ---- | - | ------ | ------ |  | - | ------ | ----- | 
|                                           |                          |   | Year Ended June 30,                                               
|                                           |                          |   |                                                                   
|                                           |                          |   | 2002                                                               |       | 2001 |   | 2000  
|                                           |                          |   |                                                                    |       |      |   |       
|                                           |                          |   | (in
thousands, except number of stores and number of transactions)
|Number of stores acquired                  |                          |   | 8                                                                  |       |      |   | 133    |        |  |   | 36     |      
|                                          
|                                          
|                                          
|                                          
|Number of transactions                     |                          |   | 4                                                                  |       |      |   | 5      |        |  |   | 8      |      
|                                          
|                                          
|                                          
|                                          
|Total purchase price                       |                          | $ | 1,412                                                              |       |      | $ | 36,745 |        |  | $ | 11,324 |      
|                                          
|                                          
|                                          
|                                          
|Amounts allocated to:                      |                          |   |                                                                    |       |      |   |        |        |  |   |        |      
|                                          
|                                          
|                                          
|                                          
|                                           | Goodwill                 |   | $                                                                  | 1,094 |      |   | $      | 33,917 |  |   | $      | 9,265 | 
|                                          
|                                          
|                                          
|                                          
|                                           | Covenants not to compete |   |                                                                    | 65    |      |   |        | 1,285  |  |   |        | 686   | 
|                                          
|                                          
|                                          
|                                          
|                                           | Property and equipment   |   |                                                                    | 135   |      |   |        | 1,468  |  |   |        | 689   | 
|                                          
|                                          
|                                          
|                                          
|                                           | Other assets             |   |                                                                    | 118   |      |   |        | 75     |  |   |        | 684   | 
|                                          
|                                          
|                                          
|                                          
|Notes payable issued  current fiscal year |                          | $ | 955                                                                |       |      | $ | 1,731  |        |  | $ | 2,097  |      
|                                          
|                                          
|                                          
|                                          
|Notes payable balance                      |                          |   | 1,464                                                              |       |      |   | 1,078  |        |  |   | 1,336  |      

Acquisitions during fiscal 2002 were not significant, individually or in the
aggregate, to the Companys consolidated financial position or statement of
operations as of June 30, 2002 and for the year then ended.

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Amortizable Intangible Assets

Covenants not to compete are as follows:

|                                  |  |                |        |      |  |   |        |  
|--------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                  |  | June 30,      
|                                  |  |               
|                                  |  | 2002           |        | 2001
|                                  |  |                |        |     
|                                  |  | (in
thousands)
|Covenants not to compete, at cost |  | $              | 2,687  |      |  | $ | 3,673  |  
|                                 
|                                 
|                                 
|                                 
|Less  accumulated amortization   |  |                | (1,141 | )    |  |   | (1,661 | )
|                                  |  |                |        |      |  |   |        |  
|                                  |  | $              | 1,546  |      |  | $ | 2,012  |  
|                                  |  |                |        |      |  |   |        |  

For the year ended June 30, 2002, $65,000 of covenants not to compete were
acquired, offset by a reduction of $10,000 for stores closed. Covenants not to
compete are amortized over the applicable period of the contract. The
weighted-average amortization period is 5.6 years.

Amortization expense related to the covenants not to compete for the year ended
June 30, 2002 and estimated for the five succeeding fiscal years are as
follows:

|                                                  |  |                |     |           |  |   |     | 
|------------------------------------------------- |  | -------------- | --- | --------- |  | - | --- | 
|Amortization Expense for Covenants Not to Compete
|                                                 
|For the Year                                      |  |                |     |           |  |   |     | 
|Ended June 30,                                    |  | Actual         |     | Estimated
|                                                  |  |                |     |          
|                                                  |  | (in
thousands)
|2002                                              |  | $              | 520 |           |  |   |     | 
|                                                 
|                                                 
|                                                 
|                                                 
|2003                                              |  |                |     |           |  | $ | 403 | 
|                                                 
|                                                 
|                                                 
|                                                 
|2004                                              |  |                |     |           |  |   | 343 | 
|                                                 
|                                                 
|                                                 
|                                                 
|2005                                              |  |                |     |           |  |   | 254 | 
|                                                 
|                                                 
|                                                 
|                                                 
|2006                                              |  |                |     |           |  |   | 136 | 
|                                                 
|                                                 
|                                                 
|                                                 
|2007                                              |  |                |     |           |  |   | 98  | 

Intangible Assets Not Subject to Amortization

The carrying value of the Companys goodwill is as follows:

|                                |  |                |        |      |  |   |        |  
|------------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                                |  | June 30,      
|                                |  |               
|                                |  | 2002           |        | 2001
|                                |  |                |        |     
|                                |  | (in
thousands)
|Goodwill  cost                 |  | $              | 83,185 |      |  | $ | 82,062 |  
|                               
|                               
|                               
|                               
|Less  accumulated amortization |  |                | (8,170 | )    |  |   | (8,170 | )
|                                |  |                |        |      |  |   |        |  
|                                |  | $              | 75,015 |      |  | $ | 73,892 |  
|                                |  |                |        |      |  |   |        |  

There were no impairment losses for the year ended June 30, 2002.

10.     ACCOUNTS PAYABLE, ACCRUED LIABILITIES, AND OTHER LIABILITIES

Accounts payable, accrued liabilities and other current liabilities consisted
of the following:

|                              |  |                |        |      |  |   |        | 
|----------------------------- |  | -------------- | ------ | ---- |  | - | ------ | 
|                              |  | June 30,      
|                              |  |               
|                              |  | 2002           |        | 2001
|                              |  |                |        |     
|                              |  | (in
thousands)
|Accrued salaries and benefits |  | $              | 6,027  |      |  | $ | 3,728  | 
|                             
|                             
|                             
|                             
|Accounts payable  trade      |  |                | 5,329  |      |  |   | 8,241  | 
|                             
|                             
|                             
|                             
|Money transfer payable        |  |                | 3,545  |      |  |   | 2,677  | 
|                             
|                             
|                             
|                             
|Accrued legal                 |  |                | 2,286  |      |  |   |       | 
|                             
|                             
|                             
|                             
|Deferred revenue              |  |                | 2,006  |      |  |   | 1,943  | 
|                             
|                             
|                             
|                             
|Interest-rate swap            |  |                | 1,815  |      |  |   | 1,469  | 
|                             
|                             
|                             
|                             
|Income taxes payable          |  |                | 1,716  |      |  |   |       | 
|                             
|                             
|                             
|                             
|Restructuring accrual         |  |                | 374    |      |  |   | 1,209  | 
|                             
|                             
|                             
|                             
|Interest payable              |  |                | 158    |      |  |   | 788    | 
|                             
|                             
|                             
|                             
|Other                         |  |                | 5,256  |      |  |   | 3,248  | 
|                              |  |                |        |      |  |   |        | 
|                              |  | $              | 28,512 |      |  | $ | 23,303 | 
|                              |  |                |        |      |  |   |        | 

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Other liabilities non-current consisted of the following:

|                         |  |                |       |      |  |   |       | 
|------------------------ |  | -------------- | ----- | ---- |  | - | ----- | 
|                         |  | June 30,      
|                         |  |               
|                         |  | 2002           |       | 2001
|                         |  |                |       |     
|                         |  | (in
thousands)
|Deferred revenue         |  | $              | 3,529 |      |  | $ | 4,628 | 
|                        
|                        
|                        
|                        
|Deferred tax liabilities |  |                | 151   |      |  |   |      | 
|                        
|                        
|                        
|                        
|Interest-rate swap       |  |                |      |      |  |   | 734   | 
|                         |  |                |       |      |  |   |       | 
|                         |  | $              | 3,680 |      |  | $ | 5,362 | 
|                         |  |                |       |      |  |   |       | 

11.     ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

A summary of comprehensive income (loss) for the years ended June 30, 2002 and
2001 is presented below:

|                                   |                                                                                |   |                     |      |      |   |      |        |  
|---------------------------------- | ------------------------------------------------------------------------------ | - | ------------------- | ---- | ---- | - | ---- | ------ | -
|                                   |                                                                                |   | Year Ended June 30,
|                                   |                                                                                |   |                    
|                                   |                                                                                |   | 2002                |      | 2001
|                                   |                                                                                |   |                     |      |     
|                                   |                                                                                |   | (in
thousands)     
|Net income                         |                                                                                | $ | 10,113              |      |      | $ | 611  |       
|                                  
|                                  
|                                  
|                                  
|Other comprehensive income (loss): |                                                                                |   |                     |      |      |   |      |       
|                                  
|                                  
|                                  
|                                  
|                                   | Unrealized gain (loss) on hedging instruments
before tax (expense) benefit     |   |                     | 388  |      |   |      | (2,203 | )
|                                  
|                                  
|                                  
|                                  
|                                   | Tax (expense) benefit                                                          |   |                     | (155 | )    |   |      | 892    |  
|                                   |                                                                                |   |                     |      |      |   |      |       
|                                   | Unrealized gain (loss) on hedging instruments net of
the tax (expense) benefit |   |                     | 233  |      |   |      | (1,311 | )
|                                   |                                                                                |   |                     |      |      |   |      |       
|Comprehensive income (loss)        |                                                                                | $ | 10,346              |      |      | $ | (700 | )     
|                                   |                                                                                |   |                     |      |      |   |      |       

Unrealized loss on hedging instruments for the year ended June 30, 2001
includes a $648,000 gain for the cumulative effect of accounting change
representing a transition adjustment for the adoption of SFAS 133.

12.     SHAREHOLDERS EQUITY

Preferred Stock

Under the Companys Certificate of Incorporation, the Board of Directors has
the power to authorize the issuance of one or more classes or series of
preferred stock and to fix the designations, powers, preferences and relative,
participating, optional or other rights, if any, and the qualifications,
limitations, or restrictions thereof, if any. At June 30, 2002, 2001, and
2000, one million shares of preferred stock were authorized with a par value of
$1.00, none of which were issued and outstanding.

Stock Option Plans

In accordance with SFAS No. 123, Accounting for Stock-Based Compensation
(SFAS 123), the Company accounts for stock-based compensation programs using
the intrinsic value method. Under the intrinsic value method, compensation
expense is equal to the excess, if any, of the quoted market price of the stock
at the grant date over the amount the employee or non-employee director must
pay to acquire the stock. As the Company does not grant stock options at an
exercise price of less than the fair market value at the date of grant, stock
options do not represent compensation expense in the determination of net
income in the consolidated statements of earnings.

Employee Stock Option Plans.The Company sponsors the 1997 Stock Option Plan
(as amended, the Plan) for eligible employees. The 1987 Stock Option Plan,
expired during fiscal 1998 (though options granted thereunder continue to be
effective in accordance with their terms), and the Company adopted the 1997
Stock Option Plan for eligible employees. There are 1,687,590 shares of Common
Stock reserved for grants of options under these two plans. Options are granted
at the sole discretion of the Board of Directors or its Compensation Committee
to selected employees of the Company. Outstanding options are generally
exercisable annually in installments over a three- to four-year period from the
date of grant at an exercise price of not less than the fair market value at
the grant date. The options expire either at five or ten years after date of
grant.

Had stock option compensation expense been determined consistent with the fair
value method of measuring compensation expense under SFAS 123, the pro forma
effect for fiscal 2002, 2001, and 2000 would have been a reduction in the

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Companys net income of approximately $1.3 million, $1.2 million, and $1.0
million, respectively, and a reduction in diluted earnings per share of
approximately $.13, $.12, and $.09, respectively.

In determining the pro forma stock compensation expense, the fair value of each
option grant is estimated on the date of grant using the Black-Scholes option
pricing model with the following weighted-average assumptions used for grants
in fiscal 2002, 2001, and 2000, respectively: expected volatility of 49%, 49%,
and 46%; expected lives of 6.7, 5.1, and 4.3, years; risk-free interest rates
of 4.6%, 3.3%, and 6.1%; and no expected dividends.

Exercise prices for employee options outstanding as of June 30, 2002, ranged
from $7.90 to $18.00 (fair market value on dates of grant). The following
table provides certain information with respect to stock options outstanding
and exercisable at June 30, 2002, under the two employees stock option plans:

|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 
|------------------------ |  | ------------- | --------- | ----------- |  | ---------------- | ----- | ----------- |  | -------- | --- | ------- |  | --------- | ------- |  |  | - | ----- | 
|                         |  | Outstanding   |           | Exercisable
|                         |  |               |           |            
|                         |  |               |           |             |  | Weighted-        |       | Weighted-   |  |          |     |         |  | Weighted-
|                         |  |               |           |             |  | average          |       | average     |  | Stock    |     | average
|                         |  | Stock options |           | exercise    |  | remaining        |       | options     |  | exercise
|Range of exercise prices |  | outstanding   |           | price       |  | contractual life |       | exercisable |  | price   
|                         |  |               |           |             |  |                  |       |             |  |         
|Under $9.00              |  |               | 48,750    |             |  | $                | 8.35  |             |  |          | 9.2 |         |  |           | 5,624   |  |  | $ | 8.06  | 
|                        
|                        
|                        
|                        
|$9.01  $10.80           |  |               | 480,477   |             |  |                  | 9.56  |             |  |          | 8.8 |         |  |           | 63,861  |  |  |   | 9.39  | 
|                        
|                        
|                        
|                        
|$10.81  $12.60          |  |               | 224,563   |             |  |                  | 11.86 |             |  |          | 6.2 |         |  |           | 162,562 |  |  |   | 11.99 | 
|                        
|                        
|                        
|                        
|$12.61  $14.40          |  |               | 364,323   |             |  |                  | 13.47 |             |  |          | 6.9 |         |  |           | 209,534 |  |  |   | 13.47 | 
|                        
|                        
|                        
|                        
|$14.41  $16.20          |  |               | 42,500    |             |  |                  | 14.65 |             |  |          | 6.8 |         |  |           | 28,749  |  |  |   | 14.62 | 
|                        
|                        
|                        
|                        
|$16.21  $18.00          |  |               | 126,250   |             |  |                  | 17.08 |             |  |          | 7.5 |         |  |           | 63,125  |  |  |   | 17.08 | 
|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 
|                         |  |               | 1,286,863 |             |  | $                | 11.93 |             |  |          |     |         |  |           | 533,455 |  |  | $ | 12.96 | 
|                         |  |               |           |             |  |                  |       |             |  |          |     |         |  |           |         |  |  |   |       | 

The weighted average fair value of options granted during the years ended June
30, 2002, 2001, and 2000, calculated using the Black-Scholes option pricing
model, was approximately $5.28 per share, $4.81 per share, and $6.87 per share,
respectively.

The following table summarizes stock option activity under the two employees
stock option plans:

|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  |          |       | 
|--------------------------------------- |  | -------- | --------- | ----------- |  | --------- | --------- | ----- |  | --------- | -------- | ------- |  | -------- | ----- | 
|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  | Weighted
|                                        |  |          |           |             |  |           |           |       |  | Available |          | Average
|                                        |  | Reserved |           | Outstanding |  | for Grant |           | Price
|                                        |  |          |           |             |  |           |           |      
|Shares at July 1, 1999                  |  |          | 1,204,289 |             |  |           | 796,988   |       |  |           | 407,301  |         |  | $        | 10.42 | 
|                                       
|                                       
|                                       
|                                       
|Increase in shares reserved for
options |  |          | 315,000   |             |  |           |          |       |  |           | 315,000  |         |  |          |      | 
|                                       
|                                       
|                                       
|                                       
|Exercised                               |  |          | (110,435  | )           |  |           | (110,435  | )     |  |           |         |         |  |          | 6.65  | 
|                                       
|                                       
|                                       
|                                       
|Canceled                                |  |          | (4,775    | )           |  |           | (102,729  | )     |  |           | 97,954   |         |  |          | 13.46 | 
|                                       
|                                       
|                                       
|                                       
|Granted                                 |  |          |          |             |  |           | 474,486   |       |  |           | (474,486 | )       |  |          | 15.09 | 
|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  |          |       | 
|Shares at June 30, 2000                 |  |          | 1,404,079 |             |  |           | 1,058,310 |       |  |           | 345,769  |         |  |          | 12.60 | 
|                                       
|                                       
|                                       
|                                       
|Increase in shares reserved for
options |  |          | 500,000   |             |  |           |          |       |  |           | 500,000  |         |  |          |      | 
|                                       
|                                       
|                                       
|                                       
|Exercised                               |  |          | (73,476   | )           |  |           | (73,476   | )     |  |           |         |         |  |          | 5.88  | 
|                                       
|                                       
|                                       
|                                       
|Canceled                                |  |          | (2,150    | )           |  |           | (233,091  | )     |  |           | 230,941  |         |  |          | 12.97 | 
|                                       
|                                       
|                                       
|                                       
|Granted                                 |  |          |          |             |  |           | 469,698   |       |  |           | (469,698 | )       |  |          | 10.21 | 
|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  |          |       | 
|Shares at June 30, 2001                 |  |          | 1,828,453 |             |  |           | 1,221,441 |       |  |           | 607,012  |         |  |          | 12.05 | 
|                                       
|                                       
|                                       
|                                       
|Exercised                               |  |          | (95,218   | )           |  |           | (95,218   | )     |  |           |         |         |  |          | 7.39  | 
|                                       
|                                       
|                                       
|                                       
|Canceled                                |  |          | (45,645   | )           |  |           | (179,362  | )     |  |           | 133,717  |         |  |          | 10.77 | 
|                                       
|                                       
|                                       
|                                       
|Granted                                 |  |          |          |             |  |           | 340,002   |       |  |           | (340,002 | )       |  |          | 9.58  | 
|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  |          |       | 
|Shares at June 30, 2002                 |  |          | 1,687,590 |             |  |           | 1,286,863 |       |  |           | 400,727  |         |  | $        | 11.93 | 
|                                        |  |          |           |             |  |           |           |       |  |           |          |         |  |          |       | 

Non-employee Director Stock Option Plan.In 1995, the Board of Directors and
the shareholders of the Company approved the nonqualified non-employee director
stock option plan. The purpose of this plan is to permit the Company to grant
options to the Companys outside directors as part of their compensation. The
plan originally had 135,000 shares reserved for issuance and in November 1998,
an amendment was approved to increase the number of shares to 260,000.
Outstanding options are generally exercisable annually in installments over a
three-year period from the date of grant at an exercise price of not less than
the fair market value at the grant date. The options expire five years after
date of grant.

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Had stock option compensation expense been determined consistent with the fair
value method of measuring compensation expense under SFAS 123, the pro forma
effect for fiscal 2002, 2001, and 2000 would have been a reduction in the
Companys net income of approximately $78,000, $118,000, and $85,000,
respectively, and a reduction in diluted earnings per share of approximately
$.01 for each of the fiscal years 2002, 2001 and 2000.

In determining the pro forma stock compensation expense, the fair value of each
non-employee director option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in fiscal 2002, 2001, and 2000, respectively:
expected volatility of 49%, 49%, and 46%; expected lives of 5.0, 5.0, and 4.9
years; risk-free interest rates of 4.6%, 3.3%, and 6.1%; and no expected
dividends.

Exercise prices for non-employee director options outstanding as of June 30,
2002, ranged from $9.09 to $16.38 (fair market value on dates of grant). The
following table provides certain information with respect to stock options
outstanding and exercisable at June 30, 2002 under the non-employee director
stock option plan:

|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 
|------------------------ |  | ------------- | ------- | ----------- |  | ---------------- | ----- | ----------- |  | -------- | --- | ------- |  | --------- | ------ |  |  | - | ----- | 
|                         |  | Outstanding   |         | Exercisable
|                         |  |               |         |            
|                         |  |               |         |             |  | Weighted-        |       | Weighted-   |  |          |     |         |  | Weighted-
|                         |  |               |         |             |  | average          |       | average     |  | Stock    |     | average
|                         |  | Stock options |         | exercise    |  | remaining        |       | options     |  | exercise
|Range of exercise prices |  | outstanding   |         | price       |  | contractual life |       | exercisable |  | price   
|                         |  |               |         |             |  |                  |       |             |  |         
|Under $10.80             |  |               | 25,000  |             |  | $                | 9.09  |             |  |          | 4.4 |         |  |           |       |  |  |   |      | 
|                        
|                        
|                        
|                        
|$10.81  $12.60          |  |               | 63,250  |             |  |                  | 11.78 |             |  |          | 2.1 |         |  |           | 46,580 |  |  | $ | 12.06 | 
|                        
|                        
|                        
|                        
|$12.61  $14.40          |  |               | 20,000  |             |  |                  | 13.25 |             |  |          | 1.4 |         |  |           | 20,000 |  |  |   | 13.25 | 
|                        
|                        
|                        
|                        
|$16.21  $18.00          |  |               | 20,000  |             |  |                  | 16.38 |             |  |          | 2.4 |         |  |           | 13,332 |  |  |   | 16.38 | 
|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 
|                         |  |               | 128,250 |             |  | $                | 12.20 |             |  |          | 2.5 |         |  |           | 79,912 |  |  | $ | 13.08 | 
|                         |  |               |         |             |  |                  |       |             |  |          |     |         |  |           |        |  |  |   |       | 

The weighted average fair value of options granted during the years ended June
30, 2002, 2001, and 2000, calculated using the Black-Scholes option pricing
model, was approximately $4.37 per share, $5.27 per share, and $7.90 per share,
respectively.

The following table summarizes stock option activity under the non-employee
director stock option plan:

|                        |  |          |         |             |  |           |         |       |  |           |         |         |  |          |       | 
|----------------------- |  | -------- | ------- | ----------- |  | --------- | ------- | ----- |  | --------- | ------- | ------- |  | -------- | ----- | 
|                        |  |          |         |             |  |           |         |       |  |           |         |         |  | Weighted
|                        |  |          |         |             |  |           |         |       |  | Available |         | Average
|                        |  | Reserved |         | Outstanding |  | for Grant |         | Price
|                        |  |          |         |             |  |           |         |      
|Shares at July 1, 1999  |  |          | 244,250 |             |  |           | 101,000 |       |  |           | 143,250 |         |  | $        | 9.08  | 
|                       
|                       
|                       
|                       
|Exercised               |  |          |        |             |  |           |        |       |  |           |        |         |  |          |      | 
|                       
|                       
|                       
|                       
|Canceled                |  |          |        |             |  |           |        |       |  |           |        |         |  |          |      | 
|                       
|                       
|                       
|                       
|Granted                 |  |          |        |             |  |           | 20,000  |       |  |           | (20,000 | )       |  |          | 16.38 | 
|                        |  |          |         |             |  |           |         |       |  |           |         |         |  |          |       | 
|Shares at June 30, 2000 |  |          | 244,250 |             |  |           | 121,000 |       |  |           | 123,250 |         |  |          | 10.28 | 
|                       
|                       
|                       
|                       
|Exercised               |  |          | (15,750 | )           |  |           | (15,750 | )     |  |           |        |         |  |          | 4.11  | 
|                       
|                       
|                       
|                       
|Canceled                |  |          |        |             |  |           |        |       |  |           |        |         |  |          |      | 
|                       
|                       
|                       
|                       
|Granted                 |  |          |        |             |  |           | 36,250  |       |  |           | (36,250 | )       |  |          | 11.31 | 
|                        |  |          |         |             |  |           |         |       |  |           |         |         |  |          |       | 
|Shares at June 30, 2001 |  |          | 228,500 |             |  |           | 141,500 |       |  |           | 87,000  |         |  | $        | 11.23 | 
|                       
|                       
|                       
|                       
|Exercised               |  |          | (38,250 | )           |  |           | (38,250 | )     |  |           |        |         |  |          | 6.58  | 
|                       
|                       
|                       
|                       
|Canceled                |  |          |        |             |  |           |        |       |  |           |        |         |  |          |      | 
|                       
|                       
|                       
|                       
|Granted                 |  |          |        |             |  |           | 25,000  |       |  |           | (25,000 | )       |  |          | 9.09  | 
|                        |  |          |         |             |  |           |         |       |  |           |         |         |  |          |       | 
|Shares at June 30, 2002 |  |          | 190,250 |             |  |           | 128,250 |       |  |           | 62,000  |         |  | $        | 12.20 | 
|                        |  |          |         |             |  |           |         |       |  |           |         |         |  |          |       | 

Stock Repurchase Program

The Companys Board of Directors has authorized the repurchase from time to
time of up to approximately $5 million of the Companys common stock in the
open market or in negotiated transactions. This stock repurchase program will
remain in effect unless discontinued by the Board of Directors. Though no
shares were purchased during fiscal 2002, as of June 30, 2002, the Company had
repurchased 211,400 shares at an average price of $12.81 per share.

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13.     INCOME TAXES

The provision for income taxes consists of the following:

|           |                    |   |                     |       |      |   |        |        |   |   |       |       | 
|---------- | ------------------ | - | ------------------- | ----- | ---- | - | ------ | ------ | - | - | ----- | ----- | 
|           |                    |   | Year Ended June 30,
|           |                    |   |                    
|           |                    |   | 2002                |       | 2001 |   | 2000  
|           |                    |   |                     |       |      |   |       
|           |                    |   | (in thousands)     
|Current - 
|          
|          
|          
|          
|           | Federal income tax |   | $                   | 4,709 |      |   | $      | 6,323  |   |   | $     | 4,212 | 
|          
|          
|          
|          
|           | State income tax   |   |                     | 761   |      |   |        | 1,187  |   |   |       | 861   | 
|           |                    |   |                     |       |      |   |        |        |   |   |       |      
|           |                    |   | 5,470               |       |      |   | 7,510  |        |   |   | 5,073 |      
|          
|          
|          
|          
|Deferred -
|          
|          
|          
|          
|           | Federal income tax |   |                     | 1,174 |      |   |        | (6,139 | ) |   |       | 289   | 
|          
|          
|          
|          
|           | State income tax   |   |                     | 269   |      |   |        | (965   | ) |   |       | 33    | 
|           |                    |   |                     |       |      |   |        |        |   |   |       |      
|           |                    |   | 1,443               |       |      |   | (7,104 | )      |   |   | 322   |      
|           |                    |   |                     |       |      |   |        |        |   |   |       |      
|           |                    | $ | 6,913               |       |      | $ | 406    |        |   | $ | 5,395 |      
|           |                    |   |                     |       |      |   |        |        |   |   |       |      

The net deferred tax asset consists of the following:

|                       |  |                |        |      |  |   |        |  
|---------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                       |  | June 30,      
|                       |  |               
|                       |  | 2002           |        | 2001
|                       |  |                |        |     
|                       |  | (in thousands)
|Gross assets           |  | $              | 10,653 |      |  | $ | 11,855 |  
|                      
|                      
|                      
|                      
|Gross liabilities      |  |                | (3,905 | )    |  |   | (3,665 | )
|                       |  |                |        |      |  |   |        |  
|Net deferred tax asset |  | $              | 6,748  |      |  | $ | 8,190  |  
|                       |  |                |        |      |  |   |        |  

The tax effect of significant temporary differences representing deferred tax
assets and liabilities are as follows:

|                              |  |                |        |      |  |   |        |  
|----------------------------- |  | -------------- | ------ | ---- |  | - | ------ | -
|                              |  | June 30,      
|                              |  |               
|                              |  | 2002           |        | 2001
|                              |  |                |        |     
|                              |  | (in thousands)
|Loan loss provision           |  | $              | 4,885  |      |  | $ | 5,419  |  
|                             
|                             
|                             
|                             
|Accrued liabilities and other |  |                | 1,564  |      |  |   | 1,040  |  
|                             
|                             
|                             
|                             
|Deferred revenue              |  |                | 2,125  |      |  |   | 2,435  |  
|                             
|                             
|                             
|                             
|Depreciation and amortization |  |                | (2,552 | )    |  |   | (1,596 | )
|                             
|                             
|                             
|                             
|Interest-rate swap            |  |                | 726    |      |  |   | 892    |  
|                              |  |                |        |      |  |   |        |  
|                              |  | $              | 6,748  |      |  | $ | 8,190  |  
|                              |  |                |        |      |  |   |        |  

The provisions for taxes on income as reported differ from the tax provision
computed by applying the statutory federal income tax rate of 35% in 2002 and
34% in each of 2001 and 2000 as follows:

|                                                         |  |                     |       |      |  |      |      |   |  |   |       | 
|-------------------------------------------------------- |  | ------------------- | ----- | ---- |  | ---- | ---- | - |  | - | ----- | 
|                                                         |  | Year Ended June 30,
|                                                         |  |                    
|                                                         |  | 2002                |       | 2001 |  | 2000
|                                                         |  |                     |       |      |  |     
|                                                         |  | (in thousands)     
|Federal income tax provision on income at
statutory rate |  | $                   | 5,959 |      |  | $    | 346  |   |  | $ | 4,644 | 
|                                                        
|                                                        
|                                                        
|                                                        
|State taxes, net of federal benefit                      |  |                     | 928   |      |  |      | 63   |   |  |   | 611   | 
|                                                        
|                                                        
|                                                        
|                                                        
|Amortization of goodwill                                 |  |                     |      |      |  |      | 112  |   |  |   | 109   | 
|                                                        
|                                                        
|                                                        
|                                                        
|Other                                                    |  |                     | 26    |      |  |      | (115 | ) |  |   | 31    | 
|                                                         |  |                     |       |      |  |      |      |   |  |   |       | 
|Income tax provision                                     |  | $                   | 6,913 |      |  | $    | 406  |   |  | $ | 5,395 | 
|                                                         |  |                     |       |      |  |      |      |   |  |   |       | 

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14.     COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases its facilities and certain equipment under non-cancelable
operating leases. Most of the Companys facility leases contain options that
allow the Company to renew leases for periods that generally range from three
to nine years. At June 30, 2002, future minimum rental payments under existing
leases were as follows (in thousands):

|                      |  |   |        | 
|--------------------- |  | - | ------ | 
|Year Ending June 30,: |  |   |        | 
|2003                  |  | $ | 18,043 | 
|                     
|                     
|                     
|                     
|2004                  |  |   | 13,810 | 
|                     
|                     
|                     
|                     
|2005                  |  |   | 8,264  | 
|                     
|                     
|                     
|                     
|2006                  |  |   | 4,103  | 
|                     
|                     
|                     
|                     
|2007                  |  |   | 2,268  | 
|                     
|                     
|                     
|                     
|Thereafter            |  |   | 1,327  | 
|                      |  |   |        | 
|                      |  | $ | 47,815 | 
|                      |  |   |        | 

Lease expense was approximately $19.2 million, $17.9 million, and $14.9
million, for the years ended June 30, 2002, 2001, and 2000, respectively.

Goleta Relationship

The Company understands that the Office of the Comptroller of the Currency (the
OCC) has expressed strong reservations about Goletas short-term loan program
and its contractual relationship with the Company, under which the Bank Loans
are offered at most of the Companys locations. Representatives of the Company
and Goleta have had discussions with representatives of the OCC about the OCCs
particular concerns regarding the Bank Loans and the actions that might be
taken to address those concerns. The Company believes that some significant
modifications of the current policies and procedures regarding the Bank Loans
and the Companys relationship with Goleta may be required to address the OCCs
concerns. But until those modifications can be identified, the Company cannot
determine whether the modifications might be material to the Companys
loan-related business and revenue. The OCC possesses extensive regulatory
authority in determining how, or even if, Goletas short-term loan program and
its relationship with the Company will continue.

Credit Agreement

The Company expects that its current credit agreement, which is scheduled to
expire on October 31, 2002, will be renewed or replaced. The Company continues
to pursue its proposed private placement of $50 million to $75 million of
senior secured debt securities, with the objective to revise its existing bank
indebtedness and credit facilities. If the Company is unable to obtain capital
from one or more other sources to achieve its objective by October 31, 2002, it
may be required to attempt to obtain a further renewal or extension of its
existing credit facilities from the Lenders. The Company cannot give any
assurance that its proposed private placement will be completed, that it will
be able to obtain additional debt capital from any other source, or that its
existing credit facilities will be renewed or extended on terms that are
acceptable to the Company, or at all.

Pending Legal Proceedings

The Company is a defendant in a number of lawsuits and state regulatory
proceedings regarding its loan-related activities, and particularly its
services as agent for Goleta regarding the Bank Loans offered at most of the
Companys locations. A key issue in those proceedings regarding the Bank Loans
is whether Goleta or the Company is properly regarded as the lender. If the
Company, rather than Goleta, were held to be the lender, then the terms of the
Bank Loans, and the Companys activities in connection with those Bank Loans,
would likely violate usury and other consumer-protection laws in certain states
and, accordingly, the Company would likely become obligated to pay damages and
other relief that could significantly impair the Companys financial condition
and financial resources. The Company and Goleta, however, strongly maintain
that Goleta, and not the Company, is the lender of the Bank Loans. The Company
expects that its defense of all of these proceedings will continue to require
the expenditure of significant amounts for legal fees and other costs and the
substantial time and attention of certain of its senior officers.

73



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##### Table of Contents



15.     EMPLOYEE BENEFITS PLANS

The Company has a 401(k) savings plan (the Benefit Plan) on behalf of its
employees. Employees may contribute up to 20% of their annual compensation to
the Benefit Plan, subject to statutory maximums. The Benefit Plan provides a
matching of 25% of employee contributions made to the Benefit Plan. The
Companys matching contributions for the Benefit Plan were approximately
$229,000, $219,000, and $217,000 for the years ended June 30, 2002, 2001, and
2000, respectively.

Effective July 1, 2001, the Company established an executive non-qualified
deferred compensation plan (the Executive Benefit Plan). Company executives
may contribute up to 25% of their annual compensation to the Executive Benefit
Plan. The Executive Benefit Plan provides a match of 25% of employee
contributions up to the current 401(k) savings plan deferral limit. The
Companys matching contributions for the Executive Benefit plan was
approximately $24,000 for the year ended June 30, 2002.

16.     RELATED PARTY TRANSACTIONS

In fiscal 2000, the Company invested a total of $1 million in ePacific, a
private company in the business of providing customized debit-card payment
systems and electronic funds transfer processing services. ePacific, formerly
a controlled subsidiary of Goleta, provides the debit-card system and
processing services to Goleta to enable it to make the Bank Loans described
above in Note 1, Summary of Significant Accounting Policies  Loans Receivable,
Net. For the fiscal year ended June 30, 2002, 2001 and 2000, the Company
purchased 150,000, 484,000 and 110,000 debit-cards for a total of $0.5 million,
$1.5 million and $0.3 million, respectively.

The Companys investment in ePacific was made at the same times, and on the
same terms, as the investment by two venture capital investors. The Company
purchased approximately 14% of the shares of ePacifics Series A Convertible
Preferred Stock purchased by the group of investors. The terms of those shares
are typical of preferred stock issued and purchased in venture capital
investments, and include the right to periodic dividends from ePacific, the
right to a preferential distribution upon liquidation of ePacific, voting
rights with ePacific common stock, and the right to convert the preferred stock
into ePacific common stock. Under a stockholders agreement with ePacific and
its other stockholders, the Company agreed to certain restrictions on transfer
of its ePacific stock, received certain securities registration rights
regarding resale of its ePacific stock, and received the right to designate one
person to serve as a director of ePacific. The Company designated Jay B.
Shipowitz, its President and Chief Operating Officer, to serve as a director of
ePacific.

17.     LEGAL SETTLEMENTS

The Company provided $2.0 million, $0.4 million, and $0.6 million,
respectively, for the settlement of lawsuits in its financial statements for
the years ended June 30, 2002, 2001 and 2000 to satisfy its settlement
obligations. In the year ended June 30, 2002, the Company entered into
agreements to settle lawsuits against the Company or resolution of regulatory
proceedings in Colorado ($1.4 million), Indiana ($0.4 million), and Maryland
($0.2 million).

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18.     SUMMARIZED QUARTERLY FINANCIAL DATA (UNAUDITED)

Summarized quarterly financial data for the fiscal years ended June 30, 2002,
2001, and 2000, are as follows:

|                                                                         |  |                                          |        |            |  |        |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|------------------------------------------------------------------------ |  | ---------------------------------------- | ------ | ---------- |  | ------ | ------ | ------- |  | ------- | ------ | - |  | - | ------ |  |  | - | ------- | 
|                                                                         |  | Unaudited                                |        |            |  |       
|                                                                         |  |                                          |        |            |  |       
|                                                                         |  | Three Months Ended                       |        |            |  |       
|                                                                         |  |                                          |        | Year Ended
|                                                                         |  | Sept 30                                  |        | Dec 31     |  | Mar 31 |        | June 30 |  | June 30
|                                                                         |  |                                          |        |            |  |        |        |         |  |        
|                                                                         |  | (in
thousands, except per share amounts)
|2002:                                                                    |  |                                          |        |            |  |        |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Revenues                                                                 |  | $                                        | 51,910 |            |  | $      | 54,662 |         |  | $       | 68,091 |   |  | $ | 54,603 |  |  | $ | 229,266 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income                                                               |  |                                          | 1,989  |            |  |        | 1,995  |         |  |         | 4,170  |   |  |   | 1,959  |  |  |   | 10,113  | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Diluted earnings per share                                               |  |                                          | .20    |            |  |        | .20    |         |  |         | .41    |   |  |   | .19    |  |  |   | 1.00    | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|2001:                                                                    |  |                                          |        |            |  |        |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Revenues                                                                 |  | $                                        | 40,238 |            |  | $      | 45,100 |         |  | $       | 60,193 |   |  | $ | 51,244 |  |  | $ | 196,775 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income (loss)                                                        |  |                                          | 1,386  |            |  |        | 1,997  |         |  |         | (4,155 | ) |  |   | 1,383  |  |  |   | 611     | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Diluted earnings (loss) per
share                                        |  |                                          | .14    |            |  |        | .20    |         |  |         | (.41   | ) |  |   | .13    |  |  |   | .06     | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|2000:                                                                    |  |                                          |        |            |  |        |        |         |  |         |        |   |  |   |        |  |  |   |         | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Revenues                                                                 |  | $                                        | 30,588 |            |  | $      | 32,284 |         |  | $       | 41,337 |   |  | $ | 36,427 |  |  | $ | 140,636 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Income before cumulative
effect
of accounting change                     |  |                                          | 1,022  |            |  |        | 1,403  |         |  |         | 5,177  |   |  |   | 1,264  |  |  |   | 8,866   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Diluted earnings per share
before cumulative effect of
accounting change |  |                                          | .10    |            |  |        | .14    |         |  |         | .51    |   |  |   | .11    |  |  |   | .86     | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net income                                                               |  |                                          | 419    |            |  |        | 1,403  |         |  |         | 5,177  |   |  |   | 1,264  |  |  |   | 8,263   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Diluted earnings per share                                               |  |                                          | .04    |            |  |        | .14    |         |  |         | .51    |   |  |   | .11    |  |  |   | .80     | 

The Companys business is seasonal because of the impact of cashing tax refund
checks. The impact of this service is in the third and fourth quarter of the
Companys fiscal year.

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REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



To the Board of Directors and Stockholders,
Ace Cash Express, Inc.:

In connection with our audit of the consolidated financial statements of Ace
Cash Express, Inc. and Subsidiaries referred to in our report dated August 26,
2002, which is included in Part IV of this Form 10-K, we have also audited
Schedule II for the year ended June 30, 2002. In our opinion, this schedule
presents fairly, in all material respects, the information required to be set
forth therein. The information presented in this schedule for the years ended
June 30, 2001 and 2000, were audited by other auditors who have ceased
operations. These auditors expressed an unqualified opinion on this schedule
in their report dated August 13, 2001.





GRANT THORNTON LLP



Dallas, Texas,
August 26, 2002

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##### Table of Contents



This is a copy of the audit report previously issued by Arthur Andersen LLP in
connection with the Ace Cash Express, Inc. filing on Form 10-K for the year
ended June 30, 2001. This audit report has not been reissued by Arthur
Andersen LLP in connection with this filing of Form 10-K. The consolidated
balance sheet at June 30, 2000, and the consolidated statements of earnings,
shareholders equity and cash flows for the year ended June 30, 1999 have not
been included in the accompanying financial statements.



REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE



To the Shareholders of Ace Cash Express, Inc.:

We have audited, in accordance with auditing standards generally accepted in
the United States, the consolidated balance sheets of Ace Cash Express, Inc., a
Texas corporation, and subsidiaries as of June 30, 2001 and 2000, and the
related consolidated statements of earnings, shareholders equity and cash
flows for each of the three years in the period ended June 30, 2001, included
in this Form 10-K and have issued our report thereon dated August 13, 2001.
Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedule referred to
below is the responsibility of the Companys management.

Schedule II  Valuation and Qualifying Accounts is presented for the purpose of
complying with the Securities and Exchange Commissions rules and is not part
of the basic consolidated financial statements. This schedule has been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.



| | ARTHUR ANDERSEN LLP
| | -------------------

Dallas, Texas
August 13, 2001

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##### Table of Contents



ACE CASH EXPRESS, INC. AND SUBSIDIARIES(a)

Schedule II  Valuation
and Qualifying Accounts(in millions)

|               |                     |           |           |          |          |          |          |            |   |        |           |     |        |  |         |       |       |  |   |      | 
|-------------- | ------------------- | --------- | --------- | -------- | -------- | -------- | -------- | ---------- | - | ------ | --------- | --- | ------ |  | ------- | ----- | ----- |  | - | ---- | 
|               |                     |           |           |          |          |          |          |            |   |        | Additions |     |        |  |        
|               |                     |           |           |          |          |          |          |            |   |        |           |     |        |  |        
|               |                     |           | Balance   |          | Charged  |          |          |            |   |        |           |     |        |  | Balance
|               |                     |           | at        |          | to costs |          | Charged  |            |   |        |           |     | at    
|               |                     |           | beginning |          | and      |          | to other |            |   |        |           |     | end of
|Description    |                     | of period |           | expenses |          | accounts |          | Deductions |   | period
|               |                     |           |           |          |          |          |          |            |   |       
|               |                     |           |           |          |          |          |          |            |   |        |          
|June 30, 2002: |                     |           |           |          |          |          |          |            |   |        |           |     |        |  |         |       |       |  |   |     
|              
|              
|              
|              
|               | Loan loss provision |           | $         | 13.4     |          |          | $        | 21.9       |   |        | $         |    |        |  | $       | (23.1 | )     |  | $ | 12.2 | 
|              
|              
|              
|              
|               | Restructure reserve |           | $         | 1.2      |          |          | $        | (0.2       | ) |        | $         |    |        |  | $       | (0.6  | )     |  | $ | 0.4  | 
|              
|              
|              
|              
|June 30, 2001: |                     |           |           |          |          |          |          |            |   |        |           |     |        |  |         |       |       |  |   |     
|              
|              
|              
|              
|               | Loan loss provision |           | $         |         |          |          | $        | 24.8       |   |        | $         | 1.6 | (b)    |  | $       | (13.0 | )     |  | $ | 13.4 | 
|              
|              
|              
|              
|               | Restructure reserve |           | $         |         |          |          | $        | 8.7        |   |        | $         |    |        |  | $       | (7.5  | ) (c) |  | $ | 1.2  | 
|              
|              
|              
|              
|June 30, 2000: |                     |           |           |          |          |          |          |            |   |        |           |     |        |  |         |       |       |  |   |     
|              
|              
|              
|              
|               | Loan loss provision |           | $         |         |          |          | $        |           |   |        | $         |    |        |  | $       |      |       |  | $ |     | 
|              
|              
|              
|              
|               | Restructure reserve |           | $         |         |          |          | $        |           |   |        | $         |    |        |  | $       |      |       |  | $ |     | 

---



|(a) |  | This schedule should be read in conjunction with the Companys audited
consolidated financial statements and related notes thereto.                                                                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | In connection with the establishment of the loan loss provision, $1.6
million was reserved for loans re-established.                                                                                                                                                                                       
|   
|(c) |  | Includes $6.5 million of costs associated with the write-off of goodwill
and covenants not to compete, fixed asset and inventory disposals, and
lease terminations related to store closings and impairments, and $1.0
million adjustment related to the Companys estimate of remaining lease
obligations.

78



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##### Table of Contents






Index to Exhibits

|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|3.1     |  | Restated Articles of Incorporation of the Company, as amended through
January 31, 1998. (Included as Exhibit 3.6 to the Companys Form 10-Q as
of December 31, 1997 (Commission File Number 0-20774) and incorporated
herein by reference.)                                                                                                                                                                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|3.2     |  | Amended and Restated Bylaws of the Company, as amended through January
31, 1998. (Included as Exhibit 3.7 to the Companys Form 10-Q as of
December 31, 1997 (Commission File Number 0-20774) and incorporated herein
by reference.)                                                                                                                                                                                                                                      
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|3.3     |  | Certificate of Amendment to the Companys Bylaws dated January 3, 2000.
(Included as Exhibit 3.3 to the Companys Form 10-Q as of December 31,
1999 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|4.1     |  | Form of Certificate representing shares of Registrants Common Stock.
(Included as Exhibit 4.1 to the Companys Registration Statement on Form
S-1 (Reg. No. 33-53286) (the Registration Statement) and incorporated
herein by reference.)                                                                                                                                                                                                                              
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.1    |  | Ace Cash Express, Inc. 1987 Stock Option Plan, as amended (including form
of Incentive Stock Option Agreement). (Included as Exhibit 10.1 to the
Registration Statement and incorporated herein by reference.)#                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.2    |  | 1992 Master Agreement dated October 14, 1992 (the Money Order
Agreement) between the Company and American Express Travel Related
Services Company, Inc. (the Money Order Supplier). (Confidential
treatment for a portion of this document has been granted by the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934) (Included as Exhibit 10.4 to the
Registration Statement and incorporated herein by reference.)
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.3    |  | Agreement Regarding Stock Pledges dated as of November 20, 1992, between
the Company and the shareholders pledging shares of Common Stock to secure
the performance of the Companys obligations under the Money Order
Agreement. (Included as Exhibit 10.7 to the Registration Statement and
incorporated herein by reference.)                                                                                                                                          
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.4    |  | Lease Agreement dated October 1, 1987, between the Company and Greenway
Tower Joint Venture, as amended by First Amendment to Lease Agreement
dated April 29, 1988, Second Amendment to Lease Agreement dated August 24,
1988, Third Amendment to Lease Agreement dated December 29, 1988 and
Fourth Amendment to Lease Agreement dated January 29, 1991. (Included as
Exhibit 10.8 to the Registration Statement and incorporated herein by
reference.)                  
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.5    |  | First Amendment to the Money Order Agreement dated December 1, 1992,
between the Company and the Money Order Supplier. (Included as Exhibit
10.9 to the Registration Statement and incorporated herein by reference.)                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.6    |  | Agreement for Purchase and Sale of Stock Assets dated January 2, 1992,
between T.J. Martin (Martin) and R.C. Hemmig (Hemmig). (Included as
Exhibit 10.10 to the Registration Statement and incorporated herein by
reference.)                                                                                                                                                                                                                                         
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.7    |  | Option to Repurchase, dated January 2, 1992, in favor of Hemmig.
(Included as Exhibit 10.12 to the Registration Statement and incorporated
herein by reference.)                                                                                                                                                                                                                                                                                                          
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.8    |  | Irrevocable Proxy of Martin dated January 2, 1992 in favor of Hemmig.
(Included as Exhibit 10.13 to the Registration Statement and incorporated
herein by reference.)                                                                                                                                                                                                                                                                                                     
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.9    |  | Letter Agreement between First Data Corporation and the Company dated
December 6, 1993, amending the First Amendment to the Money Order
Agreement. (Included as Exhibit 10.9 to the
Companys Form 10-K as of June 30, 1994 (Commission File Number 0-20774)
and incorporated herein by reference.)                                                                                                                                                                       
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|       
|       
|       
|       
|10.10   |  | Fifth Amendment to Lease Agreement dated June 13, 1994, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.10 to
the Companys Form 10-K as of June 30, 1994 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                           





---



##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.11   |  | Asset Purchase Agreement dated November 22, 1993, among the Company,
sole proprietor, limited partnership, and general partnerships that
conduct business under the name Mr. Money Check Cashers (the Sellers),
general partners of the partnership sellers (the General Partners), and
an individual agent for the Sellers and the General Partners (the
Agent). (Included as Exhibit 2.1 in the Companys Form 8-K filed on
December 7, 1993 (Commission File Number 0-20774) and incorporated herein
by reference.)
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.12   |  | Food Stamp Sub-Contract Agreement dated November 22, 1993, between the
Company and the Agent. (Included as Exhibit 2.2 to the Companys Form 8-K
filed on December 7,1993 (Commission File Number 0-20774) and incorporated
herein by reference.)                                                                                                                                                                                                                                                                             
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.13   |  | Ace Cash Express, Inc. 401(k) Profit Sharing Plan, adopted July 1, 1994.
(Included as Exhibit 10.13 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.14   |  | Ace Cash Express, Inc. Deferred Compensation Plan, adopted July 1, 1994.
(Included as Exhibit 10.14 to the Companys Form 10-K as of June 30, 1994
(Commission File Number 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                   
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
|       
|10.15   |  | Asset Purchase Agreement dated June 27, 1995, among the Company and
Quick Cash, Inc., Q.C. & G. Financial, Inc., David Christenholz and Gloria
Guerra-Leyva. (Included as Exhibit 2.1 to the Companys Form 8-K filed on
July 11, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                
|       
|       
|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|       
|       
|       
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|10.16   |  | Escrow Agreement dated June 27, 1995, among the Company, Quick Cash,
Inc., Q.C. & G. Financial, Inc., David Christenholz, Gloria Guerra-Leyva,
and Bank One, Arizona, NA, as escrow agent. (Included as Exhibit 2.2 to
the Companys Form 8-K filed on July 11, 1995 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                  
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.17   |  | Promissory Note dated June 27, 1995, of the Registrant in favor of the
Money Order Supplier. (Included as Exhibit 2.3 to Form 8-K filed on July
11, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                                                                              
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.18   |  | Second Amendment to the Money Order Agreement dated September 8, 1995,
between the Company and the Money Order Supplier. (Included as Exhibit
10.18 to the Companys Form 10-K as of June 30, 1995 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                    
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.19   |  | Ace Cash Express, Inc. Non-Employee Directors Stock Option Plan dated
March 27, 1995. (Included as Exhibit 10.19 to the Companys Form 10-K as
June 30, 1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.20   |  | Letter Agreement dated July 13, 1995, between First Data Corporation and
the Company amending the Money Order Agreement. (Included as Exhibit
10.20 to the Companys Form 10-K as of June 30, 1995 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                    
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.21   |  | Letter Agreement dated February 1, 1996, between the Company and the
Money Order Supplier amending the Money Order Agreement. (Included as
Exhibit 10.21 to the Companys Form 10-Q as of December 31, 1995
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.22   |  | 1996 MoneyGram Master Agreement dated February 1, 1996, between the
Company and the Money Order Supplier (the MoneyGram Agreement).
(Included as Exhibit 10.22 to the Companys Form 10-Q as of December 31,
1995 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                                   
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.23   |  | Agreement and Plan of Merger dated October 13, 1995, among the Company,
Check Express, Inc., and Ace Acquisition Corporation. (Included as
Exhibit 2.1 to the Companys Form 8-K filed on February 16, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.24   |  | Amendment (to Agreement and Plan of Merger) dated December 20, 1995,
among the Company, Check Express, Inc., and Ace Acquisition Corporation.
(Included as Exhibit 2.2 to the Companys Form 8-K filed on February 16,
1996 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
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|10.25   |  | Sixth Amendment to Lease Agreement dated February 1, 1996, between the
Company and Greenway Tower Joint Venture. (Included as Exhibit 10.25 to
the Companys Form 10-Q as of March 31, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                           





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.26   |  | 1996-A Amendment to the MoneyGram Agreement dated March 21, 1996,
between the Company and the Money Order Supplier. (Included as Exhibit
10.26 to the Companys Form 10-K as of June 30, 1996 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                               
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.27   |  | 1996-B Amendment to the MoneyGram Agreement dated June 27, 1996, between
the Company and the Money Order Supplier. (Included as Exhibit 10.27 to
the Companys Form 10-K as of June 30, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.28   |  | Note Purchase Agreement dated November 15, 1996, between the Company and
Principal Life Insurance Company. (Included as Exhibit 10.28 to the
Companys Form 10-Q as of December 31, 1996 (Commission File Number
0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                    
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.29   |  | Form of 9.03% Senior Secured Notes due November 15, 2003. (Included as
Exhibit 10.29 to the Companys Form 10-Q as of December 31, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                                                                                     
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.30   |  | Collateral Trust Agreement dated November 15, 1996, among the Company
and the Money Order Supplier, Principal Life Insurance Company, and
Wilmington Trust Company. (Included as Exhibit 10.30 to the Companys Form
10-Q as of December 31, 1996 (Commission File Number 0-20774) and
incorporated herein by reference.)                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.31   |  | Assignment of Deposit Accounts and Security Agreement dated November 15,
1996, between the Company and Wilmington Trust Company. (Included as
Exhibit 10.31 to the Companys Form 10-Q as of December 31, 1996
(Commission File Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                              
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.32   |  | Third Amendment to the Money Order Agreement dated November 15, 1996,
between the Company and the Money Order Supplier. (Included as Exhibit
10.32 to the Companys Form 10-Q as of December 31, 1996 (Commission File
Number 0-20774) and incorporated herein by reference.)                                                                                                                                                                                                       
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.33   |  | Amendment No. 1 to the Ace Cash Express 401K Profit Sharing Plan
effective January 1, 1998. (Included as Exhibit 10.33 to the Companys
Form 10-Q as of March 31, 1998 (Commission File Number 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                                                     
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.34   |  | Amendment No. 1 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.34 to the Companys Form 10-K as of
June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.35   |  | Amendment No. 2 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.35 to the Companys Form 10-K as of
June 30, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.) #                                                                                                                                                                                                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.36   |  | Ace Cash Express, Inc. 1997 Stock Option Plan. (Included as Exhibit A
to the Companys Proxy Statement for the 1997 Annual Meeting of
Shareholders (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                                            
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.37   |  | Amendment No. 1 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.37 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.) #                                                                                                                                                                                                                                                                  
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.38   |  | Form of Change-in-Control Executive Severance Agreement between the
Company and each of its three executive officers. (Included as Exhibit
10.38 to the Companys Form 10-K as of June 30, 1998 (Commission File No.
0-20774) and incorporated herein by reference.) #                                                                                                                                                                                                              
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.39   |  | Money Order Agreement dated as of April 16, 1998, but effective as of
December 16, 1998, between the Company and Travelers Express Company,
Inc. (Confidential treatment for a portion of this document has been
granted by the Securities and Exchange Commission pursuant to Rule 24b-2
under the Securities Exchange Act of 1934). (Included as Exhibit 10.39 to
the Companys Form 10-K as of June 30, 1998 (Commission File No. 0-20774)
and incorporated herein by reference.)
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
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|10.40   |  | Credit Agreement dated as of July 31, 1998, but effective as of December
16, 1998, among the Company, Wells Fargo Bank (Texas), National
Association, as agent (the Credit Agent), and the lenders named therein,
with Exhibits A and B thereto and Schedules 2.01(a) and 2.01(b) thereto.
(Included as Exhibit 10.40 to the Companys Form 10-K as of June 30, 1998
(Commission File No. 0-20774) and incorporated herein by reference.)                                         





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.41   |  | Amended and Restated Collateral Trust Agreement dated as of July 31,
1998, but effective as of December 16, 1998, among the Company, the Credit
Agent, Travelers Express Company, Inc., Principal Life Insurance Company
(formerly known as Principal Mutual Life Insurance Company), and
Wilmington Trust Company. (Included as Exhibit 10.41 to the Companys Form
10-K as of June 30, 1998 (Commission File No. 0-20774) and incorporated
herein by reference.)             
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.42   |  | Amended and Restated Assignment of Deposit Accounts and Security
Agreement dated as of July 31, 1998, but effective as of December 16,
1998, between the Company and Wilmington Trust Company. (Included as
Exhibit 10.42 to the Companys Form 10-K as of June 30, 1998 (Commission
File No. 0-20774) and incorporated herein by reference.)                                                                                                                                  
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|       
|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|       
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|10.43   |  | First Amendment to Credit Agreement dated as of December 16, 1998, among
the Company, the Credit Agent, and the lenders named therein, with
Schedules 2.01(a) and 2.01(b) thereto. (Included as Exhibit 10.43 to the
Companys Form 8-K filed on December 23, 1998 (Commission File No.
0-20774) and incorporated herein by reference.)                                                                                                                                        
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|       
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.44   |  | Amendment No. 3 to Ace Cash Express, Inc. Non-Employee Directors Stock
Option Plan. (Included as Exhibit 10.44 to the Companys Form 10-Q as of
December 31, 1998 (Commission File No. 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.45   |  | Amendment No. 2 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.45 to the Companys Form 10-Q as of December 31,
1999 (Commission File Number 0-20774) and incorporated herein by
reference.)#                                                                                                                                                                                                                                                       
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.46   |  | Second Amendment to Credit Agreement dated as of December 15, 1999,
among the Company, the Credit Agent , and the lenders named therein, with
Schedules 2.01(a) and 2.01(b) thereto.
(Included as Exhibit 10.46 to the Companys Form 10-Q as of December 31,
1999 (Commission File Number 0-20774) and incorporated herein by
reference.)                                                                                                                                     
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.47   |  | Master Loan Agency Agreement dated as of August 11, 1999, between the
Company and Goleta National Bank. (Confidential treatment for a portion
of this document has been granted by the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934.) (Included as Exhibit 10.47 to the Companys Form 10-K as of June
30, 2000 (Commission File No. 0-20774) and incorporated herein by
reference.)                                    
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.48   |  | Money Transfer Agreement dated as of June 30, 2000, among the Company,
Travelers Express Company, Inc., and MoneyGram Payment Systems, Inc.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.48 to the
Companys Form 10-K as of June 30, 2000 (Commission File No. 0-20774) and
incorporated herein by reference.)
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.49   |  | Change-in-Control Executive Severance Agreement dated as of August 17,
2000, between the Company and Debra A. Bradford. (Included as
Exhibit 10.49 to the Companys Form 10-K as of June 30, 2000 (Commission
File No. 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.50   |  | Amendment No. 3 to Ace Cash Express, Inc. 1997 Stock Option Plan.
(Included as Exhibit 10.50 to the Companys Form 10-Q as of December 31,
2000 (Commission File No. 0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.51   |  | Amended and Restated Credit Agreement dated November 9, 2000, among the
Company, Wells Fargo Bank Texas, National Association, as agent for the
lenders named therein, and the lenders named therein with the Schedules
(other than the Companys disclosure schedules) and the Exhibits thereto.
(Included as Exhibit 10.1 to the Companys Form 8-K dated November 9, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                              
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.52   |  | Asset Purchase Agreement dated November 10, 2000, among the Company,
Check Cashiers of Arizona, Inc., Check Cashiers of California, Inc.,
Corpus Christi Check Cashiers, Inc., U.S. Money Order Company, Inc.,
Valley Check Cashiers, Inc., Morris Silverman, and Jeffrey D. Silverman.
(Included as Exhibit 2.1 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
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|10.53   |  | Escrow Agreement dated November 10, 2000, among the Company, Check
Cashiers of Arizona, Inc., Check Cashiers of California, Inc., Corpus
Christi Check Cashiers, Inc. U.S. Money Order Company, Inc., Valley Check
Cashiers, Inc., and Chicago Title Insurance Company, as Escrow Agent.
(Included as Exhibit 2.2 to the Companys Form 8-K dated November 10, 2000
(Commission File No. 0-20774) and incorporated herein by reference.)                                       





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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|Number  |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.54   |  | Form of Amendment to Change-in-Control Executive Severance Agreement
between the Company and each of its four senior executive officers (Donald
H. Neustadt, Jay B. Shipowitz, Raymond E. McCarty, and Debra A. Bradford)
dated as of January 3, 2001. (Included as Exhibit 10.51 to the Companys
Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)#                                                                                                                                                                                                  
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.55   |  | Amendment Number 1 to Master Loan Agency Agreement, with the
corresponding Amendment Number 1 to Master Loan Participation Agreement
and Amendment Number 1 to Schedule of Interest and Fees, dated of March
29, 2001, between the Company and Goleta National Bank. (Confidential
treatment for a portion of this document has been granted by the
Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.52 to the
Companys Form 10-Q as of March 31, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.56   |  | Change-in-Control Executive Severance Agreement dated as of May 15,
2001, between the Company and Barry M. Barron. (Included as Exhibit 10.56
to the Companys Form 10-K as of June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                       
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.57   |  | Amendment Number 2 to Master Loan Agency Agreement, with the
corresponding Amendment Number 2 to Master Loan Participation Agreement,
dated of June 30, 2001, between the Company and Goleta National Bank.
(Confidential treatment for a portion of this document has been granted by
the Securities and Exchange Commission pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.) (Included as Exhibit 10.57 to the
Companys Form 10-K as of June 30, 2001 (Commission File No. 0-20774) and
incorporated herein by reference.)                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.58   |  | Change-in-Control Executive Severance Agreement dated as of July 16,
2001, between the Company and Joe W. Conner. (Included as Exhibit 10.58
to the Companys Form 10-K as of June 30, 2001 (Commission File No.
0-20774) and incorporated herein by reference.)#                                                                                                                                                                                                                                                                                                                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.59   |  | First Amendment to Amended and Restated Credit Agreement dated February
21, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.59 to the Companys Form 10-Q as of September 30, 2001
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.60   |  | Second Amendment to Amended and Restated Credit Agreement dated November
8, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.60 to the Companys Form 10-Q as of September 30, 2001
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                        
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.61   |  | Third Amendment to Amended and Restated Credit Agreement dated December
31, 2001, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.1 to the Companys Form 8-K filed on January 4, 2002
(Commission File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                          
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.62   |  | Second Amendment to Amended and Restated Collateral Trust Agreement
dated December 31, 2001, by and among the Company, Wells Fargo Bank Texas,
National Association, as agent, Travelers Express Company, Inc., Principal
Life Insurance Company, and Wilmington Trust Company as collateral
trustee. (Included as Exhibit 10.2 to the Companys Form 8-K filed on
January 4, 2002 (Commission File No. 0-20774) and incorporated herein by
reference.)                                                                                                                                                  
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.63   |  | Separation Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.1 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.64   |  | Consulting Agreement dated as of February 28, 2002, between the Company
and R. Edward McCarty. (Included as Exhibit 10.2 to the Companys Form
10-Q as of March 31, 2002 (Commission File No. 0-20774) and incorporated
herein by reference.)#                                                                                                                                                                                                                                                                                                                                                           
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.65   |  | Fourth Amendment to Amended and Restated Credit Agreement dated April
30, 2002, by and among the Company, Wells Fargo Bank Texas, National
Association, as agent for the lenders named therein, and the lenders named
therein, with the Schedules and the Exhibits thereto. (Included as
Exhibit 10.3 to the Companys Form 10-Q as of March 31, 2002 (Commission
File No. 0-20774) and incorporated herein by reference.)                                                                                                                                                                               
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|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
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|10.66   |  | Seventh Amendment to Lease Agreement dated December 20, 2000, between
the Company and Greenway Tower Joint Venture.*                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     





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##### Table of Contents



|        |  |                                                                                                                                                                                                         
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|Exhibit |  |                                                                                                                                                                                                         
|Number  |  | Description                                                                                                                                                                                             
|        |  |                                                                                                                                                                                                         
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|        |  |                                                                                                                                                                                                         
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|10.67   |  | Eighth Amendment to Lease Agreement dated May 10, 2001, between the
Company and Greenway Tower Joint Venture.*                                                                                          
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|10.68   |  | Ace Cash Express, Inc. Executive Non-Qualified Excess Plan Adoption
Agreement with the First Amendment to the Ace Cash Express, Inc. Executive
Non-Qualified Excess Plan, dated as of October 1, 2001.*#
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|        |  |                                                                                                                                                                                                         
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|        |  |                                                                                                                                                                                                         
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|        |  |                                                                                                                                                                                                         
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|21      |  | Subsidiaries of the Company.*                                                                                                                                                                           
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|23      |  | Consent of Grant Thornton LLP.*                                                                                                                                                                         
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|99      |  | Certifications of Chief Executive Officer and Chief Financial Officer
Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*                        



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|* |  | Filed herewith                                         
|- |  | -------------------------------------------------------
| 
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| 
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|# |  | Management contract or compensatory plan or arrangement