UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|(Mark One)                                    |                                                                                         
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarterly period ended March 31, 2008
|OR                                           
|o                                             | 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 001-32363

ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                                       |  | 58-2332639(I.R.S. Employer Identification No.)
|------------------------------------------------------------------------------------------------------------ |  | ----------------------------------------------
|135 North Church Street
Spartanburg, South Carolina 29306(Address of principal executive offices) (Zip Code)
|864-342-5600(Registrant's telephone number, including area code)                                            
|None(Former name, former address and former fiscal year, if changed since last report)                      

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 ý No o

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

|Large accelerated filer ý |  | Accelerated filer o |  | Non-accelerated filer o (Do not check if a smaller reporting company) |  | Smaller reporting company o
|------------------------- |  | ------------------- |  | --------------------------------------------------------------------- |  | ---------------------------

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

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Class

Outstanding as of May 9, 2008Common Stock, par value $.01 per share

64,564,211 shares




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ADVANCE AMERICA, CASH ADVANCE CENTERS, INC.  Form 10-Q  For the three months ended March 31, 2008

|                              |                                                                                       |                                                                                                    |    | Page
|----------------------------- | ------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -- | ----
|FORWARD-LOOKING STATEMENTS    |                                                                                       | 3                                                                                                 
|PART I. FINANCIAL INFORMATION |                                                                                       | 4                                                                                                 
|Item 1.                       | Financial Statements                                                                  |                                                                                                    | 4 
|                              |                                                                                       | Unaudited Consolidated Balance Sheets December 31, 2007 and March 31, 2008                         |    | 4   
|                              |                                                                                       | Interim Unaudited Consolidated Statements of Income Three Months Ended March 31, 2007 and 2008     |    | 5   
|                              |                                                                                       | Interim Unaudited Consolidated Statement of Stockholders' Equity Three Months Ended March 31, 2008 |    | 6   
|                              |                                                                                       | Interim Unaudited Consolidated Statements of Cash Flows Three Months Ended March 31, 2007 and 2008 |    | 7   
|                              |                                                                                       | Notes to Interim Unaudited Consolidated Financial Statements                                       |    | 8   
|Item 2.                       | Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                    | 22
|Item 3.                       | Quantitative and Qualitative Disclosures About Market Risk                            |                                                                                                    | 41
|Item 4.                       | Controls and Procedures                                                               |                                                                                                    | 41
|PART II. OTHER INFORMATION    |                                                                                       |                                                                                                   
|Item 1.                       | Legal Proceedings                                                                     |                                                                                                    | 42
|Item 1A.                      | Risk Factors                                                                          |                                                                                                    | 42
|Item 2.                       | Unregistered Sales of Equity Securities and Use of Proceeds                           |                                                                                                    | 43
|Item 6.                       | Exhibits                                                                              |                                                                                                    | 44
|SIGNATURES                    |                                                                                       | 45                                                                                                
|INDEX TO EXHIBITS             |                                                                                       | 46                                                                                                

2

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FORWARD-LOOKING STATEMENTS

The matters discussed in this Quarterly Report on Form 10-Q that are forward-looking statements are based on current management expectations that involve
substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements can be
identified by the fact that they do not relate strictly to historical or current facts. They use words such as "expect," "intend," "plan," "believe," "project," "anticipate," "may," "will," "should,"
"would," "could," "estimate," "continue" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should read statements that
contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other "forward-looking"
information.

The
matters described in "Part I. Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2007 and in "Part II.
Item 1A. Risk Factors" of this Quarterly Report on Form 10-Q, as well as any cautionary language in this Quarterly Report, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe in our forward-looking statements. Although we believe that our expectations are based on reasonable assumptions, actual
results may differ materially from those in the forward-looking statements as a result of various factors, including, but not limited to, the examples we provided.

Forward-looking
statements speak only as of the date of this Quarterly Report. Except as required under federal securities laws and the rules and regulations of the
U.S. Securities and Exchange Commission, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or circumstances arising after the date
of this Quarterly Report, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned not to place undue reliance on the
forward-looking statements included in this Quarterly Report or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly
qualified by these cautionary statements.

3

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PART I. FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS.

Advance America, Cash Advance Centers, Inc.        Unaudited Consolidated Balance Sheets        December 31, 2007 and March 31, 2008        (in thousands, except per share
data)

|                                                                                                                  |                                                                                                                                                                                    | December 31, 2007                          |          | March 31, 2008 |        
|----------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | -------- | -------------- | -------
|Assets                                                                                                            |                                                                                                                                                                                    |                                            |          |                |        
|Current assets                                                                                                    |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  | Cash and cash equivalents                                                                                                                                                          |                                            | $        | 28,251         |        
|                                                                                                                  | Advances and fees receivable, net                                                                                                                                                  |                                            |          | 221,480        |        
|                                                                                                                  | Deferred income taxes                                                                                                                                                              |                                            |          | 13,737         |        
|                                                                                                                  | Other current assets                                                                                                                                                               |                                            |          | 13,578         |        
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total current assets                       |          |                | 277,046
|Restricted cash                                                                                                   |                                                                                                                                                                                    |                                            | 5,701    |                |        
|Property and equipment, net                                                                                       |                                                                                                                                                                                    |                                            | 57,616   |                |        
|Goodwill                                                                                                          |                                                                                                                                                                                    |                                            | 127,286  |                |        
|Other assets                                                                                                      |                                                                                                                                                                                    |                                            | 4,049    |                |        
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total assets                               |          | $              | 471,698
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|Liabilities and Stockholders' Equity                                                                              |                                                                                                                                                                                    |                                            |          |                |        
|Current liabilities                                                                                               |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  | Accounts payable                                                                                                                                                                   |                                            | $        | 16,204         |        
|                                                                                                                  | Accrued liabilities                                                                                                                                                                |                                            |          | 31,823         |        
|                                                                                                                  | Income taxes payable                                                                                                                                                               |                                            |          |               |        
|                                                                                                                  | Accrual for third-party lender losses                                                                                                                                              |                                            |          | 4,587          |        
|                                                                                                                  | Current portion of long-term debt                                                                                                                                                  |                                            |          | 542            |        
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total current liabilities                  |          |                | 53,156 
|Revolving credit facility                                                                                         |                                                                                                                                                                                    |                                            | 142,302  |                |        
|Long-term debt                                                                                                    |                                                                                                                                                                                    |                                            | 5,136    |                |        
|Deferred income taxes                                                                                             |                                                                                                                                                                                    |                                            | 20,629   |                |        
|Deferred revenue                                                                                                  |                                                                                                                                                                                    |                                            |         |                |        
|Other liabilities                                                                                                 |                                                                                                                                                                                    |                                            | 184      |                |        
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total liabilities                          |          |                | 221,407
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|Commitments and contingencies (Note 5)                                                                            |                                                                                                                                                                                    |                                            |          |                |        
|Stockholders' equity                                                                                              |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  | Preferred stock, par value $.01 per share, 25,000 shares authorized; no shares issued and outstanding                                                                              |                                            |          |               |        
|                                                                                                                  | Common stock, par value $.01 per share, 250,000 shares authorized; 96,821 shares issued and 72,947 and 68,233 outstanding as of December 31, 2007 and March 31, 2008, respectively |                                            |          | 968            |        
|Paid in capital                                                                                                   |                                                                                                                                                                                    |                                            | 286,999  |                |        
|Retained earnings                                                                                                 |                                                                                                                                                                                    |                                            | 133,789  |                |        
|Accumulated other comprehensive loss                                                                              |                                                                                                                                                                                    |                                            | (75      | )              |        
|Common stock in treasury (23,874 and 28,588 shares at cost at December 31, 2007 and March 31, 2008, respectively) |                                                                                                                                                                                    |                                            | (171,390 | )              |        
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total stockholders' equity                 |          |                | 250,291
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        
|                                                                                                                  |                                                                                                                                                                                    | Total liabilities and stockholders' equity |          | $              | 471,698
|                                                                                                                  |                                                                                                                                                                                    |                                            |          |                |        

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

4

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Advance America, Cash Advance Centers, Inc.        Interim Unaudited Consolidated Statements of Income        Three Months Ended March 31, 2007 and 2008        (in thousands,
except per share data)

|                                                |                                    | 2007                                                          |                     | 2008   |        
|----------------------------------------------- | ---------------------------------- | ------------------------------------------------------------- | ------------------- | ------ | -------
|Total Revenues                                  |                                    | $                                                             | 168,083             |        | $      
|Center Expenses:                                |                                    |                                                               |                     |        |        
|                                                | Salaries and related payroll costs |                                                               |                     | 49,197 |        
|                                                | Provision for doubtful accounts    |                                                               |                     | 15,815 |        
|                                                | Occupancy costs                    |                                                               |                     | 23,533 |        
|                                                | Center depreciation expense        |                                                               |                     | 4,269  |        
|                                                | Advertising expense                |                                                               |                     | 5,309  |        
|                                                | Other center expenses              |                                                               |                     | 14,158 |        
|                                                |                                    |                                                               |                     |        |        
|                                                |                                    | Total center expenses                                         |                     |        | 112,281
|                                                |                                    |                                                               |                     |        |        
|                                                |                                    |                                                               | Center gross profit |        |        
|Corporate and Other Expenses (Income):          |                                    |                                                               |                     |        |        
|General and administrative expenses             |                                    |                                                               | 13,279              |        |        
|Corporate depreciation expense                  |                                    |                                                               | 818                 |        |        
|Interest expense                                |                                    |                                                               | 2,313               |        |        
|Interest income                                 |                                    |                                                               | (76                 | )      |        
|Loss on disposal of property and equipment      |                                    |                                                               | 252                 |        |        
|Loss on impairment of assets                    |                                    |                                                               | 314                 |        |        
|                                                |                                    |                                                               |                     |        |        
|                                                |                                    | Income before income taxes                                    |                     |        | 38,902 
|Income tax expense                              |                                    |                                                               | 16,343              |        |        
|                                                |                                    |                                                               |                     |        |        
|                                                |                                    | Income before income of consolidated variable interest entity |                     |        | 22,559 
|Income of consolidated variable interest entity |                                    |                                                               | (243                | )      |        
|                                                |                                    |                                                               |                     |        |        
|                                                |                                    | Net income                                                    |                     | $      | 22,316 
|                                                |                                    |                                                               |                     |        |        
|Net income per common share:                    |                                    |                                                               |                     |        |        
|                                                | Basic                              |                                                               | $                   | 0.28   |        
|                                                | Diluted                            |                                                               | $                   | 0.28   |        
|Dividends declared per common share             |                                    | $                                                             | 0.125               |        | $      
|Weighted average number of shares outstanding:  |                                    |                                                               |                     |        |        
|                                                | Basic                              |                                                               |                     | 79,117 |        
|                                                | Diluted                            |                                                               |                     | 79,167 |        

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

5

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Advance America, Cash Advance Centers, Inc.        Interim Unaudited Consolidated Statement of Stockholders' Equity        Three Months Ended March 31, 2008        (in thousands,
 except per share data)

|                                                       |                              |        |   |   |     |   |   |         |   |   |         | Common Stock
In Treasury |   |      |    
|------------------------------------------------------ | ---------------------------- | ------ | - | - | --- | - | - | ------- | - | - | ------- | ------------------------ | - | ---- | ---
|
|
|
|Balances, December 31, 2007                            |                              | 96,821 |   | $ | 968 |   | $ | 286,999 |   | $ | 133,789 |                          | $ | (75  | )  
|Comprehensive income:                                  |                              |        |   |   |     |   |   |         |   |   |         |                          |   |      |    
|                                                       | Net income                   |        |  |   |     |  |   |         |  |   |         | 14,804                   |   |      |   
|                                                       | Foreign currency translation |        |  |   |     |  |   |         |  |   |         |                         |   |      | (65
|                                                       |                              |        |   |   |     |   |   |         |   |   |         |                          |   |      |    
|Total comprehensive income                             |                              |        |   |   |     |   |   |         |   |   |         |                          |   |      |    
|Dividends paid ($0.125 per share)                      |                              |       |   |   |    |   |   |        |   |   | (8,853  | )                        |   |     |    
|Dividends payable                                      |                              |       |   |   |    |   |   |        |   |   | (30     | )                        |   |     |    
|Purchases of treasury stock                            |                              |       |   |   |    |   |   |        |   |   |        |                          |   |     |    
|Issuance of restricted stock                           |                              |       |   |   |    |   |   |        |   |   |        |                          |   |     |    
|Vesting of restricted stock issued from treasury stock |                              |       |   |   |    |   |   | (71     | ) |   |        |                          |   |     |    
|Amortization of restricted stock                       |                              |       |   |   |    |   |   | 216     |   |   |        |                          |   |     |    
|Stock option expense                                   |                              |       |   |   |    |   |   | 323     |   |   |        |                          |   |     |    
|Issuance of common stock to director in lieu of cash   |                              |       |   |   |    |   |   | 7       |   |   |        |                          |   |     |    
|                                                       |                              |        |   |   |     |   |   |         |   |   |         |                          |   |      |    
|Balances, March 31, 2008                               |                              | 96,821 |   | $ | 968 |   | $ | 287,474 |   | $ | 139,710 |                          | $ | (140 | )  
|                                                       |                              |        |   |   |     |   |   |         |   |   |         |                          |   |      |    

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

6

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Advance America, Cash Advance Centers, Inc.        Interim Unaudited Consolidated Statements of Cash Flows        Three Months Ended March 31, 2007 and 2008        (in
thousands)

|                                                                                                     |                                                                                    | 2007                 |                                                              | 2008   |        
|---------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------- | -------------------- | ------------------------------------------------------------ | ------ | -------
|Cash flows from operating activities                                                                 |                                                                                    |                      |                                                              |        |        
|Net income                                                                                           |                                                                                    | $                    | 22,316                                                       |        | $      
|Adjustments to reconcile net income to net cash provided by operating activities, net of acquisition |                                                                                    |                      |                                                              |        |        
|                                                                                                     | Income of consolidated variable interest entity                                    |                      |                                                              | 243    |        
|                                                                                                     | Depreciation and amortization                                                      |                      |                                                              | 5,087  |        
|                                                                                                     | Non-cash interest expense                                                          |                      |                                                              | 247    |        
|                                                                                                     | Provision for doubtful accounts                                                    |                      |                                                              | 15,815 |        
|                                                                                                     | Deferred income taxes                                                              |                      |                                                              | 3,053  |        
|                                                                                                     | Loss on disposal of property and equipment                                         |                      |                                                              | 252    |        
|                                                                                                     | Loss on impairment of assets                                                       |                      |                                                              | 314    |        
|                                                                                                     | Amortization of restricted stock                                                   |                      |                                                              | 392    |        
|                                                                                                     | Stock option expense                                                               |                      |                                                              | 243    |        
|                                                                                                     | Common stock issued to director in lieu of cash                                    |                      |                                                              | 22     |        
|                                                                                                     | Changes in operating assets and liabilities                                        |                      |                                                              |        |        
|                                                                                                     |                                                                                    | Fees receivable, net |                                                              |        | 625    
|                                                                                                     |                                                                                    | Other current assets |                                                              |        | (2,058 
|                                                                                                     |                                                                                    | Other assets         |                                                              |        | 45     
|                                                                                                     |                                                                                    | Accounts payable     |                                                              |        | (1,399 
|                                                                                                     |                                                                                    | Accrued liabilities  |                                                              |        | (10,870
|                                                                                                     |                                                                                    | Income taxes payable |                                                              |        | (14,754
|                                                                                                     |                                                                                    | Deferred revenue     |                                                              |        |       
|                                                                                                     |                                                                                    | Other liabilities    |                                                              |        |       
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Net cash provided by operating activities                    |        |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|Cash flows from investing activities                                                                 |                                                                                    |                      |                                                              |        |        
|Changes in advances receivable                                                                       |                                                                                    |                      | 34,323                                                       |        |        
|Changes in restricted cash                                                                           |                                                                                    |                      | (19                                                          | )      |        
|Acquisition of business, net of cash acquired                                                        |                                                                                    |                      |                                                             |        |        
|Proceeds from sale of property and equipment                                                         |                                                                                    |                      | 33                                                           |        |        
|Purchases of property and equipment                                                                  |                                                                                    |                      | (3,005                                                       | )      |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Net cash provided by investing activities                    |        |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|Cash flows from financing activities                                                                 |                                                                                    |                      |                                                              |        |        
|Payments on revolving credit facility, net                                                           |                                                                                    |                      | (76,887                                                      | )      |        
|Decrease in non-controlling interest of variable interest entity                                     |                                                                                    |                      | (2,212                                                       | )      |        
|Payments on mortgage payable                                                                         |                                                                                    |                      | (93                                                          | )      |        
|Payments on note payable                                                                             |                                                                                    |                      | (30                                                          | )      |        
|Payments of financing costs                                                                          |                                                                                    |                      | (6                                                           | )      |        
|Purchases of treasury stock                                                                          |                                                                                    |                      | (41                                                          | )      |        
|Payments of dividends                                                                                |                                                                                    |                      | (9,894                                                       | )      |        
|Changes in book overdrafts                                                                           |                                                                                    |                      | (2,966                                                       | )      |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Net cash used in financing activities                        |        |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Effect of exchange rate changes on cash and cash equivalents |        |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Net decrease in cash and cash equivalents                    |        |        
|Cash and cash equivalents, beginning of period                                                       |                                                                                    |                      | 67,245                                                       |        |        
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|Cash and cash equivalents, end of period                                                             |                                                                                    | $                    | 26,021                                                       |        | $      
|                                                                                                     |                                                                                    |                      |                                                              |        |        
|Supplemental disclosures of cash flow information:                                                   |                                                                                    |                      |                                                              |        |        
|                                                                                                     | Cash paid during the period for:                                                   |                      |                                                              |        |        
|                                                                                                     |                                                                                    |                      | Interest                                                     |        | $      
|                                                                                                     |                                                                                    |                      | Income taxes                                                 |        |        
|Supplemental schedule of non-cash investing and financing activity:                                  |                                                                                    |                      |                                                              |        |        
|                                                                                                     | Property and equipment purchases included in accounts payable and accrued expenses |                      |                                                              | 497    |        
|                                                                                                     | Restricted stock dividends payable                                                 |                      |                                                              | 49     |        
|                                                                                                     | Net assets acquired through acquisition of business                                |                      |                                                              |       |        

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

7

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Advance America, Cash Advance Centers, Inc.        Notes to Interim Unaudited Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying interim unaudited consolidated financial statements of Advance America, Cash Advance Centers, Inc. ("AACACI") and its wholly owned
subsidiaries (collectively, the "Company") have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and the rules and
regulations of the U.S. Securities and Exchange Commission (the "SEC"). They do not include all information and footnotes required by accounting principles generally accepted in the United States for
complete financial statements. Although management believes that the disclosures are adequate to prevent the information from being misleading, the interim unaudited consolidated financial statements
should be read in conjunction with the Company's audited financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2007 filed with the
SEC. In the opinion of the Company's management, all adjustments, consisting of normal recurring accruals considered necessary for a fair statement of the Company's financial condition, have been
included. The results of operations for the three months ended March 31, 2008 are not necessarily indicative of the results that may be expected for future interim periods or the entire year
ending December 31, 2008.

Description of Business

The Company conducts business under the authority of a variety of enabling state statutes including payday advance, deferred presentment, check-cashing, small
loan, credit service organization and other state laws whereby advances are made directly to customers. The Company's operations in the United Kingdom are conducted in accordance with applicable
English law. The Company's operations in Canada are conducted in accordance with applicable Canadian federal and provincial law.

Revenue Recognition

Revenues can be characterized as fees and/or interest depending on the Company's business operations and product offerings under enabling regulations. Revenue is
recognized on a constant-yield basis ratably over the term of each advance. The Company has also entered into a long-term services contract for which the Company receives advance payments.
These advance payments are recorded as deferred revenue and recognized as revenue over the life of the contract subject to certain terms and conditions.

Concentration of Risk

For the three months ended March 31, 2007 and 2008, total revenues within the Company's five largest states (measured by total revenues) accounted for
approximately 46% and 49%, respectively, of the Company's total revenues.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying value of existing assets and liabilities and their respective tax bases and for operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary

8

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Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date.

Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period excluding unvested
restricted stock. Diluted earnings per share is computed by dividing net income by the weighted average number of common shares outstanding for the period, after adjusting for the dilutive effect of
unvested restricted stock and outstanding stock options. At March 31, 2007 and 2008, zero and 298,890, respectively, unvested shares of restricted stock were not included in the computation of
diluted earnings per share because the effect of including them would be anti-dilutive. At March 31, 2007 and 2008, options to purchase 1,290,000 and 1,630,000 shares of common
stock, respectively, that were outstanding at those dates were not included in the computation of diluted earnings per share because the effect of including them would be anti-dilutive.

The
following table presents the reconciliation of the denominator used in the calculation of basic and diluted earnings per share for the three months ended March 31, 2007 and
2008 (in thousands):

2007

2008Reconciliation of denominator:Weighted average number of common shares
outstandingbasic

79,117

70,665Effect of dilutive unvested restricted stock

50

Effect of dilutive outstanding stock options



Weighted average number of common shares
outstandingdiluted

79,167

70,665


Recently Issued Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 157 ("SFAS 157"), "Fair
Value Measurements," which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS 157 does not require any new fair
value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS 157 was effective for fiscal years beginning after
November 15, 2007. The adoption of SFAS 157 did not have a material impact on the Company's financial position or results of operations.

In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to
choose, at specified election dates, to measure eligible items at fair value (the "fair value option") and requires an entity to report unrealized gains and losses on items for which the fair value
option has been elected in earnings at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred
and not deferred. SFAS 159 was effective for fiscal years beginning after November 15, 2007. The adoption of SFAS 159 did not have a material impact on the Company's financial
position or results of operations.

9

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

1. Summary of Significant Accounting Policies (Continued)

In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business Combinations" ("SFAS 141(R)"). SFAS 141(R) modifies the accounting for business combinations
and requires, with limited exceptions, the acquirer in a business combination to recognize 100 percent of the assets acquired, liabilities assumed and any non-controlling interest
in the acquiree at the acquisition-date fair value. In addition, SFAS 141(R) requires the expensing of acquisition-related transaction and restructuring costs and requires that
certain contingent assets and liabilities acquired, as well as contingent consideration, be recognized at fair value. SFAS 141(R) also modifies the accounting for certain acquired income tax
assets and liabilities. SFAS 141(R) is effective for new acquisitions consummated on or after January 1, 2009. The Company does not expect the adoption of this standard to have a
material impact on its financial position or results of operations.

In
December 2007, the FASB issued SFAS No. 160 ("SFAS 160"), "Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51," which
establishes accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling interest in
a subsidiary, which is sometimes referred to as minority interest, is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial
statements. Among other requirements, SFAS 160 requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the noncontrolling
interest. It also requires disclosure, on the face of the consolidated income statement, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest.
SFAS 160 is effective for fiscal years beginning after December 15, 2008. The Company does not expect the adoption of this standard to have a material impact on its financial position or
results of operations.

Reclassifications

Certain previously reported amounts have been reclassified to conform to the current presentation. The provision for doubtful accounts has previously been
included in the accompanying consolidated statements of income as a reduction of revenue but is now included in center expenses for all periods presented.

2. Advances and Fees Receivable, Net

Advances and fees receivable, net, consisted of the following (in thousands):

December 31,
2007

March 31,
2008Advances receivable

$
209,897

$
172,774Fees and interest receivable


36,454


29,470Returned items receivable


49,442


38,151Other


11,224


4,190Allowance for doubtful accounts


(61,306
)

(49,877
)Unearned revenues


(24,231
)

(14,428
)Advances and fees receivable, net

$
221,480

$
180,280


10

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Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

3. Allowance for Doubtful Accounts and Accrual for Third-Party Lender Losses

Changes in the allowance for doubtful accounts for the three months ended March 31, 2007 and 2008 were as follows (in thousands):

2007

2008Beginning balance

$
57,396

$
61,306Provision for doubtful accounts


15,815


21,874Charge-offs


(38,483
)

(43,674
)Recoveries


12,689


10,371Ending balance

$
47,417

$
49,877


Changes
in the accrual for third-party lender losses for the three months ended March 31, 2007 and 2008 were as follows (in thousands):

2007

2008Beginning balance

$


$
4,587Provision for doubtful accounts





(1,094
)Ending balance

$


$
3,493


The
total changes in the allowance for doubtful accounts and the accrual for third-party lender losses for the three months ended March 31, 2007 and 2008 were as follows (in
thousands):

2007

2008Beginning balance

$
57,396

$
65,893Provision for doubtful accounts


15,815


20,780Charge-offs


(38,483
)

(43,674
)Recoveries


12,689


10,371Ending balance

$
47,417

$
53,370


11

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

4. Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

December 31,
2007

March 31,
2008Employee compensation

$
11,797

$
7,873Workers' compensation


4,629


4,879Health and dental insurance


925


275Lease smoothing


2,920


2,969Advertising


436


238Construction in progress


962


372Center closing costs


1,696


1,353Accounting and tax


1,058


641Property, sales and franchise taxes


558


731Legal


1,789


1,617Severance


1,113


453Deferred revenue





1,701Other


3,940


3,015Total

$
31,823

$
26,117


5. Commitments and Contingencies

The Company is involved in a number of active lawsuits, including lawsuits arising out of actions taken by state regulatory authorities, and is involved in
various other legal proceedings with state and federal regulators. The Company is vigorously defending against all of these actions. The amount of losses and/or the probability of an unfavorable
outcome, if any, cannot be reasonably estimated for these legal proceedings. Accordingly, no accrual has been recorded for any of these matters as of March 31, 2008.



On February 27, 2007, Brenda McGinnis filed a putative class action in the Circuit Court of Clark County, Arkansas alleging violations of the Arkansas
usury law, the Arkansas Deceptive Trade Practices Act and a 2001 class action settlement agreement entered into by the Company's prior subsidiary in Arkansas. The complaint alleges that the Company's
current subsidiary made usurious loans under the Arkansas Check Cashers Act and seeks compensatory damages in amount equal to twice the interest paid on the loans, a declaration that the contracts are
void, enforcement of the 2001 class action settlement agreement, attorneys' fees and costs. The class was certified on April 22, 2008. The trial court has denied the Company's motion to compel
arbitration and the Company will appeal that decision, which appeal will run concurrently with the trial court proceedings.



On July 3, 2007, Phyliss Garrett filed a motion for contempt in the Circuit Court of Clark County, Arkansas alleging a violation of the 2001 class action
settlement agreement entered into by the Company's prior subsidiary in Arkansas and incorporated into a court order. The relief sought by the

12

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

5. Commitments and Contingencies (Continued)

plaintiff
and the Company's defenses are substantially similar to those at issue in theBrenda McGinnislawsuit described above.



On May 31, 2007, Kelvin White and two other individuals filed a lawsuit in the Circuit Court of Ouachita County, Arkansas making substantially similar
allegations and seeking substantially similar relief to theBrenda McGinnislawsuit described above. The Company's defenses are also substantially
similar.



The Company, the Company's subsidiary, McKenzie Check Advance of Florida, LLC ("McKenzie"), and certain officers, directors and employees are defendants in
a putative class-action lawsuit commenced by former customers, Wendy Betts and Donna Reuter on January 11, 2001, and a third named class representative, Tiffany Kelly, in the Circuit Court of
Palm Beach County, Florida. This putative class action alleges that McKenzie, by and through the actions of certain officers, directors and employees, engaged in unfair and deceptive trade practices
and violated Florida's criminal usury statute, the Florida Consumer Finance Act and the Florida Racketeer Influenced and Corrupt Organizations Act. The suit seeks unspecified damages, and McKenzie or
the other defendants could be required to refund fees and/or interest collected, refund the principal amount of payday cash advances, pay multiple damages and pay other monetary penalties.
Ms. Reuter's claim has been held to be subject to binding arbitration, which the Company expects to proceed in parallel with this case. The trial court has denied the Company's motion to compel
arbitration of Ms. Kelly's claims and the Company has appealed that decision.



A second Florida lawsuit was filed on August 24, 2004 in the Circuit Court of Palm Beach County by former customers Gerald Betts and Ms. Reuter
against the Company, the Company's subsidiary, Advance America, Cash Advance Centers of Florida, Inc., and certain officers and directors. The allegations, relief sought and the Company's
defenses are nearly identical to those alleged in the firstBetts and Reuterlawsuit described above.



On August 6, 2004, Tahisha King and James E. Strong, who were customers of BankWest, the lending bank for which the Company previously marketed, processed
and serviced payday cash advances in Georgia, filed a putative class action lawsuit in the State Court of Cobb County, Georgia against the Company, William M. Webster IV, the Company's
Vice Chairman, and other unnamed officers, directors, owners and "stakeholders," alleging various causes of action including that the Georgia subsidiary made illegal payday loans in Georgia in
violation of Georgia's usury law, the Georgia Industrial Loan Act and Georgia's Racketeer Influenced and Corrupt Organizations Act. The complaint alleges that BankWest was not the "true lender" and
that the Company was the "de facto" lender. The complaint seeks compensatory damages, attorneys' fees, punitive damages and the trebling of any compensatory damages. The Company and the other
defendants have denied the plaintiffs' claims and intend to continue to resist plaintiffs' efforts to conduct class arbitration.

13

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

5. Commitments and Contingencies (Continued)



The Company's Georgia subsidiary is involved in another case in Georgia that, although not a class action lawsuit, contains essentially the same allegations as
theKing and Strongcase described above. On March 10, 2003, Angela Glasscock, a customer of BankWest, filed an adversary
proceeding in the U.S. Bankruptcy Court for the Southern District of Georgia alleging that the Company's Georgia subsidiary was making payday cash advances in Georgia in violation of the Georgia
Industrial Loan Act. BankWest intervened into the case and subsequently both the subsidiary and BankWest filed a motion for summary judgment, which was granted in September 2005. In its holding, the
court ruled that BankWest was the "true lender." In April 2007, on appeal, the United States District Court overturned the U.S. Bankruptcy Court's grant of summary judgment to the Company.
Accordingly, this case will proceed to trial before the U.S. Bankruptcy Court.



On March 10, 2008, Trishia Hooper and Josephine Vaughn filed a putative class action lawsuit in the United States District Court for the Western District
of Missouri. The action alleges that the arbitration clause and class action waiver in the Company's subsidiary's loan agreement is unconscionable, that the Company's subsidiary's practices violate
the Missouri statutes governing unfair and deceptive trade practices, interest rates, loan renewals, debt reduction, and consideration of borrower's ability to repay. The lawsuit seeks certification
as a class action, unspecified monetary damages, a declaratory judgment that the arbitration clause and class action waiver is unconscionable, and injunctive relief. The Company intends to defend the
action fully and vigorously.



On July 27, 2004, John Kucan, Welsie Torrence and Terry Coates, each of whom was a customer of Republic Bank & Trust Company ("Republic"), the
lending bank for whom the Company previously marketed, processed and serviced payday cash advances in North Carolina, filed a putative class action lawsuit in the General Court of Justice for
the Superior Court Division for New Hanover County, North Carolina against the Company and Mr. Webster, alleging, among other things, that the relationship between the Company's North Carolina
subsidiary and Republic was a "rent a charter" relationship and therefore Republic was not the "true lender" on the payday cash advances it offered. The lawsuit also claims that the payday cash
advances were made, administered and collected in violation of numerous North Carolina consumer protection laws. The lawsuit seeks an injunction barring the subsidiary from continuing to do business
in North Carolina, the return of the principal amount of the payday cash advances made to the plaintiff class since August 2001, the return of any interest or fees associated with those
advances, treble damages, attorneys' fees and other unspecified
costs. Plaintiffs have appealed the trial court's decision to compel arbitration. The parties are awaiting a decision by the court on the Plaintiff's appeal.



On February 1, 2005, the Commissioner of Banks of North Carolina initiated a contested case against the Company's North Carolina subsidiary for alleged
violations of the North Carolina Consumer Finance Act. In December 2005, the Commissioner of Banks ordered that the Company's North

14

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

5. Commitments and Contingencies (Continued)

Carolina
subsidiary immediately cease and desist operating. In accordance with the Commissioner of Banks' order, the Company's North Carolina subsidiary ceased all business operations on
December 22, 2005. The Commissioner of Banks has agreed to stay this case until the decision on theKucancase described above is handed down by
the Court of Appeals.



On September 27, 2006, the Pennsylvania Department of Banking filed a lawsuit in the Commonwealth Court of Pennsylvania alleging that the Company's
Delaware subsidiary was providing lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania law and with interest and fees in excess of the amounts permitted by
Pennsylvania law. In July 2007, the court determined that certain aspects of the Company's Choice Line of Credit required the Company to be licensed under Pennsylvania's Consumer Discount Company Act
("CDCA") and enjoined the Company from continuing its lending activities in Pennsylvania for so long as the CDCA violations continued and from collecting monthly participation fees. The Company has
appealed to the Pennsylvania Supreme Court.



On August 1, 2007, Sharlene Johnson, Helena Love and Bonny Bleacher filed a putative class action lawsuit in the United States District Court,
Eastern District of Pennsylvania against the Company and two of its subsidiaries alleging that they provided lines of credit to borrowers in Pennsylvania without a license required under Pennsylvania
law and with interest and fees in excess of the amounts permitted by Pennsylvania law. The complaint seeks, among other things, a declaratory judgment that the monthly participation fee charged to
customers with a line of credit is illegal, an injunction prohibiting the
collection of the monthly participation fee and damages equal to three times the monthly participation fees paid by customers since June 2006. In January 2008, the trial court entered an order
compelling the purported class representatives to arbitrate their claims on an individual basis, unless determined otherwise by the arbiter. The Company has appealed this order.



On January 18, 2007, Raymond King and Sandra Coates, who were customers of BankWest, the lending bank for which the Company previously marketed, processed
and serviced payday cash advances in Pennsylvania, filed a putative class action lawsuit in the United States District Court, Eastern District of Pennsylvania alleging various causes of action,
including that the Pennsylvania subsidiary made illegal payday loans in Pennsylvania in violation of Pennsylvania's usury law, the Pennsylvania Consumer Discount Company Act, the Pennsylvania Unfair
Trade Practices and Consumer Protection Law, the Pennsylvania Fair Credit Extension Uniformity Act and the Pennsylvania Credit Services Act. The complaint alleges that BankWest was not the "true
lender" and that the Company was the "lender in fact." The complaint seeks compensatory damages, attorneys' fees, punitive damages and the trebling of any compensatory damages. In January 2008, the
trial court entered an order compelling the purported class representatives to arbitrate their claims on an individual basis, unless determined otherwise by the arbiter. The Company has appealed this
order.

15

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

5. Commitments and Contingencies (Continued)



Seven separate putative class actions have been filed in South Carolina against the Company's subsidiary, Advance America, Cash Advance Centers of South
Carolina, Inc., and several other unaffiliated defendants. John and Rebecca Morgan filed a complaint on August 27, 2007 in the Horry County Court of Common Pleas;
Margaret Horne filed a complaint on September 6, 2007 in the Spartanburg County Court of Common Pleas; Tawan Smalls filed a complaint on September 10, 2007 in the
Charleston County Court of Commons Pleas; Chadric and Lisa Wiley filed a complaint on September 27, 2007 in the Richland County Court of Common Pleas; Mildred Weaver filed a
complaint on September 27, 2007 in the Darlington County Court of Common Pleas; Lisa Johnson and Gilbert Herbert filed a complaint on October 2, 2007 in the Georgetown
County Court of Common Pleas; and Kimberly Kinney filed a complaint on October 12, 2007 in the Marion County Court of Common Pleas. The allegations and relief sought are similar in each
case. Plaintiffs allege that the Company's South Carolina subsidiary violated the South Carolina Deferred Presentment Services Act and the Consumer Protection Code by failing to perform a credit check
and evaluate a customer's ability to repay the advance. Each complaint seeks an injunction to prohibit the Company from
continuing its operations, the return of fees and interest, actual damages, punitive damages and attorneys' fees and costs. Each of the lawsuits has been removed to the United States District Court
for the District of South Carolina. The complaint filed by Lisa Johnson and Gilbert Herbert has been remanded to state court and the Company will seek appeal.



On September 12, 2007, Franciso Gonzalez filed a collective action lawsuit against the Company's subsidiary, Advance America, Cash Advance Centers
of Texas, Inc., in the United States District Court for the Southern District of Texas alleging violations of the Fair Labor Standards Act and Texas Pay Day Act. The complaint alleges the
Company's subsidiary in Texas failed to pay overtime wages to its employees. The complaint seeks compensatory and liquidated damages, attorneys' fees, interest and costs.



The Company is also involved in other litigation and administrative proceedings that are incidental to its business, including contractual disputes, employee
claims for workers' compensation, wrongful termination, harassment, discrimination, payment of wages due and customer claims relating to collection practices and violations of state and/or federal
consumer protection laws.

6. Capital Stock and Stock-Based Compensation Plans

On May 4, 2005, the Company announced that its Board of Directors had approved a program authorizing the repurchase by the Company of up to
$50.0 million of its outstanding common stock. On August 16, 2006, the Company announced that its Board of Directors had approved an extension of the Company's stock repurchase program
authorizing the Company to repurchase up to $100.0 million of its outstanding common stock on and after that date. On February 13, 2008, the Company announced that its Board of Directors
had approved a further extension of the Company's stock repurchase program to cover an additional $75.0 million of the Company's currently outstanding common stock. During the three months
ended March 31, 2007 and 2008, the Company repurchased, pursuant to its

16

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

6. Capital Stock and Stock-Based Compensation Plans (Continued)

stock
repurchase program, 2,826 and 4,759,322 shares of its common stock, respectively, at a cost of approximately $41,000 and $36.8 million, respectively. For the three months ended
March 31, 2007 and 2008, these amounts include 2,826 and 3,272 shares of common stock, respectively, which were surrendered by employees to satisfy their tax obligations with respect to the
vesting of shares of restricted stock awarded pursuant to the Company's 2004 Omnibus Stock Plan.

In
2004, the Company adopted Statement of Financial Accounting Standards No. 123 (Revised), Share-Based Payment ("SFAS 123(R)"). Accordingly, the Company measures the cost
of its stock-based employee compensation at fair value on the grant date and recognizes such cost in the financial statements on a straight-line basis over the requisite service period of
the awards, which is generally the vesting period.

The
Company's 2004 Omnibus Stock Plan provides for the granting of restricted stock, stock options and other stock awards to certain directors, officers and other key employees of the
Company. Additionally, during 2005, the Company granted stock options and shares of restricted stock to its President and Chief Executive Officer under a Nonqualified Stock Option Agreement and a
Restricted Stock Agreement, respectively. Both of these agreements are separate from the Company's 2004 Omnibus Stock Plan.

Restricted
stock grants under the Company's stock-based compensation plans generally vest in equal annual installments over three, five or eight years from the date of grant. Stock
option grants under the Company's stock-based compensation plans are generally exercisable in equal annual installments over three, five or eight years from the date of grant and generally expire ten
years after the date of grant.

The
grant date fair value of all shares of restricted stock was based on the market value of the Company's common stock on the dates of grant. These amounts are being expensed ratably
over each award's respective vesting period.

All
stock options were granted with an exercise price equal to the market value of the Company's common stock on the dates of grant. The Company estimated the fair value of stock options
on the date of grant using the Black-Scholes option pricing model using the following assumptions:



17

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

6. Capital Stock and Stock-Based Compensation Plans (Continued)



To
estimate each stock option's weighted average fair value on the grant dates, the following weighted average assumptions were used in the Black-Scholes option pricing model for all
stock options granted during the three months ended March 31, 2007 and 2008:

2007

2008Expected term (years)

4.41

5.42Expected volatility

46
%
48
%Expected dividends (yield)

3.0
%
4.1
%Risk-free rate

4.42
%
2.93
%


The
weighted average grant date fair values of options granted during the three months ended March 31, 2007 and 2008 were $4.51 per option and $2.70 per option,
respectively, and are being expensed ratably over each award's respective vesting period.

The
following table provides certain information with respect to stock options outstanding and exercisable at March 31, 2008 under the Company's stock-based compensation plans:

Outstanding

ExercisableNumber of stock options


1,630,000


325,000Range of exercise prices

$
8.48  $14.70

$
12.11  $14.70Weighted average exercise price

$
11.75

$
13.02Aggregate intrinsic value (in thousands)

$
(6,848
)
$
(1,779
)Weighted average remaining contractual term (years)


8.3


7.6


A
summary of the Company's authorized and available shares, activity for the three months ended March 31, 2008, and the weighted average stock option exercise
prices under its stock-based compensation plans follows:

|                     |  |           |  | Outstanding |  |           |  |          
|-------------------- |  | --------- |  | ----------- |  | --------- |  | ---------
|
|At December 31, 2007 |  | 5,200,000 |  | 507,988     |  | 1,477,500 |  | 3,214,512
|Authorized           |  |          |  |            |  |          |  |         
|Granted              |  |          |  | 42,000      |  | 152,500   |  | (194,500 
|Exercised            |  |          |  |            |  |          |  |         
|Canceled             |  |          |  |            |  |          |  |         
|                     |  |           |  |             |  |           |  |          
|At March 31, 2008    |  | 5,200,000 |  | 549,988     |  | 1,630,000 |  | 3,020,012
|                     |  |           |  |             |  |           |  |          

18

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

6. Capital Stock and Stock-Based Compensation Plans (Continued)

A
summary of the Company's restricted stock activity for the three months ended March 31, 2008 and the weighted average grant date fair values follows:

Shares

Weighted
Average
Fair ValueNonvested at December 31, 2007

266,667

$
12.10Granted

42,000


8.65Vested

(9,777
)

14.67Forfeited




Nonvested at March 31, 2008

298,890

$
11.53


The
total grant date fair value of restricted shares vested during the three months ended March 31, 2007 and 2008 was approximately $0.1 million and $0.1 million,
respectively, and the total market value of these shares on the dates vested was approximately $0.1 million and $0.1 million, respectively.

A
summary of the stock-based compensation cost included in general and administrative expenses in the accompanying consolidated statements of income for the three months ended
March 31, 2007 and 2008 follows (in thousands):

2007

2008Restricted stock

$
392

$
216Stock options


243


323Total stock-based compensation expense

$
635

$
539


As
of March 31, 2008, the total compensation cost not yet recognized related to nonvested stock awards under the Company's plans is approximately $8.0 million. The weighted
average period over which this expense is expected to be recognized is approximately 4.5 years.

7. Transactions with Variable Interest Entities

The Company conducts business in Texas through a wholly owned subsidiary registered as a Credit Services Organization ("CSO") under Texas law. In connection with
operating as a CSO, the Company entered into a credit services organization agreement ("CSO Agreement") with an unaffiliated third-party lender in 2005. The agreement governed the terms by which the
Company referred customers in Texas to that lender, on a non-exclusive basis, for a possible extension of credit. The Company processed loan applications and committed to reimburse the
lender for any loans or related fees that were not collected from those customers. During the fourth quarter of 2007, the Company terminated its agreement with this lender (the "former lender") and
entered into a new agreement with another unaffiliated third-party lender (the "new lender") with substantially similar terms and conditions as the CSO Agreement with the former lender.

The
Company had determined that the former lender was a variable interest entity ("VIE") under Financial Accounting Standards Board Interpretation No. 46 (Revised)
("FIN 46(R)") and had also determined that the Company was the primary beneficiary of this VIE. As a result, the Company

19

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

7. Transactions with Variable Interest Entities (Continued)

consolidated
the former lender into the Company's financial statements as of and for the three months ended March 31, 2007.

The
Company has determined that the new lender is also a VIE but that the Company is not the primary beneficiary of this VIE. Therefore, the Company has not consolidated the new lender
as of and for the three months ended March 31, 2008.

The
impact of the consolidation of the former lender on the Company's March 31, 2007 consolidated balance sheet was to increase (decrease) the following balance sheet accounts as
follows (in thousands):

2007Cash and cash equivalents

$
2,653Advances and fees receivable, net


27,063Accounts payable


4,016Accrued liabilities


(5,040
)Income taxes payable


169Non-controlling interest in variable interest entity


30,571


The
impact of the consolidation of the former lender on the Company's consolidated statements of income for the three months ended March 31, 2007 was to increase (decrease) the
following income statement accounts as follows (in thousands):

2007Total revenues

$
1,039Provision for doubtful accounts


(322
)Other center expenses


226Interest expense


723Income tax expense


169Income of consolidated variable interest entity


243


Under
the terms of the Company's agreement with its new third-party lender, the Company is contractually obligated to reimburse the lender for the full amount of the loans and certain
related fees that are not collected from the customers. As of March 31, 2008, the third-party lender's outstanding advances and interest receivable (which were not recorded on the Company's
balance sheet) totaled approximately $15.8 million, which is the amount the Company would be obligated to pay the third-party lender if these amounts were to become uncollectible. Additionally,
if these advances were to become uncollectible, the Company would also be required to pay the third-party lender all related NSF fees and late fees on these advances.

Because
of the Company's economic exposure for losses related to the third-party lender's advances and interest receivable, the Company has established an accrual for third-party lender
losses to reflect the Company's estimated probable losses related to uncollectible third-party lender advances. The accrual for third-party lender losses that was reported in the Company's balance
sheet at March 31, 2008 was approximately $3.5 million and was established on a basis similar to the allowance for doubtful accounts.

20

---



Advance America, Cash Advance Centers, Inc.

Notes to Interim Unaudited Consolidated Financial Statements (Continued)

8. Related Party Transactions

Included in center expenses are expenses for center leases with related parties of approximately $10,000 and $5,000 for the three months ended March 31,
2007 and 2008, respectively. Included in general and administrative expenses are expenses with related parties, relating primarily to aircraft operating expenses and operating leases for office and
warehouse space, of a net credit of approximately $1,000 and expenses of approximately $87,000 for the three months ended March 31, 2007 and 2008, respectively.

In
addition, under a time-share arrangement, the Company's Chairman and Vice Chairman have used the Company's aircraft for private purposes in exchange for the Company's use
of an identical aircraft owned by the Company's Chairman and formerly owned, in part, by the Company's Vice Chairman. Included in accounts receivable at March 31, 2008 is a $4,000 net
receivable related to this arrangement.

9. Revolving Credit Facility

In March 2008, the Company amended and restated its prior credit facility with a syndicate of banks. This revolving credit facility now provides the Company with
a $270.0 million revolving line of credit, which amount includes the ability to issue up to $25.0 million in letters of credit. This revolving credit facility matures on March 24,
2013. The Company has the option to increase the revolving credit facility by an additional $95.0 million upon receipt of sufficient commitments from lenders in the lending syndicate.

The
credit facility is collateralized by substantially all of the Company's assets and contains various financial covenants that require, among other things, the maintenance of a minimum
net worth and
certain leverage and fixed charge coverage ratios and also restricts the encumbrance of assets and the creation of indebtedness.

In
general, the Company's borrowings under the revolving credit facility bear interest, at the Company's option, at either a base rate plus an applicable margin or a LIBOR-based rate
plus an applicable margin. The base rate equals the greater of: (i) the prime rate set by Bank of America, and (ii) the sum of the federal funds rate plus 0.50%. The applicable margin is
determined each quarter by a pricing grid based on the Company's total leverage ratio of consolidated debt to consolidated EBITDA. The base rate applicable margin ranges from 1.50% to 2.25% based upon
the Company's total leverage ratio. The LIBOR-based applicable margin ranges from 2.50% to 3.25% based upon the Company's total leverage ratio. As of March 31, 2008, the applicable margin for
the prime-based rate was 1.75% and the applicable margin for the LIBOR-based rate was 2.75%.

As
of March 31, 2008, the Company had $127.2 million outstanding on the revolving portion of the credit facility and $1.3 million of letters of credit outstanding.

In
connection with this amended and restated credit facility, the Company incurred approximately $1.4 million in loan origination costs that were capitalized in other assets and
are being amortized over the remaining term of the credit facility.

10. Subsequent Events

On April 23, 2008, the Company's Board of Directors declared a cash dividend of $0.125 per share of common stock, payable on June 6, 2008 to
shareholders of record on May 27, 2008.

21

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion of our financial condition and results of operations should be read in conjunction with our consolidated
financial statements and the related notes in "Item 1. Financial Statements." This discussion contains forward-looking statements that involve risks and uncertainties such as our plans,
objectives, expectations and intentions. Our actual results could differ materially from those anticipated by these forward-looking statements. Please see Item 1A of Part II of this
Quarterly Report and "Forward-Looking Statements" at the end of this section for further discussion of the uncertainties, risks and assumptions associated with these
statements.

Overview

Headquartered in Spartanburg, South Carolina, we are the largest provider of payday cash advance services in the United States as measured by the number of
centers operated. Our centers provide short-term, unsecured cash advances that are typically due on the customers' next payday. As of March 31, 2008, we operated 2,831 centers in 35
states in the United States, 13 centers in the United Kingdom and 10 centers in Canada, and had 84 limited licensees in the United Kingdom.

We
conduct our business in most states under the authority of a variety of enabling state statutes including payday advance, deferred presentment, check-cashing, small loan, credit
service organization and other state laws. In Texas, where we operate as a credit services organization ("CSO"), we refer customers to a third-party lender that may approve and fund advances to
customers. Under the terms of our agreement with this lender, we process customer applications and are contractually obligated to reimburse the lender for the full amount of the loans and certain
related fees that are not collected from the customers. During 2006, we began offering the Advance America Choice-Line of Credit to customers in Pennsylvania and installment loans to
customers in Illinois. As a result of a July 2007 ruling in Pennsylvania, we ceased offering the Choice-Line of Credit. In the United Kingdom, we have recently started offering
short-term advances, check-cashing and other related financial products and providing limited licenses of our services to independent contractors.

We
provide advances and charge fees and/or interest as specified by the laws of the jurisdictions where we operate. The permitted size of an advance varies by jurisdiction and ranges
from $50 to $1,000. The permitted fees and/or interest on an advance also vary by jurisdiction and range from 10% to 22% of the amount of a payday cash advance. Fees and interest for the line of
credit product in Pennsylvania consisted of a monthly service fee for the line of credit plus interest on the average outstanding balance. Fees and interest for installment loans are larger relative
to the size of the advance because of the longer term of this product.

Additional
fees that we may collect include fees for returned checks and late fees. The returned check fee varies by state and ranges up to $30. We charge a customer this fee if a
deposited check is returned due to non-sufficient funds ("NSF") in the customer's account or other reasons. In three states, we are also permitted to charge a late fee, the amount of which
varies by state. In Texas, the third-party lender charges a late fee on its loan in accordance with state law.

Although
there are numerous differences under the various enabling regulations, the application and approval process, underwriting criteria, delivery method, repayment and collection
practices, customer and market characteristics and underlying economics of our principal products and services are substantially similar in most jurisdictions.



In order for a new customer to be approved for an advance, he or she is required to have a bank account and a regular source of income, such as a job.

22

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To
obtain an advance, a customer typically:



We
determine whether to approve an advance to our customers (except in Texas, where the third-party lender makes this determination). We do not undertake any evaluation of the
creditworthiness of our customers in determining whether to approve customers for advances, other than requiring proof of identification, bank account and income source, as described above. We also
consider the customer's income in determining the amount of the advance.



Generally, when customers return to a center to repay their advances they may: (1) pay their outstanding advances in full; (2) pay their outstanding
advances in full and enter into a new advance on the same date; or (3) in some states, extend their outstanding advance by paying only the applicable charges (which is often referred to in our
industry as a rollover). Our policies regarding repayment options are based on the Community Financial Services Association of America's ("CFSA") Best Practices and the various applicable state laws,
which do not make a consistent distinction among stand-alone, rollover and other types of consecutive transactions.

Currently,
we generally limit transactions to the lower of either four rollovers or the applicable state limit. Other than in regard to compliance with this policy, we do not
systematically gather, review or analyze whether a transaction may be considered a rollover transaction because this distinction is not consistent under the various applicable statutes and we do not
believe this distinction is relevant to our revenue analysis.

If
a customer does not return to repay the amount due, the center manager has the discretion to either: (1) commence past-due collection efforts, which typically may
proceed for up to
14 days in most states, or (2) deposit the customer's personal check. If the center manager has decided to commence past-due collection efforts in lieu of depositing the
customer's personal check, center employees typically contact the customer by telephone or in person to obtain a payment or a promise to pay and attempt to exchange the customer's check for a
cashier's check, if funds are available.

If
a customer is unable to meet his or her current repayment for an advance, they may qualify for an extended payment plan ("Payment Plan"). In most states, the terms of our Payment Plan
conform to the CFSA's Best Practices and guidelines. Certain states have specified their own terms and eligibility requirements for Payment Plans. Generally, a customer may enter into a Payment Plan
for no additional fee once every twelve months and the Payment Plan will call for scheduled payments that coincide with the customer's next four paydays. In some states, a customer may enter into a
Payment Plan more frequently. We will not engage in collection efforts while a customer is enrolled in a Payment Plan. If a customer misses a scheduled payment under a Payment Plan, center personnel
may resume normal collection procedures. We do not offer a Payment Plan for installment loans, nor does the third-party lender in Texas offer a Payment Plan for advances to its customers.

23

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If,
at the end of this past-due collection period or Payment Plan, the center has been unable to collect the amount due, the customer's check is then deposited. For the year
ended December 31, 2007, approximately 6.2% of total customer checks were deposited and for the three months ended March 31, 2008, approximately 5.5% of total customer checks were
deposited. Additional collection efforts are not required if the customer's deposited check clears. For the year ended December 31, 2007, approximately 24% of deposited customer checks cleared
(i.e., were not returned NSF) and for the three months ended March 31, 2008, approximately 27% of deposited customer checks cleared. If the customer's check does not clear and is
returned because of non-sufficient funds in the customer's account or because of a closed account or a stop-payment order, additional collection efforts begin. These additional
collection efforts are carried out by center employees and typically include contacting the customer by telephone or in person to obtain payment or a promise to pay and attempting to exchange the
customer's check for a cashier's check, if funds become available. We also send out a series of collection letters, which are automatically distributed from a central location based on a set of
pre-determined criteria.



The following table presents key operating data for our business:

|                                                                                                       |  | Three Months Ended
March 31,
|------------------------------------------------------------------------------------------------------ |  | ----------------------------
|
|Number of centers open at end of period                                                                |  |                             
|Number of customers servedall credit products (thousands)                                             |  |                             
|Number of payday cash advances originated (thousands)                                                  |  |                             
|Aggregate principal amount of payday cash advances originated (thousands)                              |  | $                           
|Average amount of each payday cash advance originated                                                  |  | $                           
|Average charge to customers for providing and processing a payday cash advance                         |  | $                           
|Average duration of a payday cash advance (days)                                                       |  |                             
|Average number of lines of credit outstanding during the
period (thousands) (1)                        |  |                             
|Average amount of aggregate principal on lines of credit outstanding during the period (thousands) (1) |  | $                           
|Average principal amount on each line of credit outstanding during
the period (1)                      |  | $                           
|Number of installment loans originated (thousands)                                                     |  |                             
|Aggregate principal amount of installment loans originated (thousands)                                 |  | $                           
|Average principal amount of each installment loan originated                                           |  | $                           
|Average charge to customers for providing and processing an
installment loan (2)                       |  |                             

---

24

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Our revenues consist of fees and/or interest paid to us directly by our customers. Our expenses relate primarily to the operation of our centers. These expenses
include salaries and related payroll costs, occupancy expense related to our leased centers, center depreciation expense, advertising expense and other center expenses that consist principally of
costs related to center closings, communications, delivery, supplies, travel, bank charges, various compliance and collection costs and costs associated with theft.



The effective income tax rate as a percentage of income before income taxes was 42.0% and 42.3% for the three months ended March 31, 2007 and 2008,
respectively.



In 2006, we began providing check-cashing services to customers in Arkansas pursuant to the Arkansas Check Cashers Act. In March 2008, the Attorney General of
Arkansas distributed letters to 60 companies operating under the Check Cashers Act. The letter demanded that we cease and desist offering deferred presentment transactions within the state of
Arkansas. Although no legal determination has been made that the Check Cashers Act is unconstitutional or that we have violated any provision of Arkansas state law, we have voluntarily cooperated with
the Attorney General's demands. We believe we have strictly complied with the Check Cashers Act while operating in Arkansas. We continue to serve our existing customers who are in good standing with
interest free loans while we examine other alternatives for offering short-term loan products to consumers in Arkansas. For each month that we continue to operate in Arkansas, we expect to
incur approximately $0.3 million in center operating expenses (excluding provision for doubtful accounts) with no corresponding revenues.

For
the three months ended March 31, 2007 and 2008, 0.8% and 0.9%, respectively, of our total revenues were generated from our operations in Arkansas. The following is a summary
of financial information for our operations in Arkansas for the three months ended March 31, 2007 and 2008 (in thousands):

2007

2008Total revenues

$
1,284

$
1,529Total center expenses


1,027


1,358Center gross profit

$
257

$
171


Included
in total center expenses for the three months ended March 31, 2008 is a charge of approximately $237,000 for the write down of receivables related to the change in our
operations in Arkansas.

25

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Closing of Operations in Pennsylvania.In June 2006, we began offering the Advance America Choice-Line of Credit
("Choice-Line") in Pennsylvania. The Choice-Line product allowed customers access to up to $500 in credit for which we charged a monthly participation fee plus interest on
outstanding loan balances. In July 2007, an unfavorable ruling was issued by the Commonwealth Court of Pennsylvania directing our subsidiary operating in Pennsylvania to immediately suspend its
operations. See "Item 1. Financial StatementsNotes to Interim Unaudited Consolidated Financial StatementsNote 5. Commitments and Contingencies." During the
third and fourth quarters of 2007, we closed all of our remaining centers in Pennsylvania.

The
following is a summary of financial information for our operations in Pennsylvania for the three months ended March 31, 2007 and 2008 (in thousands):

2007

2008Total revenues

$
11,044

$
3Total center expenses


5,297


296Center gross profit/(loss)

$
5,747

$
(293
)


Closing of Operations in Oregon.Legislation in Oregon became effective in 2007 that limits fees and interest on all consumer
loans. As a result of this legislation, we determined that it was no longer economically viable to continue to operate in Oregon and we closed all of our remaining Oregon centers in the fourth quarter
of 2007.

The
following is a summary of financial information for our operations in Oregon for the three months ended March 31, 2007 and 2008 (in thousands):

2007

2008Total revenues

$
1,988

$
2Total center expenses


2,057


172Center gross profit/(loss)

$
(69
)
$
(170
)




During the quarter ended March 31, 2008, we acquired one center in the United Kingdom for an aggregate purchase price, including transaction-related costs,
of approximately $0.6 million in cash and an increase in goodwill of approximately $0.5 million.

26

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The following table illustrates the composition of our center network at December 31, 2007 and March 31, 2008:

State

December 31,
2007

March 31,
2008Alabama

145

145Arizona

56

56Arkansas

30

30California

286

288Colorado

72

72Delaware

15

15Florida

261

260Idaho

11

11Illinois

81

81Indiana

117

117Iowa

36

36Kansas

59

59Kentucky

42

43Louisiana

85

86Michigan

150

151Mississippi

61

61Missouri

90

91Montana

7

7Nebraska

24

24Nevada

14

14New Hampshire

24

24New Mexico

10

10North Dakota

8

8Ohio

244

246Oklahoma

65

67Rhode Island

18

20South Carolina

136

138South Dakota

12

12Tennessee

63

63Texas

256

256Utah

6

6Virginia

150

151Washington

103

103Wisconsin

66

69Wyoming

10

11Total United States

2,813

2,831Canada

7

10United Kingdom

12

13Total

2,832

2,854




We opened 39 and 27 new centers during the three months ended March 31, 2007 and 2008, respectively.

27

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We closed 21 and 6 centers during the three months ended March 31, 2007 and 2008, respectively. The expenses related to closing centers typically include
the undepreciated costs of fixtures and signage that cannot be moved and reused at another center, moving costs, severance payments and any lease cancellation costs. We recorded expenses related to
center closures of approximately $0.7 million and $0.6 million in the three months ended March 31, 2007 and 2008, respectively.

Critical Accounting Policies and Use of Estimates

In the ordinary course of business, we have made a number of estimates and assumptions relating to the reporting of our results of operations and financial
condition in the preparation of our financial statements in conformity with generally accepted accounting principles in the United States ("GAAP"). We evaluate these estimates on an ongoing basis and
we base these estimates on the information currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these
estimates under different assumptions or conditions.

We
believe that the following critical accounting policies affect the more significant estimates and assumptions used in the preparation of our financial statements:



We believe the most significant estimates made in the preparation of our accompanying consolidated financial statements relate to the determination of an
allowance for doubtful accounts for estimated probable losses on advances we make directly to customers and an accrual for third-party lender losses for estimated probable losses on loans and certain
related fees for loans that we process for the third-party lender in Texas (See "Consolidation of Variable Interest Entity" in this section). The allowance for doubtful accounts and the accrual for
third-party lender losses represent amounts that we believe will be adequate to absorb probable losses on existing accounts that may become uncollectible by us or by the third-party lender. Our
advances and fees receivable, net on our balance sheet do not include
the advances and interest receivable for loans processed by us for the third-party lender in Texas because these loans are owned by the third-party lender.

The
allowance for doubtful accounts and accrual for third-party lender losses are primarily based upon models that analyze specific portfolio statistics and also reflect, to a lesser
extent, management's judgment regarding overall accuracy. The analytical models take into account several factors including but not limited to the number of transactions customers complete and
charge-off and recovery rates. Additional factors such as changes in state laws, center closings, length of time centers have been open in a state, relative mix of new centers within a
state and other relevant factors are also evaluated to determine whether the results from the analytical models should be revised. Because of the short-term nature of our products and the
charge-off process, aging of accounts is not a distinct component of the analysis.

We
record the allowance for doubtful accounts as a reduction of advances and fees receivable, net on our balance sheet. We record the accrual for third-party lender losses as a current
liability on our balance sheet. We charge the portion of advances and fees deemed to be uncollectible against the allowance for doubtful accounts and credit any subsequent recoveries (including sales
of debt) to the allowance for doubtful accounts.

Unpaid
advances and the related fees and/or interest are generally charged off 60 days after the date the check was returned by the customer's bank for non-sufficient
funds or other reasons, unless the customer has paid at least 15% of the total of his or her loan plus the original fee. Unpaid advances of customers who file for bankruptcy are charged off upon
receipt of the bankruptcy notice.

28

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Although
management uses the best information available to make evaluations, future adjustments to the allowance for doubtful accounts and accrual for third-party lender losses may be necessary if
conditions differ substantially from our assumptions used in assessing their adequacy.

Our
business experiences cyclicality in receivable balances from both the time of year and the day of the week. Fluctuations in receivable balances result in a corresponding impact on
the allowance for doubtful accounts, the accrual for third-party lender losses and provision for doubtful accounts.

Our
receivables are traditionally lower at the end of the first quarter, corresponding to tax refund season, and reach their highest level during the last week of December.

In
addition to the seasonal fluctuations, the receivable balances can fluctuate throughout a week, generally being at their highest levels on a Wednesday or Thursday and at their lowest
levels on a Friday. In general, receivable balances decrease approximately 4% to 7% from a typical Thursday to a
typical Friday. The first quarter of 2007 began on a Monday (a relative low point in weekly receivable balances) and ended on a Saturday (a relative low point in weekly receivable balances). The first
quarter of 2008 began on a Tuesday (a relative low point in weekly receivable balances) and ended on a Monday (a relative low point in weekly receivable balances).

To
the extent historical credit experience is not indicative of future performance or other assumptions used by management do not prevail, our loss experience could differ significantly,
resulting in either higher or lower future provisions for doubtful accounts. As of March 31, 2008, if average default rates were 5% higher or lower, the allowance for doubtful accounts and
accrual for third-party lender losses would change by approximately $2.7 million.



As a result of our acquisition of the National Cash Advance group of affiliated companies in October 1999, we recorded approximately $143.0 million of
goodwill. Additionally, during 2007 and 2008, we completed five acquisitions in the United Kingdom, resulting in an increase in goodwill of approximately $5.2 million. Due to the significance
of goodwill and the reduction of net income that would occur if goodwill were impaired, we assess the impairment of our long-lived and intangible assets annually or whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. Factors considered important that could trigger an impairment review include significant underperformance relative to
historical or projected future cash flows, significant changes in the manner of use of the acquired assets or the strategy of the overall business, and significant negative industry trends. To
identify potential impairment, we compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit does not exceed its carrying amount, we
measure the amount of impairment loss by comparing the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. The amount of any impairment would lower our net
income.

29

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Accrued liabilities in our December 31, 2007 and March 31, 2008 financial statements include accruals of approximately $0.9 million and
$0.3 million, respectively, for the remaining liability under our former self-insured health and dental insurance plans and approximately $4.6 million and
$4.9 million, respectively, for workers' compensation. Beginning in the fourth quarter of 2007 and first quarter of 2008, we are no longer self-insured for our health insurance and
dental insurance, respectively. We recognize our obligations associated with our self-insured benefits in the period the claim is incurred. The costs of both reported claims and claims incurred but
not reported, up to specified deductible limits, are estimated based on historical data, current enrollment, employee statistics and other information. We review estimates and periodically update our
estimates and the resulting reserves and any necessary adjustments are reflected in earnings currently. To the extent historical claims are not indicative of future claims, there are changes in
enrollment or employee history, workers' compensation loss development factors change or other assumptions used by management do not prevail, our expense and related accrued liabilities could increase
or decrease.



In connection with our CSO operations in Texas, we entered into an agreement with an unaffiliated third-party lender in 2005. We determined that the third-party
lender was a variable interest entity ("VIE") under Financial Accounting Standards Board Interpretation No. 46 (Revised) ("FIN 46(R)") and that we were the primary beneficiary of this
VIE. As a result, we consolidated the lender as of and for the three months ended March 31, 2007. During the fourth quarter of 2007, we terminated our CSO agreement with this lender and entered
into an agreement with another unaffiliated third-party lender with substantially similar terms and conditions as the agreement with our former lender. This new lender is also a VIE but we have
determined that we are not the primary beneficiary of this VIE. Therefore, we have not consolidated our new lender as of and for the three months ended March 31, 2008. See "Item 1.
Financial StatementsNotes to Interim Unaudited Consolidated Financial StatementsNote 7. Transactions with Variable Interest Entities" for the impact of consolidating
our former lender on our results of operations and financial condition.



In 2004, we adopted Statement of Financial Accounting Standards No. 123 (Revised), Share-Based Payment ("SFAS 123(R)"). Accordingly, we measure the
cost of our stock-based employee compensation at the grant date based on fair value and recognize such cost in the financial statements over each award's requisite service period. As of
March 31, 2008, the total compensation cost not yet recognized related to nonvested stock awards under our stock-based employee compensation plans is approximately $8.0 million. The
weighted average period over which this expense is expected to be recognized is approximately 4.5 years. See "Item 1. Financial StatementsNotes to Interim Unaudited
Consolidated Financial StatementsNote 6. Capital Stock and Stock-Based Compensation Plans" for a description of our restricted stock and stock option awards and the assumptions
used to calculate the fair value of such awards including the expected volatility assumed in valuing our stock option grants.



See "Item 1. Financial StatementsNotes to Interim Unaudited Consolidated Financial StatementsNote 1. Summary of
Significant Accounting Policies" for a description of the most recent pronouncements.

30

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Results of Operations



The following tables set forth our results of operations for the three months ended March 31, 2007 compared to the three months ended March 31,
2008:

|                                                              |                                    | Three Months Ended March 31, |        
|------------------------------------------------------------- | ---------------------------------- | ---------------------------- | -------
|
|
|
|
|Total Revenues                                                |                                    | $                            | 168,083
|Center Expenses:                                              |                                    |                              |        
|Salaries and related payroll
costs                            |                                    |                              | 49,197 
|Provision for doubtful accounts                               |                                    |                              | 15,815 
|Occupancy costs                                               |                                    |                              | 23,533 
|Center depreciation expense                                   |                                    |                              | 4,269  
|Advertising expense                                           |                                    |                              | 5,309  
|Other center expenses                                         |                                    |                              | 14,158 
|                                                              |                                    |                              |        
|                                                              | Total center expenses              |                              |        
|                                                              |                                    |                              |        
|                                                              |                                    | Center gross profit          |        
|Corporate and Other Expenses (Income):                        |                                    |                              |        
|General and administrative expenses                           |                                    |                              | 13,279 
|Corporate depreciation expense                                |                                    |                              | 818    
|Interest expense                                              |                                    |                              | 2,313  
|Interest income                                               |                                    |                              | (76    
|Loss on disposal of property and equipment                    |                                    |                              | 252    
|Loss on impairment of assets                                  |                                    |                              | 314    
|                                                              |                                    |                              |        
|                                                              | Total corporate and other expenses |                              |        
|                                                              |                                    |                              |        
|Income before income taxes                                    |                                    |                              | 38,902 
|Income tax expense                                            |                                    |                              | 16,343 
|                                                              |                                    |                              |        
|Income before income of consolidated variable interest entity |                                    |                              | 22,559 
|Income of consolidated variable interest entity               |                                    |                              | (243   
|                                                              |                                    |                              |        
|Net income                                                    |                                    | $                            | 22,316 
|                                                              |                                    |                              |        

31

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|
|

|                                                                                                       |          | Three Months Ended
March 31, |        
|------------------------------------------------------------------------------------------------------ | -------- | ---------------------------- | -------
|
|Center Information:                                                                                    |          |                              |        
|Number of centers open at beginning of period                                                          |          |                              | 2,853  
|                                                                                                       | Opened   |                              |        
|                                                                                                       | Acquired |                              |        
|                                                                                                       | Closed   |                              |        
|                                                                                                       |          |                              |        
|Number of centers open at end of period                                                                |          |                              | 2,871  
|                                                                                                       |          |                              |        
|Weighted average number of centers open during the period                                              |          |                              | 2,862  
|Number of customers servedall credit products (thousands)                                             |          |                              | 829    
|Number of payday cash advances originated (thousands)                                                  |          |                              | 2,704  
|Aggregate principal amount of payday cash advances originated (thousands)                              |          | $                            | 968,076
|Average amount of each payday cash advance originated                                                  |          | $                            | 358    
|Average charge to customers for providing and processing a payday cash advance                         |          | $                            | 56     
|Average duration of a payday cash advance (days)                                                       |          |                              | 16.4   
|Average number of lines of credit outstanding during the
period (thousands) (1)                        |          |                              | 24     
|Average amount of aggregate principal on lines of credit outstanding during the period (thousands) (1) |          | $                            | 10,202 
|Average principal amount on each line of credit outstanding during the
period (1)                      |          | $                            | 423    
|Number of installment loans originated (thousands)                                                     |          |                              | 6      
|Aggregate principal amount of installment loans originated (thousands)                                 |          | $                            | 2,345  
|Average principal amount of each installment loan originated                                           |          | $                            | 415    
|Average charge to customers for providing and processing an installment
loan (2)                       |          |                              |       

---

32

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|                                                                                 |                                    | Three Months Ended March 31, |     
|-------------------------------------------------------------------------------- | ---------------------------------- | ---------------------------- | ----
|
|
|
|Per Center (based on weighted average number of centers open during the period): |                                    |                              |     
|Center revenues                                                                  |                                    | $                            | 58.7
|Center expenses:                                                                 |                                    |                              |     
|                                                                                 | Salaries and related payroll costs |                              |     
|                                                                                 | Provision for doubtful accounts    |                              |     
|                                                                                 | Occupancy costs                    |                              |     
|                                                                                 | Center depreciation expense        |                              |     
|                                                                                 | Advertising expense                |                              |     
|                                                                                 | Other center expenses              |                              |     
|                                                                                 |                                    |                              |     
|                                                                                 |                                    | Total center expenses        |     
|                                                                                 |                                    |                              |     
|Center gross profit                                                              |                                    | $                            | 19.5
|                                                                                 |                                    |                              |     



Total revenues decreased approximately $2.6 million during the three months ended March 31, 2008 compared to the same period in 2007. Total revenues
for the 2,605 centers opened prior to January 1, 2007 and still open as of March 31, 2008 increased $7.3 million from $152.5 million for the three months ended
March 31, 2007 to $159.8 million for the same period in 2008. Centers opened prior to January 1, 2007 were at least three months and fifteen months old as of March 31, 2007
and 2008, respectively. Total revenues for the 249 centers opened after January 1, 2007 and still open as of March 31, 2008 increased $5.4 million from $0.1 million for the
three months ended March 31, 2007 to $5.5 million for the same period in 2008. Total revenues for the remaining 248 centers that closed represented a decrease of approximately
$15.3 million for the three months ended March 31, 2008 compared to the same period in 2007. Of this decrease, approximately $11.0 million and $2.0 million was due to the
closure of our centers in Pennsylvania and Oregon, respectively, during the third and fourth quarters of 2007.



Salaries and related payroll costs.The increase in salaries and related payroll costs for the three months ended
March 31, 2008 compared to the same period in 2007 was due primarily to higher salaries per center as well as higher medical costs of approximately $1.0 million for our health and dental
insurance. We averaged approximately 2.16 and 2.20 full-time equivalent field employees, including district directors, per center during the three months ended March 31, 2007 and
2008, respectively.

33

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Provision for doubtful accounts.As a percentage of total revenues, the provision for doubtful accounts increased to 12.6%
for the three months ended March 31, 2008 from 9.4% for the same period in 2007. The increase in the provision during the first quarter of 2008 was due primarily to a continued increase in loss
rates as well as lower recoveries compared to the same period in 2007. During the first quarter of 2008, we collected significantly less of the previously charged off accounts than in previous years.
During the first quarter of 2007, we collected $12.2 million, or 8.8%, of previously charged-off debt. During the first quarter of 2008, we collected $10.1 million, or 6.6%,
of previously charged-off debt. Losses generally continue to trend higher year over year and we believe the worsening economic conditions in the United States may be contributing to
increased loss rates. Our loss experience this tax refund season did not improve to the same degree as past years.

Occupancy costs.The increase in occupancy costs for the three months ended March 31, 2008 compared to the same period
in 2007 was due primarily to higher rent and repair and maintenance costs.

Advertising expense.Advertising expense decreased for the three months ended March 31, 2008 compared to the same
period in 2007 due primarily to the timing of marketing activities.

Other center expenses.The increase in other center expenses for the three months ended March 31, 2008 compared to the
same period in 2007 was due primarily to higher office supplies, toner and center closure costs.



General and administrative expenses.The increase in general and administrative expenses for the three months ended
March 31, 2008 compared to the same period in 2007 was due primarily to:



Loss on disposal of property and equipment.The decrease in loss on disposal of property and equipment for the three months
ended March 31, 2008 compared to the same period in 2007 was primarily due to fewer center closures in 2008.

Loss on impairment of assets.Loss on impairment of assets in 2007 and 2008 represents the write-down of the
undepreciated costs of certain fixed assets in our centers identified for closure.

34

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Liquidity and Capital Resources

The following table presents a summary of cash flows for the three months ended March 31, 2007 and 2008 (dollars in thousands):

|                                                     |                                                              |   |         |         |   | Variance |        
|---------------------------------------------------- | ------------------------------------------------------------ | - | ------- | ------- | - | -------- | -------
|
|Cash flows provided by (used in):                    |                                                              |   |         |         |   |          |        
|                                                     | Operating activities                                         |   | $       | 19,573  |   | $        | 35,848 
|                                                     | Investing activities                                         |   |         | 31,332  |   |          | 15,681 
|                                                     | Financing activities                                         |   |         | (92,129 | ) |          | (63,222
|                                                     | Effect of exchange rate changes on cash
and cash equivalents |   |         |        |   |          | (23    
|                                                     |                                                              |   |         |         |   |          |        
|Net (decrease) increase in cash and cash equivalents |                                                              |   | (41,224 | )       |   | (11,716  | )      
|Cash and cash equivalents, beginning of period       |                                                              |   | 67,245  |         |   | 28,251   |        
|                                                     |                                                              |   |         |         |   |          |        
|Cash and cash equivalents, end of period             |                                                              | $ | 26,021  |         | $ | 16,535   |        
|                                                     |                                                              |   |         |         |   |          |        

Our
principal sources of cash are from operations and from borrowings under our revolving credit facility. See "Certain Contractual Cash CommitmentsLong-Term
Debt Obligations" in this section for a detailed description of our revolving credit facility. We anticipate that our primary uses of cash will be to provide working capital, finance capital
expenditures, meet debt service requirements, fund advances, finance center growth, fund acquisitions, pay dividends on our common stock and repurchase shares of our outstanding common stock.

We
borrow under our $270.0 million revolving credit facility to fund our advances and to meet our other liquidity needs. Our day-to-day balances under our
revolving credit facility, as well as our cash balances, vary because of seasonal and day-to-day requirements resulting from making and collecting advances. For example, if a
month ends on a Friday (a typical payday), our borrowings and our cash balances will be high compared to a month that does not end on a Friday. This is because a substantial portion of the advances
will be repaid in cash on that day but sufficient time will not yet have passed for the cash to reduce the outstanding borrowings under our revolving credit facility. Our borrowings under our
revolving credit facility will also increase as the demand for advances increases during our peak periods such as the back-to-school and holiday seasons. Conversely, our
borrowings typically decrease during the tax refund season when cash receipts from customers peak or the customer demand for new advances decreases. Advances and fees receivable, net decreased
approximately $6.7 million, or 3.6%, to $180.3 million at March 31, 2008 compared to $187.0 million at March 31, 2007. Advances and fees receivable, net decreased
approximately $41.2 million, or 18.6%, to $180.3 million at March 31, 2008 compared to $221.5 million at December 31, 2007 due primarily to tax refund season.

In
May 2005, our Board of Directors approved a program authorizing the repurchase of up to $50.0 million of our outstanding common stock. In August 2006, our Board of Directors
approved an extension of our stock repurchase program authorizing us to repurchase up to $100.0 million of our outstanding common stock on and after that date. Additionally, in February 2008,
our Board of Directors approved a further extension of our stock repurchase program authorizing us to repurchase up to an additional $75.0 million of our outstanding common stock. Our Board of
Directors determined that the continuation and increase of the stock repurchase program serves the best interest of us and our stockholders by returning capital to our stockholders.

Share
repurchases will continue to be made from time to time on the open market, in block trades or in privately negotiated transactions, and in compliance with applicable laws,
including Securities and Exchange Commission Rule 10b-18 and Regulation M. The program does not generally require us to

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purchase
any specific number of shares, and any purchases under the program depend on market and other conditions. Our Board of Directors may suspend or cancel the stock repurchase program at any
time.

During
the three months ended March 31, 2007 and 2008, we repurchased 2,826 and 4,759,322 shares of our common stock, respectively, at a cost of approximately $41,000 and
$36.8 million, respectively. For the three months ended March 31, 2007 and 2008, these amounts include 2,826 and 3,272 shares of common stock, respectively, which were surrendered by
employees to satisfy their tax obligations with respect to the vesting of shares of restricted stock awarded pursuant to our 2004 Omnibus Stock Plan.

Although
our revolving credit facility places restrictions on our capital expenditures and acquisitions, we believe that these restrictions do not prohibit us from pursuing our growth
strategy as currently planned. Cash that is restricted due to certain states' regulatory liquidity requirements is not included in cash and cash equivalents. Instead, the restricted cash is shown on
our consolidated balance sheet as a non-current asset under the line item "Restricted cash."



The increase in net cash provided by operating activities for the three months ended March 31, 2008 compared to the same period in 2007 was due primarily
to a net increase in changes in operating assets and liabilities of $20.0 million and an increase in non-cash adjustments of $3.7 million, offset by a decrease in net income
of $7.5 million.



The decrease in net cash provided by investing activities for the three months ended March 31, 2008 compared to the same period in 2007 was primarily due
to a $15.5 million decrease in the change in cash invested in advances receivable and approximately $0.5 million for an acquisition in the United Kingdom, net of cash acquired, partially
offset by a $0.6 million increase in the change in restricted cash.



The decrease in net cash used in financing activities for the three months ended March 31, 2008 compared to the same period in 2007 was primarily due to a
$61.8 million decrease in payments on our revolving credit facility, a $2.2 million decrease in the non-controlling interest of the variable interest entity, a
$2.2 million decrease in the change in book overdrafts and a $1.0 million
decrease in dividend payments, partially offset by a $36.8 million increase in purchases of treasury stock and a $1.6 million increase in payments of financing costs.

Capital Expenditures

For the three months ended March 31, 2007 and 2008, we spent $3.0 million and $3.2 million, respectively, on capital expenditures. Capital
expenditures included expenditures for: (1) new centers opened; (2) center remodels; and (3) computer equipment replacements in our centers and at our corporate headquarters.

Off-Balance Sheet Arrangement with Third-Party Lender

In Texas, where we operate as a CSO, we offer a fee-based credit services package to assist customers in trying to improve their credit and in
obtaining an extension of consumer credit through a third-party lender. Under the terms of our agreement with this lender, we process customer applications and are contractually obligated to reimburse
the lender for the full amount of the loans

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and
certain related fees that are not collected from the customers. As of March 31, 2008, the third-party lender's outstanding advances and interest receivable (which were not recorded on our
balance sheet) totaled approximately $15.8 million, which is the amount we would be obligated to pay the third-party lender if these amounts were to become uncollectible. Additionally, if these
advances were to become uncollectible, we would also be required to pay the third-party lender all related NSF fees and late fees on these advances.

Because
of our economic exposure for losses related to the third-party lender's advances and interest receivable, we have established an accrual for third-party lender losses to reflect
our estimated probable losses related to uncollectible third-party lender advances. The accrual for third-party lender losses that was reported in our balance sheet at March 31, 2008 was
approximately $3.5 million and was established on a basis similar to the allowance for doubtful accounts. If actual losses on the third-party lender's advances are materially greater than our
accrual for third-party lender losses, our business, results of operations and financial condition could be adversely affected. See "Item 1. Financial StatementsNotes to Interim
Unaudited Consolidated Financial StatementsNote 7. Transactions with Variable Interest Entities."

Certain Contractual Cash Commitments

Our principal future contractual obligations and commitments as of March 31, 2008, including periodic interest payments, included the following (dollars in
thousands):

|                                |                           |  |         | Payment due by December 31,
|------------------------------- | ------------------------- |  | ------- | ---------------------------
|
|Long-term debt obligations:     |                           |  |         |                            
|                                | Revolving credit facility |  | $       | 127,246                    
|                                | Mortgage payable          |  |         | 7,369                      
|                                | Note payable              |  |         | 208                        
|Operating lease obligations (1) |                           |  | 152,573 |                            
|Purchase obligations            |                           |  | 809     |                            
|Other                           |                           |  | 2,730   |                            
|                                |                           |  |         |                            
|                                | Total                     |  | $       | 290,935                    
|                                |                           |  |         |                            

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Revolving Credit Facility.In March 2008, we amended and restated our credit facility with a syndicate of banks. Our
revolving credit facility now provides us with a $270.0 million revolving line of credit, which amount includes the ability to issue up to $25.0 million in letters of credit. Our
revolving credit facility matures on March 24, 2013. We have the option to increase the revolving credit facility by an additional $95.0 million upon receipt of sufficient commitments
from lenders in the lending syndicate. Any portion of our revolving credit facility that is repaid may be borrowed again.

As
of March 31, 2008, we had $127.2 million outstanding on the revolving portion of our credit facility and $1.3 million of letters of credit outstanding, leaving
approximately $141.5 million available for future borrowings under our credit facility. We believe that this availability under our credit facility in addition to cash generated from operations
should be sufficient to meet our currently anticipated liquidity requirements.

In
general, our borrowings under our revolving credit facility bear interest, at our option, at either a base rate plus an applicable margin or a LIBOR-based rate plus an applicable
margin. The base rate equals the greater of: (i) the prime rate set by Bank of America, the administrative agent under the revolving credit facility, and (ii) the sum of the federal
funds rate plus 0.50%. The applicable margin is determined each quarter by a pricing grid based on our total leverage ratio of consolidated debt to

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consolidated
EBITDA. The base rate applicable margin ranges from 1.50% to 2.25% based upon our total leverage ratio. The LIBOR-based applicable margin ranges from 2.50% to 3.25% based upon our total
leverage ratio. As of March 31, 2008, the applicable margin for the prime-based rate was 1.75% and the applicable margin for the LIBOR-based rate was 2.75%.

The
applicable rate is chosen when we request a draw down under the revolving credit facility and is based on the forecasted working capital requirements and the required notice period
for each type of borrowing. LIBOR-based rates can be selected for one-, two-, three- or six-month terms. In the case of a base rate loan, we must notify the bank on
the requested date of any required borrowing and in the case of a LIBOR-based loan, we must notify the bank three business days prior to the date of the requested borrowing. Base rate loans are
variable, and the rates on those loans are changed whenever the underlying rate changes. LIBOR-based loans bear interest for the term of the loan at the rate set at the time of borrowing for that
loan.

Our
obligations under the revolving credit facility are guaranteed by each of our domestic subsidiaries. Our borrowings under the revolving credit facility are collateralized by
substantially all of our assets and the assets of our subsidiaries. In addition, our borrowings under the revolving credit facility are secured by a pledge of all of the capital stock, or similar
equity interests, of our domestic subsidiaries and 65% of the voting capital stock, or similar equity interests, of our foreign subsidiaries. Our revolving credit facility contains various financial
covenants that require, among other things, the maintenance of minimum net worth, maximum leverage and senior leverage, minimum fixed charge coverage and maximum charge-off ratios. The
revolving credit facility contains customary covenants, including covenants that restrict our ability to, among other things (i) incur liens, (ii) incur certain indebtedness (including
guarantees or other contingent obligations), (iii) engage in mergers and consolidations, (iv) engage in sales, transfers, and other dispositions of property and assets (including
sale-leaseback transactions), (v) make loans, acquisitions, joint ventures, and other investments, (vi) make dividends and other distributions to, and redemptions and
repurchases from, equity holders, (vii) prepay, redeem, or repurchase certain debt, (viii) make changes in the nature of our business, (ix) amend our organizational documents, or
amend or otherwise modify certain of our debt documents, (x) change our fiscal quarter and fiscal year ends, (xi) enter into transactions with our affiliates, and (xii) issue
certain equity interests. The revolving credit facility contains customary events of default, including events of default resulting from (i) our failure to pay principal when due or interest,
fees, or other amounts after grace periods to be mutually agreed upon, (ii) covenant defaults, (iii) our material breach of any representation or warranty, (iv) cross defaults to
any other indebtedness in excess of $1.0 million in the aggregate, (v) bankruptcy, insolvency, or other similar proceedings, (vi) our inability to pay debts, (vii) monetary
judgment defaults in excess of $1.0 million in the aggregate, (viii) customary ERISA defaults, (ix) actual or asserted invalidity of any material provision of the loan
documentation or impairment of a material portion of the collateral, and (x) a change of control. A breach of a covenant or an event of default could cause all amounts outstanding under the
revolving credit facility to become due and payable. We were in compliance with all financial covenants at
March 31, 2008. See "Liquidity and Capital Resources" in this section for a description of how we utilize the revolving credit facility to meet our liquidity needs.

Mortgage Payable.Our corporate headquarters building and related land are subject to a mortgage, the principal amount of
which was approximately $5.4 million and $5.3 million at December 31, 2007 and March 31, 2008, respectively. The mortgage is payable to an insurance company and is
collateralized by our corporate headquarters building and related land. The mortgage is payable in 180 monthly installments of approximately $66,400, including principal and interest, and bears
interest at a fixed rate of 7.30% over its term. The mortgage matures on June 10, 2017. The carrying amount of our corporate headquarters (land, land improvements and building) was
approximately $4.9 million and $4.9 million at December 31, 2007 and March 31, 2008, respectively.

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We lease all of our centers from third-party lessors under operating leases. These leases typically have initial terms of three to five years and may contain
provisions for renewal options, additional rental charges based on revenue and payment of real estate taxes, and common area charges. In addition, we lease aircraft hangar space and certain security
and office equipment. The lessors under the aircraft hangar space lease and other office and warehouse space leases are companies controlled by or affiliated with Mr. George D. Johnson, Jr.,
our Chairman. See "Item 1. Financial StatementsNotes to Interim Unaudited Consolidated Financial StatementsNote 8. Related Party Transactions."



We enter into agreements with vendors to purchase furniture, fixtures and other items used to open new centers. These purchase commitments typically extend for a
period of two to three months after the opening of a new center. As of March 31, 2008, our purchase obligations totaled approximately $0.8 million.



We have entered into a consulting arrangement for which the retainer will be recognized over the anticipated term of the engagement. We have also entered into a
contract with a service provider that specifies certain minimum payments over the term of the contract.

Critical Estimates, Uncertainties or Assessments in the Financial Statements

The preparation of our financial statements in conformity with GAAP requires us 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, we 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 our 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 our consolidated financial statements will emerge over periods of time, such as estimates and assumptions
underlying the determination of allowance for doubtful accounts and accrual for third-party lender losses. These estimates and assumptions are monitored and periodically adjusted as circumstances
warrant. These amounts 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, this risk is mitigated by the ability to make changes to these estimates and assumptions over the same period.

We
periodically review 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. We believe that the estimates of future cash flows and fair value are reasonable. Changes in estimates of those cash flows
and fair value, however, could affect the evaluation.

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Impact of Inflation

We believe our results of operations are not dependent upon the levels of inflation.

Forward-Looking Statements

The matters discussed in this Quarterly Report on Form 10-Q that are forward-looking statements are based on current management expectations
that involve substantial risks and uncertainties, which could cause actual results to differ materially from the results expressed in, or implied by, these forward-looking statements. These statements
can be identified by the fact that they do not relate strictly to historical or current facts. They use words such as "expect," "intend," "plan," "believe," "project," "anticipate," "may," "will,"
"should," "would," "could," "estimate," "continue" and other words and terms of similar meaning in conjunction with a discussion of future operating or financial performance. You should read
statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position or state other
"forward-looking" information.

Potential
risks and uncertainties, which may cause our actual results to differ materially from the expectations we describe in our forward-looking statements, include, but are not
limited to those factors described under the heading "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2007 and under Item 1A of
Part II of this Quarterly Report, and the following:



All
forward-looking statements in this Quarterly Report are based on information available to us as of the date of this Quarterly Report. Except as required under federal securities laws
and the rules and regulations of the U.S. Securities and Exchange Commission, we do not have any intention, and do not undertake, to update any forward-looking statements to reflect events or
circumstances arising after the date of this Quarterly Report, whether as a result of new information, future events or otherwise. As a result of these risks and uncertainties, readers are cautioned
not to place undue reliance on the

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forward-looking
statements included in this Quarterly Report or that may be made elsewhere from time to time by, or on behalf of, us. All forward-looking statements attributable to us are expressly
qualified by these cautionary statements.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We have no market-risk-sensitive instruments entered into for trading purposes, as defined by GAAP.



We are exposed to interest rate risk on our revolving credit facility. Our variable interest expense is sensitive to changes in the general level of interest
rates. We may from time to time enter into interest rate swaps, collars or similar instruments with the objective of reducing our volatility in borrowing costs. We do not use derivative financial
instruments for speculative or trading purposes. We had no derivative financial instruments outstanding as of December 31, 2007 or March 31, 2008. The weighted average interest rate on
our $142.3 million of variable interest debt as of December 31, 2007 was approximately 7.76%. The weighted average interest rate on our $127.2 million of variable interest debt as
of March 31, 2008 was approximately 5.57%.

We
had total interest expense of $2.3 million and $2.7 million for the three months ended March 31, 2007 and 2008, respectively. The estimated change in interest
expense from a hypothetical 200 basis-point change in applicable variable interest rates would have been approximately $0.2 million and $0.6 million for the three months ended
March 31, 2007 and 2008, respectively.



The expansion of our operations to the United Kingdom and Canada in 2007 has exposed us to shifts in currency valuations. We may from time to time elect to
purchase financial instruments as hedges against foreign exchange rate risks with the objective of protecting our results of operations in the United Kingdom and Canada against foreign currency
fluctuations. We had no such financial instruments outstanding as of December 31, 2007 or March 31, 2008.

As
currency exchange rates change, translation of the financial results of our United Kingdom and Canadian operations into United States dollars will be impacted. Changes in exchange
rates have resulted in cumulative translation adjustments which decreased our net assets by approximately $75,000
and $140,000 as of December 31, 2007 and March 31, 2008, respectively. These cumulative translation adjustments are included in accumulated other comprehensive loss as a separate
component of stockholders' equity. Due to the immateriality of our current operations in the United Kingdom and Canada, a change in foreign currency exchange rates is not expected to have a
significant impact on our consolidated financial position, results of operations or cash flows.

ITEM 4.    CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the
effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934, as amended, and our internal control over financial reporting, as of the end of the period covered by this Report. Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that those disclosure controls and procedures are effective. There were no changes in our internal control over financial reporting during the quarter ended March 31, 2008,
that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS.

See "Part I. Item 1. Financial StatementsNotes to Interim Unaudited Consolidated Financial StatementsNote 5.
Commitments and Contingencies," which is incorporated herein by reference.

ITEM 1A.    RISK FACTORS.

Our operations and financial results are subject to various risks and uncertainties that could adversely affect our business, results of operations, financial
condition, future results and the trading price of our common stock. In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors described under
the heading "Risk Factors" in Part I of our Annual Report on Form 10-K for the year ended December 31, 2007, which could materially affect our business, results of
operations, financial condition, future results and the trading price of our common stock. The following items are changes and additions to the risks and uncertainties previously disclosed.



Our business is regulated under a variety of enabling state statutes, including payday advance, deferred presentment, check cashing, money transmission, small
loan and credit services organization state laws, all of which are subject to change and which may impose significant costs or limitations on the way we conduct or expand our business. As of
March 31, 2008, 39 states and the District of Columbia had specific laws that permitted payday cash advances or a similar form of short-term consumer loans. As of March 31, 2008, we
operated in 35 of these 39 states. Currently, we do not conduct business in the remaining four states or in the District of Columbia because we do not believe it is economically attractive to operate
in these jurisdictions due to specific legislative restrictions, such as interest rate ceilings, an unattractive population density or unattractive location characteristics. However, we may open
centers in any of these states or the District of Columbia if we believe doing so may become economically attractive because of a change in any of these variables. The remaining 11 states do not have
laws specifically authorizing the payday cash advance or short-term consumer finance business. Despite the lack of specific laws, other laws may permit us to do business in these states.

During
the last few years, legislation has been adopted in some states that prohibits or severely restricts payday cash advance and similar services. Many similar bills have also been
introduced in state legislatures. In 2007, bills that would severely restrict or effectively prohibit payday cash advances if adopted as law were introduced in 20 states plus the District of Columbia.
In addition, two states have sunset provisions in their payday cash advance laws that require renewal of the laws by these state legislatures at periodic intervals. Such new or modified legislation
could have a material adverse impact on our results of operations. For example, as a result of legislation in Oregon that became effective in July 2007, we concluded that operating in that state was
no longer economically viable and closed all of our Oregon centers. Restrictive legislation has recently been adopted in New Hampshire and Virginia. Laws prohibiting payday cash advance and similar
services or making them less profitable, or even unprofitable, could be passed in any other state at any time or existing enabling laws could expire or be
amended, any of which would have a material adverse effect on our business, results of operations and financial condition. For instance, in April 2008, the Ohio State House of Representatives passed a
bill that would cap interest rates on payday loans and limit the number of advances a customer may take in any one year. If this bill were to become law, it may not be economically viable for us to
continue operations in Ohio.

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Statutes
authorizing payday cash advance and similar services typically provide the state agencies that regulate banks and financial institutions with significant regulatory powers to
administer and enforce the law. In most states, we are required to apply for a license, file periodic written reports regarding business operations and undergo comprehensive state examinations to
ensure that we comply with applicable laws. Under statutory authority, state regulators have broad discretionary power and may impose new licensing requirements, interpret or enforce existing
regulatory requirements in different ways or issue new administrative rules, even if not contained in state statutes, that impact the way we do business and may force us to terminate or modify our
operations in particular states. They may also impose rules that are generally adverse to our industry. Any new licensing requirements or rules could have a material adverse effect on our business,
results of operations and financial condition.

In
some cases, we rely on the interpretations of the staff of state regulatory bodies with respect to the laws and regulations of their respective jurisdictions. These staff
interpretations generally are not binding legal authority and may be subject to challenge in administrative or judicial proceedings. Additionally, as the staff of state regulatory bodies change, it is
possible that their interpretations of applicable laws and regulations also may change and negatively affect our business. As a result, our reliance on staff interpretations could have a material
adverse effect on our business, results of operations and financial condition.

Additionally,
state attorneys general and banking regulators have begun to scrutinize payday cash advances and other alternative financial products and take actions that could require us
to modify, suspend or cease operations in their respective states. For example, as a result of an adverse ruling in July 2007 in a case brought by the Pennsylvania Department of Banking, we suspended
our operations and subsequently closed all of our centers in Pennsylvania. See "Item 1. Financial StatementsNotes to Interim Unaudited Consolidated Financial
StatementsNote 5. Commitments and Contingencies." In March 2008, the Attorney General of Arkansas distributed letters to 60 companies operating under the Check Cashers Act. The
letter demanded that we cease and desist offering deferred presentment transactions within the state of Arkansas. Although no legal determination has been made that the Check Cashers Act is
unconstitutional or that we have violated any provision of Arkansas state law, we have voluntarily cooperated with the Attorney General's demands. See "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of OperationsOperations in Arkansas." The closures in Pennsylvania have had a material adverse effect on our results of operations and
financial condition.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

The following table sets forth information about our stock repurchases for the three months ended March 31, 2008:

|Period (1)                |  | Total Number of Shares Purchased (2) |  | Average Price Paid per Share |      | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (2) |           | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (3)
|------------------------- |  | ------------------------------------ |  | ---------------------------- | ---- | ------------------------------------------------------------------------------------ | --------- | --------------------------------------------------------------------------------------------
|January 1 to January 31   |  | 1,323,115                            |  | $                            | 8.41 |                                                                                      | 1,323,115 |                                                                                             
|February 1 to February 29 |  | 1,081,888                            |  | $                            | 7.53 |                                                                                      | 1,081,888 |                                                                                             
|March 1 to March 31       |  | 2,502,499                            |  | $                            | 7.14 |                                                                                      | 2,502,499 |                                                                                             
|                          |  |                                      |  |                              |      |                                                                                      |           |                                                                                             
|Total                     |  | 4,907,502                            |  | $                            | 7.57 |                                                                                      | 4,907,502 |                                                                                             
|                          |  |                                      |  |                              |      |                                                                                      |           |                                                                                             

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ITEM 6.    EXHIBITS.

|Exhibit  |  | Description                                                                                                                                                                                    
|-------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1     |  | Amended and Restated Credit Agreement dated as of March 24, 2008.                                                                                                                              
|31(i)(A) |  | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.                                                  
|31(i)(B) |  | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.                                                  
|32.1     |  | Certification of Chief Executive Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).
|32.2     |  | Certification of Chief Financial Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).

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SIGNATURES

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

|            |  | ADVANCE AMERICA, CASH ADVANCE
CENTERS, INC.
|----------- |  | -------------------------------------------
|May 9, 2008 |  | By:                                        

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INDEX TO EXHIBITS

|Exhibit Number |  | Description                                                                                                                                                                                    
|-------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1           |  | Amended and Restated Credit Agreement dated as of March 24, 2008.                                                                                                                              
|31(i)(A)       |  | Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.                                                  
|31(i)(B)       |  | Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.                                                  
|32.1           |  | Certification of Chief Executive Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).
|32.2           |  | Certification of Chief Financial Officer of Advance America, Cash Advance Centers, Inc. pursuant to 18 U.S.C. Section 1350 (adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002).

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