##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
 For the quarterly period ended September 30, 2006
 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 000-50866
 DOLLAR FINANCIAL CORP.
  DELAWARE
    
    23-2636866(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification No.)
 1436 LANCASTER AVENUE,
BERWYN, PENNSYLVANIA 19312
 610-296-3400
 None
 Ö þ o
  o þ o
 o þ




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##### 



DOLLAR FINANCIAL CORP.
 INDEX
 Page No.PART I. FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsInterim Consolidated Balance Sheets as of June 30, 2006 and September 30, 2006 (unaudited)
    
    
    3Interim Unaudited Consolidated Statements of Operations for the Three Months Ended September 30, 2005 and 2006
    
    
    4Interim Consolidated Statements of Shareholders Equity as of June 30, 2006 and September 30, 2006 (unaudited)
    
    
    5Interim Unaudited Consolidated Statements of Cash Flows for the Three Months Ended September 30, 2005 and 2006
    
    
    6Notes to Interim Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    29Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4.
    
    Controls and Procedures
    
    
    39PART II. OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    39Item 6.
    
    Exhibits
    
    
    43Signature
    
    
    
    
    44Certification of Chief Executive OfficerCertification of PresidentCertification of Chief Financial OfficerCertification of Chief Executive OfficerCertification of PresidentCertification of Chief Financial Officer
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share amounts)
 June 30,
    
    
    September 30,2006
    
    
    2006(unaudited)ASSETSCash and cash equivalents
    
    $
    120,221
    
    
    $
    120,377Restricted cash
    
    
    80,750
    
    
    
    Loans receivableLoans receivable
    
    
    58,997
    
    
    
    67,621Less: Allowance for loan losses
    
    
    (5,365
    )
    
    
    (6,464
    )Loans receivable, net
    
    
    53,632
    
    
    
    61,157Other
consumer lending receivables, net of an allowance of $11,693 and
$12,908
    
    
    7,545
    
    
    
    9,605Other receivables
    
    
    8,165
    
    
    
    7,229Income taxes receivable
    
    
    515
    
    
    
    1,039Prepaid expenses
    
    
    10,166
    
    
    
    9,187Deferred tax asset, net of valuation allowance of $47,516 and $53,302
    
    
    185
    
    
    
    208Property and equipment, net of accumulated
depreciation of $73,714 and $76,365
    
    
    40,625
    
    
    
    41,238Goodwill and other intangibles, net of accumulated
amortization of $21,307 and $21,631
    
    
    218,566
    
    
    
    219,751Debt issuance costs, net of accumulated
amortization of $4,630 and $5,071
    
    
    9,437
    
    
    
    7,767Other
    
    
    2,018
    
    
    
    2,383$
    551,825
    
    
    $
    479,941LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    23,438
    
    
    $
    29,812Foreign income taxes payable
    
    
    10,963
    
    
    
    8,585Accrued expenses and other liabilities
    
    
    36,583
    
    
    
    33,064Accrued interest payable
    
    
    3,312
    
    
    
    7,339Deferred tax liability
    
    
    4,539
    
    
    
    4,965Revolving credit facilities
    
    
    39,000
    
    
    
    32,7009.75% Senior Notes due 2011
    
    
    271,487
    
    
    
    201,050Other long-term debt
    
    
    550
    
    
    
    458Shareholders equity:Common stock, $0.001 par value: 55,500,000 shares
authorized; 23,399,107 and 23,461,482 shares
issued and outstanding at June 30, 2006 and September 30,
2006, respectively
    
    
    23
    
    
    
    23Additional paid-in capital
    
    
    242,594
    
    
    
    243,273Accumulated deficit
    
    
    (114,920
    )
    
    
    (116,664
    )Accumulated other comprehensive income
    
    
    34,256
    
    
    
    35,336Total shareholders equity
    
    
    161,953
    
    
    
    161,968$
    551,825
    
    
    $
    479,941
  3




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except share and per share amounts)
 Three Months EndedSeptember 30,2005
    
    
    2006Revenues:Check cashing
    
    $
    34,347
    
    
    $
    38,389Consumer lending:Fees from consumer lending
    
    
    36,237
    
    
    
    48,825Provision for loan losses and adjustment to servicing
income
    
    
    (8,772
    )
    
    
    (9,572
    )Consumer lending, net
    
    
    27,465
    
    
    
    39,253Money transfer fees
    
    
    3,958
    
    
    
    4,667Franchise fees and royalties
    
    
    2,916
    
    
    
    2,453Other
    
    
    5,779
    
    
    
    6,951Total revenues
    
    
    74,465
    
    
    
    91,713Store and regional expenses:Salaries and benefits
    
    
    25,191
    
    
    
    28,968Occupancy
    
    
    6,718
    
    
    
    7,652Depreciation
    
    
    1,832
    
    
    
    2,054Returned checks, net and cash shortages
    
    
    3,259
    
    
    
    3,632Telephone and communications
    
    
    1,421
    
    
    
    1,544Advertising
    
    
    2,189
    
    
    
    2,262Bank charges and armored carrier expenses
    
    
    2,095
    
    
    
    2,268Other
    
    
    7,309
    
    
    
    9,463Total store and regional expenses
    
    
    50,014
    
    
    
    57,843Store and regional margin
    
    
    24,451
    
    
    
    33,870Corporate and other expenses:Corporate expenses
    
    
    9,172
    
    
    
    12,833Other depreciation and amortization
    
    
    925
    
    
    
    830Interest expense, net of interest income of $6 and $6
    
    
    7,241
    
    
    
    6,302Loss on extinquishment of debt
    
    
    
    
    
    
    7,987Other, net
    
    
    276
    
    
    
    88Income before income taxes
    
    
    6,837
    
    
    
    5,830Income tax provision
    
    
    4,538
    
    
    
    7,574Net income (loss)
    
    $
    2,299
    
    
    $
    (1,744
    )Net income (loss) per share:Basic
    
    $
    0.13
    
    
    $
    (0.07
    )Diluted
    
    $
    0.12
    
    
    $
    (0.07
    )Weighted average shares outstanding:Basic
    
    
    18,089,141
    
    
    
    23,300,313Diluted
    
    
    18,423,529
    
    
    
    23,420,534
  4




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DOLLAR FINANCIAL CORP.
 
 INTERIM CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
(In thousands, except share data)
 Accumulated
    
    
    TotalAdditional
    
    
    
    
    
    
    Other
    
    
    ShareholdersCommon Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    (Deficit)Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    (Loss) Income
    
    
    EquityBalance, June 30, 2005
    
    
    18,080,652
    
    
    $
    18
    
    
    $
    160,997
    
    
    $
    (121,885
    )
    
    $
    20,506
    
    
    $
    59,636Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,088
    
    
    
    14,088Other comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (338
    )
    
    
    (338
    )Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,965
    
    
    
    
    
    
    
    6,965Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,715Secondary public stock offering
    
    
    5,000,000
    
    
    
    5
    
    
    
    80,099
    
    
    
    
    
    
    
    
    
    
    
    80,104Restricted stock grants
    
    
    107,841
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Shares options exercised
    
    
    210,614
    
    
    
    
    
    
    
    1,363
    
    
    
    
    
    
    
    
    
    
    
    1,363Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    135
    
    
    
    
    
    
    
    
    
    
    
    135Balance, June 30, 2006
    
    
    23,399,107
    
    
    $
    23
    
    
    $
    242,594
    
    
    $
    (114,920
    )
    
    $
    34,256
    
    
    $
    161,953Comprehensive incomeForeign currency translation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,123
    
    
    
    1,123Other comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (43
    )
    
    
    (43
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,744
    )
    
    
    
    
    
    
    (1,744
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (664
    )Restricted stock grants
    
    
    17,400
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Restricted stock vested
    
    
    
    
    
    
    
    
    
    
    197
    
    
    
    
    
    
    
    
    
    
    
    197Share options excercised
    
    
    44,975
    
    
    
    
    
    
    
    344
    
    
    
    
    
    
    
    
    
    
    
    344Non-cash stock compensation
    
    
    
    
    
    
    
    
    
    
    138
    
    
    
    
    
    
    
    
    
    
    
    138Balance, September 30, 2006 (unaudited)
    
    
    23,461,482
    
    
    $
    23
    
    
    $
    243,273
    
    
    $
    (116,664
    )
    
    $
    35,336
    
    
    $
    161,968
  5




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DOLLAR FINANCIAL CORP.
 
 INTERIM UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
 Three Months EndedSeptember 30,2005
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    2,299
    
    
    $
    (1,744
    )Adjustments to reconcile net income (loss) to net
cash provided by operating activities:Depreciation and amortization
    
    
    3,175
    
    
    
    3,269Non-cash stock compensation
    
    
    28
    
    
    
    335Loss on extinguishment of debt
    
    
    
    
    
    
    7,987Losses on store closings
    
    
    257
    
    
    
    149Foreign currency loss on revaluation of
subordinated borrowings
    
    
    7
    
    
    
    Deferred tax provision
    
    
    332
    
    
    
    404Change in assets and liabilities (net of effect of acquisitions):Increase in loans and other receivables
    
    
    (5,014
    )
    
    
    (7,757
    )Increase in income taxes receivable
    
    
    (2,056
    )
    
    
    (524
    )Decrease in prepaid expenses and other
    
    
    2,005
    
    
    
    886Increase in accounts payable, income taxes payable,
accrued expenses and other liabilities and accrued interest payable
    
    
    3,300
    
    
    
    5,221Net cash provided by operating activities
    
    
    4,333
    
    
    
    8,226Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    (4,922
    )
    
    
    (959
    )Additions to property and equipment
    
    
    (4,994
    )
    
    
    (4,706
    )Net cash used in investing activities
    
    
    (9,916
    )
    
    
    (5,665
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    
    
    
    
    80,750Proceeds from the exercise of stock options
    
    
    144
    
    
    
    344Other debt payments
    
    
    
    
    
    
    (92
    )Partial prepayment of 9.75% Senior Notes due 2011
    
    
    
    
    
    
    (76,825
    )Net increase (decrease) in revolving credit facilities
    
    
    11,900
    
    
    
    (6,300
    )Payment of debt issuance costs
    
    
    (1,119
    )
    
    
    (85
    )Net cash provided by (used in) financing activities
    
    
    10,925
    
    
    
    (2,208
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    1,889
    
    
    
    (197
    )Net increase in cash and cash equivalents
    
    
    7,231
    
    
    
    156Cash and cash equivalents at beginning of period
    
    
    92,504
    
    
    
    120,221Cash and cash equivalents at end of period
    
    $
    99,735
    
    
    $
    120,377
  6




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
  ® ® ®
  Use of Estimates
  Principles of Consolidation
  Reclassification
  7




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Earnings Per Share
  Three Months EndedSeptember 30,2005
    
    
    2006Net income (loss)
    
    $
    2,299
    
    
    $
    (1,744
    )Reconciliation of denominator:Weighted average of common shares outstanding  basic1
    
    
    18,089
    
    
    
    23,300Effect of unvested restricted stock grants
    
    
    
    
    
    
    120Effect of dilutive stock options2
    
    
    334
    
    
    
    Weighted average number of common shares outstanding  diluted
    
    
    18,423
    
    
    
    23,420
 
 1
    
    Excludes 120,221 shares of unvested restricted stock, which is included in total
outstanding common shares as of September 30, 2006.2
    
    The effect of dilutive stock options was determined under the treasury stock method.
Due to the net loss during the three months ended September 30, 2006 the effect of the dilutive
options were considered to be antidilutive, and therefore were not included in the calculation of
diluted earnings per share. Stock Based Employee Compensation
 Share-Based Payment , Accounting for
Stock-Based Compensation ,
Accounting for Stock Issued to Employees
 8




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock Based Employee Compensation (continued)
   Three months EndedSeptember 30,2005
    
    2006Expected volatility
    
    
    43.6
    %
    
    
    47.6
    %Expected life (years)
    
    
    6.0
    
    
    
    6.0Risk-free interest rate
    
    
    4.11
    %
    
    
    4.72
    %Expected dividends
    
    None
    
    
    NoneWeighted average fair value
    
    $
    5.38
    
    
    $
    10.24
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateExercise
    
    Contractual
    
    Intrinsic Value ($Options
    
    Price
    
    Term (years)
    
    in millions)Options outstanding at June 30, 2006(1,622,642 shares exercisable)
    
    
    1,715,142
    
    
    $
    12.07Granted
    
    
    198,500
    
    
    $
    19.77Exercised
    
    
    (44,975
    )
    
    $
    7.65Forfeited and expired
    
    
    
    
    
    $
    Options outstanding at September 30, 2006
    
    
    1,868,667
    
    
    $
    13.00
    
    
    
    7.8
    
    
    $
    16.1Exercisable at September 30, 2006
    
    
    1,585,667
    
    
    $
    12.05
    
    
    
    7.4
    
    
    $
    15.5
   9




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Stock Based Employee Compensation (continued)
  WeightedAverageRestricted
    
    
    Grant-DateStock Awards
    
    
    Fair-ValueOutstanding at June 30, 2006
    
    
    107,841
    
    
    $
    18.36Granted
    
    
    17,400
    
    
    
    21.33Vested
    
    
    (5,020
    )
    
    
    19.23Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    120,221
    
    
    $
    18.75
  Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes, Accounting for Income Taxes
 Fair Value Measurements
 2. SUPPLEMENTARY CASH FLOW INFORMATION
 Non-cash transactions
  3. DEBT
  10




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. DEBT (continued)
       Refinancing of Existing Credit Facility
   11




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DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 3. DEBT (continued)
    4. LOSS ON EXTINGUISHMENT OF DEBT
  Call Premium
    
    $
    6.8Write-off of previously capitalized deferred issuance costs, net
    
    
    1.5Write-off of original issue premium
    
    
    (0.3
    )$
    8.0
 5. SUBSIDIARY GUARANTOR UNAUDITED FINANCIAL INFORMATION
   
    
    rank equal in right of payment with all existing and future unsubordinated indebtedness of the Guarantors;
    
    rank senior in right of payment to all existing and future subordinated indebtedness of the Guarantors; and
    
    are effectively junior to any indebtedness of OPCO, including indebtedness under OPCOs senior secured revolving credit
facility, that is either (1) secured by a lien on the Collateral that is senior or prior to the second priority liens
securing the Guarantees of the Notes or (2) secured by assets that are not part of the Collateral to the extent of the
value of the assets securing such indebtedness.
  12




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CONSOLIDATING BALANCE SHEETS
September 30, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    920
    
    
    $
    40,656
    
    
    $
    78,801
    
    
    $
    
    
    
    $
    120,377Loans receivable
Loans receivable
    
    
    
    
    
    
    10,359
    
    
    
    57,262
    
    
    
    
    
    
    
    67,621Less: Allowance for loan losses
    
    
    
    
    
    
    (1,053
    )
    
    
    (5,411
    )
    
    
    
    
    
    
    (6,464
    )Loans receivable, net
    
    
    
    
    
    
    9,306
    
    
    
    51,851
    
    
    
    
    
    
    
    61,157Other consumer lending receivables
    
    
    
    
    
    
    3,440
    
    
    
    6,165
    
    
    
    
    
    
    
    9,605Other receivables
    
    
    414
    
    
    
    1,793
    
    
    
    5,621
    
    
    
    (599
    )
    
    
    7,229Income taxes receivable
    
    
    
    
    
    
    1,039
    
    
    
    
    
    
    
    
    
    
    
    1,039Prepaid expenses
    
    
    
    
    
    
    2,450
    
    
    
    6,737
    
    
    
    
    
    
    
    9,187Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    208
    
    
    
    
    
    
    
    208Due from affiliates
    
    
    80,824
    
    
    
    56,449
    
    
    
    
    
    
    
    (137,273
    )
    
    
    Property and equipment, net
    
    
    
    
    
    
    11,143
    
    
    
    30,095
    
    
    
    
    
    
    
    41,238Goodwill and other intangibles, net
    
    
    
    
    
    
    97,764
    
    
    
    121,987
    
    
    
    
    
    
    
    219,751Debt issuance costs, net
    
    
    
    
    
    
    7,767
    
    
    
    
    
    
    
    
    
    
    
    7,767Investment in subsidiaries
    
    
    79,810
    
    
    
    355,793
    
    
    
    
    
    
    
    (435,603
    )
    
    
    Other
    
    
    
    
    
    
    683
    
    
    
    1,700
    
    
    
    
    
    
    
    2,383$
    161,968
    
    
    $
    588,283
    
    
    $
    303,165
    
    
    $
    (573,475
    )
    
    $
    479,941LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    
    
    
    $
    12,572
    
    
    $
    17,240
    
    
    $
    
    
    
    $
    29,812Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    8,585
    
    
    
    
    
    
    
    8,585Accrued expenses and other liabilities
    
    
    
    
    
    
    18,837
    
    
    
    14,227
    
    
    
    
    
    
    
    33,064Accrued interest payable
    
    
    
    
    
    
    7,938
    
    
    
    
    
    
    
    (599
    )
    
    
    7,339Deferred tax liability
    
    
    
    
    
    
    3,728
    
    
    
    1,237
    
    
    
    
    
    
    
    4,965Due to affiliate
    
    
    
    
    
    
    80,824
    
    
    
    56,449
    
    
    
    (137,273
    )
    
    
    Revolving credit facilities
    
    
    
    
    
    
    32,700
    
    
    
    
    
    
    
    
    
    
    
    32,7009.75% Senior Notes due 2011
    
    
    
    
    
    
    201,050
    
    
    
    
    
    
    
    
    
    
    
    201,050Other long-term debt
    
    
    
    
    
    
    458
    
    
    
    
    
    
    
    
    
    
    
    458
    
    
    
    358,107
    
    
    
    97,738
    
    
    
    (137,872
    )
    
    
    317,973Shareholders equity:Common stock
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Additional paid in capital
    
    
    232,176
    
    
    
    100,124
    
    
    
    15,599
    
    
    
    (104,626
    )
    
    
    243,273(Accumulated deficit) retained earnings
    
    
    (105,567
    )
    
    
    87,653
    
    
    
    162,092
    
    
    
    (260,842
    )
    
    
    (116,664
    )Accumulated other comprehensive income
    
    
    35,336
    
    
    
    42,399
    
    
    
    27,736
    
    
    
    (70,135
    )
    
    
    35,336Total shareholders equity
    
    
    161,968
    
    
    
    230,176
    
    
    
    205,427
    
    
    
    (435,603
    )
    
    
    161,968$
    161,968
    
    
    $
    588,283
    
    
    $
    303,165
    
    
    $
    (573,475
    )
    
    $
    479,941
 13




---



##### Table of Contents



CONSOLIDATING BALANCE SHEETS
June 30, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedASSETSCash and cash equivalents
    
    $
    470
    
    
    $
    39,340
    
    
    $
    80,411
    
    
    $
    
    
    
    $
    120,221Restricted cash
    
    
    
    
    
    
    80,750
    
    
    
    
    
    
    
    
    
    
    
    80,750Loans receivableLoans receivable
    
    
    
    
    
    
    9,686
    
    
    
    49,311
    
    
    
    
    
    
    
    58,997Less: Allowance for loan losses
    
    
    
    
    
    
    (1,054
    )
    
    
    (4,311
    )
    
    
    
    
    
    
    (5,365
    )Loans receivable, net
    
    
    
    
    
    
    8,632
    
    
    
    45,000
    
    
    
    
    
    
    
    53,632Other consumer lending receivables
    
    
    
    
    
    
    2,738
    
    
    
    4,807
    
    
    
    
    
    
    
    7,545Other receivables
    
    
    293
    
    
    
    2,754
    
    
    
    5,538
    
    
    
    (420
    )
    
    
    8,165Income taxes receivable
    
    
    
    
    
    
    515
    
    
    
    
    
    
    
    
    
    
    
    515Prepaid expenses
    
    
    
    
    
    
    3,020
    
    
    
    7,146
    
    
    
    
    
    
    
    10,166Deferred
income taxes
    
    
    
    
    
    
    
    
    
    
    185
    
    
    
    
    
    
    
    185Due from affiliates
    
    
    81,366
    
    
    
    61,943
    
    
    
    
    
    
    
    (143,309
    )
    
    
    Property and equipment, net
    
    
    
    
    
    
    11,619
    
    
    
    29,006
    
    
    
    
    
    
    
    40,625Goodwill and other intangibles, net
    
    
    
    
    
    
    97,860
    
    
    
    120,706
    
    
    
    
    
    
    
    218,566Debt issuance costs, net
    
    
    
    
    
    
    9,437
    
    
    
    
    
    
    
    
    
    
    
    9,437Investment in subsidiaries
    
    
    80,474
    
    
    
    341,742
    
    
    
    
    
    
    
    (422,216
    )
    
    
    Other
    
    
    
    
    
    
    647
    
    
    
    1,371
    
    
    
    
    
    
    
    2,018$
    162,603
    
    
    $
    660,997
    
    
    $
    294,170
    
    
    $
    (565,945
    )
    
    $
    551,825LIABILITIES AND SHAREHOLDERS EQUITYAccounts payable
    
    $
    371
    
    
    $
    9,896
    
    
    $
    13,171
    
    
    $
    
    
    
    $
    23,438Foreign income taxes payable
    
    
    
    
    
    
    
    
    
    
    10,963
    
    
    
    
    
    
    
    10,963Accrued expenses and other liabilities
    
    
    279
    
    
    
    20,828
    
    
    
    15,476
    
    
    
    
    
    
    
    36,583Accrued interest payable
    
    
    
    
    
    
    3,732
    
    
    
    
    
    
    
    (420
    )
    
    
    3,312Deferred tax liability
    
    
    
    
    
    
    3,334
    
    
    
    1,205
    
    
    
    
    
    
    
    4,539Due to parent
    
    
    
    
    
    
    81,366
    
    
    
    
    
    
    
    (81,366
    )
    
    
    Due to affiliate
    
    
    
    
    
    
    
    
    
    
    61,943
    
    
    
    (61,943
    )
    
    
    Revolving credit facilities
    
    
    
    
    
    
    39,000
    
    
    
    
    
    
    
    
    
    
    
    39,0009.75% Senior Notes due 2011
    
    
    
    
    
    
    271,487
    
    
    
    
    
    
    
    
    
    
    
    271,487Other long-term debt
    
    
    
    
    
    
    550
    
    
    
    
    
    
    
    
    
    
    
    550Senior Discount Notes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    650
    
    
    
    430,193
    
    
    
    102,758
    
    
    
    (143,729
    )
    
    
    389,872Shareholders equityCommon stock
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23Additional paid in capital
    
    
    231,497
    
    
    
    100,124
    
    
    
    15,599
    
    
    
    (104,626
    )
    
    
    242,594(Accumulated deficit) retained earnings
    
    
    (103,823
    )
    
    
    89,962
    
    
    
    148,529
    
    
    
    (249,588
    )
    
    
    (114,920
    )Accumulated other comprehensive income
    
    
    34,256
    
    
    
    40,718
    
    
    
    27,284
    
    
    
    (68,002
    )
    
    
    34,256Total shareholders equity
    
    
    161,953
    
    
    
    230,804
    
    
    
    191,412
    
    
    
    (422,216
    )
    
    
    161,953$
    162,603
    
    
    $
    660,997
    
    
    $
    294,170
    
    
    $
    (565,945
    )
    
    $
    551,825
 14




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##### Table of Contents



CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Check cashing
    
    $
    
    
    
    $
    11,132
    
    
    $
    27,257
    
    
    $
    
    
    
    $
    38,389Consumer lending:Fees from consumer lending
    
    
    
    
    
    
    18,387
    
    
    
    30,438
    
    
    
    
    
    
    
    48,825Provision for loan losses and adjustment
to servicing income
    
    
    
    
    
    
    (5,590
    )
    
    
    (3,982
    )
    
    
    
    
    
    
    (9,572
    )Consumer lending, net
    
    
    
    
    
    
    12,797
    
    
    
    26,456
    
    
    
    
    
    
    
    39,253Money transfer fees
    
    
    
    
    
    
    1,092
    
    
    
    3,575
    
    
    
    
    
    
    
    4,667Franchise fees and royalties
    
    
    
    
    
    
    1,133
    
    
    
    1,320
    
    
    
    
    
    
    
    2,453Other
    
    
    
    
    
    
    1,621
    
    
    
    5,330
    
    
    
    
    
    
    
    6,951Total revenues
    
    
    
    
    
    
    27,775
    
    
    
    63,938
    
    
    
    
    
    
    
    91,713Store and regional expenses:Salaries and benefits
    
    
    
    
    
    
    12,561
    
    
    
    16,407
    
    
    
    
    
    
    
    28,968Occupancy
    
    
    
    
    
    
    3,466
    
    
    
    4,186
    
    
    
    
    
    
    
    7,652Depreciation
    
    
    
    
    
    
    751
    
    
    
    1,303
    
    
    
    
    
    
    
    2,054Returned checks, net and cash shortages
    
    
    
    
    
    
    1,371
    
    
    
    2,261
    
    
    
    
    
    
    
    3,632Telephone and communications
    
    
    
    
    
    
    813
    
    
    
    731
    
    
    
    
    
    
    
    1,544Advertising
    
    
    
    
    
    
    727
    
    
    
    1,535
    
    
    
    
    
    
    
    2,262Bank charges and armored carrier expenses
    
    
    
    
    
    
    818
    
    
    
    1,450
    
    
    
    
    
    
    
    2,268Other
    
    
    
    
    
    
    3,678
    
    
    
    5,785
    
    
    
    
    
    
    
    9,463Total store and regional expenses
    
    
    
    
    
    
    24,185
    
    
    
    33,658
    
    
    
    
    
    
    
    57,843Store and regional margin
    
    
    
    
    
    
    3,590
    
    
    
    30,280
    
    
    
    
    
    
    
    33,870Corporate and other expenses:Corporate expenses
    
    
    
    
    
    
    6,282
    
    
    
    6,551
    
    
    
    
    
    
    
    12,833Management fee
    
    
    
    
    
    
    (1,576
    )
    
    
    1,576
    
    
    
    
    
    
    
    Other depreciation and amortization
    
    
    
    
    
    
    336
    
    
    
    494
    
    
    
    
    
    
    
    830Interest expense, net
    
    
    
    
    
    
    5,783
    
    
    
    519
    
    
    
    
    
    
    
    6,302Loss on extinguishment of debt
    
    
    
    
    
    
    7,987
    
    
    
    
    
    
    
    
    
    
    
    7,987Other, net
    
    
    
    
    
    
    218
    
    
    
    (130
    )
    
    
    
    
    
    
    88Equity in subsidiary
    
    
    1,744
    
    
    
    
    
    
    
    
    
    
    
    (1,744
    )
    
    
    (Loss) income before income taxes
    
    
    (1,744
    )
    
    
    (15,440
    )
    
    
    21,270
    
    
    
    1,744
    
    
    
    5,830Income tax (benefit) provision
    
    
    
    
    
    
    (134
    )
    
    
    7,708
    
    
    
    
    
    
    
    7,574Net (loss) income
    
    $
    (1,744
    )
    
    $
    (15,306
    )
    
    $
    13,562
    
    
    $
    1,744
    
    
    $
    (1,744
    )
 15




---



##### Table of Contents



CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedRevenues:Check cashing
    
    $
    
    
    
    $
    11,353
    
    
    $
    22,994
    
    
    $
    
    
    
    $
    34,347Consumer lending:Fees from consumer lending
    
    
    
    
    
    
    13,792
    
    
    
    22,445
    
    
    
    
    
    
    
    36,237Provision for loan losses and
adjustment to servicing income
    
    
    
    
    
    
    (4,484
    )
    
    
    (4,288
    )
    
    
    
    
    
    
    (8,772
    )Consumer lending, net
    
    
    
    
    
    
    9,308
    
    
    
    18,157
    
    
    
    
    
    
    
    27,465Money transfer fees
    
    
    
    
    
    
    1,025
    
    
    
    2,933
    
    
    
    
    
    
    
    3,958Franchise fees and royalties
    
    
    
    
    
    
    1,295
    
    
    
    1,621
    
    
    
    
    
    
    
    2,916Other
    
    
    
    
    
    
    2,559
    
    
    
    3,220
    
    
    
    
    
    
    
    5,779Total revenues
    
    
    
    
    
    
    25,540
    
    
    
    48,925
    
    
    
    
    
    
    
    74,465Store and regional expenses:Salaries and benefits
    
    
    
    
    
    
    12,780
    
    
    
    12,411
    
    
    
    
    
    
    
    25,191Occupancy
    
    
    
    
    
    
    3,499
    
    
    
    3,219
    
    
    
    
    
    
    
    6,718Depreciation
    
    
    
    
    
    
    913
    
    
    
    919
    
    
    
    
    
    
    
    1,832Returned checks, net and cash shortages
    
    
    
    
    
    
    1,483
    
    
    
    1,776
    
    
    
    
    
    
    
    3,259Telephone and communications
    
    
    
    
    
    
    852
    
    
    
    569
    
    
    
    
    
    
    
    1,421Advertising
    
    
    
    
    
    
    1,038
    
    
    
    1,151
    
    
    
    
    
    
    
    2,189Bank charges and armored carrier
expenses
    
    
    
    
    
    
    894
    
    
    
    1,201
    
    
    
    
    
    
    
    2,095Other
    
    
    
    
    
    
    3,276
    
    
    
    4,033
    
    
    
    
    
    
    
    7,309Total store and regional expenses
    
    
    
    
    
    
    24,735
    
    
    
    25,279
    
    
    
    
    
    
    
    50,014Store and regional margin
    
    
    
    
    
    
    805
    
    
    
    23,646
    
    
    
    
    
    
    
    24,451Corporate and other expenses:Corporate expenses
    
    
    
    
    
    
    4,505
    
    
    
    4,667
    
    
    
    
    
    
    
    9,172Management fees
    
    
    
    
    
    
    (436
    )
    
    
    436
    
    
    
    
    
    
    
    Other depreciation and amortization
    
    
    
    
    
    
    472
    
    
    
    453
    
    
    
    
    
    
    
    925Interest expense, net
    
    
    
    
    
    
    6,667
    
    
    
    574
    
    
    
    
    
    
    
    7,241Other, net
    
    
    
    
    
    
    277
    
    
    
    (1
    )
    
    
    
    
    
    
    276Equity in subsidiary
    
    
    (2,299
    )
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    Income (loss) before income taxes
    
    
    2,299
    
    
    
    (10,680
    )
    
    
    17,517
    
    
    
    (2,299
    )
    
    
    6,837Income tax (benefit) provision
    
    
    
    
    
    
    (1,849
    )
    
    
    6,387
    
    
    
    
    
    
    
    4,538Net income (loss)
    
    $
    2,299
    
    
    $
    (8,831
    )
    
    $
    11,130
    
    
    $
    (2,299
    )
    
    $
    2,299
 16




---



##### Table of Contents



CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2006
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net (loss) income
    
    $
    (1,744
    )
    
    $
    (15,306
    )
    
    $
    13,562
    
    
    $
    1,744
    
    
    $
    (1,744
    )Adjustments to reconcile net (loss) income to net cash
(used in) provided by operating activities:Undistributed income of subsidiary
    
    
    1,744
    
    
    
    
    
    
    
    
    
    
    
    (1,744
    )
    
    
    Depreciation and amortization
    
    
    
    
    
    
    1,472
    
    
    
    1,797
    
    
    
    
    
    
    
    3,269Non-cash stock compensation
    
    
    335
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    335Loss on extinguishment of debt
    
    
    
    
    
    
    7,987
    
    
    
    
    
    
    
    
    
    
    
    7,987Losses on store closings
    
    
    
    
    
    
    138
    
    
    
    11
    
    
    
    
    
    
    
    149Deferred tax provision
    
    
    
    
    
    
    394
    
    
    
    10
    
    
    
    
    
    
    
    404Change in assets and liabilities (net of effect of
acquisitions):Increase in loans and other receivables
    
    
    (121
    )
    
    
    (415
    )
    
    
    (7,400
    )
    
    
    179
    
    
    
    (7,757
    )Increase in income taxes receivable
    
    
    
    
    
    
    (4,148
    )
    
    
    
    
    
    
    3,624
    
    
    
    (524
    )Decrease in prepaid expenses and other
    
    
    
    
    
    
    534
    
    
    
    352
    
    
    
    
    
    
    
    886(Decrease) increase in accounts payable, income taxes,
payable, accrued expenses and other liabilities and
accrued interest payable
    
    
    (650
    )
    
    
    8,351
    
    
    
    1,323
    
    
    
    (3,803
    )
    
    
    5,221Net cash (used in) provided by operating activities
    
    
    (436
    )
    
    
    (993
    )
    
    
    9,655
    
    
    
    
    
    
    
    8,226Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    88
    
    
    
    (1,047
    )
    
    
    
    
    
    
    (959
    )Additions to property and equipment
    
    
    
    
    
    
    (808
    )
    
    
    (3,898
    )
    
    
    
    
    
    
    (4,706
    )Net increase in due from affiliates
    
    
    
    
    
    
    (5,229
    )
    
    
    
    
    
    
    5,229
    
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    (5,949
    )
    
    
    (4,945
    )
    
    
    5,229
    
    
    
    (5,665
    )Cash flows from financing activities:Decrease in restricted cash
    
    
    
    
    
    
    80,750
    
    
    
    
    
    
    
    
    
    
    
    80,750Proceeds from the exercise of stock options
    
    
    344
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    344Other debt payments
    
    
    
    
    
    
    (92
    )
    
    
    
    
    
    
    
    
    
    
    (92
    )Partial redemption of 9.75% Senior Notes due 2011
    
    
    
    
    
    
    (76,825
    )
    
    
    
    
    
    
    
    
    
    
    (76,825
    )Net decrease in revolving credit facilities
    
    
    
    
    
    
    (6,300
    )
    
    
    
    
    
    
    
    
    
    
    (6,300
    )Payment of debt issuance costs
    
    
    
    
    
    
    (85
    )
    
    
    
    
    
    
    
    
    
    
    (85
    )Net decrease in due to affiliates and due from parent
    
    
    542
    
    
    
    10,810
    
    
    
    (6,123
    )
    
    
    (5,229
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    886
    
    
    
    8,258
    
    
    
    (6,123
    )
    
    
    (5,229
    )
    
    
    (2,208
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    
    
    
    
    
    
    
    
    (197
    )
    
    
    
    
    
    
    (197
    )Net increase (decrease) in cash and cash equivalents
    
    
    450
    
    
    
    1,316
    
    
    
    (1,610
    )
    
    
    
    
    
    
    156Cash and cash equivalents at beginning of period
    
    
    470
    
    
    
    39,340
    
    
    
    80,411
    
    
    
    
    
    
    
    120,221Cash and cash equivalents at end of period
    
    $
    920
    
    
    $
    40,656
    
    
    $
    78,801
    
    
    $
    
    
    
    $
    120,377
 17




---



##### Table of Contents



CONSOLIDATING STATEMENTS OF CASH FLOWS
Three Months Ended September 30, 2005
(In thousands)
 Dollar FinancialDollar
    
    
    Group, Inc.
    
    
    SubsidiaryFinancial
    
    
    and Subsidiary
    
    
    Non-Corp.
    
    
    Guarantors
    
    
    Guarantors
    
    
    Eliminations
    
    
    ConsolidatedCash flows from operating activities:Net income (loss)
    
    $
    2,299
    
    
    $
    (8,831
    )
    
    $
    11,130
    
    
    $
    (2,299
    )
    
    $
    2,299Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating
activities:Undistributed income of subsidiary
    
    
    (2,299
    )
    
    
    
    
    
    
    
    
    
    
    2,299
    
    
    
    Depreciation and amortization
    
    
    
    
    
    
    1,801
    
    
    
    1,374
    
    
    
    
    
    
    
    3,175Non-cash stock compensation
    
    
    28
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28Losses on store closings
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    
    
    
    
    257Foreign currency loss on revaluation of
subordinated borrowings
    
    
    
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7Deferred tax provision (benefit)
    
    
    
    
    
    
    340
    
    
    
    (8
    )
    
    
    
    
    
    
    332Change in assets and liabilities (net of effect
of acquisitions):Decrease (increase) in loans and other
receivables
    
    
    
    
    
    
    85
    
    
    
    (5,441
    )
    
    
    342
    
    
    
    (5,014
    )Increase in income taxes receivable
    
    
    
    
    
    
    (3,847
    )
    
    
    
    
    
    
    1,791
    
    
    
    (2,056
    )Decrease in prepaid expenses and other
    
    
    
    
    
    
    535
    
    
    
    1,470
    
    
    
    
    
    
    
    2,005Increase (decrease) in accounts
payable, income taxes payable,
accrued expenses and other liabilities
and accrued
interest payable
    
    
    50
    
    
    
    6,287
    
    
    
    (904
    )
    
    
    (2,133
    )
    
    
    3,300Net cash provided by (used in) operating activities
    
    
    78
    
    
    
    (3,366
    )
    
    
    7,621
    
    
    
    
    
    
    
    4,333Cash flows from investing activities:Acquisitions, net of cash acquired
    
    
    
    
    
    
    (4,618
    )
    
    
    (304
    )
    
    
    
    
    
    
    (4,922
    )Additions to property and equipment
    
    
    
    
    
    
    (2,317
    )
    
    
    (2,677
    )
    
    
    
    
    
    
    (4,994
    )Net decrease in due from affiliates
    
    
    
    
    
    
    13,270
    
    
    
    
    
    
    
    (13,270
    )
    
    
    Net cash used in investing activities
    
    
    
    
    
    
    6,335
    
    
    
    (2,981
    )
    
    
    (13,270
    )
    
    
    (9,916
    )Cash flows from financing activities:Proceeds from the exercise of stock options
    
    
    144
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144Net increase in revolving credit facilities
    
    
    
    
    
    
    11,900
    
    
    
    
    
    
    
    
    
    
    
    11,900Payment of debt issuance costs
    
    
    
    
    
    
    (1,119
    )
    
    
    
    
    
    
    
    
    
    
    (1,119
    )Net decrease in due to affiliates and
due from parent
    
    
    (27
    )
    
    
    (4,876
    )
    
    
    (8,367
    )
    
    
    13,270
    
    
    
    Net cash provided by (used in) financing activities
    
    
    117
    
    
    
    5,905
    
    
    
    (8,367
    )
    
    
    13,270
    
    
    
    10,925Effect of exchange rate changes on cash and
cash equivalents
    
    
    
    
    
    
    
    
    
    
    1,889
    
    
    
    
    
    
    
    1,889Net increase (decrease) in cash and cash equivalents
    
    
    195
    
    
    
    8,874
    
    
    
    (1,838
    )
    
    
    
    
    
    
    7,231Cash and cash equivalents at beginning of period
    
    
    4
    
    
    
    30,049
    
    
    
    62,451
    
    
    
    
    
    
    
    92,504Cash and cash equivalents at end of period
    
    $
    199
    
    
    $
    38,923
    
    
    $
    60,613
    
    
    $
    
    
    
    $
    99,735
 18




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 6. GOODWILL AND OTHER INTANGIBLES
  Fiscal Year Ending
    
    AmountJune 30,
    
    (in thousands)2007
    
    $
    61.92008
    
    
    82.52009
    
    
    82.52010
    
    
    82.52011
    
    
    82.5Thereafter
    
    
    288.5$
    680.4
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalBalance at June 30, 2005
    
    $
    87,535
    
    
    $
    42,459
    
    
    $
    56,196
    
    
    $
    186,190Amortization of other intangibles
    
    
    (93
    )
    
    
    
    
    
    
    
    
    
    
    (93
    )Acquisition
    
    
    10,418
    
    
    
    13,896
    
    
    
    1,618
    
    
    
    25,932Foreign currency translation adjustments
    
    
    
    
    
    
    4,737
    
    
    
    1,800
    
    
    
    6,537Balance at June 30, 2006
    
    
    97,860
    
    
    
    61,092
    
    
    
    59,614
    
    
    
    218,566Amortization of other intangibles
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    (19
    )Acquisition
    
    
    (77
    )
    
    
    (120
    )
    
    
    986
    
    
    
    789Foreign currency translation adjustments
    
    
    
    
    
    
    (311
    )
    
    
    726
    
    
    
    415Balance at September 30, 2006
    
    $
    97,764
    
    
    $
    60,661
    
    
    $
    61,326
    
    
    $
    219,751
  June 30, 2006
    
    
    September 30, 2006Gross Carrying
    
    
    Accumulated
    
    
    Gross Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationNon-amortized intangible assets:Cost in excess of net assets acquired
    
    $
    232,279
    
    
    $
    21,191
    
    
    $
    233,334
    
    
    $
    21,508Territory rights
    
    
    5,361
    
    
    
    
    
    
    
    5,347
    
    
    
    Reacquired franchise rights
    
    
    1,478
    
    
    
    
    
    
    
    2,021
    
    
    
    239,118
    
    
    
    21,191
    
    
    
    240,702
    
    
    
    21,508Amortized intangible assets:Franchise agreements
    
    $
    755
    
    
    $
    116
    
    
    $
    680
    
    
    $
    123$
    755
    
    
    $
    116
    
    
    $
    680
    
    
    $
    123
 19




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 7. COMPREHENSIVE INCOME
  Three months EndedSeptember 30,2005
    
    
    2006Net income (loss)
    
    $
    2,299
    
    
    $
    (1,744
    )Foreign currency translation adjustment
    
    
    4,434
    
    
    
    1,123Fair value adjustments for cash flow hedges
    
    
    204
    
    
    
    (43
    )Total comprehensive income (loss)
    
    $
    6,937
    
    
    $
    (664
    )
 8. GEOGRAPHIC SEGMENT INFORMATION
  United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months
ended September 30, 2005Identifiable assets
    
    $
    175,822
    
    
    $
    121,905
    
    
    $
    111,552
    
    
    $
    409,279Goodwill and other intangibles, net
    
    
    92,131
    
    
    
    45,106
    
    
    
    55,490
    
    
    
    192,727Sales to unaffiliated customers:Check cashing
    
    
    11,353
    
    
    
    12,200
    
    
    
    10,794
    
    
    
    34,347Consumer lending:Fees from consumer lending
    
    
    13,791
    
    
    
    15,057
    
    
    
    7,389
    
    
    
    36,237Provision for loan losses and adjustments
to servicing revenue
    
    
    (4,483
    )
    
    
    (2,726
    )
    
    
    (1,563
    )
    
    
    (8,772
    )Consumer lending, net
    
    
    9,308
    
    
    
    12,331
    
    
    
    5,826
    
    
    
    27,465Money
transfer fees
    
    
    1,025
    
    
    
    1,914
    
    
    
    1,019
    
    
    
    3,958Franchise fees and royalties
    
    
    1,621
    
    
    
    1,295
    
    
    
    
    
    
    
    2,916Other
    
    
    2,233
    
    
    
    2,618
    
    
    
    928
    
    
    
    5,779Total sales to unaffiliated customers
    
    
    25,540
    
    
    
    30,358
    
    
    
    18,567
    
    
    
    74,465Interest
expense (income), net
    
    
    6,667
    
    
    
    (145
    )
    
    
    719
    
    
    
    7,241Depreciation and amortization
    
    
    1,385
    
    
    
    754
    
    
    
    618
    
    
    
    2,757(Loss) income before income taxes
    
    
    (10,680
    )
    
    
    12,750
    
    
    
    4,767
    
    
    
    6,837Income tax (benefit) provision
    
    
    (1,849
    )
    
    
    4,998
    
    
    
    1,389
    
    
    
    4,538
 20




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 8. GEOGRAPHIC SEGMENT INFORMATION (continued)
 United
    
    
    
    
    
    
    UnitedStates
    
    
    Canada
    
    
    Kingdom
    
    
    TotalAs of and for the three months
ended September 30, 2006Identifiable assets
    
    $
    176,776
    
    
    $
    163,001
    
    
    $
    140,164
    
    
    $
    479,941Goodwill and other intangibles, net
    
    
    97,764
    
    
    
    60,661
    
    
    
    61,326
    
    
    
    219,751Sales to unaffiliated customers:Check cashing
    
    
    11,132
    
    
    
    14,731
    
    
    
    12,526
    
    
    
    38,389Consumer lending:Fees from consumer lending
    
    
    18,387
    
    
    
    20,851
    
    
    
    9,587
    
    
    
    48,825Provision for loan losses and adjustments
to servicing revenue
    
    
    (5,590
    )
    
    
    (2,019
    )
    
    
    (1,963
    )
    
    
    (9,572
    )Consumer lending, net
    
    
    12,797
    
    
    
    18,832
    
    
    
    7,624
    
    
    
    39,253Money transfer fees
    
    
    1,092
    
    
    
    2,411
    
    
    
    1,164
    
    
    
    4,667Franchise fees and royalties
    
    
    1,133
    
    
    
    1,320
    
    
    
    
    
    
    
    2,453Other
    
    
    1,621
    
    
    
    3,773
    
    
    
    1,557
    
    
    
    6,951Total sales to unaffiliated customers
    
    
    27,775
    
    
    
    41,067
    
    
    
    22,871
    
    
    
    91,713Interest expense (income), net
    
    
    5,783
    
    
    
    (234
    )
    
    
    753
    
    
    
    6,302Depreciation and amortization
    
    
    1,087
    
    
    
    967
    
    
    
    830
    
    
    
    2,884(Loss) income before income taxes
    
    
    (15,440
    )
    
    
    17,064
    
    
    
    4,206
    
    
    
    5,830Income tax (benefit) provision
    
    
    (134
    )
    
    
    6,356
    
    
    
    1,352
    
    
    
    7,574
 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
   21




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. CONTINGENT LIABILITIES
  Canadian Legal Proceedings
  Mortillaro Smith
      United
States Legal Proceedings
 (Woods) (Castillo)
 22




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. CONTINGENT LIABILITIES (continued)
 United
States Legal Proceedings (continued)
 (Chin) (Williams).
 Chin Chin
 Woods Castillo Williams Woods Castillo Williams Castillo Castillo Woods, Castillo Williams
 Bufil Chin Bufil
  Bufil Chin Yoe
 We The
People Legal Proceedings
    23




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
 10. CONTINGENT LIABILITIES (continued)
 We The
People Legal Proceedings (continued)
   
    ex parte
  24




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  10. CONTINGENT LIABILITIES (continued)
 We The
People Legal Proceedings (continued)
      Glen Tioram Moors, Inc.
    25




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##### Table of Contents



DOLLAR FINANCIAL CORP.
 NOTES TO INTERIM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
  11. SUBSEQUENT EVENTS
        Tender premium
    
    $
    17.6Deferred Issuance costs
    
    
    7.3$
    24.9
  26




---



##### Table of Contents



DOLLAR FINANCIAL CORP.
 SUPPLEMENTAL STATISTICAL DATA
 September 30,2005
    
    
    2006Company Operating Data:Stores in operation:Company-owned
    
    
    744
    
    
    
    785Franchised stores and check cashing merchants
    
    
    572
    
    
    
    480Total
    
    
    1,316
    
    
    
    1,265
 Three Months EndedSeptember 30,2005
    
    2006Check Cashing Data:Face amount of checks cashed (in millions)
    
    $
    917
    
    
    $
    1,010Face amount of average check
    
    $
    439
    
    
    $
    476Face amount of average check (excluding Canada
and the United Kingdom)
    
    $
    389
    
    
    $
    401Average fee per check
    
    $
    16.45
    
    
    $
    18.10Number of checks cashed (in thousands)
    
    
    2,088
    
    
    
    2,120
 Three Months EndedSeptember 30,2005
    
    
    2006(in thousands)Check Cashing Collections Data:Face amount of returned checks
    
    $
    10,219
    
    
    $
    10,822Collections
    
    
    (7,257
    )
    
    
    (7,712
    )Net write-offs
    
    $
    2,962
    
    
    $
    3,110Collections as a percentage of returned checks
    
    
    71.0
    %
    
    
    71.3
    %Net write-offs as a percentage of check cashing
revenues
    
    
    8.6
    %
    
    
    8.1
    %Net write-offs as a percentage of the face amount
of checks cashed
    
    
    0.32
    %
    
    
    0.31
    %
 27




---



##### Table of Contents



Three Months EndedSeptember 30,2005
    
    
    2006U.S. company-funded consumer loan originations (1)
    
    $
    67,636
    
    
    $
    62,234Canadian company-funded consumer loan originations (2)
    
    
    129,092
    
    
    
    160,298U.K. company-funded consumer loan originations (2)
    
    
    51,922
    
    
    
    58,017Total company-funded consumer loan originations
    
    $
    248,650
    
    
    $
    280,549U.S. Servicing revenues
    
    $
    3,952
    
    
    $
    8,290U.S. company-funded consumer loan revenues
    
    
    9,839
    
    
    
    10,097Canadian company-funded consumer loan revenues
    
    
    15,057
    
    
    
    20,851U.K. company-funded consumer loan revenues
    
    
    7,389
    
    
    
    9,587Provision for loan losses and adjustment to servicing revenues
    
    
    (8,772
    )
    
    
    (9,572
    )Total consumer lending revenues, net
    
    $
    27,465
    
    
    $
    39,253Gross charge-offs of company-funded consumer loans
    
    $
    25,873
    
    
    $
    31,888Recoveries of company-funded consumer loans
    
    
    (20,970
    )
    
    
    (25,692
    )Net charge-offs on company-funded consumer loans
    
    $
    4,903
    
    
    $
    6,196Gross charge-offs of company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    10.4
    %
    
    
    11.4
    %Recoveries of company-funded consumer loans as a
percentage of total company-funded consumer loan
originations
    
    
    8.4
    %
    
    
    9.2
    %Net charge-offs on company-funded consumer loans
as a percentage of total company-funded consumer loan
originations
    
    
    2.0
    %
    
    
    2.2
    %
 
 (1)
    
    Our company operated stores in the United States originated company-funded and
bank-funded single-payment consumer loans during the three months
ended September 30, 2005 and now offer only company-funded single-payment
consumer loans in all markets, with the exception of Texas, during
the three months ended September 30, 2006. In Texas, we now offer single-payment consumer loans under a credit services
organization model.(2)
    
    All consumer loans originated in Canada and the United Kingdom are company funded. 28




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
 The following is a discussion and analysis of the financial condition and results of operations for
Dollar Financial Corp. for the three months ended September 30, 2006 and 2005. References in this
section to we, our, ours, or us are to Dollar Financial Corp. and its wholly owned
subsidiaries, except as the context otherwise requires. References to OPCO are to our wholly
owned operating subsidiary, Dollar Financial Group, Inc.
 Executive Summary
  ® ® ®
  ®
    29




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##### Table of Contents



Discussion of Critical Accounting Policies
   Revenue Recognition
       30




---



##### Table of Contents



®
 Company-Funded Consumer Loan Loss Reserves Policy
   Check Cashing Returned Item Policy
  Goodwill
  31




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##### Table of Contents



Income Taxes
  Results of Operations
 Revenue Analysis
 Three Months Ended September 30,
 (Percentage of total($ in thousands)
    
    
    revenue)2005
    
    
    2006
    
    
    2005
    
    
    2006Check cashing
    
    $
    34,347
    
    
    $
    38,389
    
    
    
    46.1
    %
    
    
    41.9
    %Consumer lending revenue, net
    
    
    27,465
    
    
    
    39,253
    
    
    
    36.9
    %
    
    
    42.8
    %Money transfer fees
    
    
    3,958
    
    
    
    4,667
    
    
    
    5.3
    %
    
    
    5.1
    %Franchise fees and royalties
    
    
    2,916
    
    
    
    2,453
    
    
    
    3.9
    %
    
    
    2.7
    %Other revenue
    
    
    5,779
    
    
    
    6,951
    
    
    
    7.8
    %
    
    
    7.5
    %Total revenue
    
    $
    74,465
    
    
    $
    91,713
    
    
    
    100.0
    %
    
    
    100.0
    %
 The Three Months Ended September 30, 2006 compared to the Three Months Ended September 30,
2005
  ®
 32




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##### Table of Contents



Store and Regional Expense Analysis
 Three Months Ended September 30,
 ($ in thousands)
    
    
(Percentage of total revenue)2005
    
    
    2006
    
    
    2005
    
    
    2006Salaries and benefits
    
    $
    25,191
    
    
    $
    28,968
    
    
    
    33.8
    %
    
    
    31.6
    %Occupancy
    
    
    6,718
    
    
    
    7,652
    
    
    
    9.0
    %
    
    
    8.3
    %Depreciation
    
    
    1,832
    
    
    
    2,054
    
    
    
    2.5
    %
    
    
    2.2
    %Returned checks, net and cash shortages
    
    
    3,259
    
    
    
    3,632
    
    
    
    4.4
    %
    
    
    4.0
    %Telephone and communications
    
    
    1,421
    
    
    
    1,544
    
    
    
    1.9
    %
    
    
    1.7
    %Advertising
    
    
    2,189
    
    
    
    2,262
    
    
    
    2.9
    %
    
    
    2.5
    %Bank
charges and armored carrier expenses
    
    
    2,095
    
    
    
    2,268
    
    
    
    2.8
    %
    
    
    2.5
    %Other
    
    
    7,309
    
    
    
    9,463
    
    
    
    9.9
    %
    
    
    10.3
    %Total store and regional expenses
    
    $
    50,014
    
    
    $
    57,843
    
    
    
    67.2
    %
    
    
    63.1
    %
   33




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##### Table of Contents



Corporate and Other Expense Analysis
 Three Months Ended September 30,
 (Percentage of total($ in thousands)
    
    revenue)2005
    
    2006
    
    2005
    
    2006Corporate expenses
    
    $
    9,172
    
    
    $
    12,833
    
    
    
    12.3
    %
    
    
    14.0
    %Other depreciation and amortization
    
    
    925
    
    
    
    830
    
    
    
    1.2
    %
    
    
    0.9
    %Interest expense
    
    
    7,241
    
    
    
    6,302
    
    
    
    9.7
    %
    
    
    6.9
    %Loss on extinguishment of debt
    
    
    
    
    
    
    7,987
    
    
    
    0.0
    %
    
    
    8.7
    %Other
    
    
    276
    
    
    
    88
    
    
    
    0.4
    %
    
    
    0.1
    %Income tax provision
    
    
    4,538
    
    
    
    7,574
    
    
    
    6.1
    %
    
    
    8.3
    %
 Corporate Expenses.
  Other Depreciation and Amortization.
  Interest Expense
  Loss on Extinguishment of Debt.
   Income Tax Provision
  34




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##### Table of Contents



Changes in Financial Condition
  Liquidity and Capital Resources
     Revolving Credit Facilities.
 Prior Domestic Revolving Credit Facility.On November 13, 2003, OPCO repaid, in full, all
borrowings outstanding under its previously existing credit facility using a portion of the
proceeds from the issuance of $220.0 million principal amount of OPCOs Notes and
simultaneously entered into a new $55.0 million senior secured reducing revolving credit
facility. On July 8, 2005, OPCO entered into an amendment and restatement of its credit
facility to increase the maximum amount of the facility from $55 million to $80 million. The
amendment and restatement reduced the rate of interest and fees payable under the credit
facility and eliminated the quarterly reductions to the commitment amount. In addition, the
amendment and restatement extended the term of the credit facility for one additional year to
November 12, 2009. At OPCOs request, existing lenders and/or additional lenders could agree
to increase the maximum amount of the credit facility to
$100 million. Under the prior credit
facility, up to $30.0 million was available in connection with letters of credit. The
commitment was subject to reductions in the event we engaged in certain issuances of debt or
equity securities or asset disposals. OPCOs borrowing capacity under the credit facility
was limited to the lesser of the total commitment of $80.0 million or 85% of certain liquid
assets. At September 30, 2006, the borrowing capacity was $69.3 million which consisted of
the $80.0 million commitment less letters of credit totaling $10.7 million issued by Wells
Fargo Bank, which guarantee the performance of certain of the contractual obligations. There
was $32.7 million outstanding under the prior facility at September 30, 2006.
 Prior Canadian Overdraft Facility.Our Canadian operating subsidiary had a Canadian
overdraft facility to fund peak working capital needs for our Canadian operations. The
Canadian overdraft facility provided for a commitment of up to approximately $10.0 million in
Canadian equivalent, of which there was no outstanding balance on September 30, 2006. Amounts
 35




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##### Table of Contents



outstanding under the Canadian overdraft facility accrued interest at a rate of Canadian
prime and were secured by a $10.0 million letter of credit issued by Wells Fargo Bank under
our prior domestic revolving credit facility.
 New Credit Facilities.
 Long-Term Debt.
 Operating Leases.
  Payments Due by Period (in thousands)Less than
    
    
    1 - 3
    
    
    4 - 5
    
    
    After 5Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    YearsRevolving credit facilities
    
    $
    32,700
    
    
    $
    32,700
    
    
    $
    
    
    
    $
    
    
    
    $
    Long-term debt:9.75% Senior Notes due 2011(1)
    
    
    201,050
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    201,050Operating lease obligations
    
    
    91,847
    
    
    
    23,772
    
    
    
    36,152
    
    
    
    17,484
    
    
    
    14,439Other long-term liabilities reflected on
the registrants balance sheet under
GAAP
    
    
    458
    
    
    
    366
    
    
    
    92
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    326,055
    
    
    $
    56,838
    
    
    $
    36,244
    
    
    $
    17,484
    
    
    $
    215,489
 
 (1)
    
    $1,050 is the unamortized premium on the Notes.  36




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##### Table of Contents



Balance Sheet Variations
 September 30, 2006 compared to June 30, 2006
           Seasonality and Quarterly Fluctuations
  Recent Accounting Pronouncements
 Accounting for
Uncertainty in Income Taxes, Accounting for Income Taxes
 37




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##### Table of Contents



Fair Value Measurements
 Cautionary Statement for Purposes of the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
 Generally
  
    
    interest rates on debt; and
    
    foreign exchange rates generating translation gains and losses.
  Interest Rates
  Foreign Exchange Rates
  38




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##### Table of Contents



Item 4. Controls and Procedures
 Evaluation of Disclosure Control and Procedures
  Changes in Internal Control Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  Canadian Legal Proceedings
  39




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##### Table of Contents



United
States Legal Proceedings
 (Woods) (Castillo) (Chin) (Williams).
 Chin Chin
 Woods Castillo Williams Woods Castillo Williams Castillo Castillo Woods, Castillo Williams
 Bufil Chin Bufil
  Bufil Chin Yoe
 40




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##### Table of Contents



We The
People Legal Proceedings
       41




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##### Table of Contents



Glen Tioram Moors, Inc.
    42




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##### Table of Contents



Item 6. Exhibits
 Exhibit No.
    
    Description of Document2.1
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart
Company, a Nova Scotia unlimited company, 764815 Ontario Inc., 1556911 Ontario Limited,
6052746 Canada Inc., 1068020 Ontario Inc. a company incorporated under the laws of the
Province of Ontario, The David Robertson Family Trust and David Robertson (1).2.2
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart
Company, a Nova Scotia unlimited company, Canadian Capital Corporation, an Ontario
Corporation, Gus Baril, Leslie Baril, and Baril Family Trust #2 (1).2.3
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart
Company, a
Nova Scotia unlimited company, 0729648 B.C. Ltd., 1204594 Alberta Ltd., 360788 B.C.
Ltd.,1008485 Alberta Ltd., 769515 Alberta Ltd., 815028 Alberta Inc., 632758 Alberta
Ltd., a company incorporated under the laws of the Province of Alberta, Rich-Mar
Securities Ltd., a company incorporated under the laws of the Province of British
Columbia, Mary Franchuk and The Mary Franchuk Family Trust (1).2.4
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart
Company, a Nova Scotia unlimited company, Jenica Holdings Inc. an Ontario Corporation,
Shelley Stanga and 1210260 Ontario Limited, an Ontario Corporation (1).2.5
    
    Purchase Agreement, dated as of October 31, 2006, among National Money Mart
Company, a Nova Scotia unlimited company, 931669 Ontario Limited, 3081219 Nova Scotia
Ltd., 3085725 Nova Scotia Limited, 603000 N.B. Inc., 602268 N.B. Inc., 11242
Newfoundland Limited, 722906 Ontario Limited, 2203850 Nova Scotia Limited, 3085726 Nova
Scotia Limited, 511742 N.B. Inc., 602269 N.B. Inc., 10768 Newfoundland Limited, R Kruze
Holdings Ltd., a company incorporated under the laws of the Province of Alberta, 1016725
Ontario Ltd., a company incorporated under the laws of the Province of Ontario,
101090510 Saskatchewan Ltd., a company incorporated under the laws of the Province of
Saskatchewan, Ron Kuzyk, Amber Kuzyk, Gerry Kilduff and Jeanette Kilduff (1).4.1
    
    Fourth Supplemental Indenture, dated October 27, 2006 among Dollar Financial
Group, Inc., a New York corporation, Dollar Financial Corp., a Delaware corporation
(DFC), the guarantors named therein and U.S. Bank National Association, as trustee
(1).10.2
    
    Credit Agreement among Dollar Financial Corp., Dollar Financial Group, Inc.,
National Money Mart Company, Dollar Financial U.K. Limited, the several lenders from
time to time parties thereto, U.S. Bank National Association, as documentation agent,
Credit Suisse Securities (USA) LLC, as syndication agent, and Wells Fargo Bank, National
Association, as administrative agent and as security trustee, dated as of October 30,
2006(1).31.1
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    
    Rule 13a-14(a)/15d-14(a) Certification of President31.3
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    
    Section 1350 Certification of Chief Executive Officer32.2
    
    Section 1350 Certification of President32.3
    
    Section 1350 Certification of Chief Financial Officer


43



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SIGNATURE
  DOLLAR FINANCIAL CORP.
 Date: November 8, 2006
    
    *By:
    /s/ Randy UnderwoodName:
    
    Randy UnderwoodTitle:
    
    Executive Vice President andChief Financial Officer(principal financial andchief accounting officer)
 
 *
    
    The signatory hereto is the principal financial and chief accounting officer and has been
duly authorized to sign on behalf of the registrant. 44