##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended December 25, 2008

or



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

For the transition period from  to

Commission file number 333-122531





THE MONEY TREE INC

(Exact name of registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Georgia                                                        |  | 58-2171386                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

114 South Broad Street

Bainbridge, Georgia 39817

(Address, including zip code, of principal
executive offices)

Registrants telephone number, including area code (229) 246-6536





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.    x  Yes     ̈  No

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



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

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

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the last practicable date.



|                    |  |                                 
|------------------- |  | --------------------------------
|Class               |  | Outstanding at December 25, 2008
|Class A, Voting     |  | 2,686 Shares                    
|Class B, Non-Voting |  | 26,860 Shares                   









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##### Table of Contents

THE MONEY TREE INC.

FORM 10-Q

December 25, 2008

TABLE OF CONTENTS

Index to Financial
Statements



|        |  |                                                                                                         |  |     
|------- |  | ------------------------------------------------------------------------------------------------------- |  | ----
|ItemNo. |  |                                                                                                         |  | Page
|        |  | PART I  FINANCIAL INFORMATION                                                                          |  |     
|        |  |                                                                                                        
|1       |  | Financial Statements                                                                                    |  | 3   
|        |  |                                                                                                        
|        |  | Consolidated Balance Sheets as of December 25, 2008 (Unaudited) and September 25, 2008                  |  | 3   
|        |  |                                                                                                        
|        |  | Consolidated Statements of Operations for the three months ended December 25, 2008 and 2007
(Unaudited) |  | 4   
|        |  |                                                                                                        
|        |  | Consolidated Statements of Cash Flows for the three months ended December 25, 2008 and 2007 (Unaudited) |  | 5   
|        |  |                                                                                                        
|        |  | Notes to Consolidated Financial Statements (Unaudited)                                                  |  | 7   
|        |  |                                                                                                        
|2       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                   |  | 16  
|        |  |                                                                                                        
|3       |  | Quantitative and Qualitative Disclosures About Market Risk                                              |  | 28  
|        |  |                                                                                                        
|4       |  | Controls and Procedures                                                                                 |  | 28  
|        |  |                                                                                                        
|        |  | PART II  OTHER INFORMATION                                                                             |  |     
|        |  |                                                                                                        
|1       |  | Legal Proceedings                                                                                       |  | 30  
|        |  |                                                                                                        
|1A      |  | Risk Factors                                                                                            |  | 30  
|        |  |                                                                                                        
|2       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                             |  | 30  
|        |  |                                                                                                        
|3       |  | Defaults Upon Senior Securities                                                                         |  | 30  
|        |  |                                                                                                        
|4       |  | Submission of Matters to a Vote of Security Holders                                                     |  | 30  
|        |  |                                                                                                        
|5       |  | Other Information                                                                                       |  | 30  
|        |  |                                                                                                        
|6       |  | Exhibits                                                                                                |  | 30  



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##### Table of Contents

Item 1. Financial Statements

The Money Tree Inc. and Subsidiaries

Consolidated
Balance Sheets



|                                                                                                    |  |                   |             |   |                    |   |             |  
|--------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ------------------ | - | ----------- | -
|                                                                                                    |  | December 25, 2008 |             |   | September 25, 2008 |  
|                                                                                                    |  | (Unaudited)       |             |   |                    |  
|Assets                                                                                              |  |                   |             |   |                    |   |             |  
|Cash and cash equivalents                                                                           |  | $                 | 5,260,284   |   |                    | $ | 12,541,302  |  
|Finance receivables, net                                                                            |  |                   | 67,213,838  |   |                    |   | 67,730,473  |  
|Other receivables                                                                                   |  |                   | 1,904,061   |   |                    |   | 956,752     |  
|Inventory                                                                                           |  |                   | 2,766,017   |   |                    |   | 3,167,021   |  
|Property and equipment, net                                                                         |  |                   | 4,823,540   |   |                    |   | 4,906,189   |  
|Other assets                                                                                        |  |                   | 2,410,452   |   |                    |   | 2,498,205   |  
|                                                                                                    |  |                   |             |   |                    |   |             |  
|Total assets                                                                                        |  | $                 | 84,378,192  |   |                    | $ | 91,799,942  |  
|                                                                                                    |  |                   |             |   |                    |   |             |  
|                                                                                                    |  |                  
|Liabilities and Shareholders Deficit                                                               |  |                   |             |   |                    |   |             |  
|                                                                                                    |  |                  
|Liabilities                                                                                         |  |                   |             |   |                    |   |             |  
|Accounts payable and other accrued liabilities                                                      |  | $                 | 3,498,124   |   |                    | $ | 3,278,870   |  
|Accrued interest payable                                                                            |  |                   | 14,359,353  |   |                    |   | 14,854,877  |  
|Senior debt                                                                                         |  |                   | 422,505     |   |                    |   | 694,890     |  
|Variable rate subordinated debentures                                                               |  |                   | 77,410,936  |   |                    |   | 82,209,211  |  
|Demand notes                                                                                        |  |                   | 3,212,204   |   |                    |   | 3,658,160   |  
|                                                                                                    |  |                   |             |   |                    |   |             |  
|Total liabilities                                                                                   |  |                   | 98,903,122  |   |                    |   | 104,696,008 |  
|                                                                                                    |  |                   |             |   |                    |   |             |  
|                                                                                                    |  |                  
|Commitments and contingencies (see Note 10)                                                         |  |                   |             |   |                    |   |             |  
|                                                                                                    |  |                  
|Shareholders deficit                                                                               |  |                   |             |   |                    |   |             |  
|Common stock:                                                                                       |  |                   |             |   |                    |   |             |  
|Class A voting, no par value; 500,000 shares authorized, 2,686 shares issued and outstanding        |  |                   | 1,677,647   |   |                    |   | 1,677,647   |  
|Class B non-voting, no par value; 1,500,000 shares authorized, 26,860 shares issued and outstanding |  |                   |            |   |                    |   |            |  
|Accumulated deficit                                                                                 |  |                   | (16,202,577 | ) |                    |   | (14,573,713 | )
|                                                                                                    |  |                   |             |   |                    |   |             |  
|Total shareholders deficit                                                                         |  |                   | (14,524,930 | ) |                    |   | (12,896,066 | )
|                                                                                                    |  |                   |             |   |                    |   |             |  
|Total liabilities and shareholders deficit                                                         |  | $                 | 84,378,192  |   |                    | $ | 91,799,942  |  
|                                                                                                    |  |                   |             |   |                    |   |             |  

See accompanying notes to the consolidated financial statements.



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##### Table of Contents

The Money Tree Inc. and Subsidiaries

Consolidated Statements of Operations



|                                                                              |  |             |            |   |      |   |            |  
|----------------------------------------------------------------------------- |  | ----------- | ---------- | - | ---- | - | ---------- | -
|Three months ended December 25,                                               |  | 2008        |            |   | 2007 |  
|                                                                              |  | (Unaudited) |           
|Interest and fee income                                                       |  | $           | 4,594,648  |   |      | $ | 4,988,192  |  
|Interest expense                                                              |  |             | (1,917,223 | ) |      |   | (2,065,513 | )
|                                                                              |  |             |            |   |      |   |            |  
|Net interest and fee income before provision for credit losses                |  |             | 2,677,425  |   |      |   | 2,922,679  |  
|Provision for credit losses                                                   |  |             | (2,234,641 | ) |      |   | (2,042,673 | )
|                                                                              |  |             |            |   |      |   |            |  
|Net interest and fee income after provision for credit losses                 |  |             | 442,784    |   |      |   | 880,006    |  
|Insurance commissions                                                         |  |             | 2,564,830  |   |      |   | 2,563,014  |  
|Commissions from motor club memberships from company owned by related parties |  |             | 463,840    |   |      |   | 512,316    |  
|Delinquency fees                                                              |  |             | 403,578    |   |      |   | 411,814    |  
|Other income                                                                  |  |             | 133,108    |   |      |   | 151,863    |  
|                                                                              |  |             |            |   |      |   |            |  
|Net revenue before retail sales                                               |  |             | 4,008,140  |   |      |   | 4,519,013  |  
|                                                                              |  |             |            |   |      |   |            |  
|Retail sales                                                                  |  |             | 4,593,979  |   |      |   | 5,034,915  |  
|Cost of sales                                                                 |  |             | (2,980,207 | ) |      |   | (3,078,292 | )
|                                                                              |  |             |            |   |      |   |            |  
|Gross margin on retail sales                                                  |  |             | 1,613,772  |   |      |   | 1,956,623  |  
|                                                                              |  |             |            |   |      |   |            |  
|Net revenues                                                                  |  |             | 5,621,912  |   |      |   | 6,475,636  |  
|                                                                              |  |             |            |   |      |   |            |  
|Operating expenses                                                            |  |             |            |   |      |   |            |  
|Personnel expense                                                             |  |             | (4,008,695 | ) |      |   | (3,881,470 | )
|Facilities expense                                                            |  |             | (1,045,556 | ) |      |   | (994,432   | )
|General and administrative expenses                                           |  |             | (850,520   | ) |      |   | (769,487   | )
|Other operating expenses                                                      |  |             | (1,346,005 | ) |      |   | (1,185,854 | )
|                                                                              |  |             |            |   |      |   |            |  
|Total operating expenses                                                      |  |             | (7,250,776 | ) |      |   | (6,831,243 | )
|                                                                              |  |             |            |   |      |   |            |  
|Net operating loss                                                            |  |             | (1,628,864 | ) |      |   | (355,607   | )
|Loss on sale of property and equipment                                        |  |             |           |   |      |   | (14,637    | )
|                                                                              |  |             |            |   |      |   |            |  
|Loss before income tax expense                                                |  |             | (1,628,864 | ) |      |   | (370,244   | )
|Income tax expense                                                            |  |             |           |   |      |   | (210,243   | )
|                                                                              |  |             |            |   |      |   |            |  
|Net loss                                                                      |  | $           | (1,628,864 | ) |      | $ | (580,487   | )
|                                                                              |  |             |            |   |      |   |            |  
|Net loss per common share, basic and diluted                                  |  | $           | (55.13     | ) |      | $ | (19.65     | )
|                                                                              |  |             |            |   |      |   |            |  
|Weighted average shares outstanding                                           |  |             | 29,546     |   |      |   | 29,546     |  
|                                                                              |  |             |            |   |      |   |            |  

See accompanying notes to the consolidated financial statements.



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The Money Tree Inc. and Subsidiaries

Consolidated Statements of Cash Flows



|                                                                                |  |             |             |   |      |   |             |  
|------------------------------------------------------------------------------- |  | ----------- | ----------- | - | ---- | - | ----------- | -
|Three months ended December 25,                                                 |  | 2008        |             |   | 2007 |  
|                                                                                |  | (Unaudited) |            
|Cash flows from operating activities                                            |  |             |             |   |      |   |             |  
|Net loss                                                                        |  | $           | (1,628,864  | ) |      | $ | (580,487    | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |             |             |   |      |   |             |  
|Provision for credit losses                                                     |  |             | 2,234,641   |   |      |   | 2,042,673   |  
|Depreciation                                                                    |  |             | 237,873     |   |      |   | 195,912     |  
|Amortization                                                                    |  |             | 1,310       |   |      |   | 1,429       |  
|Loss on sale of property and equipment                                          |  |             |            |   |      |   | 14,637      |  
|Change in assets and liabilities:                                               |  |             |             |   |      |   |             |  
|Other receivables                                                               |  |             | (947,309    | ) |      |   | (252,658    | )
|Inventory                                                                       |  |             | 401,004     |   |      |   | 211,240     |  
|Other assets                                                                    |  |             | 86,443      |   |      |   | 90,516      |  
|Accounts payable and other accrued liabilities                                  |  |             | 219,254     |   |      |   | 388,519     |  
|Accrued interest payable                                                        |  |             | (495,524    | ) |      |   | 613,515     |  
|                                                                                |  |             |             |   |      |   |             |  
|Net cash provided by operating activities                                       |  |             | 108,828     |   |      |   | 2,725,296   |  
|                                                                                |  |             |             |   |      |   |             |  
|Cash flows from investing activities                                            |  |             |             |   |      |   |             |  
|Finance receivables originated                                                  |  |             | (17,293,604 | ) |      |   | (20,730,328 | )
|Finance receivables repaid                                                      |  |             | 15,575,598  |   |      |   | 17,104,131  |  
|Purchase of property and equipment                                              |  |             | (155,224    | ) |      |   | (152,092    | )
|Proceeds from sale of property and equipment                                    |  |             |            |   |      |   | 14,785      |  
|                                                                                |  |             |             |   |      |   |             |  
|Net cash used in investing activities                                           |  |             | (1,873,230  | ) |      |   | (3,763,504  | )
|                                                                                |  |             |             |   |      |   |             |  
|Cash flows from financing activities                                            |  |             |             |   |      |   |             |  
|Net proceeds (repayments) on:                                                   |  |             |             |   |      |   |             |  
|Senior debt                                                                     |  |             | (272,385    | ) |      |   | 118,464     |  
|Demand notes                                                                    |  |             | (445,956    | ) |      |   | (928,569    | )
|Proceeds-variable rate subordinated debentures                                  |  |             | 1,596,418   |   |      |   | 3,214,603   |  
|Repayments-variable rate subordinated debentures                                |  |             | (6,394,693  | ) |      |   | (2,928,465  | )
|                                                                                |  |             |             |   |      |   |             |  
|Net cash used in financing activities                                           |  |             | (5,516,616  | ) |      |   | (523,967    | )
|                                                                                |  |             |             |   |      |   |             |  
|Net change in cash and cash equivalents                                         |  |             | (7,281,018  | ) |      |   | (1,562,175  | )
|Cash and cash equivalents, beginning of period                                  |  |             | 12,541,302  |   |      |   | 17,854,277  |  
|                                                                                |  |             |             |   |      |   |             |  
|Cash and cash equivalents, end of period                                        |  | $           | 5,260,284   |   |      | $ | 16,292,102  |  
|                                                                                |  |             |             |   |      |   |             |  

See accompanying notes to the consolidated financial statements.



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The Money Tree Inc. and Subsidiaries

Consolidated Statements of Cash Flows (continued)



|                                  |  |             |           |      |   |          
|--------------------------------- |  | ----------- | --------- | ---- | - | ---------
|Three months ended December 25,   |  | 2008        |           | 2007
|                                  |  | (Unaudited)
|SUPPLEMENTAL DISCLOSURE OF        |  |             |           |      |   |          
|CASH FLOW INFORMATION:            |  |             |           |      |   |          
|Cash paid during the quarter for: |  |             |           |      |   |          
|Interest                          |  | $           | 2,392,295 |      | $ | 1,402,672
|                                  |  |             |           |      |   |          
|Income taxes                      |  | $           |          |      | $ | 181,488  
|                                  |  |             |           |      |   |          

See accompanying notes to the consolidated financial statements.



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1  BASIS OF PRESENTATION

The consolidated financial statements of The Money Tree Inc., a Georgia corporation
(the Parent) and subsidiaries (collectively with the Parent, the Company) included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the United States Securities and Exchange
Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been omitted. For a description of significant accounting policies used
by the Company in the preparation of its consolidated financial statements, see Note 1 to the Consolidated Financial Statements in the Companys 2008 Annual Report on Form 10-K.

The consolidated financial statements include the accounts of the Company and all of its subsidiaries after eliminating all significant intercompany transactions and reflect all normal, recurring
adjustments which are, in the opinion of management, necessary to present a fair statement of the results of operations of the Company in conformity with U.S. generally accepted accounting principles for the interim periods reported. The results of
operations for the three months ended December 25, 2008 and 2007 are not necessarily indicative of the results for the full fiscal year.

NOTE 2
 NATURE OF BUSINESS

The business of The Money Tree Inc. and subsidiaries (the Company) consists of: the operation of
finance company offices in 103 locations throughout Georgia, Alabama, Louisiana and Florida; sales of merchandise (principally furniture, appliances, and electronics) at certain finance company locations; and the operation of three used automobile
dealerships in Georgia. The Company also earns revenues from commissions on premiums written for certain insurance products, when requested by loan customers, as an agent for a non-affiliated insurance company. Revenues are also generated from
commissions on the sales of automobile club memberships from a company owned by related parties and commissions from sales prepaid telephone service and prepaid cellular services.

The Companys loan portfolio consists of consumer sales finance contracts receivables and direct consumer loan receivables. Consumer sales finance contracts receivables consist principally
of retail installment sale contracts collateralized by used automobiles and consumer goods which are initiated by automobile and consumer good dealerships, subject to credit approval, in the locations where the Company operates offices. Direct
consumer loan receivables are loans originated directly to customers for general use which are collateralized by existing automobiles or consumer goods, or are unsecured.

As of December 1, 2008, the Companys registration of and ability to offer debentures and demand notes expired and has not been renewed. As a result, for the quarter ended December 25, 2008, the Company
redeemed $4.8 million more in debentures than it sold and $0.4 million more in demand notes than it sold. The Company has historically depended on the sale of debentures and demand notes to investors and the collection of finance receivables to fund
its obligations to redeem debentures and demand notes, make interest payments on debentures and demand notes, and to fund other company capital needs. The Companys continued liquidity is therefore dependent on the registration and sale of
debentures and demand notes and the continued collection of finance receivables or its ability to secure other financing sources. The deteriorating economy continues to negatively impact the credit quality of the Companys finance receivables
and may impact the Companys ability to sell debentures and demand notes once its ability to offer is renewed. In the event additional debentures or demand notes are not registered and sold to investors or the Company otherwise fails to secure
additional financing or capital sources, the Companys liquidity and capital needs will be severely and negatively affected. Management believes its business is structured to mitigate the effects of adverse economic conditions and believes its
retail operations will benefit from its established customer base and will provide sufficient liquidity for growth.



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 2  NATURE OF BUSINESS (CONTINUED)



The accompanying financial statements have been prepared on a going concern basis, which contemplates
the realization of assets and the satisfaction of liabilities in the normal course of business. The Company incurred a net loss of $11,966,366 for the year ended September 25, 2008, a net loss of $1,628,864 for the quarter ended
December 25, 2008 and had a shareholders deficit of $14,524,930 as of December 25, 2008. The Companys continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a
timely basis, originate new loans and to ultimately attain successful operations. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

NOTE 3  RECENT ACCOUNTING PRONOUNCEMENTS

In
September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No.157, Fair Value Measurements. SFAS 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting
principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and accordingly, the Company adopted this pronouncement on
September 26, 2008 with no material effect on the consolidated financial statements. As of December 25, 2008, the Company does not measure any assets or liabilities at fair value.

In February 2007, the FASB issued SFAS No.159, The Fair Value Option for Financial Assets and Liabilities  Including an Amendment of FASB Statement No. 115. SFAS 159 permits
entities to choose to measure certain financial assets and liabilities at fair value (the fair value option). Unrealized gains and losses, arising subsequent to adoption, are reported in earnings. SFAS 159 is effective for financial
statements issued for fiscal years beginning after November 15, 2007, and accordingly, the Company adopted this pronouncement on September 26, 2008 with no material effect on the consolidated financial statements.

In December 2007, the FASB issued SFAS No.141(R), Business Combinations. This Statement replaces SFAS No.141, Business
Combinations. This Statement retains the fundamental requirements in Statement 141 that the acquisition method of accounting (which Statement 141 called the purchase method) be used for all business combinations and for an acquirer
to be identified for each business combination. This Statement also establishes principles and requirements for how the acquirer: a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and
any noncontrolling interest in the acquiree; b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase and c) determines what information to disclose to enable users of the financial statements to
evaluate the nature and financial effects of the business combination. SFAS 141(R) will apply prospectively to business combinations for which the acquisition date is on or after September 26, 2009. While the Company has not yet evaluated this
statement for the impact, if any, that SFAS 141(R) will have on its consolidated financial statements, the Company will be required to expense costs related to any acquisitions after September 25, 2009.

In December 2007, the FASB issued SFAS No.160, Noncontrolling Interests in Consolidated Financial Statements. This Statement amends
Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling (minority) interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a noncontrolling interest in a subsidiary
is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. The Company has not yet determined the impact, if any, that SFAS 160 will have on its consolidated financial statements.
SFAS 160 is effective for the Companys fiscal year beginning September 26, 2009.



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 3  RECENT ACCOUNTING PRONOUNCEMENTS (CONTINUED)



SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of
FASB Statement No. 133 requires enhanced disclosures about an entitys derivative and hedging activities and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption. Management does not expect
SFAS 161 to have a material impact on the Companys consolidated financial statements.

In May 2008, the FASB issued SFAS
No. 163, Accounting for Financial Guarantee Insurance Contractsan interpretation of FASB Statement No. 60 (SFAS 163). SFAS 163 interprets Statement 60 and amends existing accounting pronouncements to clarify their
application to the financial guarantee insurance contracts included within the scope of that Statement. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within
those fiscal years. The Company does not expect that SFAS 163 will have a material impact on its consolidated financial statements.

NOTE 4 
FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

Finance receivables consisted of the following:



|                                                        |  |                   |             |   |                    |   |             |  
|------------------------------------------------------- |  | ----------------- | ----------- | - | ------------------ | - | ----------- | -
|                                                        |  | December 25, 2008 |             |   | September 25, 2008 |  
|                                                        |  | (Unaudited)       |             |   |                    |  
|Finance receivables, direct consumer                    |  | $                 | 40,622,009  |   |                    | $ | 41,654,302  |  
|Finance receivables, consumer sales finance             |  |                   | 17,222,368  |   |                    |   | 16,793,743  |  
|Finance receivables, auto sales finance                 |  |                   | 30,260,514  |   |                    |   | 30,707,329  |  
|                                                        |  |                   |             |   |                    |   |             |  
|Total gross finance receivables                         |  |                   | 88,104,891  |   |                    |   | 89,155,374  |  
|Unearned insurance commissions                          |  |                   | (2,614,316  | ) |                    |   | (2,793,425  | )
|Unearned finance charges                                |  |                   | (10,575,567 | ) |                    |   | (10,621,034 | )
|Accrued interest receivable                             |  |                   | 898,059     |   |                    |   | 865,885     |  
|                                                        |  |                   |             |   |                    |   |             |  
|Finance receivables, before allowance for credit losses |  |                   | 75,813,067  |   |                    |   | 76,606,800  |  
|Allowance for credit losses                             |  |                   | (8,599,229  | ) |                    |   | (8,876,327  | )
|                                                        |  |                   |             |   |                    |   |             |  
|Finance receivables, net                                |  | $                 | 67,213,838  |   |                    | $ | 67,730,473  |  
|                                                        |  |                   |             |   |                    |   |             |  



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 4  FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES (CONTINUED)



An analysis of the allowance for credit losses is as follows:



|                             |  |                                                      |            |   |                                               |   |            |                                                      |  |   |            |  
|---------------------------- |  | ---------------------------------------------------- | ---------- | - | --------------------------------------------- | - | ---------- | ---------------------------------------------------- |  | - | ---------- | -
|                             |  | As of and for thethree months endedDecember 25, 2008 |            |   | As of and for theyear endedSeptember 25, 2008 |   |            | As of and for thethree months endedDecember 25, 2007 | 
|                             |  | (Unaudited)                                          |            |   |                                               |   |            | (Unaudited)                                          | 
|Beginning balance            |  | $                                                    | 8,876,327  |   |                                               | $ | 3,710,679  |                                                      |  | $ | 3,710,679  |  
|Provisions for credit losses |  |                                                      | 2,234,641  |   |                                               |   | 13,812,192 |                                                      |  |   | 2,042,673  |  
|Charge-offs                  |  |                                                      | (2,614,501 | ) |                                               |   | (8,825,129 | )                                                    |  |   | (1,518,043 | )
|Recoveries                   |  |                                                      | 63,914     |   |                                               |   | 196,208    |                                                      |  |   | 47,616     |  
|Other                        |  |                                                      | 38,848     |   |                                               |   | (17,623    | )                                                    |  |   | 24,733     |  
|                             |  |                                                      |            |   |                                               |   |            |                                                      |  |   |            |  
|Ending balance               |  | $                                                    | 8,599,229  |   |                                               | $ | 8,876,327  |                                                      |  | $ | 4,307,658  |  
|                             |  |                                                      |            |   |                                               |   |            |                                                      |  |   |            |  

NOTE 5  INVENTORY

Inventory consisted of the following:



|                                 |  |                   |           |                    |   |          
|-------------------------------- |  | ----------------- | --------- | ------------------ | - | ---------
|                                 |  | December 25, 2008 |           | September 25, 2008
|                                 |  | (Unaudited)       |           |                   
|Used automobiles                 |  | $                 | 1,391,418 |                    | $ | 1,529,078
|Home furnishings and electronics |  |                   | 1,374,599 |                    |   | 1,637,943
|                                 |  |                   |           |                    |   |          
|Total inventory                  |  | $                 | 2,766,017 |                    | $ | 3,167,021
|                                 |  |                   |           |                    |   |          



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 6  ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

Accounts payable and other accrued liabilities consisted of the following:



|                                                     |  |                   |           |                    |   |          
|---------------------------------------------------- |  | ----------------- | --------- | ------------------ | - | ---------
|                                                     |  | December 25, 2008 |           | September 25, 2008
|                                                     |  | (Unaudited)       |           |                   
|Accounts payable                                     |  | $                 | 176,304   |                    | $ | 271,815  
|Insurance payable, loan related                      |  |                   | 786,886   |                    |   | 639,167  
|Accrued payroll                                      |  |                   | 528,339   |                    |   | 507,484  
|Accrued payroll taxes                                |  |                   | 39,380    |                    |   | 38,420   
|Money orders                                         |  |                   | 370,199   |                    |   | 530,888  
|Sales tax payable                                    |  |                   | 1,241,411 |                    |   | 1,210,579
|Other liabilities                                    |  |                   | 355,605   |                    |   | 80,517   
|                                                     |  |                   |           |                    |   |          
|Total accounts payable and other accrued liabilities |  | $                 | 3,498,124 |                    | $ | 3,278,870
|                                                     |  |                   |           |                    |   |          

NOTE 7  DEBT

Debt consisted of the following:



|                                                                                                                                                                                                                                                                                                                                                           |  |                   |            |                    |   |           
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ---------- | ------------------ | - | ----------
|                                                                                                                                                                                                                                                                                                                                                           |  | December 25, 2008 |            | September 25, 2008
|                                                                                                                                                                                                                                                                                                                                                           |  | (Unaudited)       |            |                   
|Senior debt: due to banks and commercial finance companies, collateralized by inventory and certain automotive equipment, and certain notes include personal guarantees of a
shareholder, interest at prime plus 2%, due 2009. The carrying values of the collateral at December 25, 2008 and September 25, 2008 were $458,621 and $725,910, respectively. |  | $                 | 422,505    |                    | $ | 694,890   
|                                                                                                                                                                                                                                                                                                                                                           |  |                   |            |                    |   |           
|Total senior debt                                                                                                                                                                                                                                                                                                                                          |  |                   | 422,505    |                    |   | 694,890   
|                                                                                                                                                                                                                                                                                                                                                           |  |                   |            |                    |   |           
|Variable rate subordinated debentures issued by The Money Tree of Georgia Inc.: due to individuals, unsecured, interest at 4.25% to 9.6%, due at various dates through 2011.                                                                                                                                                                               |  |                   | 41,575,953 |                    |   | 45,020,194
|                                                                                                                                                                                                                                                                                                                                                           |  |                  
|Variable rate subordinated debentures issued by The Money Tree Inc.: due to individuals, unsecured, interest at 6.0% to 8.7%, due at various dates through
2012.                                                                                                                                                                                           |  |                   | 35,834,983 |                    |   | 37,189,017
|                                                                                                                                                                                                                                                                                                                                                           |  |                   |            |                    |   |           
|Total subordinated debentures                                                                                                                                                                                                                                                                                                                              |  |                   | 77,410,936 |                    |   | 82,209,211
|                                                                                                                                                                                                                                                                                                                                                           |  |                   |            |                    |   |           



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 7  DEBT (CONTINUED)



|                                                                                                                               |  |                   |            |                    |   |           
|------------------------------------------------------------------------------------------------------------------------------ |  | ----------------- | ---------- | ------------------ | - | ----------
|                                                                                                                               |  | December 25, 2008 |            | September 25, 2008
|                                                                                                                               |  | (Unaudited)       |            |                   
|Demand notes issued by The Money Tree of Georgia Inc.: due to individuals, unsecured, interest at 3.0% to 4.0%, due on demand. |  |                   | 507,800    |                    |   | 613,442   
|                                                                                                                               |  |                  
|Demand notes issued by The Money Tree Inc.: due to individuals, unsecured, interest at 3.0% to 4.0%, due on demand.            |  |                   | 2,704,404  |                    |   | 3,044,718 
|                                                                                                                               |  |                   |            |                    |   |           
|Total demand notes                                                                                                             |  |                   | 3,212,204  |                    |   | 3,658,160 
|                                                                                                                               |  |                   |            |                    |   |           
|Total debt                                                                                                                     |  | $                 | 81,045,645 |                    | $ | 86,562,261
|                                                                                                                               |  |                   |            |                    |   |           

NOTE 8  INCOME TAXES

At the end of each quarter, the Company makes its best estimate of the effective tax rate expected to be applicable for the full fiscal year and uses that rate in providing for income taxes on current year-to-date
basis. For the three months ended December 25, 2008 and 2007, the Company increased the valuation allowance for its deferred income tax asset by $0.6 million and $0.3 million, respectively, resulting in a difference between income taxes
calculated using expected annual federal and state rates and actual income tax expense.

NOTE 9  RELATED PARTY TRANSACTIONS

Martin Family Group, LLLP owns the real estate of thirteen branch offices, one used car lot, and the Companys principal executive offices. The
estate of the Companys founder and former CEO is a limited partner of Martin Family Group, LLLP. A Company shareholder is the president of Martin Investments, Inc. which is the managing general partner of Martin Family Group LLLP. The Company
has entered into lease agreements whereby rent is paid monthly for use of these locations. In addition, Martin Sublease LLC, leases, and then subleases to the Company, another 54 branch office locations and two used car lots for amounts greater than
are paid in the underlying leases. This spread is generally to cover property operating cost or improvements made directly by these entities. In the opinion of management, rates paid for these are comparable to those obtained from third parties. A
Company shareholder is the President of Martin Investments, Inc., the company which ultimately controls Martin Sublease LLC. Total rents paid were $555,976 and $519,825 for the three months ended December 25, 2008 and 2007, respectively and are
included in operating expense in the Accompanying Unaudited Consolidated Statements of Operations.

The Company receives commissions from
sales of motor club memberships from an entity, owned by the Companys President and late founders three children (of which one is a Director), pursuant to an Agency Sales Agreement. Commissions earned on the sale of these memberships
were $463,840 and $512,316 for the three months ended December 25, 2008 and 2007, respectively.

The Company also engages from time to
time in other transactions with related parties. Refer to the Related Party Transactions disclosure in the notes to the Companys Consolidated Financial Statements as of and for the year ended September 25, 2008.



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 10  CONTINGENT LIABILITIES

The Company is a party to litigation arising in the normal course of business. With respect to all such lawsuits, claims, and proceedings, the Company establishes reserves when it is probable a
liability has been incurred and the amount can reasonably be estimated. In the opinion of management, the resolution of such matters will not have a material effect on the financial position or results of operations of the Company.

NOTE 11  DISCRETIONARY BONUSES

From time to
time, the Company pays discretionary bonuses to its employees. The amount of these bonuses charged to operating expenses was $589,466 and $578,655 for the three months ended December 25, 2008 and 2007, respectively.

NOTE 12  SEGMENT FINANCIAL INFORMATION

Statement of Financial Accounting Standards No. 131, Disclosure about Segments of an Enterprise and Related Information (SFAS 131), requires companies to determine segments based on how management makes decisions about
allocating resources to segments and measuring their performance.

The Company has two reportable segments: Consumer Finance and Sales and
Automotive Finance and Sales.

Consumer finance and sales segment

This segment is comprised of original core operations of the Company: the small consumer loan business in the four states in which the Company operates. The 103 offices that make up this segment are similar in size
and in the markets they serve. All, with few exceptions, offer consumer goods for sale acting as an agent for another subsidiary of the Company, Home Furniture Mart Inc., which is aggregated in this segment since its sales are generated through
these finance offices. This segment is structured with branch management reporting through a regional management level to an operational manager and ultimately to the chief operating decision maker.

Automotive finance and sales segment

This segment
is comprised of three used automobile sales locations and offers financing in conjunction with these sales. These locations target similar customers in the Bainbridge, GA, Columbus, GA and Dublin, GA markets and surrounding areas who generally
cannot qualify for traditional financing. The sales and the financing organizations are aggregated in the segment. A general manager is responsible for sales and finance administration at each of the locations and reports to an operational manager
and ultimately to the chief operating decision maker.

Accounting policies of the segments are the same as those described in the summary
of significant accounting policies. Performance is measured by various factors such as segment profit, loan volumes and delinquency and loss management. All corporate expenses are allocated to the segments. Provision for income taxes are not
allocated to segments.



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 12  SEGMENT FINANCIAL INFORMATION (CONTINUED)



|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|---------------------------------------------- |  | -------------------------------- | ------ | - | ---------------------------------- | - | ------ | ----------------- |  | - | ------ | -
|Three months ended December 25, 2008           |  | Consumer Finance& Sales Division |        |   | Automotive Finance& Sales Division |   |        | Total Segments    | 
|In Thousands                                   |  | (Unaudited)                      |       
|Net revenues (expense) before retail sales     |  | $                                | 4,111  |   |                                    | $ | (103   | )                 |  | $ | 4,008  |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Gross margin on retail sales                   |  |                                  | 943    |   |                                    |   | 671    |                   |  |   | 1,614  |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Segment operating expenses                     |  |                                  | (6,353 | ) |                                    |   | (898   | )                 |  |   | (7,251 | )
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Segment operating loss                         |  | $                                | (1,299 | ) |                                    | $ | (330   | )                 |  | $ | (1,629 | )
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|                                               |  |                                  |       
|December 25, 2008                              |  |                                  |        |   |                                    |   |        |                   | 
|In Thousands                                   |  |                                  |        |   |                                    |   |        |                   | 
|Assets                                         |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Total segment assets                           |  | $                                | 51,626 |   |                                    | $ | 25,902 |                   |  | $ | 77,528 |  
|                                               |  |                                  |       
|RECONCILIATION:                                |  |                                  |        |   |                                    |   |        | December 25, 2008 | 
|                                               |  |                                  |        |   |                                    |   |        | (Thousands)       | 
|Assets:                                        |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Total assets for reportable segments           |  |                                  |        |   |                                    |   |        |                   |  | $ | 77,528 |  
|                                               |  |                                  |       
|Cash and cash equivalents at corporate level   |  |                                  |        |   |                                    |   |        |                   |  |   | 1,228  |  
|Other receivables at corporate level           |  |                                  |        |   |                                    |   |        |                   |  |   | 1,904  |  
|Property and equipment, net at corporate level |  |                                  |        |   |                                    |   |        |                   |  |   | 1,308  |  
|Other assets at corporate level                |  |                                  |        |   |                                    |   |        |                   |  |   | 2,410  |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  
|Consolidated Assets                            |  |                                  |        |   |                                    |   |        |                   |  | $ | 84,378 |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |        |  



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The Money Tree Inc. and Subsidiaries

Notes to Consolidated Financial Statements (Unaudited)



NOTE 12  SEGMENT FINANCIAL INFORMATION (CONTINUED)



|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|---------------------------------------------- |  | -------------------------------- | ------ | - | ---------------------------------- | - | ------ | ----------------- |  | - | ------- | -
|Three months ended December 25, 2007           |  | Consumer Finance& Sales Division |        |   | Automotive Finance& Sales Division |   |        | Total Segments    | 
|In Thousands                                   |  | (Unaudited)                      |       
|Net revenues before retail sales               |  | $                                | 4,326  |   |                                    | $ | 193    |                   |  | $ | 4,519   |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Gross margin on retail sales                   |  |                                  | 1,187  |   |                                    |   | 770    |                   |  |   | 1,957   |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Segment operating expenses                     |  |                                  | (5,904 | ) |                                    |   | (928   | )                 |  |   | (6,832  | )
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Segment operating profit                       |  | $                                | (391   | ) |                                    | $ | 35     |                   |  | $ | (356    | )
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|                                               |  |                                  |       
|December 25, 2007                              |  |                                  |        |   |                                    |   |        |                   | 
|In Thousands                                   |  |                                  |        |   |                                    |   |        |                   | 
|Assets                                         |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Total segment assets                           |  | $                                | 62,881 |   |                                    | $ | 28,010 |                   |  | $ | 90,891  |  
|                                               |  |                                  |       
|RECONCILIATION:                                |  |                                  |        |   |                                    |   |        | December 25, 2007 | 
|                                               |  |                                  |        |   |                                    |   |        | (Thousands)       | 
|Assets:                                        |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Total assets for reportable segments           |  |                                  |        |   |                                    |   |        |                   |  | $ | 90,891  |  
|                                               |  |                                  |       
|Cash and cash equivalents at corporate level   |  |                                  |        |   |                                    |   |        |                   |  |   | 9,518   |  
|Other receivables at corporate level           |  |                                  |        |   |                                    |   |        |                   |  |   | 1,116   |  
|Property and equipment, net at corporate level |  |                                  |        |   |                                    |   |        |                   |  |   | 1,288   |  
|Deferred income taxes at corporate level       |  |                                  |        |   |                                    |   |        |                   |  |   | 1,210   |  
|Other assets at corporate level                |  |                                  |        |   |                                    |   |        |                   |  |   | 1,658   |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  
|Consolidated Assets                            |  |                                  |        |   |                                    |   |        |                   |  | $ | 105,681 |  
|                                               |  |                                  |        |   |                                    |   |        |                   |  |   |         |  



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

Forward-Looking Statements

The discussion set forth below, as well as other portions of this quarterly report, contains forward-looking statements within the meaning of federal securities law. Words such as may, will,
expect, anticipate, believe, estimate, continue, predict, or other similar words, identify forward-looking statements. Forward-looking statements include statements regarding
our managements intent, belief or current expectation about, among other things, trends affecting the markets in which we operate, our business, our financial condition and our growth strategies. Although we believe that the expectation
reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those predicted in
the forward-looking statements as a result of various factors, including, but not limited to, those risk factors set forth in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 3, 2009. Other factors
not identified herein could also have such an effect. If any of these risk factors occur, they could have an adverse effect on our business, financial condition and results of operations. When considering forward-looking statements keep these risks
in mind. These forward-looking statements are made as of the date of this filing. You should not place undo reliance on any forward-looking statement. We are not obligated to update forward-looking statements and will not update any forward-looking
statements in this quarterly report to reflect future events or developments.

The following discussion should be read in
conjunction with our unaudited consolidated financial statements and related notes and other financial data included elsewhere in this report. See also the notes to our consolidated financial statements, Selected Consolidated Financial Data and
Managements Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended September 25, 2008.

Overview

We make consumer finance loans and provide other financial products
and services through our branch offices in Georgia, Alabama, Louisiana and Florida. We sell retail merchandise, principally furniture, appliances and electronics, at certain of our branch office locations and operate three used automobile
dealerships in the State of Georgia. We also offer insurance products, prepaid phone services and automobile club memberships to our loan customers.

We fund our consumer loan demand through a combination of cash collections from our consumer loans, proceeds raised from the sale of debentures and demand notes and loans from various banks and other financial
institutions. Our consumer loan business consists of making, purchasing and servicing direct consumer loans, consumer sales finance contracts and motor vehicle installment sales contracts. Direct consumer loans generally serve individuals with
limited access to other sources of consumer credit, such as banks, savings and loans, other consumer finance businesses and credit cards. Direct consumer loans are general loans made typically to people who need money for some unusual or unforeseen
expense, for the purpose of paying off an accumulation of small debts or for the purchase of furniture and appliances. The following table sets forth certain information about the components of our finance receivables for the periods presented:



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##### Table of Contents

Description of Loans and Contracts



|                                           |  |                                                   |            |   |      |   |            |  
|------------------------------------------ |  | ------------------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                           |  | As of, or for, the ThreeMonths Ended December 25, |           
|                                           |  | 2008                                              |            |   | 2007 |  
|Direct Consumer Loans:                     |  |                                                   |            |   |      |   |            |  
|Number of Loans Made to New Borrowers      |  |                                                   | 15,666     |   |      |   | 5,498      |  
|Number of Loans Made to Former Borrowers   |  |                                                   | 12,441     |   |      |   | 15,162     |  
|Number of Loans Made to Existing Borrowers |  |                                                   | 13,794     |   |      |   | 20,660     |  
|Total Number of Loans Made                 |  |                                                   | 41,901     |   |      |   | 41,320     |  
|Total Volume of Loans Made                 |  | $                                                 | 15,792,769 |   |      | $ | 19,941,082 |  
|Average Size of Loans Made                 |  | $                                                 | 377        |   |      | $ | 483        |  
|Number of Loans Outstanding                |  |                                                   | 68,072     |   |      |   | 78,905     |  
|Total of Loans Outstanding*                |  | $                                                 | 33,498,425 |   |      | $ | 41,477,349 |  
|Percent of Loans Outstanding               |  |                                                   | 41.37      | % |      |   | 46.13      | %
|Average Balance on Outstanding Loans       |  | $                                                 | 492        |   |      | $ | 526        |  
|                                           |  |                                                  
|Motor Vehicle Installment Sales Contracts: |  |                                                   |            |   |      |   |            |  
|Total Number of Contracts Made             |  |                                                   | 184        |   |      |   | 190        |  
|Total Volume of Contracts Made             |  | $                                                 | 3,323,862  |   |      | $ | 3,496,254  |  
|Average Size of Contracts Made             |  | $                                                 | 18,064     |   |      | $ | 18,401     |  
|Number of Contracts Outstanding            |  |                                                   | 2,703      |   |      |   | 2,799      |  
|Total of Contracts Outstanding*            |  | $                                                 | 30,260,514 |   |      | $ | 31,895,347 |  
|Percent of Total Loans and Contracts       |  |                                                   | 37.37      | % |      |   | 35.47      | %
|Average Balance on Outstanding Contracts   |  | $                                                 | 11,195     |   |      | $ | 11,395     |  
|                                           |  |                                                  
|Consumer Sales Finance Contracts:          |  |                                                   |            |   |      |   |            |  
|Number of Contracts Made to New Customers  |  |                                                   | 860        |   |      |   | 38         |  
|Number of Loans Made to Former Customers   |  |                                                   | 30         |   |      |   | 1,008      |  
|Number of Loans Made to Existing Customers |  |                                                   | 890        |   |      |   | 1,046      |  
|Total Contracts Made                       |  |                                                   | 1,780      |   |      |   | 2,092      |  
|Total Volume of Contracts Made             |  | $                                                 | 5,902,407  |   |      | $ | 6,421,213  |  
|Number of Contracts Outstanding            |  |                                                   | 7,439      |   |      |   | 7,638      |  
|Total of Contracts Outstanding*            |  | $                                                 | 17,222,368 |   |      | $ | 16,543,773 |  
|Percent of Total Loans and Contracts       |  |                                                   | 21.26      | % |      |   | 18.40      | %
|Average Balance of Outstanding Contracts   |  | $                                                 | 2,315      |   |      | $ | 2,166      |  



|* | Contracts outstanding are exclusive of the following aggregate amounts of bankrupt accounts: $7,123,584 as of December 25, 2008 and $6,367,294 as of
December 25, 2007.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Below is a table showing our total gross outstanding finance receivables and bankrupt
accounts:



|                                               |  |                    |            |      |   |           
|---------------------------------------------- |  | ------------------ | ---------- | ---- | - | ----------
|                                               |  | As of December 25,
|                                               |  | 2008               |            | 2007
|Total Finance Receivables Outstanding (gross): |  |                    |            |      |   |           
|Direct Consumer Loans                          |  | $                  | 33,498,425 |      | $ | 41,477,349
|Motor Vehicle Installment                      |  |                    | 30,260,514 |      |   | 31,895,347
|Consumer Sales Finance                         |  |                    | 17,222,368 |      |   | 16,543,773
|Bankrupt Accounts                              |  |                    | 7,123,584  |      |   | 6,367,294 
|                                               |  |                    |            |      |   |           
|Total Gross Outstanding                        |  | $                  | 88,104,891 |      | $ | 96,283,763
|                                               |  |                    |            |      |   |           

Below is a roll-forward of the balance of each category of our outstanding finance
receivables. Loans originated reflect the gross amount of loans made or purchased during the period presented inclusive of pre-computed interest, fees and insurance premiums. Collections represent cash receipts in the form of repayments made on our
loans as reflected in our Consolidated Statements of Cash Flows. Refinancings represent the amount of the pay off of loans refinanced. Charge offs represent the gross amount of loans charged off as uncollectible (charge offs are shown net of
non-file insurance receipts in our Allowance for Credit Losses). Rebates represent reductions to gross loan amounts of precomputed interest and insurance premiums resulting from loans refinanced and other loans paid off before maturity. Other
adjustments primarily represent accounts transferred to and from the department that administers bankrupt accounts.



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##### Table of Contents

|                                           |  |                                        |             |   |      |   |             |  
|------------------------------------------ |  | -------------------------------------- | ----------- | - | ---- | - | ----------- | -
|                                           |  | For the Three Months EndedDecember 25, |            
|                                           |  | 2008                                   |             |   | 2007 |  
|Direct Consumer Loans:                     |  |                                        |             |   |      |   |             |  
|Balancebeginning                          |  | $                                      | 34,859,944  |   |      | $ | 40,719,291  |  
|Finance receivables originated             |  |                                        | 15,792,769  |   |      |   | 19,941,082  |  
|Collections                                |  |                                        | (10,694,706 | ) |      |   | (12,145,282 | )
|Refinances                                 |  |                                        | (3,424,774  | ) |      |   | (4,639,566  | )
|Charge offs, gross                         |  |                                        | (2,111,910  | ) |      |   | (1,393,669  | )
|Rebates / other adjustments                |  |                                        | (922,898    | ) |      |   | (1,004,507  | )
|                                           |  |                                        |             |   |      |   |             |  
|Balanceend                                |  | $                                      | 33,498,425  |   |      | $ | 41,477,349  |  
|                                           |  |                                        |             |   |      |   |             |  
|                                           |  |                                       
|Consumer Sales Finance Contracts:          |  |                                        |             |   |      |   |             |  
|Balancebeginning                          |  | $                                      | 16,793,743  |   |      | $ | 14,466,682  |  
|Finance receivables originated             |  |                                        | 5,902,407   |   |      |   | 6,421,213   |  
|Collections                                |  |                                        | (1,881,695  | ) |      |   | (1,619,504  | )
|Refinances                                 |  |                                        | (1,879,975  | ) |      |   | (1,783,135  | )
|Charge offs, gross                         |  |                                        | (1,229,080  | ) |      |   | (238,958    | )
|Rebates / other adjustments                |  |                                        | (483,032    | ) |      |   | (702,525    | )
|                                           |  |                                        |             |   |      |   |             |  
|Balanceend                                |  | $                                      | 17,222,368  |   |      | $ | 16,543,773  |  
|                                           |  |                                        |             |   |      |   |             |  
|                                           |  |                                       
|Motor Vehicle Installment Sales Contracts: |  |                                        |             |   |      |   |             |  
|Balancebeginning                          |  | $                                      | 30,707,329  |   |      | $ | 32,259,968  |  
|Finance receivables originated             |  |                                        | 3,323,862   |   |      |   | 3,496,254   |  
|Collections                                |  |                                        | (2,999,197  | ) |      |   | (3,339,345  | )
|Refinances                                 |  |                                        |            |   |      |   |            |  
|Charge offs, gross                         |  |                                        | (429,750    | ) |      |   | (304,684    | )
|Rebates / other adjustments                |  |                                        | (341,730    | ) |      |   | (216,846    | )
|                                           |  |                                        |             |   |      |   |             |  
|Balanceend                                |  | $                                      | 30,260,514  |   |      | $ | 31,895,347  |  
|                                           |  |                                        |             |   |      |   |             |  
|                                           |  |                                       
|Total Active Accounts:                     |  |                                        |             |   |      |   |             |  
|Balancebeginning                          |  | $                                      | 82,361,016  |   |      | $ | 87,445,941  |  
|Loans originated                           |  |                                        | 25,019,038  |   |      |   | 29,858,549  |  
|Collections                                |  |                                        | (15,575,598 | ) |      |   | (17,104,131 | )
|Refinances                                 |  |                                        | (5,304,749  | ) |      |   | (6,422,701  | )
|Charge offs, gross                         |  |                                        | (3,770,740  | ) |      |   | (1,937,311  | )
|Rebates / other adjustments                |  |                                        | (1,747,660  | ) |      |   | (1,923,878  | )
|                                           |  |                                        |             |   |      |   |             |  
|Balanceend                                |  | $                                      | 80,981,307  |   |      | $ | 89,916,469  |  
|                                           |  |                                        |             |   |      |   |             |  
|                                           |  |                                       
|Total Bankrupt Accounts:                   |  |                                        |             |   |      |   |             |  
|Balancebeginning                          |  | $                                      | 6,794,358   |   |      | $ | 6,115,375   |  
|Charge offs, gross                         |  |                                        | (302,329    | ) |      |   | (179,340    | )
|Adjustments                                |  |                                        | 631,555     |   |      |   | 431,259     |  
|                                           |  |                                        |             |   |      |   |             |  
|Balanceend                                |  | $                                      | 7,123,584   |   |      | $ | 6,367,294   |  
|                                           |  |                                        |             |   |      |   |             |  
|Total Gross Outstanding Receivables        |  | $                                      | 88,104,891  |   |      | $ | 96,283,763  |  
|                                           |  |                                        |             |   |      |   |             |  



19



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Below is a reconciliation of the amounts of the loans originated and repaid (collections)
from the receivable roll-forward to the amounts shown in our Consolidated Statements of Cash Flows.



|                                                      |  |                                 |            |   |      |   |            |  
|----------------------------------------------------- |  | ------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                      |  | Three Months Ended December 25, |           
|                                                      |  | 2008                            |            |   | 2007 |  
|Finance Receivables Originated:                       |  |                                 |            |   |      |   |            |  
|Direct consumer                                       |  | $                               | 15,792,769 |   |      | $ | 19,941,082 |  
|Consumer sales finance                                |  |                                 | 5,902,407  |   |      |   | 6,421,213  |  
|Motor vehicle installment sales                       |  |                                 | 3,323,862  |   |      |   | 3,496,254  |  
|                                                      |  |                                 |            |   |      |   |            |  
|Total gross finance receivables originated            |  |                                 | 25,019,038 |   |      |   | 29,858,549 |  
|Non-cash items included in gross finance receivables* |  |                                 | (7,725,434 | ) |      |   | (9,128,221 | )
|                                                      |  |                                 |            |   |      |   |            |  
|Finance receivables originatedcash flows             |  | $                               | 17,293,604 |   |      | $ | 20,730,328 |  
|                                                      |  |                                 |            |   |      |   |            |  
|                                                      |  |                                
|Finance Receivables Repaid:                           |  |                                 |            |   |      |   |            |  
|Collections                                           |  |                                 |            |   |      |   |            |  
|Direct consumer                                       |  | $                               | 10,694,706 |   |      | $ | 12,145,282 |  
|Consumer sales finance                                |  |                                 | 1,881,695  |   |      |   | 1,619,504  |  
|Motor vehicle installment sales                       |  |                                 | 2,999,197  |   |      |   | 3,339,345  |  
|                                                      |  |                                 |            |   |      |   |            |  
|Finance receivables repaidcash flows                 |  | $                               | 15,575,598 |   |      | $ | 17,104,131 |  
|                                                      |  |                                 |            |   |      |   |            |  



|* | Includes precomputed interest and fees (since these amounts are included in the gross amount of finance receivables originated but are not advanced in the form
of cash to customers) and refinanced receivables balances (since there is no cash generated from the repayment of original finance receivables refinanced).
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Segments and Seasonality

We segment our business operations into the
following two segments:



| |  |  | consumer finance and sales; and
| | - |  | -------------------------------



| |  |  | automotive finance and sales.
| | - |  | -----------------------------

The consumer finance and sales segment is comprised primarily of small consumer loans and sales of consumer goods such as furniture, appliances and electronics. We typically experience our strongest financial
performance for the consumer finance and sales segment during the holiday season, which is our first fiscal quarter ending December 25.

The automotive finance and sales segment is comprised exclusively of used vehicle sales and their related financing. We typically experience our strongest financial performance for the automotive finance and sales
segment during our second fiscal quarter ending March 25 when demand for used cars is at its highest. Please refer to Note 12 in the Notes to Consolidated Financial Statements for a breakdown of our operations by segment.

Net Interest Margin

A principal component of our profitability is our net interest margin, which is the difference between the interest that we earn on finance receivables and the interest that we pay on borrowed funds. In some states, statutes regulate the
interest rates that we may charge our customers, while, in other locations, competitive market conditions establish interest rates that we



20



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may charge. Differences also exist in the interest rates that we earn on the various components of our finance receivable portfolio.

Unlike our interest income, our interest expense is sensitive to general market interest rate fluctuations. These general market
fluctuations directly impact our cost of funds. Our general limited ability to increase the interest rates earned on new and existing finance receivables restricts our ability to react to increases in our cost of funds. Accordingly, increases in
market interest rates generally will narrow our interest rate spread and lower our profitability, while decreases in market interest rates generally will widen our interest rate spread and increase our profitability. Significant increases in market
interest rates will likely result in a reduction in our liquidity and profitability and impair our ability to pay interest and principal on the debentures. See Quantitative and Qualitative Disclosures About Market Risk below.

The following table presents important data relating to our net interest margin:



|                                                               |  |                                                   |            |   |      |   |            |  
|-------------------------------------------------------------- |  | ------------------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                               |  | As of, or for, the Three MonthsEnded December 25, |           
|                                                               |  | 2008                                              |            |   | 2007 |  
|Average net finance receivables(1)                             |  | $                                                 | 75,908,452 |   |      | $ | 80,248,602 |  
|Average notes payable(2)                                       |  | $                                                 | 81,867,040 |   |      | $ | 88,314,374 |  
|                                                               |  |                                                  
|Interest income                                                |  | $                                                 | 3,349,011  |   |      | $ | 3,591,153  |  
|Loan fee income, excluding delinquency fees                    |  |                                                   | 1,245,637  |   |      |   | 1,397,039  |  
|                                                               |  |                                                   |            |   |      |   |            |  
|Total interest and fee income                                  |  |                                                   | 4,594,648  |   |      |   | 4,988,192  |  
|Interest expense                                               |  |                                                   | 1,917,223  |   |      |   | 2,065,513  |  
|                                                               |  |                                                   |            |   |      |   |            |  
|Net interest and fee income before provision for credit losses |  | $                                                 | 2,677,425  |   |      | $ | 2,922,679  |  
|                                                               |  |                                                   |            |   |      |   |            |  
|Average interest rate earned (annualized)                      |  |                                                   | 24.2       | % |      |   | 24.9       | %
|Average interest rate paid (annualized)                        |  |                                                   | 9.4        | % |      |   | 9.4        | %
|                                                               |  |                                                  
|Net interest rate spread (annualized)                          |  |                                                   | 14.8       | % |      |   | 15.5       | %
|Net interest margin (annualized)(3)                            |  |                                                   | 14.1       | % |      |   | 14.6       | %



|(1) | Averages are computed using month-end balances of finance
receivables (net of unearned interest/fees, unearned insurance commissions, and unearned discounts) during the period presented.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Averages are computed using month-end balances of interest
bearing debt during the period presented.
|--- | ----------------------------------------------------------------------------------------------------

|(3) | Net interest margin represents net interest income (before
provision for credit losses) divided by the average net finance receivables.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

Analysis of Allowance for Credit Losses

An allowance for credit losses is maintained to account for the probable losses inherent in the finance receivable
portfolio. The allowance is calculated based upon managements estimate of the expected collectability of loans outstanding based upon a variety of factors, including, without limitation, periodic analysis of the loan portfolio, historic loan
loss experience,



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borrowers ability to repay and collateral considerations. We maintain an allowance for credit losses at a level that we consider adequate to provide
for probable losses based on historical ratios of charge-offs to average notes receivable.

The following table shows these
ratios of charge offs to average notes receivable for the categories of our finance receivables. The average net finance receivables are computed using monthly balances, net of unearned interest, unearned insurance commissions and unearned
discounts. Charge offs are shown at gross amounts as presented in the receivable roll-forward on page 19. Recoveries represent receipts from non-file insurance claims and cash recoveries.



|                                                            |  |                                                   |            |   |      |   |            |  
|----------------------------------------------------------- |  | ------------------------------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                            |  | As of, or for, the ThreeMonths Ended
December 25, |           
|                                                            |  | 2008                                              |            |   | 2007 |  
|Direct Consumer Loans and Consumer Sales Finance Contracts: |  |                                                   |            |   |      |   |            |  
|Average net finance receivables                             |  | $                                                 | 50,708,516 |   |      | $ | 54,314,901 |  
|Charge offsdirect consumer                                 |  | $                                                 | 2,111,910  |   |      | $ | 1,393,669  |  
|Charge offsconsumer sales finance                          |  |                                                   | 1,229,080  |   |      |   | 238,958    |  
|Charge offsbankruptcy                                      |  |                                                   | 302,329    |   |      |   | 179,340    |  
|                                                            |  |                                                   |            |   |      |   |            |  
|Total gross charge offs                                     |  |                                                   | 3,643,319  |   |      |   | 1,811,967  |  
|Recoveries (all direct consumer)                            |  |                                                   | (1,522,482 | ) |      |   | (646,224   | )
|                                                            |  |                                                   |            |   |      |   |            |  
|Charge offs, net                                            |  | $                                                 | 2,120,837  |   |      | $ | 1,165,743  |  
|Percent of net charge offs to average receivables           |  |                                                   | 4.2        | % |      |   | 2.1        | %
|                                                            |  |                                                  
|Motor Vehicle Installment Sales Contracts:                  |  |                                                   |            |   |      |   |            |  
|Average outstanding finance receivables                     |  | $                                                 | 25,199,936 |   |      | $ | 25,933,701 |  
|Charge offs, gross                                          |  | $                                                 | 429,750    |   |      | $ | 304,684    |  
|Recoveries                                                  |  |                                                   |           |   |      |   |           |  
|                                                            |  |                                                   |            |   |      |   |            |  
|Charge offs, net                                            |  | $                                                 | 429,750    |   |      | $ | 304,684    |  
|Percent of net charge offs to average receivables           |  |                                                   | 1.7        | % |      |   | 1.2        | %
|                                                            |  |                                                  
|Total Receivables:                                          |  |                                                   |            |   |      |   |            |  
|Average outstanding finance receivables                     |  | $                                                 | 75,908,452 |   |      | $ | 80,248,602 |  
|Charge offs, gross                                          |  | $                                                 | 4,073,069  |   |      | $ | 2,116,651  |  
|Recoveries (all direct consumer)                            |  |                                                   | (1,522,482 | ) |      |   | (646,224   | )
|                                                            |  |                                                   |            |   |      |   |            |  
|Charge offs, net                                            |  | $                                                 | 2,550,587  |   |      | $ | 1,470,427  |  
|Percent of net charge offs to average receivables           |  |                                                   | 3.4        | % |      |   | 1.8        | %



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As of December 25, 2008 and September 25, 2008, our allowance for credit losses
was $8.6 million and $8.9 million, respectively. This was attributable to the decrease in net outstanding finance receivables during the three months ended December 25, 2008. Net finance receivables outstanding provide the basis for the
determination of the allowance for credit losses.

Delinquency Information

Our delinquency levels reflect, among other factors, changes in the mix of loans in the portfolio, the quality of receivables, the success
of collection efforts, bankruptcy trends and general economic conditions. The delinquency information in the following tables is computed on the basis of the amount past due in accordance with the original payment terms of the loan (contractual
method). We use the contractual method for all external reporting purposes. Management closely monitors delinquency using this method to measure the quality of our loan portfolio and the probability of credit loss. We also use other tools, such as a
recency report, which shows the date of the last full contractual payment received on the loan, to determine a particular customers willingness to pay. For example, if a delinquent customer has made a recent payment, we may decide to delay
more serious collection measures, such as repossession of collateral. However, such a payment will not change the non-accrual status of the account until all of the principal and interest amounts contractually due are brought current (we receive one
or more full contractual payments and the account is less than 60 days contractually delinquent), at which time we believe future payments are reasonably assured. Below is certain information relating to the delinquency status of each category of
our receivables for the quarters ended December 25, 2008 and 2007:



|                                                  |  |                         |            |   |                                |   |            |                                        |  |   |                    |   |  |       |           |   |  |   |            |  
|------------------------------------------------- |  | ----------------------- | ---------- | - | ------------------------------ | - | ---------- | -------------------------------------- |  | - | ------------------ | - |  | ----- | --------- | - |  | - | ---------- | -
|                                                  |  | As of December 25, 2008 |           
|                                                  |  | DirectConsumerSales     |            |   | ConsumerSales FinanceContracts |   |            | Motor VehicleInstallmentSalesContracts |  |   | BankruptcyAccounts |   |  | Total |          
|Gross Loans and Contracts Receivables             |  | $                       | 33,498,425 |   |                                | $ | 17,222,368 |                                        |  | $ | 30,260,514         |   |  | $     | 7,123,584 |   |  | $ | 88,104,891 |  
|Loans and Contracts 60 - 90 days past due         |  | $                       | 935,140    |   |                                | $ | 406,198    |                                        |  | $ | 565,597            |   |  | $     | 265,496   |   |  | $ | 2,172,431  |  
|Percentage of Outstanding                         |  |                         | 2.8        | % |                                |   | 2.4        | %                                      |  |   | 1.9                | % |  |       | 3.7       | % |  |   | 2.5        | %
|Loans and Contracts greater than 90 days past due |  | $                       | 6,864,709  |   |                                | $ | 2,890,506  |                                        |  | $ | 539,810            |   |  | $     | 4,411,767 |   |  | $ | 14,706,792 |  
|Percentage of Outstanding                         |  |                         | 20.5       | % |                                |   | 16.8       | %                                      |  |   | 1.8                | % |  |       | 61.9      | % |  |   | 16.7       | %
|Loans and Contracts greater than 60 days past due |  | $                       | 7,799,849  |   |                                | $ | 3,296,704  |                                        |  | $ | 1,105,407          |   |  | $     | 4,677,263 |   |  | $ | 16,879,223 |  
|Percentage of Outstanding                         |  |                         | 23.3       | % |                                |   | 19.1       | %                                      |  |   | 3.7                | % |  |       | 65.7      | % |  |   | 19.2       | %



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##### Table of Contents

|                                                  |  |                         |            |   |                                |   |            |                                        |  |   |                    |   |  |       |           |   |  |   |            |  
|------------------------------------------------- |  | ----------------------- | ---------- | - | ------------------------------ | - | ---------- | -------------------------------------- |  | - | ------------------ | - |  | ----- | --------- | - |  | - | ---------- | -
|                                                  |  | As of December 25, 2007 |           
|                                                  |  | DirectConsumerSales     |            |   | ConsumerSales FinanceContracts |   |            | Motor VehicleInstallmentSalesContracts |  |   | BankruptcyAccounts |   |  | Total |          
|Gross Loans and Contracts Receivables             |  | $                       | 41,477,349 |   |                                | $ | 16,543,773 |                                        |  | $ | 31,895,347         |   |  | $     | 6,367,294 |   |  | $ | 96,283,763 |  
|Loans and Contracts 60 - 90 days past due         |  | $                       | 764,940    |   |                                | $ | 284,550    |                                        |  | $ | 133,411            |   |  | $     | 241,933   |   |  | $ | 1,424,834  |  
|Percentage of Outstanding                         |  |                         | 1.8        | % |                                |   | 1.7        | %                                      |  |   | 0.4                | % |  |       | 3.8       | % |  |   | 1.5        | %
|Loans and Contracts greater than 90 days past due |  | $                       | 10,879,986 |   |                                | $ | 3,382,797  |                                        |  | $ | 81,777             |   |  | $     | 3,611,602 |   |  | $ | 17,956,162 |  
|Percentage of Outstanding                         |  |                         | 26.2       | % |                                |   | 20.4       | %                                      |  |   | 0.3                | % |  |       | 56.7      | % |  |   | 18.6       | %
|Loans and Contracts greater than 60 days past due |  | $                       | 11,644,926 |   |                                | $ | 3,667,347  |                                        |  | $ | 215,188            |   |  | $     | 3,853,535 |   |  | $ | 19,380,996 |  
|Percentage of Outstanding                         |  |                         | 28.1       | % |                                |   | 22.2       | %                                      |  |   | 0.7                | % |  |       | 60.5      | % |  |   | 20.1       | %

Results of Operations

Comparison of Three Months Ended December 25, 2008 and 2007

Net Revenues

Net revenues were $5.6 million and $6.5 million for the three months ended December 25, 2008 and 2007, respectively.
Decreases in interest and fee income and gross margin on retail sales along with increases in the provision for credit losses resulted in the decrease in net revenues for the first quarter of the fiscal year ending September 25, 2009 compared
to the first quarter of last year.

Net Interest and Fee Income Before Provision for Credit Losses

Net interest and fee income before provision for credit losses was $2.7 million and $2.9 million for the three months ended
December 25, 2008 and 2007, respectively. During the first quarter of the fiscal year ending September 25, 2009, gross interest income decreased $0.4 million, from $5.0 million to $4.6 million, as a result of a slight decrease in the yield
earned on our loans outstanding. Interest expense was $1.9 million and $2.1 million for the three-month periods ended December 25, 2008 and 2007, respectively.

Provision for Credit Losses

Provision for credit losses was $2.2 million and
$2.0 million for the three months ended December 25, 2008 and 2007, respectively. Net finance receivables charged off increased approximately $1.0 million over the same period last year. Economic conditions continue to negatively impact our
customer base which has resulted in an increased level of defaults on loans. For the three months ended December 25, 2007, we provided for additional credit losses by increasing the allowance for credit losses by approximately $0.6 million.



24



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Insurance and Other Products

Income from commissions on insurance products, motor club memberships, delinquency fees and other income were approximately the same for
the three months ended December 25, 2008 and 2007.

Gross Margin on Retail Sales

Gross margins on retail sales were $1.6 million and $2.0 million for the three months ended December 25, 2008 and 2007, respectively.
Sales in the automotive segment decreased approximately $0.2 million compared to the same period last year while gross margin decreased $0.1 million. Sales and gross margin in the consumer segment were down $0.4 million and $0.3 million,
respectively, compared to last years first quarter sales and margins. The decrease in our retail sales is consistent with the downturn in consumer spending currently being experienced in the overall U.S. economy.

Operating Expenses

Operating expenses were $7.3 million and $6.8 million for the three months ended December 25, 2008 and 2007, respectively. Personnel expenses were $0.1 million higher than last year due to higher health benefit cost. General &
administrative expenses increased $0.1 million primarily due to higher communications cost associated with our new branch computer software system installed during fiscal year 2008. Other operating expenses increased $0.2 million (approximately 13%)
from prior year levels. Legal fees increased due to cost associated with preparing to register securities for sale. Travel related cost were slightly higher than the previous year due to additional personnel required to travel.

Income Tax Expense

Income tax expense was $0.0 million and $0.2 million, respectively for the three months ended December 25, 2008 and 2007, respectively. For the three months ended December 25, 2008 and 2007, we increased the valuation allowance
for our deferred income tax asset by $0.6 million and $0.3 million, respectively, resulting in a difference between income taxes calculated using expected annual federal and state expected rates and actual income tax expense.

Liquidity and Capital Resources

General

Liquidity is our ability to meet short-term financial obligations whether through collection of receivables,
potential registration to sale Debentures and Demand Notes or similar debt instruments or by generating additional funds through sales of assets to our competitors (such as our finance receivables or vehicle inventory). Continued liquidity is,
therefore, largely dependent on the collection of our receivables and the potential future sale of debt securities that meet the investment requirements of the public. We believe the cash flow from our operations coupled with potential sales of the
Debentures and Demand Notes or similar debt instruments will be sufficient to cover our liquidity needs and cash flow requirements during 2009.

Liquidity management refers to our ability to generate sufficient cash to fund the following primary uses of cash:



| |  |  | Meet all of our debenture and demand note redemption obligations;
| | - |  | -----------------------------------------------------------------



| |  |  | pay interest on all of our debentures and demand notes;
| | - |  | -------------------------------------------------------



25



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##### Table of Contents

| |  |  | pay operating expenses; and
| | - |  | ---------------------------



| |  |  | fund consumer finance loan demand and used automobile vehicle inventory.
| | - |  | ------------------------------------------------------------------------

The primary objective for liquidity management is to ensure that at all times we can meet the redemption obligations of our note holders. A secondary purpose of liquidity management is profit
management. Because profit and liquidity are often conflicting objectives, we attempt to maximize our net interest margin by making adequate, but not excessive, liquidity provisions. To the extent we have adequate cash to meet our redemption
obligations and pay interest to our note holders, we will use remaining cash to make consumer finance loans, purchase used automobile vehicle inventory and invest in other sources of potential revenues.

Changes in our liquidity position result from operating, investing and financing activities. Cash flows from operating activities are
generally the cash effects of transactions and other events that enter into the determination of our net income, including, without limitation, purchases of used automobiles, electronics, furnishings and other consumer goods for resale to our
customers. The primary investing activities include consumer loan originations and purchases and collections on such consumer loans. Our financing activities focus almost entirely on the sale of Debentures and Demand Notes.

Cash and cash equivalents decreased $11.0 million to $5.3 million at December 25, 2008 from $16.3 million at December 25, 2007.
During the three months ended December 25, 2008, cash and cash equivalents decreased $7.3 million, primarily as a result of a $5.5 million of net cash used in financing activities and $1.9 million of cash used in investing activities. We
redeemed an unusually high amount of debentures ($6.4 million) while the proceeds from the sale of debentures were $1.6 million. We also redeemed $0.4 million more in demand notes than were sold. Finance receivables originated exceeded finance
receivables repaid by approximately $1.7 million. Cash and cash equivalents decreased $1.6 million during the three months ended December 25, 2007 primarily as a result of an increase in funds used in investing activities. Funds used in
originating finance receivables exceeded repayments by $3.6 million. During the first quarter of the fiscal year ended September 25, 2008, the primary sources of cash were net cash provided by operating activities of $2.7 million. Net cash used
in financing activities was $0.5 million. Although we issued $3.2 million in debentures, we redeemed $2.9 million of debentures and demand note redemptions exceed proceeds by $0.9 million.

During 2009, we expect to continue to use a significant amount of cash to fund redemption obligations and pay interest on our securities.
We will either have to (i) register to sell additional debentures and demand notes or similar debt instruments or (ii) substantially curtail our loan originations to customers during 2009 in order to meet our liquidity needs.



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Debentures and Demand Notes

Historically, we or our subsidiary, The Money Tree of Georgia Inc., have offered Debentures and Demand Notes to investors as a significant
source of our required capital. We rely on the sale of Debentures and Demand Notes to fund redemption obligations, make interest payments and to fund other company working capital. Currently, we do not have any Debenture or Demand Notes registered
for sale to investors. While we anticipate raising additional debt capital in the form of debentures and demand notes or other similar debt instruments, there can be no assurance that we will be able to do so. Please see Risk Factors  We
are not currently offering any Debentures and Demand Notes and, to the extent we do not register additional Debentures and Demand Notes or similar debt instruments for sale to investors or otherwise raise capital in the future, our liquidity and
capital needs will be severely and negatively affected found in our Annual Report on Form 10-K for the year ended September 25, 2008.

During the three months ended December 25, 2008, we (1) received gross proceeds of $1.6 million from the sale of debentures, (2) paid $6.4 million for redemption of debentures issued by us and our
subsidiary, The Money Tree of Georgia Inc. and (3) paid $0.4 million for net redemptions of demand notes issued by us and this subsidiary. As of December 25, 2008, we had $77.4 million of debentures and $3.2 million of demand notes
outstanding compared to $82.2 million of debentures and $3.7 million of demand notes outstanding, as of September 25, 2008.

Recent Accounting
Pronouncements

Recent accounting pronouncements have been issued that may have a future effect on operations. Refer
to Note 3 to the unaudited consolidated financial statements for a discussion of these pronouncements and their possible effects.

Critical
Accounting Policies

Our accounting and reporting policies conform with U.S. generally accepted accounting
principles (GAAP) and predominant practice within the financial services industry. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the
financial statements and the accompanying notes. Actual results could differ from those estimates.

We believe that the
determination of our allowance for credit losses involves a higher degree of judgment and complexity than our other significant accounting policies. The Allowance for Credit Losses is calculated with the objective of maintaining a reserve level
believed by management to be sufficient to absorb estimated credit losses. Managements determination of the adequacy of the allowance is based on periodic evaluations of the loan portfolio and other relevant factors. However, this evaluation
is inherently subjective as it requires material estimates, including, among others, expected default probabilities, loss given default, the amounts and timing of expected future cash flows on impaired loans, and general amounts for historical loss
experience. We also consider economic conditions, uncertainties in estimating losses and inherent risks in the loan portfolio. All of these factors may be susceptible to significant change. To the extent actual outcomes differ from managements
estimates, additional provisions for credit losses may be required that would adversely impact earnings in future periods.

Finance receivables are considered impaired, i.e. income recognition ceases, as a result of past-due status or a judgment by management that, although payments are current, such action is prudent. Finance receivables on which payments are
past due 90 days or more are considered impaired unless they are well-secured and in the process of collection or renewal. Related accrued interest and fees are reversed against current period income.

When a loan is impaired, interest accrued but uncollected is generally reversed against interest income. Cash receipts on impaired loans
are generally applied to reduce the unpaid principal balance.



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We recognize deferred tax assets and liabilities for the future tax effects of temporary
differences, net operating loss carry-forwards and tax credits. Deferred tax assets are subject to managements judgment based upon available evidence that future realization is more likely than not. If management determines that we may be
unable to realize all or part of net deferred tax assets in the future, a direct charge to income tax expense may be required to reduce the recorded value of the net deferred tax asset to the expected realizable amount.

We have not substantially changed any aspect of our overall approach in the application of the foregoing policies. There have been no
material changes in assumptions or estimation techniques utilized as compared to previous years.

Impact of Inflation

Although inflation has not had a material adverse effect on our financial condition or results of operations, increases in the inflation
rate are generally associated with increased interest rates. A significant and sustained increase in the interest rates would likely unfavorably impact our profitability by reducing the interest rate spread between the rate of interest we receive on
our customer loans and interest rates we pay to our note holders, banks and finance companies. Inflation may also negatively affect our operating expenses.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our
profitability and financial performance are sensitive to changes in the U.S. Treasury yields and the spread between the effective rate of interest we receive on customer loans and the interest rates we pay on our borrowings. Our finance income
is generally not sensitive to fluctuations in market interest rates. The primary exposure that we face is changes in interest rates on our borrowings. A substantial and sustained increase in market interest rates would likely adversely affect our
growth and profitability since we will be required to increase the interest rates we pay to holders of debentures at the end of each interest adjustment period. We would also face pressure to increase interest rates on our demand notes to stay
competitive. The overall objective of our interest rate risk management strategy is to mitigate the effects of changing interest rates on our interest expense through the utilization of short-term variable rate debt and medium and long term fixed
rate debt. We have not entered into any derivative instruments to manage our interest rate risk. Please see Note 7 in the notes to our unaudited consolidated financial statements for information on our debt, including maturities and interest
rates.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure
controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) that are designed to ensure that information required to be disclosed in the Companys reports under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to the Companys management, including its
principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

As discussed in Managements Report on Internal Controls over Financial Reporting included in the Companys Annual Report on Form 10-K for the year ended September 25, 2008, the Company discovered that
summary reports related to unearned interest, unearned insurance, and accrued interest receivable were not complete. To remedy this material weakness, the Company implemented the following measures during the quarter ended December 25, 2008:



| |  |  | Additional communication to system service provider to ensure report parameters are correct.
| | - |  | --------------------------------------------------------------------------------------------



| |  |  | Monthly reconciliation of reports provided by the new finance receivable system to ensure their completion.
| | - |  | -----------------------------------------------------------------------------------------------------------



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In connection with the presentation of this Form 10-Q, management, under the supervision
and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the fiscal quarter which is the subject
of this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer have concluded that the design and operation of our disclosure controls and procedures are effective as of December 25, 2008.

Changes in Internal Control Over Financial Reporting

Except as noted above relative to the review of information provided by the new finance system, there have been no changes in our internal control over financial reporting during the quarter ended December 25,
2008, that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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PART II  OTHER INFORMATION

Item 1. Legal Proceedings

We were not involved in any
material legal proceedings during the quarter ended December 25, 2008 requiring disclosure under item 103 of Regulation S-K.

Item 1A. Risk Factors

In addition to the other information set forth in this
report, you should carefully consider the factors discussed in Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended September 25, 2008, which could materially affect our business, financial condition or
future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely
affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and
Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

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

None.

Item 5. Other Information

None.

Item 6. Exhibits



|     |  |                                                                                                                                
|---- |  | -------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Principal Executive Officers pursuant to Section 302 of The Sarbanes-Oxley Act of 2002                        
|     | 
|31.2 |  | Certification of Principal Financial Officer pursuant to Section 302 of The Sarbanes-Oxley Act of 2002                         
|     | 
|32.1 |  | Certifications of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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SIGNATURES

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



|                  |  |  |  |                                                      
|----------------- |  |  |  | -----------------------------------------------------
|                  |  |  |  | THE MONEY TREE INC.                                  
|                  |  | 
|February 17,
2009 |  |  |  | /s/ Bradley D.
Bellville                             
|Date              |  |  |  | Bradley D. Bellville                                 
|                  |  |  |  | President (Principal Executive Officer)              
|                  |  | 
|February 17, 2009 |  |  |  | /s/ Steven P. Morrison                               
|Date              |  |  |  | Steven P. Morrison                                   
|                  |  |  |  | Chief Financial Officer (Principal Financial Officer)



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