<PAGE>   1
                     U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-QSB


   [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934
       For the quarterly period ended May 2, 1998


   [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 
       For the transition period from _________ to _________


                           Commission File No. 1-13919


                                 PAWNMART, INC.
        (Exact name of small business issuer as specified in its charter)


           DELAWARE                                  75-2520896
(State or other jurisdiction of         (I.R.S. Employer Identification No.)
incorporation or organization)


            301 COMMERCE STREET, SUITE 3600, FORT WORTH, TEXAS 76102
                    (Address of principal executive offices)

                                 (817) 335-7296
                           (Issuer's telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [ ] No [X]

The number of shares of Common Stock outstanding as of June 1, 1998 was
7,209,445. The number of Series A Redeemable Common Stock Purchase Warrants
outstanding as of June 1, 1998 was 1,380,000. The number Series B Redeemable
Common Stock Purchase Warrants outstanding as of June 1, 1998 was 1,380,000.

Transitional small business disclosure format (check one): Yes [ ] No [X]





<PAGE>   2




                          PART I. FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                         PAWNMART, INC. AND SUBSIDIARIES
                           Consolidated Balance Sheets

                 (In thousands, except share and per share data)

<TABLE>
<CAPTION>
                                                                                   May 2,          January 31,
                                                                                    1998              1998
                                                                                ------------      ------------
                                                                                 (Unaudited)
<S>                                                                             <C>                        <C>
                                     Assets
Current assets:
   Cash and cash equivalents (note 2)                                           $      2,642               151
   Accounts receivable                                                                    51                32
   Pawn service charges receivable                                                       207               233
   Loans                                                                               2,153             2,421
   Inventories, net                                                                    2,074             1,944
   Prepaid expenses and other current assets                                             144                98
                                                                                ------------      ------------
            Total current assets                                                       7,271             4,879
                                                                                ------------      ------------

Property and equipment, net                                                              815               802
Goodwill and other intangible assets, net                                                 48                63
Debt issuance costs, net (note 2)                                                         27               545
Other assets                                                                             139               388
                                                                                ------------      ------------
                                                                                $      8,300             6,677
                                                                                ============      ============

                 Liabilities and Stockholders' Equity (Deficit)

Current liabilities:
   Accounts payable and accrued liabilities                                     $        486             1,051
   Current installments of notes payable (note 2)                                        513             2,070
                                                                                ------------      ------------
            Total current liabilities                                                    999             3,121
                                                                                ------------      ------------

Long-term notes payable, net of current installments (note 2)                             --             9,778
                                                                                ------------      ------------
                                                                                         999            12,899
                                                                                ------------      ------------

Stockholders' equity (deficit) (note 2):
   Preferred stock, $.01 par value; authorized 10,000,000 shares;
      3,661,200 shares issued at January 31, 1998                                         --                37
   Common stock, $.01 par value; authorized 20,000,000 shares;
      7,230,877 and 1,950,424 shares issued at May 2, 1998 and
      January 31, 1998, respectively                                                      72                19
   Series A redeemable common stock purchase warrants, $0.125 par
      value; 1,380,000 warrants issued and outstanding at May 2, 1998                    173                --
   Series B redeemable common stock purchase warrants, $0.0625 par
      value; 1,380,000 warrants issued and outstanding at May 2, 1998                     86                --
   Additional paid-in capital                                                         22,241             7,657
   Preferred stock discount                                                               --              (674)
   Accumulated deficit                                                               (15,201)          (13,191)
                                                                                ------------      ------------
                                                                                       7,371            (6,152)
   Less treasury stock, at cost; 21,432 common shares at May 2, 1998
      and 13,189 common shares and 25,000 preferred shares at
      January 31, 1998                                                                   (70)              (70)
                                                                                ------------      ------------

            Total stockholders' equity (deficit)                                       7,301            (6,222)
                                                                                ------------      ------------

                                                                                $      8,300             6,677
                                                                                ============      ============
</TABLE>




See accompanying notes to consolidated financial statements.


                                       2

<PAGE>   3




                         PAWNMART, INC. AND SUBSIDIARIES
                 Unaudited Consolidated Statements of Operations

                      (In thousands, except per share data)


<TABLE>
<CAPTION>
                                                           Thirteen Weeks    Thirteen Weeks
                                                                Ended            Ended
                                                            May 2, 1998      April 27, 1997
                                                           --------------    --------------
<S>                                                         <C>                      <C>  
Revenues:
   Merchandise sales                                        $      1,842             1,614
   Pawn service charges                                              775               674
   Other                                                              33                 8
                                                            ------------      ------------
         Total revenues                                            2,650             2,296

Cost of sales                                                      1,227             1,170
                                                            ------------      ------------
                                                                   1,423             1,126
                                                            ------------      ------------

Expenses:
   Store operating expenses                                        1,053               898
   Corporate administrative expenses                                 759               400
   Interest expense                                                  809               419
   Depreciation and amortization                                     121               131
                                                            ------------      ------------
         Total expenses                                            2,742             1,848
                                                            ------------      ------------

         Net loss                                                 (1,319)             (722)

Preferred stock dividends                                            692                --
                                                            ------------      ------------

         Net loss to common stockholders                    $     (2,011)             (722)
                                                            ============      ============

Loss per common share (note 3):
         Basic                                              $      (0.63)            (0.39)
                                                            ============      ============
         Diluted                                            $      (0.63)            (0.39)
                                                            ============      ============
</TABLE>



See accompanying notes to consolidated financial statements.


                                       3

<PAGE>   4



                         PAWNMART, INC. AND SUBSIDIARIES
                 Unaudited Consolidated Statements of Cash Flows

                                 (In thousands)


<TABLE>
<CAPTION>
                                                                                         Thirteen Weeks    Thirteen Weeks
                                                                                             Ended              Ended
                                                                                             May 2,           April 27,
                                                                                              1998              1997
                                                                                         --------------    --------------
<S>                                                                                      <C>               <C>  
Cash flows from operating activities:
   Net loss                                                                               $     (1,319)             (722)
   Adjustments to reconcile net loss to net cash used in operating activities:
         Depreciation and amortization                                                             121               131
         Amortization of debt issuance costs                                                        85                60
         Amortization of debt discount                                                             495                --
         Common stock issued for services                                                          200                --
         Changes in operating assets and liabilities:
               Accounts receivable                                                                 (19)               (7)
               Pawn service charges receivable                                                      26                25
               Inventories                                                                        (130)              (22)
               Prepaid expenses and other current assets                                           (46)               12
               Other assets                                                                        249                10
               Accounts payable and accrued liabilities                                           (565)             (286)
                                                                                          ------------      ------------
                     Net cash used in operating activities                                        (903)             (799)
                                                                                          ------------      ------------

Cash flows from investing activities:
   Net decrease in pawn loans                                                                      268               239
   Purchases of property and equipment                                                            (119)              (82)
                                                                                          ------------      ------------
                     Net cash provided by investing activities                                     149               157
                                                                                          ------------      ------------

Cash flows from financing activities:
   Proceeds from issuance of notes payable                                                         135               719
   Principal payments on notes payable                                                          (2,445)              (80)
   Net proceeds from issuance of common stock and warrants                                       5,583                --
   Purchase of treasury stock                                                                       --                (5)
   Net proceeds from issuance of preferred stock                                                    --                 1
   Payment of debt issuance costs                                                                  (10)              (92)
   Preferred stock dividends paid                                                                  (18)               --
                                                                                          ------------      ------------
                     Net cash provided by financing activities                                   3,245               543
                                                                                          ------------      ------------

Net increase (decrease) in cash and cash equivalents                                             2,491               (99)
Cash and cash equivalents at beginning of period                                                   151               143
                                                                                          ------------      ------------
Cash and cash equivalents at end of period                                                $      2,642                44
                                                                                          ============      ============

Supplemental disclosures of cash flow information -
   Cash paid for interest                                                                 $        376               358
                                                                                          ============      ============
</TABLE>



Noncash Investing and Financing Activities:

    On March 20, 1998, $9,520,000 in convertible subordinated debentures, net of
unamortized debt issuance costs of $443,000, were automatically converted into
2,380,000 shares of common stock and 3,661,200 shares of preferred stock were
automatically converted into 1,482,766 shares of common stock in connection with
the completion of the Company's initial public offering (note 2). During the
thirteen weeks ended May 2, 1998, the Company recognized $674,000 in preferred
stock dividends in connection with the amortization of preferred stock discounts
resulting from the preferred stock beneficial conversion feature. On May 1,
1998, the Company issued 44,445 shares of unregistered common stock to a
corporation in exchange for $200,000 in professional services associated with
marketing and new store site selection analysis.




See accompanying notes to consolidated financial statements.



                                       4
<PAGE>   5

                         PAWNMART, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

                                   (Unaudited)


(1)    Basis of Presentation

           The accompanying consolidated financial statements were prepared in
       accordance with generally accepted accounting principles for interim
       financial information and therefore do not include all disclosures
       necessary for complete financial statements. In the opinion of
       management, all adjustments have been made that are necessary for a fair
       presentation of the financial position and results of operations and cash
       flows as of and for the periods presented. All such adjustments are of a
       normal recurring nature. Due to a change in the Company's fiscal year end
       during January 1998, the financial results as of and for the thirteen
       weeks ended April 27, 1997 end six days earlier than the financial
       results as of and for the thirteen weeks ended May 2, 1998. The results
       of operations for the thirteen weeks ended May 2, 1998 and April 27, 1997
       are not necessarily indicative of the results that may be expected for
       the entire fiscal year or any other interim period.

           The consolidated financial statements include the financial
       statements of PawnMart, Inc. (the "Company") and its single purpose,
       wholly owned subsidiaries PCI Finance 1994-I, Inc., PCI Finance 1995-I,
       Inc., PCI Finance 1996-1, Inc., and PCI Finance 1996-2, Inc. All
       significant intercompany balances and transactions have been eliminated
       in consolidation. The consolidated financial statements should be read in
       conjunction with the consolidated financial statements for the fiscal
       year ended January 31, 1998 included in the Company's Form 10-KSB which
       has been previously filed with the Securities and Exchange Commission.

(2)    Completion of Initial Public Offering and Financial Restructuring

           On March 20, 1998, the Company completed an initial public offering
       of 1,200,000 shares of common stock at a price of $5.00 per share,
       1,380,000 Series A redeemable common stock purchase warrants at a price
       of $0.125 per warrant, and 1,380,000 Series B redeemable common stock
       purchase warrants at a price of $0.0625 per warrant and, on April 17,
       1998, the Company sold an additional 165,000 shares of common stock
       pursuant to an over-allotment option resulting in total net proceeds to
       the Company of approximately $5,583,000. Each Series A warrant and Series
       B warrant entitles the holder to purchase one share of common stock at a
       price of $6.00 per share and $8.00 per share, respectively, through March
       2003 and March 2004.

           In connection with the completion of the initial public offering,
       $9,520,000 in aggregate principal amount of the Company's 14% convertible
       subordinated debentures were automatically converted into 2,380,000
       shares of common stock and 3,661,200 shares of preferred stock
       automatically converted into an aggregate of 1,482,766 shares of common
       stock. Through May 2, 1998, the Company had utilized $2,419,000 of the
       net proceeds to repay certain notes payable.

(3)    Net Loss Per Common Share

           Net loss per common share is calculated as required by the Financial
       Accounting Standards Board's Statement of Financial Accounting Standards
       No. 128 "Earnings Per Share" (Statement No. 128). Statement No. 128
       requires dual presentation of basic and diluted earnings per share and a
       reconciliation between the two amounts. Basic earnings per share excludes
       dilution, and diluted earnings per share reflects the potential dilution
       that would occur if securities to issue common stock were exercised and
       converted into common stock. In loss periods, dilutive common equivalent
       shares are excluded as the effect would be anti-dilutive.



                                       5
<PAGE>   6

                         PAWNMART, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements




(3)    Net Loss Per Common Share, Continued

           The following table presents a reconciliation between basic and
       diluted weighted average common shares outstanding at May 2, 1998 and
       April 27, 1997. Since the effect of using the weighted average number of
       shares on a diluted basis was antidilutive to the diluted loss per share
       calculation for the thirteen weeks ended May 2, 1998 and April 27, 1997,
       diluted loss per share was calculated using the same weighted average
       number of common shares in the basic loss per share calculation.


<TABLE>
<CAPTION>
                                                           1998                 1997
                                                       -----------           ----------
                                                                 (In thousands)
<S>                                                          <C>                  <C>  
Weighted average shares - basic                              3,215                1,835
Shares attributable to stock options, warrants
and convertible securities                                   3,281                3,094
                                                       -----------           ----------
Weighted average shares - diluted                            6,496                4,929
                                                       ===========           ==========
</TABLE>




                                       6

<PAGE>   7
ITEM 2.       MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

       Statements appearing in the following discussion that are not historical
facts are forward-looking statements ("forward-looking statements") within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities and Exchange Act of 1934, as amended, which are intended
to be covered by the safe harbors created by those sections. Such
forward-looking statements are necessarily estimates reflecting the best
judgment of the Company's management based upon current information and involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such risks,
uncertainties and other factors, include, but are not limited to, those set
forth and those appearing from time to time in filings made by the Company with
the Securities and Exchange Commission. These risks, uncertainties and other
factors should not be construed as exhaustive and the Company does not
undertake, and specifically disclaims any obligation, to update any
forward-looking statements to reflect occurrences or unanticipated events or
circumstances after the date of such statements.

       In addition, the following discussion and analysis should be read in
conjunction with the Company's consolidated financial statements and notes
thereto and other financial data included in the Company's Form 10-KSB for the
fiscal year ended January 31, 1998.

GENERAL

       PawnMart, Inc. (the "Company") is a financial services and specialty
retail enterprise principally engaged in establishing and operating stores which
advance money secured by the pledge of tangible personal property and sell
pre-owned merchandise to the value-conscious consumer. The Company generates
income in two ways: through collection of a monthly service charge from
advancing money to individuals based primarily upon the estimated resale value
of pledged personal property such as jewelry, consumer electronics, tools,
musical instruments, firearms, automobiles and other miscellaneous items and
through profit realized on the retail sale of the unredeemed or other purchased
pre-owned merchandise. As of June 1, 1998, the Company was one of five publicly
traded pawnshop operators in the United States, and it owned and operated twenty
(20) stores located in Texas, Georgia, Alabama, and North Carolina.

       The completion of the Company's initial public offering on March 20, 1998
(see "Item 1. Consolidated Financial Statements") resulted in a significant
financial restructuring of the Company's capital structure which dramatically
improved the Company's consolidated balance sheet and virtually eliminated the
Company's existing interest and dividend requirements.

Expansion of Operations

       With the completion of the Company's initial public offering and
financial restructuring in March 1998, the Company strategic objective is to
implement a rapid roll-out of new PAWNMART(sm) stores in order to capitalize
upon growth opportunities afforded by the highly fragmented pawnshop industry.
To achieve its strategic objectives, the Company has adopted the following
strategy:





                                    7
<PAGE>   8
o    Develop New - Rather Than Acquire - Stores That Meet Site Selection, Store
     Size and Configuration Requirements in Selected Markets. The Company
     believes that by opening new stores - rather than acquiring smaller "mom
     and pop" stores - it will enjoy substantial long-term strategic benefits.
     First, the Company believes that ideal site selection is one of the most
     critical factors in creating a successful PAWNMART(sm) store. In this 
     regard, the Company has developed extensive customer demographics that
     identify both its borrowing and retail customers. The Company believes
     that most existing pawnshops are situated in less than ideal locations.
     The Company, therefore, believes that by opening new stores only in
     locations meeting its demographic and site selection requirements, it will
     be well situated to compete effectively in the highly fragmented pawnshop
     industry. Second, the Company believes that the "look and feel" of its
     stores is an important factor in establishing a successful specialty
     retail store and that most existing pawnshops do not meet, and cannot
     cost-effectively be modified to meet, the Company's store size and
     configuration requirements. By opening new stores only in accordance with
     its specifications, the Company can ensure that each PAWNMART(sm) has a
     similar "look and feel." During the fiscal year ending January 30, 1999
     ("Fiscal 1998"), the Company anticipates opening between 12 and 15 stores.

o    Market Positioning Strategy. The Company's strategy is to operate
     attractive stores that are clean, well-lit and conveniently located, with
     merchandise displayed in an organized and easy-to-shop manner, similar to
     national discount stores. The Company's store design and layout
     specifically target both its borrowing and retail customers.

o    Utilize Targeted Database Marketing. The Company has developed a targeted
     database marketing segmentation system that identifies the customers for
     both pawn and product sales from proprietary data collected at the store
     level. Given this customer information, the Company has developed a
     marketing strategy that seeks to leverage its understanding of customer
     demographics, motivations and purchasing behavior. This demographic data
     will include utilizing direct marketing for customer acquisition, retention
     and promotions, and for store site selection.

o    Expand in Metropolitan Areas in States With Favorable Pawn Regulations. The
     Company's roll-out strategy is to generate operating efficiencies by first
     expanding in the metropolitan areas of Atlanta, Georgia, Mobile, Alabama
     and Charlotte, North Carolina, and thereafter, in metropolitan areas in
     states with favorable pawn regulations.

o    Franchise Operations in Smaller Markets. The Company intends to sell
     PAWNMART(sm) franchises in secondary markets. The Company's franchise
     strategy is designed to allow future franchisees to benefit from the
     Company's targeted database marketing segmentation system, PAWNLINK(tm)
     computer software and information system, as well as the Company's
     standardized operating procedures.

o    Utilize Information Technology. The Company has developed PAWNLINK(tm), a
     proprietary software system, which is connected to a "wide area network"
     that allows for real-time point of sale connectivity. PAWNLINK(tm) is a 
     user friendly, menu driven software package that operates in a Windows
     95TM environment. PAWNLINK(tm) interfaces with the Company's centralized
     database, assists in determining the maximum amount of funds to advance on
     any particular pawn item, and provides in-store assistance with
     operational and sales management, inventory control and accounting.

o    Operational Excellence. The Company believes that its success will be
     substantially dependent on its ability to achieve excellence in operating
     its stores. In this regard, the Company intends to capitalize upon the
     operational expertise of its experienced specialty retail management team
     and board of directors, employ specialty retailers as store management
     personnel, utilize extensive training programs for employees and maintain
     effective extensive operating controls.




                                       8

<PAGE>   9

Selected Financial Information

       Selected elements of the Company's unaudited consolidated financial
statements are shown below for the thirteen weeks ended May 2, 1998 and April
27, 1997 as a percentage of total revenues and as a percentage change from
period to period.

<TABLE>
<CAPTION>
                                                    % OF TOTAL REVENUES
                                                   THIRTEEN WEEKS ENDED
                                                  -----------------------
                                                   MAY 2,        APRIL 27,    % INCREASE
                                                    1998           1997       (DECREASE)
                                                  --------       --------     ----------
<S>                                               <C>            <C>          <C>   
Merchandise Sales ...........................         69.5           70.3           14.1
Pawn Service Charges ........................         29.2 %         29.4 %         15.0 %
Other Income ................................          1.3            0.3          312.5
                                                  --------       --------       --------
Total Revenues ..............................        100.0          100.0           15.4
Cost of Sales ...............................         46.3           51.0            4.9
                                                  --------       --------       --------
Gross Profit ................................         53.7           49.0           26.4
Store Operating Expenses ....................         39.7           39.1           17.3
                                                  --------       --------       --------
Store Contribution ..........................         14.0            9.9           62.3
Corporate Administrative Expenses ...........         28.6           17.4           89.8
Interest Expense ............................         30.5           18.2           93.1
Depreciation and Amortization ...............          4.7            5.7           (7.7)
                                                  --------       --------       --------
Net Loss ....................................        (49.8)%        (31.4)%         82.7 %
                                                  ========       ========       ========
</TABLE>


RESULTS OF OPERATIONS

Thirteen Weeks Ended May 2, 1998 Compared to Thirteen Weeks Ended April 27, 1997

       Total revenues increased 15.4% to $2,650,000 for the thirteen weeks ended
May 2, 1998 (the "Three Month 1998 Period") as compared to $2,296,000 for the
thirteen weeks ended April 27, 1997 (the "Three Month 1997 Period"). The overall
increase is attributable to a 14.1% increase in comparable store merchandise
sales and a 15.0% increase in comparable store pawn service charges at stores
opened 12 months or more as of May 2, 1998 ("Comparative Stores").

       Merchandise sales increased 14.1% to $1,842,000 during the Three Month
1998 Period from $1,614,000 during the Three Month 1997 Period due to gains at
Comparable Stores attributable to store maturation, increased store traffic and
marketing programs.

       Pawn service charges increased 15.0% to $775,000 during the Three Month
1998 Period from $674,000 during the Three Month 1997 Period primarily due to
pawn loans at Comparable Stores increasing 8.2% from $1,989,000 at April 27,
1997 to $2,153,000 at May 2, 1998. The Company expects that, during the first
four years of operation, a store should experience significant increases in loan
activity resulting in a higher percentage of loans being renewed, causing pawn
service charges to increase as a percentage of loans outstanding.

       Gross profit as a percentage of total revenues increased 4.7% from 49.0%
during the Three Month 1997 Period to 53.7% during the Three Month 1998 Period
primarily due to improvements in shrinkage at the Company's locations and an
uninsured theft at one of the Company's locations during February 1997.
Excluding the uninsured theft at one of the Company's locations during February
1997, the Company's annualized inventory turnover rate was 2.4 times during the
Three Month 1998 Period compared to 2.2 times during the Three Month 1997 Period
primarily due to increased store traffic, marketing programs and a conscious
effort by the Company to turn older inventory. Management expects to continue a
positive trend in inventory turns as the Company continues to implement its
specialty retail strategies. The Company currently maintains theft insurance at
all locations.




                                       9
<PAGE>   10


       Store operating expenses increased 17.3% to $1,053,000 during the Three
Month 1998 Period from $898,000 during the Three Month 1997 Period primarily due
to increased labor at Comparative Stores to support increased store activity and
increased advertising expenses associated with the Company's marketing programs.

       Store contribution margin increased 62.3% to $370,000 during the Three
Month 1998 Period compared to $228,000 during the Three Month 1997 Period
primarily due to increases in Comparative Stores merchandise sales and pawn
service charges which were not offset by corresponding increases in cost of
sales and store operating expenses.

       Corporate administrative expenses increased 89.8% to $759,000 during the
Three Month 1998 Period from $400,000 during the Three Month 1997 Period
primarily due to (i) the Company issuing 44,445 shares of unregistered common
stock in exchange for $200,000 in non-recurring professional fees associated
with marketing and new store site selection, (ii) increased salaries associated
with the hiring of additional executive management to support planned growth,
(ii) increased expenses associated with development of marketing programs and
human resource development and (iii) the timing of the accrual of the Company's
annual audit fees. As a result of the above, management anticipates that
corporate administrative expenses as a percentage of total revenues will
decrease the remainder of Fiscal 1998.

       Interest expense increased 93.1% to $809,000 during the Three Month 1998
Period from $419,000 during the Three Month 1997 Period primarily due to
$495,000 in noncash non-recurring interest expense recognized during the Three
Month 1998 Period resulting from the accounting treatment relating to the
beneficial conversion feature associated with the Company's convertible
subordinated debentures which was offset by reduced interest expense during the
Three Month 1998 Period attributable to the conversion and repayment of
indebtedness upon completion of the Company's initial public offering. See note
6 to the consolidated financial statements included in the Company's Form 10-KSB
for the year ended January 31, 1998 for a discussion of the accounting treatment
relating to the beneficial conversion feature associated with the Company's
convertible subordinated debentures. The Three Month 1998 Period also included
$313,000 in interest expense which was incurred by the Company related to debt
that was either converted or repaid upon completion of the Company's initial
public offering. The Three Month 1997 Period included $398,000 in similar
interest expense.

       During the Three Month 1998 Period, the Company recognized $674,000 in
noncash non-recurring preferred stock dividends resulting from the accounting
treatment relating to the beneficial conversion feature associated with the
Company's convertible preferred stock and $18,000 in non-recurring preferred
stock dividends associated with the Company's 12% Series Convertible
Exchangeable Preferred stock. See note 9 to the consolidated financial
statements included in the Company's Form 10-KSB for the year ended January 31,
1998 for a discussion of the accounting treatment relating to the beneficial
conversion feature associated with the Company's convertible preferred stock.

       Net loss to common stockholders during the Three Month 1998 Period was
$2,011,000, or $0.63 per basic and diluted share, compared to $722,000, or $0.39
per basic and diluted share, during the Three Month 1997 Period. Excluding the
non-recurring corporate administrative expenses, non-recurring interest expense,
interest expense related to debt that was either converted or repaid upon
completion of the Company's initial public offering and non-recurring preferred
stock dividends, net loss to common stockholders during the Three Month 1998
Period would have been $311,000, or $0.10 per basic and diluted share, compared
to $324,000, or $0.18 per basic and diluted share, during the Three Month 1997
Period.



                                       10





<PAGE>   11

LIQUIDITY AND CAPITAL RESOURCES

       The profitability and liquidity of the Company are affected by the amount
of loans outstanding, which is controlled in part by the Company's loan
decisions. The Company is able to influence the frequency of forfeiture of
collateral by increasing or decreasing the amount loaned in relation to the sale
value of the pledged property. Tighter credit decisions generally result in
smaller loans in relation to the estimated sale value to the pledged property
and can thereby decrease the Company's aggregate loan balance and, consequently,
decrease pawn service charges. Additionally, small loans in relation to the
pledged property's estimated sale value tend to increase loan redemptions and
improve the Company's liquidity. Conversely, providing larger loans in relation
to the estimated sale value of the pledged property can result in an increase in
the Company's pawn service charge income. Also larger average loan balances can
result in an increase in loan forfeitures, which increases the quantity of goods
on hand and, unless the Company increases inventory turnover, reduces the
Company's liquidity. In addition to these factors, liquidity is also affected by
product sales and the pace of store expansions.

       At May 2, 1998 and January 31, 1998, the Company operated 19 stores.
Prior to the completion of the Company's initial public offering on March 20,
1998, the Company's operations were financed from funds generated from private
debt and equity offerings and funds generated from operations. On March 20,
1998, the Company completed an initial public offering resulting in net proceeds
to the Company of approximately $5,583,000. See "Item 1. Consolidated Financial
Statements." In connection with the completion of the initial public offering,
$9,520,000 in aggregate principal amount of the Company's 14% convertible
subordinated debentures were automatically converted into 2,380,000 shares of
common stock and all classes of the Company's preferred stock were automatically
converted into an aggregate of 1,482,766 shares of common stock. Additionally,
the Company utilized $2,419,000 of the net proceeds to repay $2,037,000 in 15%
notes payable, $157,000 in notes payable to stockholders and $225,000 in notes
payable to the Company's Chief Executive Officer. Furthermore, the Company
intends to utilize an additional $105,000 of the net proceeds to repay all
remaining 15% notes payable.

       In connection with the completion of the initial public offering and
resulting financial restructuring, the Company's annual cash interest
requirements have been decreased by approximately $1,697,000 and the Company's
annual cash dividend requirements have been decreased by approximately $130,000.
Management believes the completion of the initial public offering and the
resulting financial restructuring have positioned the Company with a capital
structure that will allow its planned retail store expansion.

       At May 2, 1998, the Company's primary sources of liquidity were
$2,642,000 in cash and cash equivalents, $207,000 in pawn service charges
receivable, $2,153,000 in loans, and $2,074,000 in inventories. The Company had
a current ratio of approximately 7.3 to 1.0 and 1.6 to 1.0 at May 2, 1998 and
January 31, 1998, respectively. Net cash used in operating activities was
$903,000 during the Three Month 1998 Period and $799,000 during the Three Month
1997 Period.

       The Company believes that its planned retail store expansion program will
be funded by cash flows from operations from its established stores, the net
proceeds from the initial public offering, a commercial credit facility and
other forms of financing. The Company has had discussions with several
commercial banks with regard to a credit facility which would be provided to the
Company on terms similar to credit facilities provided to other public companies
in the pawnshop industry. No assurance can be made that the Company will obtain
long or short-term financing to realize certain business opportunities. In the
event the Company does not obtain the credit facility, the Company will modify
or reduce its expansion schedule. While management does not expect that the
failure to obtain the credit facility would adversely affect the Company's cash
flows, there can be no assurance that cash flow would not be affected.



                                       11

<PAGE>   12


                           PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

       None

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

       On May 1, 1998, the Company issued 44,445 shares of unregistered common
stock, par value $.01 per share, to The Buxton Company in exchange for
professional services associated with marketing and new store site selection
analysis. In connection with such issuance, the Company has recorded $200,000 in
corporate administrative expenses which represents the fair value of the common
stock issued on the date of issuance.

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 AND REPORTS ON FORM 8-K

(a)     Exhibit 27.1 - Financial Data Schedule (EDGAR version only)

(b)     Reports on Form 8-K:  None



                                       12

<PAGE>   13

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

<TABLE>
<S>                                                    <C>
PAWNMART, INC.


By: /s/ Carson R. Thompson           June 11, 1998     By: /s/ Thomas W. White          June 11, 1998
   -----------------------           -------------        -------------------           -------------
   Carson R. Thompson                Date                 Thomas W. White               Date
   Chief Executive Officer, Director                      Vice President - Finance
   and Chairman of the Board                              and Chief Accounting Officer
</TABLE>





                                       13
<PAGE>   14
                              INDEX TO EXHIBITS





<TABLE>
<CAPTION>
EXHIBIT
NUMBER                          EXHIBIT
-------                         -------
<S>             <C>
  27.1          Financial Data Schedule
</TABLE>